BIR Ruling

February 21, 1977 Taxability of Imported Humidifying and Airwashing Equipment . This is in connection with the application of ABC Mills, Inc. for the release of its importation of 1 unit humidifying and air washing equipment type Uniluwa S40 with water tank and accessories which is intended to be used by the importer himself in texturizing synthetic yarn, a process in the manufacture of its textile products. The question to be resolved here is whether the imported article is subject to the 7% or 40% compensating tax. In a verification conducted by an examiner of the Intelligence Division with a view of ascertaining whether or not the importation consist of air conditioning parts, the following appears in his report: "Subject taxpayer is engaged in the manufacture of textiles, with plant and factory at Pasig, Metro Manila. Among the processes carried on by the manufacturer is the stretching of synthetic yarn preparatory to weaving. This process is 'texturizing'. Because of the delicate nature of yarns, texturizing can only be efficiently done under controlled surroundings that is, the room has to be kept in a constant level of humidity. Any deviation in room humidity will cause the yarns to snap, thus disrupting the continuous operation of the spinning mills. Thus, a device is necessary to keep the air constantly 'humid' or 'damp'. "The equipment being imported is a device which will keep the spinning area in a condition of constant humidity. In common language the machine is to keep the room continuously 'wet' by spraying water into the air, a process commercially known as 'humidifying the air washing'." In BIR Ruling No. 65-053, dated May 24, 1965, air conditioning (citing Encyclopedia of Science by McGraw) is defined as a process of washing, humidifying, and dehumidifying air before it enters a room, hall or building. The artificial control within enclosures of these viables of humidity, temperature, air motion and air cleanliness is termed air conditioning. Its general method of accomplishment is by means of special enclosures. The air conditioning is accomplished through a ventilation and, in reality, is a refinement of that art, combining it, as it does, air cleaning, heating, cooling, humidifying, dehumidifying and effective control of air motion within the enclosure. With the foregoing concept of air conditioning, the imported articles falls within the purview thereof. Such being the case, the same is subject to the 40% compensating tax pursuant to Section 190 in relation to Section 185-A(c), both of the Tax Code. aisadc