BIR Ruling

July 13, 1973 Pepsi-Cola Bottling Company of the Philippines, Inc. P.O. Box 670 Makati Commercial Center Makati, Rizal Attention: Mr . Reginald M . Fionton Director, Finance & Administration Gentlemen : This refers to your letter dated July 2, 1973 requesting confirmation that your importation of a refrigeration equipment, more specifically described as a complete Frick Ammonia System, with accessory compressors, indoor type evaporative condenser and ammonia receiver, all of which are essential integral parts of the bottling machinery imported by that company for its manufacturing operations, be subjected to the 7% compensating tax. aisadc To support the fact that the imported article is an essential and integral accessory of the entire bottling machinery, you enumerated the different steps or processes, clearly indicating the utilization of the aforesaid imported article, viz: "1. In the manufacture of Pepsi-Cola and other soft drinks manufactured by the Company out of its processed concentrates, one of the more important phases in the processing of the concentrates into the finished products is the determination of the correct measure of sugar solution, called the simple syrup, with the concentrates. This is done in accordance with the established formula adopted by the Parent Company, which is the owner of the trademark Pepsi-Cola. "2. From the blending tank where the simple sugar syrup solution is mixed with the manufactured/finished concentrates, the blended formula is then transferred to another storage tank for aging. "3. After the proper aging of the blended syrup, the same is then pumped to a syrup water proportioner to a pressure vessel with a cooling coil called 'carbo cooler', where this proportioned water syrup mixture flows down. But, to insure its free flow thru the cooling coil, the temperature of coolness must be strictly maintained at a certain level of cooling temperature to be able to absorb the carbon dioxide. It is in this specific step or procedure in the course of manufacturing and only in this particular phase of manufacturing is the above-described refrigeration equipment subject of this petition used and to be used by the Company. That is, to maintain the right cooling temperature of the blended syrup in order to make certain that it absorbs only so much of the carbon dioxide necessary to be contained in the finished product. "4. After the above manufacturing procedure, i.e., the blended syrup which has been cooled with the correct content of carbon dioxide, then flows into the beverage filler where the beverage product is bottled and crowned." You also stated that the foregoing clearly establishes the fact that the imported article, namely, a complete Frick Ammonia System, with accessory compressors, indoor type evaporative condenser and ammonia receiver intended solely for the purpose above-described in the process of the manufacture of the beverage commonly known in commerce as products of Pepsi-Cola is not by any stretch of imagination a storage refrigeration, let alone an appliance or facility used for the conservation or preservation of any perishable articles. That the above-described machinery is nothing else but a simple accessory, considered essential and integral part of the complex machinery and equipment for bottling operations. In reply, I have the honor to inform you that under the foregoing description of the use and nature of the imported article, namely, a complete Frick Ammonia System, with accessory compressors, indoor type evaporative condenser and ammonia receiver and our appreciation of the brochures and documents submitted, the same is an essential and integral part of a bottling machinery. Such being the case, the aforesaid imported article is subject to the 7% compensating tax pursuant to Section 120, in relation to Section 186, both of the Tax Code. Very truly yours, (SGD.) MISAEL P. VERA Commissioner of Internal Revenue TAN-1601-593-5 "TAXPAYERS SHOULD INDICATE THEIR TAN IN ALL COMMUNICATIONS TO THE BIR."