Ad valorem Tax Imposed on "Automobiles"

April 14, 1989 BIR RULING NO. 075-89 146 000-00 075-89 S i r : This refers to your letter dated February 3, 1989 requesting in behalf of your clients, the Automotive Manufacturers Institute, Inc. and the Philippine Automotive Federation, Inc., reconsideration of the ruling of this Office as indicated in the approved memorandum of the Chief, Legislative, Ruling & Research Division dated November 14, 1988, to wit: "Automobile may be safely defined as 4-wheeled motor vehicle (other than trucks and jeeps as defined under R.A. No. 4136 and R.A. No. 1188) which is propelled by gasoline, diesel or any motive fuel and specially designed for the transport of persons and not used primarily for the carrying of freight or merchandise: Provided, however , that its registered carrying capacity shall not exceed nine passengers." In the said ruling, the above definition of automobile has been adopted for internal revenue tax purposes. In your request, you seek to exclude utility vehicles from the class of automobiles for taxation purposes on the ground that under B.P. 74 and Executive Order No. 43, trucks, buses and utility vehicles constitute a separate class by itself; that utility vehicles are covered by the Commercial Vehicle Development Program while automobiles are covered by the Car Development Program being promoted by the Board of Investments; that Tariff Commission and Bureau of Customs classifications placed utility vehicles in the same class as trucks not automobiles; and that prior to the implementation of the VAT, utility vehicles, trucks and jeeps are excluded from the class of automobiles for percentage tax purposes. In reply, please be informed that "automobiles" are now subject to the ad valorem tax based on the manufacturer's or importer's selling price net of excise and value-added taxes. (Sec. 149, Tax Code, as amended by Executive Order No. 273). Said ad valorem (excise) tax is in addition to the 10% value-added tax. (Sec. 126, Ibid ). It will be noted that the article subject to tax is automobile without any distinction. However, it is obvious that the word "automobile" does not include the trucks and the jeeps as the latter are commonly understood. Words of the statute are "read and considered in their natural, ordinary, commonly-accepted and most obvious significations according to good and approved usage and without resorting to forced and subtle construction." (Espino vs. Cleofe, 52 SCRA 92, 98) To support your contentions that the word "automobile" for tax purposes also excludes "utility vehicles", you cited various provisions of the Land Transportation and Traffic Code and the Private Motor Vehicle Law. Assuming arguendo that under these statutes, automobiles do not include utility vehicle, such classification is only for purposes of registration and not for taxation purposes. Moreover, if so called utility vehicles are excluded in addition to trucks and jeeps from the definition of the word "automobile" that will be resorting to forced and subtle construction in violation of the foregoing rule of statutory construction. As regards then Section 163(e) of the Tax Code in force before Executive Order No. 273 which excludes utility vehicles from automobiles for sales tax purposes, suffice it to state that such exclusion is no longer found in the law now in force. In other words, if the present internal revenue law intended to exclude utility vehicles from the coverage of the word "automobile" it would have so stated just like the wording of then Section 163(e) of the Tax Code. The fact that such exclusion no longer exists in the law clearly proves that the same may no longer be invoked. Finally, interpretation given by other government agencies to the effect that utility vehicles are not included in the word "automobiles" cannot be applied for taxation purposes. This is so because the contemporaneous construction of the law to the effect that automobiles, for tax purposes, include utility vehicles by executive officials such as the revenue officials who are bound to enforce the same are entitled to great weight. (Orencia vs. Enrile, 55 SCRA 580, Sarmiento vs. Nolasco, 61 SCRA 80) In view thereof, this Office hereby reiterates the above ruling of November 14, 1988 and that under ruling the so-called utility vehicles are subject to tax as automobiles. Accordingly, your request has to be, as it is hereby, denied for lack of merit. aisadc Very truly yours, (SGD.) JOSE U. ONG Commissioner