BIR Ruling No. 117-62

October 31, 1962 BIR RULING NO. 117-62 The Udagri Development Corporation P. O. Box No. 210, Cebu City Gentlemen : This has reference to your letter to the Regional Director, Regional District No. 7, that city, dated June 7, 1962, requesting exemption from the payment of percentage tax under the following facts: prcd "This corporation is the owner of large tracts of agricultural land situated at Bauyan, Caromatan, Lanao del Norte, its title thereto being evidenced by Transfer Certificate of Title Nos. T-845 and T-846 . . .. These tracts of land are being plated and devoted to the raising of cassava, the tubers of which are either sold in its original form and/or processed into cassava flour or starch or "tapioca". A cassava mill has been put up by the corporation to carry on the processing of the cassava tubers produced on its own farms, into cassava flour or starch or "tapioca" which products are sold or to be sold locally and abroad. Our business is considered a new and necessary industry for which we are being granted a tax exemption by the Secretary of Finance in accordance with the provision of Rep. Act 901, as amended by Rep. Act 2351. "However, our claim for exemption from the sales tax is not predicated on the tax exemption granted by the Secretary of Finance, but rather, under the provisions of Section 188(b) of the Internal Revenue Code, as amended by Rep. Act 2376 . . .." In answer thereto, I have the honor to inform you that for converting cassava tubers into cassava flour or starch or "tapioca", that corporation falls within the purview of "manufacturer" as the term is defined in section 194(x) of the Tax Code. Accordingly, it is subject to the annual privilege tax of P20.00 and to the 7% sales tax under sections 182(1) and 186, respectively, of the same Code. While it was held in the case of Philippine Packing Corporation vs. Collector of Internal Revenue (B.R. No. L-9040, December 26, 1956) that the process of converting pineapples into pineapple chunks, sliced pineapples and juices was agricultural and, therefore, said products remained agricultural products, in the case of cassava flour or starch, however, it is believed that the process involved is no longer agricultural but a clear case of manufacturing and, therefore, flour or starch is a manufactured product. Cassava tubers sold in their original form are exempt from the 7% sales tax, pursuant to section 188(b) of the Tax Code. So also are the flour or starch exported. (Sec. 188(e), Ibid.). cdt Very truly yours, JOSE B. LINGAD Acting Commissioner of Internal Revenue