Request for Tax Credit of Certain Amounts as Specific Taxes on Petroleum Products Purchased from Petrophil Corp.

August 8, 1985 BIR RULING NO. 123-85 153 000-00 123-85 Gentlemen : This refers to your letter dated April 25 and May 17, 1984, requesting tax credit of the amounts of P393,886.06 and P53,212.80 as specific taxes on petroleum products purchased by you from Petrophil Corporation for the months of January to March, 1984. It appears that during the aforesaid period, you purchased fuel oils and lubricants from Petrophil Corporation; and that the specific tax paid thereon was passed on to you by the supplier. You now claim tax credit of the specific tax paid thereon for the reason that as a service contractor engaged in petroleum operations, one of your privileges is "exemption from all taxes, except income tax," as provided for under Section 12(a) of P.D. No. 87. In a ruling issued by this Office on March 1, 1979, it was held that based on the said tax exemption provision, your purchases of fuels and lubricants to be used in your operations from local suppliers are exempted from the payment of the specific tax. In reply, I have the honor to inform you that the fuels and lubricants purchased by you are subject to the specific tax. Your exemption under P.D. No. 87 applies only to such taxes for which you, as service contractor, would otherwise be directly liable. Consequently, you cannot claim tax exemption from the specific taxes on the petroleum products in question for the reason that the same are taxes directly payable by the manufacturer thereof. The fact that the taxes were ultimately shifted to or passed on to you did not convert the same as taxes directly payable by you for the purpose of the exemption (BIR Ruling No. 069-79 dated July 31, 1979; citing Philippine Acetylene Co., Inc. vs. Commissioner, G.R. No. L-19707, August 17, 1969). In view thereof, the aforesaid ruling of March 1, 1979 is hereby revoked. Moreover, the said ruling being erroneous, the same cannot be the basis of your claim for tax credit. Accordingly, and since the specific taxes in question were collected in accordance with law, your claims for tax credit have to be, as they are hereby denied. This constitute the final decision of this Office on this matter. Very truly yours, (SGD.) RUBEN B. ANCHETA Acting Commissioner