BIR Ruling No. 242-61

July 24, 1961 BIR RULING NO. 242-61 3rd Indorsement Returned to the Chief, Investigation Division, the docket bearing on the proposed assessments for income and contractor's fixed and percentage taxes against Rebar Buildings Inc. (hereinafter referred to as Rebar), 1515 Shaw Blvd., Mandaluyong, Rizal, in the total amount of P165,485.32. cdpr It appears that REBAR is a grantee of tax-exemption for the manufacture of prefabricated structural steel frames for buildings. From its actual operations, however, REBAR not only manufactures but also installs or erects the structural steel frames of buildings. From the contracts submitted, it appears further that REBAR also performs the work of prefabrication with materials furnished by customers. In the case entitled, Eternit Corp. vs. Collector, G.R. No. L-11891, April 29, 1959, our Supreme Court held that the installation of a manufactured product is distinct and separate from the act of manufacturing. Inasmuch as the tax-exemption of REBAR does not include the installation of erection of structural frames of buildings, it is subject to tax on such installation or erection. The various contracts entered into by REBAR should be minutely scrutinized to ascertain the very nature thereof. Where a contract calls for manufacture and installation, the cost of installation should be ascertained. Where a contract calls purely for the erection at site of the structural steel frames without prefabrication, such contract is essentially a construction work contract, in which case, REBAR is fully taxable. Where a contract calls for the manufacture of such steel frames with materials supplied by the customers, such contract is covered by the tax-exemption in which case REBAR is not taxable as a contractor. (B.I.R. Rulings Nos. 150 and 174, s. of 1961, applying ruling of Dept.) LibLex He is advised to modify the assessment accordingly. (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue