Proposed Assessment Against Contractors Fixed and Percentage Taxes, Surcharges and Penalty

December 4, 1959 BIR RULING NO. 628-59 The Regional Director Regional District No. 3 M a n i l a S i r : There is returned herewith the record of the case of the SORIANO Y CIA., Soriano Building, Manila, involving the proposed assessment of the sum of P92,511.50 as contractors fixed and percentage taxes, surcharges and penalty. aisadc The records of the case show that the said corporation manages several corporations, among them being the Philippine Oil Development Company, Atlas Fertilizer Corporation, Bislig Bay Lumber Co., Inc. for which it received during the period from September, 1956 to June 30, 1959, the sum of P2,455.733.42 as management fees. On the belief that SORIANO Y CIA is an independent contractor, the said receipts were subjected to the 3% tax prescribed by section 191 of the Tax Code. A close examination of the contractors enumerated in section 191 of the National Internal Revenue Code will reveal that the services performed by each deals with matters of manual and mechanical execution. "The normal function of an independent contractor is the performance of work predominantly physical in nature." (Moreland vs. Mason, 260 p. 1035, 45 Idaho 143) Under the principle of ejusdem generis ,"where general words follow the designation of particular things, or classes of persons or subjects, the general words will usually be construed to include only those persons or things of the same class or general nature as those specifically enumerated." Accordingly, it is believed the phrases "and other independent contractors" mentioned in the aforesaid section of the Tax Code should include only those persons engaged in business similar to those preceding the said phrase. In view of the foregoing, this Office holds that SORIANO Y CIA, is not an independent contractor within the purview of section 191 of the Tax Code and, therefore, it is subject to the tax prescribed therein. aisadc Very truly yours, (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue