Assembling of Fluorescent Lamps by a Company

December 2, 1958 BIR RULING NO. 696-58 1st Indorsement Returned to the Regional Director, Regional District No. 3, Manila, the within case of the Manila Electrical and Hardware Supply, wherein opinion is requested on whether or not the assembling of Fluorescent Lamps by said company is considered manufacturing. cdta A close analysis of the provision of Section 194(x) of the Tax Code will readily show that even the combining of materials with other materials or products, by physical or chemical process, in such manner that the finished product may be put to a special use or uses to which it could not have been put in its original condition makes one a manufacture. In the light of Section 194(x), it seems clear that in assembling flourescent lamps, the taxpayer combines the starter, ballast, base, tube lampholder, cord and plug by physical process, in such manner that the finished product (flourescent lamp) may be put to a special use to which neither of these parts individually, could have been used. cdti We cannot subscribe to the theory advanced by Agent Bienvenido P. Ferrer in his memorandum dated February 26, 1958. He contends that the act of the taxpayer in assembling these parts into a complete flourescent lamp is merely an incident to the business of selling electrical supplies and appliances. It is true that these parts are already finished products, marketable and usable at the time of purchase, but the sale of ballasts, starters, cords and others "as is" do not have the same merchantable quality as a completely assembled flourescent lamp which one sells as a finished product for immediate use. Obviously, the act of the taxpayer in assembling these materials which it purchases locally is to enchance their market value. It is also an undeniable fact that when the taxpayer assembled the various parts to produce the finished product, his intention is not to sell the parts but the finished product. Furthermore, to accept the theory of Mr. Ferrer would be tantamount to sanctioning the practice of some manufacturers to find a loophole for the circumvention of the law in order to minimize their tax liabilities. We are therefore of the opinion and so hold that the taxpayer herein is a manufacturer subject to the fixed and percentage taxes prescribed by Sections 182 and 186 of the Tax Code. (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue