MARCELO STEEL CORPORATION CORPORATION VS. COLLECTOR OF INTERNAL REVENUE
G.R. No. L-12401, October 31, 1960 NATURE:
Petition to review under section 18, Reub!ic "ct No. 112# , $ %ud&'ent o( t)e *ourt o( +$ "e$!s u)o!din& t)e $ssess'ent '$de b t)e resondent (or inco'e t$ due durin& t)e e$rs 19#2 $nd 19#3 (ro' t)e etitioner. FACTS:
Petitioner $rce!o /tee! *oror$tion is $ coror$tion du! or&$nied $nd eistin& under $nd b virtue o( t)e !$ws o( t)e P)i!iines, wit) o((ices o((ices $t $!$bon, Ri$!. t is en&$&ed en&$&ed in t)ree 3 industri$! $ctivities, n$'e!, 1 '$nu($cture o( wire (ence, 2 '$nu($cture o( n$i!s, $nd 3 '$nu($cture o( stee! b$rs, rods $nd ot)er $!!ied stee! roducts. +)e '$nu($cture o( n$i!s $nd t)e '$nu($cture o( stee! b$rs, rods $nd ot)er $!!ied stee! roducts roducts,, en%oed en%oed t)e bene(it bene(its s o( t$ ee'ti ee'tion on under under Re Reub! ub!ic ic "c "ctt No. 3# , w)ic) rovides 5/*+ON 1. "n erson, $rtners)i, co'$n, or coror$tion w)o or w)ic) s)$!! en&$&e in $ new $nd necess$r industr s)$!!, (or $ eriod o( (our e$r e$rs s (ro' (ro' t)e t)e d$te d$te o( t)e t)e or&$ or&$ni ni$ $ti tion on o( suc) suc) indu indust str r,, be enti entit! t!ed ed to ee'tion (ro' t)e $'ent o( $!! intern$! revenue t$es direct! $$b!e b suc) erson, $rtners)i, co'$n, or coror$tion in resect to s$id industr. /*. 2. +)e President o( t)e P)i!iines, s)$!!, uon reco''end$tion o( t)e /ecret$ /ecret$r r o( 7in$nce 7in$nce,, eriodic eriodic$!! $!! deter'in deter'ine e t)e u$!i(ic u$!i(ic$tio $tions ns t)$t t)e industries s)ou!d ossess to be entit!ed to t)e bene(its o( t)is "ct. /*. 3. +)is "ct s)$!! t$e e((ect uon its $rov$!. "roved, /ete'ber 30, 1946.: On $ 21, 19#3, t)e etitioner (i!ed $n inco'e t$ return (or t)e e$rs 19#2 $nd 19#3 w)ic) did not re(!ect t)e (in$nci$! resu!ts o( its t$ ee't business $ctivities but t)ose re$!ied so!e! (ro' its business o( '$nu($cturin& wire (ence. On October 1, 19#4, t)e etitioner (i!ed $'ended inco'e t$ returns (or t$$b!e e$rs 19#2 19#2 $nd $nd 19#3, 19#3, s)ow s)owin& in& t)$t it su((e su((ered red $ net net !oss !oss o( P8;1 P8;1,40 ,40;.3 ;.3; ; in 19#2 19#2,, $nd $nd P104,9#6.29 in 19#3. +)e s$id !osses were $rrived $t b conso!id$tin& t)e &ross inco'e $nd eenses $nd
+)e etitioner c$nnot deduct (ro' t)e ro(its re$!ied (ro' its t$$b!e industries, t)e !osses sust$ined b its t$ ee't business $ctivities, . . . =
CASE FOR THE PETITIONER:
/ince it is $ coror$tion or&$nied wit) $ sin&!e c$it$! t)$t $nswers (or $!! its (in$nci$! ob!i&$tions inc!udin& t)ose incurred in t)e t$-ee't industries, t)e &ross inco'e derived (ro' bot) its t$$b!e or non-ee't $nd t$- ee't industries, $nd t)e $!!ow$b!e deductions (ro' s$id inco'es, s)ou!d be conso!id$ted $nd its inco'e t$ !i$bi!it s)ou!d be b$sed on t)e di((erence between t)e conso!id$ted &ross inco'es $nd t)e conso!id$ted $!!ow$b!e deductions. t re!ies on t)e rovisions o( section 24, *o''onwe$!t) "ct No. 466, $s $'ended, $nd o( section 30, subsection d, $r$&r$) 2, o( t)e s$'e "ct ISSUE:
>ON t)e etitioner '$ be $!!owed to deduct (ro' t)e ro(its re$!ied (ro' its t$$b!e business $ctivities, t)e !osses sust$ined b its t$ ee't industries RULING:
No. +)e urose or $i' o( Reub!ic "ct No. 3# is to encour$&e t)e est$b!is)'ent or e!oit$tion o( new $nd necess$r industries to ro'ote t)e econo'ic &rowt) o( t)e countr. t is $ (or' o( subsid &r$nted b t)e Govern'ent to cour$&eous entrereneurs st$in& t)eir c$it$! in $n unnown venture. "n entrereneur en&$&in& in $ new $nd necess$r industr ($ces uncert$int $nd $ssu'es $ ris bi&&er t)$n one en&$&in& in $ venture $!re$d nown $nd deve!oed. Lie $ sett!er in $n une!ored !$nd w)o is %ust b!$in& $ tr$i! in $ vir&in (orest, )e needs $!! t)e encour$&e'ent $nd $ssist$nce (ro' t)e Govern'ent. ?e needs c$it$! to bu )is i'!e'ents, to $ )is !$borers $nd to sust$in )i' $nd )is ($'i!. *o'$r$b!e to t)e ($r'er w)o )$s %ust !$nted t)e seeds o( (ruit be$rin& trees in )is orc)$rd, )e does not eect $n i''edi$te return on )is invest'ent. @su$!! !oss is incurred r$t)er t)$n ro(it '$de. t is (or t)ese re$sons t)$t t)e !$w &r$nts )i' t$ ee'tion A to !i&)ten onerous (in$nci$! burdens $nd reduce !osses. ?owever t)ese '$ be, Reub!ic "ct No. 3# )$s con(ined t)e rivi!e&e o( t$ ee'tion on! to new $nd necess$r industries. t did not intend to &r$nt t)e t$ ee'tion bene(it to $n entrereneur en&$&ed $t t)e s$'e ti'e in $ t$$b!e or non-ee't industr $nd $ new $nd necess$r industr, b $!!owin& )i' to deduct )is &$ins or ro(its derived (ro' t)e oer$tion o( t)e (irst (ro' t)e !osses incurred in t)e oer$tion o( t)e second. @n!ie $ new $nd necess$r industr, $ t$$b!e or non-ee't industr is $!re$d $ &oin& concern, derivin& ro(its (ro' its oer$tion, $nd deservin& no subsid (ro' t)e Govern'ent. t is but ($ir t)$t it be reuired to &ive to t)e Govern'ent $ s)$re in its ro(its in t)e (or' o( t$es. +)e ($ct t)$t t)e etitioner is $ coror$tion or&$nied wit) $ sin&!e c$it$! t)$t $nswers (or $!! its (in$nci$! ob!i&$tions inc!udin& t)ose incurred in t)e t$ ee't industries is o( no 'o'ent. +)e intent o( t)e !$w is to tre$t t$$b!e or non-ee't industries $s se$r$te $nd distinct (ro' new $nd necess$r industries w)ic) $re t$- ee't (or uroses o( t$$tion. DISPOSITIVE:
+)e %ud&'ent under review is $((ir'ed, wit) costs $&$inst t)e etitioner.
