Note: Yung nakahighlight pwedeng di na ilagay although support siya sa ruling ng SC about provisions,

hindi siya gaano vital. PERO if kasya pa sa paper pwede na din idagdag hehe

Misamis Oriental Association of Coco Traders v. Department of Finance Secretary

GR No. 108524

Facts:

 Petitioner is a domestic corporation engaged in the buying and selling of copra in Misamis
Oriental.
 They filed a petition for prohibition and injunction seeking to nullify the Memorandum Circular
issued by respondents that would effectively collect value added tax against petitioners.
 Petitioners aver that prior to said issuance of the memorandum, they were exempt from VAT
under Sec. 103(b) of the NIRC which provides for the exemption of the sale of agriculture and
marine food products from VAT.
 Respondents on the other hand argue that petitioners are not exempt from VAT by virtue of Sec
103(a) of the NIRC which states that non-food agricultural products are exempt in sales of the
products in their original state by the primary producer or owner of the land where they are
produced. Hence the sale made by any other person or entity such as a trader or dealer is not
exempt from the tax.
 The Memorandum Circular issued by the BIR reclassified copra from agricultural food product to
a non-food agricultural product that prompted the respondents to collect Value Added Tax.
 Petitioner cited the opinion of Dr. Quintin of the Bureau of Food and Drug to the effect that
copra should be considered “food” because it is produced from coconut which is food and 80%
of coconut is edible.
 Respondents argue that the opinions of BIR, as the government agency charged with the
implementation of the tax laws is entitled to great respect.

Issue:

Whether or not copra is an agricultural food product so as to exempt its sale by virtue of Sec 103(b)

Ruling:

 No. the Supreme Court ruled that the Commissioner of Internal Revenue gave a strict
construction in interpreting Section 103 a and b of the NIRC consistent with the rule that tax
exemptions must be strictly construed against the taxpayer and liberally in favor of the State. In
addition, Dr. Quintin admitted that his interpretation of copra as food was based on the broader
definition of agricultural commodities and other components used in the manufacturing of food.
 Lastly, the BIR, as the government agency charged with enforcement of law, the opinion of its
Commissioner in absence of any showing that it is plainly wrong, is entitled to great weight. The
ruling was made in the exercise of his power under Section 245 of the NIRC to “make rulings or
opinions in connection with the implementation of the provisions of the internal revenue laws,
including rulings on the classification of articles for sales tax and similar purposes.