Case Digest (G.R. No. 184836)
Facts:
The case involves the Collector of Internal Revenue as the petitioner and the Anglo California National Bank, acting as a trustee for Calamba Sugar Estate, Inc., as the respondent. The Calamba Sugar Estate, Inc. is a foreign corporation incorporated under California law and was duly licensed to operate in the Philippines since May 18, 1946. This corporation consistently submitted its income tax returns to the Philippine authorities via its resident attorney-in-fact. On May 14, 1956, the Collector of Internal Revenue issued a notification to the corporation, asserting an assessment of deficiency income taxes for the years 1953, 1954, and 1955. The assessed amounts were P138,855.00 for 1953, P131,759.00 for 1954, and P393,459.00 for 1955. This assessment was based on capital gains allegedly derived from the respondent's sale of P250,000 shares of stock in the Pampanga Sugar Mills, a domestic corporation, and a promissory note valued at $500,000 executed by the Pampanga Sugar MillsCase Digest (G.R. No. 184836)
Facts:
- Parties and Corporate Status
- Respondent: Calamba Sugar Estate Inc., a foreign corporation
- Organized and existing under the laws of the State of California, U.S.A.
- Licensed on May 18, 1946, to do business in the Philippines
- Represented in the Philippines by its resident attorney-in-fact
- Petitioner: Collector of Internal Revenue
- Initiated an assessment for alleged deficiency income taxes
- Tax Assessment Details
- Assessment Dates and Periods
- Assessment dated May 14, 1956
- Periods covered: 1953, 1954, and 1955
- Amounts Alleged
- P138,855.00 for 1953
- P131,759.00 for 1954
- P393,459.00 for 1955
- Alleged Source of Deficiency
- Based on capital gains derived from the sale
- The sale of 250,000 shares of the capital stock of Pampanga Sugar Mills (a domestic corporation)
- The sale of a promissory note, dated January 1, 1950, executed by the Pampanga Sugar Mills in the sum of $500,000.00
- Transaction and Procedural Background
- Transaction Details
- Sale executed on January 16, 1953, between Calamba Sugar Estate Inc. and Pasumil Planters, Inc.
- Negotiations conducted in San Francisco, California
- Payments for the sale made in San Francisco, California
- Sale executed under and in accordance with the laws of California
- Corporate Dissolution and Licensing
- Securities and Exchange Commission cancelled the respondent’s license on December 16, 1955
- Corporation dissolved on December 30, 1955 under California law
- Previous Judicial Decisions
- Initial Ruling by the Collector of Internal Revenue
- Imposed deficiency income tax assessments on capital gains
- Ruling by the Court of Tax Appeals
- Reversed the Collector’s ruling
- Absolved the respondent from liability for the alleged deficiency tax
- Relevant Legal and Factual Clarifications
- Nature of Shares
- Shares of stock are considered intangible personal properties
- Cited supporting legal references: Art. 417 (2) of the Civil Code of the Philippines and Sec. 35, Act No. 1459
- Specific Tax Code Provisions Involved
- Section 24 of the National Internal Revenue Code: Taxes on income of foreign corporations only from sources within the Philippines
- Section 37(e) of the same Code or its equivalent in the 1934 Act (Sec. 119(e) of the 1934 Act): Determines the situs of capital gains from the sale of personal properties
- United States Jurisprudence Influences
- U.S. decisions such as East Coast Oil Co. vs. Comm., Disconto-Gaesellcraft vs. U.S. Steel Corporation, and Compania General de Tabacos de Filipinas vs. Collector
- Emphasis on the place of sale and the passing of title as decisive in the determination of situs
Issues:
- Determination of the Source of Income
- Whether the capital gains obtained from the sale of shares and the promissory note are considered income from sources within or without the Philippines.
- Specific concern on the application of Section 24 (income tax on foreign corporations) and Section 37(e) (situs of capital gains) of the National Internal Revenue Code.
- Characterization and Situs of the Property
- The classification of shares of stock as intangible personal properties and the implications thereof.
- Whether the situs of the capital gains should be based on the location where the sale was consummated versus the domicile of the corporation.
- Procedural and Administrative Concerns
- The effect of the requirement under Section 35 of the Corporation Law (Act No. 1459) regarding the registration of the transfer.
- Distinction between the situs of the property itself and the situs of the income derived from the sale.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)