Facts:
C. PEREZ RUBIO, plaintiff and appellee, filed suit in the Court of First Instance of Manila to resist an assessment by the
Collector of Internal Revenue, defendant and appellant, that taxed a stock dividend he received from
Luzon Stevedoring Co., Inc. The case reached the Supreme Court on appeal after the lower court rendered judgment for Rubio, following earlier local decisions that had held stock dividends not taxable under the local income tax law. The questions arose against the statutory background of the extension of the United States
Revenue Act of September 8, 1916 to the Philippines, subsequent congressional delegations of taxing power in the
War Revenue Act of October 3, 1917 and the Revenue Acts of February 24, 1919 and November 23, 1921, and the enactment by the Philippine Legislature of
Act No. 2833 on March 7, 1919, which defined taxable income to include "dividends" and expressly provided that "stock dividend shall be considered income, to the amount of the earnings or profits distributed." The litigation followed earlier conflicting Filipino decisions, notably
Fisher v. Trinidad, and decisions taken by the United States Supreme Court on certiorari in
Posadas v. Warner, Barnes & Co. and
Posadas v. Menzi, which had held that Philippine law validly taxed stock dividends and were therefore dispositive of the present controversy.
Issues:
Did
Act No. 2833 lawfully permit the taxation of stock dividends as the income of a stockholder? Did the taxation of stock dividends under the Philippine Income Tax Law violate the rule of
uniformity embodied in the Organic Act?
Ruling:
Ratio:
Doctrine: