Case Digest (G.R. No. 48231)
Facts:
Wise & Co., Inc., et al. v. Bibiano L. Meer, G.R. No. 48231, June 30, 1947, Supreme Court En Banc, Hilado, J., writing for the Court. Plaintiffs-appellants (Wise & Co., Inc. and several individual stockholders) sued Bibiano L. Meer, Collector of Internal Revenue, to recover amounts they had paid under written protest as deficiency income taxes assessed for 1937; the Court of First Instance of Manila had absolved the Collector from the complaint without costs, and the plaintiffs appealed.The parties filed a detailed written stipulation of facts. The material events: the Hong Kong corporation Manila Wine Merchants, Ltd. (the “Hongkong Company”) had its board recommend on May 27, 1937, voluntary winding up and the sale of its business to Manila Wine Merchants, Inc. (the “Manila Company”), a Philippine corporation formed that same day. A sale contract executed July 22, 1937, expressly provided that the transfer would take effect “on and from the first day of June, One thousand nine hundred and thirty-seven.” Following these corporate actions the Hongkong Company declared and paid distributions to its shareholders on June 8, 1937, and later declarations paid August 4 and October 28, 1937. On August 19, 1937, shareholders resolved to voluntarily liquidate and appointed a liquidator who wound up affairs, filed accounts January 12, 1938, and dissolution under Hong Kong law followed.
Plaintiffs (corporate and individual stockholders, some non‑resident aliens) filed Philippine income tax returns but the Collector assessed deficiency taxes treating the distributions as taxable gains from liquidation; plaintiffs paid under protest and sought refunds which the Collector refused. The trial court, after considering the stipulation and applicable law, absolved the Collector; plaintiffs appealed to the Supreme Court.
The principal legal issues raised were whether the distributions were ordinary dividends or liquidating distributions; whether gains realized by corporate and individual stockholders on those distributions were taxable under Act No. 2833 (as amended by Act No. 3761), §25(a); whether non‑resident individual stockholders were subject to the normal tax and/or additional tax; whether the gains derived were from Philippine sources; and whether Department of Finance Regulations No. 81, Sec. 199 was effective to exempt such distributions from income tax. The Supreme C...(Subscriber-Only)
Issues:
- Were the distributions made by Manila Wine Merchants, Ltd. ordinary dividends or distributions in liquidation (liquidating dividends)?
- If they were liquidating distributions, are the gains realized by stockholders taxable under Act No. 2833, §25(a) as amended by Act No. 3761?
- Does §10(a) (proviso) of the Income Tax Law or §198 of Regulations No. 81 exclude corporate stockholders (Wise & Co., Inc.) from tax on such liquidating gains?
- Are non‑resident individual stockholders subject to both the normal and additional taxes on the gains realized from these distributions?
- Were the gains realized by the non‑resident alien stockholders income from Philippine sources and thus taxable here?
- Is §199 of Regulations No. 81, insofar as it limits taxability of liquidating g...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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