Case Summary (G.R. No. 27701)
Antecedent Facts
Pilipinas Shell Petroleum Corporation (PSPC) entered into a Plan of Merger with Shell Philippine Petroleum Corporation (SPPC) on April 27, 1999. Following the approval of this merger by the Securities and Exchange Commission on July 1, 1999, PSPC was required to pay documentary stamp taxes amounting to P524,316.00 and, subsequently, an additional P22,101,407.64 for the transfer of real property from SPPC to PSPC. PSPC later filed for a refund asserting that the documentary stamp tax it paid was erroneous.
Court of Tax Appeals Decision
The Court of Tax Appeals (CTA) upheld PSPC's claim for tax refund, emphasizing that the transfer of SPPC’s real property to PSPC was a statutory consequence of the merger and did not constitute a sale, thus not subject to documentary stamp tax. The CTA noted that the transfer occurred automatically by operation of law without the need for a deed.
Court of Appeals Decision
In its September 10, 2009 decision, the Court of Appeals confirmed the CTA's ruling, agreeing that since the transfer of properties resulted from the merger and was not a voluntary act requiring a deed, the documentary stamp tax did not apply. The CA held that PSPC was entitled to the refund or tax credit of the amount erroneously paid.
Petitioner’s Arguments
The petitioner argued that the transaction involved both the issuance of shares and the transfer of real properties, each of which is subject to documentary stamp tax under different sections of the NIRC. The petitioner contended that Section 196 of the NIRC applies to all transfers of real property, while also asserting that the merger itself involved voluntary acts that warranted taxing the resultant transactions.
Respondent’s Position
In response, PSPC maintained that the transfer of real property was inherently part of the merger and occurred without consideration. Therefore, PSPC argued, Section 196 did not apply because that provision pertains strictly to sales, which necessitate an exchange of value, unlike the absorbent nature of a merger.
Legal Interpretation of Section 196
The Supreme Court analyzed Section 196 of the NIRC, concluding that it explicitly applies to sales of real property. The Court noted that the phrase "granted, assigned, transferred or otherwise conveyed" is qualified by the context of sale, and thus any conveyan
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Case Overview
- This case involves a petition for review on certiorari by the petitioner, Commissioner of Internal Revenue (CIR), challenging the September 10, 2009 decision of the Court of Appeals (CA) that upheld the Court of Tax Appeals (CTA) ruling.
- The CTA ordered the petitioner to refund or alternatively issue a tax credit certificate to Pilipinas Shell Petroleum Corporation (PSPC) for the erroneously paid documentary stamp tax amounting to P22,101,407.64 for the taxable year 2000.
Background of the Case
- The petitioner is the Commissioner of Internal Revenue based at the Bureau of Internal Revenue (BIR) in Quezon City.
- The respondent, PSPC, is a corporation established to operate petroleum refineries and related facilities.
- On April 27, 1999, PSPC entered a Plan of Merger with Shell Philippine Petroleum Corporation (SPPC), absorbing all assets and liabilities of SPPC.
- The merger was approved by the Securities and Exchange Commission on July 1, 1999.
- Following the merger, PSPC paid P524,316.00 in documentary stamp taxes for the original issuance of shares as per Section 175 of the National Internal Revenue Code of 1997 (NIRC).
- The BIR confirmed the tax-free nature of the merger but noted that the issuance of PSPC shares and the transfer of SPPC’s real property would be subject to documentary stamp tax.
Claims and Filings
- On May 10, 2000, PSPC paid P22,101,407.64 in documentary stamp tax regarding the transfer of real property from SPPC.
- Believing this payment was erroneous, PSPC filed a formal claim for a refund or tax credit with the petitioner on September 18, 2000.
- After receiving no response, PSPC filed a petit