au HBALD LUMBER COMPANY vs. «© ' Gee A. CASH NO, 552 Resnondent;« DECISIGN The petitioner hes appealed from the decision of

COLLECTOR OF INTERNAL

REVENUE, ~

REPUBLIC oF 4 PHILIPPINES

COURT OF TAX APPEALS

MANILA

au HBALD LUMBER COMPANY, Petitioner, » Versus «© ' Gee A. CASH NO, 552 * Resnondent;«

DECISIGN

The petitioner hes appealed from the decision of respondent requiring it to pay the sum of Pl, 300.06, as alleged additional documentary stamp tex and come promise penalty. The perties submitted the case on an agreed stipuletion of facts dated June 17, 1939, per- tinent portions of which are quoted below) "le That petitioner is a gy gery end exi under the laws of the 1 enue of the Hepublic of the Philippines;

"2. That petitioner's capital stock is divided into 1,000 shares of stock without par value} that on the date of its incoxmore- tion on Apwil 90, 1934, 250 shares of stock were subscribed and issued as followss subscxiner ttzesEex'Shase “Gestion

Janda

Miguel F. Trias 1 5.00 B00 ‘Martin B. Laurea i 5.00 S00 Federico G. Alik- 5.00 ala 1 5.00 me Good arn and that the remaining 75 shares of stock were subseri and issued to Sen- at #1 per shere or a totel subseription of F750 eo 3 “3, That at the time of the original is- 330 CE EEEEEE ey

DECISION «

GeTeNs GASE WO, $52 «2 ~~ petitioner of the aforesaid i mate stock without par value, peti er eo the decumentary tax based a the actual cansiderstion it 7 ponatved from bo cubscribers as stated in paxagraph 2 here- ;

"4. Theat in 19%, petitioner had en out- stending surplus of over ¥300,006,003 that et ® special menting of its stockholders on Sept- ember 19, 1950, the following resolution wes unanimously acdenteds “WHEREAS, the acceunts of Meald show A SUE} plus tines ech Seer bebe P30 gh0,00 eveil. able for dividends; and "WHEREAS, the is in need of additional capital in amount of *RO,000,00 te enable it to meet its increasing activities;

"NON, THRAEPORE, BE IT ABSOLVED, thet out of the exi sumplus of the re Sears oe vidends the sum of 000,00 be tronsferred irom sure plus sccount of the any to the wakishhe fee ue on and be made a.

le for the merations of the Con pany es os ef its capital, without ant status, characte: cor number fX4 value shares now Isaued fd cutstontifay and thet the pxe~ Ggaostineds eapenenedan6 aitested te rect meke and effect such transfer.”

"S. That on ee 1956, the egien- ct Nes » Svteou inecresse of 970,00 per sharey thet the Segion« @l Birector «lsc requived petitioner to pay the sum of 9200.00 os extra-judicial settl of alleged vicletion of Section 2)2 of the Na- Internal Nevenue Code;

en ee of * or.

tax and scents petitioner eleveted this cese 331 33 im |

DECISION «

GeTeAe CATE MO. 952 =3« on October 6, 1957, tioner received the decision of resp @ dated September », rae LE se My mae at the action taken by the ip died Se eek s eet ee deration of his decision of — He i 1987) that on july &, 1958, pets ved reepondent’s letter dated Sune 20 Mi artistes totes eee rage Fe ed of petitioner for the peyment of the sum of 300,00 as “compromise” penalty ic sought te be sustained, the claim has been abendoned, counsel for the Government admitting that “the some cannot be collected in the instant case, unless the petitioner agrees or consents te the peyment thereof, in accordence with the decision of the Supreme Court in the case of the University of Sto. Tomas (G & Nos. LalLL274 and 1~11200, November 28, 1958)." (See pp. 7=8, Meworandum for Respondent.) The sole issue, there- fore, which hes been submitted for our consideration re- lates to the leselity of the assessment of the addition. al documentary stomp tex an the sum of P1,000.00, Respondent meintains that the tronsfer of the sum Cf P300,000,00 from the sutlus sccount of petitioner te its copitel account in 1950 represents additions] con- sideration for the 1,900 no por value shares cf stock originally issued by it in 1934, thereby meking petition. et liable for the documentary stam tax imosed by Sec- tion 212 of the Revenue Code on the said 1,0 shares ef stock on the besis of the consideration received from the stockholders in 1934 plus the ®300,000,00 suzplus * 332 | 335

SUH OURS [|S

DECISION «

C.T.Ae CASE NO, 552 w4e tronsferred to the capitel account. On the other hand, petitioner claims thet no additional documentary stam tex is due from it as no shares of stock were issued covering the said sum of ®900,000,00, Section 212 of the Mevenue Code provides! "Sec. 212 overy OTUe, = Se ne See or purpose certi-

by OM» ONY »

there shall be collected:

er corporation, tax of fifty i.

each two pesos, or fractional port thereof of the per value of such certifi- cates! That in the cese of the ock the case of stock dividemis, the amended by Sees 2¢ Reps Ast Now 403 Goce oe A es Ss oe lic Act. Nt.

The stamp tax prescribed in Section 212 of the Nevenue Code is imposed upon original issues of certificates of stock, and the ‘tax is based, in the case of no par vale ue stocks, “upon the actus] coneiderstion teceived by the associction, company, or comorstion for the issue ence” ef such stocks, In this case, it ie sdnitted thet the tax wes paid on the besis of the sctual consid. eretion received by petitioner from the stockholders at the time of the issuance of the stecks. The sum of "300 {000,00 was not received by petitioner from the stockholders. It wos part of ite suzlus which wes trensferred to ite capital eccount, end in no sense moy the seme be treated ac in consideration for the issuance of the certificates of stock in 1934. Therefore, Sec-

333 EA

LS SaaS

TTT TT TL TR

DECISION «

C.TsAs CATE MO. 882 a 9% o tion 212 dees not apply. It would be otherwise iff, instead of merely trensferring the surplus to cepitel account, petitioner declered stock dividend and actual. ly issued shares of stock in consideration ef such divi. dend, The shares of ptock so issued would be clesrly ae oa The tule in the United Stetes under the iew from which ovrs wes patterned is that where the earned sure plus of © cozporation, or a pertion thereof, is trens~ ferred to capital sccount without issuing additional sheres ef stock to the stockholders, such transfer of surplus to ¢cepiteal account does not give rise te the liability of the cozmoretion to the stanp tare | "Statute imesing a documentary st hen fapetes eae tan tock hateanae of Orbe porate shares or certificates} the statute dees not impose a tax upon transection by a cozmorstion merely transferred an amount from ite cepital surplus and earned surplus accounts te its capitel stock acecunt and increesed aeeeses represented by no sl tags Pag oe tional shares were Ue SoCs ha Te tee ero - insu ah” = & Vv Go, 243 Fe Bde 1500) stamp taxes were net owing on transaction reby comorstion transfer- ted fund from eormed surplus accourrt to capi- tel account, thus raising velue of previous- ef any ee | ne«par stock, without the i yon 26 ete (isRsGe 1939 Cece, 10005 1902," {(F, er [ Ne find ne justification for devisting from the afore~ seid rule} I¢ is» however, contended on behalf of respondent thet the cased cited are net applicable inthis juris- diction because the law in the United Stetes is differ- ent from curs, The rnertinent rertion of the United 334 35/

—EE

DPISTION «

CoTi his CASE NO, 552 = 6 = States lew provides! i e That where such shares or certificetes are lseved without per og face velue, the tex shall be 1l cents per share {comerate share, ct investment truet or other cagonigation share, as the cease may be), unless the actual value is in excess of 5100 per shate; in which case the tax shell be 11 cents on exch 210 of octual velue og fraction thereof of such cerctifi- cetes (or of the ehe res where no certifi. cates were issued), or unlest the octual velue is less than $100 per share, in mhich case the tax shall be 3 cents on each $20 of actual value, or froction thereof, x x x" (26 UsSeCoAcy SeGe 1902 fa/s) Gur attention has heen drawn tc the fact thet under the U. % law, the documentary stamp tax on original issue of o certificate of stock without per value is besed on the getual value of the stock, while under our law the tax is based on the ggiual supsiderstion zeeeived by the comorstion. It would be futile for respondent te draw 2 line of demarceticn between the two laws by feesen of 2 slight verlance in terwinclogy, beceuse by no etretch of the imagination may any such distinction be svoiled of te support the position taken by him in this cote. On the contrazy, it is oux opinion that the decisions in U.S. ve Ancher«~Lenieis-Midlend Co. and Fe M, Schaefer Srewing Coe ve Ue “ey Bindw, MOTe Nearly reflect the correct meshing of cur lew thon of the UeSe lawe GCounsél for the Government cited the following autherities in suppert of the Legality of the assessments "The tax also applies to shares or certificates issued in s recapitalization aor the recapitalization results in the cation of on amount as ital for the first time.” (CCH Vol. 4, i pe 26,021. } 335 | 4

DECISICN =

GCeoToAe CASE Ny 552

~ 7 « “A tax is net payable with respect to stock issued in a recapitalizetion un- less the recapitalizetion results in the dedication of an emount es capitel which emount is 50 dedicated for the first time.” (CCH Vole 45 1953 ppe 265°929-26,(24, } phoch sAvddertes Stock issued in payment of « sto vidend, representing renefer of = to cepitel is taxable. " CCH Vele 4, 1 Oak. pe 26,032, ) It will be noted thet the authorities cited by counsel fox the Sovernment refer to shares ef stock Jgsgued In this cases no share of siock hes been issued cover- ing the P300,000,00 trensferred from sumlus to the capitel account of netitioner.

Finding the essessment in question without any legel bosis, the deciston anperied from is reversed. “ithout pronouncement as to costs.

% ONDERED.

Manilag “ctober 26, 195%, ROMAN ®, UMALI

Associate Judge

WE CONCURS

Presiding Judge

; 338 7]