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As to who shoulders the tax burden Philippine Acetylene Co., Inc. v.

Comissioner of Internal Revenue Facts: Petitioner sold its products to the National Power Corporation (NPC), an agency of the Philippine Government, and to the Voice of America (VOA), an agency of the United States Government. Thereafter, the CIR demanded from the petitioner the payment of P12, 910.60 as deficiency sales tax and surcharge pursuant to Sec. 186 of the National Internal Revenue Code (NIRC). Petitioner contended that it was not liable for such payment on the ground that both NPC and VOA are exempt from taxation, as they are granted by law immunity from said sales tax, alleging that if said sales tax was collected, it would impair said immunity of both NPC and VOA, since the tax burden would be shifted to them by petitioner. The CIR dismissed such contention. The CTA affirmed the dismissal. Hence, this petition before the SC. Issue: WON petitioner is liable to pay the sales tax assessed by the CIR on the purported sales that the former made in favor of NPC and VOA. Held: Petitioner is liable. The sales tax demanded from petitioner, under Sec. 186 of the NIRC, is a tax on the manufacturer or producer, and not a tax on the purchaser. It may seem that the economic burden of said tax finally falls on the purchasers NPC and VOA, when the value of the tax is billed as an additional amount to purchase price. This, however, does not change the effect that it is not the purchaser who is liable to pay the sales tax, but it is in fact the manufacturer or the producer who has the burden to pay it. Ergo, the levy of the sales tax, in the case at bar, against petitioner on the sales transaction is permissible. Petition dismissed. Maceda v. Macaraig Facts: This is a Motion for Reconsideration (MFR) of an earlier Decision of the SC in Maceda v. Macaraig promulgated on May 31,1991, wherein the petitioner seeks to nullify certain decisions and resolutions, among others of respondents Executive Secretary, Secretary of Finance, CIR, Commissioner of Customs and the Fiscal Incentives Review Board (FIRB) for exempting the NPC from indirect tax and duties. The case invloves, among others, tax refund for duties paid by the local companies on the importation of crude oil. Issues: WON NPC is exempted from all forms of taxes Held: No merit on the MFR. A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax exempt from all forms of taxes direct and indirect. When President Marcos enacted P.D. No. 938, he intended to exempt the NPC from ALL FORMS OF TAXES. Court declares that the oil companies which supply bunker fuel oil to NPC have to pay the taxes imposed upon said bunker fuel oil sold to NPC. By the nature of indirect taxation, the economic burden of such taxation is expected to be passed on to the user or consumer of the goods sold. Because the NPC has been exempted from both direct and indirect taxation, the NPC must be held exempted from absorbing the economic burden of indirect taxation. This means that the oil companies which wish to sell to NPC shall absorb the economic burden of the taxes previously paid to BIR, which they could have shifted to NPC if it did not enjoy exemption from indirect taxes. CIR vs. Gotamco Facts: Respondent Gotamco was awarded with the construction contract under which he was obliged to construct a building in favor of the World Health Organization (WHO), which was exempted from all direct and indirect taxes under the Host Agreement with the Philippine Government, to house its own offices. However, Comissioner of Internal Revenue (CIR) demanded that Gotamco was liable to pay 3% contractor's tax, since this, the CIR alleged, was a tax not on WHO, but a tax due on the contractor. Respondent Gotamco appealed to the Court of Tax Appeals (CTA) which reversed the CIR decision in favor of Gotamco. Hence, this petition for review on certiorai instituted by CIR Issue: WON respondent John Gotamco was liable to pay contractor's tax.

Held: John Gotamco is not liable. The privileges and immunities conferred in favor of WHO unnder the Host Agreement have been recognized by the SC as legally binding on Philippine authorities. The doctrine enshrined in the case of Philippine Acetylene Company v. CIR is not controlling in the case at bar. The Host Agreement, in specifically exempting the WHO from indirect taxes, contemplates taxes which, although not imposed upon or paid by WHO directly, form part of the price paid or to be paid by it. Sec. 12 of said Agreement provides that when the Organization is making important purchases for official use of property on which such duties and taxes have been charged or are chargeable the Philippine Government shall make appropriate administrative arrangements for the remission or return of the amount of duty or tax. The 3% contractor's tax would fall within this category and should be viewed as a form of an "indirect tax" on WHO, as its payment or its inclusion in the bid price would have meant an increase in the construction cost of the building. CIR v. PLDT Facts: For its importation for its business, PLDT paid the BIR numerous taxes comprised of compensating tax, advance sales tax, value-added tax and other internal revenue taxes. PLDT seeks to enjoy its tax exemption privilege under R.A. 7082 which provides, among others, that the grantee shall pay a franchise tax equivalent to three percent (3%) of all gross receipts of the telephone or other telecommunications businesses transacted under its franchise by the grantee, its successors or assigns, and the said percentage shall be in lieu of all taxes on this franchise or earnings thereof. With this in mind, PLDT filed a claim for tax refund of the foregoing taxes it paid to the BIR. With no action by the BIR, PLDT filed with the CTA a petition for review which was granted. The CA affirmed the challenged decision. Hence, this petition before the SC. Issue: WON PLDT is exempt from paying VAT, compensating taxes, advance sales taxes, and internal revenue taxes on its importation. Held: It is not exempt from said taxes. All the foregoing taxes, except the internal revenue taxes, partake of the nature of indirect taxes the economic burden of which may be shifted to the purchaser by subsequently adding said taxes to the selling price, but it does not save the person primarily and directly liable to pay said taxes from paying the same to the government. It is a well-settled doctrine that taxation is the rule, exemption therefrom is the exception. Statutes granting tax exemptions must be construed against the taxpayer. The clause in lieu of all taxes in the disputed provision of R.A. 7082 is followed by a qualifying clause on this franchise or earnings thereof, suggesting that said exemption is limited only to taxes imposed directly on PLDT. Hence, indirect taxes, not being taxes on PLDT's franchise or earnings, are outside the ambit of the in lieu provision. An exemption from all taxes excludes indirect taxes, unless the exempting law is so worded as to include indirect tax. If an exemption is found to exist, it must not be enlarged by construction. Exxonmobil Petroleum, Inc. v. CIR Facts: Petitioner, engaged in the business of selling petroleum products to domestic and international carriers, purchased from Caltex and Petron Jet A-1 fuel and other petroleum products, the excise taxes on which were paid for and remitted by both Caltex and Petron. Said taxes were however passed on to Exxon which finally shouldered said excise taxes. On numerous cases, Exxon sold liters of Jet A-1 fuel to international carriers free of excise taxes. It then filed administrative claims for refund with the BIR. Exxon filed a petition for review with the CTA claiming the same refund or tax credit. The CTA rendered a decision in favor of the CIR. Petitioner assails said Decision in the SC. Issue: WON petitioner Exxon can claim a refund of the excise taxes paid in consideration of the sale of petroleum products made by Caltex and Petron to Exxon. Held: Petitioner cannot claim refund. Petitioner is not the statutory taxpayer. Hence, it is not entitled to claim a refund of excise taxes paid. In a plethora of cases, the SC has held that the proper party to question, or to seek refund of, an indirect tax, is the statutory taxpayer, or the person on whom the tax is imposed by law and who paid the same, even if he shifts the burden thereof to another. In the case at bar, the excise taxes in question

partake of the nature of an indirect tax the economic burden of which may be shifted ultimately to the purchaser by subsequently adding the tax to the purchase price. However, such shifting of the tax burden does not change the effect that the liability to pay said tax is on the statutory taxpayer, the person on whom the tax is imposed by law. Ergo, even if Caltex and Petron passed on to Exxon the burden of the tax, the additional amount billed to Exxon for jet fuel is not a tax but merely a part of the price which Exxon had to pay as a purchaser. As to the object or subject matter of the tax: Property............ Villanueva v. City of Iloilo Facts: The municipal board of Iloilo City, believing that, with the passage of the Local Autonomy Act, it had acquired the power to enact an ordinance imposing municipal license tax on persons engaged in the business of operating tenement houses, enacted Ordinance 11 imposing such license tax on said persons engaged in the said business. By virtue of said Ordinance, the appellant City of Iloilo collected from appellees, who are owners and operators of tenement houses, said municipal license tax. This prompted appellees to file a complaint in the lower court against the City of Iloilo. Lower court adjudged the ordinance illegal. Hence, this appeal before the SC. Issues: WON the City of Iloilo is empowered by the Local Autonomy Act to impose tenement taxes. Held: Appellant's argument has merit. Appellees base their contention that the tax involoved is a real estate tax which allegedly makes the ordinance ultra vires as it imposes a levy in excess of the percentum real estate tax allowable under the Iloilo City Charter. The SC ruled that the tax in question is not a real estate tax. It is not a tax on the land on which the tenement houses are erected. It is not a fixed proportion of the assessed value of the said houses. It is not enforceable against said houses. Ergo, the tax is not a real estate tax. It is plain from the context of the ordinance that the intention is to impose a license tax on the operation of tenement houses, which is a form of business. Said imposition by the ordinance of a license tax on persons engaged in the business of operating tenement houses finds authority in the Local Autonomy Act which provides that chartered cities have the authority to impose municipal license taxes upon persons engaged in any occupation or business within their respective territories. Therefore, decision appealed from is reversed. CIR v. CA Facts: CIR caused the service of an assessment notice and demand for payment of the deficiency ad valorem percentage and fixed taxes, including increments, against Atlas Consolidated Mining and Development Corp. (ACMDC). Likewise, the Commissioner had another assessment notice, demanding deficiency ad valorem and business taxes served on ACMDC. ACMDC protested both assessments but were denied, leading to the filing of two separate petitions for review in the CTA. The CTA rendered a consolidated decision holding that ACMDC was not liable for both deficiency ad valorem taxes, but held it liable for late payment of the ad valorem tax, among other grounds. CA affirmed the said Decision, reducing however the liability of ACMDC with respect to the latter liability . Issue: WON, in computing the ad valorem tax on copper, charges for smelting and refining should also be deducted from the price of copper concentrates. Held: Said charges should be deducted. The ad valorem tax of 2% is imposed on the actual market value of the annual gross output of the mineral products extracted or produced from all mineral lands. The assessment shall be based, not upon the cost of production or extraction of said mineral products, but on the their price, before undergoing a process of manufacture, in the ordinary course of business. In the case at bar, the allowance by the CTA of smelting and refining charges as deductions is not contrary to the provisions of the tax code which prohibit any form of deduction except freight and insurance charges. If the market value chosen for the reckoning of the price is the value of the manufactured, or finished product, as in the case at bar, then all expenses of processing or manufacturing should be deducted in order to approximate as closely as possible the actual market value of the

raw mineral at the mine site. Judgment in the first case is affirmed, while judgment in the second case is hereby modified exempting ACMDC from manufacture's sales tax. Association of Customs Broker v. Municipal Board Facts: Petitioner, composed of brokers and public service operators of motor vehicles in the City of Manila, challenge the validity of Ordinance No. 3379 on the ground, among others, that, while it levies a so-called property tax, it is in reality a license tax which is beyond the power of the Municipal Board. The CFI upheld the validity of the Ordinance in question and dismissed the petition. Hence, this appeal before the SC. Issue: WON the assailed Ordinance is a license tax, and hence beyond the power of the Board to impose. Held: It is a license tax. In the case at bar, the questioned Ordinance was passed by the Municipal Board by virtue of R.A. 409 granting power to the Board to tax motor and other vehicles operating within the City of Manila. However, said provision must be in conformity with the Motor Vehicles Law which provides that no fees may be exacted for the operation of any motor vehicle with the sole exception of a property tax which may be imposed by a municipal corporation upon the motor vehicle. The character of a tax must be determined by its incidents, and the nature and legal effect of the languaged used in the questioned ordinance.While the Ordinance in dispute refers to property tax and it is fixed ad valorem, yet said tax is merely levied on motor vehicles operating within the City of Manila. Upon careful scrutiny, said tax is in reality imposed upon the performance of an act or in the engaging in an occupation, which, in this case, is the operation of motor vehicles. It is not a property tax. Thus, said Ordinance is in conflict with the Motor Vehicles Law. The Ordinance is null and void. As to the manner of computing the tax We Wa Yu v. City of Lipa Facts: Plaintiff, an owner and manager of a gasoline station in the City of Lipa, paid under protest to the City Treasurer a sum of P733.84 as taxes levied under certain Ordinances of the City of Lipa, imposing one-tenth centavo per liter on the sale of gasoline and one-half centavo per liter on the sale of alcohol, gas, or petroleum that may be made in any store or establishment within the city. Plaintiff brought an action in the CFI to recover the payment. Defendant argue that said Ordinances are valid as they were enacted pursuant to the power granted by its Charter. CFI ruled, declaring the questioned Ordinances ultra vires and ordered reimbursement to plaintiff for the payment the latter made. Hence, this appeal by defendant. Issue: WON the questioned Ordinances impose a tax on the business of selling and storing oil and gasoline, among others, or a specific tax on the article therein enumerated. Held: Plaintiff has merit. Under its Charter, the City is given the power to tax, fix the license fee for, or regulate the business affecting the storage and the sale of oil, among others. It does not possess the power to impose a tax on specific articles which may take the form of specific tax. To have such power, the grant must be clear and express. Implication of such power has no room in law for the reason that a municipal corporation, unlike a Sovereign State, does not possess the inherent power of taxation. Any doubt or ambiguity arising out of the term in granting that power must be resolved against the municipality. The Court ruled that the subject Ordinances impose a specific tax on the articles therein enumerated for the reason that the said tax is imposed by some standard of weight or measurement and not regardless of it. A tax which imposes a specific sum by the head or number, or some standard of weight or measurement, and which requires no assessment beyond a listing and classification of the objects to be taxed is a specific tax.

Situs of Taxation

Wells Fargo Bank & Union Trust Company v. CIR Facts: Birdie Lillian Eye died at California where she allegedly resided and domiciled. She left her one-half conjugal share comprised of 70,000 shares of stock in the Benguet Consolidated Mining Co., organized and existing under Philippine laws. She left a will which was duly admitted to probate in California. Petitioner Wells Fargo was duly appointed as trustee of the said shares by the said will. The Federal and State of California's inheritance taxes due on said shares have been duly paid. CIR sought to subject anew the said shares of stock to the Philippine inheritance tax, to which petitioner objected. The lower court ruled that the transmission by will of said shares of stock is subject to Philippine inheritance tax. Thus, this appeal by petitioner. Issue: WON Philippine inheritance tax can be imposed on the subject shares of stock. Held: The tax in dispute can be imposed. In a catena of American cases, where the owner of intangibles, such as shares of stock, confines his activity to his domicile, it has been ruled that his intangibles are taxed at their situs and not elsewhere, by invoking the maxim mobilia sequuntur personam. Shares of corporate stock may be taxed at the domicile of the shareholder and also at the place in which, and under whose laws, the corporation has been created. In the case at bar, the actual situs of the subject shares of stock is in the Philippines where the corporation is domiciled. However, by delivering and indorsing the certificates of stock to the Secretary of the Benguet Co., the deceased owner has extended in the Philippines her activities with respect to her intangibles so as to avail herself of the protection and benefit of the Philippine laws. Accordingly, the jurisdiction of the Philippine Government to tax must be upheld. Multiplicity of Suits CIR v. De Lara Facts: Hugo H. Miller, an American citizen, was born in Santa Cruz, California, U.S.A. In numerous occasions, he came to the Philippines without however living in any residential house therein. On January 1941, he executed his last will in Santa Cruz, California in which he declared that he was of Santa Cruz, California. Testate proceedings were instituted before the Court of California in which an order and decree of settlement of final account and final distribution was issued, wherein it found that Miller was a resident of the County of Santa Cruz, California at the time of his death. The estate of Miller protested the assessment of the liability for estate and inheritance taxes. This assessment was appealed by De Lara as Ancilliary Administrator before the CTA. The CTA decided in favor De Lara. Issue: WON the estate of Miller is subject to estate and inheritance taxes. Held: No. In determining the "gross estate" of a decedent, under the Tax Code, it is first necessary to decide whether the decedent was a resident or a non-resident of the Philippines at the time of his death. For purposes of estate and taxation, residence is interpreted as synonymous with domicile. Miller, at the time of his death, had his residence in Santa Cruz, California. Thus, it is clear that as a non-resident of the Philippines, the only properties of his estate which are subject to estate and inheritance taxes are those shares of stock issued by Philippine corporations. However, considering the reciprocal exemption from tax on intangible property granted both by the State of California and the Philippines, with respect to intangible personal property of a decedent who, at the time of his death, was a non-resident of either State, under Sec. 122 of the Tax Code and the California Inheritance Tax Act of 1935, De Lara, as Ancilliary Administrator, is entitled to exemption from the tax on the intangible personal property found in the Philippines. Instances of Double Taxation CIR v. Solidbank, Inc. Facts: Respondent filed its Quarterly Percentage Tax Returns reflecting gross receipts pertaining to 5% (Gross Receipts Tax) Rate. Respondent alleges that the total gross receipts included a particular amount, representing gross receipts from passive income, which was already subjected to 20% Final Withholding Tax (FWT). Respondent then filed a letter with the BIR for refund, representing allegedly overpaid gross receipts tax. Respondent also filed a petition for review with the CTA. CTA ruled ordering petitioner to refund in favor of respondent a reduced amount as overpaid gross receipts tax. On appeal, the CA held that the 20% FWT on a

banks interest income did not form part of the taxable gross receipts in computing the 5% GRT, because the FWT was not actually received by the bank but was directly remitted to the government. Hence, this appeal before the SC. Issue: WON there was double taxation by imposing both 20% FWT and the 5% GRT Held: There is no double taxation. The FWT and GRT are two different taxes. In a withholding tax system, the payee is the taxpayer, the person on whom the tax is imposed; the payor, a separate entity, acts as no more than an agent of the government for the collection of the tax in order to ensure its payment. FWT is a tax on passive income, while the GRT is on business. There is no double taxation. Taxes herein are imposed on two different subject matters. FWT is a tax on passive income, while the GRT is on business. Secondly, the taxing periods they affect are different. Lastly, these two taxes are of different kinds or characters. FWT is an income tax subject to withholding, while GRT is a percentage tax not subject to withholding. CIR v. Citytrust Investment Phils., Inc. Facts: The case consists of consolidated petitions. In the first petition, inspired by the CTA ruling which adjudged that the basis in computing the 5% Gross Receipts Tax (GRT) is the gross receipts minus the 20% Final Withholding Tax (FWT), respondent Citytrust filed with the Comissioner a claim for the tax refund. It alleged that its reported total gross receipts included the 20% FWT on its passive income. Thus, it sought to be reimbursed of the 5% GRT it paid on the portion of 20% FWT. Citytrust filed a petition for review with the CTA, which eventually granted its claim. On appeal, the CA affirmed the CTA Decision. In the second petition, also inspired by the same above CTA ruling, petitioner Asianbank filed with the CIR a claim for the refund of the overpaid GRT. The petitioner therein filed a petition for review with the CTA which allowed the refund. On appeal, CA, unlike in the first petition, reversed the CTA Decision and ruled in favor of the CIR. Hence, the consolidated petitions before the SC. Issue: WON there was double taxation. Held: There was no double taxation. The imposition of the 20% FWT and 5% GRT does not constitute double taxation. Double taxation means imposing two taxes on the same subject matter for the same purpose, by the same taxing authority, within the same taxing jurisdiction, during the same taxing period; and they must be of the same kind and character. The FWT is an income tax subject to withholding, while the GRT is a percentage tax which is not subject to withholding. Thus, there can be no double taxation as the two taxes are different kinds of taxes. Hence, in both petitions, the CIR was upheld by the SC. Constitutionality of double taxation City of Baguio v. De Leon Facts: A lower court decision upholding the validity of an ordinance of the City of Baguio imposing a license fee on any person, firm, entity or corporation doing business in the City of Baguio is assailed by defendantappellant Fortunato de Leon, who was held liable as a real estate dealer with a property therein. The source of authority for the challenged ordinance is supplied by Republic Act No. 329, empowering the City to fix the license fee and regulate "businesses, trades and occupations as may be established or practiced in the City. Issue: WON the Ordinance constitutes double taxation. Held: The Court finds the argument of defendant-appellant wanting. There was no double taxation. The argument against double taxation may not be invoked where one tax is imposed by the state and the other is imposed by the city, it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof. The Decision appealed from is thereby affirmed. CIR v. Manila Jockey Club, Inc.

Facts: This case consists of two consolidated cases. CIR has appealed from two decisions of the CTA disapproving his levy of amusement taxes upon respondent, a corporation organized and authorized to hold races in Manila. As mandated by law, respondent paid amusement tax on its commission but without including the 5.5% which went to the Board on Races and to the owners of horses and jockeys. Respondent did not consider as part of its gross receipts, subject to amusement tax, the amounts which it had to deliver to the Board on Races, the horse owners and the jockeys. In addition, CIR required respondent to pay amusement tax on the ten-peso contribution fund per horse in the special novato race, holding that they were part of its gross receipts. After resisting the demand of the CIR, respondent resorted to the CTA which ruled in favor of respondent. Issue: WON respondent is liable to pay amusement taxes on those amounts in dispute. Held: Respondent is not liable to pay them. The Government could not have meant to tax as gross receipt of the Manila Jockey Club that part which it directs same Club to turn to the Board on Races. The latter being a Government institution, there would be double taxation, which should be avoided unless the statute admits of no other interpretation. Gross receipts of the proprietor of the amusement place should not include any money which although delivered to the amusement place has been especially earmarked by law for some person other than the proprietor. In the case at bar, the part of the commission in question are moneys earmarked by law for horse owners and jockeys and do not for a single minute become the property of the race track. The ten-peso contribution never belonged to respondent Club. It was held by it as a trust fund. Both CTA Decisions are hereby affirmed. Tax Evasion Republic v. Gonzales Facts: Gonzales has been a private concessionaire in the U.S. Military Base at Clark Field, Angeles City. He was engaged in the manufacture of furniture and, per agreement with base authorities, supplied them with his manufactured articles. BIR discovered that for the years 1946 and 1947, there was an underdeclaration in Gonzales' declaration of sales. The BIR demanded that appellant should pay the deficiency in his income tax. When the appellant failed to pay, the appellee brought the present action. The lower court ruled against Gonzales ordering him to pay the deficiency tax with surcharges. Hence, this appeal by appellant, claiming that as a concessionaire in an American Air Base, he is not subject to Philippine tax laws pursuant to the United StatesPhilippine Military Bases Agreement. Issue: WON defendant-appellant is exempted from income tax as a concessionaire in an American base. Held: He is not exempted from said income tax. The provision relied upon by the appellant plainly contemplates limiting the exemption from the licenses, fees and taxes enumerated therein to the right to establish Government agencies, including concessions, and to the merchandise or services sold or dispensed by such agencies. The income tax, which is certainly not on the right to establish agencies or on the merchandise or services sold or dispensed thereby, but on the owner or operator of such agencies, is logically excluded from the exemption. In sum, the failure of the appellant to declare for taxation purposes his true and actual income derived from his furniture business at the Clark Field Air Base for two consecutive years is an indication of his fraudulent intent to cheat the Government of its due taxes. Based on the foregoing, the judgment appealed from is affirmed.

CIR v. Estate of Benigno Toda

Facts: The case at bar stemmed from a Notice of Assessment sent to Celebes Insurance Corp. (CIC) by the CIR for deficiency income tax arising from an alleged simulated sale of a 16-storey commercial building, which sale consisted of two transactions. CIR argued that the two transactions actually constituted a single sale of the property by CIC to Royal Match Inc. (RMI). The sale was allegedly made by the late Benigno Toda in order to evade 35% corporate income tax of CIC. With the sale being tainted with fraud, the separate corporate personality of CIC should be disregarded. Toda, being the majority owner of CIC should be held liable for the deficiency income tax. Since he is already dead, his estate shall answer for his liability. The CTA ruled in favor of the Estate which judgment was affirmed by the CA. Hence, this petition. Issue: WON there was tax evasion justifying an assessment of deficiency income tax. Held: There was tax evasion. Tax evasion connotes the integration of three factors: (1) the end to be achieved, i.e., the fraudulent underpayment or non-payment of tax; (2) an accompanying state of mind which is described as being in "bad faith"; and (3) a course of action or failure of action which is unlawful. All these factors are present in the case at bar. The scheme resorted to by CIC in making it appear that there were two sales of the subject properties, i.e., from CIC to Altonaga, and then from Altonaga to RMI cannot be considered a legitimate tax planning. Such scheme is tainted with fraud. It is obvious that the objective of the sale to Altonaga was to reduce the amount of tax to be paid especially that the transfer from him to RMI would then subject the income to only 5% individual capital gains tax, and not the 35% corporate income tax. Altonagas sole purpose of acquiring and transferring title of the subject properties on the same day was to create a tax shelter. Altonaga never controlled the property and did not enjoy the normal benefits and burdens of ownership . The execution of the two sales was calculated to mislead the BIR with the end in view of reducing the consequent income tax liability. CIC is therefore liable to pay a 35% corporate tax for its taxable net income. Petition is granted.

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