LINCOLN PHILIPPINE LIFE INSURANCE COMPANY, INC. (now JARDINE-CMG LIFE INSURANCE CO. INC.), petitioner, vs.

COURT OF APPEALS and COMMISSIONER OF INTERNAL REVENUE, respondents. G.R. No. !!"#$%. J&'( )%, !**"+ Fa,-./ Petitioner is a domestic corporation engaged in the life insurance business. In 1984, it issued 50,000 shares of stock as stock dividends, ith a par value of P100 or a total of P5 million. Petitioner paid documentar! stamp ta"es on each certificate on the basis of its par value. #he $uestion in this case is hether in determining the amount to be paid as documentar! stamp ta", it is the par value of the certificates of stock or the book value of the shares hich should be considered. #he pertinent provision of la is %ec. &&4 of the 'I(). #he )ommissioner of Internal (evenue took the vie that the book value of the shares, amounting to P19,*0+,500.00, should be used as basis for determining the amount of the documentar! stamp ta". ,ccordingl!, respondent Internal (evenue )ommissioner issued a deficienc! documentar! stamp ta" assessment in the amount of P+8,991.&5 in e"cess of the par value of the stock dividends. #ogether ith another documentar! stamp ta" assessment hich it also $uestioned, petitioner appealed the )ommissioner-s ruling to the )ourt of #a" ,ppeals. .n /arch *0, 199*, the )#, rendered its decision holding that the amount of the documentar! stamp ta" should be based on the par value stated on each certificate of stock. In turn, respondent )ommissioner of Internal (evenue appealed to the )ourt of ,ppeals hich, on 'ovember 18, 1994, reversed the )#,-s decision and held that, in assessing the ta" in $uestion, the basis should be the actual value represented b! the sub0ect shares on the assumption that stock dividends, being a distinct class of shares, are not sub0ect to the $ualification in the la as to the t!pe of certificate of stock used 1 ith or ithout par value2. #he appellate court reversed the appealed decision ith respect to the deficienc! ta" assessment on the stock dividends, but affirmed ith regards to the assessment on the Insurance Policies. 3ence, this petition. I..&0/ 4hether or not the ), erred in holding that stock dividends involving shares ith par value are sub0ect to documentar! stamp ta" based on the book value of said shares hich ruling is contrar! to hat is clearl! provided b! %ec. &&4 1no %ec.1+52 of the #a" )ode5 H0'd/ #he petition has merit. #he )ourt of ,ppeals apparentl! treats stock dividends as distinct from ordinar! shares of stock for purposes of the then 6&&4 of the 'ational Internal (evenue )ode. #here is, ho ever, no basis for considering stock dividends as a distinct class from ordinar! shares of stock since under this provision onl! certificates of stock are re$uired to be distinguished 1into either one ith par value or one ithout2 rather than the classes of shares themselves. Indeed, a reading of the then 6&&4 of the 'I() as $uoted earlier, starting from its heading, ill sho that the documentar! stamp ta" is not levied upon the shares of stock per se but rather on the privilege of issuing certificates of stock. /oreover, a stock certificate is merel! evidence of a share of stock and not the share itself. #his distinction is clear in the )orporation )ode under %ec. 7* on Certificate of stock and transfer of shares. 8rom the foregoing, it is clear that stock dividends are shares of stock and not certificates of stock hich merel! represent them. #here is, therefore, no reason for determining the actual value of such dividends for purposes of the documentar! stamp ta" if the certificates representing them indicate a par value.