Wells Fargo Bank vs. Collector 70 Phil.

235
In September 1932, Birdie Lillian Eye died in Los
Angeles, California, USA which was also her place of
domicile. She left various properties. Among those
properties include some intangibles consisting of
70,000 shares in the Benguet Consolidated Mining
Company, a corporation organized and existing
under Philippine laws.
The Collector of Internal Revenue sought to assess
and collect estate tax on the said shares. Wells
Fargo Banks & Union Trust Company, the trustee of
the estate of the decedent Eye, objected to said
assessment. Wells Fargo averred that said shares
were already subjected to inheritance tax in
California and hence cannot be taxed again in the
Philippines (note at that time the Philippines was
still under the Commonwealth and were not yet
totally independent from the US).
ISSUE: Whether or not the shares are subject to
estate tax in the Philippines.
HELD: Yes. The Supreme Court ruled that even
though the Philippines was considered a US territory
at that time, it is still a separate jurisdiction from the
US in several aspects particularly taxation. Hence,
the Philippines has the power to tax said shares. The
situs of taxation is here in the Philippines because
the situs of the shares of stock concerned is here in
the Philippines because of the fact that the said
shares were issued here by a corporation organized

and existing under the laws of the Philippines which

is also domiciled here. Further, (and this is the
deeper reason), when Eye was alive, she actually
delivered the title to said shares to the resident
secretary of the corporation here in the Philippines
hence the shares never left the Philippines.
Note: As a rule, intangibles follow the person
(mobilia sequuntur personam). Hence, intangibles
are taxable in the place where their owner may be
domiciled. However, Section 104 of the NIRC
provides that if the shares have attained business
situs here in the Philippines, then said shares are
taxable here even if the owner of said shares are
domiciled abroad.
Commissioner vs. British Overseas Airway Corp.
Facts:
British Overseas Airways Corp. (BOAC) is a 100%
Britis
Government-owned
corporation
engaged ininternational airline business and is a
member of the Interline Air Transport Association,
and thus, it operatesair transportation service and
sells transportation tickets over the routes of the
other airline members. From1959 to 1972, BOAC
had no landing rights for traffic purposes in the
Philippines and thus did not carrypassengers and/or
cargo to or from the Philippines but maintained a
general sales agent in the Philippines --Warner
Barnes & Co. Ltd., and later, Qantas Airwayus --

which was
responsible
for
selling
BOAC
ticketscovering passengers and cargoes. The
Commissioner of Internal Revenue assessed
deficiency income taxesagainst BOAC.
Issue:
Whether the revenue derived by BOAC from ticket
sales in the Philippines for air transportation,
whilehaving no landing rights in the Philippines,
constitute income of BOAC from Philippine sources,
andaccordingly, taxable.
Held:
The source of an income is the property, activity or
service that produced the income. For the source
of income to be considered as coming from
the Philippines, it is sufficient that the income is
derived fromactivity within the Philippines. Herein,
the sale of tickets in the Philippines is the activity that
produced theincome. The tickets exchanged hands
here and payments for fares were also made here in
Philippine currency.The situs of the source of
payments is the Philippines. The flow of wealth
proceeded from, and occuredwithin, Philippine
territory, enjoying the protection accorded by the
Philippine Government. In considerationof such
protection, the flow of wealth should share the
burden of supporting the government. PD 68,
inrelation to PD 1355, ensures that international
airlines are taxed on their income from Philippine
sources. The2 1/2 %tax on gross billings is an
income tax. If it had been intended as an excise or

percentage tax, it wouldhave been placed under Title

V of the Tax Code covering taxes on business.
Pascual vs. Sec. of Public Works
In 1953, Republic Act No. 920 was passed. This law
appropriated P85,000.00 for the construction,
reconstruction, repair, extension and improvement
Pasig feeder road terminals. Wenceslao Pascual,
then governor of Rizal, assailed the validity of the
law. He claimed that the appropriation was actually
going to be used for private use for the terminals
sought to be improved were part of the Antonio
Subdivision. The said Subdivision is owned by
Senator Jose Zulueta who was a member of the
same Senate that passed and approved the same
RA. Pascual claimed that Zulueta misrepresented in
Congress the fact that he owns those terminals and
that his property would be unlawfully enriched at the
expense of the taxpayers if the said RA would be
upheld. Pascual then prayed that the Secretary of
Public Works and Communications be restrained
from releasing funds for such purpose. Zulueta, on
the other hand, perhaps as an afterthought, donated
the said property to the City of Pasig.
ISSUE: Whether or not the appropriation is valid.
HELD: No, the appropriation is void for being an
appropriation for a private purpose. The subsequent
donation of the property to the government to make

the property public does not cure the constitutional

defect. The fact that the law was passed when the
said property was still a private property cannot be
ignored. In accordance with the rule that the taxing
power must be exercised for public purposes only,
money raised by taxation can be expanded only for
public purposes and not for the advantage of private
individuals. Inasmuch as the land on which the
projected feeder roads were to be constructed
belonged then to Zulueta, the result is that said
appropriation sought a private purpose, and, hence,
was null and void.
Villegas v. HsiuChiong Chai Pao
Facts: The Municipal Board of Manila enacted
Ordinance 6537 requiring aliens (except those
employed in the diplomatic and consular missions of
foreign countries, in technical assistance programs
of the government and another country, and
members of religious orders or congregations) to
procure the requisite mayors permit so as to be
employed or engage in trade in the City of Manila.
The permit fee is P50, and the penalty for the
violation of the ordinance is 3 to 6 months
imprisonment or a fine of P100 to P200, or both.
Issue: Whether the ordinance imposes a regulatory
fee or a tax.

Held: The ordinances purpose is clearly to raise

money under the guise of regulation by exacting P50
from aliens who have been cleared for employment.
The amount is unreasonable and excessive because
it fails to consider difference in situation among
aliens required to pay it, i.e. being casual,
permanent, part-time, rank-and-file or executive.
[ The Ordinance was declared invalid as it is
arbitrary, oppressive and unreasonable, being
applied only to aliens who are thus deprived of their
rights to life, liberty and property and therefore
violates the due process and equal protection
clauses of the Constitution. Further, the ordinance
does not lay down any criterion or standard to guide
the Mayor in the exercise of his discretion, thus
conferring upon the mayor arbitrary and unrestricted
powers. ]