Myline Cordial

Commissioner of Internal Revenue vs. La Tondeña Distillers, Inc. (LTDI (now Ginebra San Miguel
July 15, 2015 G.R. No. 175188
762 SCRA 636

PETITION for review on certiorari of the decision and resolution of the Court of Tax Appeals.

FACTS:
Respondent La Tondeña Distillers, Inc. (LTDI) entered into a Plan of Merger with Sugarland Beverage Corporation (SBC), SMC Juice, Inc. (SMCJI), and Metro Bottled Water Corporation (MBWC). As a result of the merger, the assets and liabilities of the absorbed corporations were transferred to respondent, the surviving corporation. Respondent later changed its corporate name to Ginebra San Miguel, Inc. (GSMI). Respondent requested for a confirmation of the tax-free nature of the said merger from the Bureau of Internal Revenue (BIR). The BIR issued a ruling stating that pursuant to Section 40(C)(2) and (6)(b) of the 1997 National Internal Revenue Code (NIRC), no gain or loss shall be recognized by the absorbed corporations as transferors of all assets and liabilities. However, the transfer of assets, such as real properties, shall be subject to DST imposed under Section 19 of the NIRC.

ISSUE:
Whether or not the transfer of real property to a surviving corporation pursuant to a merger is subject to Documentary Stamp Tax (DST).

RULING:
No. In a merger, the real properties are not deemed “sold” to the surviving corporation and the latter could not be considered as “purchaser” of realty since the real properties subject of the merger were merely absorbed by the surviving corporation by operation of law and these properties are deemed automatically transferred to and vested in the surviving corporation without further act or deed. Therefore, the transfer of real properties to the surviving corporation in pursuance of a merger is not subject to documentary stamp tax. The documentary stamp tax is imposed only on all conveyances, deeds, instruments or writing where realty sold shall be conveyed to a purchaser or purchasers. The transfer of a absorbed corporation’s real property to respondent was neither a sale nor was it a conveyance of real property for a consideration contracted to be paid as contemplated under Section 196 of the Tax Code. Hence, Section 196 of the Tax Code is inapplicable and respondent is not liable for documentary stamp tax.

NOTES:

The doctrine of stare decisis dictates that when a court has reached a conclusion in one case, it should be applied to those that follow i the facts are substantially the same, even though the parties may be different. The respondent is not liable for DST as the transfer of real properties from the absorbed corporations to respondent was pursuant to a merger. And having complied with the provisions of Sections 204(C) and 229 of the NTRC, we agree with the CTA that respondent is entitled to a refund of the DST it erroneously paid on various dates between October 31, 2001 to November 15, 2001 in the total amount of P 1411098000.

Taxes must not be imposed beyond what the law expressly and clearly declares as tax laws must be construed strictly against the State and liberally in favor of the taxpayer.

Full Text: CIR vs LTDI (now Ginebra San Miguel) G.R. No. 175188 July 15, 2015