Wells Fargo vs.

Collector of Internal RevenueGR 46720, 28 June 1940 First Division, Moran (J): 4 concur, 1 concur in result Facts: Birdie Lillian Eye died on 16 September 1932, at Los Angeles, California, the place of her alleged lastresidence and domicile. Among the properties she left was her 1/2 conjugal shares of stock in the BenguetConsolidated Mining Co., an anonymous partnership (sociedad anonima), organized under the laws of thePhilippines. She left a will duly admitted to probate in Califor nia where her estate was administered and settled. Wells Fargo bank and Union Trust Co. was duly appointed trustee of the trust by the said will. TheFederal and California State’s inheritance taxes due thereon have been duly paid. The Collector of InternalRevenue in the Philippines, however, sought to subject the shares of stock to inheritance tax, to which WellsFargo objected. Issue: Whether the shares of stock are subject to Philippine inheritance tax considering that the decedent wasdomiciled in California. Held: Originally, the settled law in the United States is that intangibles have only one situs for the purpose ofinheritance tax, and such situs is in the domicile of the decedent at the time of his or her death. But the rulehas been relaxed. The maxim “mobila sequuntur personam,” upon which the rule rests, has been decried as amere “fiction of law having its origin in considerations of general convenience and public policy, and cannotbe applied to limit or control teh right of the State to tax property within its jurisdiction” and must “yield toestablished fact of legal ownership, actual presence and control elsewhere, and cannot be applied if to do sowhould result in inescapable and patent injustice.” The relaxation of the original rule rests on either of twofundamental considerations: (1) upon the recognition of the inherent power of each government to tax persons, properties, and rights within its jurisdiction and enjoying, thus, the protection of its laws; and (2)upon the principle that as to intangibles, a single location in space is hardly possible, considering the multiple,distinct relationships which may be entered into with respect thereto.Herein, the actual situs of the shares of stock is in the Philippines, the corporation being domiciled therein.The certificates of stock remained in the Philippines up to the time when the deceased died in California, andt h e y w e r e i n p o s s e s s i o n o f o n e S y r e n a M c K e e , s e c r e t a r y o f t h e c o r p o r a t i o n , t o w h o m t h e y h a v e b e e n delivered and indorsed in blank. McKee had the legal title to the certificates of stock held in trust for the trueo w n e r t h e r e o f . T h e o w n e r r e s i d i n g i n C a l i f o r n i a h a s e x t e n d e d h e r e h e r a c t i v i t i e s w i t h r espect to herintangibles so as to avail hereself of the protection and benefit of Philippine l a w s . A c c o r d i n g l y , t h e jurisdiction of the Philippine Government to tax must be upheld. Commissioner of Internal Revenue vs. British Overseas Airways Corporation And Court Of Tax Appeals, 149 SCRA 395 Facts: British Overseas Airways Corp (BOAC) is a 100% British Government-owned corporation engaged in international airline business and is a member of the Interline Air Transport Association, and thus, it operates air transportation services and sells transportation tickets over the routes of the other airline members. From 1959 to 1972, BOAC had no landing rights for traffic purposes in the Philippines and thus, did not carry passengers and/or cargo to or from the Philippines but maintained a general sales agent in the Philippines - Warner Barnes & Co. Ltd. and later, Qantas Airways which was responsible for selling BOAC tickets covering passengers and cargoes. The Commissioner of Internal Revenue assessed deficiency income taxes against BOAC. Issue: Whether the revenue derived by BOAC from ticket sales in the Philippines, constitute income of BOAC from Philippine sources, and accordingly taxable. RULING: 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 from activity within the Philippines. Herein, the sale of tickets in the Philippines is the activity that produced the income. the tickets exchanged hands here and payment for fares were also made here in the Philippine currency. The situs of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within Philippine territory, enjoying the protection accorded by the Philippine government. In consideration of such protection, the flow of wealth should share the burden of supporting the government. PD 68, in relation to PD 1355, ensures that international airlines are taxed on their income from Philippine sources. The 2 1/2% tax on gross billings is an income tax. If it had been intended as an excise tax or percentage tax, it would have been placed under Title V of the Tax Code covering taxes on business.

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