Professional Documents
Culture Documents
Tax Cases
Tax Cases
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
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