WISE AND CO., INC. VS MEER G.R. NO. 48231 JUNE 30, 1947 PONENTE: HILADO, J.

CASE DIGEST
BY: LUZADIO, LOURY MAE M.
Facts: On June 1, 1937, Manila Wine Merchants, Ltd., a Hongkong company, was liquidated and its capital stock
was distributed to its stockholders, one of which is the petitioner. As part of its liquidation, the corporation was sold
to Manila Wine Merchants., Inc. for Php400,000. The said earnings, declared as dividends, were distributed to its
stockholders. The Hongkong company then paid the income tax for the entire earnings. As a result of the sale of its
business and assets, a surplus was realized by the Hongkong company after deducting the dividends. This surplus
was also distributed to its stockholders. The Hongkong company also paid the income tax for the said surplus. The
petitioners then filed their respective income tax returns. The respondent Commissioner, then, made a deficiency
assessment charging the individual stockholders for taxes on the shares distributed to them despite the fact that
income tax was already paid by the Hongkong company. The petitioners paid the assessed amount in protest. The
lower courts ruled in favor of the Commissioner of Internal Revenue, hence, this action.

Issue(s): 1. Whether the amount received by the petitioners were ordinary dividends or liquidating dividends. 2.
Whether such dividends were taxable or not. 3. Whether or not the profits realized by the non-resident alien
individual appellants constitute

income from the Philippines

considering that the sale took place outside the Philippines.

Held: 1. The dividends are liquidating dividends or payments for surrendered or relinquished stock in a corporation
in complete liquidation. It was stipulated in the deed of sale that the sale and transfer of the corporation shall take
effect on June 1, 1937 while distribution took place on June 8. They could not consistently deem all the business and
assets of the corporation sold as of June 1, 1937,