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(Commissioner of Internal Revenue vs.

Pilipinas Shell Petroleum Corporation,

G.R. No. 192398, September 29, 2014)

Documentary stamp tax applies only to the sale of real property, not to all other kinds
of transfers or conveyances of real properties.
On April 27, 1999, a merger took place between two corporations whereby all the assets and
liabilities of the absorbed corporation were transferred to the surviving entity. Among the assets
transferred were real properties. For the transfer of these real properties, a documentary stamp
tax was paid by the surviving corporation under Section 196 of the 1997 Tax Code. Realizing
that the documentary stamp tax was erroneously paid on the transfer of the real property as a
result of the merger, the surviving corporation applied for the refund of the DST paid. The claim
was granted by the CTA. On appeal to the Supreme Court, the Supreme Court held that the
DST is only imposed on all conveyances, deeds, instruments or writing where realty sold shall
be conveyed to a purchaser or purchasers for a consideration under Section 196 of Tax Code of
1997 Tax Code. Section 196 of the 1997 Tax Code does not apply to all kinds of transfers and
conveyances of real property for valuable consideration. It is imposed on the transfer of realty
by way of sale and does not apply to all conveyances of real property. The fact that Section 196
refers to words “sold”, “purchaser” and “consideration” undoubtedly leads to the conclusion that
only sales of real property are contemplated therein. 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, this
is not subject to DST.

the electronic messages received by HSBC from its investor-clients
abroad instructing the former to debit the latter's local and foreign currency
accounts and to pay the purchase price of shares of stock or investment in
securities do not properly qualify as either presentment for acceptance or
presentment for payment. There being neither presentment for acceptance
nor presentment for payment, then there was no acceptance or payment that
could have been subjected to DST to speak of.
Indeed, there had been no acceptance of a bill of exchange or order for
the payment of money on the part of HSBC. To reiterate, there was no bill
of exchange or order for the payment drawn abroad and made payable here
in the Philippines. Thus, there was no acceptance as the electronic messages
did not constitute the written and signed manifestation of HSBC to a
drawer's order to pay money. As HSBC could not have been an acceptor,
then it could not have made any payment of a bill of exchange or order for
the payment of money drawn abroad but payable here in the Philippines. In
other words, HSBC could not have been held liable for DST under Section
230 of the 1977 Tax Code, as amended, and Section 181 of the 1997 Tax
Code as it is not "a person making, signing, issuing, accepting, or,
transferring" the taxable instruments under the said provision. Thus, HSBC
erroneously paid DST on the said electronic messages for which it is entitled
to a tax refund.

(Commissioner of Internal Revenue vs. La Tondena Distillers, Inc.,

G.R. Nos. 175188, July 05, 2015)

Transfer of real property is subject to documentary stamp taxes only in cases of

Respondent La Tondena Distillers, Inc. entered into a Plan of Merger with Sugarland Beverage
Corporation and Metro Bottled Water Corporation, with the respondent as the surviving
corporation. The respondent requested from the BIR for a confirmation of the tax-free nature of
the merger. On September 26, 2001, the BIR issued a ruling stating that pursuant to Section
40(C)(2) and (6)(b) of the 1997 NIRC, no gain or loss shall be recognized by the absorbed
corporations. However, the transfer of assets, such as real properties, shall be subject to DST
imposed under Section 196 of the NIRC. Consequently, on various dates, the respondent paid
DST to the BIR. Later, claiming that it is exempt from paying the DST, respondent filed a claim
for the refund for the DST allegedly paid erroneously.
The Court, citing the earlier case of Commissioner of Internal Revenue vs. Pilipinas Shell
Petroleum Corporation, ruled that Section 196 of the NIRC pertains only to transactions where
real property is conveyed to a purchaser for a consideration. The phrase “granted, assigned,
transferred or otherwise conveyed” is qualified by the word “sold” which means that
documentary stamp tax under Section 196 is imposed on the transfer of real property by way of
sale and does not apply to all conveyances of real property. Thus, respondent is not liable to
DST as the transfer of real properties from the absorbed corporations to respondent was
pursuant to a merger.

St. Lukes (2012)

The subject of the controversy was income earned by SL, a non stock, non profit
proprietary hospital, from its paying patients. SC held that since SL received
revenue from paying patients, it was not operated exclusively for charitable or social welfare
purposes. This income was subject to 10% taxation under section 27(B) of the NIRC.

As the Court held:

St. Luke’s fails to meet the requirements under Section 30(E) and (G) of the NIRC to be completely
tax exempt from all its income. However, it remains a proprietary non-profit hospital under Section
27(B) of the NIRC as long as it does not distribute any of its profits to its members and such profits
are reinvested pursuant to its corporate purposes. St. Luke’s, as a proprietary non-profit hospital, is
entitled to the preferential tax rate of 10% on its net income from its for-profit activities.

Thus, St Luke’s was liable for tax at the rate of 10% in the 1998 year under section 27(B) of the

Note that in this case, there was a discussion about st. lukes exemption under sec 30 E & G,
however, the court made note of the qualification in the last paragraph – Notwithstanding the
provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing
organizations from any of their properties, real or personal, or from any of their activities
conducted for profit regardless of the disposition made of such income, shall be subject to
tax imposed under this Code.

Therefore, the Court said that ‘if a tax exempt charitable institution conducts ‘any’ activity for profit,
such activity is not tax exempt even if its not-for profit activities remain tax exempt’. The Court added

The Court cannot expand the meaning of the words ‘operated exclusively’ without violating the
NIRC. Services to paying patients are activities conducted for profit. They cannot be
considered any other way. There is a ‘purpose to make profit over and above the cost’ of
services. The ₱1.73 billion total revenues from paying patients is not even incidental to St. Luke’s
charity expenditure of ₱218,187,498 for non-paying patients.

Agra v. COA

Most likely this is about income. It makes no discussion of tax but if you’re going to base it on the
topic mentioned by ma’am – rice allowance – the SC basically says that by the very wording of the
law on which it is based, it only can be claimed by incumbents as of July 1 1989, and those
employed beyond that period are already disqualified.