Manila Wine Merchants v. Revenue

GUERRERO, J.:

In this Petition for Review on Certiorari, Petitioner, the Manila Wine Merchants, Inc., disputes the decision of the Court of Tax Appeals ordering it (petitioner) to pay respondent, the Commissioner of Internal Revenue, the amount of P86,804.38 as 25% surtax plus interest which represents the additional tax due petitioner for improperly accumulating profits or surplus in the taxable year 1957 under Sec. 25 of the National Internal Revenue Code. The Court of Tax Appeals made the following finding of facts, to wit: "Petitioner, a domestic corporation organized in 1937, is principally engaged in the importation and sale of whisky, wines, liquors and distilled spirits. Its original subscribed and paid capital was P500,000.00.

Its capital of P500,000.00 was reduced to P250,000.00 in 1950 with the approval of the Securities and Exchange Commission but the reduction of the capital was never implemented. On June 21, 1958, petitioner's capital was increased to P1,000,000.00 with the approval of the said Commission. On December 31, 1957, herein respondent caused the examination of herein petitioner's book of account and found the latter of having unreasonably accumulated surplus of P428,934.32 for the calendar year 1947 to 1957, in excess of the reasonable needs of the business subject to the 25% surtax imposed by Section 25 of the Tax Code.

On February 26, 1963, the Commissioner of Internal Revenue demanded upon the Manila Wine Merchants, Inc. payment of P126,536.12 as 25% surtax and interest on the latter's unreasonable accumulation of profits and surplus for the year 1957, computed as follows: Unreasonable accumulation of surtax P428,934.42 25% surtax due thereon P107,234.00 Add: 1/2% monthly interest from June 20, 1959 to June 20, 1962 19,302.12 TOTAL AMOUNT DUE AND COLLECTIBLE