Manila Gas Corporation Y The Islands Gas v. Revenue

IMPERIAL, J.:

Las corporaciones demandantes entablaron esta accion para recobrar del demandado, el Administrador de Rentas Internas, la suma de P64,585.65 que pagaron bajo protesta como impuesto sobre la rentea. El Juzgado de Primera Instancia de Manila de Manila dicto sentencia a favor del demandado sobreseyendo la demanda, con las costas a las demandantes, por lo que interpusieron la presente apelacion. Los hehcos del asunto estan condensados en la siguiente estipulacion celebrada por las partes: 1.

(a) Plaintiff, Manila Gas Corporation (hereinafter referred to as the "domestic corporation"), is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippine Islands, with its principal office in the City of Manila and with an office in the City of New York, U.S.A., and was, during all of the time hereinafter mentioned, operating under, and authorized by, a special franchise granted the Government of the Philippine Islands pursuant to the provisions of Act No. 2039 of the Philippine Legislature, which franchise plaintiff duly acquired, to transact and was transacting the business of furnishing gas for heat, lighting and power in the City of Manila and the Province of Rizal, with its principal office in the City of Manila. (b) Plaintiff, The Islands Gas and Electric Company (hereinafter referred to as the "foreign corporation"), is a corporation organized under the laws of the State of Maryland, U.S.A., transacting its business at Jersey City, in the State of New Jersey, but having an office at 90 Broad Street, in the City of New York, United States of America, and during all of the time mentioned in this complaint did not have, and does not now have an office, trade, or business in the Philippine Islands, and has had no domicile therein; that it was and still is a stockholder of the domestic corporation and the certificates representing its shares are and have always been physically located at the place of its domicile; that is was also a creditor of the domestic corporation and the certificates representing the obligations of the latter have always been located at the place of its domicile, the foreign corporation's domicile.

(c) Defendant is and was, during all of the time mentioned in this complaint, the Collector of Internal Revenue of the Philippine Islands, and has his principal office in the City of Manila in said Islands. 2. It is provided in the franchise of the domestic corporation, among other things, that the grantee shall annually, on the 5th day of January of each year, pay to the City of Manila and to the municipalities in the Province of Rizal in which gas is sold, 2 ½ per cent of its gross receipts within said City and municipalities, respectively, during the preceding year, and that such payment shall be in lieu of all taxes, insular, provincial and municipal, except taxes on the real estate, buildings, plant, machinery, and other personal property belonging to the grantee.

(Act No. 2039, sec. 9.) 3. On or before the 5th day of January of the years 1935, 1936 and 1937, the domestic corporation duly pa the City of Manila and to the municipalities in the P of Rizal in which gas was sold by it, the full percentages corresponding to the years 1933, 1934, 1935, and I respectively, under and in pursuance of the terms of the franchise referred to in to in the preceding paragraph.

4.

During the years 1934, 1935, and 1936, the domestic corporation through its New York office paid to the foreign corporation, as a stockholder of the domestic corporation at the office of said foreign corporation in the City of York, United States of America, the sums of P434,739, P389,766, and P359,784, respectively, as dividends duly and lawfully declared by the domestic corporation corresponding to said years 1934, 1935, and 1936, respectively. 5. During the same years, to wit, 1934, 1935, and 1936, the domestic corporation through its New York office paid to the foreign corporation, as a creditor of the former, at the office of said foreign corporation in the City of New York, U.S.A., the sums of P162,322.40, P154, 189.06, and P146,135.40, respectively, as interest corresponding to said years 1934, 1935, and 1936, respectively, on the indebtedness of the domestic corporation to the said foreign corporation.

6. The defendant levied upon and assessed against the domestic corporation and demanded of the latter the payment of the sums of P13,042.17, P11,692.98 and P21,587.04, or a total of P46,322.19 as income taxes on the amounts of P434,739, P389,766 and P359,784, respectively, paid by the domestic corporation to the foreign corporation as dividends, as stated in paragraph 4 hereof. 7.

Likewise the defendant levied upon and assessed against the domestic corporation and demanded of it the payment of the sums of P4,869.67, P4,625.67, and P8,768.12, or a total of P18,263.46, as income taxes on the amount of P162,322.40, P154,189.06, and P146,135.40 paid by the domestic corporation to the foreign corporation as interest on the, indebtedness of the former to the latter, as stated in paragraph 5 hereof. 8. The domestic corporation, having no other recourse in the matter, and to avoid the distraint of its goods and the payment of fines and penalties in the premises, under duress, against it will under instant protest and declaring said taxes, and the computation and assessment thereof erroneous, illegal, invalid and unconstitutional, paid to the defendant the full amounts of taxes levied and assessed by said defendant, as set forth in the next two preceding paragraphs, and at the same time requested the defendant to rule upon said protests.

9. Consequently, the amounts of income taxes levied and assessed by the defendant against the domestic corporation and paid by the latter during the years 1936, 1936, and 1937, for dividends and interest paid to the aforesaid foreign corporation, corresponding to the years 1934, 1935, and 1936, respectively, amount to P46,322.19 for dividends and P18,263.46 for interest, or a total of P64,585.65. 10.

The amounts of dividends and interest paid by the domestic corporation to the foreign corporation; the amounts of income taxes levied and assessed by the defendant against the domestic corporation and paid by the latter under protest; and the respective dates of payments of said taxes to the defendant, as aforesaid, are as follows: