Facts: Sometime in the 1930’s, Don Andres Soriano, a citizen and resident of the United States, formed the corporation “A. Soriano Y Cia”, predecessor of ANSCOR with a 1,000,000.00 capitalization divided into 10,000 common shares at a par value of P100/share. ANSCOR is wholly owned and controlled by the family of Don Andres, who are all non-resident aliens. In 1937, Don Andres subscribed to 4,963 shares of the 5,000 shares originally issued.
On September 12, 1945, ANSCOR’s authorized capital stock was increased to P2,500,000.00 divided into 25,000 common shares with the same par value. Of the additional 15,000 shares, only 10,000 was issued which were all subscribed by Don Andres, after the other stockholders waived in favor of the former their pre-emptive rights to subscribe to the new issues. This increased his subscription to 14,963 common shares. A month later, Don Andres transferred 1,250 shares each to his two sons, Jose and Andres Jr., as their initial investments in ANSCOR. Both sons are foreigners.
By 1947, ANSCOR declared stock dividends. Other stock dividend declarations were made between 1949 and December 20, 1963. On December 30, 1964 Don Andres died. As of that date, the records revealed that he has a total shareholdings of 185,154 shares. 50,495 of which are original issues and the balance of 134,659 shares as stock dividend declarations. Correspondingly, one-half of that shareholdings or 92,577 shares were transferred to his wife, Doña Carmen Soriano, as her conjugal share. The offer half formed part of his estate.
A day after Don Andres died, ANSCOR increased its capital stock to P20M and in 1966 further increased it to P30M. In the same year (December 1966), stock dividends worth 46,290 and 46,287 shares were respectively received by the Don Andres estate and Doña Carmen from ANSCOR. Hence, increasing their accumulated shareholdings to 138,867 and 138,864 common shares each.
On December 28, 1967, Doña Carmen requested a ruling from the United States Internal Revenue Service (IRS), inquiring if an exchange of common with preferred shares may be considered as a tax avoidance scheme. By January 2, 1968, ANSCOR reclassified its existing 300,000 common shares into 150,000 common and 150,000 preferred shares.
In a letter-reply dated February 1968, the IRS opined that the exchange is only a recapitalization scheme and not tax avoidance. Consequently, on March 31, 1968 Doña Carmen exchanged her whole 138,864 common shares for 138,860 of the preferred shares. The estate of Don Andres in turn exchanged 11,140 of its common shares for the remaining 11,140 preferred shares.
In 1973, after examining ANSCOR’s books of account and record Revenue examiners issued a report proposing that ANSCOR be assessed for deficiency withholding tax-at-source, for the year 1968 and the 2nd quarter of 1969 based on the transaction of exchange and redemption of stocks. BIR made the corresponding assessments. ANSCOR’s subsequent protest on the assessments was denied in 1983 by petitioner. ANSCOR filed a petition for review with the CTA, the Tax Court reversed petitioners ruling. CA affirmed the ruling of the CTA. Hence this position.
Issue: Whether or not a person assessed for deficiency withholding tax under Sec. 53 and 54 of the Tax Code is being held liable in its capacity as a withholding agent.
Held: An income taxpayer covers all persons who derive taxable income. ANSCOR was assessed by petitioner for deficiency withholding tax, as such, it is being held liable in its capacity as a withholding agent and not in its personality as taxpayer. A withholding agent, A. Soriano Corp. in this case, cannot be deemed a taxpayer for it to avail of a tax amnesty under a Presidential decree that condones “the collection of all internal revenue taxes including the increments or penalties on account of non-payment as well as all civil, criminal, or administrative liabilities arising from or incident to voluntary disclosures under the NIRC of previously untaxed income and/or wealth realized here or abroad by any taxpayer, natural or juridical.” The Court explains: “The withholding agent is not a taxpayer, he is a mere tax collector. Under the withholding system, however, the agent-payer becomes a payee by fiction of law. His liability is direct and independent from the taxpayer, because the income tax is still imposed and due from the latter. The agent is not liable for the tax as no wealth flowed into him, he earned no income.”
0 comments:
Post a Comment