CIR v. Pilipinas Shell Petroleum Corporation (Panda) 7.
7. The same ruling however, mentioned that the exchange of land and
September 29, 2014 | J. Villarama Jr. | Documentary Stamp Tax
PETITIONER: Commissoner of Internal Revenue
RESPONDENTS: Pilipinas Shell Petroleum Corporation (PSPC)
SUMMARY:
PSCP merged with its affiliate, Shell Philippine Petroleum Corporation (SPPC).
Pursuant to their merger plan, SPPC transferred its properties to PSCP. Because
of this, the BIR imposed a documentary stamp tax (DST) on such conveyance.
PSPC paid the amount of 22,101,407.64 but challenged such payment. It asked
for a refund or at least, a tax credit for such erroneous payment which the CTA
and CA agreed with. The SC ruled that DST only applies to conveyances pursuant
to a sale and DST’s are in the nature of excise tax applying only to specific
documents, instruments, loan agreements, and papers evidencing the acceptance,
assignment, or transfer of an obligation, right or property incident thereto. Here,
the conveyance was pursuant to a sale and was not due to a specific instrument
independent of the merger plan. Thus, the DST should not have been applied.
DOCTRINE: DST is in the nature of an excise tax because it is imposed upon
the privilege, opportunity or facility offered at exchanges for the transaction of
the business. It is a tax on documents instruments, loan agreements, and papers
evidencing the acceptance, assignment, or transfer of an obligation, right or
property incident thereto.
FACTS:
1. This is a petition for review on certiorari filed by petitioner CIR assailing the
decision of CA which affirmed the CTA’s decision ordering petitioner to
refund, or in the alternative, issue a tax credit certificate in favor of PSPC in
the amount of P22,101,407.64
2. Such amount represents the PSCP erroneously paid documentary stamp tax
(DST) for the taxable year 2000.
3. On April 27, 1999, PSPC entered into a Plan of Merger with its affiliate
SPPC.
4. In the Plan of Merger, approved by SEC, it was provided that the entire assets
and liabilities of SPPC will be transferred to, and absorbed by, PSPC.
5. On August 10, 1999, respondent paid to the BIR DST amounting to
P524,316.00 on the original issuance of shares of stock of respondent issued
in exchange for the surrendered SPPC shares pursuant to Section 175 of the
National Internal Revenue Code of 1997(NIRC or Tax Code).
6. BIR confirmed in a ruling dated October 4, 1999, that pursuant to Section 40
(C) (2) and (6) (b) of the NIRC, no gain or loss shall be recognized, if, in
pursuance to a plan of merger or consolidation, a shareholder exchanges stock
in a corporation which is a party to the merger or consolidation solely for the
stock of another corporation which is also a party to the merger or
consolidation.
improvements by SPPC to PSPC for the latter's shares of stock shall be
subject to DST imposed under Section 196 of the Tax Code.
8. On May 10, 2000, respondent paid to the BIR the amount of P22,101,407.64
representing DST on the transfer of real property from SPPC to respondent.
9. Believing that it erroneously paid DST on its absorption of real property
owned by SPPC, respondent filed with petitioner on September 18, 2000, a
formal claim for refund or tax credit of the DST in the amount of
P22,101,407.64.
10. There was no action which led PSPC to file a petition for review before the
CTA which granted PSPC their relief. Such was affirmed by the CA. Hence,
this petition.
ISSUE:
1. WoN PSPC is entitled to a refund of erroneously paid DST. Yes.
RULING:
WHEREFORE, we DENY the petition for lack of merit. The Decision dated
September 10, 2009 and Resolution dated April 13, 2010 of the Court of Appeals in
CAG.R. SP No. 77117 are hereby AFFIRMED.
RATIO:
Properties conveyed subject to a merger are not subject to DST
1. The SC interpreted Section 196 of the Tax Code which petitioner invokes as
justification for imposing the DST to the conveyed properties from SPPC to
PSCP.
b. The Court ruled that a DST is imposed on all conveyances, deeds,
instruments or writings whereby land or realty sold shall be
conveyed to the purchaser or purchasers.
c. The Court did not find merit in petitioner's contention that Section
196 covers all transfers and conveyances of real property for a
valuable consideration.
d. The provision only applies to only to sale transactions where real
property is conveyed to a purchaser for a consideration.
2. The court emphasized that the transfer of SPPC's real property to respondent
was pursuant to their approved plan of merger.
3. Here, SPPC ceased to have any legal personality and respondent PSPC
stepped into everything that was SPPC's, pursuant to the law and the terms of
their Plan of Merger negating that it was pursuant to a sale.
4. The Court explained also that DST is in the nature of an excise tax because
it is imposed upon the privilege, opportunity or facility offered at exchanges
for the transaction of the business.
a. DST is a tax on documents, instruments, loan agreements, and
papers evidencing the acceptance, assignment, or transfer of an
obligation, right or property incident thereto.
 b. It is thus imposed on the exercise of these privileges through the
execution of specific instruments, independently of the legal status
of the transactions giving rise thereto.
5. Here, the properties were not conveyed pursuant to an independent specific
deed, instrument or writing but pursuant to to a merger plan. Thus, DST
does not apply.
On Statutory Construction
1. Sec. 196 provides: SEC. 196. Stamp Tax on Deeds of Sale and Conveyance
of Real Property. — On all conveyances, deeds, instruments, or writings, other
than grants, patents, or original certificates of adjudication issued by the
Government, whereby any land, tenement or other realty sold shall be granted,
assigned, transferred or otherwise conveyed to the purchaser, or purchasers,
or to any other person or persons designated by such purchaser or purchasers,
there shall be collected a documentary stamp tax, at the rates herein below
prescribed based on the consideration contracted to be paid for such realty or
on its fair market value determined in accordance with Section 6(E) of this
Code, whichever is higher: Provided, That when one of the contracting parties
is the Government, the tax herein imposed shall be based on the actual
consideration.

2. PSPC asserted that rule of statutory construction that a statute's clauses and
phrases should not be taken as detached and isolated expressions, but the
whole and every part thereof must be considered in fixing the meaning of any
of its parts. It stressed that petitioner disregarded the qualifying word "sold"
which describes the kind of transfer that is contemplated as subject to
documentary stamp tax.
3. It is a rule in statutory construction that every part of the statute must be
interpreted with reference to the context, i.e., that every part of the statute must
be considered together with the other parts, and kept subservient to the general
intent of the whole enactment. The law must not be read in truncated parts,
its provisions must be read in relation to the whole law. The particular words,
clauses and phrases should not be studied as detached and isolated expression,
but the whole and every part of the statute must be considered in fixing the
meaning of any of its parts and in order to produce a harmonious whole.
4. SC then proceeded to explain that DST only applied to conveyances pursuant
to sales as explained above.