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JAKA INVESTMENTS CORP vs CIR

G.R. No. 147629


July 28, 2010
FIRST DIVISION

FACTS AS TO PETITIONER

Petitioner proposed to subscribe shares of JEC through a tax-free exchange where in, as
payment for its subscription, petitioner assigned and transferred to JEC the shares from
RGHC, PGCI, UCPB, and paid in cash the remaining balance. On October 14, 1994,
petitioner the paid the DST. Petitioner, after seeing the RDO’s certifications, the total amount
of which was less than the actual amount it had paid as documentary stamp tax, concluded
that it had overpaid. Petitioner subsequently sought a refund. Petitioner’s contends that the
tax base for the documentary stamp tax should have been only the shares of stock in RGHC,
PGCI, and UCPB that petitioner had transferred to JEC as payment for its subscription to the
JEC shares, and not the cash component of the payment for its subscription to the JEC
shares

FACTS AS TO RESPONDENT

On October 11, 1996, petitioner filed a petition for refund before the CTA docketed as C.T.A.
which was denied in a Decision8 dated January 19, 1999. The CTA likewise denied
petitioner’s Motion for Reconsideration. Petitioner appealed to the Court of Appeals which
sustained the CTA. Respondent maintains that the DST imposed is on the original issue of
certificates of stock of JEC on the subscription by the petitioner and not on the shares of
stock owned by petitioner in RGHC, PGCI, and UCPB, which merely form part of the partial
payment of the subscribed shares in JEC.

ISSUE RAISED BY PETITIONER

Petitioner argues that the DST computation should not include the cash component as part
payment to its subscription in JEC shares.

ISSUE RAISED BY RESPONDENT

Respondent argues that the DST computation should be imposed is on the original issue of
certificates of stock of JEC on the subscription by the petitioner.

RULING OF THE SUPREME COURT

The Supreme Court ruled in favor of respondent.

A documentary stamp is levied upon the privilege, the opportunity and the facility offered at
exchanges for the transaction of the business. This being the case the documentary stamp
tax imposition is essentially addressed and directly brought to bear upon the document
evidencing the transaction of the parties which establishes its rights and obligations, which in
the case at bar, was established and enforceable upon the execution of the Amended
Subscription Agreement and Deed of Assignment of Property in Payment of Subscription.
The documentary stamp tax is imposed on the entire subscription which is the amount of the
capital stock subscribed whether fully paid or not. It connotes an original subscription
contract for the acquisition by a subscriber of unissued shares in a corporation.
FOR PEN

1. A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the
business transacted but is an excise upon the privilege, opportunity or facility offered
at exchanges for the transaction of the business. It is an excise upon the facilities
used in the transaction of the business separate and apart from the business itself.
Documentary stamp taxes are levied on the exercise by persons of certain privileges
conferred by law for the creation, revision, or termination of specific legal
relationships through the execution of specific instruments.20