G.R. No. 175188 July 15, 2015
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. LA TONDENA DISTILLERS, INC. (LTDI) [now GINEBRA SAN MIGUEL], Respondent.

FACTS

On September 17, 2001, respondent La Tondena Distillers, Inc. (LTDI) entered into a Plan of Merger with Sugarland Beverage Corporation, SMC Juice, Inc., and Metro Bottled Water Corporation, with LTDI as the surviving corporation. Respondent requested a confirmation from the BIR on the tax-free nature of the merger. On November 5, 2001, the BIR ruled that while no gain or loss would be recognized for income tax purposes under Sections 40(C)(2) and (6)(b) of the 1997 NIRC, the transfer of real properties was subject to Documentary Stamp Tax (DST) under Section 196 of the NIRC. Consequently, respondent paid DST totaling ₱14,140,980.00 on various dates from October 31, 2001, to November 15, 2001. On October 14, 2003, respondent filed an administrative claim for a tax refund or credit for this amount, asserting it was exempt from paying DST on the merger. Simultaneously, it filed a Petition for Review with the CTA. The CTA Second Division granted the claim, ruling that Section 196 of the NIRC did not apply as there was no purchaser or buyer in a merger; the assets were transferred by operation of law under Section 80 of the Corporation Code. The CTA En Banc affirmed this decision. The Commissioner of Internal Revenue elevated the case to the Supreme Court.

ISSUE

Whether the Court of Tax Appeals En Banc erred in ruling that respondent is exempt from the payment of Documentary Stamp Tax on the transfer of real property pursuant to a corporate merger.

RULING

The Supreme Court denied the petition and affirmed the CTA’s decision. The Court held that the transfer of real property to a surviving corporation pursuant to a merger is not subject to Documentary Stamp Tax. Applying the doctrine of stare decisis and citing its prior ruling in Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation, the Court explained that Section 196 of the NIRC imposes DST only on the sale of real property where the property is conveyed to a purchaser for a consideration. The terms “sold,” “purchaser,” and “consideration” in the provision indicate it pertains solely to sale transactions. In a merger, the absorbed corporations’ properties are automatically transferred to and vested in the surviving corporation by operation of law under Section 80 of the Corporation Code, without any further act or deed; it is not a sale, and the surviving corporation is not a purchaser. Therefore, the transfer is not subject to DST. The Court also noted that the subsequent enactment of Republic Act No. 9243, which amended Section 199 of the NIRC to explicitly exempt such transfers from DST, merely removed any doubt. Having complied with the provisions for claiming a refund under Sections 204(C) and 229 of the NIRC, respondent was entitled to a refund of the erroneously paid DST.