G.R. No. 209755 , November 09, 2020
I-REMIT, INC. (FOR ITSELF AND ON BEHALF OF JPSA GLOBAL SERVICES, CO., JTKC EQUITIES, INC. AND SUREWELL EQUITIES, INC.), PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

FACTS

Petitioner I-Remit, Inc. conducted an Initial Public Offering (IPO) in 2007, offering 140,604,000 shares. Of these, 107,417,000 were primary shares offered by the issuing corporation (I-Remit), and 33,187,000 were secondary shares offered by its selling shareholders. To comply with Section 127(B) of the National Internal Revenue Code (NIRC), which imposes a tax based on the proportion of shares sold to the total outstanding shares after listing, petitioner paid a tax computed using the aggregate of all shares sold (140,604,000) as the numerator. This resulted in a tax rate of 4%. Petitioner later filed a claim for refund, arguing it overpaid. The Court of Tax Appeals (CTA) Second Division, while agreeing with petitioner on a separate computational issue regarding treasury shares, denied the refund for failure to prove petitioner was a closely held corporation. The CTA En Banc affirmed the denial but on a different legal ground.

ISSUE

Whether the tax base under Section 127(B) of the NIRC for computing the IPO tax should be the aggregate total of shares sold in both primary and secondary offerings, or whether the primary and secondary offerings should be computed separately.

RULING

The Supreme Court ruled that the tax base for primary and secondary offerings must be computed separately. The legal logic hinges on a plain reading of Section 127(B), which distinctly identifies two liable parties: “the issuing corporation in primary offering or by the seller in secondary offering.” This clear textual separation creates two distinct taxable events and obligors. A consolidated computation would unjustly merge these separate liabilities, potentially altering the applicable tax rate and distorting the statutory scheme. The law’s structure indicates an intent to treat each offering type independently for tax calculation. The Court rejected petitioner’s argument for a unified computation, as it would contravene the provision’s explicit bifurcation of responsibility. Consequently, the tax due must be determined by calculating the proportion of shares sold in the primary offering against the total outstanding shares for the issuing corporation’s liability, and separately, the proportion of shares sold in the secondary offering against the same total for the selling shareholders’ liability. The CTA En Banc’s decision was affirmed, and the claim for refund was denied.