CASE DIGEST: CIR vs. La Tondeña (G.R. No. 175188; July 15, 2015)

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

PRINCIPLE: The transfer of real property to a surviving corporation pursuant to a merger is not subject to Documentary Stamp Tax (DST).

FACTS:
La Tondeña (LT) entered into a merger with SBC, SMCJI and MBWC. So, the assets and liabilities of the absorbed corporations were transferred to LT as surviving corporation.

LT requested from the BIR a confirmation of the tax-free nature of the merger process. BIR confirmed that no gain or loss shall be recognized by the absorbed corporations as transferors of all assets and liabilities. Hence, tax-free. However, BIR insisted that the transfer of assets, such as real properties, shall be subject to DST

BIR posits that DST is levied on the exercise of the privilege to convey real property regardless of the manner of conveyance. LT, on the other hand, contends that DST is imposed only on conveyances, deeds, instruments, or writing, where realty sold shall be conveyed to a purchaser or buyer.
ISSUE:
Is transfer of real property to a surviving corporation pursuant to merger subject to DST?

HELD:
No, it is not subject to DST. The DST law under the Tax Code does not include the transfer of real property from one corporation to another pursuant to a merger.

In a merger, the real properties are not deemed "sold" to the surviving corporation and the latter could not be considered as "purchaser" of realty since the real properties subject of the merger were merely absorbed by the surviving corporation by operation of law and these properties are deemed automatically transferred to and vested in the surviving corporation without further act or deed. Therefore, the transfer of real properties to the surviving corporation in pursuance of a merger is not subject to documentary stamp tax.

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