YUTIVO SONS HARDWARE COMPANY v. COURT OF TAX APPEALS G.R. No. L-13203, January 28, 1961

YUTIVO SONS HARDWARE COMPANY v. COURT OF TAX APPEALS

G.R. No. L-13203, January 28, 1961

Corporation Law Case Digest by John Paul C. Ladiao (15 March 2016)

(Topic: Right to bring action, acquire and possess property --- relate with Art. 46 of NCC)

FACTS:

Yutivo Sons Hardware Co. (hereafter referred to as Yutivo) is a domestic corporation, organized under the laws of the Philippines, with principal office at 404 Dasmariñas St., Manila. Incorporated in 1916, it was engaged, prior to the last world war, in the importation and sale of hardware supplies and equipment. After the liberation, it resumed its business and until June of 1946 bought a number of cars and trucks from General Motors Overseas Corporation (hereafter referred to as GM for short), an American corporation licensed to do business in the Philippines. As importer, GM paid sales tax prescribed by sections 184, 185 and 186 of the Tax Code on the basis of its selling price to Yutivo. Said tax being collected only once on original sales, Yutivo paid no further sales tax on its sales to the public.

On June 13, 1946, the Southern Motors, Inc. (hereafter referred to as SM) was organized to engage in the business of selling cars, trucks and spare parts.

After the incorporation of SM and until the withdrawal of GM from the Philippines in the middle of 1947, the cars and tracks purchased by Yutivo from GM were sold by Yutivo to SM which, in turn, sold them to the public in the Visayas and Mindanao.

ISSUE:

Whether or not Southern Motors, Inc.  was organized and it operated, under circumstance that belied any intention to evade sales taxes?

HELD:

No.

the Court of Tax Appeals was not justified in finding that SM was organized for no other purpose than to defraud the Government of its lawful revenues. In the first place, this corporation was organized in June, 1946 when it could not have caused Yutivo any tax savings. From that date up to June 30, 1947, or a period of more than one year, GM was the importer of the cars and trucks sold to Yutivo, which, in turn resold them to SM. During that period, it is not disputed that GM as importer, was the one solely liable for sales taxes. Neither Yutivo or SM was subject to the sales taxes on their sales of cars and trucks. The sales tax liability of Yutivo did not arise until July 1, 1947 when it became the importer and simply continued its practice of selling to SM. The decision, therefore, of the Tax Court that SM was organized purposely as a tax evasion device runs counter to the fact that there was no tax to evade.