TOPIC: SITUS OF INCOME

Case: CIR vs Anglo California National Bank

Facts:

 Respondent Calamba Sugar Estate, Inc is a foreign corporation organized and existing under the
laws of the State of California, U.S.A., duly licensed (on May 8, 1946) to do business in the
Philippines.
It owns shares in Pampanga Sugar Mills (Domestic Corp)
 Subsequenty Respondent sold its shares in Pampanga Sugar Mills to Pasumil Planter Inc, (foreign
corp). The sale took place as was executed under the California laws
 On May 14, 1956, the petitioners Collector of Internal Revenue assessed the corporation for an
alleged deficiency income taxes based upon capital gain derived from such sale.
 In an appeal by the respondent from the ruling of the Collector, the Court of Tax Appeals
reversed said ruling and absolved the respondent form liability.

Issue

 The Collector argues that the situs of shares of stock of a corporation is considered to be at the
domicide of the latter. Is he correct?

Ruling

 Answer
- No
 Legal Basis
- Section 24 of the National Internal Revenue Codes levies income taxes on foreign
corporations only on income derived from sources within the Philippines; and with respect
to capital gains on the sale of personal properties, section 37 (e) of the same Tax Code
deems the place of sale as also that place or source of the capital gain.
- As stated by the Tax Court, there is a distinction between the situs of personal properties
and the situs of the income derived from the sale or exchange of such properties.
 Application/Conclusion
- In this case, it is admitted that the negotiation, perfection and consummation of the
contract of sale were all done in California, U.S.A. It follows that title to the shares of stock
passed from the vendor to the vendee at said place, from which time the incidents of
ownership vested on the buyer.