KOPPEL VS YATCO

This case involved a complaint for the recovery of merchant sales tax paid by Koppel
(Philippines), Inc. under protest to the Collector of Internal Revenue. Although the Court of
First Instance did not deny legal personality to Koppel (Philippines), Inc. for any and all
purposes, it dismissed the complaint saying that in the transactions involved in the case, the
public interest and convenience would be defeated and would amount to a perpetration of tax
evasion unless resort was had to the doctrine of "disregard of the corporate fiction."

The facts show that 99.5% of the shares of stocks of K-Phil were owned by K-USA. K-
Phil. acted as a representative of K-USA and not as an agent. K-Phil. also bore alone its own
incidental expenses (e.g. Cable expenses) and also those of its “principal”. Moreover, K-Phil’s
share in the profits was left in the hands of K-USA. Clearly, K-Phil was a mere branch or
dummy of K-USA, and was therefore liable for merchant sales tax. To allow otherwise would be
to sanction a circumvention of our tax laws and permit a tax evasion of no mean proportion
and the consequent commission of a grave injustice to the Government. Moreover, it would
allow the taxpayer to do by indirection what the tax laws prohibit to be done directly.