1

REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS
QUEZON CITY

SIME DARBY INTERNATIONAL TIRE

CO., INC. ( forer 1 y B. F.
GOODRICH PHILIPPINES, INC.>,
Petitioner,
-

versus -

C.T.A. CASE NO.

3814

COMMISSIONER OF INTERNAL
REVENUE,
Respondent.
X

This

appeal

focused

on

the

question

a domestic corporation,

engaged

tires,

and

liable

under

Revenue

letter

in

on

1975

in

the

manufacture

recapping
Section

25

improperly
as

dated

old

of

and

the

by

October

new

10,

1980,

in

the

vehicle

tires,

surplus

respondent

in April

motor

National

accumulated

determined
on

of

of

whether

registered

the Securities and Exchange Commission

1935,

year

is

petitioner herein,
with

Internal
for

his

details

Improperly accumulated surplus P15,908,468.00

Surtax due thereon . . . . . . . . . P 3,977,121.50
Add: 14~ interest fr.
25~

( 4 2 ~ ma X )

_____t_.L~.?_Q_L~~J_.!_.Q_J._

AMOUNT DUE AND COLLECTIBLE ....

P 5,647,512.53

3 f\ R

the

demand

which are as follows:

4 I 16 I 7 6

is

--------------

of

DECISION
CTA CASE NO. 3814
-

On

November

foregoing
thereof,
to

stating
it

1979,

that

surplus

that

in

more

than

And,

in

its

other

1969 to

plowed

<the

what

back

year

was

on

1975,

sizeable

portion

increasingly
it s

business,

investor.

He

the

February 7,

1983.

Not
petitioner

appealed

the

as

the

had

and

spent

capital.

deficiency
of

tax

surplus

accumulated

in

31,

to

because

periodically

market,

not

being

protest

this

December

amounting

not

with
to

it

of

was

in money

assessment

satisfied

expansion;

working

surplus

thereof

denied

1969

substantial

accumulation

petitioner

reiterating

as

from

major portion of

review>

improperly

invested

plant

that

petitioner's
was

that

legal basis.

contends

P15,908,486.00

to

added that

was erroneous and without

Respondent

1975,

the

cancellation

declared

aside

unreasonable

disputed

the

things,

under

set

memorandum

assessment

sought

consistently

from

was

1975

and

among

had

petitioner

1980,

24,

assessment

dividends;
its

2 -

by

related to
lending

sustaining

his

letter

respondent's
Court

and

on

and

dated

decision,
February

2,

1984.
The controlling

provisions

of Section 25 of the

DECISION
CTA CASE NO. 3814
-

National

Internal

3 -

Revenue

Code,

in

part

pertinent

states:
SEC 2 5
8_g_g_t!.i._9_T.:!. _.!;..~~----0...!:!.... ~..QJ:'P..Q..t.::..~ .!;j_ .Q.!l
Llll. Pt.::.QP.~.r.::..l.. Y........ -- ~C:.C:.Y...P.:l .',J. .l..~t.tlJ.9.. ................P .t.::.9.f.J.t ..~---- -Q.!::.
? ..-,.rPLY.~ .~ --- <a>
.LII!P_c.>.?.j:t:;__~ __Q..D.....Q
.f. ___tP..>.i
If any
corporation is formed or availed of for the
purpose of preventing the imposition of the
tax
upon
its
shareholders
or members
of
another corporation, through the medium of
permitting
its
gains
and
profits
to
accumulate
instead
of
being
divided
or
distributed,
there is levied and assessed
against such corporation for each t axab 1 e
y e a r, a t ax e q u a 1 t o t went y- f i v e pg__r . . ...<;'. ~.IJ..t .Y...P.:l.
of
the
undistributed
portion
of
its
accumulated profits or surplus which shall
be
in
addition
to
the
tax
imposed
by
sect ion twenty-four, and shall be computed,
collected and paid in the same manner and
subject
to
the
same
provisions
of
law,
including penalties, as that tax.
<b >
e.r .t!ll. <!:l. ...f..aq__:L~....... ~'!'..!Q .~..IJ.~-
The fact
that
any
corporation
is
a
mere
holding
company sha 11 be P.t.::.t!!L<:l_. __f~.. ! . ~. evidence of a
purpose
to
avoid
the
tax
upon
its
shareholders
or
members.
Similar
presumption will
lie
in
the
case
of
an
investment company where at any time during
t h e t ax a b 1 e y e a r more t han f i f t y l?.~..r . ~_e,>D. :t.Y .II!.
in value of its outstanding stock is owned
directly or indirectly, by one person.

<c >
~.Y.J.9 .~.D. ~;.~--- -9-~t.~.r.::. P.:l.. tn~. !; .!..9.D..._. ___ !:If...........P.Y.r ..
P..9..?...~
The
fact
that
the
earnings
or
profits of a corporation are permitted to
accumu 1 ate beyond the reasonable needs of
the business shall be determinative of the
purpose
to
avoid
the
tax
upon
its
shareholders
or
members
unless
the
corporation,
by
c 1 ear
preponderance
of
evidence, shall prove the contrary.
XXX

XXX

3sn

XXX

DECISION
CTA CASE NO.

3814

The
but

the

foregoing
decision

peculiar
explained

in

this

and

February

28,

The Coissioner of

No.

1664,

December

tax

under

Section

accumulate
among
tax

its

to

is
or

of Federal
a

25

Income

of

the

Code

Court

No.

then

divided
the

and

not

the

...I!.l..~-~-~.~.!!!.~n!:_ __.!::..Q.,

Taxation,

Tax

liability
Code

of
on

earning

touchstone

of

accumulation

of

Vol.

for

7,

the
on

corporation has accumulated the earnings

732;

of
Law

p.

347.)

tax

under

whether

the

in excess of

*Aff'd
in
Manila
Wine
Merchants,
Inc.
Coissioner of Internal Revenue, 127 SCRA 493.

36 .1

to

distributed

34 B. T. A.

hinges

for
its

consequences

Mertens,

on

harmless

accumulated

the

tax

profits

or

The

behind

tax

and

Case

earning

availed

gains

Inc.

C.T.A.

is

income

The

Case

from

is

corporation.

matter,
the

its

being

purpose

q:;_~~l.i....

pract i ca 1

Section

the

Tax

own

vs.

accumulated

corporation

of

profits

accumu 1 at ion

its

Inc.

Revenue,

the

the

permitting

the

clear

this

C. T. A.

distinguished

shareholders,

liability

As

as

instead

applies

surplus

Internal

avoiding

by

are

upon

As

Revenue,

of

the

of

stockholders

rest

Merchants,

1969,

25

If

purpose

the

27,

hoarding

accumulation.

must

law

1961* and Distillerias Ayala,

vs.

obnoxious

the

circumstances.

Internal

of

of

case

The Manila Wine

Coissioner
1415,

provisions

in

facts

4 -

vs.

DECISION
CTA CASE NO.

3814
-

the

reasonable

needs

5 -

of

the

of reasonable

or unreasonable

or

one

surplus

is

relative

of

situation

or

for

unreasonable

/CCA

9th,

Mertens,
case,

Vol.

purpose
under

it

the

of

this

to

contends

and

plant
that

of

find

significance,

income

Section

/2d/

one

i_J_y_

988

In
no

instant
it

or

was

of
25

its
of

tires

investment

formed

for

the

stockholders

the

Tax

stresses

substantial

the

the

manufacturing

petitioner

Code.
on

dividends

jeopardizing
surplus

other

evidence

was

words,
of

tax

its
to
its

plowed

petitioner
avoidance

law.

petitioner's
it

is

clearly

in

been

expansion.

for

125

have

as contemplated under the

We

of

that

is

be

since

without

claims

in

~_j,_J_J_g_r.:_~_q __!:l ___ __Q~

that

declaring

there

826;

holding

on

possible

extent

might

mere

argument,

yearly

operations
back

tax

provisions

support

not

of avoiding

the

policy

could

"reasonable"

Petitioner

purpose

not

profits

reasonable

aff' d

asserts

and

of

____9._f ____ .f~_ g_~.r.-~_L ____.t!:l~..9__nt~-----.I~--><--~-~--t9..D..,

360>.

the

question

<!'.J.J:.JJ...t~-~----c.::-~------- 9-~ ----l'tlj_U_~

1266,

b~-~-

p.

for

vehicles

company,

To

7,

be

B. T. A.

B. T. A.

invariably

established
for

30

1942/;

word

business,

another.

e _r.:__!:)_g__y_~_!:_t9...!:1_ '5.___, _________.l_T_l~_ ,_,

42

would

one

in

C.::gr.:P..~----b.!:..9 ..! _,

accumulation
The

fact.

What

term.

The

business.

will

3~ ?

contention
be

noted

that

of

little

Section

25

DECISION
CTA CASE NO. 3814
-

of

the

Ta><

Code

what

may

be

<1>

the

fact

company
(2)

of

the

to

purpose

of
it

although

of

for

the

is

not

it

accumulation

petitioner,

formed
on

holding

into

be

on 1 y

to

it
to

reasonable

needs

that

of for the
even

company

has

have
the

been
been

availed

absence

of

needs

policy

of

TAXPAYER'S DIVIDEND HISTORY

1969 TO 197~
Stock
DiYidtnd!

~ of
Cuh

P..i!~.r.tb.!.ll'-d .Ql~.l.!!,_nd

~ of
Balanct of
Stock
Surplus at
JU.d.d...nd' 1'-.r.lTI~

1968 (8tg. Surplus)

1969 p 10,226.498

P?..?t.~~.Je~!.QQ

p 4,321,054

p 5,917,~58

41. 37~

~7.86~

and

ruled

the records show:

Cuh
Ntt lncou
DiYidtnd
Y.!.r Afi,r.J.n~!. _la..~ ~'-ld.

unreasonable

business

dividend

are

shareholders

Thus,

in

and

criteria

say,

an

holding

profits

investment

purpose

the

mere

or availed

have

to

avoidance

reasonable

is

found

as

evidence)

are

its

or

not

may

beyond

Looking

That

ta><

proscribed

or

the

these

surp 1 us.

corporation
the

beyond

be

does
of

ta><

is

earnings

However,

avoiding

accumulation
that

that

still

of

f.?..~;..t"".

as

e><clusive.

may

possibilities

corporation

accumulate

not

two

indicative

the

business.

corporation

though

that

fact

are

us

considered

the

which

gives

<treated

permitted

6 -

27,941,685.00

an

<t:t~--~--~--

the

DECISION
CTA CASE NO.

3814

7 -

1970

17,176,270

6,426,468

7,101,070

37.41~

41.34~

31,890,417.00

1971

18,146,944

5,687,832

6,390,970

31.34~

35.22~

37,688,889.00

1972

18,556,184

8,427,551

4,899, 739

45.42~

26.40~

42,887,453.00

1973

18,602,314

9,270,306

5,389, 713

49.83~

28.97~

46,829,748.00

1974

33,952,814

10,197,336

5,928,680

30.03~

17.46~

64,686,546.00

1975

35,679,925

13,564,82?

26,086,200

38.Q;~

73.11~

~o, ~~,4H.Q.Q

P.J~, -~;.9.,~;~

P..
??_,_ ~9._s..,_~J.;
...
-

~~-~.,?.1 ~~--~~.9.

.E~--~-'--~ ~~--~1,.~

ISee Schedule I, p. 235, BIR rec.l

Analyzing
petitioner's
earned

net

period

in

the

dividends

in

P61,713,930

as

of

observed

can

1969 to
amount

the

distributing

end

it

from

total

foregoing

income,

surplus,

the

year

the

stock
or

cash

1975,

in

stock
be

seen

The

1975

by respondent's

was

that

petitioner had

P57,805,374

dividends

relation

dividends

P152,340,949

of

40.51~.

December

and

readily

of

amount

schedule

in
balance

the
of

earnings
cash

37.94~

and

amount

of

surplus

at

P60, 685,444.00.

examiners:

"xxx the
non - taxable
stock dividends
distribution of P61, 713,930 for the 7-year
period
is
not
allowed
as
dividends
paid
credit, per 1939 U.S. Tax Code <Sees. 27 (f)
and
115(f)
from
which
our
Tax
Code
was
patterned.
Such
being
the
case,
for
accumulated earning tax purposes, said tax
dividends
should
be
brought
back
to
the
surplus balance as of December 31,
1975,
and
subtracted
from
the
capital
stock
balance
as
of
the
same
date,
which
is
computed, thus -

3R4

and

during

paying
or

to

And,

DECISION
CTA CASE NO. 3814
-

B -

Balance of surplus 11 of
Deceaber 31, 1975
Balanct Shttt

P 60,685 1 444.00

Add back1 Stock Dividends distributed

(1969 to 1975)

---~Jt..7J~J..~J9.!.9.Q

Surplus Balance, as of
Dec. 31 1 1975 1 before
stock Dividend Diltribution (1969-1975)

P122,399 1 374.00

Capital Stock Balance

as of Dec. 31, 1975
Balanct Shtet 94,006,463.00
Deduct1 Stock Dividends
Distributed (1969 to
1975)

~h.n~.~J9..~Q9

Capital Stock Balance

as of Dtc. 31 1 1975,
before Stock Dividend
Distribution 32,292,533.00
"With the adjusted surplus balance of
P122,299,374
and
adjusted
capital
stock
balance of P32,292,533, both as of December
31, 1975, we shall now determine if there
is an unreasonable accumulation of surplus
as of the said date.
The amounts to be
restricted
from
this
surplus
are
the
working capital requirement of P83, 597,350
per S.G.V.
computation,
using the Bardahl
Formula,
the amount of P17,534, 147 yet to
be
spent
for
factory
expansion
program,
and
reserve
for
employee's
retirement
benefit of P5,359,931 or a total amount of
P106,490,888.00.
The remaining surplus is
therefore P15,908,486.00
<122,399,374 less
106,490, 888)
which
is
summarized
as
follows:

Adjusted Surplus balance

11 of Dec. 31, 1975 .......

1 .......... 1

Deduct: Restrictions to Surplus:

3R5

P122, 399,374.00

DECISION
CTA CASE NO.

3814
-

9 -

1> Working capital

rtquirtltnts per
S.S.V. Co1putation
lne page 12 of
Prottst Lttter) ,,,,,, P83,597 1 350

2> A1ount yet to be

spent on the 801
approval tKpansion
prograu
Total as
Approved - P35,ooo.oo
Lns1 Construction
in Progress
Recount- 371 456,853 17,5341 147
3) Rtservt for e1ployees 1
rttireunt btntfih

---~~-~~-~1-~~J

_J~.~.-4_~.~-'-.9.9

Fret Surplus as of Dectaber 31, 1975 ,,,,

~---~~~~~--~ ~-~

IEKh. H, pp. 327-239, BIR rtc,),

The problem
disputed the
as
the

of

flowed

back

in the fact that

manner respondent

December

stock

lies

31,

1975.

dividends
for

of

balance as

of December 31,

memorandum

cited

the

Philippine Supreme Court

of

Appeals

Respondent

to

support

Commissioner

arrives at the surplus

Petitioner

declared

purposes

petitioner has

should

not

determining
1975.

following
and
is
has

believes

the

the

Petitioner
decisions

been

surplus
in
of

its
the

United States Court

stand
done

have

that

that

"is

what

arbitrary

the
and

DECISION
CTA CASE NO.

3814
-

d e vo i d of leg a l
Sup r eme Cou r t

10 -

basis and that

in c ompliance with the

Ru lings the account

must

be computed as

follow s :

BIR adjusted surplus balance

Dece1btr 31 1 1975 (including
Stock Dividtnds for 1969-1975)

P122 1 3991 374.00

Dtduct1 Stock dividtnds for 1969-1975

Surplus Balance, Dece1ber 31, 1975
These Supreme

Court

rulings

and

US

tax

cases

are

as

follows:
<1>

Fisher V.

<2>

Col ssioner of Internal Revenue

vs. Manning, 66 SCRA 14

( 3)

Electric Regulator Corporation

vs. Coissioner of Internal Revenue
<U.S . Court of Appeals 2nd Circuit
No. 28, 609, August 11, 1964, 336 F.2d 339
CCH US Tax Cases Vol. 64 - 2>

( 4)

Soot Sand & Gravel Corp.

vs. Coissioner of Internal Revenue
<U.S. Court of Appeals, Fourth Circuit
No. 7886 January 11, 1960, 274 F.2d 495
American Federal Tax Reports
2d Series Volume 5

We
and

have

found

instant
except
s tock

reviewed

that

case.
for

Trinidad,

the

dividends

issues
The

the

cited

are not

Philippine

definition
is

43 Phil.

have

and
no

3~7

cases

973

by

'

petitioner

exactly similar to the

Supreme

Court

description
bearing

on

of
the

rulings
what

issues

DECISION
CTA CASE NO.

3814
-

raised
case

in

of

the

11 -

instant

Coissioner

case.
o

On

the

Internal

contrary,

Revenue

v.

in

the

Manning,

it was held by the Supreme Court:

"Where corporate earnings are used to
purchase
outstandinq
stock
treated
as
treasury
stock
as
a
technical,
but
prohibited
device,
to
avoid
effects
of
income
taxation,
distribution
of
said
corporate earnings
in the
form
of
stock
dividends
will
subject
stockholders
receiving them to income tax".

In
view

other

of

respondent

dividends

may

imposition
that

in

"the

words,

be

of

the

of

income
words

stock

that

the
as

of

said

device
on

will

out

decided

however

surplus

has

"anticipated
accrued
income

in

stock

avoid

the

Supreme

earnings

subject

so

Court
in

the

stockholders

income tax".

us

cited

favor

that

in

been

Tax

of the

this

Case

state

franchise

US

the

the

it

Appellate
was

accumulated

definitely

current

mortgage,

of

taxpayer,

case

intended

substantial

expenses,
taxes,

of

the

stockholder

Philippine

althouqh
Court

supports

to

the

corporate

dividends

the

the

even

declaration

taxation

of

receiving them to
Aqain

decision

used

distribution

form

this

to

found
cash

satisfy

liabilities

like

amortization,

federal

taxes,

sharing

profit

DECISION
CTA CASE NO. 3814
-

officers

plan,
bonus
able

to
to

being

prove the

US

Court

figures

of

in

taxpayer

surplus

determining

the

case

the

is

just

balance

placements.

was

surplus was

instant

the

the

Christmas

More

surplus

important,
balance

for

in question had adjusted the earned surplus

by

taxable

restoring

stock

supports

the

the

amounts

dividends

of

posit ion

taken

of

the

~49,820

Therefore,

(1957).

~490,000

amount

portion

the

for which the

in

in money market

the years

back

unlike

and

payable

Consequently,

purposes

retained,

invested
the

compensation

employees.

substantial

12 -

this
by

two

non -

<1952)

and

case

even

cited

respondent

that

the

of the stock dividend declared should be added

surplus

to

in

determination

the

of

unjust

accumulation of surplus profit.

Likewise,
statement

this

made

court

by

has

petitioner's

memorandum to the effect that

of

the

Court

surplus paid
had

been

of

as

Smoot

to

its

cant inued,

enlarged
its

US

for
Court

if

counsel

of

the

in

his

language

& Gravel,

plant

The
the
states

the

the

book

expansion,

inventories

business".

context
the

Sand

into

note

"To borrow the

stock dividends and

translated

receivables,
related

in

taken

or

Court

surplus

increased

other
was

quotation
further,

assets

quoted

out

will

be

"Where,

on

DECISION
CTA CASE NO. 3814
the

other

or

the

hand,

reflected

in

there

purpose

the

of

imposition of

to present

of

the

is

business
liquid

to

the

in

for

assets.

an

is

important

considering

view

of

or

the

that

the
the

The

in

that

its

in

order

in

issue nor

this
is

this

favor

of

part

of

that

foreseeable
the

cited

it

in

findings

reasonably

retention

Besides,

dividend is not

the

jurisprudence enunciated by the

"immediate

needs"

of

prevent

to

latter court decided

surtax

no

needs

shareholders".

quotation

the

immediate

indication
is

is

upon dividends which would

especially

particular case

there

accumulation

the actual

the

business

strong

income taxes

Court,

imposing

distributed

completeness

Supreme

is

surplus

of

in excess of the

foreseeable

corporation,

been

accumulation

liquid assets

reasonably

have

13 -

excess

case

stock

of the facts

of the case.
In
that

the

view

of

the

manner respondent

as

of December 31,

as

alleged

same

is

foregoing,

by

the

computed

i l 1 u s t rat e d
G..9.r'P9..r._~_t..J_Q_D_

in

t he

which

this

court

computed the

1975 is not

devoid of

petitioner.

On

pursuant

the

to

US

surplus

legal

basis

contrary,
Tax

Code

the
as

~j__~_c.;:!:_!.:j ~ ---B!'..9...1:l._L~..tQ..r..

case

have

persuasive

370

of

the

c i t ed

jurisprudence.

free

believes

effect

on

our

DECISION
CTA CASE NO. 3814
Furthermore,
to

the

is

its

of investments
records,

what

imposition

petitioner

14 strongly
of

the

in the money

and

The

is

against

continuing

market.

agree

renewal

As shown by the

31,
31,
31,
31,
31,
31,
31,

~~-J.~_T1_C:::._~.l... ~-~J-~.D.c;_~----$_b_.~g-~.

.
.
.
.
.
.
.

1959
1970
1971
1972
1973
1974
1975

also

of

show

placement

that
for

January to December 1975,

It

to

said money market placements are as follows:

records

balance

us

surtax

25"

substantial

As _q_f_
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.
Dec.

persuade

cannot

be

9, 131,273.00
9,000,000.00
5,017,392.00
13,500,000.00
15,000,000.00
20,449,204.00
22,500,000.00
petitioner' s

13

average

i. e. ,

months,

from

stood at P27,257,759.00.

denied

that

money

market

placement

in no way related to petitioner's business of tire

manufacturing.
that

Along

investment

corporation
securities

in
of

accumulation
business

of

82 L Ed

unrelated
beyond

been

held

enterprise

1354,

that
is

an
not

line,

earnings

unrelated

(He 1 vering

282,

this

v.

and

58 S

Ct

to

37.1

be

the

stock

or

indicate

Co.,

<1938>;

it

unrelated
for

held

of

needs

Grocery

in

been

in

usually

932

investment
deemed

or

reasonable

National

has

profits

business

business

the

it

the

of

the

304
has

an

US

also

business

reasonable

DECISION
CTA CASE NO.

3814
-

of

needs

the

business.
120

Coissioner,
in

The

Manila

issioner

invested

in

we

no

see

F<2d)

Wine

123

money

Circ.

Co.

&

1941/,

cited

The

v.

Inc.

v.

Revenue,

in

the

market

I'f

case

the

bar

at

unrelated

why

reason

/9th

Merchants,

surplus

Perry

<J. M.

Internal

o'f

pet it ioner' s

15 -

to

same

can

its

be

business,

cannot

be

made

available for dividend distribution.

To
the

summarize,

past

eight

petitioner
amount
stock

of

years

has
cash

of

dividends
of

accumulated

surplus

readily

recognizable

working

capital

program

and

actuation

in

years
has

by

including
invested

balance

in

fact

the

year

in

market

37?

items

for

as

expansion

cited

An
US

Tax

more

importantly

the

past

question,
its

as

such

benefits.

is

has

improperly

surplus

the

to

surplus
fact

approved

with

minimal

in

such

retirement

that

question,

average

the

to

801

substantially
money

an

for

compare

37.94~

deducting

This conclusion

the

in

Examiner

restrictions

that

declaring

computed

consonance

Court decisions.
supported

Revenue

by

employees

year

been

requirement,

done

the

leaving

40.51~

The

observed

averaging

equitably

and

has

including

21.55~.

reasonably

court

consistently

dividends

balance

this

seven

petitioner

surplus

placements

cash
which

DECISION
CTA CASE NO.

3814
-

are

entirely

that

of

different

investment

such

readily

available

proqram

is

instead

not

of

e)(pansion
years.

amount

necessary

to

finance

supported

by

decreasing
proqram,

it

has

the

corresponding

is

even

court

to

the

its

to

BOI

out
have

e)(pansion

presented

for

used

in

the

increasing

by

the

the

BIR

noted
in

reason
as

being

it' s

e)(cluded

so

figures

if

this

already

To

business.

is

cash

Morea v er,

e)(aminer

16 -

the

BOI

that

computation

approved

the

e)(pansion

pro qram.
On the
can

be

basis

safely

of the

analysis

assumed

that

and

observation,

petitioner

it

could

have

opinion

that

declared more cash dividends.

Viewed

in this

petitioner

had

beyond

business

that

its

light,

we

unreasonably

petitioner

needs.

had

Section 25 of the

not

Ta)( Code

presumption

that

the

purpose

preventing

ta)(

upon
Our

its

accumulation
and

without

for

earnings

accumulated
It

necessarily

places

1975,

the

it

the

upon

burden
it

was

follows

to

overcome

availed

imposition

which

of

of

for

income

shareholders.

attention

petitioner

of the

sustained

the

of

are

that
of

is

the

drawn
25'>'

surplus

basis,

but

in

to

surta)(
this

suffice

it

the

contention

for

of

unreasonable

case

was

to

state

erroneous
that

the

DECISION
CTA CASE NO.

3814
-

assessment

in

17 -

question

was

based

on

the

findings

substantiated by the evidence submitted to this court

and fortified by the law and jurisprudence.
WHEREFORE,
and

the

petitioner

ordered

in

to

representing

petition for
the

pay

review

above - entitled
of

the

the

25~

surtaK

and

is

case

disissed
is

hereby

P5,647,512.53
on

interest

unreasonable accuulation of surplus for 1975,

additional

5~

fro receipt

surcharge and

by the

of the respondent
1983,

pursuant

Section

and an

interest per annu on

petitioner of the

under his

to

14~

final

decision

letter dated February 7,

51(e) (2)

& (3)

of

National Internal Revenue Code.

SO ORDERED.
Quezon City,

Metro Manila,

August 26,

1991.

~~l2.~
ERNESTO D. ACOSTA
Associate Judge
WE CONCUR:

~~
(on official leave>
CONSTANTE C. ROAQUIN
Associate
Judge

37.1

its

the

DECISION
CTA CASE NO. 3814
-

18 -

C E R T I F I C A T I 0 N
I

hereby certify

that

this

decision

was

reached

after due consultation among the members of the Court

of

Tax

Appeals

in

accordance

with

Section

Article VIII of the Constitution.

Pr
iding Judge
Court of Tax Appeals

3 7S

13,