Professional Documents
Culture Documents
Toda
G.R. No. 147188
NATURE: This Court is called upon to determine in this case whether the
tax planning scheme adopted by a corporation constitutes tax evasion
that would justify an assessment of deficiency income tax
Altonaga paid
CIC filed corporate annual income tax return for 1999, declaring its gain
from the sale of the real property in the amount of PHP 75,728,021. After
crediting withholding taxes of PHP 254,497, it paid PHP 26,341,207 for
its real taxable income of PHP 75,987,725.
On July 1990, Mr. Toda sold his entire shares of stocks in Cibeles
Incorporated to Mr. Choa for PHP 12.5M, as evidenced by a Deed of Sale
of Shares of Stocks.
In the meanwhile, Mr. Toda sold all his shareholdings in the insurance
company to a certain Mr. Choa. A deed of sale was concluded between
them for Mr. Todas shareholdings in the insurance company. Thereafter,
BIR assessed the insurance company deficiency income tax arising from
the sale of the subject real properties. Three years thereafter, Mr. Toda
died.
Tax avoidance is the legal utilization of the tax regime to one's own
advantage, to reduce the amount of tax that is payable by means that are
within the law. Tax evasion is the general term for efforts by individuals,
firms, trusts and other entities to evade taxes by illegal means. Tax
evasion
usually
entails
taxpayers
deliberately
misrepresenting
or
concealing the true state of their affairs to the tax authorities to reduce
their tax liability, and includes, in particular, dishonest tax reporting
(such as declaring less income, profits or gains than actually earned; or
overstating deductions).
Tax evasion connotes the integration of three factors:
(1) the end to be achieved, i.e., the payment of less than that known by
the taxpayer to be legally due, or the non-payment of tax when it is
shown that a tax is due; (2) an accompanying state of mind which is
described as being "evil," in "bad faith, " "willful," or "deliberate and not
accidental"; and (3) a course of action or failure of action which is
unlawful.
All factors are present in the case at bar. The scheme resorted to by CIC
in making it appear that there were two sales of the properties is tainted
with fraud.
It is obvious that the objective of the sale to Altonaga was to reduce the
amount of tax to be paid. The transfer to RMI would result to a 5%
individual Capital Gains Tax, instead of a 35% Corporate Income Tax. It
was for the sole purpose of creating a tax shelter. Altonaga never
controlled the property. The sale was a tax ploy, a sham, without
business purpose and economic substance.