BIR Ruling [UN-434-95]

December 6, 1995 BIR RULING [UN-434-95] Sycip, Gorres Velayo & Co. P.O. Box 256 Makati Central Post Office 1299 Metro Manila Attention: Atty . C . P . Noel Gentlemen : This refers to your letters dated May 30 and July 12, 1991 protesting the proposed assessment against your client, Carriedo Towers Developers, Inc. involving amount of P172,570.00 representing documentary stamp tax for the years 1988 and 1989 on the ground that the same has no legal and factual bases. It appears that on November 21, 1988, a Deed of Assignment covering seven (7) parcels of land situated in Sta. Cruz, Manila was executed by Cityland Development Corporation (CDC) in favor of Carriedo Towers Developers, Inc. as partial payment of its subscription to the shares of stock of Carriedo Towers Developers, Inc.; that it paid the documentary stamp tax on the Deed of Assignment based on the par value of the shares; that the Examiners in their Memo-Report dated February 14, 1991 stated that "they failed to pay the documentary stamp tax on the shares of stocks", hence the proposed assessment for P172,570.00 as documentary stamp tax for the years 1988 and 1989; that in the letters dated May 30 and July 12, 1991, counsel for the taxpayer protested the proposed assessment on the ground that since the value of the property transferred to CDC to Carriedo Towers Developers, Inc. represents only a partial payment of its subscription, Carriedo Towers Developers, Inc. did not issue any certificate of stock to CDC, hence, no documentary stamp tax was paid; and that on December 29, 1989, Carriedo Towers Developers, Inc. merged with Cityplans, Inc. with the latter as surviving corporation. Pursuant to Section 64 of the Corporation Code, no certificate of stock shall be issued to a subscriber until the full amount of his subscription together with interest and expense (in case of delinquent shares) if any, is due has been paid. It is clear that if a subscriber has not fully paid its subscription, no certificate of stock shall be issued. It is only upon full payment of the subscription that a certificate of stock can be issued. (see also Commissioner of Internal Revenue vs. Construction Resources of Asia, Inc., CTA Case No. L-68230, November 25, 1986) In the instant case, it appears that Carriedo Towers Developers, Inc. did not issue any certificate of stock in favor of CDC because the latter has only made a partial payment of its subscription. Hence, no certificate of stock was issued to CDC on which the documentary stamp tax can be imposed. In view thereof, this Office is of the opinion as it hereby holds that your client, Carriedo Towers Developers, Inc. is not liable to the payment of the aforementioned documentary stamp tax liability involving the amount of P172,570.00 for the years 1988 and 1989. Accordingly, the said case is now considered closed. cdtech Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue