Case 23 Facts: in 1994, petitioner sought to invest in JAKA Equities Corporation (JEC), which was then planning to undertake

an initial public offering (IPO) and listing of its shares of stock with the Philippine Stock Exchange. petitioner proposed to subscribe to Five Hundred Eight Million Eight Hundred Six Thousand Two Hundred Pesos (P508,806,200.00) out of the increase in the authorized capital stock of JEC through a tax-free exchange under Section 34(c)(2) of the National Internal Revenue Code (NIRC) of 1977, as amended, which was effected by the execution of a Subscription Agreement and Deed of Assignment of Property in Payment of Subscription. Under this Agreement, as payment for its subscription, petitioner will assign and transfer to JEC shares of stock. The intended IPO and listing of shares of JEC did not materialize. However, JEC still decided to proceed with the increase in its authorized capital stock and petitioner agreed to subscribe thereto, but under different terms of payment. Thus, petitioner and JEC executed the Amended Subscription Agreement wherein the aboveenumerated RGHC, PGCI, and UCPB shares of stock were transferred to JEC. In lieu of the FEBTC shares, petitioner paid JEC. petitioner paid One basic documentary stamp tax inclusive of the 25% surcharge for late payment on the Amended Subscription Agreement. Petitioner, after seeing the RDOs certifications, the total amount of which was less than the actual amount it had paid as documentary stamp tax, concluded that it had overpaid. Petitioner subsequently sought a refund for the alleged excess documentary stamp tax and surcharges it had paid. Petitioners main contention in this claim for refund is that the tax base for the documentary stamp tax on the Amended Subscription Agreement should have been only the shares of stock in RGHC, PGCI, and UCPB that petitioner had transferred to JEC as payment for its subscription to the JEC shares, and should not have included the cash portion of its payment, based on Section 176 of the National Internal Revenue Code of 1977, as amended by Republic Act No. 7660, or the New Documentary Stamps Tax Law (the 1994 Tax Code), the law applicable at the time of the transaction. Petitioner argues that the cash component of its payment for its subscription to the JEC shares, totaling Three Hundred Seventy Million Seven Hundred Sixty-Six Thousand Pesos (P370,766,000.00) should not have been charged any documentary stamp tax. Petitioner claims that there was overpayment because the tax due on the transferred shares was only Five Hundred Ninety-Three Thousand Five Hundred Twenty-Eight and 15/100 Pesos (P593,528.15), as indicated in the certifications issued by RDO Esquivias. Petitioner alleges that it is entitled to a refund for the overpayment, which is the difference in the amount it had actually paid (P1,003,895.65) and the amount of documentary stamp tax due on the transfer of said shares (P593,528.15), or a total of Four Hundred Ten Thousand Three Hundred Sixty-Seven Pesos (P410,367.00). Petitioner explains that in this instance where shares of stock are used as subscription payment, there are two documentary stamp tax incidences, namely, the documentary stamp tax on the original issuance

of the shares subscribed (the JEC shares), which is imposed under Section 175; and the documentary stamp tax on the shares transferred in payment of such subscription (the transfer of the RGHC, PGCI and UCPB shares of stock from petitioner to JEC), which is imposed under Section 176 of the 1994 Tax Code. Petitioner argues that the documentary stamp tax imposed under Section 175 is due on original issuances of certificates of stock and is computed based on the aggregate par value of the shares to be issued; and that these certificates of stock are issued only upon full payment of the subscription price such that under the Bureau of Internal Revenues (BIRs). Respondent maintains that the documentary stamp tax imposed in this case is on the original issue of certificates of stock of JEC on the subscription by the petitioner of the P508,806,200.00 shares out of the increase in the authorized capital stock of the former pursuant to Section 175 of the NIRC. The documentary stamp tax was not imposed on the shares of stock owned by petitioner in RGHC, PGCI, and UCPB, which merely form part of the partial payment of the subscribed shares in JEC. Respondent avers that the amounts indicated in the Certificates of RDO Esquivias are the amounts of documentary stamp tax representing the equivalent of each group of shares being applied for payment. Considering that the amount of documentary stamp tax represented by the shares of stock in the aforementioned companies amounted only to P593,528.15, while the basic documentary stamp tax for the entire subscription of P508,806,200.00 was computed by respondents revenue officers to the tune of P803,116.72, exclusive of the penalties, leaving a balance of P209,588.57, is a clear indication that the payment made with the shares of stock is insufficient. ISSUE: whether or not petitioner is entitled to a partial refund of the documentary stamp tax and surcharges it paid on the execution of the Amended Subscription Agreement. RULING: In claims for refund, the burden of proof is on the taxpayer to prove entitlement to such refund. It was thus incumbent upon petitioner to show clearly its basis for claiming that it is entitled to a tax refund. the petitioner failed to do. In the case at bar, the rights and obligations between petitioner JAKA Investments Corporation and JAKA Equities Corporation are established and enforceable at the time the Amended Subscription Agreement and Deed of Assignment of Property in Payment of Subscription were signed by the parties and their witness, so is the right of the state to tax the aforestated document evidencing the transaction. DST is a tax on the document itself and therefore the rate of tax must be determined on the basis of what is written or indicated on the instrument itself independent of any adjustment which the parties may agree on in the future x x x. The DST upon the taxable document should be paid at the time the contract is executed or at the time the transaction is accomplished. The overriding purpose of the law is the collection of taxes. So that when it paid in cash the amount of P370,766,000.00 in substitution for, or replacement of the 1,313,176 FEBTC shares, its payment of P1,003,835.65 documentary stamps tax pursuant to Section 175 of NIRC is in order. Thus, applying the settled rule in this jurisdiction that, a claim for refund is in the nature of a claim for exemption, thus, should be construed in strictissimi juris against the taxpayer (Commissioner of Internal

Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332) and since the petitioner failed to adduce evidence that will show that it is exempt from DST under Section 199 or other provision of the tax code, the court ruled the focal issue in the negative. A documentary stamp tax is in the nature of an excise tax. It is not imposed upon the business transacted but is an excise upon the privilege, opportunity or facility offered at exchanges for the transaction of the business. It is an excise upon the facilities used in the transaction of the business separate and apart from the business itself. Documentary stamp taxes are levied on the exercise by persons of certain privileges conferred by law for the creation, revision, or termination of specific legal relationships through the execution of specific instruments. documentary stamp taxes are levied independently of the legal status of the transactions giving rise thereto. The documentary stamp taxes must be paid upon the issuance of the said instruments, without regard to whether the contracts which gave rise to them are rescissible, void, voidable, or unenforceable. The fact that it was petitioner and not JEC that paid for the documentary stamp tax on the original issuance of shares is of no moment, as Section 173 of the 1994 Tax Code states that the documentary stamp tax shall be paid by the person making, signing, issuing, accepting or transferring the property, right or obligation. petition is DISMISSED.