Wise & Co., Inc. et. al (Plaintiff-appellants) were stockholders of Manila Wine Merchants, Ltd., aforeign corporation duly authorized to do business in the Philippines. The Board of Directors of ManilaWine Merchants, Ltd., (HK Co.), recommended to the stockholders that they adopt resolutions necessaryto sell its business and assets to Manila Wine Merchants, Inc., a Philippine corporation, (PH Co.), for thesum of P400,000. The HK Co. made a distribution from its earnings for the year 1937 to its stockholders. As a result of the sale of its business and assets to PH Co., a surplus was realized and the HK Co.distributed this surplus to the shareholders (Appellants included).Philippine income tax had been paid by HK Co. on the said surplus from which the said distributions weremade. At a special general meeting of the shareholders of the HK Co., the stockholders by resolutiondirected that the company be voluntarily liquidated and its capital distributed among the stockholders. The Appellants duly filed Income Tax Returns, on which the defendant, Meer (CIR) made deficiencyassessments. Plantiffs paid under written protest and sought recovery. CFI ruled in favor of CIR hencethe appeal. SC HELD : CFI judgment affirmed. (Subsequent Motion for Reconsideration by Wise, et. al. denied) ISSUES and RULINGS:1.) Appellants contend that the amounts received by them and on which the taxes in question wereassessed and collected were ordinary dividends ; CIR contends that they were liquidating dividends . SC: The distributions under consideration were not ordinary dividends. Therefore, they are taxable asliquidating dividends. It was stipulated in the deed of sale that the sale and transfer of the HK Co. shalltake effect on June 1, 1937. Distribution took place on June 8. They could not consistently deem all thebusiness and assets of the corporation sold as of June 1, 1937, and still say that said corporation, as agoing concern, distributed ordinary dividends to them thereafter. 2.) Are such liquidating dividends taxable income? SC: Income tax law states that Where a corporation, partnership, association, joint-account, or insurancecompany distributes all of its assets in complete liquidation or dissolution, the gain realized or losssustained by the stockholder, whether individual or corporation, is a taxable income or a deductible lossas the case may be. Appellants received the distributions in question in exchange for the surrender and relinquishment bythem of their stock in the HK Co. which was dissolved and in process of complete liquidation. That moneyin the hands of the corporation formed a part of its income and was properly taxable to it under theIncome Tax Law. When the corporation was dissolved and in process of complete liquidation and itsshareholders surrendered their stock to it and it paid the sums in question to them in exchange, atransaction took place. The shareholder who received the consideration for the stock earned that muchmoney as income of his own, which again was properly taxable to him under the Income Tax Law. 3.) Non-resident alien individual appellants contend that if the distributions received by them were to beconsidered as a sale of their stock to the HK Co., the profit realized by them does not constitute incomefrom Philippine sources and is not subject to Philippine taxes, "since all steps in the carrying out of thisso-called sale took place outside the Philippines." SC: This contention is untenable. The HK Co. was at the time of the sale of its business in thePhilippines, and the PH Co. was a domestic corporation domiciled and doing business also in thePhilippines. The HK Co. was incorporated for the purpose of carrying on in the Philippine Islands thebusiness of wine, beer, and spirit merchants and the other objects set out in its memorandum of association. Hence, its earnings, profits, and assets, including those from whose proceeds thedistributions in question were made, the major part of which consisted in the purchase price of thebusiness, had been earned and acquired in the Philippines. As such, it is clear that said distributions wereincome "from Philippine sources."