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vs Yatco, 1946) ! Bar2016

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Koppel Philippines, Inc. vs Alfredo Yatco (Collector of Internal Latest Cases

Revenue)
GR L47673, 77 Phil 496, October 10, 1946
# 2016 - 2015

Facts:
# 2014 - 2013
Koppel Industrial Car and Equipment company (KICE), a foreign
company not doing business in the Philippines, owned 995
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shares out of the 1000 shares that comprise the capital stock of
KPI, a domestic corporation licensed as commercial broker in the
Philippines. The remaining 5 shares were owned by each of the
officers of KPI. KICE is in the business of selling railway
materials, machineries and supplies. Buyers in the Philippines,
when interested, asked for price quotations from KPI, and KPI
then cabled for the quotation desired from KICE. However, KPI
Creative Commons
quoted to the purchaser a selling price above the figures quoted
by KICE. On the basis of these quotations, orders were placed
by the local buyers. Between KICE and KPI, the arrangement
nonetheless was that KICE controls how much share of the profits Licensed under Creative
goes to KPI. For these transactions, the BIR treated KPI as a Commons Attribution-
subsidiary of KICE and collected from KPI the merchants’ sales NonCommercial 4.0
tax, which was a revenue law in force at the time the sales took International License.
place.
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KPI paid the taxes under protest, demanded for refund and
contended that KPI could not be liable for merchants’ sales tax Subscribe
because it was only acting as broker between KICE and the local
buyers. The lower court dismissed the complaint and ruled in
favor of the government.

Issue 1: W/N KPI did business with the local buyers as an agent
of KICE and not as broker

Held:
Yes. The facts that KICE unilaterally controls the amount of so-
called “share in the profits” of KPI and that KICE owns an
overwhelming majority (99.5%) of the capital stock of the KPI are
sufficient to conclude that the latter is a mere dummy, agent or
wholly-owned subsidiary of KICE. Such conclusion is based on
the doctrine that courts may ‘pierce the corporate veil’ to uncover
the true intents of these corporations.

Issue 2: W/N the application of “piercing the corporate veil”

doctrine is proper

Held:

Yes. With regards only to the transactions involved, KPI and KICE
were treated as one and the same so that taxes could be rightly
collected. The court has to disregard this “corporate fiction” to
prevent KICE / KPI from evading its taxes by contravening the
local internal revenue laws.

The court did not deny legal personality to KPI; in fact, it had no
power to hold so. The doctrine was used only to adjudge the
rights and liabilities of each parties in these kind of transactions.
##

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