G.R. No. L-12752




Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-12752 March 31, 1965 THE COLLECTOR OF INTERNAL REVENUE, petitioner, vs. BINALBAGAN ESTATE, INC., respondent. R E S O L U T I O N^* BENGZON, J.P., J.: Petitioner has moved for reconsideration of our decision herein. We held that the acquisition cost of the 216,000 non-par value BISCOM shares which respondent Binalbagan Estate, Inc. acquired in exchange for its tangible assets and sugar quota, is the fair market value of said assets and sugar quota as of the time of the exchange. According to movant, however, the acquisition cost of the aforestated 216,000 BISCOM shares is the capital invested on, rather than the fair market value of, the assets given in exchange for them. Since the fair market value of the assets includes not only capital invested but also the increase in value, movant contends that to determine the true and actual gain realized from the subsequent sale of the BISCOM shares only the capital invested should be considered. Accordingly, movant argues that the effect of using the fair market value of the assets as the acquisition cost of the BISCOM shares would be to reduce the true and actual gain by the amount equivalent to the increase in value of the assets, thereby allowing Binalbagan to avoid the payment of the corresponding tax on said increase of value.1äwphï1.ñët We cannot agree with this contention. Such increase in value of the assets should have been taxed as profit realized by Binalbagan from the exchange of said assets from the BISCOM shares. Such tax fell due at the time of the exchange, or specifically not later than May 15, 1947. The same, therefore, is distinct from the tax on the profit from the sale of the BISCOM shares; so that, to assess the former as part of the latter, as pressed by the movant, would be inequitable and unfair, considering that prescription may have set in. The reason given by movant why no tax was separately imposed on the profit from the exchange of assets for stocks is that the same "was merely paper profit" because there was actually no money paid or received by the parties in the exchange. Since, in all dispositions of property by exchange no money changes hands, the profit derived therefrom would always be, in the words of movant, "merely paper profit." Consequently, if we were to sustain movant's proposition, no profit from any exchange of properties will be taxable. Such a view will render completely nugatory paragraph (c) of Section 35 of the National Internal Revenue Code, which provides for the rule in determining taxable gain when one property is exchanged for another. The National Assembly, in enacting the National Internal Revenue Code, could not have intended the aforestated paragraph to have absolutely no effect. The duty of this Court being to give effect, as far as possible, to the whole statute and every part thereof, we cannot accept movant's reasoning and disregard paragraph (c) of Section 35. WHEREFORE, the motion for reconsideration is hereby denied. So ordered. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal and Zaldivar, JJ., concur. Paredes, J., took no part. Footnotes ^Editor's Note: See main decision on p. 1, ante*. The Lawphil Project - Arellano Law Foundation