COMMISSIONER OF INTERNAL REVENUE v.

NORTON and
HARRISON COMPANY. G.R. No. L-17618. August 31, 1964
FACTS:

Norton and Harrison is a corporation organized to buy and sell at wholesale and retail all kinds of
goods and merchandise. Jackbilt is also a corporation organized on for producing concrete blocks.
On 1948, the corporations entered into an agreement whereby Norton was made the sole and
exclusive distributor of concrete blocks manufactured by Jackbilt.

On 1949, Norton purchased all the outstanding shares of stock of Jackbilt. This prompted the CIR to
investigate and eventually asses Norton and Harrison for deficiency sales tax and surcharges.

ISSUE: Whether Norton and Harrison is liable for the deficiency sales tax and surcharges.

RULING:

YES. The Court ruled that Norton and Jackbilt should be considered as one. Jackbilt's outstanding
stocks, board of directors, finance of operations, employees, and compensation are all controlled by
Norton and Harrison. Jackbilt is merely an adjunct, business conduit or alter ego, of Norton and
Harrison and that the fiction of corporate entities, separate and distinct from each, should be
disregarded. This is a case where the doctrine of piercing the veil of corporate fiction, should be
made to apply.

By being separate entities, the corporations would have to pay lesser income tax. The combined
taxable Norton-Jackbilt income would subject Norton to a higher tax.