PASCUAL VS COMMISSION OF INTERNAL REVENUE G.R. No. 78133 October 18, 1988 Artic e 17!

9 Facts: Petioners Mariano Pascual and Renato Dragon bought 2 parcels of land from Santiago Bernardino, et al. The bought another ! parcels of land from "uan Ro#ue. The first 2 parcels of land $ere sold b petitioners to Marenir De%elopment &orporation, $hile the other ! $ere sold to 'rlinda Re es and Maria Samson. Petitioners reali(ed P)*+,22,.-. and P*.,... net profits in the t$o transactions. The capital gains ta/es $ere paid b petitioners in )0-! and )0-, b a%ailing of the ta/ amnesties granted in the said ears. 1o$e%er, petitioners $ere assessed and re#uired to pa a total amount of P).-, ).).-. b then acting B2R &ommissioner 'fren Plana as alleged deficienc corporate income ta/es for the ears )0*3 and )0-.. Petitioners protested the said assessment asserting that the ha%e a%ailed of ta/ amnesties $a bac4 in )0-,. Respondent &ommissioner informed petitioners that in the ears )0*3 and )0-., petitioners as co5o$ners in the real estate transactions formed an unregistered partnership or 6oint %enture ta/able as a corporation under Section 2.7b8 and its income $as sub6ect to the ta/es prescribed under Section 2,, both of the 9ational internal Re%enue &ode: that the unregistered partnership $as sub6ect to corporate income ta/ as distinguished from profits deri%ed from the partnership b them $hich is sub6ect to indi%idual income ta/: and that the a%ailment of ta/ amnest under PD no. 2!, as amended, b petitioners relie%ed petitioners of their indi%idual income ta/ liabilities but did not relie%e from them the ta/ liabilit of the unregistered partnership. Petitioner filed a petition for re%ie$ $ith the &ourt of Ta/ ;ppeals $hich affirmed the decision ta4en b respondent commissioner. 2ssue: <=9 the parties formed an unregistered partnership> 1eld: 9o. Ratio: There is no e%idence that petitioners entered into an agreement to contribute mone , propert or industr to a common fund, and that the intended to di%ide the profits among themsel%es. Respondent commissioner and?or his representati%e 6ust assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co5o$ners thereof. The sharing of returns does not itself establish a partnership $hether or not the persons sharing therein ga%e a 6oint or common right or interest in the propert . There must be a clear intent to form a partnership, the e/istence of a 6uridical personalit different from the indi%idual partners, and the freedom of each part to transfer or assign the $hole propert . There is clear e%idence of co5o$nership bet$een the petitioners. The t$o isolated transactions $hereb the purchased properties and sold the same a fe$ ears thereafter did not thereb ma4e them partners. The shared in the gross5profits as co5o$ners and paid their capital gains ta/es on their net profits and a%ailed of the ta/ amnest thereb . The cannot be considered to ha%e formed an unregistered partnership $hich is thereb liable for corporate income ta/, as the respondent commissioner proposes.