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Petitioners borrowed money from their father and bought several real properties. They appointed their brother (Simeon) as manager of the said properties. Respondent demanded the payment of income ta) oncorporations.
Petitioners borrowed money from their father and bought several real properties. They appointed their brother (Simeon) as manager of the said properties. Respondent demanded the payment of income ta) oncorporations.
Petitioners borrowed money from their father and bought several real properties. They appointed their brother (Simeon) as manager of the said properties. Respondent demanded the payment of income ta) oncorporations.
,petitioners, vs. THE COLLECTOR OF INTERNAL REVENUE and THE COURT OFTAX APPEALS, respondents. G.R. No. L-9996, Octob! "#, "9#$
Fact%& Petitioners borrowed sum of money from their father and together with their own personal funds theyused said money to buy several real properties. They then appointed their brother (Simeon) as manager of thesaid real properties with powers and authority to sell, lease or rent out said properties to third persons. Theyrealized rental income from the said properties for the period 1!"#1!.$n September %!, 1"! respondent &ollector of 'nternal (evenue demanded the payment of income ta) oncorporations, real estate dealer*s fi)ed ta) and corporation residence ta) for the years 1!"#1!. The letter of demand and corresponding assessments were delivered to petitioners on +ecember ,, 1"!, whereupon theyinstituted the present case in the &ourt of Ta) -ppeals, with a prayer that .the decision of the respondent contained in his letter of demand dated September %!, 1"!. be reversed, and that they be absolved from thepayment of the ta)es in /uestion. &T- denied their petition and subse/uent 0( and 1ew Trials were denied.2ence this petition. I%%'& 3hether or not petitioners have formed a partnership and conse/uently, are sub4ect to the ta) on corporations provided for in section %! of &ommonwealth -ct. 1o. !55, otherwise 6nown as the 1ational'nternal (evenue &ode, as well as to the residence ta) for corporations and the real estate dealers fi)ed ta). H(d& )ES. The essential elements of a partnership are two, namely7 (a) an a*!+nt to cont!,b't +on-,.!o.!t- o! ,nd'%t!- to a co++on /'nd 8 and (b) ,ntnt to d,0,d t1 .!o/,t% a+on* t1 cont!act,n*.a!t,% . The first element is undoubtedly present in the case at bar, for, admittedly, petitioners have agreed to,and did, contribute money and property to a common fund. 9pon consideration of all the facts andcircumstances surrounding the case, we are fully satisfied that their purpose was to engage in real estatetransactions for monetary gain and then divide the same among themselves, because of the followingobservations, among others7 (1) Said common fund was not something they found already in e)istence8 (%)They invested the same, not merely in one transaction, but in a series of transactions8 (,) The aforesaid lotswere not devoted to residential purposes, or to other personal uses, of petitioners herein.-lthough, ta6en singly, they might not suffice to establish the intent necessary to constitute a partnership, thecollective effect of these circumstances is such as to leave no room for doubt on the e)istence of said intent inpetitioners herein.:or purposes of the ta) on corporations, our 1ational 'nternal (evenue &ode, includes these partnerships ; with the e)ception only of duly registered general copartnerships ; within the purview of the term.corporation.. 't is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said&ode is concerned and are sub4ect to the income ta) for corporations G.R. No. $2"33 Octob! "2, "922 MARIANO P. PASCUAL and RENATO P. 4RAGON, petitioners, vs. THE COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents. :-&TS7 1. $n <une %%, 15", petitioners bought two (%) parcels of land from Santiago =ernardino, et al. and on 0ay %>, 155, they bought another three (,) parcels of land from <uan (o/ue. The first two parcels of land were sold by petitioners in 15> to0arenir +evelopment &orporation, while the three parcels of land were sold by petitioners to ?rlinda (eyes and 0aria Samson on 0arch 1,1@A. Petitioners realized a net profit in the sale made in 15> in the amount of P15",%%!.@A, while they realized a net profit of P5A,AAA.AA in the sale made in 1@A. The corresponding capital gains ta)es were paid by petitioners in 1@, and 1@! by availing of the ta) amnesties granted in the said years.2owever, in a letter dated 0arch ,1, 1@ of then -cting ='( &ommissioner ?fren '. Plana, petitioners were assessed and re/uired to pay a total amount of P1A@,1A1.@A as alleged deficiency corporate income ta)es for the years 15> and 1@A. %.respondent &ommissioner informed petitioners that in the years 15> and 1@A, petitioners as co#owners in the real estate transactions formed an unregistered partnership or 4oint venture ta)able as a corporation under Section %A(b) and its income was sub4ect to the ta)es prescribed under Section %!, both of the 1ational 'nternal (evenue &ode ,. 't ruled that on the basis of the principle enunciated in Evangelista 3 an unregistered partnership was in fact formed by petitioners which li6e a corporation was sub4ect to corporate income ta) distinct from that imposed on the partners. 'SS9?7 1.3B1 petitioners have formed co#ownership or an unregistered partnership. %. wBn are sub4ect to the ta) on corporations provided for in section %! of &ommonwealth -ct. 1o. !55 2?C+7 1. this is a clear evidence of co#ownership between the petitioners. 'n the present case, there is no evidence that petitioners entered into an agreement to contribute money, property or industry to a common fund, and that they intended to divide the profits among themselves. (espondent commissioner andB or his representative 4ust assumed these conditions to be present on the basis of the fact that petitioners purchased certain parcels of land and became co# owners thereof. 'n ?vangelista, there was a series of transactions where petitioners purchased twenty#four (%!) lots showing that the purpose was not limited to the conservation or preservation of the common fund or even the properties ac/uired by them. The character of habituality peculiar to business transactions engaged in for the purpose of gain was present. %. 1$.The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have a 4oint or common right or interest in the property. There must be a clear intent to form a partnership, the e)istence of a 4uridical personality different from the individual partners, and the freedom of each party to transfer or assign the whole property. There is no ade/uate basis to support the proposition that they thereby formed an unregistered partnership. The two isolated transactions whereby they purchased properties and sold the same a few years thereafter did not thereby ma6e them partners. They shared in the gross profits as co# owners and paid their capital gains ta)es on their net profits and availed of the ta) amnesty thereby. 9nder the circumstances, they cannot be considered to have formed an unregistered partnership which is thereby liable for corporate income ta), as the respondent commissioner proposes.