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[PARTNERSHIP DISTINGUISHED FROM] 2.

W/N they should pay the tax collectively or whether the latter should be prorated
13 JOSE GATCHALIAN, ET AL. vs. THE COLLECTOR OF INTERNAL REVENUE among them and paid individually.
April 29, 1939 | Imperial, J. |
Held:
Doctrine: Insert doctrine here 1. PARTNERSHIP
● It is admitted that if what was formed was a partnership, Gatchalian and Co.
Facts: would be liable. But if what was formed was merely a community of property,
● Gatchalian and company paid certain amounts ranging from P0.07 to P0.18 they are exempt from payment.
to enable them to buy a P2 sweepstakes ticket. ● The CIR collected the tax under section 10 of Act No. 2833, as last amended
● The ticket was registered in the name of Jose Gatchalian and Company. by section 2 of Act No. 37611.
● The ticket won one of the third prizes (P50,000). ● There is no doubt that if Gatchalian and Co. merely formed a community of
○ The corresponding check was drawn by the National Charity property they are exempt from the payment of income tax under the law.
Sweepstakes Office in favor of Jose Gatchalian & Company against ○ But according to the stipulation facts, they organized a partnership
the Philippine National Bank, which check was cashed by Jose of a civil nature because each of them put up money to buy a
Gatchalian & Company. sweepstakes ticket for the sole purpose of dividing equally the prize
● Gatchalian was required by the income tax examiner to file the which they may win, as they did in fact.
corresponding income tax return covering the prize won by Jose Gatchalian ○ The partnership was not only formed, but upon the organization
& Company. thereof and the winning of the prize, Jose Gatchalian personally
● The CIR made an assessment against Jose Gatchalian & Company appeared in the office of the Philippines Charity Sweepstakes, in
requesting the payment of the sum of P1,499.94 to the deputy provincial his capacity as co-partner, as such collected the prize, the office
treasurer of Pulilan, Bulacan. issued the check for P50,000 in favor of Jose Gatchalian and
● Gatchalian & Company requested from the CIR exemption from payment of company, and the said partner, in the same capacity, collected the
the income tax. said check.
○ The CIR denied their request and reiterated his demand. ○ All these circumstances repel the idea that they organized and
● In view of their failure to pay, the CIR issued a warrant of distraint and levy formed a community of property only.
against the property of Gatchalian and Company. 2. COLLECTIVELY
● To avoid embarrassment arising from the embargo of the property of their, ● Having organized and constituted a partnership of a civil nature, the said
Gatchalian and Company paid under protest P601.51 as part of the tax and entity is the one bound to pay the income tax.
penalties to the municipal treasurer and requested CIR that they be allowed ● There is no merit in their contention that the tax should be prorated among
to pay under protest the balance of the tax and penalties by monthly them and paid individually, resulting in their exemption from the tax.
installments.
○ Their request was granted subject to the condition that they file the Dispositive
usual bond secured by two solvent persons to guarantee prompt In view of the foregoing, the appealed decision is affirmed, with the costs of this
payment of each installment as it becomes due. instance to the plaintiffs appellants. So ordered.
○ Gatchalian and Company filed a bond to guarantee the payment of
the balance of the alleged tax liability by monthly installments at the
rate of P118.70 a month.
● Gatchalian and Company failed to pay the monthly installments so the CIR
ordered the municipal treasurer of Pulilan, Bulacan to execute the warrant of
distraint and levy issued against Gatchalian and Company.
● In order to avoid annoyance and embarrassment arising from the levy of
their property, Gatchalian and Co. paid under protest P1,260.93
representing the unpaid balance of the income tax and penalties demanded
by the CIR.
○ They then formally protested to the CIR against the payment of said
amount and requested the refund thereof but the CIR overruled the
protest and denied the refund.
1 SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon the total net
income received in the preceding calendar year from all sources by every corporation, joint-stock
Issue: company, partnership, joint account (cuenta en participacion), association or insurance
1. W/N Gatchalian and Co. formed a partnership or merely a community of property company, organized in the Philippine Islands, no matter how created or organized, but not
without a personality of its own. including duly registered general copartnership (compañias colectivas), a tax of three per
centum upon such income xxx