Tax case digests for Pre-finals (2013) Tan vs. Del Rosario., Jr.

(237 SCRA 324) This is a consolidated case, second one pertains to the GPP Facts:
Petitioners, assailing Section 6 of Revenue Regulations No. 2-93, argue that public respondents (Secretary of Finance and the CIR) have exceeded their rule-making authority in applying Simplified Net Income Taxation scheme to general professional partnership.

The questioned regulation reads: Sec. 6. General Professional Partnership — The general professional partnership (GPP) and the partners comprising the GPP are covered by R. A. No. 7496. Thus, in determining the net profit of the partnership, only the direct costs mentioned in said law are to be deducted from partnership income. Also, the expenses paid or incurred by partners in their individual capacities in the practice of their profession which are not reimbursed or paid by the partnership but are not considered as direct cost, are not deductible from his gross income.

A general professional partnership, unlike an ordinary business partnership (which is treated as a corporation for income tax purposes and so subject to the corporate income tax), is not itself an income taxpayer. The income tax is imposed not on the professional partnership, which is tax exempt, but on the partners themselves in their individual capacity computed on their distributive shares of partnership profits.

Sec. 23. Tax liability of members of general professional partnerships. — (a) Persons exercising a common profession in general partnership shall be liable for income tax only in their individual capacity, and the share in the net profits of the general professional partnership to which any taxable partner would be entitled whether distributed or otherwise, shall be returned for taxation and the tax paid in accordance with the provisions of this Title. (b) In determining his distributive share in the net income of the partnership, each partner — (1) Shall take into account separately his distributive share of the partnership's income, gain, loss, deduction, or credit to the extent provided by the pertinent provisions of this Code, and (2) Shall be deemed to have elected the itemized deductions, unless he declares his distributive share of the gross income undiminished by his share of the deductions.

There is, then and now, no distinction in income tax liability between a person who practices his profession alone or individually and one who does it through partnership (whether registered or not) with others in the exercise of a common profession. Indeed, outside of the gross compensation income tax and the final tax on passive investment income, under the present income tax system all individuals deriving income from any source whatsoever are treated in almost invariably the same manner and under a common set of rules.

Nitafan vs. CIR (1987)
Petitioners, the duly appointed and qualified Judges presiding over Branches 52, 19 and 53, respectively, of the Regional Trial Court, National Capital Judicial Region, all with stations in Manila, seek to prohibit and/or perpetually enjoin respondents, the Commissioner ofInternal Revenue and the Financial Officer of the Supreme Court, from making any deduction of withholding taxes from their salaries. They submit that "any tax withheld from their emoluments orcompensation as judicial officers constitutes a decrease or diminution of their salaries, contrary to the provision of Section 10, Article VIII of the 1987 Constitution mandating that during their continuance in office, their salary shall not be decreased," even as it is anathema to the Ideal of an independent judiciary envisioned in and by said Constitution." It may be pointed out that, early on, the Court had dealt with the matter administratively in response to representations that the Court shall direct its Finance Officer to discontinue the withholding of taxes from salaries of members of the Bench. Thus, on June 4, 1987, it was reaffirmed by the Court en banc. ISSUE: Whether or not members of the Judiciary are exempt from income taxes. HELD: No. The debates, interpellations and opinions expressed regarding the constitutional provision in question until it was finally approved by the Commission disclosed that the true intent of the framers of the 1987 Constitution, in adopting it, was to make the salaries of members of the Judiciary taxable. The ascertainment of that intent is but in keeping with the fundamental principle of constitutional construction that the intent of the framers of the organic law and of the people adopting it should be given effect. The primary task in constitutional construction is to ascertain and thereafter assure the realization of the purpose of the framers and of the people in the adoption of the Constitution. It may also be safely assumed that the people in ratifying the Constitution were guided mainly by the explanation offered by the framers. The ruling that "the imposition of income tax upon the salary of judges is a dimunition thereof, and so violates the Constitution", in Perfecto vs. Meer, as affirmed in Endencia

vs. David must be declared discarded. The framers of the fundamental law, as the alter ego of the people, have expressed in clear and unmistakable terms the meaning and import of Section 10, Article VIII, of the 1987 Constitution that they have adopted

Stated otherwise, we accord due respect to the intent of the people, through the discussions and deliberations of their representatives, in the spirit that all citizens should bear their aliquot part of the cost of maintaining the government and should share the burden of general income taxation equitably. Therefore, the petition for Prohibition is hereby dismissed.

Borromeo vs. CSC (199 SCRA 911) CIR vs. CA (1991) Paper Industries Corp of the Phil vs. CA (250 SCRA 459) CIR vs. ICC

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