Evangelista, et al. v. CIR, GR No.

L-9996, October 15, 1957

Facts:
Herein petitioners seek a review of CTAs decision holding them liable for income tax, real estate dealers tax and
residence tax. As stipulated, petitioners borrowed from their father a certain sum for the purpose of buying real properties.
Within February 1943 to April 1994, they have bought parcels of land from different persons, the management of said
properties was charged to their brother Simeon evidenced by a document. These properties were then leased or rented to
various tenants.
On September 1954, CIR demanded the payment of income tax on corporations, real estate dealers fixed tax,
and corporation residence tax to which the petitioners seek to be absolved from such payment.

Issue: Whether petitioners are subject to the tax on corporations.

Ruling:
The Court ruled that with respect to the tax on corporations, the issue hinges on the meaning of the terms
corporation and partnership as used in Section 24 (provides that a tax shall be levied on every corporation no matter
how created or organized except general co-partnerships) and 84 (provides that the term corporation includes among
others, partnership) of the NIRC. Pursuant to Article 1767, NCC (provides for the concept of partnership), its essential
elements are: (a) an agreement to contribute money, property or industry to a common fund; and (b) intent to divide the
profits among the contracting parties.
It is of the opinion of the Court that the first element is undoubtedly present for petitioners have agreed to, and did,
contribute money and property to a common fund. As to the second element, the Court fully satisfied that their purpose
was to engage in real estate transactions for monetary gain and then divide the same among themselves as indicated by
the following circumstances:
1. The common fund was not something they found already in existence nor a property inherited by them pro
indiviso. It was created purposely, jointly borrowing a substantial portion thereof in order to establish said common fund;
2. They invested the same not merely in one transaction, but in a series of transactions. The number of lots
acquired and transactions undertake is strongly indicative of a pattern or common design that was not limited to
the conservation and preservation of the aforementioned common fund or even of the property acquired. In other
words, one cannot but perceive a character of habitually peculiar to business transactions engaged in the purpose
of gain;
3. Said properties were not devoted to residential purposes, or to other personal uses, of petitioners but were
leased separately to several persons;
4. They were under the management of one person where the affairs relative to said properties have been
handled as if the same belonged to a corporation or business and enterprise operated for profit;
5. Existed for more than ten years, or, to be exact, over fifteen years, since the first property was acquired,
and over twelve years, since Simeon Evangelista became the manager;
6. Petitioners have not testified or introduced any evidence, either on their purpose in creating the set up
already adverted to, or on the causes for its continued existence.

The collective effect of these circumstances is such as to leave no room for doubt on the existence of said intent in
petitioners herein.
Also, petitioners argument that their being mere co-owners did not create a separate legal entity was rejected
because, according to the Court, the tax in question is one imposed upon "corporations", which, strictly speaking, are
distinct and different from "partnerships". When the NIRC includes "partnerships" among the entities subject to the tax on
"corporations", said Code must allude, therefore, to organizations which are not necessarily "partnerships", in the
technical sense of the term. The qualifying expression found in Section 24 and 84(b) clearly indicates that a joint venture
need not be undertaken in any of the standard forms, or in conformity with the usual requirements of the law on
partnerships, in order that one could be deemed constituted for purposes of the tax on corporations. Accordingly, the
lawmaker could not have regarded that personality as a condition essential to the existence of the partnerships therein
referred to. For purposes of the tax on corporations, NIRC includes these partnerships - with the exception only of duly
registered general co partnerships - within the purview of the term "corporation." It is, therefore, clear that petitioners
herein constitute a partnership, insofar as said Code is concerned and are subject to the income tax for corporations.
As regards the residence of tax for corporations (Section 2 of CA No. 465), it is analogous to that of section 24
and 84 (b) of the NIRC. It is apparent that the terms "corporation" and "partnership" are used in both statutes with
substantially the same meaning. Consequently, petitioners are subject, also, to the residence tax for corporations.
Finally, on the issues of being liable for real estate dealers tax, they are also liable for the same because the
records show that they have habitually engaged in leasing said properties whose yearly gross rentals exceeds P3,000.00
a year.