FREDERICK C. FISHER vs.

WENCESLAO TRINIDAD
SYLLABUS
LEGAL EFFECT OF WITHDRAWAL OF PROTEST. Where an income tax is paid under protest, and pending
an action brought to recover the money paid, the protestant withdraws his protest, in the absence of a
counterclaim, the legal effect of the withdrawal is to dismiss the action and leave the parties in the same situation
as if no protest was ever made.
STATEMENT
October 19, 1920, the plaintiff, a resident of the City of Manila, filed a complaint against the defendant as
Collector Internal Revenue, in which he alleged that he was a shareholder in the Philippine-American Drug
Company, a domestic corporation; that in the year 1919, he received from the drug company certificates of shares
of the par value of P24,800, as his proportionate share of a stock dividend, duly and lawfully declared by the
company; that the defendant erroneously and unlawfully, and against the will and protest of the plaintiff,
required him to pay an income tax on such stock dividend in the amount of P899.91; that the plaintiff paid the
tax under protest, and made a written demand upon the defendant for its return, which was refused, and plaintiff
prays for judgment for the amount, with interest and costs.
A demurrer was filed to the complaint upon the ground that it "does not state facts sufficient to constitute a cause
of action," which was sustained by the trial court, and the plaintiff, refusing to plead further, the complaint was
dismissed. From which ruling the plaintiff appealed to this court where the decision of the lower court was
reversed by this court, 1 and the case was remanded to the lower court for further proceedings not inconsistent
with the opinion.
The defendant filed an answer, denying all of the material allegations of the complaint, and as a further and
special defense, alleged that the stock dividend in question "represented and was accrued to the said PhilippineAmerican Drug Company since March 1, 1913, and distributed by said corporation among its stockholders;" that
the par value of the stock "did not exceed the amount of the earnings and profits actually earned by the
corporation;" and that by reason thereof the defendant levied the tax in question, which was paid under protest.
The case was tried and submitted upon an agreed statement of facts, and the court rendered judgment in favor
of the plaintiff for the amount of P899.91, without interest and costs, from which decision the defendant appeals,
contending:
"I. The court below erred in holding that the Philippine Legislature had no power to tax a stock dividend as
income in an income tax law.
"II. The court below erred in not passing on the constitutional question raised.
"III. The court below erred in rendering judgment for the plaintiff."
DECISION
December 14, 1923, after the appeal was perfected, the plaintiff wrote the defendant a letter in which he said:
"Please be advised that I hereby withdraw the protest heretofore made by on the 30th day of March, 1920, in
connection with income tax in the amount of P899.91 assessed by you on shares of the Philippine-American Drug
Company of the par value of P24,800."
This was later confirmed by another letter addressed to this court stating in substance that the plaintiff had
withdrawn and did not rely upon his protest because he had since sold the stock in question. Notwithstanding
that fact, the Attorney-General insists upon a decision by this court on the merits, and in particular as to the
constitutionality of the law and the legal right of the defendant to levy and collect the tax in question.
The plaintiff contends that the record now presents a moot case, and for such reason there is nothing left for this
court to decide. That contention must be sustained. The payment of the money under protest was the basis of
plaintiff's action, without which it could not be sustained. His protest is not withdrawn. The legal effect of it is to
withdraw his complaint and to place the whole matter in the same position as if no protest had ever been made.
It must be conceded that in the absence of a protest the action could not be maintained. In other words, the
plaintiff is now in court seeking to recover money which was not paid under protest. It is true that the plaintiff
obtained judgment against the defendant in the lower court, but in legal effect the withdrawal of the protest was
a waiver of all of plaintiff's rights under that judgment. For such reason, there is nothing left for this court to
decide.
Without passing upon the merits of the question involved or the constitutionality of the act or the right of the
defendant to levy the tax in question, the judgment of the lower court is reversed, and plaintiff's complaint is
dismissed, with judgment for costs in both this and the lower court against the plaintiff and in favor of the
defendant. So ordered.

CIR V. PROCTER AND GAMBLE 204 SCRA 378

FACTS:
PMC paid a 25-35% tax on its income for a relevant year. Thereafter, deriving at its net income, it declared
dividends for the benefit of PMCUSA. From this declared dividends, it paid a 25% tax, as per taxation laws. The
company did the same for the next few quarters. Then, contending that it is the withholding agent for the tax
paid on the dividends paid to PMC-USA, it requested for the refund of its alleged overpayments of taxes. The
company was denied the refund and coursing through the CTA, the latter ruled in its favor.
HELD:
The submission of the Commissioner of Internal Revenue that PMC-Phil. is but a withholding agent of the
government and therefore cannot claim reimbursement of the alleged over paid taxes, is completely meritorious.
The real party in interest being the mother corporation in the United States, it follows that American entity is
the real party in interest, and should have been the claimant in this case.
Closely intertwined with the first assignment of error is the issue of whether or not PMC-U.S.A. is a non-resident
foreign corporation under Section 24(b)(1) of the Tax Code (the subsidiary of an American) a domestic corporation
domiciled in the United States, is entitled under the U.S. Tax Code to a United States Foreign Tax Credit
equivalent to at least the 20 percentage paid portion (of the 35% dividend tax) spared or waived as otherwise
considered or deemed paid by the government. The law pertinent to the issue is Section 902 of the U.S. Internal
Revenue Code, as amended by Public Law 87-834, the law governing tax credits granted to U.S. corporations on
dividends received from foreign corporations, which to the extent applicable reads:
SEC. 902 - CREDIT FOR CORPORATE STOCKHOLDERS IN FOREIGN CORPORATION.
(a) Treatment of Taxes Paid by Foreign Corporation - For purposes of this subject, a domestic corporation which
owns at least 10 percent of the voting stock of a foreign corporation from which it receives dividends in any taxable
year shall(1)
to the extent such dividends are paid by such foreign corporation out of accumulated profits [as defined
in subsection (c) (1) (a)] of a year for which such foreign corporation is not a less developed country corporation,
be deemed to have paid the same proportion of any income, war profits, or excess profits taxes paid or deemed to
be paid by such foreign corporation to any foreign country or to any possession of the United States on or with
respect to such accumulated profits, which the amount of such dividends (determined without regard to Section
78) bears to the amount of such accumulated profits in excess of such income,
war profits, and excess profits taxes (other than those deemed paid); and
(2)
to the extent such dividends are paid by such foreign corporation out of accumulated profits [as defined
in subsection (c) (1) (b)] of a year for which such foreign corporation is a less-developed country corporation, be
deemed to have paid the same proportion of any income, war profits, or excess profits taxes paid or deemed to be
paid by such foreign corporation to any foreign country or to any possession of the United States on or with respect
to such accumulated profits, which the amount of such dividends bears to the amount of such accumulated profits.
xxx xxx xxx
(c) Applicable Rules
(1) Accumulated profits defined - For purpose of this section, the term 'accumulated profits' means with respect to
any foreign corporation. (A) for purposes of subsections (a) (1) and (b) (1), the amount of its gains, profits, or
income computed without reduction by the amount of the income, war profits, and excess profits taxes imposed
on or with respect to such profits or income by any foreign country.... ; and
(B) for purposes of subsections (a) (2) and (b) (2), the amount of its gains, profits, or income in excess of the income,
was profits, and excess profits taxes imposed on or with respect to such profits or income.
The Secretary or his delegate shall have full power to determine from the accumulated profits of what year or
years such dividends were paid, treating dividends paid in the first 20 days of any year as having been paid from

the accumulated profits of the preceding year or years (unless to his satisfaction shows otherwise), and in other
respects treating dividends as having been paid from the most recently accumulated gains, profits, or earnings.
There is nothing in the aforecited provision that would justify tax return of the disputed 15% to the private
respondent. Furthermore, as ably argued by the petitioner, the private respondent failed to meet certain
conditions necessary in order that the dividends received by the nonresident parent company in the United States
may be subject to the preferential 15% tax instead of 35%. Among other things, the private respondent failed: (1)
to show the actual amount credited by the U.S. government against the income tax due from PMC-U.S.A. on the
dividends received from private respondent; (2) to present the income tax return of its mother company for 1975
when the dividends were received; and (3) to submit any duly authenticated document showing that the U.S.
government credited the 20% tax deemed paid in the Philippines.

Silkair (Singapore) Pte. Ltd., v. Commissioner of Internal Revenue G.R. No.184398, February 25, 2010
FACTS: Silkair, a foreign corporation organized under the laws of Singapore is an online international carrier
plying the Singapore-Cebu-Singapore and Singapore-Cebu-Davao-Singapore routes. Silkair filed with the BIR an
administrative claim for the refund of Three Million Nine Hundred Eighty-Three Thousand Five Hundred Ninety
Pesos and Forty-Nine Centavos (P3,983,590.49) in excise taxes which it allegedly erroneously paid on its
purchases of aviation jet fuel from Petron Corporation from June to December 2000. Since the BIR took no action
on petitioners claim for refund, petitioner sought judicial recourse. CTA First Division ruled that Silkair was
qualified for tax exemption under the provisions of Section 135 of the National Internal Revenue Code and Art. 4
of the Air Transport Agreement between the Philippines and Singapore but not entitled thereto for failure to
present proof that it was authorized to operate in the Philippines during the period material to the case due to
non-admission of some of its exhibits which were merely photocopies. The said exhibits were Silkairs Certificate
of Registration from the SEC and operating permit from the Civil Aeronautics Board (CAB). CTA En Banc denied
the petition for review on the ground, among others, of failure to prove that it was authorized to operate in the
Philippines for the period June to December 2000 and further ruled that Silkair was not the proper party to file
the instant claim for refund.
ISSUE:
Whether Silkair has substantially proven its authority to operate in the Philippines [by invoking the
principle of judicial notice].
RULING: No. The CTA cannot take judicial notice of Silkairs SEC Registration, previously offered and admitted
in evidence in similar cases before the CTA. A court is not compelled to take judicial notice of pieces of evidence
offered and admitted in a previous case unless the same are properly offered or have accordingly complied with
the requirements on the rules of evidence. In other words, the evidence presented in the previous cases cannot be
considered in the instant case without being offered in evidence. The documents are not among the matters
which the law mandatorily requires the court to take judicial notice of, without any introduction of evidence.
Neither could it be said that petitioners SEC Registration and operating permits from the CAB are documents
which are of public knowledge, capable of unquestionable demonstration, or ought to be known to the judges
because of their judicial functions, in order to allow the CTA to take discretionary judicial notice of the said
documents. Moreover, a hearing is necessary before judicial notice of any matter may be taken by the court. This
requirement of a hearing is needed so that the parties can be heard thereon if such matter is decisive of a material
issue in the case.
Silkair cannot rely on the principle of judicial notice so as to evade its responsibility of properly complying with
the rules of evidence.
TAN V. CIR GR L-109289, OCTOBER 3, 1994
FACTS:
This case seeks to assail the constitutionality of Republic Act No. 7496, also commonly known as the Simplified
Net Income Taxation Scheme ("SNIT"), amending certain provisions of the National Internal Revenue Code and,
in G.R. No. 109446, the validity of Section 6, Revenue Regulations No. 2-93, promulgated by public respondents
pursuant to said law.

The several propositions advanced by petitioners revolve around the question of whether or not public respondents
have exceeded their authority in promulgating Section 6, Revenue Regulations No. 2-93, to carry out Republic
Act No. 7496.
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.
The real objection of petitioners is focused on the administrative interpretation of public respondents that would
apply SNIT to partners in general professional partnerships.
HELD:
The Court, first of all, should like to correct the apparent misconception that general professional partnerships
are subject to the payment of income tax or that there is a difference in the tax treatment between individuals
engaged in business or in the practice of their respective professions and partners in general professional
partnerships. The fact of the matter is that 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.
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.
We can well appreciate the concern taken by petitioners if perhaps we were to consider Republic Act No. 7496 as
an entirely independent, not merely as an amendatory, piece of legislation. The view can easily become myopic,
however, when the law is understood, as it should be, as only forming part of, and subject to, the whole income
tax concept and precepts long obtaining under the National Internal Revenue Code. To elaborate a little, the
phrase "income taxpayers" is an all embracing term used in the Tax Code, and it practically covers all persons
who derive taxable income. The law, in levying the tax, adopts the most comprehensive tax situs of nationality
and residence of the taxpayer (that renders citizens, regardless of residence, and resident aliens subject to income
tax liability on their income from all sources) and of the generally accepted and internationally recognized income
taxable base (that can subject non-resident aliens and foreign corporations to income tax on their income from
Philippine sources). In the process, the Code classifies taxpayers into four main groups, namely: (1) Individuals,
(2) Corporations, (3) Estates under Judicial Settlement and (4) Irrevocable Trusts (irrevocable both as to corpus
and as to income).
Partnerships are, under the Code, either "taxable partnerships" or "exempt partnerships." Ordinarily,
partnerships, no matter how created or organized, are subject to income tax (and thus alluded to as "taxable
partnerships") which, for purposes of the above categorization, are by law assimilated to be within the context of,
and so legally contemplated as, corporations. Except for few variances, such as in the application of the
"constructive receipt rule" in the derivation of income, the income tax approach is alike to both juridical persons.
Obviously, SNIT is not intended or envisioned, as so correctly pointed out in the discussions in Congress during
its deliberations on Republic Act 7496, aforequoted, to cover corporations and partnerships which are
independently subject to the payment of income tax.
"Exempt partnerships," upon the other hand, are not similarly identified as corporations nor even considered as
independent taxable entities for income tax purposes. A general professional partnership is such an example. 4
Here, the partners themselves, not the partnership (although it is still obligated to file an income tax return
[mainly for administration and data]), are liable for the payment of income tax in their individual capacity

computed on their respective and distributive shares of profits. In the determination of the tax liability, a partner
does so as an individual, and there is no choice on the matter. In fine, under the Tax Code on income taxation,
the general professional partnership is deemed to be no more than a mere mechanism or a flow-through entity in
the generation of income by, and the ultimate distribution of such income to, respectively, each of the individual
partners.
Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above standing rule as now so
modified by Republic Act No. 7496 on basically the extent of allowable deductions applicable to all individual
income taxpayers on their non-compensation income. There is no evident intention of the law, either before or
after the amendatory legislation, to place in an unequal footing or in significant variance the income tax treatment
of professionals who practice their respective professions individually and of those who do it through a general
professional partnership.

CIR V. VISAYAS ELECTRIC 23 SCRA 715

FACTS:
Visayas Electric was given legislative franchise to operate and maintain an electric light, heat, and power system
in the City of Cebu, certain municipalities in the Province of Cebu, and other surrounding places. In a board of
directors' meeting, respondent company established a pension fund, known as the "Employees' Reserve for
Pensions." Said fund is for the benefit of its "present and future" employees, in the event of retirement, accident
or disability. Every month thereafter an amount has been set aside for this purpose. It is taken from the gross
operating receipts of the company. This reserve fund was later invested by the company in stocks of San Miguel
Brewery, Inc., for which dividends have been regularly received. But these dividends were not declared for tax
purposes.

It was in a letter that the Auditor General gave notice that as the company has retained full control of the fund,
therefore, the dividends are not tax exempt; but that such dividends may be excluded from gross receipts for
franchise tax purposes, provided the same are declared for income tax purposes.
In pursuance of the above letter, the Provincial Auditor of Cebu allowed the company the option to declare the
dividends either as part of the company's income for income tax purposes or as part of its income for franchise tax
purposes. The company elected the latter. However, as per report of a revenue examiner, it was found out that
the company was the full custodian of the funds and thus, the corporate income tax was imposed on the same.
HELD:
The disputed income are not receipts, revenues or profits of the company. They do not go to the general fund of
the company. They are dividends from the San Miguel Brewery, Inc. investment which form part of and are added
to the reserve pension fund which is solely for the benefit of the employees, "to be distributed among the
employees."
Not escaping notice is that by the resolution of respondent company's board and the setting aside of monthly
amounts from its gross operating receipts for that fund, said company was merely acting, with respect to such
fund, as trustee for its employees. For, indeed, the intention to establish a trust in favor of the employees is clear.
A valid express trust has thus been created. And, for tax purposes, the employees' reserve fund is a separate
taxable entity. Respondent company then, while retaining legal title and custody over the property, holds it in
trust for the beneficiaries mentioned in the resolution creating the trust, in the absence of any condition therein
which would, in effect, destroy the intention to create a trust.
Given the fact that the dividends are returns of the trust estate and not of the grantor company, we must say that
petitioner misconceived the import of the law when he assessed said dividends as part of the income of the
company. Similarly, the tax court should not have considered them at all as the company's "receipts, revenues
and profits" which are exempt from income tax.

CIR V. CA, CTA, GCL RETIREMENT PLAN 207 SCRA 487

FACTS:
Private Respondent, GCL Retirement Plan (GCL, for brevity) is an employees' trust maintained by the employer,
GCL Inc., to provide retirement, pension, disability and death benefits to its employees. The Plan as submitted
was approved and qualified as exempt from income tax by Petitioner Commissioner of Internal Revenue in
accordance with Rep. Act No. 4917.
Respondent GCL made investsments and earned therefrom interest income from which was witheld the fifteen
per centum (15%) final witholding tax imposed by Pres. Decree No. 1959.
Respondent GCL filed with Petitioner a claim for refund in the amounts of P1,312.66 withheld by Anscor Capital
and Investment Corp., and P2,064.15 by Commercial Bank of Manila. On 12 February 1985, it filed a second
claim for refund of the amount of P7,925.00 withheld by Anscor, stating in both letters that it disagreed with the
collection of the 15% final withholding tax from the interest income as it is an entity fully exempt from income
tax as provided under Rep. Act No. 4917 in relation to Section 56 (b)of the Tax Code.
The refund requested having been denied, Respondent GCL elevated the matter to respondent Court of Tax
Appeals (CTA). The latter ruled in favor of GCL, holding that employees' trusts are exempt from the 15% final
withholding tax on interest income and ordering a refund of the tax withheld.
HELD:
It is to be noted that the exemption from withholding tax on interest on bank deposits previously extended by
Pres. Decree No. 1739 if the recipient (individual or corporation) of the interest income is exempt from income
taxation, and the imposition of the preferential tax rates if the recipient of the income is enjoying preferential
income tax treatment, were both abolished by Pres. Decree No. 1959. Petitioner thus submits that the deletion of
the exempting and preferential tax treatment provisions under the old law is a clear manifestation that the single
15% (now 20%) rate is impossible on all interest incomes from deposits, deposit substitutes, trust funds and
similar arrangements, regardless of the tax status or character of the recipients thereof. In short, petitioner's
position is that from 15 October 1984 when Pres. Decree No. 1959 was promulgated, employees' trusts ceased to
be exempt and thereafter became subject to the final withholding tax.
To begin with, it is significant to note that the GCL Plan was qualified as exempt from income tax by the
Commissioner of Internal Revenue in accordance with Rep. Act No. 4917 approved on 17 June 1967. This law
specifically provided:
Sec. 1. Any provision of law to the contrary notwithstanding, the retirement benefits received by officials and
employees of private firms, whether individual or corporate, in accordance with a reasonable private benefit plan
maintained by the employer shall be exempt from all taxes and shall not be liable to attachment, levy or seizure
by or under any legal or equitable process whatsoever except to pay a debt of the official or employee concerned
to the private benefit plan or that arising from liability imposed in a criminal action; . . . (emphasis ours).
In so far as employees' trusts are concerned, the foregoing provision should be taken in relation to then Section
56(b) (now 53[b]) of the Tax Code, as amended by Rep. Act No. 1983, supra, which took effect on 22 June 1957.
This provision specifically exempted employee's trusts from income tax and is repeated hereunder for emphasis:
Sec. 56. Imposition of Tax. (a) Application of tax. The taxes imposed by this Title upon individuals shall apply to
the income of estates or of any kind of property held in trust.
xxx xxx xxx
(b) Exception. The tax imposed by this Title shall not apply to employee's trust which forms part of a pension,
stock bonus or profitsharing plan of an employer for the benefit of some or all of his employees . . .
The tax-exemption privilege of employees' trusts, as distinguished from any other kind of property held in trust,
springs from the foregoing provision. It is unambiguous. Manifest therefrom is that the tax law has singled out
employees' trusts for tax exemption.

And rightly so, by virtue of the raison de'etre behind the creation of employees' trusts. Employees' trusts or benefit
plans normally provide economic assistance to employees upon the occurrence of certain contingencies,
particularly, old age retirement, death, sickness, or disability. It provides security against certain hazards to
which members of the Plan may be exposed. It is an independent and additional source of protection for the
working group. What is more, it is established for their exclusive benefit and for no other purpose.
The tax advantage in Rep. Act No. 1983, Section 56(b), was conceived in order to encourage the formation and
establishment of such private Plans for the benefit of laborers and employees outside of the Social Security Act.
It is evident that tax-exemption is likewise to be enjoyed by the income of the pension trust. Otherwise, taxation
of those earnings would result in a diminution accumulated income and reduce whatever the trust beneficiaries
would receive out of the trust fund. This would run afoul of the very intendment of the law.
The deletion in Pres. Decree No. 1959 of the provisos regarding tax exemption and preferential tax rates under
the old law, therefore, can not be deemed to extent to employees' trusts. Said Decree, being a general law, can not
repeal by implication a specific provision.

OA V. CIR 45 SCRA 74
FACTS:
Petitioners were surviving heirs of Julia Baales. An action for partition of estate was instituted wherein Oa
was appointed as the administrator. He was also appointed as the guardian of the minor children. No partition
took place however. Instead, the funds and properties were used to increase income. It was invested in many
things. The income derived was then divided equally among the petitioners. This prompted the Commissioner
to hold that there was a formed unregistered partnership and subjected them to corporate income tax.
HELD:
The petitioners pose for our resolution the following questions: (1) Under the facts found by the Court of Tax
Appeals, should petitioners be considered as co-owners of the properties inherited by them from the deceased
Julia Buales and the profits derived from transactions involving the same, or, must they be deemed to have
formed an unregistered partnership subject to tax under Sections 24 and 84(b) of the National Internal Revenue
Code? (2) Assuming they have formed an unregistered partnership, should this not be only in the sense that they
invested as a common fund the profits earned by the properties owned by them in common and the loans granted
to them upon the security of the said properties, with the result that as far as their respective shares in the
inheritance are concerned, the total income thereof should be considered as that of co-owners and not of the
unregistered partnership? And (3) assuming again that they are taxable as an unregistered partnership, should
not the various amounts already paid by them for the same years 1955 and 1956 as individual income taxes on
their respective shares of the profits accruing from the properties they owned in common be deducted from the
deficiency corporate taxes, herein involved, assessed against such unregistered partnership by the respondent
Commissioner?
It is thus incontrovertible that petitioners did not, contrary to their contention, merely limit themselves to holding
the properties inherited by them. Indeed, it is admitted that during the material years herein involved, some of
the said properties were sold at considerable profit, and that with said profit, petitioners engaged, thru Lorenzo
T. Oa, in the purchase and sale of corporate securities. It is likewise admitted that all the profits from these
ventures were divided among petitioners proportionately in accordance with their respective shares in the
inheritance. In these circumstances, it is Our considered view that from the moment petitioners allowed not only
the incomes from their respective shares of the inheritance but even the inherited properties themselves to be
used by Lorenzo T. Oa as a common fund in undertaking several transactions or in business, with the intention
of deriving profit to be shared by them proportionally, such act was tantamonut to actually contributing such
incomes to a common fund and, in effect, they thereby formed an unregistered partnership within the purview of
the above-mentioned provisions of the Tax Code.
It is but logical that in cases of inheritance, there should be a period when the heirs can be considered as coowners rather than unregistered co-partners within the contemplation of our corporate tax laws aforementioned.

Before the partition and distribution of the estate of the deceased, all the income thereof does belong commonly
to all the heirs, obviously, without them becoming thereby unregistered co-partners, but it does not necessarily
follow that such status as co-owners continues until the inheritance is actually and physically distributed among
the heirs, for it is easily conceivable that after knowing their respective shares in the partition, they might decide
to continue holding said shares under the common management of the administrator or executor or of anyone
chosen by them and engage in business on that basis. Withal, if this were to be allowed, it would be the easiest
thing for heirs in any inheritance to circumvent and render meaningless Sections 24 and 84(b) of the National
Internal Revenue Code.

EVANGELISTA V. COLL 102 PHIL 140

FACTS:
Petitioners borrowed money from their father and with collective effort bought several real properties and then
leased the same. They derived income from it and divided it amongst themselves. Thereafter, they were assessed
for payment of corporate tax. They assail the said assessment by saying that they are not a partnership but mere
co-owners.
HELD:
To begin with, the tax in question is one imposed upon "corporations", which, strictly speaking, are distinct and
different from "partnerships". When our Internal Revenue Code 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. Thus, for instance, section 24 of said Code exempts from the
aforementioned tax "duly registered general partnerships which constitute precisely one of the most typical forms
of partnerships in this jurisdiction. Likewise, as defined in section 84(b) of said Code, "the term corporation
includes partnerships, no matter how created or organized." This qualifying expression 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.
Again, pursuant to said section 84(b), the term "corporation" includes, among other, joint accounts, (cuentas en
participation)" and "associations," none of which has a legal personality of its own, independent of that of its
members. Accordingly, the lawmaker could not have regarded that personality as a condition essential to the
existence of the partnerships therein referred to. In fact, as above stated, "duly registered general copartnerships"
which are possessed of the aforementioned personality have been expressly excluded by law (sections 24 and 84
[b] from the connotation of the term "corporation" It may not be amiss to add that petitioners' allegation to the
effect that their liability in connection with the leasing of the lots above referred to, under the management of
one person even if true, on which we express no opinion tends to increase the similarity between the nature of
their venture and that corporations, and is, therefore, an additional argument in favor of the imposition of said
tax on corporations.
For purposes of the tax on corporations, our National Internal Revenue Code, includes these partnerships with
the exception only of duly registered general copartnerships within the purview of the term "corporation." It is,
therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said Code is concerned
and are subject to the income tax for corporations.

PASCUAL V. CIR 166 SCRA 560

FACTS:
Petitioner bought several parcels of land and afterwards, sold the same to incur profits. They were later on
assessed by the Commissioner for deficiency corporate taxes to which they opposed, averring that they are merely
co-owners and not an unregistered partnership or joint venture, to be taxed as a corporation.
HELD:
In 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. Respondent
commissioner and/ or his representative just assumed these conditions to be present on the basis of the fact that

petitioners purchased certain parcels of land and became co-owners thereof. In Evangelists, there was a series of
transactions where petitioners purchased twenty-four (24) lots showing that the purpose was not limited to the
conservation or preservation of the common fund or even the properties acquired by them. The character of
habituality peculiar to business transactions engaged in for the purpose of gain was present.
The sharing of returns does not in itself establish a partnership whether or not the persons sharing therein have
a joint or common right or interest in the property. There must be a clear intent to form a partnership, the
existence of a juridical personality different from the individual partners, and the freedom of each party to
transfer or assign the whole property.
In the present case, there is clear evidence of co-ownership between the petitioners. There is no adequate 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 make them partners.
They shared in the gross profits as co- owners and paid their capital gains taxes on their net profits and availed
of the tax amnesty thereby. Under the circumstances, they cannot be considered to have formed an unregistered
partnership which is thereby liable for corporate income tax, as the respondent commissioner proposes.
And even assuming for the sake of argument that such unregistered partnership appears to have been formed,
since there is no such existing unregistered partnership with a distinct personality nor with assets that can be
held liable for said deficiency corporate income tax, then petitioners can be held individually liable as partners
for this unpaid obligation of the partnershipIn the instant case, petitioners bought two (2) parcels of land in 1965.
They did not sell the same nor make any improvements thereon. In 1966, they bought another three (3) parcels
of land from one seller. It was only 1968 when they sold the two (2) parcels of land after which they did not make
any additional or new purchase. The remaining three (3) parcels were sold by them in 1970. The transactions
were isolated. The character of habituality peculiar to business transactions for the purpose of gain was not
present.