1. What is income or capital?

Q: What is income tax?

A: A tax on all yearly profits arising from property, profession,
trade or business, or a tax on person’s income, emoluments,
profits and the like (Fisher v. Trinidad, GR L-19030. Oct. 20, 1922)
Q: What is the nature of income tax?
A: It is generally regarded as an excise tax. It is not levied upon
persons, property, funds or profits but on the privilege of
receiving said income or profit.

Q: What is income?
A: It refers to all wealth which flows into the taxpayer other than
as mere return of capital. It includes the forms of income
specifically described as gains and profits, including gains derived
from the sale or other disposition of capital assets (Sec. 36, RR
No.2).
An income is an amount of money coming to a person or
corporation within a specified time, whether as payment for
services, interest or profit from investment. Unless otherwise
specified, income means cash or its equivalent (Conwi v. CIR, GR
48532, Aug. 31, 1992).
Income is a flow of service rendered by capital by payment of
money from it or any benefit rendered by a fund of capital in
relation to such fund through a period of time (Madrigal v.
Rafferty, GR 12287, Aug. 8, 1918).

Q: How does “income” differ from “capital”? (1995 Bar

Question)
A: CAPITAL INCOME
Constitutes the Any wealth which
investment which is flows into the taxpayer
the source of income other than a mere
return of capital
Is the wealth Is the service of wealth
Is the tree Is the fruit
Fund Flow