DIGEST NO.

EUFEMIA EVANGELISTA, MANUELA EVANGELISTA, and FRANCISCA EVANGELISTA ,

petitioners, vs.THE COLLECTOR OF INTERNAL REVENUE and THE COURT OF TAX
APPEALS, respondents. G.R. No. L-9996, October 15, 1957

Facts: Petitioners borrowed sum of money from their father and together with their own personal
funds they used said money to buy several real properties. They then appointed their brother
(Simeon) as manager of the said real properties with powers and authority to sell, lease or rent
out said properties to third persons. They realized rental income from the said properties for the
period 1945-1949.

On September 24, 1954 respondent Collector of Internal Revenue demanded the payment of
income tax on corporations, real estate dealer's fixed tax and corporation residence tax for the
years 1945-1949. The letter of demand and corresponding assessments were delivered to
petitioners on December 3, 1954, whereupon they instituted the present case in the Court of Tax
Appeals, with a prayer that "the decision of the respondent contained in his letter of demand dated
September 24, 1954" be reversed, and that they be absolved from the payment of the taxes in
question. CTA denied their petition and subsequent MR and New Trials were denied. Hence this
petition.

Issue: Whether or not petitioners have formed a partnership and consequently, are subject to the
tax on corporations provided for in section 24 of Commonwealth Act. No. 466, otherwise known as
the National Internal Revenue Code, as well as to the residence tax for corporations and the real
estate dealers fixed tax.

Held: YES. The essential elements of a partnership are two, namely: (a) an agreement to
contribute money, property or industry to a common fund; and (b) intent to divide the
profits among the contracting parties. The first element is undoubtedly present in the case at
bar, for, admittedly, petitioners have agreed to, and did, contribute money and property to a
common fund. Upon consideration of all the facts and circumstances surrounding the case, we
are fully satisfied that their purpose was to engage in real estate transactions for monetary gain
and then divide the same among themselves, because of the following observations, among
others: (1) Said common fund was not something they found already in existence; (2) They
invested the same, not merely in one transaction, but in a series of transactions; (3) The aforesaid
lots were not devoted to residential purposes, or to other personal uses, of petitioners herein.

Although, taken singly, they might not suffice to establish the intent necessary to constitute a
partnership, the collective effect of these circumstances is such as to leave no room for doubt on
the existence of said intent in petitioners herein.

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.

DIGEST No. 2

Facts:
Herein petitioners seek a review of CTA's decision holding them liable for income tax, real estate
dealer's 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
dealer's 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 dealer 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.