AFISCO INSURANCE CORPORATION VS.

CA
GR NO. 112675 DATED JANUARY 25, 1999

Partnership taxable as a corporation, sec. 24 NIRC

FACTS: AFISCO, et al. are 41 domestic companies that issue risk insurance
policies for machines. These 41 companies entered into 2 Treaties with non-
resident foreign corporation, Munich. Such treaties required AFISCO. et al. to
form a Pool of Machinery Insurers, which said companies complied with Years
later,

BIR assessed the Pool of Machinery Insurers as a comonition of

(1) deficiency corporate taxes, and

(2) withholding taxes on dividends paid out to Munich and each of the 41 domestic
companies.

AFISCO, et al argue that they cannot be considered an informal partnership,

thus, they cannot be taxed as a corporation. Pursuant to this AFISCO, et al
filed a protest.

The CIR and the CA both DENIED such protest and ruled that the Pool of Machinery
Insurers was a partnership taxable as a corporation and the sind Poolis
collection of premiums on behalf of its members (AFISCO, et al.) was taxable
income.

ISSUE: WoN the Pool of Machinery Insurance, acting as a mere agent and performing
strictly administrative functions, and which did not sure or assume any risk in
its own name was a parmership or association subject to tax as a corporation

HELD: YES, it is a partnership/association; thus, it is taxable as a corporation

under Sec. 24.

The SC ruled that the ff factors indicate that the Pool is actually a partnership
association

(1) the pool has a common find consisting of money and other valuables that are
deposited in the name and credit of the pool:

(2) The pool functions through an executive board, which resembles the board of
directors of a corporation. Composed of one representative for each of the
ceding companies and

(3) The pool work is indispensable beneficial and economically useful to the
business of 41 insurance companies. et and Munich because without it they would
not have received their premiums.

DOCTRINE. Section 24 of the NIRC covers unregistered partnerships and even

associations or joint accounts, which had no legal personalities apart from
their individual members.

Furthermore, the term partnership includes a syndicate. group, pool, joint

venture or other unincorporated organization, through or by means of which any
business, financial operation, or venture is carried on.

The pool filed an inform return.

Q: Does tax on income and dividends amount to double taxation?

A: NO. Tax on income is different from tax on dividend because they have
different tax basis (Afisco Insurance Companies v. CA, G.R. No. 1123675, January
25, 1999).