MAZO, WINSTONEY MARIE S.

LAW 3-B

TAXATION 02

CASE DIGEST ON
#20 REYES V. CIR
G.R. NO. L-24020-21, July 29, 1968
FACTS:
Father and son, Florencio and Angel Reyes, herein petitioners, purchased a lot
and building in 1950 which they continued the leasing business of the previous
owner. Their building administrator, who collected the rents, kept its books and
records and rendered statements, reported an annual gross income of P90,000.00.
The CIR assessed them income tax, surcharge and compromise for the years 1951
to 1952 and 1955-1956 of P46,647.00 and P37,528.00 respectively. These tax
liabilities, according to the CIR, allegedly arising from the partnership formed by
the petitioners.
The appeal and subsequent motion for reconsideration by the petitioners with
the CTA, although the amounts reduced, were both denied. The CTA relying on the
provision of the NIRC which imposes income tax on corporations organized in, or
existing under the laws of the Philippines, no matter how created or organized but
not including registered general partnerships, a term, which according to the
second provision cited, includes partnerships no matter how created or organized,
,
Hence, this petition was filed before the Supreme Court. This time the
petitioners insisted that they could not be considered as a partnership as their
intention was not to engage in rental business collectively, but rather, divide and
use the building to house their own enterprises after 10 years. This intention was
expressed in an affidavit that they filed with the BIR. Therefore, they could not be
held liable to income tax for partnerships as embodied in the NIRC provision.
However, it was also noted that after almost 15 years from the acquisition of the
property there was no division made.
ISSUE:
Whether or not herein petitioners acquired the personality of a partnership
when they continue to earn income from the rents of the building they both owned
for almost 15 years for them to be subjected to income tax for corporations and
partnerships under the NIRC.
RULING:
Yes, the Supreme Court affirmed the ruling of the CTA conforming to the
rationale that the NIRC is clear and equivocal in its provisions that except for those
duly registered as general partnerships, a partnership, no matter how created or
organized is similarly taxed as a corporation. Hence, the father and son petitioners
were ordered to pay the reduced assessments with costs.