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    Digest - Pascual Vs CIR

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    Petitioners bought and sold land in separate transactions in 1968 and 1970, realizing profits. The Commissioner assessed deficiency corporate income taxes, arguing the transactions formed an unregistered partnership subject to such taxes. The Court held that no partnership existed, as there was no agreement to contribute to a common fund or divide profits, merely isolated co-ownership. While co-owners can share profits, this does not alone constitute a partnership. The Commissioner could not consider them a partnership liable for corporate taxes.

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    Digest - Pascual Vs CIR

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    remrase
    107 views2 pages
    Petitioners bought and sold land in separate transactions in 1968 and 1970, realizing profits. The Commissioner assessed deficiency corporate income taxes, arguing the transactions formed an unregistered partnership subject to such taxes. The Court held that no partnership existed, as there was no agreement to contribute to a common fund or divide profits, merely isolated co-ownership. While co-owners can share profits, this does not alone constitute a partnership. The Commissioner could not consider them a partnership liable for corporate taxes.

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    3. Digest_Pascual vs CIR

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    Petitioners bought and sold land in separate transactions in 1968 and 1970, realizing profits. The Commissioner assessed deficiency corporate income taxes, arguing the transactions formed an unregistered partnership subject to such taxes. The Court held that no partnership existed, as there was no agreement to contribute to a common fund or divide profits, merely isolated co-ownership. While co-owners can share profits, this does not alone constitute a partnership. The Commissioner could not consider them a partnership liable for corporate taxes.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    107 views2 pages

    Digest - Pascual Vs CIR

    Uploaded by

    remrase
    Petitioners bought and sold land in separate transactions in 1968 and 1970, realizing profits. The Commissioner assessed deficiency corporate income taxes, arguing the transactions formed an unregistered partnership subject to such taxes. The Court held that no partnership existed, as there was no agreement to contribute to a common fund or divide profits, merely isolated co-ownership. While co-owners can share profits, this does not alone constitute a partnership. The Commissioner could not consider them a partnership liable for corporate taxes.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 2

    MARIANO P. PASCUAL and RENATO P. DRAGON vs.

    THE COMMISSIONER OF
    INTERNAL REVENUE and COURT OF TAX APPEALS
    G.R. No. 78133 October 18, 1988

    Facts: Petitioners bought two (2) parcels of land from Santiago Bernardino and another
    three (3) parcels of land from Juan Roque. The first two parcels of land were sold by
    petitioners in 1968 to Marenir Development Corporation, while the three parcels of land
    were sold by petitioners to Erlinda Reyes and Maria Samson on Petitioners realized a
    net profit in the sale made in 1968 in the amount of P165,224.70, while they realized a
    net profit of P60,000.00 in the sale made in 1970. The corresponding capital gains taxes
    were paid by petitioners in 1973 and 1974 by availing of the tax amnesties granted in
    the said years.

    However, in a letter dated March 31, 1979 of then Acting BIR Commissioner Efren I.
    Plana, petitioners were assessed and required to pay a total amount of P107,101.70 as
    alleged deficiency corporate income taxes for the years 1968 and 1970. Petitioners
    protested the said assessment in a letter of June 26, 1979 asserting that they had
    availed of tax amnesties way back in 1974.

    In a reply of respondent Commissioner informed petitioners that in the years 1968 and
    1970, petitioners as co-owners in the real estate transactions formed an unregistered
    partnership or joint venture taxable as a corporation under Section 20(b) and its income
    was subject to the taxes prescribed under Section 24, both of the National Internal
    Revenue Code 1 that the unregistered partnership was subject to corporate income tax
    as distinguished from profits derived from the partnership by them which is subject to
    individual income tax; and that the availment of tax amnesty under P.D. No. 23, as
    amended, by petitioners relieved petitioners of their individual income tax liabilities but
    did not relieve them from the tax liability of the unregistered partnership. Hence, the
    petitioners were required to pay the deficiency income tax assessed.

    Issue: Whether or not the petitioners formed an unregistered partnership.

    Held: No, 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 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.

    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 partnership

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