Col V Batangas Digest

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\ql \li1298\sb0\sl-276\slmult0 \par\pard\ql\li1298\sb0\sl-276\slmult0 \par\pard\
ql\li1298\sb0\sl-276\slmult0 \par\pard\ql\li1298\sb224\sl-276\slmult0 \up0 \expn
dtw-3\charscalex100 \ul0\nosupersub\cf1\f2\fs24 Col\ul0\nosupersub\cf2\f3\fs24 l
ector of Internal Revenue\ul0\nosupersub\cf1\f2\fs24 v. Batangas \ul0\nosu
persub\cf2\f3\fs24 Transport Company and Laguna-Tayabas Bus \par\pard\ql \l
i1298\sb22\sl-230\slmult0 \up0 \expndtw-2\charscalex100 Company \ul0\nosupersub\
cf3\f4\fs20 (1958) Joint Emergency Operation; ruling based on an \ul0\nosupersub
\cf4\f5\fs20 agency case: evangelista v. cir \par\pard\qj \li1298\ri1167\sb132\s
l-180\slmult0 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf5\f6\fs16 Caveat:
I\u8217?m not 100% sure if I got the right case, in the sense that this is an OG
case \u8230? and I got mine off lawphil.net. Rest assured nag-match \up0 \expnd
tw-3\charscalex100 naman ang title and doctrine involved, so most likely tama na
man. \par\pard\ql \li1298\sb0\sl-253\slmult0 \par\pard\ql\li1298\sb187\sl-253\sl
mult0 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf6\f7\fs22 Doctrines: \par\
pard\ql \li1658\ri1135\sb106\sl-230\slmult0\tx2018\tx2018 \up0 \expndtw0\charsca
lex103 \ul0\nosupersub\cf7\f8\fs20 \u8226?\ul0\nosupersub\cf8\f9\fs20 \ul0\nosu
persub\cf3\f4\fs20
A \ul0\nosupersub\cf4\f5\fs20 joint venture \ul0\nosupersu
b\cf3\f4\fs20 need not be undertaken in any of the \ul0\nosupersub\cf4\f5\fs20 s
tandard form\ul0\nosupersub\cf3\f4\fs20 , or in conformity with the \ul0\nosuper
sub\cf4\f5\fs20 usual \line\tab \up0 \expndtw-1\charscalex100 requirements of th
e law on partnerships\ul0\nosupersub\cf3\f4\fs20 , in order that one could be de
emed constituted for the purposes \line \tab \up0 \expndtw-2\charscalex100 of th
e \ul0\nosupersub\cf4\f5\fs20 tax on corporations\ul0\nosupersub\cf3\f4\fs20 . \
par\pard\ql \li1658\ri1133\sb10\sl-230\slmult0\tx2018\tx2018 \up0 \expndtw0\char
scalex100 \ul0\nosupersub\cf7\f8\fs20 \u8226?\ul0\nosupersub\cf8\f9\fs20 \ul0\n
osupersub\cf3\f4\fs20
Although \ul0\nosupersub\cf4\f5\fs20 no legal personali
ty may have been created\ul0\nosupersub\cf3\f4\fs20 by the Joint Emergency Oper
ation, nevertheless, \line\tab \up0 \expndtw-2\charscalex100 said Joint Emergenc
y Operation joint venture, or joint management operated the business affairs of
the two \line \tab \up0 \expndtw-2\charscalex100 companies as though they co

nstituted a single entity, company or partnership, thereby obtaining \pa
r\pard\ql \li2018\sb1\sl-217\slmult0 \up0 \expndtw-3\charscalex100 \ul0\nosupers
ub\cf4\f5\fs20 substantial economy and profits in the operation. \par\pard\ql \l
i1298\sb0\sl-253\slmult0 \par\pard\ql\li1298\sb1\sl-253\slmult0 \up0 \expndtw-3\
charscalex100 \ul0\nosupersub\cf6\f7\fs22 Facts: \par\pard\qj \li1298\ri1122\sb1
07\sl-253\slmult0 \up0 \expndtw-2\charscalex100 This case is an appeal of the CT
A decision which reversed the assessment and decision of the Collector \up0 \exp
ndtw-2\charscalex100 of Internal Revenue (CIR) assessing and demanding from resp
ondents Batangas Transpo and Laguna Bus \up0 \expndtw-2\charscalex100 the amount
of Php54,143.54 which represent deficiency income tax and compromise for the ye
ar 1946-\line \up0 \expndtw-2\charscalex100 1949. Pending then appeal to the CTA
, the assessment was increased to P148,890.14 \par\pard\qj \li1298\ri1672\sb242\
sl-260\slmult0 \up0 \expndtw-2\charscalex100 Respondent bus companies are 2 dist
inct and separate corporations, engaged in the business of land \up0 \expndtw-2\
charscalex100 transportation by means of motor busses and operating distinct and
separate lines.\par\pard\sect\sectd\sbknone\cols2\colno1\colw4311\colsr160\coln
o2\colw7289\colsr160\ql \li1298\sb0\sl-253\slmult0 \par\pard\ql \li1298\sb0\sl-2
53\slmult0 \par\pard\ql \li1298\sb29\sl-253\slmult0 \up0 \expndtw-1\charscalex10
0 Incorporation\par\pard\ql \li1298\sb11\sl-253\slmult0 \up0 \expndtw-1\charscal
ex100 Paid up capital (each)\par\pard\ql \li1298\sb6\sl-253\slmult0 \up0 \expndt
w0\charscalex101 Pre - war Head Office\par\pard\ql \li1298\sb11\sl-253\slmult0 \
up0 \expndtw-1\charscalex100 Manager\par\pard\qj \li1298\ri409\sb13\sl-251\slmul
t0 \up0 \expndtw-1\charscalex100 Connection & close relation: \up0 \expndtw-1\ch
arscalex100 President and owner of 30% \up0 \expndtw-1\charscalex100 stock of ea
ch corpo\par\pard\column \ql \li4471\sb0\sl-253\slmult0 \par\pard\ql \li20\sb18\
sl-253\slmult0\tx3202 \up0 \expndtw-1\charscalex100 Batangas Transpo\tab \up0 \e
xpndtw-1\charscalex100 Laguna Bus\par\pard\ql \li20\sb11\sl-253\slmult0\tx3202 \
up0 \expndtw-1\charscalex100 1918\tab \up0 \expndtw-1\charscalex100 1928\par\par
d\ql \li20\sb11\sl-253\slmult0\tx3202 \up0 \expndtw-1\charscalex100 Php1,000,000
.00\tab \up0 \expndtw-1\charscalex100 Php1,000,000.00\par\pard\ql \li20\sb6\sl-2
53\slmult0\tx3202 \up0 \expndtw-1\charscalex100 Batangas, Batangas\tab \up0 \exp
ndtw-1\charscalex100 San Pablo, Laguna\par\pard\ql \li20\sb11\sl-253\slmult0\tx3
202 \up0 \expndtw-1\charscalex100 Joseph Benedict\tab \up0 \expndtw-1\charscalex
100 Martin Olsen\par\pard\ql \li7003\sb0\sl-253\slmult0 \par\pard\ql \li2552\sb8
\sl-253\slmult0 \up0 \expndtw-1\charscalex100 Max Blouse \par\pard\sect\sectd\sb
knone \qj \li1298\sb0\sl-240\slmult0 \par\pard\qj\li1298\ri1361\sb34\sl-240\slmu
lt0 \up0 \expndtw-2\charscalex100 During the war, the two companies lost their r
espective businesses. Post-war, they were able to acquire \up0 \expndtw-3\charsc
alex100 56 auto busses from the US Army which they divided equally. \par\pard\ql
\li1298\sb0\sl-252\slmult0 \par\pard\ql\li1298\ri1221\sb19\sl-252\slmult0 \up0
\expndtw-2\charscalex100 Two years later, Martin Olsen resigned as manager and J
oseph Benedict was appointed as Manager of \up0 \expndtw-2\charscalex100 both co
mpanies by their respective Board of Directors. According to Benedict, the purpo
se of the joint \up0 \expndtw-2\charscalex100 management called \u8220?Joint Eme
rgency Operation\u8221? was to economize in overhead expenses. At the end of \up
0 \expndtw-2\charscalex100 each calendar year, all gross receipts and expenses o
f both companies are determined and the net profit \up0 \expndtw-2\charscalex100
were divided 50-50 then transferred to the book of accounts of each company, an
d each company \line \up0 \expndtw-3\charscalex100 prepares its own income tax r
eturn from their 50% share. \par\pard\ql \li1298\sb248\sl-253\slmult0 \up0 \expn
dtw-2\charscalex100 The CIR theorizes that the 2 companies pooled their resource
s in the establishment of the Joint \par\pard\qj \li1298\ri1143\sb18\sl-240\slmu
lt0 \up0 \expndtw-2\charscalex100 Emergency Operation thereby forming a joint ve
nture. He believes that a corporation exists, distinct from \up0 \expndtw-3\char
scalex100 the 2 respondent companies. \par\pard\ql \li1298\sb0\sl-250\slmult0 \p
ar\pard\ql\li1298\ri1397\sb22\sl-250\slmult0 \up0 \expndtw-2\charscalex100 The C
TA held that the Joint Emergency Operation is not a corporation within the conte
mplation of the \up0 \expndtw-2\charscalex100 NIRC, much less a partnership, ass
ociation or insurance company, and therefore was not subject to \up0 \expndtw-3\
charscalex100 income tax separately and independently of respondent companies. \

par\pard\ql \li1298\sb248\sl-253\slmult0 \up0 \expndtw-3\charscalex100 Issues: \
par\pard\ql \li1658\ri1118\sb10\sl-250\slmult0\tx2018\tx2018 \up0 \expndtw0\char
scalex106 1.\ul0\nosupersub\cf10\f11\fs22 \ul0\nosupersub\cf6\f7\fs22 W/N the
2 transportation companies involved are liable to the payment of income tax as
a \line\tab \up0 \expndtw-1\charscalex100 corporation on the theory that the jo
int emergency operation organized and operated by them is a \line \tab \up0 \exp
ndtw-1\charscalex100 \ul0\nosupersub\cf9\f10\fs22 corporation \ul0\nosupersub\cf
6\f7\fs22 within the meaning of Sec 84 of the Revised Internal Revenue Code.
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l-253\slmult0 \par\pard\ql\li1658\ri1120\sb39\sl-253\slmult0\tx2018\tx2018\tx201
8 \up0 \expndtw0\charscalex102 \ul0\nosupersub\cf6\f7\fs22 2.\ul0\nosupersub\cf1
0\f11\fs22 \ul0\nosupersub\cf6\f7\fs22 NOT RELATED: W/N the CIR, after the ap
peal from his decision has been perfected, and after \line\tab \up0 \expndtw0\ch
arscalex100 the CTA has acquired jurisdiction over the same, but before the CIR
has filed an answer with the \line \tab \up0 \expndtw0\charscalex108 court, may
still modify his assessment subject of the appeal by increasing the same, on the
\line \tab \up0 \expndtw0\charscalex100 ground that he committed error in good
faith in making said appealed assessment. \par\pard\ql \li1298\sb0\sl-253\slmult
0 \par\pard\ql\li1298\sb194\sl-253\slmult0 \up0 \expndtw-1\charscalex100 Held/Ra
tio: \par\pard\ql \li1658\ri1120\sb107\sl-253\slmult0\tx2018\tx2018\tx2018\tx201
8 \up0 \expndtw-3\charscalex100 \ul0\nosupersub\cf9\f10\fs22 1. \tab \up0 \expnd
tw0\charscalex100 YES, although no legal personality may have been creat
ed by the Joint Emergency \line\tab \up0 \expndtw-2\charscalex100 Operation,
nevertheless said joint venture or joint management operated the busi
ness \line \tab \up0 \expndtw0\charscalex101 affairs of the \up0 \expndtw0\cha
rscalex102 2 companies as though they constituted a single entity, comp
any or \line \tab \up0 \expndtw-2\charscalex100 partnership, thereby obtaining
substantial economy and profits in the operation. \par\pard\qj \li2018\ri1119\sb
87\sl-253\slmult0 \up0 \expndtw0\charscalex102 \ul0\nosupersub\cf6\f7\fs22 The C
ourt ruled on this issue by citing the case of \ul0\nosupersub\cf12\f13\fs22 Euf
emia Evangelista, et. al v. CIR\ul0\nosupersub\cf13\f14\fs22 - \ul0\nosupersub\
cf12\f13\fs22 agency \line \up0 \expndtw0\charscalex100 case. \ul0\nosupersub\cf
6\f7\fs22 This involved the 3 sisters who borrowed from their father money which
they invested in \line \up0 \expndtw0\charscalex102 land and then improved upon
and later sold. The sisters also hired their brother to oversee the \line \up0
\expndtw0\charscalex100 buy-and-sell of land. Contrary to their claim that said
operation was merely a co-ownership, the \line \up0 \expndtw0\charscalex100 Cour
t ruled that considering the facts and circumstances surrounding the said case,
the 3 sisters \line \up0 \expndtw0\charscalex102 had purpose to engage in real e
state transactions for monetary gain and then divide the profits \line \up0 \exp
ndtw-1\charscalex100 among themselves, making them co-partners. When the
Tax Code included \u8220?partnerships\u8221? \line \up0 \expndtw0\charscalex1
00 among the entities subject to the tax on corporations, it must refer to \ul0\
nosupersub\cf9\f10\fs22 organizations which are \line \up0 \expndtw-1\charscalex
100 not necessarily partnerships in the technical sense of the term\ul0\nosupers
ub\cf6\f7\fs22 , and that furthermore, said law \line \up0 \expndtw-1\charscalex
100 defined the term "corporation" as including \ul0\nosupersub\cf9\f10\fs22 par
tnerships no matter how created or organized. \par\pard\ql \li2018\sb107\sl-253\
slmult0\tx10071 \up0 \expndtw-1\charscalex100 \ul0\nosupersub\cf6\f7\fs22 Furthe
r, from the standpoint of income tax law, the procedure and practice
of the \tab \up0 \expndtw-2\charscalex100 2 bus \par\pard\qj \li2018\ri1120\s
b0\sl-255\slmult0 \up0 \expndtw-1\charscalex100 companies in determining the net
income of each was arbitrary and unwarranted. After all, the 2 \up0 \expndtw-1\
charscalex100 companies operates in 2 different lines, in different prov
inces or territories, with different \up0 \expndtw0\charscalex100 equipment
and personnel it cannot possibly be true and correct to say that the end of each
year, \up0 \expndtw0\charscalex100 the gross receipts and income in the gross e
xpenses of two companies are exactly the same for \up0 \expndtw-3\charscalex100
purposes of the payment of income tax. \par\pard\qj \li2018\ri1122\sb67\sl-260\s

lmult0 \up0 \expndtw-1\charscalex100 Thus, the Court held that the Joint Emergen
cy Operation or sole management or joint venture in \line \up0 \expndtw-1\charsc
alex100 this case falls under the provisions of section \up0 \expndtw-1\c
harscalex100 84 (b) of the Internal Revenue Code, and \par\pard\ql \li201
8\sb6\sl-253\slmult0 \up0 \expndtw-2\charscalex100 consequently, it is liable to
income tax provided for in section 24 of the same code. \par\pard\qj \li2018\ri
1122\sb82\sl-260\slmult0 \up0 \expndtw0\charscalex100 * But they were exempted f
rom paying 25% surcharge for failure to file a tax return, because of \line \up0
\expndtw-1\charscalex100 their honest belief (based on advice of their attorney
s and accountants) that they are not required \line \up0 \expndtw-3\charscalex10
0 to do so. \par\pard\ql \li1658\sb0\sl-253\slmult0 \par\pard\ql\li1658\ri1119\s
b193\sl-253\slmult0\tx2018\tx2018\tx2018\tx2018 \up0 \expndtw-3\charscalex100 \u
l0\nosupersub\cf9\f10\fs22 2. \tab \up0 \expndtw0\charscalex100 YES, pending app
eal in the Court of Tax Appeals of an assessment made by the Collector \line\tab
\up0 \expndtw0\charscalex105 of Internal Revenue, the Collector, pending hearin
g before said court, may amend his \line \tab \up0 \expndtw0\charscalex102 appea
led assessment and include the amendment in his answer before the court, and the
\line \tab \up0 \expndtw-2\charscalex100 latter may on the basis of the evidenc
e presented before it, redetermine the assessment.
}
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the two \line \tab \up0 \expndtw-2\charscalex100 companies as though they co

charscalex100 income tax separately and independently of respondent companies. \

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{\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{

{\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{

{\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{

{\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{

{\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{

{\sp{\sn shapeType}{\sv 0}}{\sp{\sn fFlipH}{\sv 0}}{\sp{\sn fFlipV}{\sv 0}}{\sp{

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purposes of the payment of income tax. \par\pard\qj \li2018\ri1122\sb67\sl-260\s

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