[PARTNERSHIP DISTINGUISHED FROM]
W/N they should pay the tax collectively or whether the latter should be prorated
13 JOSE GATCHALIAN, ET AL. vs. THE COLLECTOR OF INTERNAL REVENUE
April 29, 1939 | Imperial, J. |
Doctrine: Insert doctrine here
Facts:
● Gatchalian and company paid certain amounts ranging from P0.07 to P0.18
to enable them to buy a P2 sweepstakes ticket.
● The ticket was registered in the name of Jose Gatchalian and Company.
● The ticket won one of the third prizes (P50,000).
○ The corresponding check was drawn by the National Charity
Sweepstakes Office in favor of Jose Gatchalian & Company against
the Philippine National Bank, which check was cashed by Jose
Gatchalian & Company.
● Gatchalian was required by the income tax examiner to file the
corresponding income tax return covering the prize won by Jose Gatchalian
& Company.
● The CIR made an assessment against Jose Gatchalian & Company
requesting the payment of the sum of P1,499.94 to the deputy provincial
treasurer of Pulilan, Bulacan.
● Gatchalian & Company requested from the CIR exemption from payment of
the income tax.
○ The CIR denied their request and reiterated his demand.
● In view of their failure to pay, the CIR issued a warrant of distraint and levy
against the property of Gatchalian and Company.
● To avoid embarrassment arising from the embargo of the property of their,
Gatchalian and Company paid under protest P601.51 as part of the tax and
penalties to the municipal treasurer and requested CIR that they be allowed
to pay under protest the balance of the tax and penalties by monthly
installments.
○ Their request was granted subject to the condition that they file the
usual bond secured by two solvent persons to guarantee prompt
payment of each installment as it becomes due.
○ Gatchalian and Company filed a bond to guarantee the payment of
the balance of the alleged tax liability by monthly installments at the
rate of P118.70 a month.
● Gatchalian and Company failed to pay the monthly installments so the CIR
ordered the municipal treasurer of Pulilan, Bulacan to execute the warrant of
distraint and levy issued against Gatchalian and Company.
● In order to avoid annoyance and embarrassment arising from the levy of
their property, Gatchalian and Co. paid under protest P1,260.93
representing the unpaid balance of the income tax and penalties demanded
by the CIR.
○ They then formally protested to the CIR against the payment of said
amount and requested the refund thereof but the CIR overruled the
protest and denied the refund.
Issue:
1. W/N Gatchalian and Co. formed a partnership or merely a community of property
without a personality of its own.
2.
among them and paid individually.
Held:
1. PARTNERSHIP
● It is admitted that if what was formed was a partnership, Gatchalian and Co.
would be liable. But if what was formed was merely a community of property,
they are exempt from payment.
● The CIR collected the tax under section 10 of Act No. 2833, as last amended
by section 2 of Act No. 37611.
● There is no doubt that if Gatchalian and Co. merely formed a community of
property they are exempt from the payment of income tax under the law.
○ But according to the stipulation facts, they organized a partnership
of a civil nature because each of them put up money to buy a
sweepstakes ticket for the sole purpose of dividing equally the prize
which they may win, as they did in fact.
○ The partnership was not only formed, but upon the organization
thereof and the winning of the prize, Jose Gatchalian personally
appeared in the office of the Philippines Charity Sweepstakes, in
his capacity as co-partner, as such collected the prize, the office
issued the check for P50,000 in favor of Jose Gatchalian and
company, and the said partner, in the same capacity, collected the
said check.
○ All these circumstances repel the idea that they organized and
formed a community of property only.
2. COLLECTIVELY
● Having organized and constituted a partnership of a civil nature, the said
entity is the one bound to pay the income tax.
● There is no merit in their contention that the tax should be prorated among
them and paid individually, resulting in their exemption from the tax.
Dispositive
In view of the foregoing, the appealed decision is affirmed, with the costs of this
instance to the plaintiffs appellants. So ordered.
1 SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon the total net
income received in the preceding calendar year from all sources by every corporation, joint-stock
company, partnership, joint account (cuenta en participacion), association or insurance
company, organized in the Philippine Islands, no matter how created or organized, but not
including duly registered general copartnership (compañias colectivas), a tax of three per
centum upon such income xxx