EUFEMIA EVANGELISTA V

EUFEMIA EVANGELISTA v. COLLECTOR OF INTERNAL REVENUE, GR No.
L-9996,
1957-10-15
Facts:
This is a petition, filed by Eufemia Evangelista
, Manuela Evangelista and Francisca Evangelista,... for review of a decision of the Court of
Tax Appeals,... hold that the petitioners are liable for the income tax, real estate dealer's tax
and the residence tax for the years 1945 to 1949... in the total amount of P6,878.34,... It
apears from the stipulation submitted by the parties:... petitioners borrowed from their father
the sum of P59,140.00 which amount together with their personal monies was used by
them for the purpose of buying real properties,... they appointed their brother Simeon
Evangelista to 'manage their properties with full power to lease; to collect and receive rents;
to issue receipts therefor; in default of such payment, to bring' suits against the defaulting...
tenant; to sign all letters, contracts, etc., for and in their behalf, and to endorse and deposit
all notes and checks for them;... after having bought the above-mentioned real properties,
the petitioners had the same rented or leased to various tenants... respondent Collector of
Internal Revenue demanded the payment, of income tax... letter of demand and the
corresponding assessments were delivered to petitioners
, whereupon they instituted the present case in the Court of Tax Appeals, with a prayer that
"the decision of the respondent contained in. his letter of demand... be reversed, and that
they be absolved from the payment of the taxes in question
Court of Tax Appeals rendered... decision for the respondent
, and, a petition for reconsideration and new trial having been subsequently denied, the
case is now before Us for review at the instance of the petitioners.
Petitioners insist, however, that they are mere co-owners
, not copartners, for, in consequence of the acts performed by them, a legal entity, with a
personality independent of that of its members, did not come into existence, and some of
the characteristics of partnerships... are lacking in the case at bar.
Issues:
whether petitioners are subject to the tax on corporations provided for in section 24 of
National Internal Revenue Code
Ruling:
Article 1767 of the Civil Code of the Philippines provides :

"By the contract of partnership two or more persons bind themselves to contribute money,
property, or industry to a common fund, with the intention of dividing1 the profits among-
themselves."
Pursuant to this article, the essential elements of a partnership are two, namely: (a) an
agreement to contribute money, property or industry to a common fund; and (b) intent to
divide the profits among the contracting parties. The first element is undoubtedly present in
the... case at bar, for, admittedly, petitioners have agreed to, and did, contribute money and
property to a common fund. Hence, the issue narrows down to their intent in acting as they
did. Upon consideration of all the facts and circumstances surrounding the... case, we are
fully satisfied that their purpose was to engage in real estate transactions for monetary gain
and then divide the same among themselves,... because:
1. Said common fund was... created... purposely. What is more they jointly borrowed a
substantial portion thereof in order to... establish said common fund.
They invested the same, not merely in one transaction, but in a series of transactions.
s strongly indicative of a pattern or common design that was not limited to... the
conservation and preservation of the aforementioned common fund
. In other words, one cannot but perceive a character of habituality peculiar to business
transactions engaged in for... purposes of gain.
The aforesaid lots were not devoted to residential purposes,... , or to other personal uses,
of petitioners herein.
The properties were leased separately to several persons... properties have been under the
management of one person, namely, Simeon Evangelista
Thus, the affairs relative to said properties have been handled as if the same belonged to a
corporation or business enterprise operated for profit.
as defined in section 84(6) of said Code, "the term corporation includes partnerships, no
matter how created or organized." This qualifying expression clearly indicates that a joint
venture... need not be undertaken in any of the standard forms, or in conformity with the
usual requirements of the law on partnerships, in order that one couid be deemed
constituted for purposes of the tax on corporations. Again, pursuant to said section 84(6),
the term "corporation"... includes, among other, "joint accounts, (cuentas en participation)"
and "associations", none of which his a legal personality of its own, independent of that of
its members. Accordingly, the lawmaker could not have regarded that personality as a
condition... essential to the existence of the partnerships, therein referred to. In fact, as
above stated, "duly registered general copartnerships" which are possessed of the
aforementioned personality have been expressly excluded by law (sections 24 and 84 [6])
from the... connotation of the term "corporation." It may not be amiss to add that petitioners'
allegation to the effect that their liability in connection with the leasing of the lots above
referred to, under the management of one person even if true, on which we express no
opinion tends... to increase the similarity between the nature of their venture and that of
corporations, and is, therefore, an additional argument in favor of the imposition of said tax
on corporations.
For purposes of the tax on corporations, our National Internal Revenue Code, includes
these partnerships with the exception only of duly registered general copartnerships within
the purview of the term "corporation."
It is, therefore, clear to our mind that... petitioners herein constitute a partnership, insofar as
said Code is concerned, and are subject to the income tax for corporations.
As regards the residence tax for corporations, section 2 of Commonwealth Act No. 465
provides in part:

"Entities liable to residence tax. Every corporation, no matter how created or organized,
whether domestic or resident foreign, engaged in or doing business in the Philippines shall
pay an annual residence tax of five pesos and an annual additional tax... which, in no case,
shall exceed one thousand pesos, in accordance with the following schedule: * * *.

"The term 'corporation' as used in this Act includes joint-stock company, partnership, joint
account (cuentas en participacion), association or insurance company, no matter how
created or organized." (italics ours.)
Considering that the pertinent part of this provision is analogous to that of sections 24 and
84 (b) of our National Internal Revenue Code (Commonwealth Act No. 466), and that the
latter was approved on June 15, 1939, the day immediately after the approval of said
Commonwealth Act No. 465 (June 14, 1939), it is apparent that the terms "corporation" and
"partnership" are used in both statutes with substantially the same meaning. Consequently,
petitioners are subject, also, to the residence tax for corporations.
Wherefore, the appealed decision of the Court of Tax Appeals is hereby affirmed

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EUFEMIA EVANGELISTA v. COLLECTOR OF INTERNAL REVENUE, GR No.

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