Case Digest (G.R. No. L-68118)
Facts:
Jose P. Obillos, Jr., Sarah P. Obillos, Romeo P. Obillos and Remedios P. Obillos v. Commissioner of Internal Revenue and Court of Tax Appeals, G.R. No. 68118, October 29, 1985, the Supreme Court Second Division, Aquino, J., writing for the Court.On March 2, 1973, Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. for two lots in Greenhills, San Juan (1,124 and 963 sq. m.). The next day he transferred his rights in those lots to his four children — the petitioners — so they could build residences. On March 13, 1973, Ortigas & Co. sold the lots to the petitioners for P178,708.12 (exhibits A and B). The record indicates the petitioners became co-owners (presumably Torrens titles in co-ownership).
After holding the lots for more than a year, in 1974 the petitioners resold both parcels to Walled City Securities Corporation and Olga Cruz Canda for P313,050 (exhibits C and D). The total profit was P134,341.88 (about P33,584 per petitioner). The petitioners treated the profit as capital gain and paid income tax only on one-half of each share (reported as P16,792 per petitioner).
In April 1980 — one day before the five-year prescriptive period expired — the Commissioner of Internal Revenue (CIR) assessed the petitioners on the theory they had formed an unregistered partnership or joint venture and therefore were liable to corporate income tax on the total profit (invoking sections 24(a) and 84(b) of the Tax Code and the Collector of Internal Revenue v. Batangas Trans. Co. precedent). The CIR assessed P37,018 as corporate income tax, P18,509 as 50% fraud surcharge and P15,547.56 as accumulated interest (total P71,074.56). The CIR also treated each petitioner’s P33,584 share as a distributive dividend taxable in full and assessed deficiency individual income taxes aggregating P56,707.20 (including surcharge and interest). Combined with taxes already paid, the petitioners faced alleged liabilities totaling P127,781.76.
The petitioners contested the assessments before the...(Subscriber-Only)
Issues:
- Did the petitioners form an unregistered partnership or joint venture taxable as such under the Tax Code and Civil Code (i.e., was there the requisite intent to form a partnership)?
- If not, are the CIR’s assessments (corporate tax, fraud surcharge, interest and deficiency taxes) against the petitioners...(Subscriber-Only)
Ruling:
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Ratio:
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Doctrine:
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