Case Digest (A.M. No. 855-MJ)
Facts:
In Antonio Roxas, Eduardo Roxas and Roxas y Compania, in their own respective behalfs and as judicial co-guardians of Jose Roxas, petitioners, versus the Court of Tax Appeals and the Commissioner of Internal Revenue, respondents, decided April 26, 1968 under the 1935 Philippine Constitution, the petitioners inherited from their grandparents extensive agricultural estates in Nasugbu, Batangas (19,000 hectares), a residential house and lot in Malate, Manila, and various corporate shares. They organized Roxas y Compania to manage these assets. After World War II, local tenants sought to purchase the Nasugbu parcels they tilled; the Government, lacking funds, arranged with the partnership through Rehabilitation Finance Corporation loans. The partnership sold 13,500 hectares on ten-year installments, realizing net gains of ₱42,480.83 in 1953 and ₱29,500.71 in 1955, of which 50% was reported under Section 34 of the Tax Code as capital gains. The partnership also received ₱8,000 annualCase Digest (A.M. No. 855-MJ)
Facts:
- Succession and Partnership Formation
- Don Pedro Roxas and Doña Carmen Ayala, Spanish subjects, transmitted by hereditary succession to their grandchildren—Antonio, Eduardo and Jose Roxas—the following properties:
- Agricultural lands (19,000 hectares) in Nasugbu, Batangas
- Residential house and lot on Wright St., Malate, Manila
- Various corporate shareholdings
- The three Roxas brothers formed a partnership, Roxas y Compañía, to manage the inherited properties
- Key Transactions
- Agricultural Lands
- Post–World War II, tenants sought to buy the lands they tilled; the Government, pursuant to agrarian policy, persuaded Roxas y Cia. to sell 13,500 hectares for P2,079,048.47 plus P300,000 for survey and subdivision
- Government lack of funds led to a loan of P2,500,000 from Rehabilitation Finance Corporation (RFC), collateralized by the lands; farmers bought by ten-year installments, partnership paid RFC from amortizations
- Net gains from installment sales: P42,480.83 (1953) and P29,500.71 (1955); 50% of each gain reported as long–term capital gains
- Residential House
- Inherited Malate house occupied by Jose Roxas after his brothers married
- Jose paid P8,000 annual rent to Roxas y Cia. “in fairness” to Antonio and Eduardo
- Securities Transactions
- Partnership realized profits from purchase and sale of corporate shares
- Tax Assessments and Litigation
- June 17, 1958, Commissioner assessed:
- Roxas y Cia.: real estate dealer’s fixed tax (P150 + P10 penalty) and dealer in securities tax (P150 + P10 penalty) for 1952
- Deficiency income taxes for 1953 and 1955 against each brother for unreported 50% of land‐sale gains and disallowed deductions
- Protest denied; appeal to Court of Tax Appeals (CTA) filed January 9, 1961
- CTA decision (July 31, 1965): upheld assessments except dealer in securities tax and disallowed deductions for two contributions; imposed deficiency taxes on brothers and fixed tax (P150) on partnership
- Partnership and brothers appealed to the Supreme Court; Commissioner did not cross‐appeal
Issues:
- Classification of gain from sale of Nasugbu farm lands: ordinary versus capital gain
- Deductibility of claimed representation expenses and charitable contributions
- Liability of Roxas y Cia. for real estate dealer’s fixed tax under Section 194 of the Tax Code
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)