Case Digest: Evangelista v. CIR, G.R. No. L-9996, October 15, 1957 | 102 Phil 140

FACTS: Petitioners borrowed a sum of money from their father. They used said money with their own personal funds to buy several real properties. From 1943-1994, they bought parcels of land and then appointed their brother, Simeon, to manage said real properties. The real properties were then sold, leased or rented out to third persons.  

In September 1954, CIR demanded the payment of income tax on corporations, real estate dealer’s fixed tax, and corporation residence tax for the years 1945-1949 to which they sought to be absolved from the payment of the taxes in question. However, CTA denied their petition. Hence this petition.  

ISSUE: Whether or not petitioners have formed a partnership and consequently, are subject to the tax on corporations.  

DECISION: Yes, they have formed a partnership. Sec. 24 of the NIRC provides that a tax shall be levied on every corporation no matter how created or organized except general co-partnerships. The issue revolves on the meaning of the terms “corporation” and “partnership”. Sec. 84 of the NIRC provides that the term corporation includes partnership. 

Pursuant to Art. 1767 of the Civil Code, the essential elements of partnership are:

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 1^st element is present in the case because the petitioners have agreed to, and did, contribute money and property to a common fund. For the 2^nd element, the collective effect of the following series of transactions establishes the existence of said intent:  

1. Said common fund was not something they already found in existence. 
2. They invested the same, not merely in one transaction, but in a series of transactions.
3. The aforesaid lots were not devoted to residential purposes, or to other personal uses, of petitioners herein.
4. The affairs relative to said properties have been handled as if the same belonged to a corporation or business and enterprise operated for profit.  

It is evident that petitioners constituted a partnership which is subject to the income tax for corporations. 

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