7/24/2019 Obillos vs Cir Digest

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JOSE P. OBILLOS, JR vs COMMISSIONER OF INTERNAL REVENUE

G.R. No. L-68118. Octob! "#, 1#8$

FACTS:

Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two lots. The net dayhe trans!erred his rights to his !o"r children, the petitioners, to enable them to b"ild their

residences. #. $res"mably, the Torrens titles iss"ed to them wo"ld show that they were co%

owners o! the two lots. a!ter haing held the two lots !or more than a year, the petitioners

resold them to the 'alled City Sec"rities Corporation and Olga Cr"( Canda. One day be!ore

the epiration o! the )e year prescriptie period, the Commissioner o! *nternal +een"e

re"ired the !o"r petitioners to pay corporate income ta on the total pro)t o! $-/,0 in

addition to indiid"al income ta on their shares thereo!. The Commissioner acted on the

theory that the !o"r petitioners had !ormed an "nregistered partnership or 1oint ent"re

within the meaning o! sections 2/3a# and 4/3b# o! the Ta Code. The petitioners contested

the assessments. Two J"dges o! the Ta Co"rt s"stained the same. J"dge +oa"in dissented.

5ence, the instant appeal.

*SS67:

'O8 the petitioners !ormed a partnership, hence, are liable !or ta.

57L9:

'e hold that it is error to consider the petitioners as haing !ormed a partnership "nder

article -0 o! the Ciil Code simply beca"se they allegedly contrib"ted $-4,;4.-2 to b"y

the two lots, resold the same and diided the pro)t among themseles.

To regard the petitioners as haing !ormed a taable "nregistered partnership wo"ld res"lt in

oppressie taation and con)rm the dict"m that the power to ta inoles the power todestroy. That eent"ality sho"ld be obiated.

As testi)ed by Jose Obillos, Jr., they had no s"ch intention. They were co%owners p"re and

simple. To consider them as partners wo"ld obliterate the distinction between a co%

ownership and a partnership. The petitioners were not engaged in any 1oint ent"re by

reason o! that isolated transaction.

Their original p"rpose was to diide the lots !or residential p"rposes. *! later on they !o"nd it

not !easible to b"ild their residences on the lots beca"se o! the high cost o! constr"ction,

then they had no choice b"t to resell the same to dissole the co%ownership. The diision o!

the pro)t was merely incidental to the dissol"tion o! the co%ownership which was in thenat"re o! things a temporary state. *t had to be terminated sooner or later.