Obillos v. Commissioner,
139 SCRA 436
Facts:
Jose Obillos, Sr. completed payment to Ortigas & Co., Ltd. on two lots he transferred his rights to his four children, the petitioners, to enable them to build their residences. The petitioners resold them to the Walled City Securities Corporation.
The Commissioner of Internal Revenue required the four petitioners to pay corporate income tax on the total profit of P134,336 in addition to individual income tax on their shares thereof.
Issue:
Whether petitioners are considered to have formed a taxable partnership.
Held:
No.
Ratio:
SC hold that it is error to consider the petitioners as having formed a partnership under article 1767 of the Civil Code simply because they allegedly contributed P178,708.12 to buy the two lots, resold the same and divided the profit among themselves.
To regard the petitioners as having formed a taxable unregistered partnership would result in oppressive taxation and confirm the dictum that the power to tax involves the power to destroy. That eventuality should be obviated.
As testified by Jose Obillos, Jr., they had no such intention. They were co-owners pure and simple. To consider them as partners would obliterate the distinction between a co-ownership and a partnership. The petitioners were not engaged in any joint venture by reason of that isolated transaction.
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