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TodayisWednesday,March04,2015

RepublicofthePhilippines
SUPREMECOURT
Manila
THIRDDIVISION
G.R.No.148187April16,2008
PHILEXMININGCORPORATION,petitioner,
vs.
COMMISSIONEROFINTERNALREVENUE,respondent.
DECISION
YNARESSANTIAGO,J.:
ThisisapetitionforreviewoncertiorarioftheJune30,2000Decision1oftheCourtofAppealsinCAG.R.SPNo.
49385,whichaffirmedtheDecision2 of the Court of Tax Appeals in C.T.A. Case No. 5200. Also assailed is the
April3,2001Resolution3denyingthemotionforreconsideration.
Thefactsofthecaseareasfollows:
OnApril16,1971,petitionerPhilexMiningCorporation(PhilexMining),enteredintoanagreement4 with Baguio
GoldMiningCompany("BaguioGold")fortheformertomanageandoperatethelattersminingclaim,knownas
theSto.Ninomine,locatedinAtokandTublay,BenguetProvince.Thepartiesagreementwasdenominatedas
"PowerofAttorney"andprovidedforthefollowingterms:
4. Within three (3) years from date thereof, the PRINCIPAL (Baguio Gold) shall make available to the
MANAGERS (Philex Mining) up to ELEVEN MILLION PESOS (P11,000,000.00), in such amounts as from
time to time may be required by the MANAGERS within the said 3year period, for use in the
MANAGEMENT of the STO. NINO MINE. The said ELEVEN MILLION PESOS (P11,000,000.00) shall be
deemed, for internal audit purposes, as the owners account in the Sto. Nino PROJECT. Any part of any
incomeofthePRINCIPALfromtheSTO.NINOMINE,whichisleftwiththeSto.NinoPROJECT,shallbe
addedtosuchownersaccount.
5. Whenever the MANAGERS shall deem it necessary and convenient in connection with the
MANAGEMENT of the STO. NINO MINE, they may transfer their own funds or property to the Sto. Nino
PROJECT,inaccordancewiththefollowingarrangements:
(a)Thepropertiesshallbeappraisedand,togetherwiththecash,shallbecarriedbytheSto.Nino
PROJECTasaspecialfundtobeknownastheMANAGERSaccount.
(b) The total of the MANAGERS account shall not exceed P11,000,000.00, except with prior
approval of the PRINCIPAL provided, however, that if the compensation of the MANAGERS as
hereinprovidedcannotbepaidincashfromtheSto.NinoPROJECT,theamountnotsopaidincash
shallbeaddedtotheMANAGERSaccount.
(c) The cash and property shall not thereafter be withdrawn from the Sto. Nino PROJECT until
terminationofthisAgency.
(d) The MANAGERS account shall not accrue interest. Since it is the desire of the PRINCIPAL to
extend to the MANAGERS the benefit of subsequent appreciation of property, upon a projected
terminationofthisAgency,theratiowhichtheMANAGERSaccounthastotheownersaccountwill
be determined, and the corresponding proportion of the entire assets of the STO. NINO MINE,
excluding the claims, shall be transferred to the MANAGERS, except that such transferred assets
shallnotincludeminedevelopment,roads,buildings,andsimilarpropertywhichwillbevalueless,or
ofslightvalue,totheMANAGERS.TheMANAGERScan,ontheotherhand,requireattheiroption
that property originally transferred by them to the Sto. Nino PROJECT be retransferred to them.
UntilsuchassetsaretransferredtotheMANAGERS,thisAgencyshallremainsubsisting.
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xxxx
12. The compensation of the MANAGER shall be fifty per cent (50%) of the net profit of the Sto. Nino
PROJECT before income tax. It is understood that the MANAGERS shall pay income tax on their
compensation,whilethePRINCIPALshallpayincometaxonthenetprofitoftheSto.NinoPROJECTafter
deductiontherefromoftheMANAGERScompensation.
xxxx
16. The PRINCIPAL has current pecuniary obligation in favor of the MANAGERS and, in the future, may
incurotherobligationsinfavoroftheMANAGERS.ThisPowerofAttorneyhasbeenexecutedassecurity
forthepaymentandsatisfactionofallsuchobligationsofthePRINCIPALinfavoroftheMANAGERSand
as a means to fulfill the same. Therefore, this Agency shall be irrevocable while any obligation of the
PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS account. After all
obligationsofthePRINCIPALinfavoroftheMANAGERShavebeenpaidandsatisfiedinfull,thisAgency
shallberevocablebythePRINCIPALupon36monthnoticetotheMANAGERS.
17.NotwithstandinganyagreementorunderstandingbetweenthePRINCIPALandtheMANAGERStothe
contrary,theMANAGERSmaywithdrawfromthisAgencybygiving6monthnoticetothePRINCIPAL.The
MANAGERSshallnotinanymannerbeheldliabletothePRINCIPALbyreasonaloneofsuchwithdrawal.
Paragraph5(d)hereofshallbeoperativeincaseoftheMANAGERSwithdrawal.
xxxx5
In the course of managing and operating the project, Philex Mining made advances of cash and property in
accordance with paragraph 5 of the agreement. However, the mine suffered continuing losses over the years
which resulted to petitioners withdrawal as manager of the mine on January 28, 1982 and in the eventual
cessationofmineoperationsonFebruary20,1982.6
Thereafter, on September 27, 1982, the parties executed a "Compromise with Dation in Payment"7 wherein
Baguio Gold admitted an indebtedness to petitioner in the amount of P179,394,000.00 and agreed to pay the
same in three segments by first assigning Baguio Golds tangible assets to petitioner, transferring to the latter
BaguioGoldsequitabletitleinitsPhilodrillassetsandfinallysettlingtheremainingliabilitythroughpropertiesthat
BaguioGoldmayacquireinthefuture.
On December 31, 1982, the parties executed an "Amendment to Compromise with Dation in Payment"8 where
the parties determined that Baguio Golds indebtedness to petitioner actually amounted to P259,137,245.00,
whichsumincludedliabilitiesofBaguioGoldtoothercreditorsthatpetitionerhadassumedasguarantor.These
liabilitiespertainedtolongtermloansamountingtoUS$11,000,000.00contractedbyBaguioGoldfromtheBank
ofAmericaNT&SAandCitibankN.A.Thistime,BaguioGoldundertooktopaypetitionerintwosegmentsbyfirst
assigningitstangibleassetsforP127,838,051.00andthentransferringitsequitabletitleinitsPhilodrillassetsfor
P16,302,426.00. The parties then ascertained that Baguio Gold had a remaining outstanding indebtedness to
petitionerintheamountofP114,996,768.00.
Subsequently,petitionerwroteoffinits1982booksofaccounttheremainingoutstandingindebtednessofBaguio
GoldbychargingP112,136,000.00toallowancesandreservesthatweresetupin1981andP2,860,768.00tothe
1982operations.
Inits1982annualincometaxreturn,petitionerdeductedfromitsgrossincometheamountofP112,136,000.00
as"lossonsettlementofreceivablesfromBaguioGoldagainstreservesandallowances."9However,theBureau
ofInternalRevenue(BIR)disallowedtheamountasdeductionforbaddebtandassessedpetitioneradeficiency
incometaxofP62,811,161.39.
PetitionerprotestedbeforetheBIRarguingthatthedeductionmustbeallowedsinceallrequisitesforabaddebt
deduction were satisfied, to wit: (a) there was a valid and existing debt (b) the debt was ascertained to be
worthlessand(c)itwaschargedoffwithinthetaxableyearwhenitwasdeterminedtobeworthless.
PetitioneremphasizedthatthedebtaroseoutofavalidmanagementcontractitenteredintowithBaguioGold.
Thebaddebtdeductionrepresentedadvancesmadebypetitionerwhich,pursuanttothemanagementcontract,
formedpartofBaguioGolds"pecuniaryobligations"topetitioner.Italsoincludedpaymentsmadebypetitioneras
guarantorofBaguioGoldslongtermloanswhichlegallyentitledpetitionertobesubrogatedtotherightsofthe
originalcreditor.
PetitioneralsoassertedthatduetoBaguioGoldsirreversiblelosses,itbecameevidentthatitwouldnotbeable
to recover the advances and payments it had made in behalf of Baguio Gold. For a debt to be considered
worthless, petitioner claimed that it was neither required to institute a judicial action for collection against the
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debtor nor to sell or dispose of collateral assets in satisfaction of the debt. It is enough that a taxpayer exerted
diligenteffortstoenforcecollectionandexhaustedallreasonablemeanstocollect.
OnOctober28,1994,theBIRdeniedpetitionersprotestforlackoflegalandfactualbasis.Itheldthatthealleged
debt was not ascertained to be worthless since Baguio Gold remained existing and had not filed a petition for
bankruptcy and that the deduction did not consist of a valid and subsisting debt considering that, under the
managementcontract,petitionerwastobepaidfiftypercent(50%)oftheprojectsnetprofit.10
PetitionerappealedbeforetheCourtofTaxAppeals(CTA)whichrenderedjudgment,asfollows:
WHEREFORE,inviewoftheforegoing,theinstantPetitionforReviewisherebyDENIEDforlackofmerit.
The assessment in question, viz: FAS18288003067 for deficiency income tax in the amount of
P62,811,161.39isherebyAFFIRMED.
ACCORDINGLY, petitioner Philex Mining Corporation is hereby ORDERED to PAY respondent
Commissioner of Internal Revenue the amount of P62,811,161.39, plus, 20% delinquency interest due
computedfromFebruary10,1995,whichisthedateafterthe20daygraceperiodgivenbytherespondent
withinwhichpetitionerhastopaythedeficiencyamountxxxuptoactualdateofpayment.
SOORDERED.11
TheCTArejectedpetitionersassertionthattheadvancesitmadefortheSto.Ninominewereinthenatureofa
loan. It instead characterized the advances as petitioners investment in a partnership with Baguio Gold for the
development and exploitation of the Sto. Nino mine. The CTA held that the "Power of Attorney" executed by
petitioner and Baguio Gold was actually a partnership agreement. Since the advanced amount partook of the
natureofaninvestment,itcouldnotbedeductedasabaddebtfrompetitionersgrossincome.
TheCTAlikewiseheldthattheamountpaidbypetitionerforthelongtermloanobligationsofBaguioGoldcould
not be allowed as a bad debt deduction. At the time the payments were made, Baguio Gold was not in default
sinceitsloanswerenotyetdueanddemandable.Whatpetitionerdidwastoprepaytheloansasevidencedby
the notice sent by Bank of America showing that it was merely demanding payment of the installment and
interestsdue.Moreover,Citibankimposedandcollecteda"preterminationpenalty"fortheprepayment.
TheCourtofAppealsaffirmedthedecisionoftheCTA.12Hence,upondenialofitsmotionforreconsideration,13
petitionertookthisrecourseunderRule45oftheRulesofCourt,allegingthat:
I.
TheCourtofAppealserredinconstruingthattheadvancesmadebyPhilexinthemanagementoftheSto.
NinoMinepursuanttothePowerofAttorneypartookofthenatureofaninvestmentratherthanaloan.
II.
The Court of Appeals erred in ruling that the 50%50% sharing in the net profits of the Sto. Nino Mine
indicatesthatPhilexisapartnerofBaguioGoldinthedevelopmentoftheSto.NinoMinenotwithstanding
theclearabsenceofanyintentonthepartofPhilexandBaguioGoldtoformapartnership.
III.
The Court of Appeals erred in relying only on the Power of Attorney and in completely disregarding the
Compromise Agreement and the Amended Compromise Agreement when it construed the nature of the
advancesmadebyPhilex.
IV.
TheCourtofAppealserredinrefusingtodelveupontheissueoftheproprietyofthebaddebtswriteoff.14
PetitionerinsiststhatindeterminingthenatureofitsbusinessrelationshipwithBaguioGold,weshouldnotonly
relyonthe"PowerofAttorney",butalsoonthesubsequent"CompromisewithDationinPayment"and"Amended
CompromisewithDationinPayment"thatthepartiesexecutedin1982.Thesedocuments,allegedlyevincedthe
partiesintenttotreattheadvancesandpaymentsasaloanandestablishacreditordebtorrelationshipbetween
them.
Thepetitionlacksmerit.
Thelowercourtscorrectlyheldthatthe"PowerofAttorney"istheinstrumentthatismaterialindeterminingthe
truenatureofthebusinessrelationshipbetweenpetitionerandBaguioGold.Beforeresortmaybehadtothetwo
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compromiseagreements,thepartiescontractualintentmustfirstbediscoveredfromtheexpressedlanguageof
the primary contract under which the parties business relations were founded. It should be noted that the
compromiseagreementsweremerecollateraldocumentsexecutedbythepartiespursuanttotheterminationof
their business relationship created under the "Power of Attorney". On the other hand, it is the latter which
establishedthejuridicalrelationofthepartiesanddefinedtheparametersoftheirdealingswithoneanother.
The execution of the two compromise agreements can hardly be considered as a subsequent or
contemporaneous act that is reflective of the parties true intent. The compromise agreements were executed
eleven years after the "Power of Attorney" and merely laid out a plan or procedure by which petitioner could
recover the advances and payments it made under the "Power of Attorney". The parties entered into the
compromiseagreementsasaconsequenceofthedissolutionoftheirbusinessrelationship.Itdidnotdefinethat
relationshiporindicateitsrealcharacter.
Anexaminationofthe"PowerofAttorney"revealsthatapartnershiporjointventurewasindeedintendedbythe
parties.Underacontractofpartnership,twoormorepersonsbindthemselvestocontributemoney,property,or
industrytoacommonfund,withtheintentionofdividingtheprofitsamongthemselves.15Whileacorporation,like
petitioner,cannotgenerallyenterintoacontractofpartnershipunlessauthorizedbylaworitscharter,ithasbeen
heldthatitmayenterintoajointventurewhichisakintoaparticularpartnership:
The legal concept of a joint venture is of common law origin. It has no precise legal definition, but it has
beengenerallyunderstoodtomeananorganizationformedforsometemporarypurpose.xxxItisinfact
hardlydistinguishablefromthepartnership,sincetheirelementsaresimilarcommunityofinterestinthe
business, sharing of profits and losses, and a mutual right of control. x x x The main distinction cited by
most opinions in common law jurisdictions is that the partnership contemplates a general business with
somedegreeofcontinuity,whilethejointventureisformedfortheexecutionofasingletransaction,andis
thusofatemporarynature.xxxThisobservationisnotentirelyaccurateinthisjurisdiction,sinceunderthe
CivilCode,apartnershipmaybeparticularoruniversal,andaparticularpartnershipmayhaveforitsobject
aspecificundertaking.xxxItwouldseemthereforethatunderPhilippinelaw,ajointventureisaformof
partnership and should be governed by the law of partnerships. The Supreme Court has however
recognized a distinction between these two business forms, and has held that although a corporation
cannot enter into a partnership contract, it may however engage in a joint venture with others. x x x
(Citationsomitted)16
Perusal of the agreement denominated as the "Power of Attorney" indicates that the parties had intended to
createapartnershipandestablishacommonfundforthepurpose.Theyalsohadajointinterestintheprofitsof
thebusinessasshownbya5050sharingintheincomeofthemine.
Underthe"PowerofAttorney",petitionerandBaguioGoldundertooktocontributemoney,propertyandindustry
to the common fund known as the Sto. Nio mine.17 In this regard, we note that there is a substantive
equivalenceintherespectivecontributionsofthepartiestothedevelopmentandoperationofthemine.Pursuant
toparagraphs4and5oftheagreement,petitionerandBaguioGoldweretocontributeequallytothejointventure
assetsundertheirrespectiveaccounts.BaguioGoldwouldcontributeP11Munderitsownersaccountplusanyof
its income that is left in the project, in addition to its actual mining claim. Meanwhile, petitioners contribution
would consist of its expertise in the management and operation of mines, as well as the managers account
whichiscomprisedofP11Minfundsandpropertyandpetitioners"compensation"asmanagerthatcannotbe
paidincash.
However,petitionerassertsthatitcouldnothaveenteredintoapartnershipagreementwithBaguioGoldbecause
itdidnot"bind"itselftocontributemoneyorpropertytotheprojectthatunderparagraph5oftheagreement,it
wasonlyoptionalforpetitionertotransferfundsorpropertytotheSto.Nioproject"(w)henevertheMANAGERS
shalldeemitnecessaryandconvenientinconnectionwiththeMANAGEMENToftheSTO.NIOMINE."18
Thewordingofthepartiesagreementastopetitionerscontributiontothecommonfunddoesnotdetractfrom
thefactthatpetitionertransferreditsfundsandpropertytotheprojectasspecifiedinparagraph5,thusrendering
effective the other stipulations of the contract, particularly paragraph 5(c) which prohibits petitioner from
withdrawingtheadvancesuntilterminationofthepartiesbusinessrelations.Ascanbeseen,petitionerbecame
boundbyitscontributionsoncethetransfersweremade.Thecontributionsacquiredanobligatorynatureassoon
aspetitionerhadchosentoexerciseitsoptionunderparagraph5.
Thereisnomerittopetitionersclaimthattheprohibitioninparagraph5(c)againstwithdrawalofadvancesshould
not be taken as an indication that it had entered into a partnership with Baguio Gold that the stipulation only
showedthatwhatthepartiesenteredintowasactuallyacontractofagencycoupledwithaninterestwhichisnot
revocableatwillandnotapartnership.
Inanagencycoupledwithinterest,itistheagencythatcannotberevokedorwithdrawnbytheprincipaldueto
aninterestofathirdpartythatdependsuponit,orthemutualinterestofbothprincipalandagent.19Inthiscase,
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thenonrevocationornonwithdrawalunderparagraph5(c)appliestotheadvances made by petitioner who is

supposedlytheagentandnottheprincipalunderthecontract.Thus,itcannotbeinferredfromthestipulationthat
thepartiesrelationundertheagreementisoneofagencycoupledwithaninterestandnotapartnership.
Neithercanparagraph16oftheagreementbetakenasanindicationthattherelationshipofthepartieswasone
of agency and not a partnership. Although the said provision states that "this Agency shall be irrevocable while
any obligation of the PRINCIPAL in favor of the MANAGERS is outstanding, inclusive of the MANAGERS
account,"itdoesnotnecessarilyfollowthatthepartiesenteredintoanagencycontractcoupledwithaninterest
thatcannotbewithdrawnbyBaguioGold.
It should be stressed that the main object of the "Power of Attorney" was not to confer a power in favor of
petitioner to contract with third persons on behalf of Baguio Gold but to create a business relationship between
petitionerandBaguioGold,inwhichtheformerwastomanageandoperatethelattersminethroughtheparties
mutualcontributionofmaterialresourcesandindustry.Theessenceofanagency,evenonethatiscoupledwith
interest,istheagentsabilitytorepresenthisprincipalandbringaboutbusinessrelationsbetweenthelatterand
thirdpersons.20Whererepresentationforandinbehalfoftheprincipalismerelyincidentalornecessaryforthe
properdischargeofonesparamountundertakingunderacontract,thelattermaynotnecessarilybeacontractof
agency,butsomeotheragreementdependingontheultimateundertakingoftheparties.21
Inthiscase,thetotalityofthecircumstancesandthestipulationsinthepartiesagreementindubitablyleadtothe
conclusionthatapartnershipwasformedbetweenpetitionerandBaguioGold.
First,itdoesnotappearthatBaguioGoldwasunconditionallyobligatedtoreturntheadvancesmadebypetitioner
undertheagreement.Paragraph5(d)thereofprovidesthatuponterminationofthepartiesbusinessrelations,
"theratiowhichtheMANAGERSaccounthastotheownersaccountwillbedetermined,andthecorresponding
proportionoftheentireassetsoftheSTO.NINOMINE,excludingtheclaims"shallbetransferredtopetitioner.22
AspointedoutbytheCourtofTaxAppeals,petitionerwasmerelyentitledtoaproportionatereturnofthemines
assetsupondissolutionofthepartiesbusinessrelations.Therewasnothingintheagreementthatwouldrequire
BaguioGoldtomakepaymentsoftheadvancestopetitioneraswouldberecognizedasanitemofobligationor
"accountspayable"forBaguioGold.
Thus,thetaxcourtcorrectlyconcludedthattheagreementprovidedforadistributionofassetsoftheSto.Nio
mineupontermination,aprovisionthatismoreconsistentwithapartnershipthanacreditordebtorrelationship.It
should be pointed out that in a contract of loan, a person who receives a loan or money or any fungible thing
acquiresownershipthereofandisboundtopaythecreditoranequalamountofthesamekindandquality.23In
this case, however, there was no stipulation for Baguio Gold to actually repay petitioner the cash and property
thatithadadvanced,butonlythereturnofanamountpeggedataratiowhichthemanagersaccounthadtothe
ownersaccount.
In this connection, we find no contractual basis for the execution of the two compromise agreements in which
Baguio Gold recognized a debt in favor of petitioner, which supposedly arose from the termination of their
businessrelationsovertheSto.Ninomine.The"PowerofAttorney"clearlyprovidesthatpetitionerwouldonlybe
entitled to the return of a proportionate share of the mine assets to be computed at a ratio that the managers
accounthadtotheownersaccount.Excepttoprovideabasisforclaimingtheadvancesasabaddebtdeduction,
there is no reason for Baguio Gold to hold itself liable to petitioner under the compromise agreements, for any
amountoverandabovetheproportionagreeduponinthe"PowerofAttorney".
Next,thetaxcourtcorrectlyobservedthatitwasunlikelyforabusinesscorporationtolendhundredsofmillionsof
pesos to another corporation with neither security, or collateral, nor a specific deed evidencing the terms and
conditionsofsuchloans.Thepartiesalsodidnotprovideaspecificmaturitydatefortheadvancestobecomedue
and demandable, and the manner of payment was unclear. All these point to the inevitable conclusion that the
advanceswerenotloansbutcapitalcontributionstoapartnership.
ThestrongestindicationthatpetitionerwasapartnerintheStoNiomineisthefactthatitwouldreceive50%of
thenetprofitsas"compensation"underparagraph12oftheagreement.Theentiretyofthepartiescontractual
stipulations simply leads to no other conclusion than that petitioners "compensation" is actually its share in the
incomeofthejointventure.
Article 1769 (4) of the Civil Code explicitly provides that the "receipt by a person of a share in the profits of a
businessisprimafacieevidencethatheisapartnerinthebusiness."Petitionerasserts,however,thatnosuch
inference can be drawn against it since its share in the profits of the Sto Nio project was in the nature of
compensationor"wagesofanemployee",undertheexceptionprovidedinArticle1769(4)(b).24
Onthisscore,thetaxcourtcorrectlynotedthatpetitionerwasnotanemployeeofBaguioGoldwhowillbepaid
"wages"pursuanttoanemployeremployeerelationship.Tobeginwith,petitionerwasthemanageroftheproject
and had put substantial sums into the venture in order to ensure its viability and profitability. By pegging its
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compensationtoprofits,petitioneralsostoodnottoberemuneratedincasetheminehadnoincome.Itishardto
believe that petitioner would take the risk of not being paid at all for its services, if it were truly just an ordinary
employee.
Consequently,wefindthatpetitioners"compensation"underparagraph12oftheagreementactuallyconstitutes
its share in the net profits of the partnership. Indeed, petitioner would not be entitled to an equal share in the
incomeofthemineifitwerejustanemployeeofBaguioGold.25Itisnotsurprisingthatpetitionerwastoreceivea
50% share in the net profits, considering that the "Power of Attorney" also provided for an almost equal
contribution of the parties to the St. Nino mine. The "compensation" agreed upon only serves to reinforce the
notionthatthepartiesrelationswereindeedofpartnersandnotemployeremployee.
Alltold,thelowercourtsdidnoterrintreatingpetitionersadvancesasinvestmentsinapartnershipknownasthe
Sto.Ninomine.Theadvanceswerenot"debts"ofBaguioGoldtopetitionerinasmuchasthelatterwasunderno
unconditionalobligationtoreturnthesametotheformerunderthe"PowerofAttorney".Asfortheamountsthat
petitioner paid as guarantor to Baguio Golds creditors, we find no reason to depart from the tax courts factual
finding that Baguio Golds debts were not yet due and demandable at the time that petitioner paid the same.
Verily,petitionerprepaidBaguioGoldsoutstandingloanstoitsbankcreditorsandthisconclusionissupported
bytheevidenceonrecord.26
In sum, petitioner cannot claim the advances as a bad debt deduction from its gross income. Deductions for
incometaxpurposespartakeofthenatureoftaxexemptionsandarestrictlyconstruedagainstthetaxpayer,who
mustprovebyconvincingevidencethatheisentitledtothedeductionclaimed.27Inthiscase,petitionerfailedto
substantiateitsassertionthattheadvancesweresubsistingdebtsofBaguioGoldthatcouldbedeductedfromits
grossincome.Consequently,itcouldnotclaimtheadvancesasavalidbaddebtdeduction.
WHEREFORE,thepetitionisDENIED.ThedecisionoftheCourtofAppealsinCAG.R.SPNo.49385datedJune
30, 2000, which affirmed the decision of the Court of Tax Appeals in C.T.A. Case No. 5200 is AFFIRMED.
PetitionerPhilexMiningCorporationisORDEREDtoPAYthedeficiencytaxonits1982incomeintheamountof
P62,811,161.31,with20%delinquencyinterestcomputedfromFebruary10,1995,whichistheduedategivenfor
thepaymentofthedeficiencyincometax,uptotheactualdateofpayment.
SOORDERED.
CONSUELOYNARESSANTIAGO
AssociateJustice

WECONCUR:
*CONCHITACARPIOMORALES

AssociateJustice
MINITAV.CHICONAZARIO
AssociateJustice

ANTONIOEDUARDOB.NACHURA
AssociateJustice

RUBENT.REYES
AssociateJustice

ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
assignedtothewriteroftheopinionoftheCourtsDivision.
CONSUELOYNARESSANTIAGO
AssociateJustice
Chairperson,ThirdDivision

CERTIFICATION
PursuanttoSection13,ArticleVIIIoftheConstitutionandtheDivisionChairpersonsAttestation,Icertifythatthe
conclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.
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REYNATOS.PUNO
ChiefJustice

Footnotes
*InlieuofAssociateJusticeMa.AliciaAustriaMartinez.
1Rollo,pp.4657pennedbyAssociateJusticePortiaAlioHormachuelosandconcurredinbyAssociate

JusticesMa.AliciaAustriaMartinez(nowanAssociateJusticeoftheSupremeCourt)andElviJohnS.
Asuncion.
2Id.at169196pennedbyJusticeAmancioQ.Saga.
3Id.at59.
4Id.at6069.
5Id.at6263,66&68.
6Id.at124.
7Id.at8997.
8Id.at98106.
9Id.at129.
10Id.at148149.
11Id.at195.
12Id.at4657.
13Id.at59.
14Id.at18.
15CIVILCODE,Art.1767.
16Aurbachv.SanitaryWaresManufacturingCorporation,G.R.No.75875,December15,1989,180SCRA

130,146147.
17PowerofAttorney,paragraph2(a),rollo,p.61.
18Rollo,p.62.
19CIVILCODE,Art.1927.Anagencycannotberevokedifabilateralcontractdependsuponit,orifitisthe

meansoffulfillinganobligationalreadycontracted,orifapartnerisappointedmanagerofapartnershipin
thecontractofpartnershipandhisremovalfromthemanagementisunjustifiable.
20Partnership,AgencyandTrusts,1996Ed.,DeLeonandDeLeon,Jr.,p.330.
21SeeNielson&Company,Inc.v.LepantoConsolidatedMiningCompany,135Phil.532,542(1968).
22Rollo,p.63.
23CIVILCODE,Art.1953.
24Article1769(4)(b)oftheCivilCodestates:

Art.1769.Indeterminingwhetherapartnershipexists,theserulesshallapply:
xxxx
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(4)Thereceiptbyapersonofashareoftheprofitsofabusinessisprimafacieevidencethatheisa
partnerinthebusiness,butnosuchinferenceshallbedrawnifsuchprofitswerereceivedin
payment:
xxxx
(b)Aswagesofanemployeeorrenttoalandlord
xxxx
25SeeTocaov.CourtofAppeals,396Phil.166,180182(2000).
26Rollo,pp.8188.
27SeeLawofBasicTaxationinthePhilippines,2001RevisedEd.,BenjaminB.Aban,p.119.
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