REYES V.

CIR

Facts:
● Petitioners, father and son, purchased a lot and building known as the Gibbs building for
Php 835,000.00 of which they paid the sum of Php 375, 000.00 leaving a balance of Php
460, 000.00 representing the mortgage obligation of the vendors with China Bank which
mortgage was assumed by the vendee petitioners.
● The initial payment was shared equally by father and son. Leases entered into before
the sale were continued and respected. An administrator was entrusted to collect the
rents, keep its books and records, render accounts, negotiate leases, make necessary
repairs and disburse payments, whenever necessary for the conservation and
preservation of the building. Petitioners divided equally the income of the operation and
maintenance, which amounted to Php 90, 000 annually.
● CIR: assessed petitioners income tax of Php 46, 647, surcharge and compromise for the
years 1951-1954.
● CTA: sustained the CIR but reduced the liability to Php 37, 528; applied the provisions of
the National Internal Revenue Code which imposes an income tax on corporations
organized in, or existing under the laws of the Philippines, no matter how created or
organized but not including duly registered general co partnerships; that the term
corporation, citing the same law, also includes partnerships no matter how created or
organized; applied Evangelista v. CIR.
● Hence, the instant petition.

Issue and Held:

● WoN the Evangelista ruling is applicable- YES.
○ The case at bar has the same factual milieu as Evangelista, and the difference
cited by petitioner are of such slight significance that they do not call for a
different ruling.
○ CTA merely yielded to the command of an authoritative decision.
● WoN the petitioners, in acquiring the Gibbs building, established a partnership subject to
income tax as a corporation- YES.
○ Evangelista v. CIR: When our Internal Revenue Code includes partnerships
among the entities subject to the tax on corporations, said Code must allude,
therefore, to organizations which are not necessarily partnerships in the technical
sense of the term.
○ The provision in 84b of said Code defines the term corporations as including
partnerships, no matter how created or organized.
○ This qualifying expression clearly indicates that a joint venture need not be
undertaken in the standard forms or in conformity with the usual requirements of
the law on partnerships, in order that one can be deemed constituted for
purposes of the tax on corporations.

Ruling:
● CTA affirmed.