by John Lloyd Macuñat

JOSE GATCHALIAN ET AL. v. COLLECTOR OF INTERNAL REVENUE, GR No. 45425, 1939-04-29

Facts:

plaintiffs are all residents of the municipality of Pulilan, Bulacan, and that defendant is the Collector of Internal Revenue of the Philippines;... plaintiffs, in order to enable them to purchase one sweepstakes ticket valued at two pesos (P2), subscribed and paid therefor the amounts as follows:... immediately thereafter... plaintiffs purchased... from... ne of the duly authorized agents of the National Charity Sweepstakes Office one ticket bearing No. 178637... and that the said ticket was registered in the name of Jose Gatchalian and Company... as a result

, the above-mentioned ticket bearing No. 178637 won one of the third prizes in the amount of P50,000... and... which check was cashed... by Jose Gatchalian & Company

Gatchalian was required by income tax examiner Alfredo David to file the corresponding income tax return covering the prize won by Jose Gatchalian & Company and that... the said return was signed by

Gatchalian... efendant made an assessment against... requesting the payment of the sum of P1,499.94 to the deputy provincial treasurer of Pulilan, Bulacan... plaintiffs, through their attorney, sent to defendant a reply... requesting exemption from the payment of the income tax to which reply there were enclosed fifteen (15)... separate individual income tax returns filed separately by each one of the plaintiffs... defendant... denied plaintiffs' request... for exemption from the payment of tax... in view of the failure of the plaintiffs to pay the amount of tax demanded by the defendant, notwithstanding subsequent demand... issued a warrant of distraint and levy against the property of the plaintiffs... plaintiffs,... through Gregoria Cristobal, Maria C. Legaspi and Jesus Legaspi,... paid under protest the sum of P601.51... as part of the tax... and requested defendant that plaintiffs be allowed to pay under protest the balance... plaintiffs demanded upon defendant the refund of the total sum of

P1,863.44... paid under protest by them but that defendant refused and still refuses to refund the said amount... notwithstanding the plaintiffs' demands.

Issues:

Whether the plaintiffs formed a partnership, or merely a community of property without a personality of its own

Ruling:

There is no doubt that if the plaintiffs merely formed a community of property the latter is exempt from the payment of income tax under the law. But according to the stipulated facts the plaintiffs organized a partnership of a civil nature because each of them put up money... to buy a sweepstakes ticket for the sole purpose of dividing equally the prize which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil Code). The partnership was not only formed, but upon the organization thereof and the winning of... the prize, Jose Gatchalian personally appeared in the office of the Philippine Charity Sweepstakes, in his capacity as co-partner, as such collected the prize, the office issued the check for P50,000 in favor of Jose Gatchalian and company, and the said partner,... in the same capacity, collected the said check. All these circumstances repel the idea that the plaintiffs organized and formed a community of property only.

Having organized and constituted a partnership of a civil nature, the said entity is the one bound to pay the income tax which the defendant collecte

There is no merit in... plaintiffs' contention that the tax should be prorated among them and paid individually, resulting in their exemption from the tax.

Principles: