Court of Tax Appeals
0Asian Planners Amalgamated, Incorporated vs. Commissioner of Internal Io¥ Revenue, et al.
M £PUf\UC
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THE PHil.lPPIN £
C JURT 0 ~ TAX APPEA
QUEZON CITY
AS IAN PLANNERS AMALGAMATED,
INCORPORATED ,
Peti tioner ,
- versus -
COMMI SS IONER OF I NTERNAL
REVENUE,
Respondent.
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C . T~A. CASE NO. 3238
D E C I S I 0 N
The c ase is one of a deficiency corporate income
and delinquency percentage taxes assessment against
petitioner which all eges to be a general profes sional
partnership contemplated i n Section 24 (a) .of the
National Interna l Revenue Code, as amended , t o wit:
"A tax is he reby imposed upon the taxable
net income rece ived dur ing each taxable
year from all s ources by every corporation
organized in , or existing under t he laws
of the Philippines, and .partner ships , no
matter how created or organized, but not
i ncluding gener al professiona l par t nerships ,
in acco dance with t he following:
xxx . "
(Underscoring suppl i ed) .
Petitioner do ing business under the firm name of
Asian Planners Amalgamated, Inc. with princ ipal office
i n Cebu City , is a domestic corporat ion organized and
existing unde r the l aws of t he Philippines.
By t he
206
DEC I SION -
CTA CASE NO . 3238
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artic l e s of i ncorporati on it has for its pr i mary pur
poses the f ollowing:
"a )
To develop and i mprove subdivisions ,
l ands , and estates and to engage the
services of competent professionals,
artisans, skill ed workers , and ot her
persons that may be necessar y to
accomplish this purposeJ except to
engage in s ubdivi s ion busineSSJ
"b)
To make and enter i nto all kinds of
l awfu l contracts and agreements with
any per son , firm , par tnersh ip, corpo-
ra tion , associati on ,
es~ablishrnent ,
i nstitu t ion , or entity f or the deve-
lopment and improvement of subdivi-
sions , l ands , and estates and the
constr uct i on , reconstruction, re-
modelling , or alterat ion thereon of
buildings , or other structures: as
well as all kinds of lawful contracts
and agreements f or the purpose of
purchasi ng, acquiring , sell i ng , ex-
changing or disposing of all kinds of
lawful goods, wares , merchandise, or
products of every class , kind , and
description s uch as but not limited
to, hardware and constructionmaterials;"
Sometime on Januar y 28, 1980 the Bureau of Internal
Revenue Regional Office No . VII (Cebu Ci ty) .advised
t he petitioner corporation of the ver if icati on of its
i ncome and business tax liabilities f or the years 1974 ,
1975 and 1976 and the proposed assessment f or deficiency
i ncome t ax arising f r om d i s allowances/additional i ncome
as well as delinquency percentage tax on the unr eported
gross r eceipt s der i ved from contractual services 1 res-
pectively pr ovided under Sec t ions 24 (a) .and 205 of t he
National I nte r na l Revenue Code as amended .
Petitioner
207
DECISION -
CTA CASE NO. 3238 had its objection on the validity in a letter dated April 13, 1980. Notwithstanding, the respondent Com missioner of Internal Revenue proceeded with the issuance of the formal assessment and demand under notices on February 23, 1981 (Deficiency Income Tax for B227,733.92) and on April 6, 1981 (Delinquency Percentage Tax amounting to 868,917.74), computed as follows:
Deficiency Income Tax
ACR No, 60-6-07-000231-74/81 Net income per return - - - 2-2 = = = eo wm & RB 4,127.43 Add: Disallowance/additional income ~ Undeclared income ---- B 9,390.83 Professional fees ~=-- 30,846.74 40,237.57 Net income per investigation - ---=--- - Pp 44, B 44,365.01 00 Income tax due thereon ---"------+-= P 11,091.00 Less: Amount already assessed - - ~-=---- 1,032.00 Balance -7- 2-7 eee we eee ee B 10,059.00 Add: 14% int.fr.2-23-76 to 2-23+79 =-~ 2 = 4,224.78 TOTAL AMOUNT DUE & COLLECTIBLE ---<--- = BP 14,203.78
VVVVVUVYVEV
ACR No. 60-€-07-00075-75/81 Net income per return ~ - ----- e-em B 13,787.12 Add: Disallowances/additional income - Professional fees - - = - B® 77,975.50 Drafting expenses =- - = = 5,337.25 Miscellaneous expenses - - 1,735.28 Project expense -~-- = 1,541.39 Wedding gifts ------ 500.00 87,089.42 Net income per investigation -<-----=- P100,876.54 54 Income tax due thereon - -----+-"---- B 25,307.00 Less: Amount paid - - ------#--s <8 == Balancer e-- 2-222 eee ewe E5730. 00 Add: 14% int.fr.4-19-76 to 4-19-79 -—— wm 10,628.94 TOTAL AMOUNT DUE & COLLECTIBLE =- ----- <= 2 35,935.94
VVYVVVVVVV
208
DECISION -
CTA CASE NO. 3238 ACR No. 60-6-07-000103-76/81 Net income per return - ---- 7-2 =--=- 7 - B 69,996.44 Add: Disallowances/additional income -~ , Professional foes -=--- = 2350,857.94 Drafting expenses - - = - = 8,013.90 Office & travelling expenses ~ 4,709.01 Legal & audit fees - - - - - 2,162.00 365,995.44 Net income per investigation - -- = -- 7 — ~ B 435,725.29 Income tax due thereon -~- - = - 7 = -~= ~ = B 142,509.00 Less: Amount paid = --------7-=---7-7- —17,499.00 Balance@wrret eter eee ee = = = B 125,010.00 Add: 143 int.fr.4-15-77 to 4-15-80 -----~ 504.20 TOTAL AMOUNT DUE & COLLECTIBLE - - - ~~ - ~ - B 177,514.20
VW
Del inquency Percentage Tax 1974 Gross receipts ~ 4th quarter. . . . B 90,348.70 3% tax due thereon . 2 2 2 © © « » PB 2,710.46 25% tax due thereon .. 1. «ow» © « 677,61 Total... 6% 6 0 © a o @ o@ PB 3,388.07 14% int. fr. 1/20/75 - 7/31/80... 2,621.15 203 int. fr. 8/1/80 - 4/20/81... 488.25 TOTAL AMOUNT DUE «4 6 6 6 «© © #© © @ © © © © oo B 6,497.47 1975 Gross receipts - lst quarter. . . . B 29,348.50 3% tax due thereon ... + se « © « 889.46 25% surcharge . . 2 0 2 + «© «© 0 @ a 220.3 Total e e e e s e a a e e @ * o B 1,100.59 143 int. fr. 4/20/75 - 7/31/80. . « 813.47 20% int. fr. 8/1/80 - 4/20/81... 158.60 YOTAL AMOUNT DUE «2 2 oo © ow © oo ew et ot ew B 2,072.66 Gross receipts ~ 2nd quarter. . . . B154,049.00 3% tax due thereon .. 4.6.2 « « PB 4,621.47 253 surcharge . . - 2 0 6 © © © @ 2 1,155.37 TOtale «see os ee vo vo oe & 5,716.84 14% int. fr. 7/20/75 ~ 7/31/60. . . 4,068.16 20% int. fr. 8/1/80 = 4/20/81... 832.49 TOTAL AMOUNT DUE a © a CJ - e e . ° & ° e e 2 10,677.49 209
DECISION =
CTA CASE NO. 3238 Gross receipts - 3rd quarter. . .
3% tax due thereon . . 6 a 6 « 2 25% Surcharge . . 2 6 » «© © « © « Total eo ee oe wo ww eo e B 1,404.53 14% int. fr. 10/20/75 - 7/31/80 20% int, fr. 8/1/80 ~ 4/20/81 .
TOTAL AMOUNT DUE. @ e =a ,& * J e s e a a e e 2 2,504.30 Gross receipts - 4th quarter. .
B 30,000.00 33 tax due thereon .. .o «© « « B 900.00 253 surcharge . . +21» © ae«.e 225.00 Total ee eo oe eo © ew wo ow oe B 1,425.00 143 int. fr. 1/20/76 - 7/31/80. . 712.84 20% int. fr. 8/1/80 ~ 4/20/81. . 162.12 TOLAL AMOUNT DUE. a e e e e J e ° eo e a e a R lL, 999.96 1276 Gross receipts - lst quarter. #242 ,189.22 20% int. fr. 8/1/80 - 4/20/81 1,308.81 TOTAL AMOUNT DUE. « « « « «© « ee «© « o ¢ BIG,145.72 3% tax due thereon ......- . 8B 7,265.61 25% surcharge « « + «+ 2 « © eo 1,816.42 Total oe ee we ee ew ew eo BP O,082.10 14% int. fr. 1/20/76 - 7/31/80. . 5,754.81 Gross receipts = 2nd quarter... None Gross receipts - 3rd quarter. P150, 328.09 3% tax due thereon ... +c «1 « « B 4,509.84 25% Surcharge . « » 6 » s « 6 © « 1,127.46 Total 2 0 2 © @ 6 © oe eo B 5,637.30 14% int. fr. 10/20/76 ~ 7/31/80 . 2,981.74 20% int. fr. 8/1/80 - 4/20/81 . . 812,38 TOTAL AMOUNT DUE. ® @ e 0e® «© @ @ o fF e@ ww @ @ RB 9,431.42 Gross receipts ~ 4th quarter. .
3% tax due thereon .... «4.
25% Surcharge « 2 « « « «ee a Total 6 e+ © © © ow © 14% int. fr. 1/20/77 - 7/31/80.
20% int. fr. 8/1/80 ~ 4/20/81 .
TOTAL AMOUNT DUE. . 2 6 « « @ e 318,952.88 B 9,568.59 2,392.15 P 11,960.74 5,904,33 1,723.65 ee 6 o o 6 PI9,5E9.72 T oO T A L e # ® 8 # © # » ®@® € @© © © a2 & @ B68 ,917.74
VVVVIVVVY
2 so 8 «@ roe @ 210
DECISION -
CTA CASE NO. 3238 - 6 - By and large, petitioner contends that "It is , at most, a partnershi p; an aggrupati on of s even (7) .l icensed practising architects (names deleted )~ as 'incorpor at ors ' but who , i n tr ut h and in fact, assoc i ated themsel ves together, each contributing money and indus try to a common fund for the pursuit of a common profession, and with the intention and agreemen t to divide the profits of their common l abor among themselves , as they did" cor r espondingly dec l ared in their i ndiv i dual income tax returns and paid taxes due t herefr om.
Respondent poses the r ub wrapped up this wi s e : petitione is a body corporate engaged in trade and business t ha t clearly disqualifies it as a general professional partnership wherein "no par t of the i ncome of wh ich i s derived fr om engag ing i n trade or business" (Sec. 20 (b) .of the Tax Code as amended) .and wou l d thu s let go t he chips to fall where they may on t he taxabl e corporate activities , so to speak . The case was submitted for decision on t he basis of the plead ings and r ecord wh ich revolves into t he question of whether under the given facts petitioner is a general profess ional partnership for all intent and purpose of the Tax Code .
We may say a t the ou t set t ha t we f ai l to find for , t he peti tioner.
The record makes it clear tha t the petitioner is a stock corporation organized under t he 211
DECISION -
CTA CASE NO . 323S - 7 - pertinent provisions of Act 1459 as amended (Corporation Code ) .having been registered with t he Securities and Exchange Comm i ssion on J anuary 21 , 1971. The r egis- t ration of t he corpor ation i& no i dle ceremony and t he real ity the reof had emptied petiti oner 's claim to a general profess i onal partnership of l egal signi f icance. I t is suffic ient f or the purpose of the I ncome Tax law that t he corporati on be regist ered and organ ized and it cannot be denied t ha t t he peti tioner i s such.
We
thu s find illogic s uch sprouti ng i mpressions precip i - tately broached by the peti tioner tha t 1) .i t has not been legally for med or organized as a corporat ion pur- suant to the provisions of the Corporation Law; 2) .its registration as a corporation did not validate ipso facto an otherwise illegal act, i.e. , cor poration c annot be organized for the exercise of a profession ; and 3) .its being r egistered with the Securit ies and Exchange Commission is no sufficient proof that it is i ndeed a corporation .
In short, petitioner would write requiem to i ts own corporate being .
A f l apdoodle of a now-you- have-now-you-don ' t milieu and an expedient wishful piffle indeed !
We cannot bring ourselves to believe that the petitioner cor poration could emasculate into a ·~ere shell without real ity".
But far be it from a comedy of errors, t here is no reason apparen t fr om the record why petitioner's 212
DECISION -
CTA CASE NO. 3238 - 8 - corporate existence could be ignored . First, petitioner s .
charter goes back to the year 1971 and thru the inter- vening years it has preserved and maintained its corpo- r ate organization .
Second, it functi ons and transacts business in its corporate capaci t y continuously and actively and there is no evidence that i t had ceased nor a suggestion that it was dismantled into a partner- ship.
Third , it holds itself to the general public as a corporation and has consistently filed i ts income t ax r eturns as a corporation.
These are the compelling indicia of the s eparate life and operati on consiste nt with the bus iness purpose f or which petitioner corpor ation was created and upon which the tax a ssessmen t sought by the responden t Commissioner of Internal Revenue are essentially addressed and directly brought t o bear. The quibble on the much ado-ed al l profe s sional practising architects composition of the incorporating directors as would l end color to a professional partnersh i p can hardly be a r eassuring prospect t hat can easily be reconc iled with tne rule .
Such a postu re would s tretch too far the effective r ange of expediency and gravely impair t he end for wh i ch the statute was intended .
It
is non sequi t ur and brooks no instant exempt i on ~rom the tax obligati ons incurred by the petitioner's under- · t aking as a corporat e enti ty under the provisions of S e~tio n 24 (a ) _on corporate i ncome tax and Section 205 on percentage t ax both of t he Tax Code. 213 ..
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DECISION -
CTA CASE NO. 3238 - 9 - FOR ALL THE FOREGOING , we hold the pe t iti oner corporation l iable for the defic iency corporate i nc'ome t ax and delinquency percentage tax for the years in question in accordance with the respondent ' s assessment wh ich payment i s hereby ordered with costs against t he petitioner .
SO ORDERED.
Quezon City, Metro Manila, August 31, 1984.
HE CONCUR:
'
• ROAQU IN
Judge
214 ~/'{Qt; .&
_/ ~~REYE~/
Associat e Ju~~