COMMISSIONER OF INTERNAL REVENUE, petitioner vs.

BURROUGHS LIMITED AND THE COURT OF TAX AEALS,

respon!ents
G.R. No. L"###$%
&'ne (), ()*#
+r+s, &.
Summary: BIR Rules and Regulations
FACTS,
On March 1979, the branch office of Burroughs Ltd In the country a!!lied "ith the #entral Ban$ for authority to remit to its !arent
com!any abroad branch !rofit amounting to %h!7,&'7,()*((On March 1', 1979, it !aid the 1)+ branch !rofit remittance ta, !ursuant
to Sec -' .b/.-/.ii/ of the 0ational Re1enue #ode .see Note 1/ 2o"e1er, Burroughs Ltd remitted to its head office the amount of only
%h!&,'99,9993(4 and so on 5ecember -', 19*(, Burroughs Ltd filed a "ritten claim for the refund or ta, credit of the amount of
%h!17-,()*9( re!resenting alleged o1er!aid branch !rofit remittance ta, BIR ruled in fa1or of the refund on 6anuary -1, 19*(, but the
#IR contends that there should be no refund because Memorandum #ircular 0o *7*- dated March 17, 19*- had re1o$ed and8or
re!ealed the BIR ruling of 6anuary -1, 19*( Said memorandum circular states7 Considering that the 15% branch profit remittance tax
is imposed and collected at source, necessarily the tax base should be the amount actually applied for by the branch with the Central
Bank of the Philippines as profit to be remitted abroad!
ISSUES,
9O0 Burroughs Limited is entitled to a refund .in the amount of %17-,()*9(/ -ES
9O0 Memorandum #ircular 0o *7*- .M# *7*-/ dated 17 March 19*- can be gi1en retroacti1e effect: NO
HELD,
In a BIR ruling dated 6anuary -1, 19*( by then ;cting #ommissioner of Internal Re1enue 2on <fren I %lana, the afore=uoted !ro1ision
had been inter!reted to mean that >the tax base upon which the 15% branch profit remittance tax shall be imposed"is# the profit
actually remitted abroad and not on the total branch profits out of which the remittance is to be made! 9hat is a!!licable in the case at
bar is still the BIR Ruling of 6anuary -1, 19*( because Burroughs Ltd !aid the branch !rofit remittance ta, in =uestion on March 1',
1979 ?herefore, Memorandum #ircular 0o *7*- dated March 17, 19*- cannot be gi1en retroacti1e effect in light of Section 3-7 of the
0ational Internal Re1enue #ode "see Note 2# ?he !re@udice that "ould result to !ri1ate Burroughs Ltd by a retroacti1e a!!lication of
Memorandum #ircular 0o *7*- is beyond =uestion for it "ould be de!ri1ed of the substantial amount of %17-,()*9(, and insofar as
the enumerated e,ce!tions are concerned, Burroughs Ltd does not fall under any of them 2ence, Burroughs Ltd is entitled to ha1e a
refund
C$% decision affirmed
NOTES,
1/ Sec. 24. Rates of tax on corporations.
(b) Tax on foreign corporations
(2) (ii) Tax on branch profts remittances. Any proft remitted abroad by a branch to its head ofce shall be
subject to a tax of ffteen per cent (!")
-/ Se.. %/0. Non-retroactivity of rulings. ;ny re1ocation, modification, or re1ersal of any of the rules and regulations !romulgated in
accordance "ith the !receding section or any of the rulings or circulars !romulgated by the #ommissioner s1+22 not 3e 4iven
retro+.tive +pp2i.+tion i5 t1e revo.+tion, 6o!i5i.+tion, or revers+2 7i22 3e pre8'!i.i+2 to t1e t+9p+:er e,ce!t in the follo"ing cases
.a/ "here the ta,!ayer deliberately misstates or omits material facts from his return or in any document re=uired of him by the Bureau
of Internal Re1enue4 .b/ "here the facts subse=uently gathered by the Bureau of Internal Re1enue are materially different from the facts
on "hich the ruling is based, or .c/ "here the ta,!ayer acted in bad faith .;BS7#B0 Broadcasting #or! 1 #?;, 1(* S#R; 1)171)-/
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COMMISSIONER OF INTERNAL REVENUE, petitioner vs. ;ILLIAM &. SUTER +n! THE COURT OF TAX AEALS, respon!ents
G.R. No. L"/$$%/
Fe3r'+r: /*, ()#)
Re:es, &BL, &.
Summary: 0ature of !artnershi! bet"een s!ouses
FACTS,
; limited !artnershi!, named A9illiam 6 Suter BMorcoinB #o, Ltd,A "as formed in 19'7 by 9illiam 6 Suter as the general !artner, and
6ulia S!irig and Custa1 #arlson, as the limited !artners ?he !artners contributed, res!ecti1ely, %-(,(((((, %1*,((((( and %-,(((((
to the !artnershi! ?he firm engaged, among other acti1ities, in the im!ortation, mar$eting, distribution and o!eration of automatic
!honogra!hs, radios, tele1ision sets and amusement machines, their !arts and accessories In 19'*, ho"e1er, general !artner Suter
and limited !artner S!irig got married and, thereafter, limited !artner #arlson sold his share in the !artnershi! to Suter and his "ife ?he
limited !artnershi! had been filing its income ta, returns as a cor!oration In 19)9, the #ommissioner, in an assessment, consolidated
the income of the firm and the indi1idual incomes of the !artners7s!ouses Suter and S!irig resulting in a determination of a deficiency
income ta, against res!ondent Suter
ISSUES,
9O0 the cor!orate !ersonality of Suter >MorcoinD #o, Ltd should be disregarded for income ta, !ur!oses, as Suter and his "ife S!irig
actually formed a single ta,able unit NO
9O0 the !artnershi! "as dissol1ed after the marriage of the !artners Suter and S!irig and the subse=uent sale to them by #arlson of
his !artici!ation of %-,((((( in the !artnershi! for a nominal amount of %1(( NO
HELD,
;i22i+6 &. S'ter <M+r.oin= Co., Lt!. 7+s not + 'nivers+2 p+rtners1ip, 3't + p+rti.'2+r one. Based on ;rticle 1&7' and 1&7) of the
S!anish #i1il #ode of 1**9 ."hich "as the la" in force "hen the sub@ect firm "as organiEed in 19'7/, + 'nivers+2 p+rtners1ip
re>'ires eit1er t1+t t1e o38e.t o5 t1e +sso.i+tion 3e +22 t1e present propert: o5 t1e p+rtners, as contributed by them to the
common fund, or else >all that the !artners may ac=uire by their industry or "or$ during the e,istence of the !artnershi!D 9illiam 6
Suter AMorcoinA#o, Ltd "as not such a uni1ersal !artnershi!, since the contributions of the !artners "ere fi,ed sums of money,
%-(,((((( by 9illiam Suter and %1*,((((( by 6ulia S!irig, and neither one of them "as an industrial !artner It follo"s that 9illiam 6
Suter >MorcoinD #o, Ltd "as not a !artnershi! that s!ouses "ere forbidden to enter by ;rticle 1&77 of the #i1il #ode of 1**9
Further, sep+r+te propert: 3ro'41t 3: p+rtners into t1e 6+rri+4e !oes not 3e.o6e .on8'4+2 ;s such, the a!!ellantBs 1ie" that by
the marriage of both !artners the com!any became a single !ro!rietorshi!, is erroneous ?he ca!ital contributions of !artners 9illiam 6
Suter and 6ulia S!irig "ere se!arately o"ned and contributed by them before their marriage4 and after they "ere @oined in "edloc$,
such contributions remained their res!ecti1e se!arate !ro!erty under the S!anish #i1il #ode .;rticle 139&/4 $he following shall be the
exclusi&e property of each spouse' "a# $hat which is brought to the marriage as his or her own( ! ?hus, the indi1idual interest of each
consort in 9illiam 6 Suter >MorcoinD #o, Ltd did not become common !ro!erty of both after their marriage in 19'*
A p+rtners1ip 1+s + sep+r+te 8'ri!i.+2 person+2it:, +n! 6e63ers t1ereo5 1+ve sep+r+te in.o6e 'n!er t1e t+9 .o!e. It is the
basic tenet of the S!anish and %hili!!ine la" that + p+rtners1ip 1+s + 8'ri!i.+2 person+2it: o5 its o7n, !istin.t +n! sep+r+te 5ro6
t1+t o5 its p+rtners .unli$e ;merican and <nglish la" that does not recogniEe such se!arate @uridical !ersonality/4 by!assing of the
e,istence of the limited !artnershi! as a ta,!ayer can only be done by ignoring or disregarding clear statutory mandates and basic
!rinci!les of our la" ?he limited !artnershi!Bs se!arate indi1iduality ma$es it im!ossible to e=uate its income "ith that of the
com!onent members ;lthough Section -' of the Internal Re1enue #ode merges registered general co7!artnershi!s .compa)ias
colecti&as/ "ith the !ersonality of the indi1idual !artners for income ta, !ur!oses, this rule is e,ce!tional in its disregard of a cardinal
tenet of %hili!!ine !artnershi! la"s, and cannot be e,tended by mere im!lication of its limited !artnershi!s
?o add, in.o6e o5 3ot1 spo'ses, not t1e .on8'4+2 p+rtners1ip, is t+9+32e ;s such, a!!ellant is mista$en in assuming that the
con@ugal !artnershi! of gains is a ta,able unit, "hich it is not 9hat is ta,able is the Aincome of both s!ousesA .Section ')GdH/ in their
indi1idual ca!acities ?hough the amount of income .income of the con@ugal !artnershi! 1is7a71is the @oint income of husband and "ife/
may be the same for a gi1en ta,able year, their conse=uences "ould be different, as their contributions in the business !artnershi! are
not the same
C$% decision affirmed
ETITION FOR AUTHORIT- TO CONTINUE USE OF THE FIRM NAME ?S-CI, SALA@AR, FELICIANO, HERNANDE@ A
CASTILLO.? LUCIANO E. SALA@AR, FLORENTINO , FELICIANO, BENILDO G. HERNANDE@. GREGORIO R. CASTILLO.
ALBERTO . SAN &UAN, &UAN C. RE-ES, &R., ANDRES G. GATMAITAN, &USTINO H. CACANINDIN, NOEL A. LAMAN,
ETHEL;OLDO E. FERNANDE@, ANGELITO C. IMERIO, EDUARDO R. CENI@A, TRISTAN A. CATINDIG, ANCHETA B. TAN, +n!
ALICE V. ESIGAN, petitioners
IN THE MATTER OF THE ETITION FOR AUTHORIT- TO CONTINUE USE OF THE FIRM NAME ?O@AETA, ROMULO, DE LEON,
MABANTA A RE-ES.? RICARDO &. ROMULO, BEN&AMIN M. DE LEON, ROMAN MABANTA, &R., &OSE MA. RE-ES, &ESUS S. &.
SA-OC, EDUARDO DE LOS ANGELES, +n! &OSE F. BUENAVENTURA, petitioners
G.R. No. X)/"(
&'2: %C, ()0)
Me2en.io"Herrer+, &.
Summary: #ontinued use of the name of deceased !artner in a !artnershi!8firm
FACTS,
%etitions "ere filed by the sur1i1ing !artners of ;tty ;le,ander Syci!, "ho died on May ), 197) and by the sur1i1ing !artners of ;tty
2erminio OEaeta, "ho died on February 1', 197&, !raying that they be allo"ed to continue using, in the names of their firms, the
names of !artners "ho had !assed a"ay %etitioners contend that the continued use of the name of a deceased or former !artner "hen
!ermissible by local custom, is not unethical but care should be ta$en that no im!osition or dece!tion is !racticed through this use
?hey also contend that no local custom !rohibits the continued use of a deceased !artnerIs name in a !rofessional firmIs name4 there is
no custom or usage in the %hili!!ines, or at least in the Creater Manila ;rea, "hich recogniEes that the name of a la" firm necessarily
identifies the indi1idual members of the firm
ISSUE,
9O0 sur1i1ing !artners may be allo"ed by the court to retain the name of the !artners "ho already !assed a"ay in the name of the
firm NO
HELD,
In the case of Register of 5eeds of Manila 1s #hina Ban$ing #or!oration, "here the la" firm of %er$ins and %once <nrile sought to
inter1ene as amicus curiae, the S# as$ed to be informed why the name of Perkins is still being used although %tty * % Perkins is
already dead! %er$ins and %once <nrile !ro1ided the same arguments as the current !etitioners, but the court, in its resolution,
ordered the la" firm to desist from using the name of the deceased !artner, %er$ins, in &iew of the personal and confidential nature of
the relations between attorney and client and the high standards demanded in the canons of professional ethics, no practice should be
allowed which e&en in a remote degree could gi&e rise to the possibility of deception!
In the instant !etition, S# found no reason to de!art from this ruling ;lthough ASyci!, SalaEar, Feliciano, 2ernandeE and #astilloA and
AOEaeta, Romulo, 5e Leon, Mabanta and ReyesA are !artnershi!s, the use in their !artnershi! names of the names of deceased
!artners "ill run counter to ;rticle 1*1) of the #i1il #ode "hich !ro1ides:
%rt 1+15 *&ery partnership shall operate under a firm name, which may or may not include the name of one or more of
the partners
$hose who, not being members of the partnership include their names in the firm name, shall be sub,ect to the liability of a
partner!
It is clear from the abo1e !ro1ision that t1e n+6es in + 5ir6 n+6e o5 + p+rtners1ip 6'st eit1er 3e t1ose o5 2ivin4 p+rtners +n!, in
t1e .+se o5 non"p+rtners, s1o'2! 3e 2ivin4 persons 71o .+n 3e s'38e.te! to 2i+3i2it:. In fact, ;rticle 1*-) of the #i1il #ode
!rohibits a third !erson from including his name in the firm name under !ain of assuming the liability of a !artner ?he heirs of a
deceased !artner in a la" firm cannot be held liable as the old members to the creditors of a firm !articularly "here they are non7
la"yers
In regards to the last !aragra!h of ;rticle 1*'( of the #i1il #ode cited by !etitioners, this !rimarily deals "ith the e,em!tion from liability
in cases of a dissol1ed !artnershi!, of the indi1idual !ro!erty of the deceased !artner for debts contracted by the !erson or !artnershi!
"hich continues the business using the !artnershi! name or the name of the deceased !artner as !art thereof4 secondly, ;rticle 1*'(
treats more of a commercial partnership "ith a good "ill to !rotect rather than of a !rofessional !artnershi!, "ith no saleable good "ill
but "hose re!utation de!ends on the !ersonal =ualifications of its indi1idual members 2ence, + s+2e+32e 4oo!7i22 .+n e9ist on2: in +
.o66er.i+2 p+rtners1ip +n! .+nnot +rise in + pro5ession+2 p+rtners1ip .onsistin4 o5 2+7:ers.
A p+rtners1ip 5or t1e pr+.ti.e o5 2+7 .+nnot 3e 2iDene! to p+rtners1ips 5or6e! 3: ot1er pro5ession+2s or 5or 3'siness. For one
thing, the la" on accountancy s!ecifically allo"s the use of a trade name in connection "ith the !ractice of accountancy % partnership
for the practice of law is not a legal entity -t is a mere relationship or association for a particular purpose -t is not a partnership
formed for the purpose of carrying on trade or business or of holding property! ?hus, it has been stated that the use of a nom de
plume, assumed or trade name in law practice is improper!
Petitions denied Petitioners ad&ised to drop the names ./0C-P. and .12%*$%.