Professional Documents
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CTA
Roxas vs. CTA
GR No. L-25043 | April 26, 1968
Facts:
Don Pedro Roxas and Dona Carmen Ayala, both Spanish, transmitted to their grandchildren by hereditary
succession the following properties:
a.
-
The govt, in line with the constitutional mandate to acquire big landed estates and apportion them among
landless tenants-farmers, persuaded the Roxas brothers to part with their landholdings
The brothers agreed to sell 13,500 hec to the govt for P2.079Mn, plus 300K survey and subdivision expenses
A special arrangement was made with the Rehabilitation Finance Corporation to advance to Roxas y Cia the
amount of P1.5Mn as loan
Under the arrangement, Roxas y Cia. allowed the farmers to buy the lands for the same price but by installment,
and contracted with the RFC to pay its loan from the proceeds of the yearly amortizations paid by the farmers
In 1953 and 1955, Roxas y Cia. derived from said installment payments a net gain of P42,480.83 and P29,500.71.
50% of said net gain was reported for income tax purposes as gain on the sale of capital asset held for more than
one year pursuant to Sec. 34 of the Tax Code
b.
-
c.
To manage the properties, Antonio Roxas, Eduardo Roxas and Jose Roxas, the children, formed a partnership
Basis: house rentals received from Jose, pursuant to Art. 194 of the Tax Code stating that an owner of a real
estate who derives a yearly rental income therefrom in the amount of P3,000.00 or more is considered a real
expenses and contributions claimed by Roxas y Cia and the Roxas brothers
The brothers protested the assessment but was denied, thus appealing to the CTA
CTA decision: sustained the assessment except the demand for the payment of the fixed tax on dealer of securities
and the disallowance of the deductions for contributions to the Philippine Air Force Chapel and Hijas de Jesus'
Retiro de Manresa
Issue: Should Roxas y Cia be considered a real estate dealer because it engaged in the business of selling real
estate
more a year:
Section 194 of the Tax Code, in considering as real estate dealers owners of real estate receiving rentals of at
least P3,000.00 a year, does not provide any qualification as to the persons paying the rentals
The fact that there were hundreds of vendees and them being paid for their respective holdings in installment for
a period of ten years, it would nevertheless not make the vendor Roxas y Cia. a real estate dealer during the 10-
landless
It was the duty of the Government to pay the agreed compensation after it had persuaded Roxas y Cia. to sell its
haciendas, and to subsequently subdivide them among the farmers at very reasonable terms and prices. But due to
the lack of funds, Roxas y Cia. shouldered the Government's burden, went out of its way and sold lands directly to
the farmers in the same way and under the same terms as would have been the case had the Government done it
itself
The power of taxation is sometimes called also the power to destroy. Therefore it should be exercised with
caution to minimize injury to the proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly
Therefore, Roxas y Cia. cannot be considered a real estate dealer for the sale in question. Hence, pursuant to
Section 34 of the Tax Code the lands sold to the farmers are capital assets, and the gain derived from the sale
thereof is capital gain, taxable only to the extent of 50%
As to the deductions
a.
P40 tickets to a banquet given in honor of Sergio Osmena and P28 San Miguel beer given as gifts to various
In this case, the evidence does not show such link between the expenses and the business of Roxas y Cia
b.
Contributions to the Pasay police and fire department and other police departments as Christmas funds
Contributions to the Christmas funds are not deductible for the reason that the Christmas funds were not spent for
public purposes but as Christmas gifts to the families of the members of said entities
Under Section 39(h), a contribution to a government entity is deductible when used exclusively for public purposes
As to the contribution to the Manila Police trust fund, such is an allowable deduction for said trust fund belongs to
the Manila Police, a government entity, intended to be used exclusively for its public functions.
c.
d.
Located within the premises of the university, the chapel in question has not been shown to belong to the Catholic
No deficiency income tax is due for 1953 from Antonio Roxas, Eduardo Roxas and Jose Roxas. For 1955
they are liable to pay deficiency income tax in the sum of P109.00, P91.00 and P49.00, respectively