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  • Tan v. Del Rosario G.R. No. 109289 October 3, 1994: Vitug, J.: Facts

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    Ninya Saquilabon
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    This case concerns the validity of the Simplified Net Income Taxation Scheme (SNIT) which amended the National Internal Revenue Code. Petitioners claimed to be taxpayers adversely affected by SNIT and argued that the title of the bill that became the law was deficient. The Court had to determine whether SNIT was applicable to general professional partnerships. The Court held that SNIT was not intended to cover corporations and partnerships as they are independently subject to income tax. The Court explained that general professional partnerships are considered "exempt partnerships" under the Tax Code, where the individual partners rather than the partnership itself are liable for income tax based on their distributive shares of profits. Therefore, Section 6 of Revenue Regulation No. 2-

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    This case concerns the validity of the Simplified Net Income Taxation Scheme (SNIT) which amended the National Internal Revenue Code. Petitioners claimed to be taxpayers adversely affected by SNIT and argued that the title of the bill that became the law was deficient. The Court had to determine whether SNIT was applicable to general professional partnerships. The Court held that SNIT was not intended to cover corporations and partnerships as they are independently subject to income tax. The Court explained that general professional partnerships are considered "exempt partnerships" under the Tax Code, where the individual partners rather than the partnership itself are liable for income tax based on their distributive shares of profits. Therefore, Section 6 of Revenue Regulation No. 2-

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    © All Rights Reserved
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    33 views2 pages

    Tan v. Del Rosario G.R. No. 109289 October 3, 1994: Vitug, J.: Facts

    Uploaded by

    Ninya Saquilabon
    This case concerns the validity of the Simplified Net Income Taxation Scheme (SNIT) which amended the National Internal Revenue Code. Petitioners claimed to be taxpayers adversely affected by SNIT and argued that the title of the bill that became the law was deficient. The Court had to determine whether SNIT was applicable to general professional partnerships. The Court held that SNIT was not intended to cover corporations and partnerships as they are independently subject to income tax. The Court explained that general professional partnerships are considered "exempt partnerships" under the Tax Code, where the individual partners rather than the partnership itself are liable for income tax based on their distributive shares of profits. Therefore, Section 6 of Revenue Regulation No. 2-

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as docx, pdf, or txt
    of 2

    Tan v.

    Del Rosario
    G.R. No. 109289 October 3, 1994

    VITUG, J.:

    Facts:

    Two consolidated cases assail the validity of RA 7496 or the Simplified Net Income
    Taxation Scheme ("SNIT"), which amended certain provisions of the NIRC, as well as the
    Rules and Regulations promulgated by public respondents pursuant to said law.

    Petitioners claim to be taxpayer adversely affected by the continued implementation of


    the amendatory legislation.

    Petitioners contend that the title of House Bill No. 34314, progenitor of Republic Act No.
    7496, is a misnomer or, at least, deficient for being merely entitled, "Simplified Net
    Income Taxation Scheme for the Self-Employed and Professionals Engaged in the Practice
    of their Profession".

    Furthermore, Petitioners argued that Republic Act No. 7496 desecrates the constitutional
    requirement that taxation "shall be uniform and equitable" in that the law would now
    attempt to tax single proprietorships and professionals differently from the manner it
    imposes the tax on corporations and partnerships.

    The Court has given due course to both petitions.


    Issue:
    Whether or not SNIT is applicable to general professional partnerships?
    Held:

    No. SNIT is not intended or envisioned, as so correctly pointed out in the discussions in
    Congress during its deliberations on Republic Act 7496, aforequoted, to cover
    corporations and partnerships which are independently subject to the payment of income
    tax.

    Partnerships are, under the Code, either "taxable partnerships" or "exempt


    partnerships." Ordinarily, partnerships, no matter how created or organized, are subject
    to income tax (and thus alluded to as "taxable partnerships") which, for purposes of the
    above categorization, are by law assimilated to be within the context of, and so legally
    contemplated as, corporations. Except for few variances, such as in the application of the
    "constructive receipt rule" in the derivation of income, the income tax approach is alike
    to both juridical persons.
    "Exempt partnerships," upon the other hand, are not similarly identified as corporations
    nor even considered as independent taxable entities for income tax purposes.

    A general professional partnership is such an example. Here, the partners themselves,


    not the partnership (although it is still obligated to file an income tax return [mainly for
    administration and data]), are liable for the payment of income tax in
    their individual capacity computed on their respective and distributive shares of profits.
    In the determination of the tax liability, a partner does so as an individual, and there is
    no choice on the matter. In fine, under the Tax Code on income taxation, the general
    professional partnership is deemed to be no more than a mere mechanism or a flow-
    through entity in the generation of income by, and the ultimate distribution of such
    income to, respectively, each of the individual partners.

    Section 6 of Revenue Regulation No. 2-93 did not alter, but merely confirmed, the above
    standing rule as now so modified by Republic Act No. 7496 on basically the extent of
    allowable deductions applicable to all individual income taxpayers on their non-
    compensation income. There is no evident intention of the law, either before or after the
    amendatory legislation, to place in an unequal footing or in significant variance the
    income tax treatment of professionals who practice their respective professions
    individually and of those who do it through a general professional partnership.

    WHEREFORE, the petitions are DISMISSED.

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