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    CIR vs. William J. Suter and CTA, G.R. No. L-25532, 28 February 1969 Encarnacion Magalona et al. vs. Juan Pesayco, 59 Phil 453, G.R. No. 39607, 06 February 1934

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    CIR vs. William J. Suter and CTA, G.R. No. L-25532, 28 February 1969 Encarnacion Magalona et al. vs. Juan Pesayco, 59 Phil 453, G.R. No. 39607, 06 February 1934

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    130 views3 pages

    Case Digest: Partnership

    Uploaded by

    Ksets
    CIR vs. William J. Suter and CTA, G.R. No. L-25532, 28 February 1969 Encarnacion Magalona et al. vs. Juan Pesayco, 59 Phil 453, G.R. No. 39607, 06 February 1934

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    of 3

    CIR vs. William J.

    Suter and CTA, L-25532, February 28, 1969


    Magalona vs. Pesayco, 59 Phil 453

    Facts - what happened in the case


    Issue - the reason for filing
    Ruling is the decision along with backup on why u think it was right or wrong (Yes or No,
    answers the question of the issue) backed up by articles
    CIR vs. William J. Suter and CTA, G.R. No. L-25532, 28 February 1969

    FACTS
    This case began with a partnership of three (3) individuals, two (2) of whom got married a year
    after the partnership commenced, followed by the sale of the third partner’s share to the married
    couple. The limited partnership files its income tax as a corporation.
    In 1959, the CIR audited the partnership and the couple and found delinquency income taxes on
    William Suter for 2 years. Suter contested the findings and won his case in the Court of Tax
    Appeals. CIR petitioned for reconsideration of the court decision on the grounds that the
    partnership was dissolved upon the marriage and the sale of shares, and even if it was not
    dissolved, the marriage has a significant effect on how Suter’s income tax should be computed.

    ISSUE
    CIR contested the ruling of the court of appeals reversing the CIR’s assessment of Suter’s
    income taxes.

    RULING
    No, the appeal of CIR was denied.
    The basis of CIR were the followings:
    - They’re not a limited partnership; and
    - They’re one legal entity as husband and wife.
    However, Sutor’s side stated that they are still a limited partnership and should be taxed similarly
    with corporation. The court of appeals ruled for Suter on this issue by process of elimination
    since by law they are not a general or universal partnership, nor can it be a single proprietorship
    by virtue of the marriage, which leaves the conclusion that it is still a limited partnership. The
    court of appeals used Art. 1396 of the Spanish Civil Code to refute that Husband and Wife are
    one legal entity and should be taxed as such.
    Further, the court of the appeals also refuted the CIR’s use of Koppel (Phil.), Inc., vs. Yatco, 77
    Phil. 504, L-13554, 30 October 1964, on the basis of the regularity of how the partnership paid
    its taxes since the very beginning and were not doing fraud. The court found no anomalies that
    the partnership has been paying. The court of appeals also stated that, according to the income
    tax code, general partnership is different from a limited partnership and CIR shouldn’t tax the
    partnership and its members as a general partnership. Lastly, as the contributions of each spouse
    are different, the court ruled that income tax should be applied on individual capacities and not
    as conjugal property.
    Encarnacion Magalona et al. vs. Juan Pesayco, 59 Phil 453, G.R. No. 39607, 06 February
    1934

    FACTS
    The case began with a partnership amongst Pesayco, Magalona, and Sermeno with the purpose
    of catching “semillas de bangus o ata”. They each contributed P 1,850.03 to their capital.
    Pesayco has been managing the business from January 1, 1931 up till the herein complaint which
    was filed in April 21, 1931.

    ISSUE
    The defendant, Pesayco, didn’t give the amount due to the partners from the profits earned that
    quarter, which totaled to P 2,925 realized by him on the sales thereof.

    RULING
    Yes. Pesayco’s argument was that there was no partnership. However, the partnership was
    conclusively proven through the oral testimonies of the other partners Magalona and Sermeno, as
    well as other witnesses. Although the defendant argued that the partnership isn’t official because
    it wasn’t in writing, according to Art. 1771 a partnership can be in any form except in cases that
    includes immovable property or real rights, which means that it is a partnership.

    With this the court affirmed the decision with cost in both instances against Pesayco.

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