Roxas v. CTA, 23 SCRA 276 (1968)
G.R. No. L-25043
Apr! 26, 1968
ANT"N#" ANT"N#" R"$AS, %&'AR&" R"$AS a R"$AS * C#A., +r o rsp/+v a! a! a as /a! /oaras aras o "S% R"$AS, petitioners, vs. C"'RT " TA$ A%ALS a C"#SS#"N%R " #NT%RNAL R%%N'%, respondents. Leido, Andrada, Perez and Associates for petitioners. Office of the Solicitor General for respondents.
:%NG;"N, .., .., J.: a/+s< Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects, transmitted to their grandchildren by hereditary succession several properties. To manage the abovementioned properties, said children, namely, namely, Antonio Antonio Roxas, !duardo Roxas and "ose "ose Roxas, #ormed a partnership called Roxas Roxas y Compania. At the conclusion o# the $$%, the tenants &ho have all been tilling the lands in 'asugbu #or generations expressed their desire to purchase #rom Roxas Roxas y Cia. the parcels parcels &hich they actually actually occupied. occupied. (or its part, the )overnment, )overnment, in consonance consonance &ith the consti constituti tutiona onall mandat mandate e to ac*uir ac*uire e big landed landed estate estatess and apport apportion ion them among among landl landless ess tenant# tenant#arm armers ers,, persuaded the Roxas brothers to part &ith their landholdings. landholdings. Con#erences &ere held &ith the #armers in the early part o# +- and #inally the Roxas brothers agree to sell +/,011 hectares to the )overnment #or distribution to actual occupants #or a price o# P%,12,1-.-2 P%,12,1-.-2 plus P/11,111 #or #or survey and distribution expenses. 3t turned out ho&ever that the )overnment did not have #unds to cover the purchase price, and so a special arrangement &as made #or the Rehabilitation (inance Corporation to advance to Roxas y Cia. the amount o# P+,011,111.11 as loan. Collateral #or such loan loan &ere the lands proposed to be sold sold to the #armers. 4nder the arrangement, Roxas y Cia. Cia. allo&ed the #armers to buy the lands #or the same price but by installment, and contracted &ith the Rehabilitation (inance Corporation to pay its loan #rom the proceeds o# the yearly amorti5ations paid by the #armers. The C3R demanded #rom Roxas y Cia. the payment o# de#iciency income taxes resulting #rom the inclusion as income o# Roxas y Cia. o# the unreported 016 o# the net pro#its #or +0/ and +00 derived #rom the sale o# the 'asugbu #armlands to the tenants, and the disallo&ance o# deductions #rom gross income o# various business expenses expenses and contributions contributions claimed claimed by Roxas y Cia. and the Roxas brothers. brothers. (or the reason that Roxas Roxas y C3a. subdivided its 'asugbu #armlands and sold them to the #armers on installment, the Commissioner considered the partnership as engaged in the business o# real estate, hence, +116 o# the pro#its derived there #rom &as taxed. The Roxas brothers protested the assessment but inasmuch as said protest &as denied, they instituted an appeal in the CTA &hich sustained the assessment. 7ence, this appeal.
#ss< 3.
33. 33.
3s the gain gain deri derived ved #rom #rom the the sale sale o# the 'asugb 'asugbu u #arm #arm lands lands an ordina ordinary ry gain, gain, henc hence e +116 +116 taxable taxable88 And And is Roxas y Cia liable #or the payment o# de#iciency income #or the sale o# 'asugbu #armlands8 Are Are the the dedu deduct ctio ions ns #or #or bus busin ines esss exp expen ense sess and and cont contri ribu buti tion onss ded deduc uctib tible le88
R!< 3. '9. The propos propositio ition n o# o# the C3R cannot cannot be #avora #avorably bly accepte accepted d in in this this isolat isolated ed transa transacti ction on &ith &ith its its peculi peculiar ar circumstances inspite o# the #act that there &ere hundreds o# vendees. Although they paid #or their respective holdings in installment #or the period o# +1 years, it &ould nevertheless ma:e the vendor Roxas y Cia. a real estate dealer during the +1year amorti5ation period. period. 3t should be borne in mind that the sale sale o# the 'asugbu #armlands to the very #armers &ho tilled them #or generations &as not only in consonance &ith, but more in obedience t o the re*uest and pursuant to the policy o# our our )overnment to allocate lands to the landless. landless. 3t &as the bounden duty
o# the )overnment to pay the agreed compensation a#ter it had persuaded Roxas y Cia. to sell its haciendas, and to subse*uently subdivide them among the #armers at very reasonable terms and prices. 7o&ever, the )overnment could not comply &ith its duty #or lac: o# #unds. 9bligingly, Roxas y Cia. shouldered the )overnment;s burden, &ent out o# its &ay and sold lands directly to the #armers in the same &ay and under the same terms as &ould have been the case had the )overnment done it itsel#. (or this magnanimous act, the municipal council o# 'asugbu passed a resolution expressing the people;s gratitude. 3n #ine, Roxas y Cia. cannot be considered a real estate dealer #or the sale in *uestion. 7ence, pursuant to section /- o# the Tax Code, the land sold to the #armers are capital assets, and the gain derived #rom the sale thereo# is capital gain, taxable only to the extent o# 016.
33.
DISALLOWED DEDUCTIONS
Roxas y Cia. deducted #rom its gross income the amount o# P-1.11 #or tic:ets to a ban*uet given in honor o# Sergio 9smena and P%.11 #or Sa ! beer given as gi#ts to various persons. The deduction &ere claimed as representation expenses. Representation expenses are deductible #rom gross income as expenditures incurred in carrying on a trade or business under Section /1
aguio City Police Christmas #unds, ?anila Police Trust (und, Philippines 7erald@s #und #or ?anila@s neediest #amilies and 9ur ady o# (atima chapel at (ar !astern 4niversity. The contributions to the Crs+=as s o + asa> C+> o!/, asa> C+> r= a :ao C+> o!/ ar o+ /+! #or the reason that the Christmas #unds &ere not spent #or public purposes but as Christmas gi#ts to the #amilies o# the members o# said entities. 4nder Section / o a+=a /ap! a+ + ar %as+r 'vrs+> on the ground that the said university gives dividends to its stoc:holders
&o/+rs< 3. Sale o# property by lando&ners to tenants under government policy to allocate lands to the landless subject not subject to real estate dealer;s tax. 33. The po&er o# taxation is sometimes called also the po&er to destroy. There#ore it should be exercised &ith caution to minimi5e injury to the proprietary rights o# a taxpayer. 3t must be exercised #airly, e*ually and uni#ormly, lest the tax collector :ill the Bhen that lays the golden egg.
