CIR v. Burroughs G.R. No.

L-25532 February 28, 1969 (BIR Rules and Regulations) FACTS :In March 1979, the branch office of Burroughs Ltd. inthe country applied with the Central Bank for authority to remitto its parent company abroad branch profit amounting toP7,647,058.00.On March 14, 1979, it paid the 15% branch profit remittancetax pursuant to Sec. 24 (b) (2) (ii)6. Based on this lawBurroughs Ltd remitted to its head office the amount of P6,499,999.30However on December 24, 1980 Burroughs Ltd. filed a writtenclaim for the refund or tax credit of the amount of P172,058.90representing alleged overpaid branch profit remittance tax.BIR ruled in favor of the refund onJanuary 21, 1980.CIR contends that there should be no refund becauseMemorandum Circular No. 8-82dated March 17, 1982 had revoked and/or repealed the BIR ruling of January 21, 1980.Said memorandum circular states-Considering that the 15% branch profit remittance tax isimposed and collected at source, necessarily the tax baseshould be the amount actually applied for by the branch withthe Central Bank of the Philippines as profit to be remittedabroad. Issue : WON Burroughs Limited is entitled to a refund (in theamount of P172,058.90). Held: Yes. In a BIR ruling dated January 21, 1980 by thenActing Commissioner of Internal Revenue Hon. Efren I. Planathe aforequoted provision had been interpreted 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 remittanceis to be made."What is applicable in the case at bar is still the BIR Ruling of January 21, 1980 because Burroughs Ltd. paid the branch profit remittance tax in question on March 14, 1979 . Memorandum Circular No. 8-82 dated March 17, 1982cannot be given retroactive effect in the light of Section327 7of the National Internal Revenue Code. The prejudice that would result to private Burroughs Ltd. by aretroactive application of Memorandum Circular No. 8-82 isbeyond question for it would be deprived of the substantial amount of P172,058.90 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. WILLIAM J. SUTER and THE COURT OF TAX APPEALS, respondents.A limited partnership, named "William J. Suter 'Morcoin' Co., Ltd.," was formed in 1947 by William J. Suter asthe general partner, and Julia Spirig and Gustav Carlson, as the limited partners. The partners contributed,respectively, P20,000.00, P18,000.00 and P2,000.00 to the partnership. The firm engaged, among other activities, in the importation, marketing, distribution and operation of automatic phonographs, radios,television sets and amusement machines, their parts and accessories.In 1948, however, general partner Suter and limited partner Spirig got married and, thereafter, limitedpartner Carlson sold his share in the partnership to Suter and his wife.The limited partnership had been filing its income tax returns as a corporation. In 1959, theCommissioner, in an assessment, consolidated the income of the firm and the individual incomes of thepartners-spouses Suter and Spirig resulting in a determination of a deficiency income tax againstrespondent Suter. ISSUES: (a) Whether or not the corporate personality of the William J. Suter "Morcoin" Co., Ltd. should bedisregarded for income tax purposes, considering that respondent William J. Suter and his wife, Julia SpirigSuter actually formed a single taxable unit; and(b) Whether or not the partnership was dissolved after the marriage of the partners, respondentWilliam J. Suter and Julia Spirig Suter and the subsequent sale to them by the remaining partner, GustavCarlson, of his participation of P2,000.00 in the partnership for a nominal amount of P1.00. SC: (a) CIR has evidently failed to observe the fact that the partnership was not a universal partnership, but a particular one .A universal partnership requires either that the object of the associationbe all the present property of the partners, as contributed by them to the common fund, or else " all that thepartners may acquire by their industry or work during the existence of the partnership". William J. Suter "Morcoin" Co., Ltd. was not such a universal partnership, since the contributions of the partners were fixedsums of money, P20,000.00 by William Suter and P18,000.00 by

Julia Spirig and neither one of them was anindustrial partner. It follows that William J. Suter "Morcoin" Co., Ltd. was not a partnership that spouses wereforbidden to enter by Article 1677 of the Civil Code of 1889.The appellant's view, that by the marriage of both partners the company became a singleproprietorship, is equally erroneous. The capital contributions of partners William J. Suter and Julia Spirigwere separately owned and contributed by them before their marriage; and after they were joined inwedlock, such contributions remained their respective separate property under the Spanish Civil Code(Article 1396):The following shall be the exclusive property of each spouse:(a) That which is brought to the marriage as his or her own; ....Thus, the individual interest of each consort in the partnership did not become common property ofboth after their marriage in 1948.The change in its membership, brought about by the marriage of the partners and their subsequentacquisition of all interest therein, is no ground for withdrawing the partnership from the coverage of Section24 of the tax code, requiring it to pay income tax.The code (NIRC) taxes a limited partnership on its income, but not a general copartnership ( compaiacolectiva ), because it is in the case of compaias colectivas that the members, and not the firm, aretaxable in their individual capacities for any dividend or share of the profit derived from the duly registeredgeneral partnership.(b) The fi rm was not a universal partnership, but a particular one. It follows that the partnership was not onethat A and B were forbidden to enter under Article 1677. (now Art. 1782.) Nor could the subsequentmarriage of the partners operate to dissolve it, such marriage not being one of the causes provided for that purpose by law. Gregorio Ortega, Tomas del Castillo, Jr. and Benjamin Bacorro v. CA, SEC and Joaquin Misa G.R. No. 109248 July 3, 1995 Vitug, J. Facts: Ortega, then a senior partner in the law firm Bito, Misa, and Lozada withdrew in said firm. He filed with SEC a petition for dissolution and liquidation of partnership. SEC en banc ruled that withdrawal of Misa from the firm had dissolved the partnership.Reason: since it is partnership at will, the

law firm could be dissolved by any partner at anytime, such as by withdrawal therefrom, regardless of good faith or bad faith, since nopartner can be forced to continue in the partnership against his will. Issue: 1. WON the partnership of Bito, Misa & Lozada (now Bito, Lozada, Ortega & Castillo)is a partnership at will; 2. WON the withdrawal of Misa dissolved the partnership regardlessof his good or bad faith; Held: 1. Yes. The partnership agreement of the firm provides that [t]he partnership shallcontinue so long as mutually satisfactory and upon the death or legal incapacity of one of the partners, shall be continued by the surviving partners.2 . Y e s . A n y o n e o f t h e p a r t n e r s m a y , at his sole pleasure, dictate a dissolution of t h e partnership at will (e.g. by way of withdrawal of a partner). He must, however, act in goodfaith, not that the attendance of bad faith can prevent the dissolution of the partnership butthat it can result in a liability for damages.