THIRD DIVISION Hence, the instant petition for review on certiorari under Rule 45
[G.R. No. 113459. November 18, 2002] of the Rules of Court raising the following issues:
COMMISSIONER OF INTERNAL REVENUE petitioner, vs. JOSEFINA
LEAL, respondent.
DECISION
SANDOVAL-GUTIERREZ, J.:
Pursuant to Section 116 of Presidential Decree No. 1158,[1] (The
National Internal Revenue Code of 1977, as amended [Tax Code for
brevity]), which provides:
SEC. 116. Percentage tax on dealers in securities; lending investors.
Dealers in securities shall pay a tax equivalent to six (6%) per centum of
their gross income. Lending investors shall pay a tax equivalent to
five (5%) per cent of their gross income. (emphasis added)
the Commissioner of Internal Revenue, petitioner, issued Revenue
Memorandum Order (RMO) No. 15-91 dated March 11,
1991,[2] imposing 5% lending investors tax on pawnshops based on
their gross income and requiring all investigating units of the Bureau of
Internal Revenue (BIR) to investigate and assess the lending investors
tax due from them. The issuance of RMO No. 15-91 was an offshoot of
petitioners evaluation that the nature of pawnshop business is akin to
that of lending investors, which term is defined in Section 157 (u) of the
Tax Code in this wise:
(u) Lending investors include all persons who make a practice
of lending money for themselves or others at interests.
Subsequently, petitioner issued Revenue Memorandum Circular
(RMC) No. 43-91 dated May 27, 1992,[3] subjecting the pawn ticket to
the documentary stamp tax as prescribed in Title VII of the Tax Code.
Adversely affected by those revenue orders, herein respondent
Josefina Leal, owner and operator of Josefinas Pawnshop in San Mateo,
Rizal, asked for a reconsideration of both RMO No. 15-91 and RMC No.
43-91 but the same was denied with finality by petitioner in its BIR
Ruling No. 221-91 dated October 30, 1991.[4]
Consequently, on March 18, 1992, respondent filed with the
Regional Trial Court (RTC), Branch 75, San Mateo, Rizal, a petition for
prohibition, docketed as Civil Case No. 849-92,[5]seeking to prohibit
petitioner from implementing the revenue orders.
Petitioner, through the Office of the Solicitor General, filed a
motion to dismiss[6] the petition on the ground that the RTC has no
jurisdiction to review the questioned revenue orders and to enjoin their
implementation. Petitioner contends that the subject revenue orders
were issued pursuant to his power to make rulings or opinions in
connection with the implementation of the provisions of internal
revenue laws.[7] Thus, the case falls within the exclusive appellate
jurisdiction of the Court of Tax Appeals, citing Section 7 (1) of Republic
Act No. 1125.[8]
The RTC, through then Presiding Judge Andres B. Reyes,
Jr.,[9] issued an order on April 27, 1992[10] denying the motion to
dismiss, holding that the revenue orders are notassessments to
implement a Tax Code provision, but are in effect new taxes (against
pawnshops) which are not provided for under the Code, and which
only Congress is empowered to impose.
Petitioner then filed with the Court of Appeals a petition
for certiorari and prohibition under Rule 65 of the Revised Rules of
Court (now 1997 Rules of Civil Procedure, as amended), docketed as
CA-G.R. SP No. 28824. Petitioner alleged that in denying the motion to
dismiss, the RTC Judge acted without or in excess of his jurisdiction, or
with grave abuse of discretion. In its Decision dated December 23,
1993, the Court of Appeals dismissed the petition for lack of legal
basis[11] and ruled that the (RTC) order denying the motion to dismiss is
subject to immediate challenge before the Supreme Court (not the
Court of Appeals), which is the sole authority to determine and
resolve an issue purely of law pursuant to Section 5, Article VIII of the
1987 Constitution.[12] Nonetheless, the Court of Appeals resolved the
case on the merits, sustaining the RTC ruling that the questioned
revenue orders are new additional measures which only Congress is
empowered to impose.[13]
1. WHETHER THE COURT OF APPEALS HAS
JURISDICTION OVER A PETITION FOR CERTIORARI UNDER
RULE 65 OF THE RULES OF COURT WHERE THE AUTHORITY
OF THE REGIONAL TRIAL COURT TO REVIEW THE SUBJECT
REVENUE ORDERS IS BEING QUESTIONED;
2. WHETHER IT IS THE RTC OR THE COURT OF TAX
APPEALS WHICH HAS JURISDICTION OVER THE INSTANT
CASE.
Anent the first issue, petitioner contends that the Court of
Appeals has original jurisdiction to issue writs of mandamus,
prohibition, certiorari, habeas corpus and quo warranto, and auxiliary
writs or processes, whether or not in aid of its appellate jurisdiction,
pursuant to Section 9(1) of Batas Pambansa Blg. 129. Petitioner thus
claims that his petition for certiorari filed with the Court of Appeals
pursuant to Rule 65 of the Rules of Court is the proper recourse to
assail the RTC order denying his motion to dismiss.
Petitioners contention is meritorious. The Court of Appeals erred
in holding that it has no jurisdiction over petitioners special civil action
for certiorari under Rule 65 of the Rules. While this Court exercises
original jurisdiction to issue the extraordinary writ of certiorari (as well
as the writs of prohibition, mandamus, quo warranto, and habeas
corpus),[14] such power is not exclusive to this Court but
is concurrent with the Court of Appeals[15] and the Regional Trial
Courts.[16] We reiterate our pronouncement on this issue in Morales vs.
Court of Appeals:[17]
Under Section 9 (1) of B.P. Blg. 129, the Court of
Appeals has concurrent original jurisdiction with the Supreme
Court pursuant to Section 5 (1) of Article VIII of the Constitution and
Section 17 (1) of the Judiciary Act of 1948, and with the Regional Trial
Court pursuant to Section 21 (1) of B.P. Blg. 129 to issue writs
of certiorari, mandamus, prohibition, habeas corpus, and quo
warranto. These are original actions, not modes of appeals.
Since what the petitioner filed in CA-G.R. SP No. 40670 was a special
civil action for certiorari under Rule 65, the original jurisdiction of
the Court of Appeals thereon is beyond doubt.
This error of the Court of Appeals was due to its misapplication of
Section 5 (2) (c) of Article VIII of the Constitution and of that portion of
Section 17 of the Judiciary Act of 1948 vesting upon the Supreme
Court exclusive jurisdiction to review, revise, reverse, modify, or affirm
on certiorari as the law or rules of court may provide, final judgments
and decrees of inferior courts in all cases in which the jurisdiction of
any inferior court is in issue. It forgot that this constitutional and
statutory provisions pertain to the appellate not original jurisdiction
of the Supreme Court, as correctly maintained by the
petitioner. An appellate jurisdiction refers to a process which is but a
continuation of the original suit, not a commencement of a new
action, such as that of a special civil action for certiorari. The
general rule is that a denial of a motion to dismiss or to quash in
criminal cases is interlocutory and cannot be the subject of an appeal
or of a special civil action for certiorari. Nevertheless, this Court has
allowed a special civil action for certiorari where a lower court has
acted without or in excess of jurisdiction or with grave abuse of
discretion in denying a motion to dismiss or to quash. The
petitioner believed that the RTC below did so; hence, the special
civil action for certiorari before the Court of Appeals appeared to
be the proper remedy. (emphasis added)
Such concurrence of original jurisdiction among the Regional
Trial Court, the Court of Appeals and this Court, however, does not
mean that the party seeking any of the extraordinary writs has the
absolute freedom to file his petition in the court of his
choice. The hierarchy of courts in our judicial system determines the
appropriate forum for these petitions. Thus, petitions for the issuance
of the said writs against the first level (inferior) courts must be filed
with the Regional Trial Court and those against the latter, with the
Court of Appeals. A direct invocation of this Courts original jurisdiction
to issue these writs should be allowed only where there are special and
important reasons therefor, specifically and sufficiently set forth in the
petition. This is the established policy to prevent inordinate demands
upon the Courts time and attention, which are better devoted to
matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Courts docket.[18] Thus, it was proper for petitioner to
institute the special civil action for certiorari with the Court of Appeals
assailing the RTC order denying his motion to dismiss based on lack of
jurisdiction.
While the Court of Appeals correctly took cognizance of the
petition for certiorari, however, let it be stressed that the jurisdiction to
review the rulings of the Commissioner of Internal Revenue pertains to
the Court of Tax Appeals, not to the RTC.
The questioned RMO No. 15-91 and RMC No. 43-91 are actually
rulings or opinions of the Commissioner implementing the Tax Code
on the taxability of pawnshops. This is clear from petitioners RMO No.
15-91, pertinent portion of which reads:
A restudy of P.D. 114 (the Pawnshop Regulation Act) shows that the
principal activity of pawnshops is lending money at interest and
incidentally accepting a pawn of personal property delivered by the
pawner to the pawnee as security for the loan (Sec. 3, ibid.). Clearly, this
makes pawnshop business akin to lending investors business activity
which is broad enough to encompass the business of lending money at
interest by any person whether natural or juridical. Such being the case,
pawnshops shall be subject to the 5% lending investors tax based on
their gross income pursuant to Section 116 of the Tax Code, as
amended.[19]
Such revenue orders were issued pursuant to petitioner's powers
under Section 245 of the Tax Code, which states:
"SEC. 245. Authority of the Secretary of Finance to promulgate rules and
regulations. The Secretary of Finance, upon recommendation of the
Commissioner, shall promulgate all needful rules and regulations for
the effective enforcement of the provisions of this Code.
"The authority of the Secretary of Finance to determine articles similar
or analogous to those subject to a rate of sales tax under certain
category enumerated in Section 163 and 165 of this Code shall be
without prejudice to the power of the Commissioner of Internal
Revenue to make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws,
including ruling on the classification of articles of sales and similar
purposes." (emphasis added)
Under Republic Act No. 1125 (An Act Creating the Court of Tax
Appeals [CTA for brevity]), as amended, such rulings of the
Commissioner of Internal Revenue are appealable to that court, thus:
"SEC. 7. Jurisdiction. The Court of Tax Appeals shall exercise exclusive
appellate jurisdiction to review by appeal, as herein provided -
(1) Decisions of the Commissioner of Internal Revenue in cases
involving disputed assessments, refunds of internal revenue taxes, fees
or other charges, penalties imposed in relation thereto, or other
matters arising under the National Internal Revenue Code or other
laws or part of law administered by the Bureau of Internal
Revenue;
x x x x x x x x x. (emphasis added)
"SEC. 11. Who may appeal; effect of appeal. Any person, association or
corporation adversely affected by a decision or ruling of the
Commissioner of Internal Revenue, or the Commissioner of Customs
or any provincial or city Board of Assessment Appeals may file an
appeal in the Court of Tax Appeals within thirty days after the
receipt of such decision or ruling.
x x x x x x x x x. (emphasis added)
SEC. 18. x x x. No judicial proceedings against the Government
involving matters arising under the National Internal Revenue
Code, the Customs Law or the Assessment Law shall be maintained,
except as herein provided, until and unless an appeal has been
previously filed with the Court of Tax Appeals and disposed of in
accordance with the provisions of this Act.
x x x x x x x x x. (emphasis added)
This Court, in Rodriguez, etc. vs. Blaquera, etc.,[20] ruled:
"Plaintiff maintains that this is not an appeal from a ruling of the
Collector of Internal Revenue, but merely an attempt to nullify General
Circular No. V-148, which does not adjudicate or settle any controversy,
and that, accordingly, this case is not within the jurisdiction of the
Court of Tax Appeals.
"We find no merit in this pretense. General Circular No. V-148 directs
the officers charged with the collection of taxes and license fees to
adhere strictly to the interpretation given by the defendant to the
statutory provisions abovementioned, as set forth in the
Circular. The same incorporates, therefore, a decision of the
Collector of Internal Revenue (now Commissioner of Internal
Revenue) on the manner of enforcement of the said statute, the
administration of which is entrusted by law to the Bureau of
Internal Revenue. As such, it comes within the purview of Republic
Act No. 1125, Section 7 of which provides that the Court of Tax
Appeals shall exercise exclusive appellate jurisdiction to review by
appeal x x x decisions of the Collector of Internal Revenue in x x x
matters arising under the National Internal Revenue Code or other
law or part of the law administered by the Bureau of Internal
Revenue. x x x." (emphasis added)
In the same vein, we held in Meralco Securities Corporation vs.
Savellano,[21] thus:
Respondent judge has no jurisdiction to take cognizance of the
case because the subject matter thereof clearly falls within the scope of
cases now exclusively within the jurisdiction of the Court of Tax
Appeals. Section 7 of Republic Act No. 1125, enacted June 16, 1954,
granted to the Court of Tax Appeals exclusive appellate
jurisdiction to review by appeal, among others, decisions of the
Commissioner of Internal Revenue in cases involving disputed
assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under
the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue. The law
transferred to the Court of Tax Appeals jurisdiction over all cases
involving said assessments previously cognizable by Courts of First
Instance, and even those already pending in said courts. The
question of whether of not to impose a deficiency tax assessment on
Meralco Securities Corporation undoubtedly comes within the purview
of the words disputed assessments or of other matters arising under
the National Internal Revenue Code. In the case of Blaquera, etc. vs.
Rodriguez, etc.(103 Phil. 511 [1958]), this Court ruled that the
determination of the correctness or incorrectness of a tax assessment
to which the taxpayer is not agreeable, falls within the jurisdiction of
the Court of Tax Appeals and not of the Court of First Instance, for
under the provisions of Section 7 of Republic Act No. 1125, the Court
of Tax Appeals has exclusive appellate jurisdiction to review, on
appeal, any decision of the Collector of Internal Revenue in cases
involving disputed assessments and other matters arising under
the National Internal Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue.
Here, as earlier mentioned, respondent Josefina Leal, being a
pawnshop owner, is assailing the revenue orders imposing 5% lending
investors tax on pawnshops issued by petitioner.Clearly then, she
should have filed her petition with the Court of Tax Appeals, not the
RTC. Indeed, the Court of Appeals erred in holding that the RTC order
should have been challenged before this Court.
WHEREFORE, the petition is GRANTED. Accordingly: (1) the
assailed Decision dated December 23, 1993 of the Court of Appeals in
CA-G.R. SP No. 28824 is SET ASIDE; (2) the Order dated April 27, 1992
and the Writ of Preliminary Injunction dated May 21, 1992 both issued
by the RTC, Branch 75, San Mateo, Rizal in Civil Case No. 849-92, are
declared NULL and VOID for having been issued without jurisdiction;
and (3) Civil Case No. 849-92 is ordered DISMISSED.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-25043 April 26, 1968
ANTONIO ROXAS, EDUARDO ROXAS and ROXAS Y CIA., in their 194 of the Tax Code, an owner of a real estate who derives a yearly
own respective behalf and as judicial co-guardians of JOSE rental income therefrom in the amount of P3,000.00 or more is
ROXAS, petitioners, considered a real estate dealer and is liable to pay the corresponding
vs. fixed tax.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL
REVENUE, respondents. The Commissioner of Internal Revenue justified his demand for the
fixed tax on dealers of securities against Roxas y Cia., on the fact that
Leido, Andrada, Perez and Associates for petitioners. said partnership made profits from the purchase and sale of securities.
Office of the Solicitor General for respondents.
In the same assessment, the Commissioner assessed deficiency income
BENGZON, J.P., J.: taxes against the Roxas Brothers for the years 1953 and 1955, as
follows:
Don Pedro Roxas and Dona Carmen Ayala, Spanish subjects,
transmitted to their grandchildren by hereditary succession the 1953 1955
following properties:
Antonio Roxas P7,010.00 P5,813.00
Eduardo Roxas 7,281.00 5,828.00
(1) Agricultural lands with a total area of 19,000 hectares,
situated in the municipality of Nasugbu, Batangas province; Jose Roxas 6,323.00 5,588.00

(2) A residential house and lot located at Wright St., Malate,
Manila; and
(3) Shares of stocks in different corporations.
To manage the above-mentioned properties, said children, namely,
Antonio Roxas, Eduardo Roxas and Jose Roxas, formed a partnership
called Roxas y Compania.
The deficiency income taxes resulted from the inclusion as income of
Roxas y Cia. of the unreported 50% of the net profits for 1953 and 1955
derived from the sale of the Nasugbu farm lands to the tenants, and
the disallowance of deductions from gross income of various business
expenses and contributions claimed by Roxas y Cia. and the Roxas
brothers. For the reason that Roxas y Cia. subdivided its Nasugbu farm
lands and sold them to the farmers on installment, the Commissioner
considered the partnership as engaged in the business of real estate,
hence, 100% of the profits derived therefrom was taxed.

AGRICULTURAL LANDS The following deductions were disallowed:

At the conclusion of the Second World War, the tenants who have all
been tilling the lands in Nasugbu for generations expressed their desire ROXAS Y CIA.:
to purchase from Roxas y Cia. the parcels which they actually occupied.
For its part, the Government, in consonance with the constitutional 1953
Tickets for Banquet in honor of
mandate to acquire big landed estates and apportion them among P 40.00
S. Osmeña
landless tenants-farmers, persuaded the Roxas brothers to part with
their landholdings. Conferences were held with the farmers in the early Gifts of San Miguel beer 28.00
part of 1948 and finally the Roxas brothers agreed to sell 13,500
hectares to the Government for distribution to actual occupants for a Contributions to —
price of P2,079,048.47 plus P300,000.00 for survey and subdivision
expenses. Philippine Air Force Chapel 100.00

Manila Police Trust Fund 150.00

It turned out however that the Government did not have funds to cover
the purchase price, and so a special arrangement was made for the
Philippines Herald's fund for Manila's neediest
Rehabilitation Finance Corporation to advance to Roxas y Cia. the
families 100.00
amount of P1,500,000.00 as loan. Collateral for such loan were the
lands proposed to be sold to the farmers. Under the arrangement, 1955
Roxas y Cia. allowed the farmers to buy the lands for the same price Contributions to Contribution to
but by installment, and contracted with the Rehabilitation Finance Our Lady of Fatima Chapel, FEU 50.00
Corporation to pay its loan from the proceeds of the yearly
amortizations paid by the farmers. ANTONIO ROXAS:

1953
In 1953 and 1955 Roxas y Cia. derived from said installment payments Contributions to —
a net gain of P42,480.83 and P29,500.71. Fifty percent of said net gain
was reported for income tax purposes as gain on the sale of capital Pasay City Firemen Christmas Fund 25.00
asset held for more than one year pursuant to Section 34 of the Tax
Code. Pasay City Police Dept. X'mas fund 50.00

1955
RESIDENTIAL HOUSE
Contributions to —

During their bachelor days the Roxas brothers lived in the residential Baguio City Police Christmas fund 25.00
house at Wright St., Malate, Manila, which they inherited from their
grandparents. After Antonio and Eduardo got married, they resided Pasay City Firemen Christmas fund 25.00
somewhere else leaving only Jose in the old house. In fairness to his
Pasay City Police Christmas fund 50.00
brothers, Jose paid to Roxas y Cia. rentals for the house in the sum of
P8,000.00 a year.
EDUARDO ROXAS:

ASSESSMENTS 1953
Contributions to —
On June 17, 1958, the Commissioner of Internal Revenue demanded Hijas de Jesus' Retiro de Manresa 450.00
from Roxas y Cia the payment of real estate dealer's tax for 1952 in the
amount of P150.00 plus P10.00 compromise penalty for late payment, Philippines Herald's fund for Manila's neediest
and P150.00 tax for dealers of securities for 1952 plus P10.00 families 100.00
compromise penalty for late payment. The assessment for real estate
dealer's tax was based on the fact that Roxas y Cia. received house 1955
rentals from Jose Roxas in the amount of P8,000.00. Pursuant to Sec. Contributions to Philippines 120.00

Herald's fund for Manila's
neediest families
JOSE ROXAS:
1955
Contributions to Philippines
Herald's fund for Manila's
neediest families 120.00
The Roxas brothers protested the assessment but inasmuch as said
protest was denied, they instituted an appeal in the Court of Tax
Appeals on January 9, 1961. The Tax Court heard the appeal and
rendered judgment on July 31, 1965 sustaining 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. The Tax Court's
judgment reads:
WHEREFORE, the decision appealed from is hereby affirmed
with respect to petitioners Antonio Roxas, Eduardo Roxas,
and Jose Roxas who are hereby ordered to pay the
respondent Commissioner of Internal Revenue the amounts
of P12,808.00, P12,887.00 and P11,857.00, respectively, as
deficiency income taxes for the years 1953 and 1955, plus 5%
surcharge and 1% monthly interest as provided for in Sec.
51(a) of the Revenue Code; and modified with respect to the
partnership Roxas y Cia. in the sense that it should pay only
P150.00, as real estate dealer's tax. With costs against
petitioners.
Not satisfied, Roxas y Cia. and the Roxas brothers appealed to this
Court. The Commissioner of Internal Revenue did not appeal.
The issues:
(1) Is the gain derived from the sale of the Nasugbu farm
lands an ordinary gain, hence 100% taxable?
(2) Are the deductions for business expenses and
contributions deductible?
(3) Is Roxas y Cia. liable for the payment of the fixed tax on
real estate dealers?
The Commissioner of Internal Revenue contends that Roxas y Cia.
could be considered a real estate dealer because it engaged in the
business of selling real estate. The business activity alluded to was the
act of subdividing the Nasugbu farm lands and selling them to the
farmers-occupants on installment. To bolster his stand on the point, he
cites one of the purposes of Roxas y Cia. as contained in its articles of
partnership, quoted below:
4. (a) La explotacion de fincas urbanes pertenecientes a la
misma o que pueden pertenecer a ella en el futuro,
alquilandoles por los plazos y demas condiciones, estime
convenientes y vendiendo aquellas que a juicio de sus
gerentes no deben conservarse;
The above-quoted purpose notwithstanding, the proposition of the
Commissioner of Internal Revenue cannot be favorably accepted by Us
in this isolated transaction with its peculiar circumstances in spite of
the fact that there were hundreds of vendees. Although they 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 ten-year amortization period.
It should be borne in mind that the sale of the Nasugbu farm lands to
the very farmers who tilled them for generations was not only in
consonance with, but more in obedience to the request and pursuant
to the policy of our Government to allocate lands to the landless. It was
the bounden 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. However, the Government could not comply with its
duty for lack of funds. Obligingly, 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. For this
magnanimous act, the municipal council of Nasugbu passed a
resolution expressing the people's gratitude.
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, lest the tax collector kill the "hen that lays the golden egg".
And, in order to maintain the general public's trust and confidence in
the Government this power must be used justly and not treacherously.
It does not conform with Our sense of justice in the instant case for the
Government to persuade the taxpayer to lend it a helping hand and
later on to penalize him for duly answering the urgent call.
In fine, 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%.
DISALLOWED DEDUCTIONS
Roxas y Cia. deducted from its gross income the amount of P40.00 for
tickets to a banquet given in honor of Sergio Osmena and P28.00 for
San Miguel beer given as gifts to various persons. The deduction were
claimed as representation expenses. Representation expenses are
deductible from gross income as expenditures incurred in carrying on a
trade or business under Section 30(a) of the Tax Code provided the
taxpayer proves that they are reasonable in amount, ordinary and
necessary, and incurred in connection with his business. In the case at
bar, the evidence does not show such link between the expenses and
the business of Roxas y Cia. The findings of the Court of Tax Appeals
must therefore be sustained.
The petitioners also claim deductions for contributions to the Pasay
City Police, Pasay City Firemen, and Baguio City Police Christmas funds,
Manila Police Trust Fund, Philippines Herald's fund for Manila's
neediest families and Our Lady of Fatima chapel at Far Eastern
University.
The contributions to the Christmas funds of the Pasay City Police, Pasay
City Firemen and Baguio City Police 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. For this reason, the disallowance
must be sustained. On the other hand, the contribution to the Manila
Police trust fund 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.
The contributions to the Philippines Herald's fund for Manila's neediest
families were disallowed on the ground that the Philippines Herald is
not a corporation or an association contemplated in Section 30 (h) of
the Tax Code. It should be noted however that the contributions were
not made to the Philippines Herald but to a group of civic spirited
citizens organized by the Philippines Herald solely for charitable
purposes. There is no question that the members of this group of
citizens do not receive profits, for all the funds they raised were for
Manila's neediest families. Such a group of citizens may be classified as
an association organized exclusively for charitable purposes mentioned
in Section 30(h) of the Tax Code.
Rightly, the Commissioner of Internal Revenue disallowed the
contribution to Our Lady of Fatima chapel at the Far Eastern University
on the ground that the said university gives dividends to its
stockholders. Located within the premises of the university, the chapel
in question has not been shown to belong to the Catholic Church or
any religious organization. On the other hand, the lower court found
that it belongs to the Far Eastern University, contributions to which are
not deductible under Section 30(h) of the Tax Code for the reason that
the net income of said university injures to the benefit of its
stockholders. The disallowance should be sustained.
Lastly, Roxas y Cia. questions the imposition of the real estate dealer's
fixed tax upon it, because although it earned a rental income of
P8,000.00 per annum in 1952, said rental income came from Jose
Roxas, one of the partners. 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
Net taxable income P299,592.47
paying the rentals. The law, which states: 1äwphï1.ñët
Tax Due P147,250.00
. . . "Real estate dealer" includes any person engaged in the
business of buying, selling, exchanging, leasing or renting Tax paid 147,159.00
property on his own account as principal and holding himself
out as a full or part-time dealer in real estate or as an owner
of rental property or properties rented or offered to rent for an Deficiency P91.00
aggregate amount of three thousand pesos or more a year: . . . ===========
(Emphasis supplied) .
JOSE ROXAS

is too clear and explicit to admit construction. The findings of the Court Net income per return P222,681.76
of Tax Appeals or, this point is sustained.1äwphï1.ñët
Add: 1/3 share, profits in
P153,429.15
Roxas y Cia.
To Summarize, no deficiency income tax is due for 1953 from Antonio
Roxas, Eduardo Roxas and Jose Roxas. For 1955 they are liable to pay
Less amount reported 146,135.46
deficiency income tax in the sum of P109.00, P91.00 and P49.00,
respectively, computed as follows: *
Amount understated 7,113.69

ANTONIO ROXAS Less 1/3 share of

contributions disallowed
Net income per return P315,476.59
from partnership but
allowed as deductions to
Add: 1/3 share, profits in
P 153,249.15 partners 7,042.02 71.67
Roxas y Cia.

Less amount declared 146,135.46

Net income per review P222,753.43

Less: Exemption 1,800.00

Amount understated P 7,113.69

Contributions disallowed 115.00

Net income subject to tax P220,953.43

Tax due P102,763.00

P 7,228.69
Tax paid 102,714.00
Less 1/3 share of
contributions amounting
to P21,126.06 disallowed
Deficiency P 49.00
from partnership but
===========
allowed to partners 7,042.02 186.67

WHEREFORE, the decision appealed from is modified. Roxas y Cia. is

Net income per review P315,663.26
hereby ordered to pay the sum of P150.00 as real estate dealer's fixed
tax for 1952, and Antonio Roxas, Eduardo Roxas and Jose Roxas are
Less: Exemptions 4,200.00
ordered to pay the respective sums of P109.00, P91.00 and P49.00 as
their individual deficiency income tax all corresponding for the year
Net taxable income P311,463.26 1955. No costs. So ordered.

Tax due 154,169.00 Reyes, J.B.L., Dizon, Makalintal, Sanchez, Castro, Angeles and Fernando,
JJ., concur.
Tax paid 154,060.00 Zaldivar, J., took no part.
Concepcion, C.J., is on leave.

Deficiency P 109.00
========== Footnotes

EDUARDO ROXAS

Net income per return P 304,166.92

Add: 1/3 share, profits in

P 153,249.15
Roxas y Cia

Less profits declared 146,052.58

Amount understated P 7,196.57

Less 1/3 share in

contributions amounting
to P21,126.06 disallowed
from partnership but
allowed to partners 7,042.02 155.55

Net income per review P304,322.47

Less: Exemptions 4,800.00