Limpan Investment Corp v CIR

Doctrine: constructive receipt of income

Income even if not actually received is to be reported as income. “The withdrawal in 1958 of the
deposits in court pertaining to the 1957 rental income is not sufficient justification for the
nondeclaration of said income in 1957, since the deposit was resorted to due to the refusal of
petitioner to accept the same, and was not the fault of its tenants; hence, petitioner is deemed to have
constructively received such rentals in 1957.”

Limpan Co, Petitioner is a corporation in the business of leasing out various properties in Pasay and
Manila. It is owned by the Sps. Lim.

BIR assessed deficiency taxes for 1956 and 1957. BIR alleged that Limpan had undeclared rental
income of 20,199.00 and P81,690.00 for the years 1956 and 1957 respectively.

WN Limpan is liable for tax on the unreported rental income? YES

Explanations of Limpan Court Ruling

For 1956
a. It never received 20k income, this was Unmeritorious. The arrangement that Lim
collected by Lim who retained ownership of retained ownership to the properties and
the property and applied such to the turn over 6% to the corporation to be
payment of rent. applied to rentals of the land and in
exchange for whatever rentals they may
collect from tenants who refused to
recognize new owners was uncorroborated
and unusual.
12100 was omitted by the Treasurer, Solis Even their own witness admitted to the
underdeclaration.
For 1957
part of the income totaling 31,380, of which Not proven. Lim was not presented as
13500 was received by its President Lim witness.
who turned over the said amount only in
1959.
And a certain tenant, Go Tong, The withdrawal in 1958 of the deposits
deposited 10,800 in court (as in court pertaining to the 1957 rental
consignment, since the tenant did not income is no sufficient justification for
recognize Lim as the owner of the the non-declaration of said income in
property) and 4200 of said income 1957, since the deposit was resorted to
should not be declared as income since due to the refusal of petitioner to accept
this was paid by a subtenant. the same, and was not the fault of its
tenants; hence, petitioner is deemed to
*MAIN kahit eto lang sabihin mo. have constructively received such
rentals in 1957. The payment by the
sub- tenant in 1957 should have been
reported as rental income in said year,
since it is income just the same
regardless of its source.

29,350 was omitted by Solis. Even their own witness admitted to the
underdeclaration.