9.) javier vs. ancheta.pdf

8/19/2019 9.) Javier vs. Ancheta.pdf

1/16

r ,., :n.

iC.

o Tli

: - ' O J ~ T O T

•

/ MELCHOR J . JAVIER , JR . ,

Pe t i t i one r ,

- .ver sus ...

C T . A. CASE NO. 339 3

R

UBE

N B. ANCHETA

in

is

ca

pac

i ty

as

Commiss i oner

of Intern a l Revenue ,

Respondent•

X - -

. .- .• .-

. - . -

.X

D E C I S I 0 N

The ques tion here

is

whethe ·r t he proceeds of

an

err

o

neous

bank

re

mi

t tance

to

a

taxpayer over

which

he exer c

is ed

c

omplete

.o

mini

on t.o the e x t.e

nt

.

of disposing them beyond a l l chance of r

ecover

y

const i tute ta

xable

i ncome to him.

The f acts

are

no · d i spu ted As

l l g e ~

by

peti t ioner Melchor J .

Javi

e r , J r .

in

his pe t i t ion

. .

for revi

ew

and admi t .ted by re spondent Commiss i one r

Qf. Inter nal Rev

enue

fn his answer:

COMES

NOW th

e

Peti t ioner

, t hr ough

i ts unders

igne

d counsel and t t

his

Honorable Cour t respectful ly alleges:

1 That he is a Fil ipino c i ti zen ,

of lega l a

ge

, m

ar r ied

and a re s i dent

of

· 108 now 3 6) Jose Abad

Santos

St ree t San J uan ; Metro

Man i l

a ; and

t hat the r e sponden t. Ruben B

Ancheta

is

the

C

ommissioner

of

.

Internal

Revenue

and holds h i s off ice a t the Bureau of

Inter na l R

evenue

i n Quezon

City

wh

er

e

he

may

be s e

rv

ed with s ummons and

othe

r .

proces

se

s of th is Honorable Court .

19

8

•


2/16

DECISION .. .

C

TA

CASE . 3393

- 2 -

2.

That on or

a

bout

J une 3,

1977,

Victoria L. Javier ,

the wife

of. t he

pet..iti:oner, received fr om the Prudent ia l

Bank and Trust Company in Pasay Ci t y

the

amount of US$999;973.70 remitted

by her s i s t e r

Mr

s .

Do

lores Ve ntosa

,

thru so

me u.s.

banks amo ng which i s

Mellon Bank, N.A.

3.

That on

or

about J u n ~

29,

1977

Mellon

Bank, N.A. f i led a

compl

a in t

with

the Court of Fi rs t

I

nstance of

Riza l

(docketed

a s Civi l Case No. 26899)

agains t t

he pet i t ioner

his w i f ~ and

other

defend

an ts c l aiming t hat

i t s

remittance of US 1

, 000

,0

00

.00

was a

cler ica l

error and

should

have

been

US 1 ,0

00.00

only and

prayi

ng tha t the

excess

amount of US$999 , ooo·

.oo

be

re -

.

turned

on the ground that

.

the defendants

are

t ruste

es of

an

implied

t rus t

fo

r

the

benefi t

of

Mellon B

an

k with the

clear

i

mmediate and

continuing duty

to

r

eturn

the said

amount from

the m

oment

.·

i t . was

rece

ived

.

4. That

on or abou

t Novenb

cr

5 ,

1977,

t he Ci t y Fiscal of

Pasay

City

f i led

an

I nformation wi th the

Circ

ui t

Cri

minal

Court o c k e d as C C C ~ I I - .

2369-P.C .) ~ b a r g i n g the pet i t ione r and

his wife wit

h

the crime of Estafa al leg-

.

ing

tha t

t hey

misappropriated

,

misapplie

d

and con

v

er te

d

to

their oNn

pe

rsonal

us e

and

benef

t the

am

ount of US $99 9

1

000 . 00

which they received unde r an i mpl ied

tru s t

for

t he

benefi

t

of

Mellon Bank

and

as a r

esu

lt.

of

t he

mist

ake in the

remit tance by the l

a t

te r .

s.

Th

a t

on March 15, 1978 ,

the

pet i t ion e r f

i le

d h is I ncome Ta Re

t.urn

f o ~

the

taxable year

1977

showing a

gross

in

come

of P53,05 3.38 and

a

net

income

of

P48 , 05

3.38

and s ta t ing i n

the footnote

of

the

r e

turn

that.

Tax

pa

yer

was recipient of some money r ece i ved

fr

om

abroad which

he

presumed to

be

a gi f t but

tu rned

out to

be an .error and is now sub

j ec t

of

l i t iga t ion

.

2

•


3/16

DECISION -

CTA ~ NO . 3393

- 3 -

6. Th a t

1

or before Decembe r 15 ,

19 80 , t he pet i t .i oner

re

c

eive

d a le t.t er

from t:he acting Comm i

ssione

r of I n te

rna

l

Revenue

dated Nove mber 14 , 1980 t ogethe r

with

i ncome

assess

m

ent

. no t ic es f o r t he

years 1976 and 19 77

de

manding

tha t

pe

t i -

.

t io

ne

r pay

on

or before Dec embe r 15, 1980

the

amount. of Pl,615.9G and P9 , 287

,2

97.Sl

as

deficiency

assessments

for

the

years

197 6 and 1977 respec t ive

ly

. A copy

of

the le t

ter of

the Act ing Commiss io

ner

of

In t ernal Revenue da te d November 14 , 1980

is attached hereto ma rked a s Annex A ,

and

copies of the asse ssme

n t

n

t.ic

es for

the

yea

rs

1976

and

1977

are

a t ta

ched

her eto

mar ked

Annexes A-1

and A -2

resp

ec t

i

vely

. · ·

7. T

ha

t

on

Dece

mb

e r 15 , 1980 , the

pet i t.

ioner

wrote t he

Bure

au of In tern a l

Revenue

that

he

was

pa

yi

ng

the

de f i

c i

enc

y

income

asse

s sme

nt

f or t he yea r 1976 bu t

denying t ha t he -had any . undeclared income

f

or

the year

1977

and r equested t ha t the

assessment fo r 197 7 be made to await

f i

nal

cou r t dec is ion

on the

C


4/16

DECISION -

CTA

CASE NO . 3393

- .4 -

l

Re ve

nue

on

t he pe t i t i oner vs. protest on the def i - .

ciency in

co'me tax assess

m

ent

. f or t h e y

ea

r 197 7

is

agains t the

law consideri

ng

a

the amoun t. of

US 1

,0 00

,000.00

temitted allegedly by mistake

to

h

is

wife

is

no t

subject to

i

nc

ome

tax

,

for

b

ein

g

mere

opinion

or

conclusion

on the

p

ar

t o f

pet i

-

t i o

ner

,

and e r r o n e o ~ s re spondent avers

i n his

ans

we r

as Special and

Affirmat

ive

De fE n

ses:

SPECihL

AND

AF FIRMATIVE DEFENSE S

3.

Sectio

n

29

a )

p

the

Tax

C

ode

pr

ovides:

Sec

.

29.

G

ross In

come . -

a) General de

f i n

i t ion

. .:. .'G.r oss

inco

me

• ·.i nc ludes gains , profi t s

and

i ncome

der ive

d

from

s alar

ies

wages,

or

compensation

for

p ~ r -

sona

l

se rv ices of

whatev r·t ki.nd

a

nd

in whate

ver

form pa id , or

fr

om

p

rofe

ssions, vo

cations

trades ,

businesses , c o m m ~ r c e

sa les

, or

deal

ings in prop

er ty w

he th

e r

re

a l

or p e r s n a

gr ow ing out

of

the

ownersh

ip or

use of or i n te r e st. in

such property , also f r om i nte re

s ts

,

r

ents

,

di

v

idends

, secur i t

ie.s, of

t he t

rans ac t ion

of busines s

carr

ied

or f or gain or prof i t

gains, pro-

.

f i t s and i ncome

de

rived fro

m any

source

whateve r .

4. Se

ct io

n 21

of

the Na t iona l

Internal Revenue Code provide s

th

a t a

tax

is i mposed upon t he taxable net

i ncom e r eceived during

each

tax

abl

e y

ea

r

from

a l l sources by e

ve

ry i

nd

iv idual,

whet

h

er

a c

i t izen

of

the

Phil ip

pin

es

res i ding

t

her

ein

or

an al ien

r

esiding in

the Ph i l ippines .

Ne

t ·

nco

me under t he

Tax Code me

ans

the

gross

inc

ome computed

un

de

r S

ec

t i on 29 of t he Co

de

l ess the

deduc t i

o

ns allowe

d

by

l

aw

;

I

0

1:;

•


5/16

DEC

IS

ION -

CTA CASE

NO

. 3393

- 5 -

5 . The u.s. 1,000,000 . 00 r

ec

e ived

by pe t i t ioner from the Me l lon Bank c l

ear

ly

f a 1 ~ s under gross in

come

as

defined

i n

Section 29(

a ) and t h

er efore

, s ubjec t

to inco

me t

ax

as ·

provided

f o r under Se

c t i

on

21 o f the Nat i onal Intern a l Icv

cn

uc Code ;

.

'·

6.

A ta

xpa

y

er

, who

re

c e

ived earnings

,

under

a

c la

i m

of

r ig h t

and

wit out

r e

s tr ic t

i o

as

to

i t s dispos i t ion, ha s re ceived i ncome

which he

is requi red

to

r

etur n,

e ven though

i t may s t

i l

l

be

claimed tha t. he i s no t . en - .

t i t l ed t.o

re t

a in the money and even t hough

he may

s t i l l

be

adjudged

l i

able to re

st.ore

i t s

eq

uiv

a l

en t . u

.s. vs. Ell ia

R. Lewis,

34 0 u.s. 590-592 ;

.

.

7. The e s p o n d e n t ~ def iciency i ncome

t ax

assessment

i

ssued agairist

pe t '

t ion

e r

in

the

amount of

~ 9 , 2 8 7 , 2 9 7 . 5 1

for t he

c alendar

ye

ar

1977

was issued

in

acco

rd

ance

with l aw and exis t ing r evenue r

egula tions;

and

8. Al

l presumptions ar e i n

fav

or of

t

he

c

orrectness

of t

he assessm

en t . ( In

t e r -

.

provincial

Autobus co . , I

nc

. vs .

Collecto

r

of

I n

te

rna l Revenue, G.R. No. L - ~ 7 4 Ja n .

31 , 19 56 , 52

0 •

G (

11) .P

. 791 ) •.

-

As shown in Annex A of

the

pe t i t i on f or r

ev

i

ew

,

the deficie ncy inc

ome

t ax f or t he year 1977 , which

is

c

ontested by pet i t ione

r , i s

co

mput,ed

as

f

ollows

:

. 211

Net income

per r

eturn

o • • • • • .. • P 48,053.38

Add: Undec lared

inco

me ••• •••• • 7

,020,000.00

Ne t income

pe

r i

nvest igat io

n

••••• 7

,

068,053.38

L

ess: Person

a l & a

ddit iona

l exemptions •

5 , 0 0 0 .

0 ~

Net taxable i ncome • • • • • • • • • 7,063.L053 . 38

Income tax due thereon • • • • • • • •

4

, 899 , 377 . 00

Less:

Amoun t

already assessed

• • • • • 10

,7 62.0

0

B a 1 a n c e . P4 , 888 , 615 800

Add

: 50 s urcha rge • • o • • • 2 ,444 , 308 . 00

14% i n t . f r • 3

-15

- 78 t o 7-31- 80 • • 1 , 627 , 57 3 •9 5

20%

i n t . f r .

~ ~ -a:o to

- 3.

0_.8

.0. •

326,800.56

TOTAL AMOUNT D

UE &

COLLECT IBLE •••• ~ ~ ~ ~ ~ z ~ ~ z ~ ~ ~

2 3

•

•


6/16

DECIS ION

CTA

CASE 08 393

.6 -

The

rec

ords

of

t he ca s e r evea l t ha t os t ,

i f

no t a l l , of t he US$999 , 000 . 00 mi

staken

l

r emi

t.t

e

to

Mr .

&

Mr s .

Melch

or J . J avier , Jr . by

the Mellon

Bank , N. Ae have already been i r re t r ie vably spen t

by

t hem

as

f

ol

l ows :

( P e

78 , BIR

re

co

rd

s 1 pp .

8

~

CTA r ec

or

ds )

1 . Pu rchase of 160 acre l o t i n

Ca l i fo r n

ia

Ci ty -

~ ~ ~ ~ ~

~ ~

~

~ ~ 2 5 0 0 0

0 0

2. Bank

deposi t

s - .- .- .- .- .- .-

.-

.- .- .- .

55 0, 000 . 00

3. Money marke t pla

ce

ments appr

ox

. . . 1 , 3

0,0

00 . 00

4 . Lega l f ees

5 . Ho

spi ta

l i

zat

io

n and l

as t

i

n

ess

o fathe r e .- . - .- . •- . - - - . - . - . - . .

6 . Dole outs t o r e la t ives

and

f

r i

ends -

7 .

Househol

d expenses

8 .

G

ambli

ng l

osse

s

9 . others (US$12o , oo·o . oo )

00, 000. 00

150 , 000 . 00

315 , 000. 00

60 , 000.00

280 , 0

. 00

900,0 0

0.0

0

P7

, 405 000 . 00

vvvvv

vvv

vvv

vv

Pe t i t.i oner ' s pos i t i

on

i s tha t th'e amoun t r eceived

y

him fr om t he Me l lon Bank

1

. A. is no t

u

i .ncome • .a s

t

he

term i s de f i

ne

d i n Section 29 of t he Na t i ona l

Intern a l

Re

venue Code

bec

ause t he s a id

amo

un t is

ne i the r c ompensat ion f or se rvices e n d e e d nor ga i ns

ot

pr

of i

t s

re

a

l ized fr

om

busin

es

s o r

dealin

gs

in

pr o-

pe r ty 1 and t hat under

the

r

ule

of eju sdem ge e r i ~

t he ph

rase

' a.nd i ncome

der i

ved from a ny

so

ur

ce what

.- .

soever

• .f ound in

the de f i

n i t i on

of

•gross i ncome ' ·.

201

•


7/16

DEC

I SI O

CTA C

ASE

O. 3.93

.7

refe rs

t:o

o r n p n s i o n fo

r se:r:

\l

i ces r

ende

r:e a nd

g,ain s

or piof

i t:s from business o · ea l ing s in

proper

ty,

a

nd

cannot::. be

in terpr

e

te

:d

to

me

·an

or

i n

c lude

• r.ec

e ip t s

1

from any

sourc.e

what

.

soever .

(p . 1 04 1 CTA r e:c o r

ds

. )

To be

conside

r

ed

i .nc:ome •

a •

rece ip t

8

_

must hav

e

been e i the r

(a ) _

act ive ly

soug

h t. by the r

.ec:ipie:n

sue.

as.

wa

ges.

,

sa l a r

:

ie

s

a nd c ornpe:ns

a t i

on f

or

. se r vices

or

f

or

. the

ex

:e

rc i se

of one ' s prof

e:s.

s io

n , v

oca t on

,

t ra de

,

bu

s i

ness

,

corn

me

rc.e ,

sa

l e s o r

deal ings

in pr

ope:x

t .

y,

or

(b )

pro

duced

or de:r i

ved

from

the

rec ip ien t

' s , owne

rs

h i

p

or.

use

o f

p r o p t y such as. te

n ts , i

nte r e s t s and

di'Jidends.

. T

he

amoun t i n

que

·

s t

i on w

as

n

e i the r

ac

t

ive

ly s

ousht.

by

the pe t i t i oner

. ,

t.o r: the

p roduct

or f r

u

i t s

-

of

h i s

pr ope

r

ty

_

I t

i s

a ur_

c:eipt

' _b

u t

not an

• i _

nco

rne

' .

{

J1 l

OS

, CTA rec .)

P

e t

i t ioner:

conced

es

tha

t u

nlawfu

l

gain

s ,

garnb-

ng

win

ni

ngs

,

e tc

. a r e

subje

.

c t

. to

income

t

a

al though

such

r e·

ce

i

pt s

a r:e no t

speci f ica l ly

mentioned

i n t

he

def in i t ion of gross

i n

come

9

• ( I?

1 06 , CTA r eco r ds. )

And

r igh t ly

so

. As a

rna t te

:r

of

fac

t , i n

the Un

i

ted

Sta

te s

f r

:

om

w

hich Sec:t.i

on 29 (a ) _

of

t

he

Tax.

Code

w

as

copied

a

lmost

verba

tim

f rom

sim

i

la

r:

provis i

ons

of

the

Un i

ted

Sta te s I n te rna eve n e Cod e ( fo rmer -

ly Se·c t ion 22@ ) , and

of the

r

egu

la t ions iss.ued · in

.

20 5

•


8/16

DECI SION -

CTA C

AS

E NO . 3393

•

- .8 -

connect ion t he rew h , i t has been he

ld

tha t

unl

aw- .

ful gains a:s

t hose f rom r ansom money paid

t

a

ki dnape r (

Hump

hreys vse Commissioner , 42 B.T.A.

. .

857 , af f i rmed, 7 Ci r . , 25 F . 2d 340)

~ f r

a

u d

u l e n t

misappl

i

ed

mon

e

ys

of

a

c l ien t

.

by

an a t

to

rn

ey

(U

ni ted

States

vs .

Wampler,

D.C , 5 F., Supp . 796) 1 graf t

Chadick

vs

. Uni ted State s , 5

Cir

, 77 F. 2d 961 ,

ce r t ior

ar

i

denied

, 296

u.s. 609,

80 L.

Ed.

432 )

l ot te r ie s (Droge vs . Commissioner , 35 B. T. A. 829 ;

Hunti n

gton

vs . Commissio

ner,

35 S.T.A . 835 ; Voye r

vs

. C

omm

i s s i

one

r

4 B T.A .

2 ~

i l l

egal

prize

fighting

pictur es (Rickard vs.•

Co

mmi ss ione r 15

B.

l .,A

. 316) ;_ unlawf ul i nsurance polic ies Pat t

erso

n

vs . Ande r s on , D.C 20 F . Supp. 799 ) •. race - t;rack

bookmaking MK.enna vs . Co

mmissione

r , 1 B. T A. 326) ;

ca rd

playing (Weine r vs .

Co

mm

is

s i

one r

10 B T.A •

905) ;_ i l l i c i t t

ra

f f i c i n l iq uor (United

States

vs

.

Sul l iv an , 274 u.s. 259 71 L.

Ed

. 1037) cons t i tute

t axab

le

inc

ome

. In

an

a emp t to s tay c lea r of

such

dec is ions , howe

ver,

pe t i

t ioner

wo uld take

r efu

ge

i n

the

l ack of any effor t

on

his par

t

al le g

edly

, to s

ee

k the

gain

i nvolved h

er

ein .

Peti t ioner misse s the

point

.

The c

o n

t ~ o l l i n g s tatu te i s Sec t ion 29( a ) _of t he

Nationa l I ntern

a l

evenue Code befo r e

i t s

ame ndmen t .

20ti

•

•


9/16

DECISION - .

CTA

CASE

NO

39

..

.9 -

by

Batas

Pambansa Bl g .

135e t

de

f ines

g r o

i ncome ,

which

t e r m

i s employed

i n S

ec t

ion

8

(also

before i t s

am

endmen

t by

Batas

Pambans a

Blg

. 135 .as par t of

the

de f in i ti on

of n

e t i n

co

m

e

subject

to

inc

om

e

tax

under

Sect

.

ion

21

in

t

he case

of i

ndividuals

and Section

24 in the

c ase

of corpora t

ions The def i nit ion

combines

a

descript ive l i s t of broa

d scope enumerating

. ·

vari

ous

ac t iv i t i

es givi

ng

r is

e

t items of incom

e

\

' lith the catcha l

l ph ras e

gains, pro f i t

s

and

i ncome

derived

from

any

source

what

eve

r

111

•

The

defini

t i on

is

in

sweep i ng terms .· Thus , · i

nsofa

r

as

per t in ent

hereto ,

Gross

i

nc

om

e i

nclude

s gains,

pro

f i t s

,

and

i ncome

derived from

x

x e u l

~ g s in

p

ro

- .

per ty x growing out of the ownership

or

use of cr

in

te res t

in

such prope

r

ty1

also

from

X

x

gai

ns

,

prof i

ts

,

and

i ncome dez:i

ve

d

fro

m

any source whate

ver . T

e

broad

sw

eep

of this

lan

g

uage

i n

dica

tes

t

he purpose of

Congres s

to

use

the fu l l

mea

s

ure

of i

ts

t

ax

i ng power within

tho

s e

definabl

e categori

es

. (

He lvering

vs.

Cl i fford,

309 u. s . 331 , 334; 60 S o Ct

. 554

, 556 7

84

L.

788

.)

.

Ac cording l y t h Governmen t may tax , no t

only

o

wne

r

sh ip

, but

an

y

r i

gh t

or

pr iv

i lege

t

ha

t i s a

?


10/16

DECI SI O -

CTA CASE

NO e

3393

- 10 -

const i tuent of ownership

Li

ab

i l y

ro

ay r

est

upon t he e

nj

oyment by

the

taxpaye r

of pr iv i l

ege s .' '·

and benEfits so s ub

s tant

i a l and i mportan t as to

make

i t

r easonable and ju s t to

dea

l with

him

a s

i f

he were

the

o

wn

er

,

and

to

t

ax

him

on

that

bas

i s .

(Burne t vs . We

l l s

, 289 u.s. 670 , 7 8

53 s . c t . 761 , 7 77 L. Ed . 1439 . . Although

t axes

are

public

dut ies

attached t o the owner ship

of prope r

ty

, t he s ta te

should be

able

to

exact

their per fo r mance without being compe l led to t ake

s i

d

es in

pr

iv

ate

co

ntrov

e r s

ies

. Pos

se

ssio

n

i s

gene

ra l

prima f acie evidence p own e r ship , and

is perhap s i ndeed the sou r ce of the concep t i t se l f

t hough

the t i

me is l ong pas t when

i t

~ n synonymous

with i t . I t wou ld be in to le r abl e tha t the tax mus t

-

be ass

essed against

bth t he

putat iv

e to

r tfeasor

and

the c laiman t ;

col lec t ion

of t

he

revenue c a no t

be delayed, nor s hould the Treasury

b ~

c ompe l led

to

decide when a posse ssor

•s

. c la ims are without.

l

ega

l warran t

(Na t ional C

i ty

Bank of New York vs .

Helver

i ng , 2

Cir .

98 F. 2d 93 , 96.

Now

,

to

t he c ase a t ba r .

He

r e , pe t i t ioner s

asse r t i on of c omp le te domin i

on

over Me l lon Bank

0

•

er

r

oneous

remi t t

anc

e of f unds to hi s wife , his

J·

exerci s e

f

ow e r ship

ove

r t he m t o the ex t

en

t of

•

di s

po

sing of

a l

m

os

t every c en t avo

of

t

he

fun

ds

, and

203

•


11/16

DECISI

O

CTA

CASE NO

. 393

-

ll

-

his

c ons equent t

ra

ns f e r of

po ss

e

ss ion

, use

an

d

t i t l e t o tHe

e c i p i

~ n t s a s to ma ke them t he

o w n e ~

s

th

e r eof , we

re

f

or

all i ntents

and

pur

po

s e s exe r - .

cise and en joyment o f

r ig

ht s

and

privi leges tha t

a

re

c

onst

i tue

n

ts

of

o

wn

er

sh

ip

.

He

d

em

onstr

a t ed

pos i t i ve l y

and

unequ ivocal l y his r ight

to

di s

pose

of the

Mell

on

B a n k ~ fu

nd s ,

and

he d

id

even

spend

th em

,

a l

mos t

to

t

he

l

ast cen

ta

vo

, beycnd a

l l ch

ance

of

t

heir

recove r y . This was clea r l y a us e

of

t he

Mel l on

B a n k ~

f un

ds by p t i t i o n ~ r

f or

his

own

enj

o

yment and ben

e

f i

t j

us

t a s am

ply

and ful ly a s

though

he had t i t l e t t hem . Such enjoymen t and

exercise

by pe t i t i o

ner

of

pr iv i l

ege s and

benef i ts

so substantia l and important as t o

w ~ c t

r

ea

son-

able and jus t to

dea l with him as

i f

e

were

t he

-

owner,

and t o t ax him on

tha t

basis (B

urn

e t ·vs

Wel l s ,

e_

up r a ) '· c

an

ha

ve no

different

t

ax

c o

nse

quenc

es

when the f unds a r e e a r ned i n lawful man

ne

r

t h

an whe

n t h

ey are

de

rived

f r om

i l

leg a l

source

s .

An unl

aw

fu

l ga

in

, as

well

as a l awfu l o

ne

,

cons t i tu tes t axable i ncome when i ts r ecipien t has

such control

o

ve

r i t ha

t ,

as a prac t ic a l

mat

t

er ,

he

de r iv es re adi l y rea l iz able economic va lue

from

t (B

urn

e t vs .

Well

s , 289 US 67 0, 678 1 77 L.

Ed

.

1 4 3

; Co

r l

i s v s . Bowe s , 281

US

376 , 378r

74 L. Ed . 16

,

917

.)

That occurs whe n c a sh , as

2

~

•


12/16

DECISION -

CTA C

ASE

NO . 3393

- .12 -

here ,

is

del i

vered

by i

ts

owne r t o t he

taxpayer

in a man ner which al lows the recipien

freedom

(.

to

dispose of t a t wil l p

even though t

may have

been

obtained by

fr

au d or mi s take and

is fr

eedom

t o

use

i t

may

be

assai lable

by

so

meone

with

a

bette

r t

i t .le to

i t . Rut

ki

n

vs

.

Un

i

te

d

States

,

343 US 131 ,

37:

96 L . Ed . 835 , S39 o .

Such

ga ins are t axable i n t

he year

during which

they

are

rea l i

ze do

This

statutory pol i

cy is

i

nvoke

d

in t he i nteres t of orde r l y adminisbat i on . Rutkin

vs.

Unit

ed S

ta tes

, supr.ao ) . Co l l

ect io

n

of

the

r

eve

nue

c

annot be delayed, no

r

sbou ld

t he G

overnmen t be

compelled

to decide when a posses sor • c l aims

are

wi thou t l ega l warran t . National

i ~

Bank

vs

.

He lv

er

ing

Le

2g7

98 F 2d 93 , 96 .) . The r e

is

no

adequate r eason

wh

y apsa

i la

ble unlawfu l gain s shou ld

be t r

eated

different ly

in

th is

r

espect

fr

om s s i

~

ab le

lawf

ul g i n s Ce r ta in ly t

here

~

no r eason

for t

reat in

g t hem more

lenient ly

. United

States

vs . Sul l ivan, 274 US 259, 263 f 71 L. Ed . 1037,

1039 . )

As · to pet i t i one r

0

•

a l

l ega t ion (par 5 , pet

i t io

n

for r evie w) .

th

a t i n the f o

otnote

of h

is

1977 i ncome

tax

r eturn

he

s t

ated

tha t he w r

ecipient

of some

money r

eceive

rom a r oad which

he

pre

sumed

to

be

21

0

•

•


13/16

DECISI

ON

-

C

TA

CASE O. 3393

- .

13

-

a

g i f t

bu t u ~ n e d

out

t o be an

error and

is n

ow

subjec t of lit igation w, and his submiss i on • t ha t

any a ssessment covering th

i s

matte r should

awai

t

f inal

cour t d

ecis

i on · (p • . a,· CTA r

ecords )

· there

is noth

ing

in the Nationa l I n t e r na l

Revenue

Code

. ·

wh

ic

h

ex

pr

essly

r

equ i res ,

as

a c

ondit ion

of

t

he

ex i

s t

ence of a t axable gain , th a t

th

ere a l s o be an absence

of a de fin i t e ,

unconditiona

l o

bl iga

t ion t o r epay or

r e tur n t ha t which wou ld otherwise c o

nEti tute

a gai n.

In t

he

case of

National

Ci ty Ban k of New

Yo

rk vs .

Helve

ring , supra , 98

F.

2d 9S , t he taxpaye r was t

axe

d

on b

ond

s w

hic

h he had

unla

wful ly withheld from t he

co

rporat i

on

of

w

hich

.he wa s an of f icer .

These

bond s

wer e the property of t he corpor a t i

on

i n the s ense

that it cou ld

ha

ve

reclaimed the

m ~ ~ Cour t s aid -

Bu t there are several c ases

in

which pers

ons

have

be

en

t

axed

upon property

which

co

uld

be r ecovered

.

f rom t hem . For examp

le ,

t he l ender upon usur i

ous

i

nte

r es t - i on

an accr

ua l b

as

is - must i nclude h i s

appa rent pro f i t in his retu rn , though pos s i bly he may

be

a l

l owed to d

educ

t i t

as

a loss i f t he

borrow

e r

re c la i

ms

i t . (Barker

vs.

Magruder 68 App . o.c . 211 ,

5 F. 2d 22 . ) Agai n , when a r

ai

l r oad col lec t s too

The

fac

t t hat. i

nte

r es t is usurious unde r

the

l aw ,

and may be

r ecove

red ba

c k by t he

borrowe

,

does no t preven it f rom being

in

com , he n rece ived ,

t o a t

ax

paye r

on

t

he

c

as

h bas is . Likew i se , the t.ax

abi lity

of

an a

cc rua

l

of

u

surious

i n tere s t i s

not

aff ected because

of

i

t s

i l lega l ity.. I f in a sub- .

sequent year the

amo

unt

becomes

uncol lect ible , or a

l oss is sustained in r e spec t t her eof , a d

educt

i on ·

on account

thereo

f i s t hen

allow

able . (Uma l i , R.

M.

Re

viewe r in T

axation

198 0 ed . , pp .

8 7 ~

c i t ing

1955

PH Fed . Taxes , Pa r . 8010. )

211

•

•


14/16

I • •

\

\

.

.:.:.

DECI

S ION - .

CTA C

ASE

NOe 3393

.1

l arge f are s the e

xces

s i s i ncome , t hough the

passenge rs 'have a t heoretica l r ight.

of

res t i tu - .. ·

t i

on e (

Ch icago

, R.

I .

& P ~ R Co . vs . Commissio

ner

,

7 Cir . 47 F. 2d . 990

We

not

e t

hat

in

t he .d

ef

ic i

ency

i ncome

tax

assessment unde r

co

ns ideration , r e spondent. furthe r

re

ques

t ed pet i t ioner to pay 50' su rcha

rge

as pro- .

vided for in

Sect i

on 72

of

t h ~ Tax coe a , in add i t i on

to t,he de f iciency i ncome

tax

of

P4

, 888 , 615 00

and

in te

res t

due t hereon .

Sin

ce

pet i t

i oner f i le d his

inc

ome

tax

r

eturn

fo

r

taxa

ble

year

1

97

7,

the

·

SO%

surcharge was i mposed, i n a l l .p ro

babili ty

, y r

es

pondent becau

se

he conside red t he r eturn

f i

l ed f

alse

or f r a

u d u ~ e n t

This addi t i ona l requ

m e n t

to our

mind , i s much les s called f or because pe t i t i oner ,

-

as

state

d ear

l i

e

r

r eflec t ed

in

h

is

1

97

7 r eturn a

.

footnote

t

ha

t

Taxpaye

r was r e

cipi

en

t

of

s

om

e money

r

ece

i ved

fro

m ab,oad wh

ic

h he p r e

s u m e ~

to be gi

f t

but t

urne

d out be an erro r and i s now sub jec t

of l i t iga t ion"

From t h is , ~ ~

ca

n har d ly be said t ha t

th

er e

was actua l and i n tent ion

a l

f raud , consisting of

de

ception wi l

l f

ul ly and de

l ibera t

e ly done or r e

sorted t o by e t i ti one r in or der to induce t

he

ove r nmen to g ive up some lega l r igh t , or the

21

2

•

•


15/16

r

DE

CI S

ION

-

CTA CAS E 0

3393

5 -

l a t te r , due t o a f

a ls

e r e t ur

n,

was pl

ace

a t a

d

isadvan ta


16/16

.

DECI SI ON -

CT C SE N O 3393

- 16 -

Accordingly,

pe t i t ioner Me l chor

Je

J av i er , r .

i s he r eby o ~ d e r e d to pay to responden t Comm i

ss

i one r

.

of I nterna l Re

venue

t he s um

of

P6 , 796 , 53 2.80

as

de

f icien

c y i nc

om

e

tax fo

r 1977 , pl

us

10% su r charge

and

2

0

per

ann

um

i

nte re

s t f

ro

m Novembe r 14 , 1980

up t o f u payment

ther eo

f

but no

t o exceed the

amount c orresp

ond

i ng t o

three

years pur suant t o

Sec t i on

Sl e

) ~ f t he Na

t lp na

l n t e r ~

a ~ v e n u e

Code

as amendeq by Presiden t i a t Decree No s 17 05 .

W H

E R ~

F O ~ t he

decision

appealed

fr

om i s

m o d f i e d

a s

n q i p ~ t ~ p

in

~ h e

above

o

pinio

n

of

the

' • . '·

Court .

With

c o s t ' ·

' SO ORDERED .

Quezon C

i ty

,

Metro

Man i l a ,

J ~ : :

2

7,

1983 .

M NTE ~

Presid i ng J udge

WE C

ON

CUR

:

: : : : ~ ~

~

~ ~

ssociate

u ~ U I N

•

'

.

I

I

I

9.) javier vs. ancheta.pdf

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