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General principles INTERNATIONAL EXCHANGE BANK v . COMMISSIONER OF INTERNAL REVENUE520 SCRA 675 (2007), SECOND DIVISION, (CARPIO MORALES, J .) To claim that time deposits evidenced by passbooks should not be subject to documentary stamp tax is a clear evasion of the rule on equality and uniformity in taxation that requires the imposition of documentary stamp tax on documents evidencing transactions of the same kind, in this particular case, on all certificates of deposits drawing interest. The International Exchange Bank (IEB) personally received an assessment for deficiency Documentary Stamp Tax (DST) on its purchases of securities from the Bangko Sentral ng Pilpinas (BSP)or Government Securities PurchasedReverse Repurchase Agreement (RRPA) and its Savings Account-Fixed Savings Deposit (FSD) for the taxable years 1996 and 1997. The IEB then filed a protest letteralleging that its FSD is not subject to DST since it cannot be considered a certificate of deposit subjectto DST under Section 180 of the Tax Code for, unlike a certificate of deposit which is a negotiableinstrument, the passbook it issued for its FSD was not payable to the order of the depositor or to someother person as the deposit could only be withdrawn by the depositor or by a duly authorizedrepresentative. Furthermore, the bank argued that deposits evidenced by a passbook which have featuresakin to a time deposit such as petitioners FSD, is not subjectto DST under the Tax Code and theNIRC. ISSUE Whether or not the IEBs Fixed Savings Deposit evidenced by a passbook is subject to Documentary Stamp Tax for the years assessed. HELD : A passbook representing an interest earning deposit account issued by a bank qualifies as acertificate of deposit drawing interest. A document to be deemed a certificate of deposit requires nospecific form as long as there is some written memorandum that the bank accepted a deposit of a sum of money from a depositor. What is important and controlling is the nature or meaning conveyed by thepassbook and not the particular label or nomenclature attached to it, inasmuch as substance, not form, isparamount. The negotiable character of any and all documents under Section 180 is immaterial forpurposes of imposing DST. Orders for the payment of sum of money payable at sight or on demand areof course explicitly exempted from the payment of DST. Thus, a regular savings account with apassbook which is withdrawable at any time is not subject to DST, unlike a time deposit which is payableon a fixed maturity date. As for the IEBs argument that its FSD is similar to a regular savings deposit because it is evidenced by a passbook, the same does not lie. The FSD, like a time deposit, provides for a higher interest rate when the deposit is not withdrawn within the required fixed period; otherwise, it earns interest pertaining to a regular savingsdeposit. Having a fixed term and the reduction of interest rates in case of pre-termination are essentialfeatures of a time deposit.It bears emphasis that DST is an excise tax upon the privilege, opportunity or facility offered atexchanges for the transaction of the business. While tax avoidance schemes and arrangements are notprohibited, tax laws cannot be circumvented in order to evade payment of just taxes. To claim that timedeposits evidenced by passbooks should not be subject to DST is a clear evasion of the rule on equality and uniformity in taxation that requires the imposition of DST on documents evidencing transactions of the same kind, in this particular case, on all certificates of deposits drawing interest. Jumamil vs. Caf, et al. Jumamil vs. Caf, et al. [GR 144570, 21 September 2005] Third Division, Corona (J): 4 concur Facts: In 1989, Vivencio V. Jumamil filed before the Regional Trial Court (RTC) of Panabo, Davao del Norte a petition for declaratory relief with prayer for preliminary injunction and writ of restraining order against Mayor Jose J. Cafe and the members of the Sangguniang Bayan of Panabo, Davao del Norte. He questioned the constitutionality of Municipal Resolution 7, Series of 1989 (Resolution 7). Resolution 7, enacting Appropriation Ordinance 111, provided for an initial appropriation of P765,000 for the construction of stalls around a proposed terminal fronting the Panabo Public Market which was destroyed by fire. Subsequently, the petition was amended due to the passage of Resolution 49, series of 1989 (Resolution 49), denominated as Ordinance 10, appropriating a further amount of P1,515,000 for the construction of additional stalls in the same public market. Prior to the passage of these resolutions, Mayor Cafe had already entered into contracts with those who

advanced and deposited (with the municipal treasurer) from their personal funds the sum of P40,000 each. Some of the parties were close friends and/or relatives of Cafe, et al. The construction of the stalls which Jumamil sought to stop through the preliminary injunction in the RTC was nevertheless finished, rendering the prayer therefor moot and academic. The leases of the stalls were then awarded by public raffle which, however, was limited to those who had deposited P40,000 each. Thus, the petition was amended anew to include the 57 awardees of the stalls as private respondents. Jumamil alleges that Resolution Nos. 7 and 49 were unconstitutional because they were passed for the business, occupation, enjoyment and benefit of private respondents, some of which were close friends and/or relative of the mayor and the sanggunian, who deposited the amount of P40,000.00 for each stall, and with whom also the mayor had a prior contract to award the would be constructed stalls to all private respondents; that resolutions and ordinances did not provide for any notice of publication that the special privilege and unwarranted benefits conferred on the private respondents may be availed of by anybody who can deposit the amount of P40,000; and that nor there were any prior notice or publication pertaining to contracts entered into by public and private respondents for the construction of stalls to be awarded to private respondents that the same can be availed of by anybody willing to deposit P40,000.00. The Regional Trial Court dismissed Jumamils petition for declaratory relief with prayer for preliminary injunction and writ of restraining order, and ordered Jumamil to pay attorneys fees in the amount of P1,000 to each of the 57 private respondents. On appeal, and on 24 July 2000 (CA GR CV 35082), the Court of Appeals affirmed the decision of the trial court. Jumamil filed the petition for review on certiorari. Issue [1]: Whether Jumamil had the legal standing to bring the petition for declaratory relief Held [1]: Legal standing or locus standi is a partys personal and substantial interest in a case such that he has sustained or will sustain direct injury as a result of the governmental act being challenged. It calls for more than just a generalized grievance. The term interest means a material interest, an interest in issue affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. Unless a persons constitutional rights are adversely affected by the statute or ordinance, he has no legal standing. Jumamil brought the petition in his capacity as taxpayer of the Municipality of Panabo, Davao del Norte and not in his personal capacity. He was questioning the official acts of the the mayor and the members of the Sanggunian in passing the ordinances and entering into the lease contracts with private respondents. A taxpayer need not be a party to the contract to challenge its validity. Parties suing as taxpayers must specifically prove sufficient interest in preventing the illegal expenditure of money raised by taxation. The expenditure of public funds by an officer of the State for the purpose of executing an unconstitutional act constitutes a misapplication of such funds. The resolutions being assailed were appropriations ordinances. Jumamil alleged that these ordinances were passed for the business, occupation, enjoyment and benefit of private respondents (that is, allegedly for the private benefit of respondents) because even before they were passed, Mayor Cafe and private respondents had already entered into lease contracts for the construction and award of the market stalls. Private respondents admitted they deposited P40,000 each with the municipal treasurer, which amounts were made available to the municipality during the construction of the stalls. The deposits, however, were needed to ensure the speedy completion of the stalls after the public market was gutted by a series of fires. Thus, the award of the stalls was necessarily limited only to those who advanced their personal funds for their construction. Jumamil did not seasonably allege his interest in preventing the illegal expenditure of public funds or the specific injury to him as a result of the enforcement of the questioned resolutions and contracts. It was only in the Remark to Comment he filed in the Supreme Court did he first assert that he (was) willing to engage in business and (was) interested to occupy a market stall. Such claim was obviously an afterthought. Issue [2]: Whether the rule on locus standi should be relaxed. Held [2]: Objections to a taxpayer's suit for lack of sufficient personality, standing or interest are procedural matters. Considering the importance to the public of a suit assailing the constitutionality of a tax law, and in keeping with the Court's duty, specially explicated in the 1987 Constitution, to determine whether or not the other branches of the Government have kept themselves within the limits of the Constitution and the laws and that they have not abused the discretion given to them, the Supreme Court may brush aside technicalities of procedure and take cognizance of the suit. There being no doctrinal definition of transcendental importance, the following determinants formulated by former Supreme Court Justice Florentino P. Feliciano are instructive: (1)

the character of the funds or other assets involved in the case; (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government; and (3) the lack of any other party with a more direct and specific interest in raising the questions being raised. But, even if the Court disregards Jumamils lack of legal standing, this petition must still fail. The subject resolutions/ordinances appropriated a total of P2,280,000 for the construction of the public market stalls. Jumamil alleged that these ordinances were discriminatory because, even prior to their enactment, a decision had already been made to award the market stalls to the private respondents who deposited P40,000 each and who were either friends or relatives of the mayor or members of the Sanggunian. Jumamil asserted that there (was) no publication or invitation to the public that this contract (was) available to all who (were) interested to own a stall and (were) willing to deposit P40,000. Respondents, however, counter that the public respondents act of entering into this agreement was authorized by the Sangguniang Bayan of Panabo per Resolution 180 dated 10 October 1988 and that all the people interested were invited to participate in investing their savings. Jumamil failed to prove the subject ordinances and agreements to be discriminatory. Considering that he was asking the Court to nullify the acts of the local political department of Panabo, Davao del Norte, he should have clearly established that such ordinances operated unfairly against those who were not notified and who were thus not given the opportunity to make their deposits. His unsubstantiated allegation that the public was not notified did not suffice. Furthermore, there was the time-honored presumption of regularity of official duty, absent any showing to the contrary. INCOME TAXATION Henderson v. Collector, 1 SCRA 649 Facts: Arthur Henderson is the President of the American Intl. Underwriters for the Phils. w/c represents a group of American cos. engaged in the business of general insurance (exc. in life insurance). he receives a basic annual salary of P30,000 and allowance for house rentals and utilities. Although he and his wife are childless and are only two in the family, they lived in a large apartment provided for by his employer. As company president, he and his wife had to entertain and put up houseguests for the company. The BIR now seeks to collect taxes on the allowances for rental and utilities expenses. Held: The exigencies of Henderson's high executive position, not to mention social standing, demanded and compelled them to live in a more spacious and pretentious quarters like the ones they had occupied. Because they had to entertain and put up houseguests, the employer had to grant him allowances for rental and utilities in addition to his annual basic salary to take care of those expenses for rental and utilities in excess of their personal needs. Hence, the fact that the taxpayers had to live or did not have to live in the apartment chosen by the employer is of no moment, for no part of the allowance redounded to the benefit of the Hendersons. Neither was there an amount retained by them. Their bills for rental were paid directly by the employer to the creditor. INDIVIDUAL INCOME TAXATION LORENZO OA V CIR GR No. L -19342 | May 25, 1972 | J. Barredo Facts: Julia Buales died leaving as heirs her surviving spouse, Lorenzo Oa and her five children. A civil case was instituted for the settlement of her state, in which Oa was appointed administrator and later on the guardian of the three heirs who were still minors when the project for partition was approved. This shows that the heirs have undivided interest in 10 parcels of land, 6 houses and money from the War Damage Commission. Although the project of partition was approved by the Court, no attempt was made to divide the properties and they remained under the management of Oa who used said properties in business by leasing or selling them

and investing the income derived therefrom and the proceeds from the sales thereof in real properties and securities. As a result, petitioners properties and investments gradually increased. Petitioners returned for income tax purposes their shares in the net income but they did not actually receive their shares because this left with Oa who invested them. Based on these facts, CIR decided that petitioners formed an unregistered partnership and therefore, subject to the corporate income tax, particularly for years 1955 and 1956. Petitioners asked for reconsideration, which was denied hence this petition for review from CTAs decision. Issue: W/N there was a co-ownership or an unregistered partnership W/N the petitioners are liable for the deficiency corporate income tax Held: Unregistered partnership. The Tax Court found that instead of actually distributing the estate of the deceased among themselves pursuant to the project of partition, the heirs allowed their properties to remain under the management of Oa and let him use their shares as part of the common fund for their ventures, even as they paid corresponding income taxes on their respective shares. Yes. For tax purposes, the co-ownership of inherited properties is automatically converted into an unregistered partnership the moment the said common properties and/or the incomes derived therefrom are used as a common fund with intent to produce profits for the heirs in proportion to their respective shares in the inheritance as determined in a project partition either duly executed in an extrajudicial settlement or approved by the court in the corresponding testate or intestate proceeding. The reason is simple. From the moment of such partition, the heirs are entitled already to their respective definite shares of the estate and the incomes thereof, for each of them to manage and dispose of as exclusively his own without the intervention of the other heirs, and, accordingly, he becomes liable individually for all taxes in connection therewith. If after such partition, he allows his share to be held in common with his co-heirs under a single management to be used with the intent of making profit thereby in proportion to his share, there can be no doubt that, even if no document or instrument were executed, for the purpose, for tax purposes, at least, an unregistered partnership is formed. For purposes of the tax on corporations, our National Internal Revenue Code includes these partnerships The term partnership includes a syndicate, group, pool, joint venture or other unincorporated organization, through or by means of which any business, financial operation, or venture is carried on (8 Mertens Law of Federal Income Taxation, p. 562 Note 63; emphasis ours.) with the exception only of duly registered general copartnerships within the purview of the term corporation. It is, therefore, clear to our mind that petitioners herein constitute a partnership, insofar as said Code is concerned, and are subject to the income tax for corporations. Judgment affirmed.