Sanchez v. CIR (1955, 97 Phil 867)

(Sanchez v. Collector of Internal Revenue, G.R. No.
L-7521, October 18, 1955, 97

Phil 867)
FIRST DIVISION
[G.R. No. L-7521. October 18, 1955.]
VERONICA SANCHEZ, plaintiff-appellant, vs. THE COLLECTOR
OF INTERNAL REVENUE, defendant-appellee.
Benjamin C. Yatco for appellant.
Solicitor General Ambrosio Padilla and Solicitors Esmeraldo Umali and
Roman Cansino, Jr. for appellee.
SYLLABUS
1. TAXATION; REAL ESTATE DEALER'S TAX; PERSONS SUBJECT
THERETO. Considering that appellants constructed her four-door
"accessoria purposely for rent or profit; that she has been continuously
leasing the same to third persons since its construction in 1947; that she
manages her property herself; and that said leased holding appears to her
main source of livelihood, she is engaged in the leasing of real estate, and is
a real estate dealer as defined by section 194(s) of the Internal Revenue
Code, as amended by Republic Act No. 42.
2. ID.; TAXATION; SEPARATED TAX LEVIED UPON A BUSINESS OR
OCCUPATION AND THE PROPERTY USED THEREIN DOES NOT AMOUNT
TO DOUBLE TAXATION. A license tax may be levied upon a business or
occupation although the land or property used therein is subject to property
tax; and the state may collect an ad valorem tax on property used in a
calling, and at the same time impose a license tax on the pursuit of that
calling, the imposition of the latter kind of tax being in no sense a double
tax.
DECISION
REYES, J.B.L., J p:
Appellant Veronica Sanchez is the owner of a two-story, four-door
"accessoria" building at 181 Libertad Street, Pasay City, which she
constructed in 1947. The building has an assessed value of P21,540 and the
land is assessed at P7,980, or a total value of P29,540 (Exhibit 2). While
appellant lives in one of the apartments, she is renting the rest to other
persons. In 1949, she derived an income therefrom of P7,540 (Exhibit 1).
Appellant also runs a small dry goods store in the Pasay market, from which
she derives an annual income of about P1,300 (also Exhibit 1).
In the early part of 1951, the Collector of Internal Revenue made
demand upon appellant for the payment of P163.51 as income tax for the
year 1950, and P637 as real estate dealer's tax for the years 1946 to 1950,
plus the sum of P50 as compromise (Exhibit 4). Appellant paid the taxes
demanded under protest, and on October 16, 1951 filed action in the Court
of First Instance of Manila (C. C. No. 14957) against the Collector of Internal
Revenue for the refund of the taxes paid, claiming that she is not a real
estate dealer. The lower Court, after trial, found appellant to be such a
dealer, as defined by section 194(s) of the National Internal Revenue Code,
as amended by Republic Act Nos. 42 and 588, and declared the collection of
the taxes in question legal and in accordance with said provision. Wherefore,
Veronica Sanchez appealed to this Court.
At the outset, it should be noted that while appellant claims the
refund of the amount of P825 allegedly paid by her to the Collector of
Internal Revenue as real estate dealer's tax, it appears that the sum of
P163.31 thereof corresponds to her income tax for the year 1949 (Exhibit 4),
so that the amount of tax actually involved herein is only P687, paid by
appellant as real estate dealer's tax for the years 1946 to 1950. We notice
also that the lower Court, in deciding this case, applied the definition of
"real estate dealer" in section 194(s) of the National Internal Revenue Code,
as amended by Republic Acts Nos. 42 and 588. Republic Act No. 588 took
effect only on September 22, 1950, while the tax in question was paid by
appellant for the years 1946 to 1950. Hence, the law applicable to this case
is section 194(s) of the Tax Code before it was amended by Republic Act No.
588, which defines real estate dealers as follows:
" 'Real estate dealers' includes all persons who for their own
account are engaged in the sale of lands, buildings or interests
therein or in leasing real estate." (R. A. No. 42)
Does appellant fall within the above definition? We are of the opinion
that she does. The kind and nature of the building constructed by her
which is a four-door "accessoria" shows that it was from the beginning
intended for lease as a source of income or profit to the owner; and while
appellant resides in one of the apartments, it appears that she always
rented the other apartments to other persons from the time the building
was constructed up to the time of the filing of this case.
The case of Argellies vs. Meer * G. R. No. L-3730, promulgated on
April 25, 1952, cited by appellant in support of her appeal, is not in point.
In that case, Argellies had always resided outside the Philippines, and his
properties in Manila were administered and managed by a local real estate
company. We held that Argellies could not be considered as engaged in
business of letting real estate, because he did not appear to have reinvested
the rents received by him from this country, nor to have taken part in the
management of his local holdings. In the case at bar, however, it was
appellant who had the apartment in question constructed, purposely for
lease or profit, and she manages the property herself. While she runs a
small store in Pasay market, it is unlikely, and the evidence does not show,
that she devotes all her personal time and labor to such store, considering
its size and the fact that she derives little income therefrom. On the other
hand, the work of attending to her leased property and her tenants would
not take much of her time and attention, especially since she lives in the
premises herself. And the leasing of her apartment appears to be her
principal means of livelihood, for the income she derives therefrom amounts
to more than five times that which she makes from her store.
Considering, therefore, that appellant constructed her four-door
"accessoria" purposely for rent or profit; that she has been continuously
leasing the same to third persons since its construction in 1947; that she
manages her property herself; and that said leased holding appears to be
her main source of livelihood, we conclude that appellant is engaged in the
leasing of real estate, and is a real estate dealer as defined by section 194(s)
of the Internal Revenue Code, as amended by Republic Act No. 42.
Appellant argues that she is already paying real estate taxes on her
property, as well as income tax on the income derive therefrom, so that to
further subject its rentals to the "real estate dealers' tax" amounts to double
taxation. This argument has already been rejected by this Court in the case
of People vs. Mendaros, et al., L-6975, promulgated May 27, 1955, wherein
we held that "it is a well settled rule that license tax may be levied upon a
business or occupation although the land or property used therein is
subject to property tax", and that "the state may collect an ad valorem tax
on property used in a calling, and at the same time impose a license tax on
the pursuit of that calling", the imposition of the latter kind of tax being in
no sense a double tax.
The evidence shows, however, that the apartment house in question
was constructed only in 1947, while the real estate dealer's tax demanded of
and paid by appellant was for the years 1946 to 1950 (see Exhibit 4).
Wherefore, appellant is entitled to a refund of the tax paid for the year 1946,
amounting to P37.50.
With the modification that the appellee Collector of Internal Revenue
is ordered to refund to appellant Veronica Sanchez the amount of P37.50
paid as real estate dealer's tax for the year 1946, the decision appealed from
is, in all other respects, affirmed. Costs against appellant. So ordered.
Bengzon, Acting C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo
and Concepcion, JJ., concur.

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(Sanchez v. Collector of Internal Revenue, G.R. No.

L-7521, October 18, 1955, 97

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