EN BANC The facts of this case are:

Petitioner, a domestic corporation duly registered since June 21, 1955, is

[G.R. No. L-21570. July 26, 1966.] engaged in the business of leasing real properties. It commenced actual business
operations on July 1, 1955. Its principal stockholders are the spouses Isabelo P. Lim
LIMPAN INVESTMENT CORPORATION , petitioner, vs. COMMISSIONER and Puri cacion Ceñiza de Lim, who own and control ninety-nine per cent (99%) of its
OF INTERNAL REVENUE, ET AL. , respondents. total paid-up capital. Its president and chairman of the board is the same Isabelo P.
Lim.
Vicente L. San Luis for petitioner. Its real properties consist of several lots and buildings, mostly situated in Manila
and in Pasay City, all of which were acquired from said Isabelo P. Lim and his mother,
Solicitor General Arturo A. A. Alafriz, Assistant Solicitor General F. R. Rosete, Vicenta Pantangco Vda. de Lim.
Solicitor A. B. Afurong and Atty. V. G. Saldajeno for respondents.
Petitioner corporation duly led its 1956 and 1957 income tax returns, reporting
therein net incomes of P3,287.81 and P11,098.36 respectively, for which it paid the
SYLLABUS corresponding taxes therefor in the sums of P657.00 and P2,220.00
Sometime in 1958 and 1959, the examiners of the Bureau of Internal Revenue
1. TAXATION; INCOME TAXES; EFFECT OF ADMISSION BY TAXPAYER OF
conducted an investigation of petitioner's 1956 and 1957 income tax returns and, in the
UNDECLARED INCOME; CASE AT BAR. — Petitioner, having admitted, through its own
course thereof, they discovered and ascertained that petitioner had undeclared its
witness, that it had not declared more than one-half of the amount found by the BIR
rental incomes by P20,199.00 and P81,690.00 during these taxable years and had
examiners as unreported rental income for the year 1956 and more than one-third of
claimed excessive depreciation of its buildings in the sums of P4,260 and P16,338.00
the amount ascertained by the examiners as unreported rental income for the year
covering the same period. On the basis of these ndings, respondent Commissioner of
1957, contrary to its original claim to the revenue authorities, it was incumbent upon it
Internal Revenue issued its letter- assessment and demand for payment of de ciency
to establish the remainder of its pretensions by clear and convincing evidence.
income tax and surcharge against petitioner corporation, computed as follows:
2. ID.; ID.; CONSTRUCTIVE RECEIPT OF INCOME; CASE AT BAR. — The 90-AR-C-348-58/56
withdrawal in 1958 of the deposits in court pertaining to the 1957 rental income is not
su cient justi cation for the nondeclaration of said income in 1957, since the deposit Net income per audited return P3,287.81
was resorted to due to the refusal of petitioner to accept the same, and was not the
Add: Unallowable deductions:
fault of its tenants; hence, petitioner is deemed to have constructively received such
rentals in 1957. The payment by the subtenant in 1957 should have been reported as Undeclared Rental Receipt
rental income in said year, since it is income just the same regardless of its source.
(Schedule A) P20,199.00
3. ID.; ID.; DEPRECIATION A QUESTION OF FACT. — This Court has already held
that "depreciation is a question of fact and is not measured by theoretical yardstick, but Excess Depreciation (Sched. B) 4,260.00 P24,459.00
should be determined by a consideration of actual facts," and the ndings of the Tax Net income per investigation 27,746.00
Court in this respect should not be disturbed when not shown to be arbitrary or in
abuse of discretion (Commissioner of Internal Revenue vs. Priscila Estate, Inc., et al., Tax due thereon 5,549.00
G.R. No. L-18282, May 29, 1964). The rates of depreciation on Bulletin "F" of the Federal
Less: Amount already assessed 657.00
Internal Revenue Service has some persuasive effect (Zamora vs. Collector of Internal
Revenue, L-15280, May 31, 1963). Balance 4,892.00

Add: 50% Surcharge 2,446.00

DECISION DEFICIENCY TAX DUE 7,338.00

90-AR-C-1196-58/57
REYES, J.B.L. , J : p Net income per audited return P11,098.00

Appeal interposed by petitioner Limpan Investment Corporation against a Add: Unallowable deductions:
decision of the Court of Tax Appeals, in its CTA Case No. 699, holding and ordering it Undeclared Rental Receipt (Schedule A) P81,690.00
(petitioner) to pay respondent Commissioner of Internal Revenue the sums of
P7,338.00 and P30,502.50, representing de ciency income taxes, plus 50% surcharge Excess Depreciation (Sched. B) 16,338.00 P98,028.00
for the years 1956, and 1957, respectively, plus 5% surcharge and 1% monthly interest
Net income per investigation 109,126.00
from June 30, 1959 to the date of payment, with costs.
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 Tax due thereon 22,555.00 not be declared as rental income in 1957.
Less: Amount already assessed 2,220.00 With regard to the depreciation which respondent disallowed and deducted from
the returns led by petitioner, the same witness tried to establish that some of its
Balance 20,335.00
buildings are old and out of style; hence, they are entitled to higher rates of depreciation
Add: 50% Surcharge 10,167.50 than those adopted by respondent in his assessment.

DEFICIENCY TAX DUE P30,502.50 Isabelo P. Lim was not presented as witness to corroborate the above testimony
of Vicente G. Solis.
Petitioner corporation requested respondent Commissioner of Internal Revenue
On the other hand, Plaridel M. Mingoa, one of the BIR examiners who personally
to reconsider the above assessment but the latter denied said request and reiterated
conducted the investigation of the 1956, and 1957 income tax returns of petitioner
its original assessment and demand, plus 5% surcharge and the 1% monthly interest
corporation, testi ed for the respondent that he personally interviewed the tenants of
from June 30, 1959 to the date of payment; hence, the corporation led its petition for
petitioner and found that these tenants had been regularly paying their rentals to the
review before the Tax Appeals Court, questioning the correctness and validity of the
collectors of either petitioner or its president, Isabelo P. Lim, but these payments were
above assessment of respondent Commissioner of Internal Revenue. It disclaimed
not declared in the corresponding returns; and that in applying rates of depreciation to
having received or collected the amount of P20,199.00, as unreported rental income for
petitioner's buildings, he adopted Bulletin "F", of the U.S. Federal Internal Revenue
1956, or any part thereof, reasoning out that "the previous owners of the leased
Service.
buildings has (have) to collect part of the total rentals in 1956 to apply to their payment
of rental in the land in the amount of P21,630.00" (par. 11, petition). It also denied On the basis of the evidence, the Tax Court upheld respondent Commissioner's
having received or collected the amount of P81,690.00, as unreported rental income for assessment and demand for de ciency income tax which, as above stated in the
1957, or any part thereof, explaining that part of said amount totalling P31,380.00 was beginning of this opinion, petitioner has appealed to this Court.
not declared as income in its 1957 tax return because its president, Isabelo P. Lim, who Petitioner corporation pursues the same theory advocated in the court below
collected and received P13,500.00 from certain tenants, did not turn the same over to and assigns the following alleged errors of the trial court in its brief, to wit:
petitioner corporation in said year but did so only in 1959; that a certain tenant (Go
Tong) deposited in court his rentals amounting to P10,800.00, over which the "I. The respondent Court erred in holding that the petitioner had an
corporation had no actual or constructive control; and that a sub-tenant paid P4,200.00 unreported rental income of P20,199.00 for the year 1956.
which ought not be declared as rental income. "II. The respondent Court erred in holding that the petitioner had an
Petitioner likewise alleged in its petition that the rates of depreciation applied by unreported rental income of P81,690.00 for the year 1957.
respondent Commissioner to its buildings in the above assessment are unfair and
"III. The respondent Court erred in holding that the depreciation in the
inaccurate.
amount of P20,598.00 claimed by petitioner for the years 1956 and 1957 as
Sole witness for petitioner corporation in the Tax Court was its Secretary- excessive."
Treasurer, Vicente G. Solis, who admitted that it had omitted to report the sum of
P12,100.00 as rental income in its 1956 tax return and also the sum of P29,350.00 as and prays that the appealed decision be reversed.
rental income in its 1957 tax return. However, with respect to the difference between This appeal is manifestly unmeritorious. Petitioner having admitted, through its
this omitted income (P12,100.00) and the sum (P20,199.00) found by respondent own witness (Vicente G. Solis), that it had undeclared more than one-half (1/2) of the
Commissioner as undeclared in 1956, petitioner corporation through the same witness amount (P12,100.00 out of P20,199.00) found by the BIR examiners as unreported
(Solis), tried to establish that it did not collect or receive the same because, in view of rental income for the year 1956 and more than one-third (1/3) of the amount
the refusal of some tenant to recognize the new owner, Isabelo P. Lim and Vicenta (P29,350.00 out of P81,690.00) ascertained by the same examiners as unreported
Pantangco Vda. de Lim, the former owners, on one hand, and the same Isabelo P. Lim, rental income for the year 1957, contrary to its original claim to the revenue authorities,
as president of petitioner corporation, on the other hand, had verbally agreed in 1956 to it was incumbent upon it to establish the remainder of its pretensions by clear and
turn over to petitioner corporation six per cent (6%) of the value of all its properties, convincing evidence, that in the case is lacking.
computed at P21,630.00, in exchange for whatever rentals the Lims may collect from
With respect to the balance, which petitioner denied having unreported in the
the tenants. And, with respect to the difference between the admittedly undeclared sum
disputed tax return, the excuse that Isabelo P. Lim and Vicenta Pantangco Vda. de Lim
of P29,350.00 and that found by respondent Commissioner as unreported rental
retained ownership of the lands and only later transferred or disposed of the ownership
income (P81,690.00) in 1957, the same witness Solis also tried to establish that
of the buildings existing thereon to petitioner corporation, so as to justify the alleged
petitioner corporation did not receive or collect the same but that its president, Isabelo
verbal agreement whereby they would turn over to petitioner corporation six percent
P. Lim, collected part thereof and may have reported the same in his own personal
(6%) of the value of its properties to be applied to the rentals of the land and in
income tax return; that same Isabelo P. Lim collected P13,500.00, which he turned over
exchange for whatever rentals they may collect from the tenants who refused to
to petitioner in 1959 only; that a certain tenant (Go Tong) deposited in court his rentals
recognize the new owner or vendee of the buildings, is not only unusual but
(P10,800.00), over which the corporation had no actual or constructive control and
uncorroborated by the alleged transferors, or by any document or unbiased evidence.
which were withdrawn only in 1958; and that a sub-tenant paid P4,200.00 which ought
Hence, the first assigned error is without merit.
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 As to the second assigned error, petitioner's denial and explanation of the non-
receipt of the remaining unreported income for 1957 is not substantiated by
satisfactory corroboration. As above noted, Isabelo P. Lim was not presented as a
witness to con rm accountant Solis nor was his 1957 personal income tax return
submitted in court to establish that the rental income which he allegedly collected and
received in 1957 were reported therein.
The withdrawal in 1958 of the deposits in court pertaining to the 1957 rental
income is no su cient justi cation for the non-declaration 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. 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.
On the third assigned error, su ce it to state that this Court has already held that
"depreciation is a question of fact and is not measured by theoretical yardstick, but
should be determined by a consideration of actual facts", and the ndings of the Tax
Court in this respect should not be disturbed when not shown to be arbitrary or in
abuse of discretion (Commissioner of Internal Revenue vs. Priscila Estate, Inc. et al., L-
18282, May 29, 1964) and petitioner has not shown any arbitrariness or abuse of
discretion on the part of the Tax Court in nding that petitioner claimed excessive
depreciation in its returns. It appearing that the Tax Court applied rates of depreciation
in accordance with Bulletin "F" of the U.S. Federal Internal Revenue Service, which this
Court pronounced as having strong persuasive effect in this jurisdiction, for having
been the result of scienti c studies and observation for a long period in the United
States, after whose Income Tax Law ours is patterned (M. Zamora vs. Collector of
Internal Revenue & Collector of Internal Revenue vs. M. Zamora; E. Zamora vs. Collector
of Internal Revenue & Collector of Internal Revenue vs. E. Zamora, Nos. L-15280, L-
15290, L-15289 & L-15281, May 31, 1963), the foregoing error is devoid of merit.
WHEREFORE, the appealed decision should be, as it is hereby, a rmed. With
costs against petitioner-appellant, Limpan Investment Corporation.
Concepcion, C.J., Barrera, Dizon, Regala, Makalintal, J.P. Bengzon, Zaldivar,
Sanchezand Castro, JJ., concur.

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