Definition of "Real Estate Dealers"

October 16, 1958 BIR RULING NO. 624-58 Mr. Rafael A. Jose Assistant City Fiscal Manila S i r : Reference is made to your letter dated July 8, 1958, requesting exemption from the payment of the real estate dealer's fixed tax for the year 1955. As reason therefor, you stated, among others, that you have never been engaged in business as a real estate dealer, particularly during that year, because from 1946 up to the present, you have been devoting your full time to the performance of your duties as assistant fiscal in the City of Manila. In support thereof, you cited the case of "Domingo Imperial vs. Collector of Internal Revenue", G.R. No. L-7924, September 30, 1955. prcd In answer thereto, I have the honor to inform you that the decision in the aforesaid case cannot be made to apply to yours because, while the real estate dealer's fixed tax involved in that case is that corresponding to the fourth quarter of 1946 to the third quarter of 1950, in your case the tax in question is that due for the year 1955. If the tax being collected in the Imperial case were one which was due for years later than 1950, we believe that the Supreme Court would have affirmed the decision of this Office subjecting him to the tax. This conclusion clearly follows from the decision of the Supreme Court, a portion of which is hereunder quoted: "In the case at bar, plaintiff-appellee is made to pay a license tax from the fourth quarter of 1946 to the third quarter of 1950, the last date being the date when the amending statute, Republic Act No. 588, was passed. This retroactive application of the amending statute would affect the plaintiff-appellee who would be required to pay a tax which he was not required to pay under the old statute. The Legislature cannot be presumed to have intended to make the law retroactive. As a matter of fact, as we have stated in the original decision, no such retroactive effect was within the legislative intent, because an amendment to the law (R.A. 588), proposing to make the amendatory law retroactive from October, 1944 was voted down. . . ." (Resolution, Domingo Imperial vs. C.I.R., G.R. No. L-7924, Nov. 18, 1955) Moreover, in the case of "Veronica Sanchez vs. Collector of Internal Revenue", G.R. No. L-7521, October 18, 1955, which was decided later than the Imperial case, the Supreme Court said: cdpr "Does appellant fall within the above-definition (of real estate dealers)? 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 has always rented the other apartments to other persons form the time the building was constructed up to the filing of this case." (Parenthesis supplied) Applying the aforequoted doctrine to your case, it would seem indubitable that you are embraced within the definition of "real estate dealers" under Section 194(s) of the Tax Code even before its amendment by Republic Act No. 588. We shall quote from paragraph II of your letter under reply: "(a) The lots occupied by my tenants located at Cristobal St., Paco, Manila, are conjugal property, acquired by my wife and myself thru purchase . . . from Mr . Gatchalian . At that time the above-mentioned tenants were already occupying said lots ; they only paid us the rents, when we became owners of said lots, . . .. " (Emphasis supplied) "(b) The improvements constructed at our lots located at Rodriguez Lanuza St., Paco, Manila after Liberation . . . are also conjugal property and were rebuilt partly from loan obtained from the RFC and partly from our savings. The lower story of the house we live at said address and those portions that are not occupied by my family, are occupied by tenants." (Emphasis supplied) As regards your argument that the rental collected from your real property is not a business profit, but a civil fruit within the purview of Article 441 of the Civil Code, suffice it for us to state that the tax in question being an internal revenue tax, the applicable law on the matter is the National Internal Revenue Code, as amended, and not the Civil Code which is a general law. Finally, the decisions of the American courts cited by you as authority to further support your stand cannot prevail over the decisions of our Supreme Court, it being a rule of statutory construction and interpretation that the former are merely persuasive and not binding in nature. It may be stated, however, that if your respective gross rentals as real estate dealer for the years 1956 and 1957 did not exceed the amount of P4,000.00, you need not pay the real estate dealer's fixed tax for the years 1957 and 1958, pursuant to Section 182(A)(3)(s) of the Tax Code, as amended by Republic Acts No. 1612 and No. 1856. In view of all the foregoing, it would be highly appreciated if you can now pay the amount of P150.00, the sum due from you as real estate dealer for the year 1955, plus the corresponding compromise penalty for failure to pay the tax on time. Very truly yours, (SGD.) MELECIO R. DOMINGO Acting Commissioner of Internal Revenue Copy furnished: Chief, Office Audit Section