[ G.R. No. 33196. December 19, 1930 ] 55 Phil. 439
[ G.R. No. 33196. December 19, 1930 ]
TAN SENGUAN & CO., PLAINTIFF AND APPELLANT, VS. THE COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLEE. D E C I S I O N
JOHNS, J.:
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It is admitted that the original articles of copartnership of the plaintiff were duly registered in the mercantile registry on the 24th of August, 1914, and that its amended articles were also registered on the 9th of June, 1917, at which time the capital of the partnership was P200,000, of which Tan Senguan was then the owner of P75,000. That in the year 1923 Tan Senguan withdrew P70,000 from the partnership, which reduced his share to P5,000, and that in the same year Tan Chuan Hui withdrew all of his P10,000 thereby reducing the capital of the partnership to P120,000. That both of such withdrawals were approved by the partnership and duly annotated in the mercantile registry. That in the year 1926, one Tan Kim Pue became a partner and contributed P53,187.33 to the partnership, which was also approved by the other partners, which was duly annotated on the books of the partnership, but was not recorded in the mercantile registry. The question is thus squarely presented as to whether, for the purpose of taxation, the admission of Tan Kim Pue in 1926 as a new member in the old partnership legally operates as a dissolution of the old firm and the creation of a new partnership which, it is admitted, was not registered.
Article 25 of the Code of Commerce is as follows:
“There shall also be recorded in the registry all resolutions or acts which affect the increase or decrease in the capital of mercantile associations, whatever may be their denomination, and those which modify or alter the conditions of the recorded instrument.
“The omission of this requisite shall produce the effects mentioned in the foregoing article.”
This clearly implies that, for a registered partnership to maintain its status as such, it is necessary that all its acts and resolutions, changing its membership and capital, should be recorded, so that the public in dealing with the partnership may be fully advised as to the names of the partners and the capital stock of the partnership. If the partnership may change its capital stock or its personnel of its own volition without the making of a corresponding record in the mercantile registry of such changes, the persons with whom it does business would then be misled and deceived as to the personnel and capital stock of the partnership. The purpose of the law is to exempt from such taxation a partnership which has its articles of copartnership duly registered in the mercantile registry, and to require the payment of the tax of a copartnership which does not have its articles of copartnership duly registered in the mercantile registry, and it is the policy of the law to encourage a copartnership to have its articles duly registered in the mercantile registry, so that the public may know the names of the partners and the capital stock of the partnership, and the amount of stock of each partner. To permit changes in the capital stock and personnel of a registered partnership at the whim and volition of its members, without recording the changes in the mercantile registry, would in legal effect nullify the purpose and intent of the law.
As the lower court well says:
“The law is clear that unregistered concerns must pay income taxes as entities, while registered ones do not. The law was adopted for the very purpose of encouraging registration of partnerships. The courts would render poor service to the business community, if they did not strictly enforce the law.”
The making of such changes in the official records is easy and simple and would avoid’ the tax in question.
The judgment of the lower court is affirmed, with costs. So ordered.
Johnson, Malcolm, Ostrand and Romualdez, JJ., concur.