Limpan Investment Company deemed to have constructively received rental payments in 1957 when they were deposited in court due to its refusal to receive them.
FACTS:
• BIR assessed deficiency taxes on Limpan Corp, a company that leases real property, for under-declaring its rental income for years 1956-57 by around P20K and P81K respectively.
• Petitioner appeals on the ground that portions of these underdeclared rents are yet to be collected by the previous owners and turned over or received by the corporation.
• Petitioner cited that some rents were deposited with the court, such that the corporation does not have actual nor constructive control over them.
• The sole witness for the petitioner, Solis (Corporate Secretary- Treasurer) admitted to some undeclared rents in 1956 and1957, and that some balances were not collected by the corporation in 1956 because the lessees refused to recognize and pay rent to the new owners and that the corp’s president Isabelo Lim collected some rent and reported it in his personal income statement, but did not turn over the rent to the corporation.
• He also cites lack of actual or constructive control over rents deposited with the court.
ISSUE:
Whether or not the BIR was correct in assessing deficiency taxes against Limpan Corp. for undeclared rental income
HELD:
Yes. Petitioner admitted that it indeed had undeclared income (although only a part and not the full amount assessed by BIR). Thus, it has become incumbent upon them to prove their excuses by clear and convincing evidence, which it has failed to do. When is there constructive receipt of rent? With regard to 1957 rents deposited with the court, and withdrawn only in 1958, the court viewed the corporation as having constructively received said rents. The non-collection was the petitioner’s fault since it refused to refused to accept the rent, and not due to nonpayment of lessees. Hence, although the corporation did not actually receive the rent, it is deemed to have constructively received them.
