VERONICA SANCHEZ, PLAINTIFF AND APPELLANT, VS. THE COLLECTOR OF INTERNAL REVENUE, DEFENDANT AND APPELLEE.

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 (Exhibt 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 appellant1 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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^[*] 91 Phil., 147.