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Javier v. Ancheta

The petitioner received a bank transfer of $999,973.70 that was later claimed to be an error and should have been only $1,000. The petitioner spent the money and did not return it. The issue is whether this amount constitutes taxable income. The court held that it does, as the definition of gross income in the tax code is very broad and includes any gains or profits from any source. As the petitioner exercised complete control over the money, spending it as he wished, it qualifies as taxable income despite later being claimed as an error by the bank.

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424 views1 page

Javier v. Ancheta

The petitioner received a bank transfer of $999,973.70 that was later claimed to be an error and should have been only $1,000. The petitioner spent the money and did not return it. The issue is whether this amount constitutes taxable income. The court held that it does, as the definition of gross income in the tax code is very broad and includes any gains or profits from any source. As the petitioner exercised complete control over the money, spending it as he wished, it qualifies as taxable income despite later being claimed as an error by the bank.

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Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Title: Javier v.

Ancheta (CTA) for services rendered nor gains or profits realized from
Doctrine: business or dealings in property.
Facts:  To be considered “income” a receipt must have been
 Victoria L. Javier, the wife of the petitioner, received from the either (a) actively sought by the recipient, such as wages,
Prudential Bank and Trust Company in Pasay City the amount salaries and compensation for services or f or the
of US$999,973.70 remitted by her sister, Mrs. Dolores exercise of one's profession, vocation, trade, business,
Ventosa, through some U.S banks among which is Mellon commerce, sales or dealings in property; or (b)produced
Bank, N.A. or derived from the recipient' s ownership or use of
 Mellon Bank, N.A. filed a complaint with the Court of First property, such as tents, interests and dividends. The
Instance of Rizal against the petitioner, his wife and other amount in question was neither actively sought by the
defendants claiming that its remittance of US$1,000,000 .00 petitioner, or the product or fruits of his property. It is a
was a clerical error and should have been US$1,000.00 only receipt but not an income.
and praying that the excess amount of US$999,000.00 be  Petitioner misses the point.
returned.  The controlling statute is Section 29(a) of the NIRC before
 That on March 15, 1978, the petitioner filed his income Tax its amendment by Batas Pambansa Blg . 135. It defines
Return for the taxable year 1977 showing a gross income of “gross income", which term is employed in Section 28 as
P53,053.38 and a net income of P48,053.38 and stating in the part of the definition of "net income" subject to income
footnote of the return that. "Taxpayer was recipient of some tax under Section 21 in the case of individuals and
money received from abroad which he presumed to be a gift Section 24 in the case of corporations. The definition
but turned out to be an error and is now subject of litigation." combines a descriptive list of broad scope enumerating
 The petitioner was assessed with an income tax deficiency. various activities giving rise to items of income with the
Issue: catchall phrase "gains, profits and income derived from
WON the proceeds of an erroneous bank remittance transfer to a any source whatever”
taxpayer over which he exercised complete dominion to the extent  The definition is in sweeping terms. Thus, insofar as
of disposing them beyond all chance of discovery. – YES pertinent hereto, "Gross income includes gains, profits,
 Bought a house in California, invested in stocks, and income derived from x X x dealings in property x X
medication & hospitalization for his father, gambling growing out of the ownership or use of interest in such
loses and dole-outs to friends & family property; X X x gains, profits , and income derived from
many source whatever”. The broad sweep of this
Held: language indicates the purpose of Congress to use the
 Petitioner's position is that the amount received by him full measure of its taxing power within those definable
from the Mellon Bank is not income.as the term is categories.
defined in Section 29 of the National Internal Revenue
Code because the said amount is neither compensation

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