for his tax since he is arguing

FACTS: that he has a conjugal

Vicente Madrigal and Susana partnership with his wife.
Paterno were legally married However, the court ruled that the
prior to Januray 1, 1914. The one that should be taxed is the
marriage was contracted under income which is the flow of the
the provisions of law concerning capital, thus it should not be
conjugal partnership. divided into 2. Moreover Paterno
On 1915, Madrigal filed a has no estate and income, and
declaration of his net income for cannot be properly be
year 1914, the sum of considered the separate income
P296,302.73. Vicente Madrigal of the wife for the purposes of
was contending that the said the additional tax.
declared income does not
represent his income for the
year 1914 as it was the income
of his conjugal partnership with
Paterno. He said that in
computing for his additional
income tax, the amount declared
should be divided by 2. the
United States CIR decided
against the claim of Madrigal. He
paid under protest, and the
couple decided to recover the
sum of P3,786.08 alleged to have
been wrongfully and illegally
assessed and collected by the
CIR.

ISSUE: Whether or not the

income reported by Madrigal
on 1915 should be divided into
2 in computing for the
additional income tax.

HELD: No! The point of view of

the CIR is that the Income Tax
Law, as the name implies, taxes
upon income and not upon
capital and property.
The essential difference
between capital and income is
that capital is a fund; income is
a flow. Capital is wealth, while
income is the service of wealth.
ITC, Vicente wants to half his
declared income in computing