CASE DIGESTS (Taxation I)

CIR v Algue (1988) Facts: 1. Jan 14, 65: resp corp who is engaged in engineering and construction business received from pet CIR a letter assessing an P83K income tax deficiency from 1958-59 2. Jan 18, 65: resp filed a letter of protest/request for reconsideration, stamped and received in the office of pet on the same day 3. Mar 12, 65: a warrant of distraint and levy was presented to resp through its counsel, Atty. Albert Guevara, Jr. Who refused it on the ground of pending protest 4. Protest was not found in the docket of the case so Atty. Guevara produced his own copy and gave a photostat to Ramon Reyes, BIR agent who deferred service of warrant 5. Apr 7, 65: Atty. Guevara was informed that the BIR is not taking any action on the prote st and it was only then that he accepted the warrant 6. After 16 days, resp filed a petition for review on the decision of CIR w/CTA Issues: 1. W/N pet correctly disallowed the 75K-deduction as legitimate business expenses in its income tax returns claimed by resp 2. W/N the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law Ruling: 1. NO a. The 75K should be deducted as ordinary and necessary expenses which were paid to Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez for their services to Algue in one of its buss venture with Philippine Sugar Estate Development Company. PSEDC appointed resp as its agent authorizing it to sell its land, factories and oil manufacturing process. The persons mentioned worked for the formation of of the Vegetable Oil Investment Corporation, inducing other persons to invest in it. The VOIC later on purchased the PSEDC properties for w/c the latter gave 125K to resp as commission. 75K of this amount was given to the persons mentioned as promotional fees. b. Under the Tax Code, the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; should be a reduction from gross income. 2. YES a. As a rule the warrant of distraint and levy is "proof of the finality of the assessment" and renders hopeless a request for reconsideration," being "tantamount to an outright denial thereof and makes the said request deemed rejected." b. But there is a special circumstance in the case that prevents the application of the abovementioned rule: four days before the warrant was served, a letter of protest was sent by resp to the tax authorities. During the intervening period, the warrant cannot was premature and cannot be served c. protest was pro forma and is based on strong legal considerations and thus should suspend the running of the reglemantary period w/c started on the date resp received the assessment. It only started to run again when resp was served with the warrant upon being informed that the BIR rejected the protest

CIR v Pineda (1967) Facts: 1. 2. 3. 4. 5. 6. 1945: Atanasio Pineda died, survived by wife , Felicisima Bagtas and 15 children, one is Manuel Pineda,a lawyer Estate proceedings were had and Felicisima was the administratix of the prop. Resp Manuels share was 2,500 After estate proceedings, BIR went investigated the income tax liability of the estate from 1945-48 since the corresponding income tax returns were not filed. Collector of BIR filed said returns for the estate based on the estate proceedings amounting to P2,928 Resp who received the assessment contested the same, appealing before the CTA only the proportionate part pertaining to him as his share in the estate