CIR vs Algue,
Inc.
No.
L-28896. February 17, 1988.
Facts:
Private respondent, a domestic
corporation engaged in engineering, construction and other allied activities,
received a letter from the petitioner assessing it in the total amount of P83,
183.85 as delinquency income taxes for the years 1958 and 1959. Algue filed a
letter of protest or request for reconsideration.
Petitioner contends that the claimed
deduction of P75, 000. 00 was properly disallowed because it was not an
ordinary, reasonable or necessary business expense.
Court of Tax Appeals however, agreed
with Algue, Inc. holding that the said amount had been legitimately paid as
promotional fees for their work in the formation of Vegetable Oil Investment
Corporation of the Philippines and its subsequent purchase of the properties of
the Philippine Sugar Estate Development Corporation.
Issue:
1.
Whether
or not the CIR correctly disallowed the P75, 000. 00 deduction claimed by
private respondent.
2.
Whether
or not the payments in promotional fees are fictitious and excessive.
Ruling:
1.
No.
The claimed of deduction by the
private respondent was permitted under the code.
2.
No.
Not fictitious: Since Algue, Inc
was a family corporation where strict business procedures were not applied and
immediate issuance of receipts was not required.
Not excessive: Since the total
commission paid by PSEDC to the private respondent was P125,000.00. After
deducting the said fees, Algue still had a balance of P50,000.00 as clear
profit from the transaction. The amount of P75,000.00 was 60% of the total
commission. This was reasonable proportion, considering that it was the payees
who did practically everything, from the formation of VOIC to the actual
purchase by it of PSEDC.
Algue Inc. has proved that the
payment of fees was necessary and reasonable.
The appealed decision of the CTA is
affirmed.
Doctrine:
-
Taxes
are the lifeblood of the government and so should be collected without
unnecessary hindrance.
-
On
the other hand, such collection should be made in accordance with law as any
arbitrariness will negate the very reason for government itself.
-
It
is, therefore, necessary to reconcile the apparently conflicting interests of
the authorities and the tax payers so that the real purpose of taxation, which
is the promotion of the common good, may be achieved.
-
SYMBIOTIC
RELATIONSHIP: Every person who is able to must contribute his share in the
burden of running the government. The government, for its part, is expected to
respond in the form of tangible and intangible benefits intended to improve the
lives of the people and enhance their material and moral values.
Philippine
Guaranty Co., Inc. vs CIR
No.
L-22074. April 30, 1965
Facts:
The petitioner, a domestic insurance
company, entered into reinsurance contracts with foreign insurance companies
not doing business in the Philippines. Pursuant to the reinsurance contracts,
petitioner ceded to the foreign reinsurers premiums, which were excluded from
its gross income when it filed its income tax returns. Furthermore, it did not
withhold or pay tax on them.
Consequently, the CIR assessed
against petitioner withholding tax on ceded reinsurance premiums.
Petitioner protested on the ground.
Issue:
Whether or not the reinsurance
premiums ceded to foreign reinsurers not doing business in the Philippines are
not subject to withholding tax.
Ruling:
No.
It is subject to withholding tax.
Where the reinsurance show that the
activities that constituted the undertaking to reinsure a domestic insurer
against losses arising from original insurances in the Philippines were
performed in the Philippines, the reinsurance premiums are considered as coming
from sources within the Philippines and are subject to Philippine Income Tax.
Tax code does not require a foreign
corporation to engage in business in the Philippines in subjecting its income
tax. It suffices that the activity creating the income is performed or done in
the Philippines. What is controlling, therefore, is not the place of business
but the place of activity that created an income.
Doctrine:
-
The
Government is not stopped from collecting taxes by mistakes or errors of its
agents.
-
NECESSITY
THEORY: Taxation is a power predicated upon necessity. It is a necessary burden
to preserve the State’s sovereign and a means to give the citizenry an army to
resist aggression, a navy to defend its shores from invasion, a corps of civil
servants to serve, public improvements for the enjoyment of the citizenry, and
those which come within the State’s territory and facilities and protection
which a government is supposed to provide.
Tio vs Videogram
Regulatory Board
No.
L-75697. June 18, 1987
Facts:
Petitioner, on his own behalf and
purportedly on behalf of another videogram operators adversely affected,
assails the constitutionality of PD 1987: An Act Creating the Videogram
Regulatory Board with broad powers to regulate and supervise the videogram
industry
Issue:
Whether or not the levy of 30% tax
under PD 1987 as for a public purpose, and therefore a valid imposition.
Ruling:
Yes.
It was imposed primarily to answer
the need for regulating the video industry, particularly because of the rampant
film piracy, the flagrant violation of intellectual property rights, and the
proliferation of pornographic video tapes. And while it was also an objective
of the DECREE to protect the movie industry, the tax remains a valid
imposition.
Doctrine:
-
Tax
imposed under the DECREE is not harsh, oppressive, confiscatory and in
restraint of trade but regulatory and a revenue measure. The levy is for public
purpose.
Vera vs
Fernandez
No.
L-31364. March 30, 1979
Facts:
The motion for allowance of claim
and payment of taxes dated May 28, 1969 was filed on June 3, 1969. The claim
represents the indebtedness to the Government of the late Tongoy for deficiency
income taxes. The Administrator opposed the motion solely on the ground that
the claim was barred under Section 5, Rule 86 of ROC.
Issue:
Whether or not the Statute of
Non-claims (Sec 5, ROC) barred the claim of the Government for unpaid taxes,
though it was filed within the period of limitations prescribed in NIRC.
Ruling:
No.
Claims for taxes may be collected
even after the distribution of the decedent’s estate among his heirs who shall
be liable therefore in proportion of their share in the inheritance. The reason
for the more liberal treatment of claims for taxes against a decedent’s estate
in the form of exception from the application of the statute of non-claims, is
not hard to find.
Doctrine:
-
Taxes
are the lifeblood of the Government and their prompt and certain availability
are imperious need.
-
Upon
taxation depends the Government’s ability to serve the people for whose benefit
taxes are collected.
