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    Collector V. Goodrich International Rubber Co.: By: Ellaine M. Quimson

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    Ludy Jane Feliciano
    1) Goodrich claimed deductions for bad debts and representation expenses but provided receipts from its officers rather than the entities where expenses were incurred. 2) The Commissioner disallowed some of the claimed deductions. The Court of Tax Appeals allowed some deductions but the Government appealed to the Supreme Court. 3) The Supreme Court rejected deductions for most of the alleged bad debts because Goodrich did not prove the debts were actually worthless or that it had reasonable grounds to believe they were worthless, as required by law. It allowed deductions for some bad debts where worthlessness was properly established.

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    Collector V. Goodrich International Rubber Co.: By: Ellaine M. Quimson

    Uploaded by

    Ludy Jane Feliciano
    67 views2 pages
    1) Goodrich claimed deductions for bad debts and representation expenses but provided receipts from its officers rather than the entities where expenses were incurred. 2) The Commissioner disallowed some of the claimed deductions. The Court of Tax Appeals allowed some deductions but the Government appealed to the Supreme Court. 3) The Supreme Court rejected deductions for most of the alleged bad debts because Goodrich did not prove the debts were actually worthless or that it had reasonable grounds to believe they were worthless, as required by law. It allowed deductions for some bad debts where worthlessness was properly established.

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    no.-50-Collector-v-Goodrich

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    1) Goodrich claimed deductions for bad debts and representation expenses but provided receipts from its officers rather than the entities where expenses were incurred. 2) The Commissioner disallowed some of the claimed deductions. The Court of Tax Appeals allowed some deductions but the Government appealed to the Supreme Court. 3) The Supreme Court rejected deductions for most of the alleged bad debts because Goodrich did not prove the debts were actually worthless or that it had reasonable grounds to believe they were worthless, as required by law. It allowed deductions for some bad debts where worthlessness was properly established.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    67 views2 pages

    Collector V. Goodrich International Rubber Co.: By: Ellaine M. Quimson

    Uploaded by

    Ludy Jane Feliciano
    1) Goodrich claimed deductions for bad debts and representation expenses but provided receipts from its officers rather than the entities where expenses were incurred. 2) The Commissioner disallowed some of the claimed deductions. The Court of Tax Appeals allowed some deductions but the Government appealed to the Supreme Court. 3) The Supreme Court rejected deductions for most of the alleged bad debts because Goodrich did not prove the debts were actually worthless or that it had reasonable grounds to believe they were worthless, as required by law. It allowed deductions for some bad debts where worthlessness was properly established.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    COLLECTOR V. GOODRICH INTERNATIONAL RUBBER CO.

    G.R. No. L-22265


    December 22,1697

    By: Ellaine M. Quimson

    PONENTE: CONCEPCION, C.J.

    FACTS:

    Goodrich claimed for deductions based upon receipts issued, not by entities in which the
    alleged expenses had been incurred, but by the officers of Goodrich who allegedly paid for them.

    The Commissioner disallowed deductions in the amount of P50,455.41 (for the year
    1951) for bad debts and P30,188.88 (for year 1952) for representation expenses.

    Goodrich appealed from the said assessment to the Court of Tax Appeals (CTA) which
    allowed the deduction for bad debts but disallowing the alleged representation expenses. CTA
    amended its decision allowing the deduction of representation expenses.

      The Government appealed to the Supreme Court.

    The alleged bad debts are the following:

    1. Portillo's Auto Seat Cover                                        630.31


    2. Visayan Rapid Transit                                                 17,810.26
    3. Bataan Auto Seat Cover                                           373.13
    4. Tres Amigos Auto Supply                                         1,370.31
    5. P. C. Teodorolawphil                                                  650.00
    6. Ordnance Service, P.A.                                             386.42
    7. Ordnance Service, P.C.                                             796.26
    8. National land Settlement Administration          3,020.76
    9. National Coconut Corporation                               644.74
    10. Interior Caltex Service Station                             1,505.87
    11. San Juan Auto Supply                                              4,530.64
    12. P A C S A                                                                       45.36
    13. Philippine Naval Patrol                                            14.18
    14. Surplus Property Commission                             277.68
    15. Alverez Auto Supply                                                   285.62
    16. Lion Shoe Store                                                         1,686.93
    17. Ruiz Highway Transit                                                2,350.00
    18. Esquire Auto Seat Cover                                        3,536.94
    T O T A L                                                                               P50,455.41*

    ISSUUE: Whether or not these bad debts are properly deducted.


    RULING:

    The claim for deduction for debt numbers 1-10 is REJECTED. Goodrich has not
    established either that the debts are actually worthless or that it had reasonable grounds to
    believe them to be so.

    NIRC permits the deduction of debts “actually ascertained to be worthless within the
    taxable year” obviously to prevent arbitrary action by the taxpayer, to unduly avoid tax liability.

    The requirement of ascertainment of worthlessness require proof of 2 facts:


    1.       That the taxpayer did in fact ascertain the debt to be worthless
    2.       That he did so, in good faith.

    Good faith on the part of the taxpayer is not enough. He must also how that he had
    reasonably investigated the relevant facts and had drawn a reasonable inference from the
    information obtained by him. In the case, Goodrich has not adequately made such showing.

    The payments made, some in full, after some of the foregoing accounts had been
    characterized as bad debts, merely stresses the undue haste with which the same had been written
    off. At any rate, respondent has not proven that said debts were worthless. There is no evidence
    that the debtors cannot pay them. It should be noted also that, in violation of Revenue
    Regulations No. 2, Section 102, respondent had not attached to its income tax returns a statement
    showing the propriety of the deductions therein made for alleged bad debts.

    SC held that the claim for bad debts are allowed but only up to P22,627.35, those from
    Debts 11-18 since following accounts were properly written off.

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