Scribd Logo
Upload

Welcome to Scribd!

  • 30 views

    CIR Vs Algue, Inc.

    Uploaded by

    Angel
    The Court of Tax Appeals ruled in favor of Algue, Inc. in a case where the Commissioner of Internal Revenue disallowed a P75,000 deduction claimed by Algue as a business expense. The Court of Tax Appeals found that the payment was a legitimate promotional fee paid to induce investors for a new business venture. On appeal, the Supreme Court upheld the Court of Tax Appeals' decision, finding that the deduction was allowed under the tax code and that the collection of taxes, while necessary, must still be conducted according to law.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd

    CIR Vs Algue, Inc.

    Uploaded by

    Angel
    30 views1 page
    The Court of Tax Appeals ruled in favor of Algue, Inc. in a case where the Commissioner of Internal Revenue disallowed a P75,000 deduction claimed by Algue as a business expense. The Court of Tax Appeals found that the payment was a legitimate promotional fee paid to induce investors for a new business venture. On appeal, the Supreme Court upheld the Court of Tax Appeals' decision, finding that the deduction was allowed under the tax code and that the collection of taxes, while necessary, must still be conducted according to law.

    Original Description:

    CASE

    Original Title

    CIR vs Algue, Inc.

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    The Court of Tax Appeals ruled in favor of Algue, Inc. in a case where the Commissioner of Internal Revenue disallowed a P75,000 deduction claimed by Algue as a business expense. The Court of Tax Appeals found that the payment was a legitimate promotional fee paid to induce investors for a new business venture. On appeal, the Supreme Court upheld the Court of Tax Appeals' decision, finding that the deduction was allowed under the tax code and that the collection of taxes, while necessary, must still be conducted according to law.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    30 views1 page

    CIR Vs Algue, Inc.

    Uploaded by

    Angel
    The Court of Tax Appeals ruled in favor of Algue, Inc. in a case where the Commissioner of Internal Revenue disallowed a P75,000 deduction claimed by Algue as a business expense. The Court of Tax Appeals found that the payment was a legitimate promotional fee paid to induce investors for a new business venture. On appeal, the Supreme Court upheld the Court of Tax Appeals' decision, finding that the deduction was allowed under the tax code and that the collection of taxes, while necessary, must still be conducted according to law.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    G.R. No.

    L-28896 February 17, 1988

    COMMISSIONER OF INTERNAL REVENUE, petitioner,


    vs.
    ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.

    Topic: Meaning of Taxation

    Facts:
    Algue, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the CIR
    assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 - 1959. Algue filed a letter of protest or
    request for reconsideration.

    The CIR contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary
    reasonable or necessary business expense. The CTA agreed with Algue. It held that the said amount had been legitimately paid by
    Algue for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for
    their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the
    properties of the Philippine Sugar Estate Development Company.

    Issue:
    Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as
    legitimate business expenses in its income tax returns. (NO)

    Held:

    The total commission paid by the Philippine Sugar Estate Development Co. to Algue was P125,000.00. After deducting the said
    fees, Algue still had a balance of P50,000.00 as profit from the transaction. The amount of P75,000.00 was 60% of the total
    commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of
    the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties.

    Algue proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in
    inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business
    requiring millions of pesos.

    Doctrine of Necessity/Definition of Taxation:


    It is said that taxes are what we pay for civilization. Without taxes, the government would be paralyzed for lack of the
    motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the
    taxing authorities, every person who is able to must contribute his share in the running of 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
    moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an
    arbitrary method of exaction by those in the seat of power.

    But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be
    exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts
    will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
    demonstrate, as it has here, that the law has not been observed.

    We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in
    accordance with Rep. Act No. 1125. And we also find that the claimed deduction by the private respondent was permitted under the
    Internal Revenue Code and should therefore not have been disallowed by the petitioner.

    *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 taxpayers so that the real purpose of taxation, which is the
    promotion of the common good, may be achieved.

    You might also like