Scribd
Upload
0 views2 pages

CIR vs Algue

The case involves the Commissioner of Internal Revenue's tax assessment against Algue, Inc. for delinquency income tax, which Algue contested, leading to a legal dispute over the deductibility of a promotional fee. The Court of Tax Appeals ruled in favor of Algue, determining the fee was a legitimate business expense, while the CIR argued it was not ordinary or necessary. Ultimately, the court upheld the deduction, emphasizing the taxpayer's burden to prove the validity of claimed deductions.

Uploaded by

Jonalyn Dalisay
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
Download as docx, pdf, or txt
0 views2 pages

CIR vs Algue

The case involves the Commissioner of Internal Revenue's tax assessment against Algue, Inc. for delinquency income tax, which Algue contested, leading to a legal dispute over the deductibility of a promotional fee. The Court of Tax Appeals ruled in favor of Algue, determining the fee was a legitimate business expense, while the CIR argued it was not ordinary or necessary. Ultimately, the court upheld the deduction, emphasizing the taxpayer's burden to prove the validity of claimed deductions.

Uploaded by

Jonalyn Dalisay
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
Download as docx, pdf, or txt
Download as docx, pdf, or txt
You are on page 1/ 2

Commissioner of Internal Revenue, petitioner

Vs.
Algue, INC.
G. R. No. L-28896, February 17, 1988

Facts:

1. On January 14, 1965, the Commissioner of Internal Revenue issued a tax assessment
against Algue, Inc, a domestic corporation engaged in engineering, construction, and allied
activities.
2. The petitioner sent a letter to the respondent assessing delinquency income tax for
the years 1958 to 1959 amounting to 83,183.85.
3. On January 18, Algue filed a protest/request for reconsideration challenging the tax
assessment. BIR did not act on the protest and later could not locate the protest letter in
their records.
4. On March 12, 1965, the BIR issued a warrant of distraint and levy which a legal action
to seize property for unpaid taxes. Algues lawyer, Atty. Alberto Guevara, Jr. Refused to
receive the warrant because the protest was still pending.
5. On April 7, 1965, the BIR officially rejected Algue’s protest. Atty. Guevara then
accepted the warrant of distraint and levy.
6. Algue then filed an appeal with the Court of Tax Appeals, challenging the CIR’s
assessment in April 23, 1965. The CTA ruled in favor of Algue, stating that the protest filed
by the respondents was filed on time and suspended the deadline for appeal. That the
promotional fees paid by Algue were legitimate business expenses and should be tax-
deductible.
7. CIR argued that the 75,000 promotional fee should not be deducted from the taxable
income because it was not an ordinary and necessary business expense. That the payments
were suspicious because most of the recipients were family members of Algue, that there
was no proper documentation on how the payments were made and no clear proof that the
payments were legitimate. Further, the CIR alleges that the payments have been an attempt
to avoid taxes.
8. Algue countered that allegations by arguing that the promotional fee was a
legitimate expense for sevices actually rendered. That recipients reported the payments in
their income tax returns and paid necessary taxes and that the company had clear business
transactions, and the CIR had no valid reason to disallow the deduction.

Issue: W/N the 75,000 promotional fee be considered a tax-deductible business expense.

Ruling:
Yes. The court ruled that the promotional fee was a legitimate and necessary business
expense because the payees helped establish VOICP and arranged the sale of PSEDC
properties. The payments were reasonable, as Algue still had 50,000 in profit after
deducting the fees. Thus, the Tax Code allows deductions for reasonable compensation
paid for services actually rendered. It is true that the burden is on the taxpayer to prove the
validity of the claimed deduction.

doctrine

Benefits-Protection Theory (Doctrine of Symbiotic Relationship)


Despite the natural reluctance to surrender part of one's hard
earned income to the taxing authorities , every person who is able
to 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.

You might also like