TRINIDAD CIR V Algue

CIR v. Algue (Ktle) private respondent, through its counsel, Atty. Alberto Guevara, Jr.
, who refused
G.R. No. 148208 December 15, 2004| CRUZ, J| Taxation to receive it on the ground of the pending protest.
4. A search of the protest in the dockets of the case proved fruitless. Atty.
PETITIONER: COMMISSIONER OF INTERNAL REVENUE, petitioner, Guevara produced his file copy and gave a photostat to BIR agent Ramon
RESPONDENTS: ALGUE, INC., and THE COURT OF TAX APPEALS, Reyes, who deferred service of the warrant.
respondents. 5. On April 7, 1965, Atty. Guevara was finally informed that the BIR was not
taking any action on the protest and it was only then that he accepted the warrant
Summary: The Philippine Sugar Estate Development Company assigned Algue of distraint and levy earlier sought to be served.
Inc., as its agent. It was authorized to sell its land, factories and oil 6. Sixteen days later, on April 23, 1965, Algue filed a petition for review of the
manufacturing process. As such,the corporation worked for the formation of the decision of the Commissioner of Internal Revenue with the Court of Tax
Vegetable Oil Investment Corporation, until they were able to purchase the Appeals.
PSEDC properties. For this sale, Algue Inc., received as agent a commission of 7. The petitioner contends that the claimed deduction of P75,000.00 was
P126, 000.00, and it was from this commission that the P75, 000.00 promotional properly disallowed because it was not an ordinary reasonable or necessary
fees were paid to Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, business expense. The petitioner claims that these payments are fictitious
O'Farell, and Pablo Sanchez. because most of the payees are members of the same family in control of Algue.
It is argued that no indication was made as to how such payments were made,
Commissioner of Internal Revenue contends that the claimed deduction is not whether by check or in cash, and there is not enough substantiation of such
allowed because it was not an ordinary reasonable or necessary business payments. In short, the petitioner suggests a tax dodge, an attempt to evade a
expense, and that the appeal of the respondent was not made on time. The Court legitimate assessment by involving an imaginary deduction.
of Tax Appeals had seen it differently. Agreeing with Algue Inc., it held that the 8.The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held
said amount had been legitimately paid by the private respondent for actual that the said amount had been legitimately paid by the private respondent for
services rendered. The payment was in the form of promotional fees. 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
SC held that the appeal of the private respondent from the decision of the Vegetable Oil Investment Corporation of the Philippines and its subsequent
petitioner was filed on time with the respondent court in accordance with Rep. purchase of the properties of the Philippine Sugar Estate Development
Act No. 1125. And that the claimed deduction by the private respondent was Company.
permitted under the Internal Revenue Code (Sec 30) and should therefore not 9. Hence this petition
have been disallowed by the petitioner.
Issue/s of the case:
Doctrines: 1. Whether or not the Collector of Internal Revenue correctly disallowed the
Taxes are the lifeblood of the government and so should be collected without P75,000.00 deduction claimed by private respondent Algue as legitimate business
unnecessary hindrance On the other hand, such collection should be made in expenses in its income tax returns? NO
accordance with law as any arbitrariness will negate the very reason for 2. Whether or not the appeal of the private respondent from the decision of the
government itself. It is therefore necessary to reconcile the apparently Collector of Internal Revenue was made on time and in accordance with law?- YES
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. RULING: SC held 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
Facts of the Case: No. 1125. And that the claimed deduction by the private respondent was permitted
1. On January 14, 1965, the private respondent, a domestic corporation engaged under the Internal Revenue Code and should therefore not have been disallowed by
in engineering, construction and other allied activities, received a letter from the the petitioner.
petitioner assessing it in the total amount of P83,183.85 as delinquency income RATIO:
taxes for the years 1958 and 1959. 1. SC agrees with the respondent court that the amount of the promotional fees
2. On January 18, 1965, Algue flied a letter of protest or request for was not excessive. The total commission paid by the Philippine Sugar
reconsideration, which letter was stamp received on the same day in the office of Estate Development Co. to the private respondent was P125,000.00. After
the petitioner. deducting the said fees, Algue still had a balance of P50,000.00 as clear
3. On March 12, 1965, a warrant of distraint and levy was presented to the 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. This is aligned with Tax Code, Sec 30
2. On Petitioner’s contention of tax dodging. SC said that: We find that these
suspicions were adequately met by the private respondent when its
President, Alberto Guevara, and the accountant, Cecilia V. de Jesus,
testified that the payments were not made in one lump sum but periodically
and in different amounts as each payee's need arose. It should be
remembered that this was a family corporation where strict business
procedures were not applied and immediate issuance of receipts was not
required. Even so, at the end of the year, when the books were to be closed,
each payee made an accounting of all of the fees received by him or her, to
make up the total of P75,000.00. Admittedly, everything seemed to be
informal. This arrangement was understandable, however, in view of the
close relationship among the persons in the family corporation.
3. On the alleged wrong timing of filing, SC said that: The proven fact is that
four days after the private respondent received the petitioner's notice of
assessment, it filed its letter of protest. This was apparently not taken into
account before the warrant of distraint and levy was issued; indeed, such
protest could not be located in the office of the petitioner. It was only after
Atty. Guevara gave the BIR a copy of the protest that it was, if at all,
considered by the tax authorities. During the intervening period, the warrant
was premature and could therefore not be served. When the appeal was filed
on April 23, 1965, only 20 days of the reglementary period had been
consumed.
Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

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CIR v. Algue (Ktle) private respondent, through its counsel, Atty. Alberto Guevara, Jr.

Teehankee, C.J., Narvasa, Gancayco and Griño-Aquino, JJ., concur.

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