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G.R. No. L-12798 May 30, 1960

VISAYAN CEBU TERMINAL CO., INC.,petitioner-appellant,vs.

COLLECTOR OF INTERNAL REVENUE,respondent-appellee.

Duterte and Rodriguez for petitioner.

Assistant Solicitor General Jose P. Alejandro and Atty. Sixto J. Javier for respondent.

CONCEPCION, J.:

Petitioner Visayan Cebu Terminal Co., Inc., seeks a review of the decision of the Court of Tax

Appeals in the above entitled case. The dispositive part of said decision reads as follows:

FOR THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby

modified, and appellant is hereby ordered to pay the Collector of Internal Revenue,

within a reasonable period to be fixed by the latter, the sum of P15,517.00, computedbelow:

Net income per return P41,596.45Disallowances:

(1) Salaries 500.00

(2) Representation Expenses:As claimed by appellant 75,855.88

Allowed 10,000.00 65,855.88

(3) Miscellaneous expenses 5,768.00

Net income subject to tax P113,720.33Tax due on P113,720.33:

P100,000.00 at 20% P20,000.00P13,720.00 at 28% 3,842.00 P23,842.00

Less tax previously assessed and paid 8,325.00

Deficiency tax P15,517.00

With costs against appellant.

The facts, which are not disputed, are set forth in the aforementioned decision, from which we

quote:

"The appellant, Visayan Terminal Co. Inc., is a corporation organized for the purpose of

handling arrastre operations in the port of Cebu. It was awarded the contract for the said arrastreoperations by the Bureau of Customs, pursuant to Act No. 3002, as amended.

"On March 1, 1952, appellant filed its income tax return for 1951 reporting a gross income ofP420,633.40 and claimed deductions amounting to P379,036.95, leaving a net income of


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P41,596.45 on which it paid income tax in the sum of P8,319.20. The sum of P379,036.95

claimed as deductions consisted of various items, among which were the following:

1. Salaries

(a) Salary and bonus of Juan

Eugenio Lo P1,875.00(b) Salary of Felix Go Chan 250.00

(c) Salary of Teomino Tiu

Tiam 250.00 P 2,375.002. Representation expenses 75,855.88

3. Miscellaneous expenses

(a) Christmas bonus given to

various persons P1,500.00(b) Tips to ships' officers 4,800.00 6,300.00

TOTAL P84,530.88

The said sums of P2,375.00, P75,855.88 and P6,300.00, representing salaries,representation expenses and miscellaneous expenses, respectively, or a total of

P84,530.88, were disallowed by the Collector of Internal Revenue, thus giving rise to adeficiency assessment of P18,991.00.

x x x x x x x x x

Upon request for reconsideration, the Collector modified the deficiency income tax

assessment by allowing the deduction from appellant's gross income of the salary of JuanEugenio Lo in the sum of P1,875.00 and miscellaneous expenses amounting to P532.00,

at the same time maintaining the disallowance of the full amount of P75,855.88 as

representation expenses. The revised deficiency assessment is itemized in the letter of theCollector dated March 26, 1955, and is reproduced below:

Net income as per return P41.596.45Disallowances:

per investigation:

salaries of officers P 2,375.00allowed per reaudit 1,875.00 500.00

per investigation and reaudit,

representation expenses 75,855.88

per investigation, miscellaneousexpenses 6,300.00

allowed per reaudit 532.00 5,768.00

Net income subject to tax perreaudit P123,720.33

Tax due on P123,720.33:

P100,000.00 at 20% P20,000.00P23,720.00 at 28% 6,642.00 P26,642.00


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Less tax previously assessed and paid 8,325.00

Deficiency tax P18,317.00

Add: 5% surcharge 915.85

1% monthly interest from5/31/53 to 4/30/55 4,212.91Compromise for late payment 40.00

Total amount due on April 30,1955 P23,485.76

Appellant has agreed to the disallowance of the sum P500.00 representing the salaries of

Felix Go Chan and Teotimo Tiu Tiam at P250.00 each, and the sum of P5,768.00,representing miscellaneous expenses. The only issue raised in this appeal relates to the

deductibility of the sum of P75,855.88 as representation expenses.

Passing upon said issue, which is, also, the only one raised in this appeal, the lower court heldthat "representation ... expenses fall under the category of business expenses which" are

allowable deductions from gross income if they meet the conditions prescribed by law",particularly section 30(a) (1) of the National Internal Revenue Code; that, to be deductible, said

business expenses must "ordinary and necessary expenses paid or incurred in carrying on any

trade or business"; that those expenses "must also, meet the further test of reasonableness in

amount", this test being "inherent in the phase `ordinary and necessary'"; thatsomeof therepresentation expenses claimed by appellant had been evidenced by vouchers or chits, but

others were reimbursed "without presentation of supporting papers; that the aforementioned

vouchers or chits were allegedly "destroyed when the house of Buenaventura M. Veloso,treasurer of appellant, where the records were kept was burned"; that, accordingly, "it is not

possible to determine the actual amount covered by supporting papers and the amount without

supporting papers"; that the court should, therefore, "determine from all available data the

amount properly deductible as representation expenses"; that "during the period of four (4) yearsfrom 1949 to 1952, appellant had gross income, net income, net profits and claimed

representation expenses as follows:

Year Gross Income Net Profit Representation

Expenses

1949 P722,135.42 P61,257.53 P83,703.541950 451,303.21 33,023.78 10,424.39

1951 420,479.39 41,596.45 75,855.88

1952 425,326.86 34,207.31 63,618.64

and that "from the above figures, we may infer that the sum of P10,000 may be

considered reasonably necessary for entertainment expenses of appellant in 1951, it

having claimed a little over the amount in 1950, when its gross income was more than itsgross income in 1951 and 1952", and because "it allegedly spent for entertainment

purposes in 1948 the sum of P500.00 only." Hence, the lower court modified the


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assessment of the taxes due from appellant herein the manner set forth in the beginning of

this decision.

In its brief, appellant does not assail any of the premises upon which the aforementioned

conclusion of the lower court was predicated. What is more, it relied upon, and, even,

quoted some of the views expressed in the decision appealed from. Appellant, however,maintains that said court had acted arbitrarily in considering the representation expenses

in 1950, not those incurred in 1949 and 1952, in fixing the amount deductible in 1951.

This pretense is clearly untenable. It appears: (a) that part of the alleged representationexpenses had never had any supporting paper; (b) that the vouchers and chits covering

other representation expenses had been allegedly destroyed; (c) that there is no

documentary evidence on record of any of the representation expenses in question; (d)

that no testimonial evidence has been introduced on any specific item of said allegedexpenses; (e) that there is no more than oral proof to the effect that payments had been

made to appellant's officers for representation expenses allegedly made by the latter and

about the general nature of such alleged expenses; (f) that the gross income in 1950

exceeded the gross income in 1951 and 1952, and (g) that the representation expenses in1948 amounted to P500 only. Under these circumstances, the lower court was fully

justified in concluding that the representation expenses in 1951 should be slightly lessthan those incurred in 1950.

Upon the other hand, appellant has not even tried to show why its representation

expenses in 1951 should be deemed bigger than the amount allowed by the lower court.In fact, the latter had been patently fair and reasonable, if not rather liberal, in allowing

appellant to deduct P10,000.00 as representation expenses for 1951, there being

absolutely no concrete evidence of the sums then actually spent for purposes ofrepresentation. It may not be amiss to note that the explanation to the effect that the

supporting paper of some of those expenses had been destroyed when the house of the

treasurer was burned, can hardly be regarded as satisfactory, for appellant's records are

supposed to be kept in its offices, not in the residence of one of its officers.

Being in accordance with the facts and the law, the decision appealed from is herebyaffirmed, with costs against petitioner-appellant, Visayan Cebu Terminal Co., Inc. It is so

ordered.

Paras, C J., Bengzon, Montemayor, Bautista Angelo, Labrador, Barrera, and Gutierrez

David JJ.,concur.

Kurnzle&Streif, Inc v. CIR - WALA

G.R. No. L-23226 November 28, 1967

ALHAMBRA CIGAR and CIGARETTE MANUFACTURING COMPANY,petitioner-

appellant,


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vs.

THE COMMISSIONER OF INTERNAL REVENUE,respondent-appellee.

Gamboa and Gamboa for petitioner-appellant.

Office of the Solicitor General for respondent-appellee.

FERNANDO, J.:

This Court, in this petition for the review of a decision of the Court of Tax Appeals is not faced

with a problem of undue complexity. The law governing the matter has been authoritatively

expounded in an opinion by the then Justice, now Chief Justice, Concepcion inAlhambra Cigar

v. Collector of Internal Revenue,1a case involving the same parties over a similar question but

covering an earlier period of time. The limits of a power of respondent Commissioner of Internal

Revenue to allow deductions from the gross income "the ordinary and necessary expenses paid

or increased during the taxable year in carrying on any trade or business, including a reasonableallowance for salaries and other compensation for personal services actually rendered . . ."

2had

thus been authoritatively expounded. What remains to be decided in this litigation is whether thedecision of the Court of Tax Appeals sought to be reviewed reflected with fidelity the doctrine

thus announced or deviated therefrom.

According to the petition for review, Alhambra Cigar & Cigarette Manufacturing Company,petitioner-appellant, "is a corporation duly organized and existing under the laws of thePhilippines, with principal office at 31 Tayuman street, Tondo, Manila; and the respondent-

appellee is the duly appointed and qualified Commissioner of Internal Revenue, vested with

authority to act as such for the Government of the Republic of the Philippines, . . . .3

In the petition for review it was contended that the Court of Tax Appeals, in affirming the action

taken by respondent-appellee Commissioner of Internal Revenue, erred "(a) In holding that A. P.Kuenzle and H.A. Streiff who were the President and Vice-President, respectively, of the

petitioner-appellant, were entitled to a salary of only P6,000.00 each year, for 1954, 1955, 1956

and 1957, and a bonus equal to the reduced bonus of W. Eggmann for each of said years; anddisallowing as deductions the portions of their salary and bonus in excess of said amounts; (b) In

disallowing, as deductions, all the directors' fees and commissions paid by the petitioner-

appellant to A.P. Kuenzle and H.A. Streiff; (c) In holding that the petitioner-appellant is liablefor the alleged deficiency income taxes in question."

4

It is indisputable as noted in the brief for petitioner-appellant that the deductions disallowed by

respondent-appellee, Commissioner of Internal Revenue, for the year 1954 to 1957 designated assalaries, officers; bonus, officers; commissions to managersand directors' fees"relate

exclusively to the compensations paid by the petitioner-appellant in 1954, 1955, 1956 and 1957,

to A. P. Kuenzle and H.A. Streiff who were, during the said years, as they had been in prioryears and still are, directors and the president and vice-president, respectively, of the petitioner-

appellant. . . ."5

Under the category ofsalaries, officersof the fixed annual compensation of A. P. Kuenzle and

H. A. Streiff in the amount of P15,000.00 each "the respondent-appellee allowed for each of


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them a salary of only P6,000.00 and disallow the balance of P9,000.00, or a total disallowance of

P18,00.0,0 for both of them, for each of the years in question."6Under that of the bonus, officers

of the amount under such category paid to the above gentlemen for the year 1954 of P14,750.00each, "the respondent-appellee allowed each of them a bonus of only P5,850.00, and disallowed

the balance of P8,900.00 or a total disallowance of P17,800.00 for both of them."7For the year

1955, the bonus being paid, once again, amounting to P14,750.00 to each of them, "therespondent-appellee allowed for each of them, a bonus of only P7,000.00, and disallowed thebalance of P7,750.00 each, or a total disallowance of P15,500.00 for both of them."

8For the year

1956, again the amount, not suffering any change for each, "the respondent-appellee allowed for

each of them a bonus of only P5,500.00 and disallowed the balance of P9,250.00 each, or a totaldisallowance of P18,500.00 for both of them."

9Lastly, for the year 1957, of a similar amount

payable to each in the concept of bonus, "the respondent-appellee allowed for each of them a

bonus of only P6,500.00, and disallowed the balance of P8,250.00 each, or a total disallowance

of P16,500.00 for both of them."10

As to the deduction in the concept of commissions to managers, the brief for the petitioner

appellant states: "The commissions paid by the petitioner-appellant to A. P. Kuenzle and H. A.Streiff in the amount of P13,607.61 each in 1954, or a total of P27,215.22 for both of them;

P14,097.62 each in 1955, or a total of P28,195.24 for both of them; P13,180.87 each in 1956, ora total of P26,361.74 for both of them; and P13,144.29 each in 1957, or a total of P26,288.48 forboth of them, were entirely disallowed by the respondent-appellee."

11

Concerning the directors' feespaid to both officials by petitioner-appellant, it is noted in the briefthat "in the amount of P11,504.71 each in 1954, or a total of P23,009.42 for both of them;

P10,693.02 each in 1955, or a total of P21,386.04 for both of them; P10,360.23 each in 1956, or

a total of P20,720.46 for both of them; and P9,716.63 each in 1957, or a total of P19,433.26 forboth of them were also entirely disallowed by the respondent-appellee."

12

In the decision of the respondent Court of Tax Appeals sought to be reviewed, there was anappraisal of the evidence on which respondent-appellee Commissioner of Internal Revenue

based the above deduction on salaries and bonuses: "The evidence shows that prior to 1954,

Messrs. A. P. Kuenzle and H. A. Streiff President and Vice-President, respectively, of petitionercorporation, were each paid an annual salary P6,000.00 and a bonus of about four times as much

as the annual salary. In Alhambra Cigar and Cigarette Manufacturing Company v. Coll. of Int.

Rev. C.T.A. No. 142 January 31, 1957 (affd. in G.R. Nos. L-12026 & L-12131, May 29, 1959),

this Court held that considering the nature of the services performed by Messrs. Kuenzle andStreiff the salary of P6,000.00 paid to each of them was reasonable and, therefore, deductions is

ordinary and necessary business expense. The bonus paid to each of said officers was however

reduced to the amount equivalent to that paid to Mr. W. Eggmann, the resident Treasurer and

Manager of petitioner. Following the decision of the Supreme Court in G. R. Nos. L-12026 & L-12131, . . ., respondent allowed as deduction P6,000.00 as salary to Messrs. Kuenzle and Streiff

and a bonus equivalent to that paid annually to Mr. Eggmann from 1954 to 1957, as indicated

above."13

Then the decision of respondent Court of Tax Appeals in affirming what respondent-appellee did

explained why: "Upon the evidence of record, we find no justification to reverse or modify the


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decision of respondent with respect to the disallowance of a portion of the salaries and bonuses

paid to Messrs. Kuenzle and Streiff. Petitioner seeks to justify the increase in the salaries of

Messrs. Kuenzle and Streiff on the ground of increased costs of living. The said officers ofpetitioner are, however, non-residents of the Philippines."

14

It may be stated in this connection that the brief for petitioner-appellant did not actually disputethe fact of non-residence of the aforesaid officials. Thus: "A. P. Kuenzle or H. A. Streiff usually

came to the Philippines every two years, and generally stayed from five to eight weeks (t.s.n., pp.

203-204). During the years in question, H. A. Streiff was in the Philippines from January 27 toMarch 20, 1954. He was personally present at the special meeting of the board of directors of the

petitioner-appellant on February 19, 1954 and at the regular meeting on February 27, 1954, the

minutes of all of which he signed as Vice-President (Exhibits Q, Q-1 and Q-2). He was also

personally present at the semi-annual meeting of stockholders of the petitioner-appellant onFebruary 19, 1954, the minutes of which he also signed as vice-president (Exh. R). A. P. Kuenzle

was in the Philippines from February 3 to March 8, 1956 (t.s.n., pp. 204-205). He was personally

present at the special meeting of the board of directors on February 22, and on February 23,

1956, and at the semi-annual general meeting of stockholders on February 23, 1956, the minutesof all of which he signed as President (Exhs. Q-8, Q-9. and R-4). H. A. Streiff came again to the

Philippines in 1958, and he personally attended the special meeting of the board of directors onMarch 7, 1968, the minutes of which he also, signed as Vice-President (Exh. Q-16)."

15

There was in the brief of petitioner-appellant stress laid on those work performed by them, both

in and outside the Philippines. "During their stay in the Philippines, A. P. Kuenzle or H. A.Streiff inspected the install petitions of the petitioner-appellant, and discussed with the local

management, personnel and management matters, long-range planning and policies of the

company (t.s.n., pp. 205-206). Aside from these visits of A. P. Kuenzle and H. A. Streiff to thePhilippines, there were other personal consultations between them and the local management.

There were about seven staff members in the local management, and each of them went on home

leave every four years and for consultations in Switzerland with the general managers, AP

Kuenzle and H. A. Streiff. These home leaves each lasted for six months. In this way, at leastone staff member went on home leave every year and for consultations with the general

manager. . . ."16

As to commissions and directors' fees, it is the finding of the Court of Tax Appeals: "In

connection with the commissions paid to Messrs. Kuenzle and Streiff there is no evidence of any

particular service rendered by them to petitioner to warrant payment of commissions. Counselfor petitioner sought to prove the various types of services performed by said officers, but the

services mentioned are those for which they have been more than adequately compensated in the

form of salaries and bonuses. As regards the directors' fees, it is admitted that Messrs. Kuenzle

and Streiff "usually came to the Philippines every two years, and generally stayed from five toeight weeks." (Page 17, Memorandum for Petitioner.) We cannot see any justification for the

payment of director's fees of about P10,000.00 to each of said officers for coming to the

Philippines to visit their corporation once in two years. Being non-resident President and Vice-President of Petitioner corporation of which they are the controlling stockholders, we are more

inclined to believe that said commissions and directors' fees, payment of which was based on a


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certain percentage of the annual profits of petitioner, are in the nature of dividend

distributions,"17

Considering how carefully the Court of Tax Appeals considered the matter of the disallowances

in the light of Section 30 of the National Internal Revenue Code, the task for petitioner-appellant

in proving that it erred in holding that A. P. Kuenzle and H. A. Streiff were entitled only to thesalary of P6,000.00 each a year, for 1954, 1955, 1956 and 1957, and a bonus equal to the reduced

bonus of one of its officials a certain W. Eggmann, for each of said years, and in disallowing as

deductions the directors' fees and commissions paid by it to them, was far from easy. Nor couldit be said that petitioner-appellant did succeed in such effort As mentioned earlier, the previous

case ofAlhambra Cigar & Cigarette Manufacturing Company v. The Collector of Internal

Revenue,18

has laid down the applicable principle of law.

In the language of then Justice, now Chief Justice, Concepcion: "In the light of the tenor of the

foregoing provision, whenever a controversy arises on the deductibility, for purposes of income

tax, of certain items for alleged compensation of officers of the taxpayer, two (2) questions

become material, namely: (a) Have "personal services" been "actually rendered" by said officers?(b) In the affirmative case, what is the "reasonable allowance" therefore? When the Collector of

Internal Revenue disallowed the fees, bonuses and commissions aforementioned, and thecompany appealed therefrom, it became necessary for the [Court of Tax Appeals] to determine

whether said officer had correctly applied section 30 of the Tax Code, and this, in turn, required

the consideration of the two (2) questions already adverted to. In the circumstances surrounding

the case, we are of the opinion that the [Court of Tax Appeals] has correctly construed andapplied said provision." So it is now. This appeal too cannot prosper.

Even if there were no such previous decision, it would still follow, in the light of the controllingdoctrines, that the Court of Tax Appeals must be sustained. The well written brief for petitioner-

appellant citing Botany Worsted Bills v. United States,

19

states: "Whether the amountsdisallowed by the respondent-appellee in the respective years were reasonable compensation forpersonal services, is a question of fact to be determined from all the evidence."

20That the

question thus involved is inherently factual, appears to be undeniable. This Court is bound by the

finding of facts of the Court of Tax Appeals, especially so, where as here, the evidence insupport thereof is more than substantial, only questions of law thus being left open to it for

determination.21

Without ignoring this various factors which petitioner-appellant would have this

Court consider in passing upon the determination made by the Court of Tax Appeals but with full

recognition of the fact that the two officials were non-residents, it cannot be said that itcommitted the alleged errors, calling for the interposition of the corrective authority of this

Court. Nor as a matter of principle is it advisable for this Court to set aside the conclusion

reached by an agency such as the Court of Tax Appeals which is, by the very nature of its

function, dedicated exclusively to the study and consideration of tax problems and hasnecessarily developed an expertise on the subject unless, as did not happen here, there has been

an abuse or improvident exercise of its authority.

WHEREFORE, the decision of the Court of Tax Appeals is affirmed, with costs against

petitioner-appellant.


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Dizon, Makalintal, Bengzon, J.P., Sanchez, Zaldivar, Castro and Angeles, JJ.,concur.

Concepcion, C.J., and Reyes, J.B.L., J.,took no part.

G.R. No. L-15922 November 29, 1961

C. F. CALANOC,petitioner,

vs.

THE COLLECTOR OF INTERNAL REVENUE,respondent.

Francisco M. Gonzales for petitioner.Office of the Solicitor General and Special Attorney Librada del Rosario-Natividad for

respondent.

LABRADOR, J.:

This is a petition to review the decision of the Court of Tax Appeals affirming an assessment of

P7,378.57, by the Collector of Internal Revenue as amusement tax and surcharge due on a

boxing and wrestling exhibition held by petitioner Calanoc on December 3, 1949 at the Rizal

Memorial Stadium.

By authority of a solicitation permit issued by the Social Welfare Commission on November 24,

1949, whereby the petitioner was authorized to solicit and receive contributions for the orphansand destitute children of the Child Welfare Workers Club of the Commission, the petitioner on

December 3, 1949 financed and promoted a boxing and wrestling exhibition at the RizalMemorial Stadium for the said charitable purpose. Before the exhibition took place, thepetitioner applied with the respondent Collector of Internal Revenue for exemption from

payment of the amusement tax, relying on the provisions of Section 260 of the National Internal

Revenue Code, to which the respondent answered that the exemption depended upon petitioner'scompliance with the requirements of law.

After the said exhibition, the respondent, through his agent, investigated the tax case of thepetitioner, and from the statement of receipts which was furnished the agent, the latter found that

the gross sales amounted to P26,553.00; the expenditures incurred was P25,157.62; and the net

profit was only P1,375,30. Upon examination of the said receipts, the agent also found the

following items of expenditures: (a) P461.65 for police protection; (b) P460.00 for gifts; (c)P1,880.05 for parties; and (d) several items for representation.

Out of the proceeds of the exhibition, only P1,375.38 was remitted to the Social WelfareCommission for the said charitable purpose for which the permit was issued.

On November 24, 1951, the Collector of Internal Revenue demanded from the petitionerpayment of the amount of 533.00; the expenditures incurred was P25,157.62; and the net profit


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GUTIERREZ DAVID, J.:

This is an appeal from a decision of the Court of tax Appeals reversing the decision of theCommissioner of Internal Revenue which held herein respondent Consuelo L. Vda. de Prieto

liable for the payment of the sum of P21,410.38 as deficiency income tax, plus penalties and

monthly interest.

The case was submitted for decision in the court below upon a stipulation of facts, which

for brevity is summarized as follows: On December 4, 1945, the respondent conveyed by way ofgifts to her four children, namely, Antonio, Benito, Carmen and Mauro, all surnamed Prieto, real

property with a total assessed value of P892,497.50. After the filing of the gift tax returns on or

about February 1, 1954, the petitioner Commissioner of Internal Revenue appraised the realproperty donated for gift tax purposes at P1,231,268.00, and assessed the total sum of

P117,706.50 as donor's gift tax, interest and compromises due thereon. Of the total sum of

P117,706.50 paid by respondent on April 29, 1954, the sum of P55,978.65 represents the total

interest on account of deliquency. This sum of P55,978.65 was claimed as deduction, among

others, by respondent in her 1954 income tax return. Petitioner, however, disallowed the claimand as a consequence of such disallowance assessed respondent for 1954 the total sum of

P21,410.38 as deficiency income tax due on the aforesaid P55,978.65, including interest up toMarch 31, 1957, surcharge and compromise for the late payment.

Under the law, for interest to be deductible, it must be shown that there be anindebtedness, that there should be interest upon it, and that what is claimed as an interest

deduction should have been paid or accrued within the year. It is here conceded that the interest

paid by respondent was in consequence of the late payment of her donor's tax, and the same was

paid within the year it is sought to be declared. The only question to be determined, as stated bythe parties, is whether or not such interest was paid upon an indebtedness within the

contemplation of section 30 (b) (1) of the Tax Code, the pertinent part of which reads:

SEC. 30Deductions from gross income.In computing net income there shall be

allowed as deductions

x x x x x x x x x

(b) Interest:

(1)In general.The amount of interest paid within the taxable year onindebtedness, except on indebtedness incurred or continued to purchase or carry

obligations the interest upon which is exempt from taxation as income under this Title.

The term "indebtedness" as used in the Tax Code of the United States containing similar

provisions as in the above-quoted section has been defined as an unconditional and legally

enforceable obligation for the payment of money.1awphl.nt(Federal Taxes Vol. 2, p. 13,019,Prentice-Hall, Inc.; Merten's Law of Federal Income Taxation, Vol. 4, p. 542.) Within the

meaning of that definition, it is apparent that a tax may be considered an indebtedness. As stated


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by this Court in the case of Santiago Sambrano vs.Court of Tax Appeals and Collector of

Internal Revenue (101 Phil., 1; 53 Off. Gaz., 4839)

Although taxes already due have not, strictly speaking, the same concept as debts,

they are, however, obligations that may be considered as such.

The term "debt" is properly used in a comprehensive sense as embracing not

merely money due by contract but whatever one is bound to render to another, either for

contract, or the requirement of the law. (Camben vs.Fink Coule and Coke Co. 61 LRA584)

Where statute imposes a personal liability for a tax, the tax becomes, at least in a

board sense, a debt. (Idem).

A tax is a debt for which a creditor's bill may be brought in a proper case. (State vs.Georgia Co., 19 LRA 485).

It follows that the interest paid by herein respondent for the late payment of her donor's taxis deductible from her gross income under section 30(b) of the Tax Code above quoted.

The above conclusion finds support in the established jurisprudence in the United States

after whose laws our Income Tax Law has been patterned. Thus, under sec. 23(b) of the Internal

Revenue Code of 1939, as amended1

, which contains similarly worded provisions as sec. 30(b)of our Tax Code, the uniform ruling is that interest on taxes is interest on indebtedness and is

deductible. (U.S. vs.Jaffray, 306 U.S. 276. See also Lustig vs.U.S., 138 F. Supp. 870;

Commissioner of Internal Revenue vs.Bryer, 151 F. 2d 267, 34 AFTR 151; Penrose vs.U.S. 18

F. Supp. 413, 18 AFTR 1289; Max Thomas Davis, et al. vs.Commissioner of Internal Revenue,

46 U.S. Boared of Tax Appeals Reports, p. 663, citing U.S. vs.Jaffray, 6 Tax Court of UnitedStates Reports, p. 255; Armour vs.Commissioner of Internal Revenue, 6 Tax Court of the United

States Reports, p. 359; The Koppers Coal Co. vs.Commissioner of Internal Revenue, 7 TaxCourt of United States Reports, p. 1209; Toy vs.Commissioner of Internal Revenue; Lucas vs.

Comm., 34 U.S. Board of Tax Appeals Reports, 877; Evens and Howard Fire Brick Co. vs.

Commissioner of Internal Revenue, 3 Tax Court of United States Reports, p. 62). The rule

applies even though the tax is nondeductible. (Federal Taxes, Vol. 2, Prentice Hall, sec. 163,13,022; see also Merten's Law of Federal Income Taxation, Vol. 5, pp. 23-24.)

To sustain the proposition that the interest payment in question is not deductible for thepurpose of computing respondent's net income, petitioner relies heavily on section 80 of

Revenue Regulation No. 2 (known as Income Tax Regulation) promulgated by the Department

of Finance, which provides that "the word `taxes' means taxes proper and no deductions should

be allowed for amounts representing interest, surcharge, or penalties incident to delinquency."The court below, however, held section 80 as inapplicable to the instant case because while it

implements sections 30(c) of the Tax Code governing deduction of taxes, the respondent

taxpayer seeks to come under section 30(b) of the same Code providing for deduction of intereston indebtedness. We find the lower court's ruling to be correct. Contrary to petitioner's belief, the

portion of section 80 of Revenue Regulation No. 2 under consideration has been part and parcel


13/38

of the development to the law on deduction of taxes in the United States. (See Capital Bldg. and

Loan Assn. vs.Comm., 23 BTA 848. Thus, Mertens in his treatise says: "Penalties are to be

distinguished from taxes and they are not deductible under the heading of taxs." . . . Interest onstate taxes is not deductible as taxes." (Vol. 5, Law on Federal Income Taxation, pp. 22-23, sec.

27.06, citing cases.) This notwithstanding, courts in that jurisdiction, however, have invariably

held that interest on deficiency taxes are deductible, not as taxes, but as interest. (U.S. vs.Jaffray,et al.,supra; see also Mertens, sec. 26.09, Vol. 4, p. 552, and cases cited therein.) Section 80 ofRevenue Regulation No. 2, therefore, merely incorporated the established application of the tax

deduction statute in the United States, where deduction of "taxes" has always been limited to

taxes proper and has never included interest on delinquent taxes, penalties and surcharges.

To give to the quoted portion of section 80 of our Income Tax Regulations the meaning

that the petitioner gives it would run counter to the provision of section 30(b) of the Tax Codeand the construction given to it by courts in the United States. Such effect would thus make the

regulation invalid for a "regulation which operates to create a rule out of harmony with the

statute, is a mere nullity." (Lynch vs.Tilden Produce Co., 265 U.S. 315; Miller vs.U.S., 294 U.S.

435.) As already stated, section 80 implements only section 30(c) of the Tax Code, or theprovision allowing deduction of taxes, while herein respondent seeks to be allowed deduction

under section 30(b), which provides for deduction of interest on indebtedness.

In conclusion, we are of the opinion and so hold that although interest payment for

delinquent taxes is not deductible as tax under Section 30(c) of the Tax Code and section 80 of

the Income Tax Regulations, the taxpayer is not precluded thereby from claiming said interestpayment as deduction under section 30(b) of the same Code.

In view of the foregoing, the decision sought to be reviewed is affirmed, withoutpronouncement as to costs.

Bengzon, Bautista Angelo, Labrador, Barrera, Paredes, and Dizon, JJ., concur.Paras, C. J., Concepcion, and Reyes, J.B.L., JJ., concur in the result.

CIR v. Lednicky, et al, Gitierrez v. CollectorAMBOT

G.R. No. L-21551 September 30, 1969

FERNANDEZ HERMANOS, INC.,petitioner,

vs.

COMMISSIONER OF INTERNAL REVENUE and COURT OF TAX APPEALS,respondents.

-----------------------------


14/38


COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.

FERNANDEZ HERMANOS, INC., and COURT OF TAX APPEALS,respondents.

-----------------------------


COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.

FERNANDEZ HERMANOS INC., and the COURT OF TAX APPEALS,respondents.

-----------------------------


FERNANDEZ HERMANOS, INC.,petitioner,vs.

THE COMMISSIONER OF INTERNAL REVENUE, and HON. ROMAN A. UMALI,

COURT OF TAX APPEALS,respondents.

L-21551:

Rafael Dinglasan for petitioner.

Office of the Solicitor General Arturo A. Alafriz, Solicitor Alejandro B. Afurong and Special

Attorney Virgilio G. Saldajeno for respondent.

L-21557:

Office of the Solicitor General for petitioner.

Rafael Dinglasan for respondent Fernandez Hermanos, Inc.

L-24972:

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Felicisimo R.

Rosete and Special Attorney Virgilio G. Saldajeno for petitioner.

Rafael Dinglasan for respondent Fernandez Hermanos, Inc.

L-24978:

Rafael Dinglasan for petitioner.

Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Antonio G.

Ibarra and Special Attorney Virgilio G. Saldajeno for respondent.


15/38

TEEHANKEE, J.:

These four appears involve two decisions of the Court of Tax Appeals determining the

taxpayer's income tax liability for the years 1950 to 1954 and for the year 1957. Both thetaxpayer and the Commissioner of Internal Revenue, as petitioner and respondent in the cases a

quo respectively, appealed from the Tax Court's decisions, insofar as their respective contentions

on particular tax items were therein resolved against them. Since the issues raised areinterrelated, the Court resolves the four appeals in this joint decision.

Cases L-21551 and L-21557

The taxpayer, Fernandez Hermanos, Inc., is a domestic corporation organized for the

principal purpose of engaging in business as an "investment company" with main office atManila. Upon verification of the taxpayer's income tax returns for the period in question, the

Commissioner of Internal Revenue assessed against the taxpayer the sums of P13,414.00,P119,613.00, P11,698.00, P6,887.00 and P14,451.00 as alleged deficiency income taxes for theyears 1950, 1951, 1952, 1953 and 1954, respectively. Said assessments were the result of alleged

discrepancies found upon the examination and verification of the taxpayer's income tax returns

for the said years, summarized by the Tax Court in its decision of June 10, 1963 in CTA CaseNo. 787, as follows:

1. Losses

a. Losses in Mati Lumber Co. (1950) P 8,050.00

b. Losses in or bad debts of Palawan Manganese Mines, Inc. (1951)353,134.25

c. Losses in Balamban Coal Mines

1950 8,989.76

1951 27,732.66

d. Losses in Hacienda Dalupiri

1950 17,418.95

1951 29,125.82

1952 26,744.81

1953 21,932.62

1954 42,938.56

e. Losses in Hacienda Samal


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1951 8,380.25

1952 7,621.73

2. Excessive depreciation of Houses

1950 P 8,180.40

1951 8,768.11

1952 18,002.16

1953 13,655.25

1954 29,314.98

3. Taxable increase in net worth

1950 P 30,050.00

1951 1,382.85

4. Gain realized from sale of real property in 1950 P 11,147.2611

The Tax Court sustained the Commissioner's disallowances of Item 1, sub-items(b) and (e) and Item 2 of the above summary, but overruled the Commissioner's

disallowances of all the remaining items. It therefore modified the deficiency assessments

accordingly, found the total deficiency income taxes due from the taxpayer for the yearsunder review to amount to P123,436.00 instead of P166,063.00 as originally assessed by

the Commissioner, and rendered the following judgment:

RESUME

1950 P2,748.00

1951 108,724.00

1952 3,600.00

1953 2,501.00

1954 5,863.00

Total P123,436.00

WHEREFORE, the decision appealed from is hereby modified, and petitioner isordered to pay the sum of P123,436.00 within 30 days from the date this decision

becomes final. If the said amount, or any part thereof, is not paid within said period, there

shall be added to the unpaid amount as surcharge of 5%, plus interest as provided inSection 51 of the National Internal Revenue Code, as amended. With costs against

petitioner. (Pp. 75, 76, Taxpayer's Brief as appellant)


17/38

Both parties have appealed from the respective adverse rulings against them in the Tax

Court's decision. Two main issues are raised by the parties: first, the correctness of the Tax

Court's rulings with respect to the disputed items of disallowances enumerated in the Tax Court'ssummary reproduced above, and second, whether or not the government's right to collect the

deficiency income taxes in question has already prescribed.

On the first issue, we will discuss the disputed items of disallowancesseriatim.

1.Re allowances/disallowances of losses.

(a)Allowance of losses in Mati Lumber Co. (1950).The Commissioner of InternalRevenue questions the Tax Court's allowance of the taxpayer's writing off as worthless securities

in its 1950 return the sum of P8,050.00 representing the cost of shares of stock of Mati Lumber

Co. acquired by the taxpayer on January 1, 1948, on the ground that the worthlessness of said

stock in the year 1950 had not been clearly established. The Commissioner contends thatalthough the said Company was no longer in operation in 1950, it still had its sawmill and

equipment which must be of considerable value. The Court, however, found that "the companyceased operations in 1949 when its Manager and owner, a certain Mr. Rocamora, left for Spain

,where he subsequently died. When the company eased to operate, it had no assets, in otherwords, completely insolvent. This information as to the insolvency of the Company reached

(the taxpayer) in 1950," when it properly claimed the loss as a deduction in its 1950 tax return,

pursuant to Section 30(d) (4) (b) or Section 30 (e) (3) of the National Internal Revenue Code.2

We find no reason to disturb this finding of the Tax Court. There was adequate basis for

the writing off of the stock as worthless securities. Assuming that the Company would latersomehow realize some proceeds from its sawmill and equipment, which were still existing as

claimed by the Commissioner, and that such proceeds would later be distributed to its

stockholders such as the taxpayer, the amount so received by the taxpayer would then properlybe reportable as income of the taxpayer in the year it is received.

(b)Disallowance of losses in or bad debts of Palawan Manganese Mines, Inc.(1951).The taxpayer appeals from the Tax Court's disallowance of its writing off in 1951 as a loss or

bad debt the sum of P353,134.25, which it had advanced or loaned to Palawan Manganese

Mines, Inc. The Tax Court's findings on this item follow:

Sometime in 1945, Palawan Manganese Mines, Inc., the controlling stockholders

of which are also the controlling stockholders of petitioner corporation, requested

financial help from petitioner to enable it to resume it mining operations in Coron,Palawan. The request for financial assistance was readily and unanimously approved by

the Board of Directors of petitioner, and thereafter a memorandum agreement was

executed on August 12, 1945, embodying the terms and conditions under which thefinancial assistance was to be extended, the pertinent provisions of which are as follows:

"WHEREAS, the FIRST PARTY, by virtue of its resolution adopted onAugust 10, 1945, has agreed to extend to the SECOND PARTY the requested

financial help by way of accommodation advances and for this purpose has


18/38

authorized its President, Mr. Ramon J. Fernandez to cause the release of funds to

the SECOND PARTY.

"WHEREAS, to compensate the FIRST PARTY for the advances that it has

agreed to extend to the SECOND PARTY, the latter has agreed to pay to the

former fifteen per centum (15%) of its net profits.

"NOW THEREFORE, for and in consideration of the above premises, the

parties hereto have agreed and covenanted that in consideration of the financialhelp to be extended by the FIRST PARTY to the SECOND PARTY to enable the

latter to resume its mining operations in Coron, Palawan, the SECOND PARTY

has agreed and undertaken as it hereby agrees and undertakes to pay to the FIRSTPARTY fifteen per centum (15%) of its net profits." (Exh. H-2)

Pursuant to the agreement mentioned above, petitioner gave to Palawan Manganese Mines,Inc. yearly advances starting from 1945, which advances amounted to P587,308.07 by the end of

1951. Despite these advances and the resumption of operations by Palawan Manganese Mines,Inc., it continued to suffer losses. By 1951, petitioner became convinced that those advances

could no longer be recovered. While it continued to give advances, it decided to write off asworthless the sum of P353,134.25. This amount "was arrived at on the basis of the total of

advances made from 1945 to 1949 in the sum of P438,981.39, from which amount the sum of

P85,647.14 had to be deducted, the latter sum representing its pre-war assets. (t.s.n., pp. 136-139,Id)." (Page 4, Memorandum for Petitioner.) Petitioner decided to maintain the advances given in

1950 and 1951 in the hope that it might be able to recover the same, as in fact it continued to

give advances up to 1952. From these facts, and as admitted by petitioner itself, Palawan

Manganese Mines, Inc., was still in operation when the advances corresponding to the years1945 to 1949 were written off the books of petitioner. Under the circumstances, was the sum of

P353,134.25 properly claimed by petitioner as deduction in its income tax return for 1951, eitheras losses or bad debts?

It will be noted that in giving advances to Palawan Manganese Mine Inc., petitioner did

not expect to be repaid. It is true that some testimonial evidence was presented to show that therewas some agreement that the advances would be repaid, but no documentary evidence was

presented to this effect. The memorandum agreement signed by the parties appears to be very

clear that the consideration for the advances made by petitioner was 15% of the net profits ofPalawan Manganese Mines, Inc. In other words, if there were no earnings or profits, there was no

obligation to repay those advances. It has been held that the voluntary advances made without

expectation of repayment do not result in deductible losses. 1955 PH Fed. Taxes, Par. 13, 329,

citing W. F. Young, Inc. v. Comm., 120 F 2d. 159, 27 AFTR 395; George B. Markle, 17 TC.1593.

Is the said amount deductible as a bad debt? As already stated, petitioner gave advances toPalawan Manganese Mines, Inc., without expectation of repayment. Petitioner could not sue for

recovery under the memorandum agreement because the obligation of Palawan Manganese

Mines, Inc. was to pay petitioner 15% of its net profits, not the advances. No bad debt could arisewhere there is no valid and subsisting debt.


19/38

Again, assuming that in this case there was a valid and subsisting debt and that the debtor

was incapable of paying the debt in 1951, when petitioner wrote off the advances and deducted

the amount in its return for said year, yet the debt is not deductible in 1951 as a worthless debt. Itappears that the debtor was still in operation in 1951 and 1952, as petitioner continued to give

advances in those years. It has been held that if the debtor corporation, although losing money or

insolvent, was still operating at the end of the taxable year, the debt is not considered worthlessand therefore not deductible.3

The Tax Court's disallowance of the write-off was proper. The Solicitor General hasrightly pointed out that the taxpayer has taken an "ambiguous position " and "has not definitely

taken a stand on whether the amount involved is claimed as losses or as bad debts but insists that

it is either a loss or a bad debt."4

We sustain the government's position that the advances made

by the taxpayer to its 100% subsidiary, Palawan Manganese Mines, Inc. amounting toP587,308,07 as of 1951 were investments and not loans.

5The evidence on record shows that the

board of directors of the two companies since August, 1945, were identical and that the only

capital of Palawan Manganese Mines, Inc. is the amount of P100,000.00 entered in the taxpayer's

balance sheet as its investment in its subsidiary company.

6

This fact explains the liberality withwhich the taxpayer made such large advances to the subsidiary, despite the latter's admittedly

poor financial condition.

The taxpayer's contention that its advances were loans to its subsidiary as against the Tax

Court's finding that under their memorandum agreement, the taxpayer did not expect to be

repaid, since if the subsidiary had no earnings, there was no obligation to repay those advances,becomes immaterial, in the light of our resolution of the question. The Tax Court correctly held

that the subsidiary company was still in operation in 1951 and 1952 and the taxpayer continued

to give it advances in those years, and, therefore, the alleged debt or investment could notproperly be considered worthless and deductible in 1951, as claimed by the taxpayer.

Furthermore, neither under Section 30 (d) (2) of our Tax Code providing for deduction by

corporations of losses actually sustained and charged off during the taxable year nor under

Section 30 (e) (1) thereof providing for deduction of bad debts actually ascertained to beworthless and charged off within the taxable year, can there be a partial writing off of a loss or

bad debt, as was sought to be done here by the taxpayer. For such losses or bad debts must be

ascertained to be so and written off during the taxable year, are therefore deductible in full or notat all, in the absence of any express provision in the Tax Code authorizing partial deductions.

The Tax Court held that the taxpayer's loss of its investment in its subsidiary could not bededucted for the year 1951, as the subsidiary was still in operation in 1951 and 1952. The

taxpayer, on the other hand, claims that its advances were irretrievably lost because of the

staggering losses suffered by its subsidiary in 1951 and that its advances after 1949 were "only

limited to the purpose of salvaging whatever ore was already available, and for the purpose ofpaying the wages of the laborers who needed help."

7The correctness of the Tax Court's ruling in

sustaining the disallowance of the write-off in 1951 of the taxpayer's claimed losses is borne out

by subsequent events shown in Cases L-24972 and L-24978 involving the taxpayer's 1957income tax liability. (Infra, paragraph 6.) It will there be seen that by 1956, the obligation of the

taxpayer's subsidiary to it had been reduced from P587,398.97 in 1951 to P442,885.23 in 1956,

and that it was only on January 1, 1956 that the subsidiary decided to cease operations.8


20/38

(c)Disallowance of losses in Balamban Coal Mines (1950 and 1951).The Court

sustains the Tax Court's disallowance of the sums of P8,989.76 and P27,732.66 spent by the

taxpayer for the operation of its Balamban coal mines in Cebu in 1950 and 1951, respectively,and claimed as losses in the taxpayer's returns for said years. The Tax Court correctly held that

the losses "are deductible in 1952, when the mines were abandoned, and not in 1950 and 1951,

when they were still in operation."

9

The taxpayer's claim that these expeditions should beallowed as losses for the corresponding years that they were incurred, because it made no salesof coal during said years, since the promised road or outlet through which the coal could be

transported from the mines to the provincial road was not constructed, cannot be sustained. Some

definite event must fix the time when the loss is sustained, and here it was the event of actualabandonment of the mines in 1952. The Tax Court held that the losses, totalling P36,722.42 were

properly deductible in 1952, but the appealed judgment does not show that the taxpayer was

credited therefor in the determination of its tax liability for said year. This additional deduction

of P36,722.42 from the taxpayer's taxable income in 1952 would result in the elimination of thedeficiency tax liability for said year in the sum of P3,600.00 as determined by the Tax Court in

the appealed judgment.

(d) and (e) Allowance of losses in Hacienda Dalupiri (1950 to 1954) and Hacienda Samal

(1951-1952).The Tax Court overruled the Commissioner's disallowance of these items oflosses thus:

Petitioner deducted losses in the operation of its Hacienda Dalupiri the sums of

P17,418.95 in 1950, P29,125.82 in 1951, P26,744.81 in 1952, P21,932.62 in 1953, andP42,938.56 in 1954. These deductions were disallowed by respondent on the ground that

the farm was operated solely for pleasure or as a hobby and not for profit. This

conclusion is based on the fact that the farm was operated continuously at aloss.1awphl.nt

From the evidence, we are convinced that the Hacienda Dalupiri was operated bypetitioner for business and not pleasure. It was mainly a cattle farm, although a few race

horses were also raised. It does not appear that the farm was used by petitioner for

entertainment, social activities, or other non-business purposes. Therefore, it is entitled todeduct expenses and losses in connection with the operation of said farm. (See 1955 PH

Fed. Taxes, Par. 13, 63, citing G.C.M. 21103, CB 1939-1, p.164)

Section 100 of Revenue Regulations No. 2, otherwise known as the Income Tax

Regulations, authorizes farmers to determine their gross income on the basis of

inventories. Said regulations provide:

"If gross income is ascertained by inventories, no deduction can be made

for livestock or products lost during the year, whether purchased for resale,

produced on the farm, as such losses will be reflected in the inventory by reducingthe amount of livestock or products on hand at the close of the year."

Evidently, petitioner determined its income or losses in the operation of said farm

on the basis of inventories. We quote from the memorandum of counsel for petitioner:


21/38

"The Taxpayer deducted from its income tax returns for the years from

1950 to 1954 inclusive, the corresponding yearly losses sustained in the operation

of Hacienda Dalupiri, which losses represent the excess of its yearly expendituresover the receipts; that is, the losses represent the difference between the sales of

livestock and the actual cash disbursements or expenses." (Pages 21-22,

Memorandum for Petitioner.)

As the Hacienda Dalupiri was operated by petitioner for business and since it

sustained losses in its operation, which losses were determined by means of inventoriesauthorized under Section 100 of Revenue Regulations No. 2, it was error for respondent

to have disallowed the deduction of said losses. The same is true with respect to loss

sustained in the operation of the Hacienda Samal for the years 1951 and 1952.10

The Commissioner questions that the losses sustained by the taxpayer were properly based

on the inventory method of accounting. He concedes, however, "that the regulations referred to

does not specify how the inventories are to be made. The Tax Court, however, felt satisfied with

the evidence presented by the taxpayer ... which merely consisted of an alleged physical count ofthe number of the livestock in Hacienda Dalupiri for the years involved."11

The Tax Court was

satisfied with the method adopted by the taxpayer as a farmer breeding livestock, reporting onthe basis of receipts and disbursements. We find no Compelling reason to disturb its findings.

2.Disallowance of excessive depreciation of buildings (1950-1954).During the years1950 to 1954, the taxpayer claimed a depreciation allowance for its buildings at the annual rate

of 10%. The Commissioner claimed that the reasonable depreciation rate is only 3% per annum,

and, hence, disallowed as excessive the amount claimed as depreciation allowance in excess of

3% annually. We sustain the Tax Court's finding that the taxpayer did not submit adequate proofof the correctness of the taxpayer's claim that the depreciable assets or buildings in question had

a useful life only of 10 years so as to justify its 10% depreciation per annum claim, such findingbeing supported by the record. The taxpayer's contention that it has many zero or one-pesoassets,

12representing very old and fully depreciated assets serves but to support the

Commissioner's position that a 10% annual depreciation rate was excessive.

3. Taxable increase in net worth (1950-1951).The Tax Court set aside the

Commissioner's treatment as taxable income of certain increases in the taxpayer's net worth. It

found that:

For the year 1950, respondent determined that petitioner had an increase in net

worth in the sum of P30,050.00, and for the year 1951, the sum of P1,382.85. Theseamounts were treated by respondent as taxable income of petitioner for said years.

It appears that petitioner had an account with the Manila Insurance Company, therecords bearing on which were lost. When its records were reconstituted the amount of

P349,800.00 was set up as its liability to the Manila Insurance Company. It was

discovered later that the correct liability was only 319,750.00, or a difference ofP30,050.00, so that the records were adjusted so as to show the correct liability. The

correction or adjustment was made in 1950. Respondent contends that the reduction of


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petitioner's liability to Manila Insurance Company resulted in the increase of petitioner's

net worth to the extent of P30,050.00 which is taxable. This is erroneous. The principle

underlying the taxability of an increase in the net worth of a taxpayer rests on the theorythat such an increase in net worth, if unreported and not explained by the taxpayer, comes

from income derived from a taxable source. (See Perez v. Araneta, G.R. No. L-9193,

May 29, 1957; Coll. vs. Reyes, G.R. Nos. L- 11534 & L-11558, Nov. 25, 1958.) In thiscase, the increase in the net worth of petitioner for 1950 to the extent of P30,050.00 wasnot the result of the receipt by it of taxable income. It was merely the outcome of the

correction of an error in the entry in its books relating to its indebtedness to the Manila

Insurance Company. The Income Tax Law imposes a tax on income; it does not tax anyor every increase in net worth whether or not derived from income. Surely, the said sum

of P30,050.00 was not income to petitioner, and it was error for respondent to assess a

deficiency income tax on said amount.

The same holds true in the case of the alleged increase in net worth of petitioner for the

year 1951 in the sum of P1,382.85. It appears that certain items (all amounting to P1,382.85)

remained in petitioner's books as outstanding liabilities of trade creditors. These accounts werediscovered in 1951 as having been paid in prior years, so that the necessary adjustments were

made to correct the errors. If there was an increase in net worth of the petitioner, the increase innet worth was not the result of receipt by petitioner of taxable income."

13The Commissioner

advances no valid grounds in his brief for contesting the Tax Court's findings. Certainly, these

increases in the taxpayer's net worth were not taxable increases in net worth, as they were not the

result of the receipt by it of unreported or unexplained taxable income, but were shown to bemerely the result of the correction of errors in its entries in its books relating to its

indebtednesses to certain creditors, which had been erroneously overstated or listed as

outstanding when they had in fact been duly paid. The Tax Court's action must be affirmed.

4. Gain realized from sale of real property (1950).We likewise sustain as being in

accordance with the evidence the Tax Court's reversal of the Commissioner's assessment on all

alleged unreported gain in the sum of P11,147.26 in the sale of a certain real property of thetaxpayer in 1950. As found by the Tax Court, the evidence shows that this property was acquired

in 1926 for P11,852.74, and was sold in 1950 for P60,000.00, apparently, resulting in a gain of

P48,147.26.14

The taxpayer reported in its return a gain of P37,000.00, or a discrepancy ofP11,147.26.

15It was sufficiently proved from the taxpayer's books that after acquiring the

property, the taxpayer had made improvements totalling P11,147.26,16

accounting for the

apparent discrepancy in the reported gain. In other words, this figure added to the originalacquisition cost of P11,852.74 results in a total cost of P23,000.00, and the gain derived from the

sale of the property for P60,000.00 was correctly reported by the taxpayer at P37,000.00.

On the second issue of prescription, the taxpayer's contention that the Commissioner'saction to recover its tax liability should be deemed to have prescribed for failure on the part of

the Commissioner to file a complaint for collection against it in an appropriate civil action, as

contradistinguished from the answer filed by the Commissioner to its petition for review of thequestioned assessments in the case a quohas long been rejected by this Court. This Court has

consistently held that "a judicial action for the collection of a tax is begun by the filing of a

complaint with the proper court of first instance, or where the assessment is appealed to the


23/38

Court of Tax Appeals, by filing an answer to the taxpayer's petition for review wherein payment

of the tax is prayed for."17

This is but logical for where the taxpayer avails of the right to appeal

the tax assessment to the Court of Tax Appeals, the said Court is vested with the authority topronounce judgment as to the taxpayer's liability to the exclusion of any other court. In the

present case, regardless of whether the assessments were made on February 24 and 27, 1956, as

claimed by the Commissioner, or on December 27, 1955 as claimed by the taxpayer, thegovernment's right to collect the taxes due has clearly not prescribed, as the taxpayer's appeal orpetition for review was filed with the Tax Court on May 4, 1960, with the Commissioner filing

on May 20, 1960 his Answer with a prayer for payment of the taxes due, long before the

expiration of the five-year period to effect collection by judicial action counted from the date ofassessment.

Cases L-24972 and L-24978

These cases refer to the taxpayer's income tax liability for the year 1957. Upon

examination of its corresponding income tax return, the Commissioner assessed it for deficiency

income tax in the amount of P38,918.76, computed as follows:

Net income per return P29,178.70

Add: Unallowable deductions:

(1) Net loss claimed on Ha. Dalupiri 89,547.33

(2) Amortization of Contractual right claimedas an expense under Mines Operations 48,481.62

Net income per investigation P167,297.65

Tax due thereon 38,818.00

Less: Amount already assessed 5,836.00

B a l a n c e P32,982.00

Add: 1/2% monthly interest from 6-20-59

to 6-20-62 5,936.76

TOTAL AMOUNT DUE ANDCOLLECTIBLE P38,918.76 18

The Tax Court overruled the Commissioner's disallowance of the taxpayer's losses in theoperation of its Hacienda Dalupiri in the sum of P89,547.33 but sustained the disallowance of the

sum of P48,481.62, which allegedly represented 1/5 of the cost of the "contractual right" over themines of its subsidiary, Palawan Manganese Mines, Inc. which the taxpayer had acquired. It

found the taxpayer liable for deficiency income tax for the year 1957 in the amount of P9,696.00,

instead of P32,982.00 as originally assessed, and rendered the following judgment:

WHEREFORE, the assessment appealed from is hereby modified. Petitioner is

hereby ordered to pay to respondent the amount of P9,696.00 as deficiency income taxfor the year 1957, plus the corresponding interest provided in Section 51 of the Revenue


24/38

Code. If the deficiency tax is not paid in full within thirty (30) days from the date this

decision becomes final and executory, petitioner shall pay a surcharge of five per cent

(5%) of the unpaid amount, plus interest at the rate of one per cent (1%) a month,computed from the date this decision becomes final until paid, provided that the

maximum amount that may be collected as interest shall not exceed the amount

corresponding to a period of three (3) years. Without pronouncement as to costs.

19

Both parties again appealed from the respective adverse rulings against them in the Tax

Court's decision.

5.Allowance of losses in Hacienda Dalupiri (1957).The Tax Court cited its previous

decision overruling the Commissioner's disallowance of losses suffered by the taxpayer in theoperation of its Hacienda Dalupiri, since it was convinced that the hacienda was operated for

business and not for pleasure. And in this appeal, the Commissioner cites his arguments in his

appellant's brief in Case No. L-21557. The Tax Court, in setting aside the Commissioner's

principal objections, which were directed to the accounting method used by the taxpayer found

that:

It is true that petitioner followed the cash basis method of reporting income andexpenses in the operation of the Hacienda Dalupiri and used the accrual method with

respect to its mine operations. This method of accounting, otherwise known as the hybrid

method, followed by petitioner is not without justification.

... A taxpayer may not, ordinarily, combine the cash and accrual bases. The

1954 Code provisions permit, however, the use of a hybrid method of accounting,combining a cash and accrual method, under circumstances and requirements to

be set out in Regulations to be issued. Also, if a taxpayer is engaged in more than

one trade or business he may use a different method of accounting for each tradeor business. And a taxpayer may report income from a business on accrual basisand his personal income on the cash basis.' (See Mertens, Law of Federal Income

Taxation, Zimet & Stanley Revision, Vol. 2, Sec. 12.08, p. 26.)20

The Tax Court, having satisfied itself with the adequacy of the taxpayer's

accounting method and procedure as properly reflecting the taxpayer's income or losses,and the Commissioner having failed to show the contrary, we reiterate our ruling [supra,

paragraph 1 (d) and (e)] that we find no compelling reason to disturb its findings.

6.Disallowance of amortization of alleged "contractual rights."The reasons forsustaining this disallowance are thus given by the Tax Court:

It appears that the Palawan Manganese Mines, Inc., during a special meeting of itsBoard of Directors on January 19, 1956, approved a resolution, the pertinent portions of

which read as follows:

"RESOLVED, as it is hereby resolved, that the corporation's current assets

composed of ores, fuel, and oil, materials and supplies, spare parts and canteen


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supplies appearing in the inventory and balance sheet of the Corporation as of

December 31, 1955, with an aggregate value of P97,636.98, contractual rights for

the operation of various mining claims in Palawan with a value of P100,000.00,its title on various mining claims in Palawan with a value of P142,408.10 or a

total value of P340,045.02 be, as they are hereby ceded and transferred to

Fernandez Hermanos, Inc., as partial settlement of the indebtedness of thecorporation to said Fernandez Hermanos Inc. in the amount of P442,895.23."(Exh. E, p. 17, CTA rec.)

On March 29, 1956, petitioner's corporation accepted the above offer of transfer,

thus:

"WHEREAS, the Palawan Manganese Mines, Inc., due to its yearly

substantial losses has decided to cease operation on January 1, 1956 and in order

to satisfy at least a part of its indebtedness to the Corporation, it has proposed to

transfer its current assets in the amount of NINETY SEVEN THOUSAND SIX

HUNDRED THIRTY SIX PESOS & 98/100 (P97,636.98) as per its balance sheetas of December 31, 1955, its contractual rights valued at ONE HUNDRED

THOUSAND PESOS (P100,000.00) and its title over various mining claimsvalued at ONE HUNDRED FORTY TWO THOUSAND FOUR HUNDRED

EIGHT PESOS & 10/100 (P142,408.10) or a total evaluation of THREE

HUNDRED FORTY THOUSAND FORTY FIVE PESOS & 08/100

(P340,045.08) which shall be applied in partial settlement of its obligation to theCorporation in the amount of FOUR HUNDRED FORTY TWO THOUSAND

EIGHT HUNDRED EIGHTY FIVE PESOS & 23/100 (P442,885.23)," (Exh. E-1,

p. 18, CTA rec.)

Petitioner determined the cost of the mines at P242,408.10 by adding the value ofthe contractual rights (P100,000.00) and the value of its mining claims (P142,408.10).Respondent disallowed the deduction on the following grounds: (1) that the Palawan

Manganese Mines, Inc. could not transfer P242,408.10 worth of assets to petitioner

because the balance sheet of the said corporation for 1955 shows that it had only currentas worth P97,636.96; and (2) that the alleged amortization of "contractual rights" is not

allowed by the Revenue Code.

The law in point is Section 30(g) (1) (B) of the Revenue Code, before its

amendment by Republic Act No. 2698, which provided in part:

"(g)Depletion of oil and gas wells and mines.:

"(1)In general.... (B) in the case of mines, a reasonable allowance fordepletion thereof not to exceed the market value in the mine of the product

thereof, which has been mined and sold during the year for which the return and

computation are made. The allowances shall be made under rules and regulationsto be prescribed by the Secretary of Finance:Provided, That when the allowances

shall equal the capital invested, ... no further allowance shall be made."


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Assuming, arguendo, that the Palawan Manganese Mines, Inc. had assets worth

P242,408.10 which it actually transferred to the petitioner in 1956, the latter cannot just

deduct one-fifth (1/5) of said amount from its gross income for the year 1957 becausesuch deduction in the form of depletion charge was not sanctioned by Section 30(g) (1)

(B) of the Revenue Code, as above-quoted.

x x x x x x x x x

The sole basis of petitioner in claiming the amount of P48,481.62 as a deductionwas the memorandum of its mining engineer (Exh. 1, pp. 31-32, CTA rec.), who stated

that the ore reserves of the Busuange Mines (Mines transferred by the Palawan

Manganese Mines, Inc. to the petitioner) would be exhausted in five (5) years, hence, theclaim for P48,481.62 or one-fifth (1/5) of the alleged cost of the mines corresponding to

the year 1957 and every year thereafter for a period of 5 years. The said memorandum

merely showed the estimated ore reserves of the mines and it probable selling price. No

evidence whatsoever was presented to show the produced mine and for how much they

were sold during the year for which the return and computation were made. This isnecessary in order to determine the amount of depletion that can be legally deducted from

petitioner's gross income. The method employed by petitioner in making an outrightdeduction of 1/5 of the cost of the mines is not authorized under Section 30(g) (1) (B) of

the Revenue Code. Respondent's disallowance of the alleged "contractual rights"

amounting to P48,481.62 must therefore be sustained.21

The taxpayer insists in this appeal that it could use as a method for depletion under the

pertinent provision of the Tax Code its "capital investment," representing the alleged value of its

contractual rights and titles to mining claims in the sum of P242,408.10 and thus deduct outrightone-fifth (1/5) of this "capital investment" every year. regardless of whether it had actually

mined the product and sold the products. The very authorities cited in its brief give the correctconcept of depletion charges that they "allow for the exhaustion of the capital value of thedeposits by production"; thus, "as the cost of the raw materials must be deducted from the gross

income before the net income can be determined, so the estimated cost of the reserve used up is

allowed."22

The alleged "capital investment" method invoked by the taxpayer is not a method ofdepletion, but the Tax Code provision, prior to its amendment by Section 1, of Republic Act No.

2698, which took effect on June 18, 1960, expressly provided that "when the allowances shall

equal the capital invested ... no further allowances shall be made;" in other words, the "capital

investment" was but the limitation of the amount of depletion that could be claimed. The outrightdeduction by the taxpayer of 1/5 of the cost of the mines, as if it were a "straight line" rate of

depreciation, was correctly held by the Tax Court not to be authorized by the Tax Code.

ACCORDINGLY, the judgment of the Court of Tax Appeals, subject of the appeals in

Cases Nos. L-21551 and L-21557, as modified by the crediting of the losses of P36,722.42

disallowed in 1951 and 1952 to the taxpayer for the year 1953 as directed in paragraph 1 (c) of

this decision, is hereby affirmed. The judgment of the Court of Tax Appeals appealed from inCases Nos. L-24972 and L-24978 is affirmed in toto. No costs. So ordered.


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Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Fernando, Capistrano and

Barredo, JJ., concur.

G.R. No. L-22265 December 22, 1967

COLLECTOR OF INTERNAL REVENUE,petitioner,vs.

GOODRICH INTERNATIONAL RUBBER CO.,respondent.

Manuel O. Chan for respondent.

Manuel O. Chan for respondent.

CONCEPCION, C.J.:

Appeal by the Government from a decision of the Court of Tax Appeals, setting aside theassessments made by the Commissioner of Internal Revenue, in the sums of P14,128.00 and

P8,439.00, as deficiency income taxes allegedly due from respondent Goodrich International

Rubber Companyhereinafter referred to as Goodrich for the years 1951 and 1952,respectively.

These assessments were based on disallowed deductions, claimed by Goodrich, consisting ofseveral alleged bad debts, in the aggregate sum of P50,455.41, for the year 1951, and the sum of

P30,138.88, as representation expenses allegedly incurred in the year 1952. Goodrich hadappealed from said assessments to the Court of Tax Appeals, which, after appropriate

proceedings, rendered, on June 8, 1963, a decision allowing the deduction for bad debts, but

disallowing the alleged representation expenses. On motion for reconsideration and new trial,filed by Goodrich, on November 19, 1963, the Court of Tax Appeals amended its

aforementioned decision and allowed said deductions for representation expenses. Hence, thisappeal by the Government.

The alleged representation expenses are:

1. Expenses at Elks Club P10,959.21

2. Manila Polo Club 4,947.35

3. Army and Navy Club 2,812.95

4. Manila Golf Club 4,478.45

5. Wack Wack Golf Club,Casino Espaol, etc.

6,940.92

T O T A L P30,138.88


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The claim for deduction thereof is based upon receipts issued, notby the entities in which the

alleged expenses had been incurred, but by the officers of Goodrichwho allegedly paid them.

The claim must be rejected. If the expenses had really been incurred, receipts or chits would have

been issued by the entities to which the payments had been made, and it would have been easy

for Goodrich or its officers to produce such receipts.lawphilThese issued by said officers merelyattest to their claimthat they had incurred and paid said expenses. They do not establish payment

of said alleged expenses to the entities in which the same are said to have been incurred. The

Court of Tax Appeals erred, therefore, in allowing the deduction thereof.

The alleged bad debts are:

1. Portillo's Auto Seat Cover P630.31

2. Visayan Rapid Transit 17,810.26

3. Bataan Auto Seat Cover373.13

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 SettlementAdministration

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*


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The issue, in connection with these debts is whether or not the same had been properly deducted

as bad debts for the year 1951. In this connection, we find:

Portillo's Auto Seat Cover (P730.00):

This debt was incurred in 1950. In 1951, the debtor paid P70.00, leaving a balance of P630.31.That same year, the account was written off as bad debt (Exhibit 3-C-4). Counsel for Goodrich

had merely sent two (2) letters of demand in 1951 (Exh. B-14). In 1952, the debtor paid the full

balance (Exhibit A).

Visayan Rapid Transit(P17,810.26):

This debt was, also, incurred in 1950. In 1951, it was charged off as bad debt, after the debtor

had paid P275.21. No other payment had been made.lawphilTaxpayer's Accountant testified

that, according to its branch manager in Cebu, he had been unable to collect the balance. Thedebtor had merely promised and kept on promising to pay. Taxpayer's counsel stated that the

debtor had gone out of business and became insolvent, but no proof to this effect. wasintroduced.

Bataan Auto Seat Cover (P373.13):

This is the balance of a debt of P474.13 contracted in 1949. In 1951, the debtor paid P100.00.

That same year, the balance of P373.13 was charged off as bad debt. The next year, the debtorpaid the additional sum of P50.00.

Tres Amigos Auto Supply (P1,370.31):

This account had been outstanding since 1949. Counsel for the taxpayer had merely sent demandletters (Exh. B-13) without success.

P. C. Teodoro (P650.00):

In 1949, the account was P751.91. In 1951, the debtor paid P101.91, thus leaving a balance of

P650.00, which the taxpayer charged off as bad debt in the same year. In 1952, the debtor made

another payment of P150.00.

Ordinance Service, P.A. (P386.42):

In 1949, the outstanding account of this government agency was P817.55. Goodrich's counselsent demand letters (Exh. B-8). In 1951, it paid Goodrich P431.13. The balance of P386.42 waswritten off as bad debt that same year.

Ordinance Service, P.C. (P796.26):

In 1950, the account was P796.26.lawphilIt was referred to counsel for collection. In 1951, the

account was written off as a debt. In 1952, the debtor paid it in full.


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National Land Settlement Administration (P3,020.76):

The outstanding account in 1949 was P7,041.51. Collection letters were sent (Exh. B-7). In 1951,the debtor paid P4,020.75, leaving a balance of P3,020.76, which was written off, that same year,

as a bad debt. This office was under liquidation, and its Board of Liquidators promised to pay

when funds shall become available.

National Coconut Corporation (P644.74):

This account had been outstanding since 1949. Collection letters were sent (Exh. B-12) without

success. It was written off as bad debt in 1951, while the corporation was under a Board ofLiquidators, which promised to pay upon availability of funds. In 1961, the debt wasfully paid.

Interior Caltex Service Station (P1,505.87):

The original account was P2,705.87, when, in 1950, it was turned over for collection to counsel

for Goodrich (p. 156, CTA Records). Counsel began sending letters of collection in April 1950.Interior Caltex made partial payments, so that as of December, 1951, the balance outstandingwas P1,505.87.lawphil.netThe debtor paid P200, in 1952; P113.20, in 1954; P750.00, in 1961;

and P300.00.00 in 1962. The account had been written off as bad debt in 1951.

The claim for deduction of these ten (10) debts should be rejected. Goodrich has not established

either that the debts are actually worthless or that it had reasonable grounds to believe them to beso in 1951. Our statute 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 requires proof of two facts: (1) that thetaxpayer did in fact ascertain the debt to be worthlessness, in the year for which the deduction is

sought; and (2) that, in so doing, he acted in good faith.1

Good faith on the part of the taxpayer is not enough. He must show, also, that he had reasonably

investigated the relevant facts and had drawn a reasonable inference from the information thusobtained by him.

2Respondent herein 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

can not pay them.lawphil.netIt should be noted also that, in violation of Revenue RegulationsNo. 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.

Upon the other hand, we find that the following accounts were properly written off:

San Juan Auto Supply (P4,530.64):


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This account was contracted in 1950. Referred, for collection, to respondent's counsel, the latter

secured no payment. In November, 1950, the corresponding suit for collection was filed (Exh.

C). The debtor's counsel was allowed to withdraw, as such, the debtor having failed to meet him.In fact, the debtor did not appear at the hearing of the case.lawphil.netJudgment was rendered in

1951 for the creditor (Exh. C-2). The corresponding writ of execution (Exh. C-3) was returned

unsatisfied, for no properties could be attached or levied upon.

PACSA (P45.36),

Philippine Naval Patrol (P14.18),

Surplus Property

Commission

(P277.68),

Alvarez Auto Supply (P285.62):

These four (4) accounts were 2 or 3 years old in 1951. After the collectors of the creditor hadfailed to collect the same, its counsel wrote letters of demand (Exhs. B-10, B-11, B-6 and B-2) tono avail. Considering the small amounts involved in these accounts, the taxpayer was justified in

feeling that the unsuccessful efforts therefore exerted to collect the same sufficed to warrant their

being written off.3

Lion Shoe Store (P11,686.93),

Ruiz Highway Transit (P2,350.00),

and

Esquire Auto Seat Cover (P3,536.94):

These three (3) accounts were among those referred to counsel for Goodrich for collection. Up to

1951, when they were written off, counsel had sent 17 Letters of demand to Lion Shoe Store(Exh. B); 16 demand letters to Ruiz Highway Transit (Exh. B-1); and 6 letters of demand to

Esquire Auto Seat Cover (Exit. B-5) In 1951, Lion Shoe Store, Ruiz Highway Transit, and

Esquire Auto Seat Cover had made partial payments in the sums of P1,050.00, P400.00, andP300.00 respectively. Subsequent to the write-off, additional small payments were made and

accounted for as income of Goodrich. Counsel interviewed the debtors, investigated their ability

to pay and threatened law suits. He found that the debtors were in strained financial condition

and had no attachable or leviable property. Moreover, Lion Shoe Store was burned twice, in

1948 and 1949. Thereafter, it continued to do business on limited scale. Later; it went out ofbusiness. Ruiz Highway Transit, had more debts than assets. Counsel, therefore, advised

respondent to write off these accounts as bad debts without going to court, for it would be"foolish to spend good money after bad."

The deduction of these eight (8) accounts, aggregating P22,627.35, as bad debts should beallowed.


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WHEREFORE, the decision appealed from should be, as it is hereby, modified, in the sense that

respondent's alleged representation expenses are totally disallowed, and its claim for bad debts

allowed up to the sum of P22,627.35 only. Without special pronouncement as to costs. It is soordered.

Reyes, J.B.L., Dizon, Makalintal, Bengzon, JJ., Zaldivar, Sanchez, Castro, Angeles andFernando, JJ.,concur.

G.R. No. L-15290 May 31, 1963

MARIANO ZAMORA,petitioner,vs.

COLLECTOR OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.

-----------------------------

G.R. No. L-15280 May 31, 1963

COLLECTOR OF INTERNAL REVENUE,petitioner,

vs.

MARIANO ZAMORA,respondent.

-----------------------------

G.R. No. L-15289 May 31, 1963

ESPERANZA A. ZAMORA, as Special Administratrix of Estate of FELICIDAD

ZAMORA,petitioner,vs.

COLLECTOR OF INTERNAL REVENUE and COURT OF TAX APPEALS, respondents.

-----------------------------

G.R. No. L-15281 May 31, 1963

COLLECTOR OF INTERNAL REVENUE,petitioner,vs.

ESPERANZA A. ZAMORA, as Special Administratrix, etc.respondent.

Office of the Solicitor General for petitioner.Rodegelio M. Jalandoni for respondents.

PAREDES, J.:

In the above-entitled cases, a joint decision was rendered by the lower court because theyinvolved practically the same issues. We do so, likewise, for the same reason.


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Cases Nos. L-15290 and L-15280

Mariano Zamora, ow

Documents

3y1s Tax f 1 Fullshem