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  • CIR v. Algue Inc

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    Algue Inc, an engineering and construction company, was assessed additional income taxes of P83,183.85 for 1958-1959. The Commissioner of Internal Revenue disallowed a P75,000 deduction that Algue claimed for promotional fees paid. Algue argued the fees were legitimate business expenses. The Court of Tax Appeals ruled in favor of Algue, finding the fees were paid for actual services rendered in inducing investors for a new business venture. The issue was whether the disallowed deduction was a legitimate business expense. The Supreme Court ultimately ruled in favor of Algue, finding the promotional fees were necessary and reasonable expenses.

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    Algue Inc, an engineering and construction company, was assessed additional income taxes of P83,183.85 for 1958-1959. The Commissioner of Internal Revenue disallowed a P75,000 deduction that Algue claimed for promotional fees paid. Algue argued the fees were legitimate business expenses. The Court of Tax Appeals ruled in favor of Algue, finding the fees were paid for actual services rendered in inducing investors for a new business venture. The issue was whether the disallowed deduction was a legitimate business expense. The Supreme Court ultimately ruled in favor of Algue, finding the promotional fees were necessary and reasonable expenses.

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    14 views2 pages

    CIR v. Algue Inc

    Uploaded by

    zac
    Algue Inc, an engineering and construction company, was assessed additional income taxes of P83,183.85 for 1958-1959. The Commissioner of Internal Revenue disallowed a P75,000 deduction that Algue claimed for promotional fees paid. Algue argued the fees were legitimate business expenses. The Court of Tax Appeals ruled in favor of Algue, finding the fees were paid for actual services rendered in inducing investors for a new business venture. The issue was whether the disallowed deduction was a legitimate business expense. The Supreme Court ultimately ruled in favor of Algue, finding the promotional fees were necessary and reasonable expenses.

    Copyright:

    © All Rights Reserved
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    of 2

    COMMISSIONER OF INTERNAL REVENUE, 

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

    G.R. No. L-28896 February 17, 1988

    DOCTRINES
    Taxes are the lifeblood of the government and so should All the ordinary and necessary expenses paid or incurred
    be collected without unnecessary hindrance. On the other during the taxable year in carrying on any trade or
    hand, such collection should be made in accordance with business, including a reasonable allowance for salaries or
    law as any arbitrariness will negate the very reason for other compensation for personal services actually
    government itself. It is therefore necessary to reconcile the rendered are deductible from the Gross Income
    apparently conflicting interests of the authorities and the
    taxpayers so that the real purpose of taxation, which is the
    promotion of the common good, may be achieved.

    FACTS:
    Algue Inc., a domestic corporation engaged in CTA - held that the said amount had been legitimately paid
    engineering, construction and other allied activities, was by the private respondent for actual services rendered.
    assessed by the CIR amounting to P83,183.85 as The payment was in the form of promotional fees.
    delinquency income taxes for the years 1958 and 1959.
    Algue received as agent a commission of P126,000.00 for
    CIR - claimed deduction of P75,000.00 was properly the sale of Philippine Sugar Estate Development
    disallowed because it was not an ordinary reasonable or Company properties, and it was from this commission that
    necessary business expense the P75,000.00 promotional fees were paid to the
    aforenamed individuals.

    ISSUE:

    whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by Algue Inc as
    legitimate business expenses in its income tax returns.
    RULING:

    NO. Algue Inc has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted
    by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve
    themselves in a new business requiring millions of pesos.

    It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack
    of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard
    earned income to the taxing authorities, every person who is able to must contribute his share in the running of the
    government

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