CIR vs. Itogon Suyoc Mines

Respondent Itogon-Suyoc Mines, a mining corporation duly organized and existing under Philippine laws fild  its income tax return.

Fiscal year (1956-1960) paid PhP 13, 155.20 as the first installment of the income tax due. Then filed an amended income tax return reporting a net loss of PhP 331,707.33

Fiscal year (1960-1961) setting forth its income tax liability of PhP 97.345 but deducting the amount of PhP 13,155.20 representing alleged tax credit for over-payment of the preceding fiscal year 1959-1960.

Petitioner assessed against the respondent the amount of PhP 1,512.83 as 1% monthly interest.  The basis for such an assessment was the absence of legal right to deduct said amount before the refund or tax credit thereof was approved by petitioner CIR.

ISSUE: WON respondent corporation is liable to pay the sum of PhP1,512.83 as 1% monthly interest for delinquency in the payment of income tax.?

HELD:
NIRC provides that interest upon the amount determined as a deficiency shall be assessed and shall be paid upon notice and demand from the CIR at the specified. If in any preceding year the tax payer was entitled to a refund of any amount due as tax, such amount, if not yet refunded, maybe deducted from the tax to be paid.

Gancayco vs.Collector

Gancyaco files his income tax return for the year 1949.  Respondent issued a warrant of distraint and levy against the properties of Gancayco for the satisfaction of his deficiency income tax liability, and accordingly, the municipal treasurer issued a notice of sale of said property at public auction. Gancayco filed a petition to cancel the sale and direct that the same be re-advertised at a future date

ISSUE: Whether the sum of PhP 16,860.31 is due from Gancayco as deficiency income tax for 1949 hinges on the validity of his claim for deduction:
                                       a) farming expense PhP 27,459
                                       b) representation expenses PhP 8,933.45

HELD:
a)Farming Expenses - no evidence has been presnted as to the nature of the said farming expenses other than the care statement of petitioner that they were spent for the development and cultivation of his property.

No specification has been made as to the actual amount spent for purchase of tools, equipment or materials or the amount spent for improvement.

b) Representation expense
PhP 22, 820 is allowed
PhP 8,993.45 is disallowed because of the absence of recipt, invoices or vouchers of the expenditures in question, petitioner could not sspecify the items constituting the same when or on whom or on what they were incurred.

Commissioner of Internal Revenue vs. Juliane Baier-nickel

Respondent Juliane Baier-nickle, a non-resident German citizen, is the President of JUBANITEX, a domestic corporation engaged in manufacturing, marketing on wholesale only embroided textile products.  The corporation appointed and engaged the service of respondent as commission agent.  It was agreed that respondent will receive 10% sales commission on all sales actually concluded and collected through her efforts.

In 1995, respondent received the amount of PhP1,707,772.64 representing her sales commission income from which JUBANITEX withheld the corresponding 10% withholding tax amounting to PhP170,777.26 and remitted the same to the BIR.  Respondent filed a claim to refund the amount PhP170,777.26 alleged to have been mistakenly withheld and remitted by JUBANITEX to the BIR.  Respondent contended that her sales commission income is not   taxable in the Philippines because the same was a compensation for her services rendered in Germany considered as income from source outside the Philippines.

ISSUE: WON respondent's sales commission income is taxable in the Philippines?

HELD:

YES.  Commission received by respondent were actually her remuneration in the performance of her duties as President of JUBANITEX and not as a mere sales agent.  The income derived by respondent is therefore an income taxable in the Philippines because JUBANITEX is a domestic corporation.

Pursuant to the foregoing provision of the NIRC, non-resident aliens, whether or not engaged in trade or business, are subject to Philippine income taxation on their income received from all sources within the Philippines.

Respondent failed to discharge the burden of proving that her income was from sources outside the Philippines and exempt from the application of our income tax law.

CIR vs. Isabela Cultural Corporation

Isabela Cultural Corp.(ICC for brevity) , a domestic corporation received from BIR assessment notice no. FAS-1-86-90000680 (680 for brevity) for deficiency income tax in the amount of PhP 333,196.86 and assessment notice no. FAS-1-86-90-000681 (681 for brevity) for deficiency expanded withholding tax in the amount of PhP 4,897.79, inclusive of surcharge and interest both for the taxable year 1986.  The deficiency income tax of PhP 333,196 arose from BIR disallowance of ICC claimed expenses deductions for professional and security services billed to and paid by ICC in 1986.

The deficiency expanded withholding tax of PhP4,897.79 was allegedly due to the failure of ICC to withhold 1% expanded withholding tax on its claimed PhP244,890 deduction for security services.

Court of Tax Appeal and Court of Appeal affirmed that the professional services were rendered to ICC in 1984 and 1985, the cost of the service was not yet determinable at that time, hence, it could be considered as deductible expenses only in 1986 when ICC received the billing statement for said service.  It further ruled that ICC did not state its interest income from the promissory notes of Realty Investment and that ICC properly withheld the remitted taxes on the payment for security services for the taxable year 1986.

Petitioner contend that since ICC is using the accrual method of accounting, the expenses for the professional services that accrued in 1984 and 9185 should have been declared as deductions from income during the said years and the failure of ICC to do so bars it from claiming said expenses as deduction for the taxable year 1986.

ISSUE (1):  WON CA is correct in sustaining the deduction of the expenses for professionals and security services form ICC gross income?

HELD: NO

Revenue Audit Memorandum Order No.1-2000 provides that under the accrual method of accounting, expenses not being claimed as deductions by a tax payer in the current year when they are incurred cannot be claimed as deductions from the income for the succeeding year.

ISSUE (2): WON CA correctly held that ICC did not understate its interest income from the promissory notes of Realty Investment, Inc; that ICC withheld the required 1% withholding tax from the deduction for security services.

HELD:

Sustaining the finding of the CTA and CA that no such understatement exist and that only simple interest computation and not a compounded one should have been applied by the BIR.  There is no indeed no stipulation between the latter and ICC on the application of compound interest.

Under Article 1959 of the Civil Code, unless there is a stipulation to the contrary, interest due should not further earn interest.