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CIR vs Algue, Inc.

No. L-28896. February 17, 1988.

Private respondent, a domestic corporation engaged in engineering, construction and other allied activities,
received a letter from the petitioner assessing it in the total amount of P83, 183.85 as delinquency income taxes for the
years 1958 and 1959. Algue filed a letter of protest or request for reconsideration.
Petitioner contends that the claimed deduction of P75, 000. 00 was properly disallowed because it was not an
ordinary, reasonable or necessary business expense.
Court of Tax Appeals however, agreed with Algue, Inc. holding that the said amount had been legitimately paid
as promotional fees for their work in the formation of Vegetable Oil Investment Corporation of the Philippines and its
subsequent purchase of the properties of the Philippine Sugar Estate Development Corporation.
1. Whether or not the CIR correctly disallowed the P75, 000. 00 deduction claimed by private respondent.
2. Whether or not the payments in promotional fees are fictitious and excessive.
1. No.
The claimed of deduction by the private respondent was permitted under the code.
2. No.
Not fictitious: Since Algue, Inc was a family corporation where strict business procedures were not applied
and immediate issuance of receipts was not required.
Not excessive: Since the total commission paid by PSEDC to the private respondent was P125,000.00. After
deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The
amount of P75,000.00 was 60% of the total commission. This was reasonable proportion, considering that it
was the payees who did practically everything, from the formation of VOIC to the actual purchase by it of
Algue Inc. has proved that the payment of fees was necessary and reasonable.
The appealed decision of the CTA is affirmed.

Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance.
On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the
very reason for government itself.
It is, therefore, necessary to reconcile the apparently conflicting interests of the authorities and the tax payers
so that the real purpose of taxation, which is the promotion of the common good, may be achieved.
SYMBIOTIC RELATIONSHIP: Every person who is able to must contribute his share in the burden of
running the government. The government, for its part, is expected to respond in the form of tangible and
intangible benefits intended to improve the lives of the people and enhance their material and moral values.

Philippine Guaranty Co., Inc. vs CIR

No. L-22074. April 30, 1965
The petitioner, a domestic insurance company, entered into reinsurance contracts with foreign insurance
companies not doing business in the Philippines. Pursuant to the reinsurance contracts, petitioner ceded to the foreign
reinsurers premiums, which were excluded from its gross income when it filed its income tax returns. Furthermore, it did
not withhold or pay tax on them.
Consequently, the CIR assessed against petitioner withholding tax on ceded reinsurance premiums.
Petitioner protested on the ground.
Whether or not the reinsurance premiums ceded to foreign reinsurers not doing business in the Philippines are not
subject to withholding tax.
It is subject to withholding tax.

Where the reinsurance show that the activities that constituted the undertaking to reinsure a domestic insurer
against losses arising from original insurances in the Philippines were performed in the Philippines, the reinsurance
premiums are considered as coming from sources within the Philippines and are subject to Philippine Income Tax.
Tax code does not require a foreign corporation to engage in business in the Philippines in subjecting its income
tax. It suffices that the activity creating the income is performed or done in the Philippines. What is controlling, therefore,
is not the place of business but the place of activity that created an income.

The Government is not stopped from collecting taxes by mistakes or errors of its agents.
NECESSITY THEORY: Taxation is a power predicated upon necessity. It is a necessary burden to preserve
the States sovereign and a means to give the citizenry an army to resist aggression, a navy to defend its
shores from invasion, a corps of civil servants to serve, public improvements for the enjoyment of the
citizenry, and those which come within the States territory and facilities and protection which a government
is supposed to provide.

Tio vs Videogram Regulatory Board

No. L-75697. June 18, 1987
Petitioner, on his own behalf and purportedly on behalf of another videogram operators adversely affected, assails
the constitutionality of PD 1987: An Act Creating the Videogram Regulatory Board with broad powers to regulate and
supervise the videogram industry
Whether or not the levy of 30% tax under PD 1987 as for a public purpose, and therefore a valid imposition.
It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant
film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And
while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition.

Tax imposed under the DECREE is not harsh, oppressive, confiscatory and in restraint of trade but regulatory
and a revenue measure. The levy is for public purpose.

Vera vs Fernandez
No. L-31364. March 30, 1979
The motion for allowance of claim and payment of taxes dated May 28, 1969 was filed on June 3, 1969. The
claim represents the indebtedness to the Government of the late Tongoy for deficiency income taxes. The Administrator
opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of ROC.
Whether or not the Statute of Non-claims (Sec 5, ROC) barred the claim of the Government for unpaid taxes,
though it was filed within the period of limitations prescribed in NIRC.
Claims for taxes may be collected even after the distribution of the decedents estate among his heirs who shall be
liable therefore in proportion of their share in the inheritance. The reason for the more liberal treatment of claims for taxes
against a decedents estate in the form of exception from the application of the statute of non-claims, is not hard to find.

Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need.
Upon taxation depends the Governments ability to serve the people for whose benefit taxes are collected.