23 CIR v Isabela Cultural Corporation G.R. No.

172231, February 12, 2007

FACTS: BIR disallowed Isabela Cultural Corp. deductible expenses for services which were rendered in
1984 and 1985 but only billed, paid and claimed as a deduction on 1986. After CA sent its demand
letters, Isabela protested. CTA found it proper to be claimed in 1986 and affirmed by CA
ISSUE: W/N Isabela who uses accrual method can claim on 1986 only
HELD: NO. The accrual of income and expense is permitted when the all-events test has been met. This
test requires: (1) fixing of a right to income or liability to pay; and (2) the availability of the reasonable
accurate determination of such income or liability.
Accrual method of accounting presents largely a question of fact; such that the taxpayer bears the
burden of proof of establishing the accrual of an item of income or deduction.
In the instant case, the expenses for professional fees consist of expenses for legal and auditing services.