CTA Case No. 3281

DECISION

CTA CASE NO.

balance of FS5,501.41 showld be allowed, If oa taxpayer’s claimed deductions for certain expenses but no available records were available were allowed cansidering the testimony of the accountant as to the nature of these expenses, whirh testimony was not contradicted by the Government (Basilan Estates VS. Commissrtoner aot Internal Revenue, supra). with more reasan ahead the aimed deduction of petitianer for repairs and mainteooiee of his law office be allewed conmaidering thal his records af those expenses were avatlable and petitioner’s testimeny as te the nature af these expenses was nat cantradicted by respondent.

Legal Consultation Fees

Respondent's examiners disallowed the amount of P17,27090 as alleged Jegal and consultation fees for the reason that the receipts presented by petitioner are mere bond paper purportedly signed by the persons rec ‘eaiving the amount.

As explained by petitioner during the hearing of this case on March 18, 196%; Q. Who assued this Exhibit "Rei" to you” A. This receipt was issued by Otty. Renata Callanta who if now the President of the

Quezon City Chapter of the Integrated Kar

of the Fhitippines.

On non

DECISION

···- CTA CASE NO. 3281 -·- l _,

I

had to ask ·f ot~ the help o ·f rltty.

Callanta in a certain case whi ch i s ~it h the Bur .. ei3U o'f Cus t.oms. (.)I thoU<] h

I

h"''ve been rwactic:.i.ng for" a lCHlfJ time.

I

rl Pver· appeared in any pnJCeed .i.ng with the Bureau of Custom<;; and ll'l h e r ·e a c: lien t:.

<Tf

mine was involved with a leg a l action It'd. th the Customs.

I

rPnuestf ·~d (H ty.

Callc"'\nt.a, who is kn o\•JlG•c1q PiC~blP jn t h e Bureau of Customs;

~;o I sh.:~ '~ !:·:~ c:l 1•1.'i. tt1 h.i 111 a certain p ~ rcent of the fee~ I received in th."\ t c a•s.:1.

I

p.:dd Atty.

Ca 11 an ta

Two

Thousand Three Hundred Peso s . (:1.

Whose

~;i<;Jnatur" e appp .;.~t·· r,~ .~hove t:he r1 .~ me Renato Ma.

Ca ll a nt ~?

A •

T h .i. s i s h i. <::;

~; i q n a t.1 .1 r· e • D.

Hc)vl d .i.d you know?

D.

In connection with E >:hjb:i.t "1< .. --::~~~~ tell this

Honorable

Court

whose s ignature appear·s in said e>:hibit?

A.

This is the signature of Attv. A. Galang. Q.

How did you know that is the signature of A t t '1 G c3 1 <~ n g ?

A.

This was also signed in my presence. Q.

Please

why you.

Galang?

e>:plain to th.is Hc,norable paid CCHl!sul tat:i.on fe e to Cour· t.

Atty.

A.

In 1977,

I

I'Jas

r ·equested by my client Vicar Music to negotiate a joint venture in Japan.

The first. time I went to Japan

I

had a lot of difficulty.

The Japanese

lawyer of Bony kept on b:~l l .i.ng me that certain proposal of mine could not be agreed to by them because i t wa s against ,Japanese l c=~I'I S.

On thP othp r· hand they had with them Atty.

Feliciano of

the 55

DECISION ~-

CTA CASE NO. 22601 prestigious Sycip Felicianga in Makati who is very knowledgeahle that -[ felt IT was at toe disadvantage so I retained the services of Atty. Galang for Fifteen Thousand Peqos.

He was not anly knoawledqeahi= in Japanese laws but he spoke Japanete well. This FIS.900.,00 was of course part af the feas I received from Vicor Music. T shared part of my fee ta Atty. Galang. This receipt was signed in Tokyo, if I rememher correctly.

(t.S-eMe, pO. Ie to 15, hearing of March 8, 198%) Again, conmseicer ang that bhese Legal cansultation fees were pirogner dy eubm bari tiahercd, petitioner's records af these claimed deductions were available and presented in Court ag Exhibits hE MRD and “Ee@". and petitioner’s testimony as to the nature ae these BL Pye pee (AR not. controverted ar cantradicxted by respondent, the amount of FL7,300 as legal and conmerdtation fees should be allowed. (Basilan Estate Ve Commissioner of Internal Revenue, supre.)

In this item of qasoline, ail and gqrease, petitioner claimed a total deduction of FA,4423.35, but respondent's examiner allowed anly FR,SO7. RO which is the ameaunt supported hy the officral 06

DECISION ~-

CTA CASE NO.

receipts submitted by petitioner. The ositm of P2,.164.95 was disallowed for heing uncunported, Fetitioner is neat enya dd ercd bo claim a deduction for his @xpenses in conmection with the use of hig car from his home to his office ame back because such expenses are perzanal. And Ff bbe car was used for purposes ather than buminess or oun bhe exercise of his profession, tlie Cree Rost are personal expenses, and therefore, nol deductible, He is, however, entitled to ai deduction of that portion of his expences in canpectior with Che ouae of his car which ts related fo the e@exerciee of bis profession. Assuming that petibtiener usect fae car two-thirds of the time for business and one-third for personal purpotes, and as claimed hy him he spent Pa, 462.38 An the taxable year under cansideration for gasoline, ot) and aqrease, only 2/3 af FS,462.25, or FE,64).96 can be claimed by petitioner frei his gross income (fc Jamir vs. Collector of Internal Revenue, “L-16552, Narch 30, IPG2, * SCRA 7IS,) While a taxpayer 18 not relieved from the burden of substantiating his claimed deductions, care should be taken ta permi? reasonable o¢

DECISION ~-

CTA CASE NO.

determination af the amount which may fe claimed as deduction, provided that there Gs prance basis for some allowance. Disallowing amenarts claimed few deduction merely because there is mo sufficient or available documentary evidence which wilh eeatabliagh the precise amount beyond a wearscupyahle deuirt ignores commonly recognized business practices aes well as the fact that proof may be eztkablisheed by credible oral testimony. Where there is evidence that the taxpayer has actually fnew eed eepeancecd , and there is no proaf of the exaeck smut achuatty spent, the Commissioner sheeteb ads ae co deverr ony approximation as he can, hearing heavily bf he chooses ttpon the taxpayer whose inexactitude is of his own making. (Cohan vs, Commissioner, 3% F. ed, S40, cited in Visayan Cebu Terminal ws. Collector of Internal Revenue, “£L-1e7PR, Nay 3O, @€PEO, 108 Phil. 3203; Gencayco vs. Collector of Internal Revenue, “€-1335.5, April 20, 964, 1% SCRA BRO; Zamora vs. Collector of Internal Revenue, £15280 & L-15289~-?O, May 3l, 1963, 8 SCRA 163.)

Employees. Transportation & Telephone, Bills The same could be said of the employees transportation expenses of FA72.48 and telephone 08

DECISION ~

CTA CASE NO. SRE ii bills in the amount of PE Ag. GS which Wee disallowed by respondent’ s eyamingr far lack of supporting papers. There i585 proper basis for their allowance as petitioner is admittedly engaged in the practise of his profession asm a lawyer. He has a law office end it as hard to canceive of ao law office without a telephone. AS a matter of fact, at has been established that the blelephone was listed in the telephone directory we the name of petitioner and respondent’ s examiner had bean using it at the time she was examining petitioner’ s “Trt .

income tax return. (t,.8.9., Pp. 7, Hearing of May 8. 1984.) And with respect to the employees transportatian expense of FL7E IR. the anorpk is too insignificant that it can hardly be said that there 316 no proper basis for its allowance, (rs stated above, disallowing amounts claimert fow deduction, especially when there if hasis for their allowance, merely because there js nua available documentary evidence which will eatablish the precise amount beyond a reasonable doubt ignores commonly recognized business practices as well as the fact that proof may be established by credible og

DEC ISTON

CTA CASE NO.

oral testimony. AS testified hy pedihioners (t.5.n., p. 18, hearing of March 18. 1°.)

"T had at that time a secretary whoa held the petty cash and - had two (2) MeSSengers. meveryclay « the messengers would mail registered letters in the post office and file pleadings in Comets and sometimes bring documents to and from clients and other matters which [ asked them to co."

Office Supplies

On this item of office Supplies in the ameunt of FPS,341.42, respondent's examiner Lestified that the expenses were disallowed because they were unsupported. (t.3.%., 6. &l, hearing of May 68, 1984.) Where ai taxpayer claimed deductions for certain expenses but no records were available, the deduction may he allowed considering Fhe teakimnony of the accountant as to the nature af thorwe expenses, which testimany was mot coaonkradicted hy the Government. (Basilan Estates ws. Commissioner of Internal Revenue, fupra.) Granting that no records are available, no testimon, whatsoever regarding the nature of these ex PRMSeac was presented by petitioner, although petitioner himself testified, as shown above, an the mature, amount and/ar basis of the allowance af his other claimed deductions. The rule has been established or

CS

DECISION -

CTA CASE NO, 3281 that the bare statement of a taxpaver thak an ilem af expense is ordinavy and necessary, tUnaccamparnied by adequate evidence, has no wetabht with the Commissioner or with the courts, (Pe Vera vs, Collector of Internal Revenue, ih foe ity be March 23, ~¢25°, Bastlan Estates ve, Commissioner of Internal Revenue, supra. } Disallowing amounts claimed for deduction, 15 we have said above, merely because there 315 no available documentary evidence which will establish the preci e Amott heryertct a reacvrab les denib& ignores commonly recognized busine practices hut proof should be established by eredible oral testimony, which was mat done an this item, WIS TY, petitioner is engaged oan hie pre ae Paice oof tyitn profession as a lawyer and invariably he cars tec supplies but taxpeyers carrying maherials anid supplies oan hand should inelude in expenses the charges for materiels and supplies only tai the amount that they are actually consumed and used in the operation during the year for which the return is made, and provided that the cost of surh materials and supplies had not been deducted in determining the met income for any previous CAI. _ \ y 61 a

DECISION

CTA CASE NG. “Beat (Sec. 67, Rev. Reqs.

whatsoever, oral or dacumentary, petitioner. As presented thy respondent, deductions are grace and therefore the deduction must he ahle to prove to the deductians which the law The item of of fice supplies PA,341.42 cannot therefare he Accordingly, petitioner os tax for the year 1977 is L971.

Add: Unallowable decuetions:

Office rental FAD Pe EMS Gasoline, 211 and grease 1 FRO, 7S Qffice supslies 3,311.48 Net income per decision

Less: Exenptions

Net taxable income Income tax due thereon Less: Amount paid 62 No. Z2.)

Lo

aptly matters

Laxpayen

That ofes ais im tive de fie benny computed 25 Rica ev idonne this effect was stated by of legislative seek Lag aa eoatibled adiows .

of amos allowed, Lei cenes fol Lopr > Rit. 1dis,14 PIS.0F1 87 POS. 806.00 PB BB0.00

DECISTON

CTA CASE NO. 2281 ~ 1 rye Ralance of tax due Pe TAG OO Adict: Interest frem 4-16-78 to 10-31-80 PhO?

Total ameaunt due and collectible Fogg PO? WO?

WHEREFORE, petitioner Amada . Amacor, dr... 1% hereby ordered to pay to respnandent Commissioner af Internal Revenue the amen t vg Pon Ph? OF AS deficiency income tax for the yen isr7, pitas surcharges and interest incident toa delinquency pursuant to the provisions of Gertion Sicery(eic2) of the applicable National [nternal Mevenue Code, as amended.

SO ORDERE”.

Quezon City, Metro Manila, February RB, 1989, Cheadle aloe). 7 ononre Auten

Presiding Judge

WE CONCUR:

CONSTANTE/C. ROAQUIN ssociate Judge

Bers) Xs 2

ALEX Z. REYES

Associate Judge

on

DECISION ~

CERTIFICATION

I hereby certify that this decision was reached after due consultation among the members of the Court of Tax Appeals in accordance with Section 13, Article VITI of the Constitution.

a ) . ofc : 4

AMANTE FZLLER

Presidio Tyree

Cereb mf Tas Anmeats