CTA Case No. 3806

REPUBLIC oF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

DELFIN MA. V. CRUZ, JR.,

Patitioner,

Ver SS C.T.A. CASE NO. 3806

COMMISSIONER OF INTERNAL

REVENUE ,

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D EF tf Ff S rF§ Oo WM

This case involves the deductibility af

interest payments for incame tax purposes.

Fetitioner declared for his 19°74 Lincome tax

return the amount of F1l68,884,35 as deductible

interest expense which the respondent Commissianer

disallowed. Accardingly, a deficiency income tax

assesament far the amount af FIlS,1798.25 was issued

under Demand Letter and Assessment Notice Mo.

26-3-N6108991-74 dated Decemher 14, 1979 (Exhs. "4"

and "4ema"),.

Subsequently, petitioner’ s deficiency

assessment was revised with a reduced income tax

liability of F96,193.64, ainclusive of interest

(Exhe. US", "6" and "7"), consequenced by the

digallowance af an interest payment of FPL4h,d04,19

ta a certain Fablo S. Crus.

divu

NECISTON —

CTA CASE NO. SAD4G

So oyequeask for further reconsideration under oa

January 22, 1980 Tether (Fxh. "O™) of the revisect

Agcecceamernk prayed ta nme avail as the resnpancdent

euebained the correctness therenaf under letter

dated December 16, 198) and January 2A, 1982 (p,. a4

and op, Fe. BIR rec., respemtively) but receipt

thereof was denied by the petittaner.

(ny Oe tober An, LR, respondent filed A

Judicial Achkian for collection in the Regional

Traadl Court of Queran City, docketed as Civil Case

No. OM 36992, entitled "Republic of the Philippines

WER Delfin Wa, Vv, (rar, were" (Exh. "pry,

Petitioner war duly eerved with saumane with a copy

of the caid compladnt oon dune Oo, I9R4,

Petibdeoner considered the filing of the

jadieial ae tien a cleryie) cf his recqiues tect

receonetcerabion of Tentiary ??, Leen, filed the

does kanb pe bition for review om duly 4, 1984,

Tho rere e rai aes the quest tans of

Jurisdiction and deduckibility af interest payments

for adncome tas purposes.

Respondent interposes AS special and

affirmative defense the lack of jurisdiction as the

present petitian filed am duly 4, 1984 is beyond

the regqlementary S3O-day period to appeal from

respondents decieioan. This Court, nevertheless

Lou

DECTSLOM

CTA COSE NO. S806

fide, bere ote im om tebe ber prerye byrer bh bbae

ad deced tether mf Outraged Mh, POR, hated torudbe cheorpy

Lhe omerb bey fey peeonedderabion oof pebitdener oof

Vea AQ. tree oaetiuad dy bree oserb ber aunret

meee tive by the peba td torier. Whak appears fram the

pebibio for restew and dhe are ues Crp. tt ke to,

CYA pec. Yee wed }ooae momment oof pebaibioner Cpuy. oho

ey ETN per.) te that afber Filipe tbe regres bt feu

recomiderakion oof the oar emer arf Decombter 14,

TOPO, ne bibiener oreeedsverd oor due Oy US Re cummearre

and copies oof reepondenk oc complatiabk ti Civil Care

Plea, CP Ae fa Leck before thie Paecatomal drted tee &

Of (reser, Ciby, Thane) CFM. ceelkang be coallect fream

pelibioner the dofie terey direeme bea ef PS

eyes Clemarrebed cepreher eat epere oe eae & (Mea. Bye Ben

AED TP DY claboedd Decemtther db, tego, Wer tly, ecb

eomp bedi Cor aeckteny for eollercbioan Fite he fore

(hice Teg ioped Fried Courk mf Chieeon Oa by Leg bameniuy be

tos & Cleaytiad af po kb btener e Peercpuresss b fer

reeonetderataen oof cslanttary BP, Lee CSem Popa dite

ve dam Vaieor Teng Seure and Co. , Prien dot L. Mereh

Sl ARMS, OTS SETA SEs Seater ow. Cem. of tiok.

Peg OPA Came Mea oro. Atta. 14, TSR Yahe

Fa

Plea, (tS SERA RFS y anc the Me was, from rece tp k

Of oerummones and omeyrtes thereat oan diya Fy Loe,

bimedy appeadecd te thas Crocus t bry pe bib terrer ony ited y

DECISTONW

CTA CASE NO. 2R04

4. AORF (See pe te ETN rem), TImedeed, the alleced

letber of Auguet Sy PPA could not be treater am an

appoatable decision hecauce, as petitioner hlcntly

denies having recevied bthe same, there ais mo preoat

ef service thereaf whether by mail oor pereoanal

delivery.” (Mesolubian, OTA Case No. SRAOG, Anrgqeest

Vi, 19787)

The remaining question dis whether interest

paymenk ag allowable deduction for inecamne tan

poo poeee musk necesearily be stipulated to writing.

Petitioner presents none of any such written

stipulbabttan much Tess the loan camtrack iteelf., but

evhbmibte (1) a capy of the certification of Fablo &.

Crue cated Gepthember 22, AP7R. certifying that he

received fram pebitioner as payment of intere in

e744 in the amoaunk of FURS .OO4. to CExh. UR FR

records, page TOA: and C2) aA copy of the ancame

ban rekturna oof aagd Mr. Pablo &. Cruz for taxable

year L744 which declared receipt of interest income

ain 1974 in the AMOLEDE of PAAN,OO4L ID from

petitioner (Ext. "G"), thus, inferring that, 1) an

indebtedne

exigteds a) an obligation to pay

intere

Sb ooh 6Seadd: indebtedness: and |) interest was

paids and pressing the validity af the question,

where theyre Le ryet wrod bhen contract

ide

DECISTOnM —

CTA CASE NOL 2806

Of Toan, may net oemblateorab omvideneceas te prove an

extebteonee af loan be admieedhbte, Pile Pubthite URS

trpqinyy

ane

Meenpoocdent eioape op bie unavarydtig aemer tien as

tives:

"Ter fore, the corbifteabtion ieerurd

hy Pabla &. Crus and thre Jatbher’oa Income

Tan Reburgyr fea 2974 CRs. UR ane "OG",

resspee hivedly, Pati ktener) carchind b kee apy

evidenee dn this came by pebttionmer cha

motooeaffierm and canoe he ao moubebitiube

fora ow dktem comtract the berms whach

must oe hipudlate the inbtereet payable by

petitioner ote Pabhiea SS. Cri whe tr tien

tie ouneer obliqakion bo deelare the came

in ohte oimeeme bas return amd paay blie

cer rernana tng Dnecomes faa chars there.

Horeover, pebibioner ehouted drewe wt thheded

fhe corresponding thneame tax due an eaaid

PAA, SLAP oof RANA EPL Ga padcd by his

epechi bere, Te ote ate owerkhy to nate

that Patio S&S. Crus ie pebtibieaner re cer

boreower tm oa& Taan oof PéOo,Ogad. OC from

Conqenenr ie Deve Dropimen & ened PU areres

Corporation Cp. M1, FIR recorday.”

“Tr owdow oof the foregmeing. ah is

vweepy ot Dear bhebho opekibtonerr’ = elaam few

deduction of the inberest payment iin the

eamaruyk af Pia ,aod. is fas no btegal baste.

Necoardingly, the deficiency ineeame bax

Ameeeement for Ted ieeued against the

pebitioener was valde and dn accordance

with law."

LeWyVer

We agree with the reepondent Commi

Section 2OCh) of the National Tnternal Peyventiie

Cade af V7 7 provides, dno part, that there shall be

Allowed as deductions "“toberesebh paid ar accrued

within oa taxable year oon dnodohbtedire dee ed in

connection wath the teogqaayer oe mreaferetion, brace or

idv