Banico and Sons, Inc. vs. Bureau of Internal Revenue and Eufracio D. Santos, et al.

DECISION -

- 2 - 1984 from the respondent assessing the corporation for deficiency income tax and surtax, details of which are shown below:

Deficiency Income Tax ( g_ ·~-L...A. ~.-R_~_p_Q_!"d ?J __ J!.L--~) Gross inco11e:

RPnt Dividend Other incoliE!

Gain on sale of seeuritil~s Total gross inco.e Less: lnco.e subjected to final tax: Dividend Share - Equitable Banking Corporation Gain on sale of securities Taxable gross inco.e Less: Allowable deductions: Interest and bank charges Taxes and licenses Donations and contributions Accountant and auditor's fees SSS, Medicare and EC St tionery and office supplies Hrt tftxnbl, inr.o Tax due lht>reon less: Tax credit Deficiency incoliE! tax Add: 14X int. fr. 4/16/80 to 7/31/80 20X int. fr. 8/01180 to 4/15/83 Total A10unt Due and Collectible p 83,589.14 69,185.00 _l:gLQ.{tn p 8,599.48 3,372.19 4,519.40 1,000.00 261.70 ---·· .§~-~. ~~ Deficiency Surtax < ~..!-I~-.-~..:....-R.t?s;;:...Q.r.-..!i!a..!...-..P~-~ ) Total gros~ incoae lper stateaentl Less: Total expenses Net lnco.e per state1ent Add: Depreciation deducted Total net incote Less: Assees-ents for deficiency inco~e Net profit 2SX surtax Add: l4X int. fr. 4/16/80 to 7/31/80 201 int. fr. 8/01/80 to 4/15/83 Total A•ount Due and Collectible 972 P144,000.00 83,589.14 89,711.25 _.P.~,..Q.HJ~ P4S0,344.S2 -~~~A!~.~.n Pl64,526.2S ·-· ~8, JC!.3. Q~

P146 127 23

r·~a: ·4~:-89 ---·----·~4.~~. ! ~ p 47,907.70 1,952.40 -~'Jl.~!-~ p 75! 778.38 P450, 344.52 ...1.3.;!,_~_1. 84 P216,380.68 _ ?..Q, {)!!_~.!.59 P295,183.27 _ ,9,90f?._lll P24S,276.45 i~""61;·3i9:i1 2,498.96 -~~ •. H.~~ .. ~ p 96,992.02

- 3 - Petitioner protested the a bove assessme nts on January 21, 1985 through a letter dated Januar y 18 , 1985.

On December 22, 1988, respondent i ssued its £ i nal decision, in a letter dated December 6 , 1988 s igned by co-respondent Deputy Commi ssioner Eu£r a cio D. Santos, denying petitioner's protest fo r lack o£ legal a nd .factual b i .

Petit i oner thus sent, on January 20, 1989 t hrough registered mail <c. T. A. Records, p . 27), t his peti ti o n for review which was received by this Court on J a nua ry 28, 1989.

Responde nt on t he other hand , i n h i s answer a nd by way of special and af.firmative de£enses al l ege d among others, that:

1 > The assessments have already become £inal, executory and collect· ble, pursuant t o Sections 7 and 11 of Repub l ic Act < R. A. > No .

1125, because the petition for review was .filed only on J a nuary 28, 1989, o r t hirty seven (37 ) days a fter petitioner r e ceived on December 22, 1988 the l etter denying his pr otest t o the assessments;

2 ) The expenses disallowed mainly consists of rentals, dividends, interests, e"t;c. which are pass ive and fixed income that cannot be consi dered as ordi nary and necessary expenses deductible under the Tax Code; 97~ - 4 - 3) The cash position of the company warrants a declaration of cash dividends to shareholders as the investments made were mainly on speculative securities; 4) Petitioner, being a closely held family corporation organized as a mere holding company, there exists a prima facie evidence of a scheme to avoid the tax upon its s hareholders; and ~ ) Th ARAeRamenta in quaf'ltlon w Ttt :iar.tu d :i.n accorda nce with law. Ref ore th i.a Court for considers ion ere the following issues:

1.

Whether or not the petition for review was filed within the prescriptive period of thirty <30) days, in compliance with Sections 7 and 11 of R.A. No. 1125; 2.

Whether or not petitioner deficiency income tax P75,778.38; and is liable for amounting to 3.

Whether or not petitioner is guilty of unreasonable accumulation of profits making it liable for deficiency surtax in the amount of P96,992.02. This Court, in response to respondent's defense of prescription, holds that the petition for review was filed within the thirty-day period prescribed in Sections 7 and 11 of R. A. No. 1125.

Section 1 of Rule 13 of the Rules of Court provides: "Section 1.

gpu.r:t.L. ____ cjg:f..4 n...f?d. The appearances, motions , other papers with the these rules shall be ~}:_!:_:£n g ____ Jii -~!;l _______ t.hJ?. filing o:f pleadings, notices, orders and cour t as required by made by :filing them . I -

- 5 - perAonally with the clerk of the court or by sending them by :r:e.gis_t_E'T~J.f -.... _f!l_a.:l.._.:t. In the first case, the clerk shall endorse on the pleading the date and hour of filing. In the second case, .t.J1 ~ --- ___ c:;f. ~ t E?__ __Q_f_ ___ t .h.~ _____ !!L~J_.t!D.Q. ___ g_t_ !!1 o t i on s, ··-· p 1 E? _a c:;f. :1.. 11.9 a.'··· -···- Q.£_ .. ~!! Y ...... __ q ..t Q.~.L .. .R.?.P ~!:-~------.9. r payments ___ or. ........ !:! E? p o.~ i :t .~- '-· _ a a ·-···--a h 9.~ Q_ b.y _____ 1;_l:!_~ __ p 9 ~.t.. qff ice ~tamp __ q_Q .. the . ~nve.J,. .ope> ___ q_;r::- _ j;. _!:l~ .--r.~9.t~..t .D~. receipt, _ s,h~l_J, ____ b.e. COD.~i-~~:r. .E;"q ..... !il~ .. _!;._b,_!;? ___ g_~.t .E'. ___ Q;{ :their ... :fi.ling, __ payment, .. or ... !=fepo_a;l..,_1; ___ in __ p _r;>ur: .. t .!. Tl)e env:e.J,.qpe_._ ...... s.h~ll .bE?_ .. ?tJ: _~9.hE?J!._!_g~hE;>_rec_q]:"d of . ~he q~se ."

<Underscoring supplied> Thus, it has been held that when a pleading, such as the herein petition for review, is sent by registered mail, the date of mailing of such pleading, as shown by the post office stamp on the envelope or registry receipt, shall be considered the date of filing <Mercader vs. Commissioner of Internal Revenue, C.T.A . CaRe No. 1997 , October 2,1969. > Although the petition for r eview in the case at bar was actually received by this Court on January 28, 1989, the post office stamp on the envelope indicates that the same was mailed on January 20, 1989 or twenty nine <29> calendar days after the petitioner recei ved the final decision of the respondent.

Therefore, contrary to respondent's claim, t his action has not yet prescribed.

This Court now comes to the issue on the merits. Petitioner claimed that the follo wing expenses were disallowed i 'n gross violation · of its ri~hts to 97 .

)

- 6 - procedural d ue process of l aw: <Peti t ion for Review, C.T.A. Records, p. 5 ) Salaries, rages, bonuses Interest and bank charges Taxes and licenses Gas and oil Telephone, telegra• and cable Car repair/taintenance Car insurance and registration Representation and entertaintent Stationery, printing and supplies Donations and contributions Business travel p 63,000. 00 8,599. 48 1, 372.19 6,803.35 746. 34 12,926.10 5,707. 15 4,226. 62 646.25 7.1' 207. 20 16,349. 91 1,000. 00 none p 8,599.48 3,372. 19 none none none none none 646.25 p 63,000.00 nime 2,000.001 6,803.35 746.34 12,926. 10 5, 707. 15 4,226.62 none Accountant and auditor's fees Transportation and freight Depreciation SSS, "edicare and EC contribution "iscellaneous 1, 134. 76 78,802.59 261. 70 4,590.60 249.60 4,519. 40 none 1,000.00 none none 261.70 none none 22,687.80 16,349.91 none 1, 134.76 78,802.59 none 4,590.60 249.60 "agazines and periodicals "e•bership dues TOTAL ·-·-····--·~~Q~ .. Q9. ~!3~t~~-~ ._ .• .!.UmL._ P18, 399.02 ------·-~~ •. QQ _P215, ~4. 8~ It further alleged that: "The aforementioned expenses claimed as deductions consisting of expenses for salaries, gas and oil, telephone, car, maintenance, etc.

!!.f..~ .. - ... ~ J,..l ___ 9.J:"'A~!t9.:.f...Y. __ ~ng D.!?Gg.~"".!'lr.Y __ .. ex.P..~.n.~~!':! commonly or normally incurred by enterprises engaged in a similar field of business.

The same were all incurred and paid during t he taxable year 1979.

The aforesaid deductions %or expenses were incurred in the course of carrying on its business as a real estate corporation. Lastly, t hese expenses claimed as deductions are duly supported by vouchers, and/or other doc'uments which the exam·ner evidently did not bother to verify or consider altoget her." <Petition for Review, C.T.A. Records, p . 7> The applicable provision bf t he Tax Code is Section 30 which reads: 976 .)

, I

- 7 - "Section 30.

Deductions Income - In computing net income, be allowed as deduction - from Gross there shall

a. Expenses

1. In General.

All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered:

travelling expenses while a way fr om home in the pursuit of a trade or business, rentals or other payments required to be made as a · condition to t he continued use or possession, fo r he purpose of trade or business, of prope r y to which the taxpayer has not taken or a not taking title or i n which he has no equity.

XXX XXX xxx" Since deductions from income are matters of legislative grace, only those expenses which are expressly provided for by law shall be allowed.

Generally, however, before an e xpense is allowed as deduction, it must:

1) be both ordinary and necessaryJ 2> be paid or incurred within the taxable year; and 3> be incurred in carrying on a trade or business.

<Aranae, Updated National Internal Revenue Code, 1988 Edition, p.175).

The burden of proof is on the petitioner to show that the expenses being questioned passed all the requirements for deduc tibili y.

Only then will this Court allow such deductions. 977

- 8 - Petitioner rightly quoted in its petition <C.T.A. Records, p.

6> the meaning and application o£ the term "ordinary" and "necessary " as £all ows: "Expenses will ordinarily be c onsi dered necessary if the expenditure is app ~op~~~~~ l'ln d . he 1 P-.:(.\J 1 ... in .. . de .vg..J,._q_p), o..g __ ~ ot;i ... m~_:!,._nt~. :i,.o.J,JJg._ ..tJ:t~. t.~r. p_a,}.':E:;>L~.!~L .P . \,1 s.i n.'?.!?l?..· 0 b vi o us 1 y, u nder such a view, the necessity involved is not absolute or inexorable.

Normally, a taxpayer wil l not incur an expenditure unless ~.!?..Q:U.:i, _:r_~q_._._ Q~ j IJ_ s :t. . .i, f.:!,. e 9._ ..... 9 Y.... __ tJ1 ~ .......... Jl. ~ ~-c1.s .... _ .. Q_! __ J;.h§' ___ .... _lJ. ~ 13. .. !.ng~_§. · Proceeding on that logical assumption, the courts are slow to override the t axpayer's judgement as to the necessit y for incurring the expenses.

Consequently, the real di ficulties i n the interpretation of the terms ordinary and necessary arise not £rom the word necessary but £rom its companion word ordinary.

The £act that expenses are necessary is not necessarily decisive since personal expenses can also be necessary.

<Merten's Volume 4A, pp.

39-40). "

<Underscoring supplied ) "An expense will be considered ordinary i£ it normally occurs in connection with business similar to the one claiming the deduction.

Ordinary does not imply that the payments must be habitual or norma l in the sense that the taxpayer will have to make them o£ten .

A necessary expense must not be essential expense, but merely one that is PT. 9 per .... <=m. <;L ... .1:11a c1.E;' .•. ___ :j. :r:L ... t h!? ______ .:i,JJ..!-.. ~;r..~~-t_ .. ___ Q :f_. __ tJJ ~ . . J?usin es~ _,ppe;r.a,ti.P.Il• However , an expense will not be deductible i£ it is necessary but not ordinary.

(Michie' s Federal Tax Handbook, p. 3090>."

<Underscoring Supplied > Un£ortunately, petitioner was not able to prove preponderance of evidence, expenses it claimed ,\ proper deductions from gross income.

It failed convince this Court that the expenditures it claimed by as to as deductions are "appropriate and he lp£ul in devel oping 978 - 9 - and maintaining the taxpayer's business " or " required or justified by the needs of the business" or "proper and made in the interest of the business operation". As correctly stated by the respondent: "Th e expenses disal lowed are not ordinary and necessary expenses considering that the income of petitioner which consists mainly of rentals , dividends, interest, etc. and which are considered as passive and fixed income can be realized without the necessity of incurring the disallowed e xpenses. findings of the investigating examiner disclose that the rental income, which canst tutes the main bulk of petitioner's yearly i ncome, consists of advanced rental payable every five years beginning 1973 up to the year 1977.

Taking into consideration petitioner's other sources of income which are mo s tly passive i n nature, the disallowed expenses cannot be considered as ordinary and necessary expenses deductible for taxation pur poses under Section 30 of the Tax Code.

<Answer, C.T . A. Records, pp. 36-37>." further, petitioner, for unknown reason, did not even bother to present a written forma l offer of its evidence and memorandum to support its allegations. Section 34 of Rule 132 of the Rules of Court provides: "Offer of evidence.- The court shall consider no evidence which has not been fo rmal ly offered.

The purpose for which the evidence is offered must be s pecified." Th e evidence deserves no considerat ion from the court if not formally offered in, evidence <Veran vs. Court of Tax Appeals 157 SCRA 438; People vs. Villapana 161 SCRA 72; People vs. Carino 165 SCRA 664; People vs. Santito J r . 201 SCRA 87) . ·.

9 ~ ·

I ~

DECIS ION

G.T.A. CAHE NU. 4330 - 10 - There is a presumption as to the c orrectness and validity of the assessment <Collect or va.

Bohol Land Transportation Co., 107 Phil.

965).

Since the presumption was not destroyed by the petit i oner, t his Court has no course but to affirm the aame. With regard to deficiency surtax , this Court upholds the respondent ' s assessment. The pP.r· n . r1t p < v l't on o.f h N l ion 1 Int r nal Revenue o e t hen i Section 2 wh c h provides:

"Section 25.

Addi ional Tax on Corpora t ions Imprcp r ly Ao o umulat2ng Profits or Surplus.

<a> Imposi tion of Tax. - If any corporation , except banks, insurance companies, or personal holding companies, whether domestic or fore gn , is formed or availed or for the purpose of preve nting t he imposition of he x upon its s hareholders or members or the shareholders or members of another corporation , through the medium of permitting its gains and profits to accumulate instead of being divided or distributed, there is levied and assessed against suc h corporation, for each taxa ble y e ar, a tax equal to twen t y - five per centum of the undi s tr i buted portion of its accumulated pr ofits or surplus which shall be in addition to the tax imposed by Section 24, and shall be computed, collected and paid in the sa me manner and subject to the same provisions of law, including penalties, as that tax.

XXX XXX XXX < c > Evide n ce det.erminati ve of purposes. The fact that the e arnings,or profits of a corporation are pe rmitted , to ac umulate beyond the rea sona ble nee ds · of the business shall be determinative of the purpose to avoid the tax u pon its shareholders or me mbers unles s the corporation, by clear 980

- 11 - preponderance of evidence, shall contrary."

prove the In the case of Basilan Estates, Inc.

Commissioner of Internal Revenue <21 SCRA 17), v.

the Supreme Court ruled that the taxpayer unreasonably accumulated its corporate profits based on following circumstances: "1. Strang financial position of the petitioner as of Dece mber 31 , 1953.

Assets were P388,617.00 while the liabilities amounted to only P61,117.31 or a ratio of 6: 1.

? .

An Pi l CJ ~~l , th o pnr , inn h d ~ on F.J I dP.J ·a hl e capital adequate t o meet the reasonable need s of the business amounting to P327,499. 69 <assets less liabilities>. 3.

The P200,000.00 electrificat i on of drier and a n d the P50,0UO.OO reserved control were reverted to its

1953 .

reserved for mechanization for malaria surplus in

4. Withdrawal by shareholders of large sums of money as personal loans.

5. Investments of undistributed earnings in assets having no proximate connection with the business as hospital building and equipment worth P59,794.72.

6. In 1953, with an increase of surplus amounting to P677,232.01, the capital stock was increased to P500,000.00 although there was no need for such increase. " the Petitioner claimed that "<t>he foregoing c ircumstances do not exist in the case of petitioner I Ba nico and Sons, Inc. "

<Petition for Review, C.T.A.

Hecords,

p. 10 > However, it conceded that "the c o rporatio n disclosed a strong financial position in 98 .J - 12 - t he year of 1979 a s s h own by the fact that out of the total asse ts amounting to P4, 356,653.00, outstanding l i ab i l i t ies amo unte d onl y to P704,314.00 for an asset- l iability ratio of 6. 1 to 1. " ( Lbid. )

Pe t itioner would like to i mpress u pon th i s Court t hat there was no unr easonable accumulation o f profits. It argued that

(1) it had no a d e q ua te c apital to meet the reasonable needs of the bus iness ; ( 2 ) its shareholders had not wit hdrawn l a r g e sum o f money as personal loan from the cor poration; and

(3) it had not invested ita earn ings i n asset s h a v i ng no proximate connec tion to the business but had invested the s ame in accordance with the primary and sec ondary purposes for which the corporation was organized. The arguments would not s tand s c ruti ny of this _, Court.

Firstly, peti ioner, in a letter to respondent dated December 23, 1982 <B.I. R .

Re cords, P• 99), c l aimed that corporate funds were ti e d u p i n r eal properties, marketable securi t ies, and t emporary in vestment which resulted to inadequac y of its. capital to meet the reason able needs o f t he business .

The claim however, was belied by t he fin ancial stat e me nts \ I submitted by the corporation .

Th e sta tements showed that, in 1979, the petitioner had a n increase in 98 2

- 13 - investment amounting to P694,531.81 computed follows:

narketable securities and teaporary invest~ents: As of Oeceaber 31, 1979 IBIR records, p. 271 Less: As of January 1, 1979 !BIR Records, p. 101 Increase in invest•ent in 1979 P2,933,930.62 r~. 239. 398 •. at p 694 531.81 ::-.-:::::::::0'.:!-··:-··~-:: :.· as In arguing that "the co mpany does not have sufficient cash from which to declare cash dividends and that to sell these securities will either result in a loss or at the very least, will h a mper the company's speculative activities", < B. I. R.

Records, p.99) petitioner did not explain, to the satisfaction of this Court why it invested an additio nal P694,531.81 worth of securities.

Furthermore, contrary to petitioner 's contention, it had considerable capital a dequate to meet the reasonable needs of the business amounting to P3,652 , 338.41 <assets less liabilities). Secondly, while it is true that no personal loans were gran·ted to the shareholders by the petitioner, the B.l.R. Records reveal that the latter gave bonuses, salaries. and wage s~ gasoline al lowances ; car 'repairs, insurance, registration and maintenance a ll owances;

representation allowances ;

personal donations and c ontributions;

business travels:

telephone c harges;

etc. which, as previously discussed "not for services rendered to enhance the business of the company xxx ..

- 14 - (H) ow e ver, i t maybe treate d as distribution of divide nds to the stoc kholders. "

<B.I.R.

Records, p.

5 5) And t hir d ly , pe tit ioner failed to support its last argume nt.

I t s pe tition reads a s follows: "C R >espondents evi dently failed to consider the pri mary and s e conda r y pur poses for which t he petitioner c orpor ation was organi z ed.

Among others, t he company was organize d to engage in the real estate busines s , a griculture a nd i n inves tment i n ma rketable securities, bonds, d e bentures, e t c.

Likewise evident is that responde nt' s examiner a lso overlooked the fact a s disclosed in the financia l statement !or the yea r that the petitioner cor poration had under s tudy , pro posed, various projects such as c onstructi on of a n ice plant and sa l t making pr oject, which are all in line with he purposes for which he corpor ation was f ormed .

xxx Considering the purposes for which the petiti oner corporation wa s formed together with the various proj e cts i t was intending to unrler take , it can not be said that Ba n ico and ~; n o n , Inc .

h d allow d improper eccu rnu l tion o1 e arning s beyond t he re s ona ble need s of its business.

On the contrary, t he ' <J J p<trat i o n wa s a c tu ll y i n ne d of rnor f u nds to pursu e i t s proposed v a r i ous projects."

<C.T.A. Records, pp. 8- 9 > In the case of Manila Wine Merchants. Inc.

vs.

Commissioner of Inter n a l Re ve nue

<127 SCRA

483>, the Su preme Cou r t, quoting Mer tens , Law of Feder al I ncome Tax ation, held:

" A prerequisite to t he i mposition of the tax h a s been that the corp or a tion be for med or ava i led of for t he pur pose of avoidi ng the i nc ome t ax (or s urtax> on its shareholder s , or on the s hareholders of any other ·'

DECISION -

C.T.A. CASE NO.

4330 - 15 - corporation by permitting the earnings and profits of the corporation to accumulate instead of dividing them among or distributing them to the shareholders.

If the earnings and profits were distributed , thP s hareho ders would be required to pay a n income tax thereon whereas , if the d atri bution were not made to them, they would incur no tax in respect to the undistributed earnings and profits of the corporation.

The touchstone of liability is the purpose behind the accumulation of t he income and not the consequences of the accumulation.

Thus, if the fail ure to pay dividends is due o some other cause, such as the us e ... 9 f u n dis t rib _u \ e>_c:L -~a rn..:!..D. g s ___ stJ:l q __ .P.t:::.Qfi t,g for t 11e ....

ea~g_r:g:~ble. ___ nl?..~ds __ , __ J:;>.f .• _,_:t_h§? __ ~B~.~ .. ;l,.!J§.'_~~.

such purpose does not fall within t he interdiction of the statute. To de erm'ne the 'reasonable needs' of the business in order to j ust ify an accumulation o earnings, he Courts of the United St~ e have invented the so-called 'I.mmediacy ... T~s.t.' which construed the words 're sonable needs f he us ness' to mean he . mme!-Ha e .. _ .. Jleeds ... ot. ..... j.~e_p_~_gi __ -~-~- ' and it was genera ly held that 'if the cor poration did not prove an i mmedi te n ed for the accumula ion o the earn·ng and prof its, the sccumula ion was not for he r sonable needs of the busin s , ·n th penal y tax would apply.~ <Underscoring supplied > In that case, the Supreme Court affirmed the decision of this Court in finding that "the purchase of the U. S . A.

Treasury bonds were in no way related to petitioner's busi ness of importi ng and selling wines whisky , liquors and distilled s pirits, and thus construed as an investment beyond the reasonable needs I I of the business . "

It further held t hat: "In order to determine whether profits are accumulated £or the reasonable rieeds of the business as to avoid the surtax upon .

985

- 16 - shareholders, the controlling intention of the taxpayer is that which is manifested at the time of accumulation not subsequently declared intentions which are merely the product of afterthought.

f. .. spec>q~,l,?.t_i_y_E;> ___ ?nd _:i,ndefi,ni t~-- pu~pose ..... ~;i,.l,.l __ not ___ su_f;fip~!.-- _____ l:_h~. !!!f:='rE?_ .r:e_99gni ti,_on.. __ of. _a _ ;futl:lr:e_ ... P.r:.9.P-tl?.!'.l ___ g.D.c:i ..... t.D.!'?. ciiscussio_n, _of.

__ po~~j.ble ....

a\'1~ a+:t;e.:rQ?ti_\.'1?.

E!Olut,ions is _r:tot _ suff;i,._ciep_t . .. Qe.J:i r:tiJ:.er:te ~s of plan coupled w i t.h act ion ta_\5E?J), __ :t.9.W.~r.!:f.s ______ i,\~? consummat.i<:J.n .. _are ___ e~s_e_n_t;i..?.~. · " <Underscoring supplied> In the case under consideration, petitioner, in the taxable year 1979, had an increase in investment amounting to P694,531.81.

Its pleading, however, is bereft of any explanation on what type or kind of investments it entered into during the year.

Petitioner was confident that by mere stating that the corporation was organized to engage in the business of investing in marketable securities, bonds or debentures, the corporation is no longer liable under Section 25 of the Tax Code. In line with the doctrine enunciated in nanila Wine nerchants, case (supra>, this court finds the conclusion made by the petitioner totally misplaced. As to the proposed construction of an ice plant and salt making project, petitioner in the course of the trial, failed to present as part of its evidence, I the AT ticles of IncorporAtion and ,the Bo rd Resolutions to prove the approval or existence of the projects.

Consequently, this Court finds the proposal speculative '\- 9 86 _, ·'

- 17 - and indefinite.

They are mer ely conjectures, surmises or spec ulations which did not pass the "immediacy test" as discussed in the above - cited case .

WHEREFORE, in view of the foregoing, the final decision of the respondent ordering petitione~ to pay the amounts of P75,778.38 for deficiency income tax and P96,992 .02 for deficiency surtax is hereby AFFIRftED.

WE CONCUR:

. GRUBA Judge z~,. t(y RAI10N 0 DE V .

'A Associate Jud e Q~(Q,~ ERHESTO D. ACOSTA Presiding Judge CERTIFICATE I hereby certify that this decision was reached after due consultation among the members of the Court of Ta x Ap peals in a c c ordanc e with Section 13, Article VIII of th e Constitution. 98'( ~ Q.O-~ ERNESTO D. ACOSTA Presiding Judge _!