FACTS
The CIR slapped Algue, Inc. with an assessment for delinquency taxes from 1958 to 1959 amounting to P83,183.85.
The company filed a letter of protest, claiming that the P75,000 deduction it had made was paid for promotional fees, for services rendered in the creation of the Vegetable Oil Investment Corporation of the Philippines,. and its subsequent purchase of the properties of the Philippine Sugar Estate Development Co.
Subsequently, a warrant of distraint and levy was presented to the company's counsel, who refused to receive it on account of the pending protest.
The company filed an appeal before the CTA, which ruled that indeed, the subject amount had been legitimately paid by company for actual services rendered.
The CIR insisted that said deduction was fictitious and a mere attempt to evade a legitimate assessment.
RULING
The Court ruled in favor of Algue, Inc.
The burden is on the taxpayer to prove the validity of the claimed deduction. In this case, the onus has been charged satisfactorily. Algue, Inc. has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise.
Even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.
