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    Zamora v. Collector

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    Pax Yabut
    Mariano Zamora appealed a decision of the Court of Tax Appeals (CTA) regarding the disallowance of certain business promotion expenses. The CTA had allowed a deduction of only half of the claimed P20,957 in expenses incurred by Zamora's wife for the promotion of his hotel and pharmacy businesses. Zamora argued the full amount should be allowed. The Supreme Court ruled in favor of the CTA, finding that without proper receipts to show which expenses were strictly for business as opposed to personal use, the 50% allocation was fair. Representation expenses must meet statutory requirements to be deductible, including being ordinary and necessary, reasonable in amount, and supported by documentation.

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    Zamora v. Collector

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    Pax Yabut
    426 views2 pages
    Mariano Zamora appealed a decision of the Court of Tax Appeals (CTA) regarding the disallowance of certain business promotion expenses. The CTA had allowed a deduction of only half of the claimed P20,957 in expenses incurred by Zamora's wife for the promotion of his hotel and pharmacy businesses. Zamora argued the full amount should be allowed. The Supreme Court ruled in favor of the CTA, finding that without proper receipts to show which expenses were strictly for business as opposed to personal use, the 50% allocation was fair. Representation expenses must meet statutory requirements to be deductible, including being ordinary and necessary, reasonable in amount, and supported by documentation.

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    Mariano Zamora appealed a decision of the Court of Tax Appeals (CTA) regarding the disallowance of certain business promotion expenses. The CTA had allowed a deduction of only half of the claimed P20,957 in expenses incurred by Zamora's wife for the promotion of his hotel and pharmacy businesses. Zamora argued the full amount should be allowed. The Supreme Court ruled in favor of the CTA, finding that without proper receipts to show which expenses were strictly for business as opposed to personal use, the 50% allocation was fair. Representation expenses must meet statutory requirements to be deductible, including being ordinary and necessary, reasonable in amount, and supported by documentation.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    426 views2 pages

    Zamora v. Collector

    Uploaded by

    Pax Yabut
    Mariano Zamora appealed a decision of the Court of Tax Appeals (CTA) regarding the disallowance of certain business promotion expenses. The CTA had allowed a deduction of only half of the claimed P20,957 in expenses incurred by Zamora's wife for the promotion of his hotel and pharmacy businesses. Zamora argued the full amount should be allowed. The Supreme Court ruled in favor of the CTA, finding that without proper receipts to show which expenses were strictly for business as opposed to personal use, the 50% allocation was fair. Representation expenses must meet statutory requirements to be deductible, including being ordinary and necessary, reasonable in amount, and supported by documentation.

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    MARIANO ZAMORA, petitioner,

    vs.
    COLLECTOR OF INTERNAL REVENUE and COURT OF TAX APPEALS,
    respondents.G.R. No. L-15290, May 31, 1963
    Paredes, J.:
    Facts:
    Mariano Zamora, owner of the Bay View Hotel and Farmacia Zamora, filed his
    income tax returns. The CIR found that he failed to file his return of the capital
    gains derived from the sale of certain real properties and claimed deductions
    which were not allowable. The collector required him to pay deficiency income
    tax. On appeal by Zamora, the CTA reduced the amount of deficiency income
    tax.
    Zamora appealed, alleging that the CTA erred in dissallowing P10,478.50, as
    promotion expenses incurred by his wife for the promotion of the Bay View
    Hotel and Farmacia Zamora (which is of P20,957.00, supposed business
    expenses).
    Zamora alleged that the CTA erred in disallowing P10,478.50 as promotion
    expenses incurred by his wife for the promotion of the Bay View Hotel and
    Farmacia Zamora. He contends that the whole amount of P20,957.00 as
    promotion expenses, should be allowed and not merely one-half of it, on the
    ground that, while not all the itemized expenses are supported by receipts, the
    absence of some supporting receipts has been sufficiently and satisfactorily
    established.
    Issue:
    Whether or not CTA erred in allowing only one half of the promotion expenses?
    Ruling: NO.
    Section 30, of the Tax Code, provides that in computing net income, there shall
    be allowed as deductions all the ordinary and necessary expenses paid or
    incurred during the taxable year, in carrying on any trade or business. Since
    promotion expenses constitute one of the deductions in conducting a business,
    same must satisfy these requirements. Claim for the deduction of promotion

    expenses or entertainment expenses must also be substantiated or supported


    by record showing in detail the amount and nature of the expenses incurred.
    Considering, as heretofore stated, that the application of Mrs. Zamora for dollar
    allocation shows that she went abroad on a combined medical and business
    trip, not all of her expenses came under the category of ordinary and necessary
    expenses; part thereof constituted her personal expenses. There having been
    no means by which to ascertain which expense was incurred by her in
    connection with the business of Mariano Zamora and which was incurred for
    her personal benefit, the Collector and the CTA in their decisions, considered
    50% of the said amount of P20,957.00 as business expenses and the other
    50%, as her personal expenses. We hold that said allocation is very fair to
    Mariano Zamora, there having been no receipt whatsoever, submitted to
    explain the alleged business expenses, or proof of the connection which said
    expenses had to the business or the reasonableness of the said amount of
    P20,957.00.
    In the case of Visayan Cebu Terminal Co., Inc. v. CIR., it was declared that
    representation expenses fall under the category of business expenses
    which are allowable deductions from gross income, if they meet the
    conditions prescribed by law, particularly section 30 (a) [1], of the Tax
    Code; that to be deductible, said business expenses must be ordinary and
    necessary expenses paid or incurred in carrying on any trade or business;
    that those expenses must also meet the further test of reasonableness in
    amount. They should also be covered by supporting papers; in the absence
    thereof the amount properly deductible as representation expenses should
    be determined from available data.

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