Fernandez Hermanos v. Revenue

TEEHANKEE, J.:

These four appears involve two decisions of the Court of Tax Appeals determining the taxpayer's income tax liability for the years 1950 to 1954 and for the year 1957. Both the taxpayer and the Commissioner of Internal Revenue, as petitioner and respondent in the cases a quo respectively, appealed from the Tax Court's decisions, insofar as their respective contentions on particular tax items were therein resolved against them. Since the issues raised are interrelated, the Court resolves the four appeals in this joint decision.

Cases L-21551 and L-21557 The taxpayer, Fernandez Hermanos, Inc., is a domestic corporation organized for the principal purpose of engaging in business as an "investment company" with main office at Manila. Upon verification of the taxpayer's income tax returns for the period in question, the Commissioner of Internal Revenue assessed against the taxpayer the sums of P13,414.00, P119,613.00, P11,698.00, P6,887.00 and P14,451.00 as alleged deficiency income taxes for the years 1950, 1951, 1952, 1953 and 1954, respectively.

Said assessments were the result of alleged discrepancies found upon the examination and verification of the taxpayer's income tax returns for the said years, summarized by the Tax Court in its decision of June 10, 1963 in CTA Case No. 787, as follows: 1. Losses - a. Losses in Mati Lumber Co. (1950) P 8,050.00 b.

Losses in or bad debts of Palawan Manganese Mines, Inc. (1951) 353,134.25 c. Losses in Balamban Coal Mines - 1950 8,989.76 1951 27,732.66 d. Losses in Hacienda Dalupiri - 1950 17,418.95 1951 29,125.82 1952 26,744.81 1953 21,932.62 1954 42,938.56 e.

Losses in Hacienda Samal - 1951 8,380.25 1952 7,621.73 2. Excessive depreciation of Houses - 1950 P 8,180.40 1951 8,768.11 1952 18,002.16 1953 13,655.25 1954 29,314.98 3. Taxable increase in net worth - 1950 P 30,050.00 1951 1,382.85 4.

Gain realized from sale of real property in 1950 P 11,147.2611 The Tax Court sustained the Commissioner's disallowances of Item 1, sub-items (b) and (e) and Item 2 of the above summary, but overruled the Commissioner's disallowances of all the remaining items. It therefore modified the deficiency assessments accordingly, found the total deficiency income taxes due from the taxpayer for the years under review to amount to P123,436.00 instead of P166,063.00 as originally assessed by the Commissioner, and rendered the following judgment: RESUME 1950 P2,748.00 1951 108,724.00 1952 3,600.00 1953 2,501.00 1954 5,863.00 Total