Taxation Law Case Digest:

PILMICO-MAURI FOODS CORP., PETITIONER, vs. COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.

Principle:

In supporting a claim for business deductions, the sales invoices and or official receipts must be presented in order to meet the requirements laid down in Section 238 of the 1977 Tax Code.

Facts:

Pilmico, the petitioner, was assessed in its withholding and value-added, and deficiency income tax for the taxable year 1996. The assessment shows that Pilmico has a claim of business deduction pertaining to the purchased raw materials that were disallowed based on its failure to support the necessary sales invoices as expressed under Section 238 of the 1977 Tax Code. The Court of Tax Appeals that there were alterations in the sales invoice which creates serious doubts about its authenticity.

Now, Pilmico raises an argument that Section 29 of the 1977 Tax Code shall be applicable to determine the deductibility of its expenses such as the expenses of the ordinary and necessary expenses; that must be incurred within the taxable year; and must be incurred in carrying the trade of business.  Further, Pilimico argues that the law does not require official receipts to support the expenses incurred before the 1977 Tax Code took effect.

Issue:

Whether Section 238 of 1977 Tax Code applies to the deductibility of expenses at hand

Ruling:

The Court ruled in its affirmative.

The Court emphasized that Section 238 and Section 29 of the Tax Code are to be read together. The official receipts are not the sole pieces of evidence that can prove the alleged expenses but such receipts shall be subjected to an examination once presented. Here, since such receipts were presented, the Court of Tax Appeals cannot be faulted for making reference of the same. Consequently, Section 238 of the 1977 Tax Code is applicable to determine       if such receipts and invoices presented may substantiate the claim for deduction.