Commissioner vs.

Algue

GRL-28890, 17 February 1988

First Division, Cruz (J); 4 concur

Facts: The Philippine Sugar Estate Development Company (PSEDC) appointed Algue Inc. as its agent,
authorizing it to sell its land, factories, and oil manufacturing process. The Vegetable Oil Investment
Corporation (VOICP) purchased PSEDC properties. For the sale, Algue received a commission of
P125,000 and it was from this commission that it paid Guevara, et. al. organizers of the VOICP, P75,000
in promotional fees. In 1965, Algue received an assessment from the Commissioner of Internal Revenue
in the amount of P83,183.85 as delinquency income tax for years 1958 amd 1959. Algue filed a protest
or request for reconsideration which was not acted upon by the Bureau of Internal Revenue (BIR). The
counsel for Algue had to accept the warrant of distrant and levy. Algue, however, filed a petition for
review with the Coourt of Tax Appeals.

Issue: Whether the assessment was reasonable.

Held: Taxes are the lifeblood of the government and so should be collected without unnecessary
hindrance. Every person who is able to pay must contribute his share in the running of the government.
The Government, for his part, is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their moral and material values. This symbiotic
relationship is the rationale of taxation and should dispel the erroneous notion that is an arbitrary
method of exaction by those in the seat of power. Tax collection, however, should be made in
accordance with law as any arbitrariness will negate the very reason for government itself. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate that the law has not been observed. Herein, the claimed deduction (pursuant to Section 30
[a] [1] of the Tax Code and Section 70 [1] of Revenue Regulation 2: as to compensation for personal
services) had been legitimately by Algue Inc. It has further proven that the payment of fees was
reasonable and necessary in light of the efforts exerted by the payees in inducing investors (in VOICP) to
involve themselves in an experimental enterprise or a business requiring millions of pesos. The
assessment was not reasonable.