Commissioner of lnternal Revenue vs.

Algue, Inc,

FACTS:
 January 14, 1965, Algue, a domestic corporation engaged in engineering,
construction and other allied activities, received a letter from the petitioner
assessing it in the total amount of P83,183.85 as delinquency income taxes for
the years 1958 and 1959.
 January 18, 1965, Algue filed a letter of protest or request for reconsideration,
which letter was stamp-received on the same day
 March 12, 1965, a warrant of distraint and levy was presented to Algue, through
its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of
the pending protest.
o Protest could not be found in the dockets so Guevara produced his file
copy and gave a photostat to BIR agent Ramon Reyes, who deferred
service of the warrant
 April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any
action on the protest thus he accepted the warrant of distraint and levy.
 April 23, 1965, Algue filed a petition for review of the decision of the CIR with the
CTA.

ISSUE + RULING:

Whether or not the appeal was made on time? YES

 Rep. Act No. 1125: the appeal may be made within thirty days after receipt of the
decision or ruling challenged
 GR: the warrant of distraint and levy is "proof of the finality of the assessment"
and "renders hopeless a request for reconsideration," being "tantamount to an
outright denial thereof and makes the said request deemed rejected."
 XPN: there is a special circumstance in the case at bar that prevents application
of this accepted doctrine.
o 4 days after notice of assessment, Algue filed its protest but was not
taken into account before the warrant of distraint and levy was issued, for
it was lost. So protest was only taken into account when atty. Guevara
gave a copy. Thus during the intervening period, the warrant was
premature and could therefore not be served.
o It had the effect of suspending on January 18 the reglementary period
which started on the date the assessment was received, January 14. The
period started running again only on April 7,when the Algue was definitely
informed of the implied rejection
o Hence, when the appeal was filed on April 23, 1965, only 20 days of the
reglementary period had been consumed.

Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by Algue as legitimate business expenses in its income tax
returns? YES
 CIR: claimed deduction of P75,000.00 was properly disallowed because it was
not an ordinary, reasonable or necessary business expense but a mere
imaginary deduction
 Amount had been legitimately paid by the Algue for actual services rendered.
Payment was in the form of promotional fees collected by the payees for their
work.
 Facts showing it was a promotional fee and not a tax dodge as CIR propose and
it was not excessive.