BIR Ruling

April 23, 1996 Casita Crafts, Inc. 2720 A Taft Avenue Ext. Pasay City Attention: Gerardo P . Roces President Gentlemen : This refers to your deficiency income tax for 1987 in the amount of P983,372.56 under Assessment No. 002263-87 dated January 28, 1991. cdtech The above deficiency income tax assessment was based on claimed deductions which were disallowed for being unsupported. Other items of claimed deductions like rental payments, legal and audit fees, among others, were likewise disallowed due to your failure to subject said payments to expanded withholding taxes which is a mandatory requirement before said expenses can be allowed as deductions from gross income. (RMO No. 13-80 dated March 14, 1980). A careful study of the records of your case disclosed that although the claimed deductions were not adequately supported by documentary evidences such as official receipts and/or disbursement vouchers, our revenue examiner allowed 50% of the said claimed deductions, applying the Cohan Rule thereto which states that "Where the taxpayer kept inadequate records and the precise amount of expenses is hard to determine, it is the duty of the Court to make determination, even if the result is a mere approximation" (Zamora V. Commissioner, CTA Case No. 234, Dec. 29, 1958) Moreover, we find the documents you later submitted to this Office, in response to our request for the submission of the same to substantiate your protest, to be unsubstantial as they are not in complement of those already presented to our examiner. Accordingly, your protest has to be as it is hereby denied for being unsubstantiated. In view of the foregoing, you are hereby ordered to pay to the Revenue District Office located in your place of business, the above deficiency income tax in the amount of P983,372.56, plus increments that have accrued thereon, within fifteen (15) days from your receipt hereof otherwise, collection thereof will be enforced through the summary remedies provided by law, without further notice. This constitutes the final decision of this Office on the matter. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue