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Tax Deductibility of Farming and Representation Expenses

Santiago Gancayco appealed a tax deficiency assessed by the Collector of Internal Revenue for deductions claimed on his 1949 income tax return for farming and representation expenses. The court ruled that the farming expenses were not deductible as they were capital expenditures for developing Gancayco's property prior to it becoming productive. The court allowed deduction of the representation expenses that Gancayco could substantiate with receipts or invoices, but disallowed amounts that lacked documentation.

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517 views1 page

Tax Deductibility of Farming and Representation Expenses

Santiago Gancayco appealed a tax deficiency assessed by the Collector of Internal Revenue for deductions claimed on his 1949 income tax return for farming and representation expenses. The court ruled that the farming expenses were not deductible as they were capital expenditures for developing Gancayco's property prior to it becoming productive. The court allowed deduction of the representation expenses that Gancayco could substantiate with receipts or invoices, but disallowed amounts that lacked documentation.

Uploaded by

Mini U. Soriano
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© © All Rights Reserved
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GR No.

L-13325 / April 20, 1961


Santiago Gancayco v. The Collector of Internal Revenue (CIR)

Facts:
Gancayco filed his income tax return for 1949 with a claim for deduction for his farming expenses and
representation expenses. A year after, he was assessed of a deficiency by the CIR ruling that the subject
items were not deductible. A warrant of distraint and levy against his properties was already issued.
Should it fail, a judicial action can be resorted to, even simultaneously, as a remedy to collect tax. Hence,
the appeal.

Issue:
Whether or not the farming expenses and representation expenses are deductible items of income tax.

Held:
The farming expenses are not a deductible item while the representation expenses are deductible. No
evidence has been presented concerning the nature of the farming expenses except that they were
spent for the development and cultivation of his property. Amounts expended in the development of
farms, orchards, and ranches prior to the time when the productive state is reached may be regarded as
investments of capital or capital expenditure where deduction is not allowed as under Section 31 of the
Tax Code. On the matter of representation expenses, amounts which cannot be specified for absence of
receipts, invoices, or vouchers of expenditures was not allowed to be deducted in income tax.

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