SPIT | B2015CASE DIGESTS

Perez vs. CTAMay 30, 1958Reyes, J.B.L., J.Francis G. Francisco(This is a 1 page case in the Unreported Cases section of Phil. Reports. I recommend just reading the original)SUMMARY: The CTA ordered Eugenio Perez, the petitioner, to pay P41,547.77 as deficiency income taxes for 1947-1950. The amount was arrived at on the basis of Eugenios increase in net worth. Both the Collector of Internal Revenue and CTA applied the net worth method of determining taxable income.

ISSUE: WON the net worth method appliesDOCTRINE: Yes. The authority to use this method in determining income is rooted from Sec. 41 of the Internal Revenue Code of 1939 of the United State. The method is based upon the general theory that money and other assets in excess of liabilities of a taxpayer, after an accurate and proper adjustment of non-deductible items, not accounted for by his income tax returns, lead to the inference that part of his income has not been reported. No cogent reason is shown for deviating from this practice in the Philippines. Section 38 of the NIRC authorizes the application of the Net Worth Method in this jurisdiction.

DISPOSITIVE: Decision AFFIRMED. Perez must pay the tax deficiency.