Collector of Internal Revenue v Goodrich (1967)

Collector of Internal Revenue v Goodrich GR No L-22265, December 22, 1967

FACTS:
Goodrich claimed for deductions based upon receipts issued, not by entities in which alleged expenses had been incurred but by the officers of Goodrich who allegedly paid for them. The CIR disallowed deductions in the amount of P50,455.41 for 1951 for bad debts and P30,188.88 for 1952 for representation expenses. Goodrich appealed from the said assessment to the CTA which allowed the deductions.

ISSUE:
Are the deductions proper?

RULING:
The representation expenses are totally disallowed but the bad debts are allowed up to P22,627.35 only. The requirement of ascertaining the worthlessness require proof of 2 facts:

1. That the taxpayer did in fact ascertain the debt to be worthless;
   
2. That he did so, in good faith.
   

The above requirements have not been adequately proven to be complied with by Goodrich.