Esso Standard Eastern, Inc. v CIR
GR Nos L-28508-9, July 7, 1989
FACTS:
Esso deducted from its gross income, as part of its ordinary and necessary business expenses, margin fees it had paid to the Central Bank on its profit remittances to its New York Office. The CIR disallowed the claimed deduction. ESSO appealed to the CTA but was denied. Hence, this petition.
ISSUE:
Whether the margin fees were deductible from gross income either as a
FACTS:
Esso deducted from its gross income, as part of its ordinary and necessary business expenses, margin fees it had paid to the Central Bank on its profit remittances to its New York Office. The CIR disallowed the claimed deduction. ESSO appealed to the CTA but was denied. Hence, this petition.
ISSUE:
Whether the margin fees were deductible from gross income either as a
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(1) tax or
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(2) ordinary and necessary business expense
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(1) No, it is not a tax. A tax is levied to provide revenue for government operations, while the proceeds of the margin fee are applied to strengthen our country’s international reserves. Thus the margin fee was imposed by the State in the exercise of its police power ant not the power of taxation.
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(2) No. ESSO has not shown that the remittance to the head office of part of its profits was made in furtherance of its own trade or business. The petitioner merely presumed that all corporate expenses are necessary and appropriate in the
absence of a showing that they are illegal or ultra vires. This is error. The public respondent is correct when it asserts that
the paramount rule is that claims for deductions are a matter of legislative grace and do not turn on mere equitable
considerations... The taxpayer in every instance has the burden of justifying the allowance of any deduction claimed.
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