Alhambra vs Collector of Customs 102 SCRA 1337

Facts:
Alhambra is a corporation engaged in manufacturing tobaccos. It contends that the salaries of its officersKuenzle and Streiff, who are nonresident and are being paid P6,000.00,were reasonable and deductible as ordinary business expense as well as their commissions and director’s fees.

Issue:
Whether or not the salaries, commissions and director’s fees of Kuenzle and Streiff are deductible as ordinary expense

Ruling:
Qualified yes,considering the nature of the work of Kuenzle and Streiff, being president and vice-president of the company, respectively, their salaries are deductible as ordinary expense of the company. However, the commissions and director’s fees are not deductible because there is no evidence of any particular service rendered by them so as to warrant payment of commissions and with regards to director’s fee, it is quite inconceivable to accept that they are being paid P10,000.00 for a mere visit in their company in the Philippines. Director’s fees are more often a percentage of annual sales of the company.