CIR vs Henderson

Principle/s:

-          Gross Income includes gains, profits, and income derived from salaries, wages, or compensation for personal services whatever kind and in whatever form paid.

Collector of Internal Revenue vs Henderson

GR No. L-12954, 1961

FACTS:

In the foregoing assessments, the Bureau of Internal Revenue considered as part of the spouses (American Citizens) taxable income the taxpayer husband’s allowances for rental, residential expenses, water, electricity and telephone; bonus paid to him; withholding tax and entrance fee to the Marikina Gun and Country Club paid by his employer for his account; and traveling allowance of his wife.

ISSUE:

Whether the allowances shall all be exempted from gross income?

HELD:

“Gross Income” includes gains, profits, and income derived from salaries, wages, or compensation for personal service whatever kind and in whatever form paid, or from professions, vocations, trades, businesses, commerce, sales, or dealings in property, whether real or personal, growing out of the ownership or use of or interest in such property; also from interest, rents, dividends, securities, or the transactions of any business carried on for gain or profit, or gains, profits, and income derived from any source whatever.

Their bills for rental and utilities were paid directly by the employer-corporation to the creditors. Nevertheless, as correctly held by the Court of Tax Appeals, the taxpayers are entitled only to a ratable value of the allowances in question, and only the amount of P4,800.00 annually, the reasonable amount they have spent for home rental and utilities such as light, water, telephone, etc., should be the amount subject to tax, and the excess considered as expenses of the corporation.