35.

[G.R. No. L-12954. February 28, 1961.]

COLLECTOR OF INTERNAL REVENUE, Petitioner, v. ARTHUR HENDERSON, Respondent

TAXATION; INCOME TAXES; ALLOWANCES FOR BUSINESS EXECUTIVE’S HOUSING EXPENSES;

CASE AT BAR. — The taxpayers in the case at bar, are childless and there are only the two of
them in the family. Although the quarters they occupied exceeded their personal needs, the
exigencies of husband-taxpayer’s high executive position demanded and compelled them to live in
more spawning and pretentious quarters like the ones they had occupied. They had to entertain
and put up house-guests in their apartments. This is the reason why the husband-taxpayer’s
employer-corporation had to grant him allowance for rental and utilities in addition to his annual
basic salary to take care of those extra expenses for rental and utilities in excess of their personal
needs. The fact that the taxpayers had to live or did not have to live in the apartment’s chosen by
the husband-taxpayer’s employer-corporation is of no moment, for no part of the allowances in
question redounded to their personal benefit or was retained by them. Their bills for rental and
utilities were paid directly by the employer-corporation to the creditors. Nevertheless, the
taxpayers are entitled only to a ratable value of the allowances in question. Only the reasonable
amount they would spent for house rental and utilities such as light, water, telephone, etc.,
should be subject to tax. The excess should be considered as expenses of the corporation.

36. Limpan v CIR

37. CIR v PAL
38. CIR v CA
39. Bibiano Banas v CA