G.R. No. L-9408 - Hilado vs. Collector of Internal Revenue

On March 31, 1952, petitioner Emilio Y. Hilado filed his 1951 income tax return with the Treasurer of Bacolod City, claiming a deduction of ₱12,837.65 pursuant to General Circular No. V-123 issued by the Collector of Internal Revenue under rules laid down by the Secretary of Finance.
The Collector issued an assessment notice demanding payment of ₱9,419.00, which petitioner paid in monthly installments, completing payment on January 2, 1953.

On August 30, 1952, the Secretary of Finance, through the Collector, issued General Circular No. V-139, revoking Circular No. V-123 and providing that losses from World War II casualties are deductible only in the year of actual loss.
The Collector disallowed the ₱12,837.65 deduction for 1951, assessed a deficiency tax of ₱3,546.00, and denied petitioner’s motion for reconsideration.

Petitioner filed a petition for review with the Court of Tax Appeals, which affirmed the deficiency assessment.
Petitioner then appealed to the Supreme Court.

The claimed ₱12,837.65 was part of petitioner’s war damage claim approved by the Philippine War Damage Commission under the Philippine Rehabilitation Act of 1946 but unpaid due to lack of U.S. congressional appropriation.
The last installment received and notice of no further payment occurred in 1950; the claim depended on Commission discretion and was not enforceable as a legal right (Section 113 of the Rehabilitation Act).

Whether the ₱12,837.65 war damage claim is deductible as a loss in petitioner’s 1951 taxable year.
Whether the unpaid war damage claim constitutes a “business asset” deductible under the National Internal Revenue Code.
Whether General Circular No. V-139 is valid and may be applied retroactively, revoking General Circular No. V-123.
Whether Philippine internal revenue laws, including loss deductions, were in force and enforceable during the period of enemy occupation.