Facts:

• The case Jose Ledesma vs. The Collector of Internal Revenue and the Provincial Treasurer of Occidental Negros was filed on March 11, 1918, in the Court of First Instance of Occidental Negros.
• Plaintiff Jose Ledesma sought to recover P10,065.44 paid under protest related to his 1916 income tax.
• Ledesma claimed deductions:
  • P135,229.10 for employee compensation,
  • P6,281.55 for "depreciacion de valores en cartera,"
  • P8,000 for "exencion personal."
• The defendants rejected these claims, insisting on taxing Ledesma's full income.
• Ledesma argued that employee payments were fixed compensations, while the Attorney-General argued they were bonuses, not legitimate expenses.
• The lower court, led by Judge Norberto Romualdez, allowed the P135,229.10 deduction but denied the P6,381.55 for book depreciation.
• The court ordered the defendants to refund P9,199.55 to Ledesma, without interest or costs.
• Both parties appealed: Ledesma sought interest, while the defendants contested the employee compensation deduction.

Issue:

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Ruling:

• The Supreme Court ruled that the lower court did not err in denying interest on the awarded amount, as the law at that time prohibited interest collection in such cases.
• The Supreme Court affirmed the lower court's decision to allow the ...(Unlock)

Ratio:

• The Supreme Court's denial of interest was based on Section 1579 of Act No. 2711, which prohibited interest in similar actions.
• The court noted that Ledesma's payment was made on December 20, 1917, and the applicable law governed the case.
• Regarding the P135,229.10 deduction, the court determined that the payments were fixed compensations based on employee contributions, not bonus...continue reading