CASE DIGEST

LAW ON TAXATION

Joselito T. Santos Jr.

1/31/20114-CLM

ATTY. Sherwin Prose Castaneda

CIR vs. Algue, Inc.G.R. No. L-28896February 17, 1988

Facts:

According to this case on 14 January 1965, private respondent, a domestic corporation, received a letter from the petitioner assessing the former’s delinquency income taxes in the total amount of P 83,183.85 for the years 1958 and 1959. On 18 January 1965, Algue filed a letter of protest or request for consideration, which letter was stamped on the same day in the office of the petitioner. On 12 March 1965, a warrant of distrait and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest. On 7 April 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distrait and levy earlier sought to be served.

On 23 April 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals disallowing a deduction a deduction of P 75,000 as business expense.

Issue:

Whether or not the appeal from the CIR was made on time and in accordance with the law.

Held:

According to the ruling of the court, Yes, the appeal by the private respondent from the CIR was made on time and in accordance with the law.As the Court of Tax Appeals stated the protest filed by the private respondent was not pro forma and was based on strong legal considerations.  It thus had the effect of suspending on 18 January 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., 14 January 1965. The period started running again only on 7 April 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on 23 April 1965 only 20 days of the reglementary period had been consumed.

Maceda vs. Macaraig

1

GR 88291, 31 May 1991

Facts:

According to this case an act was created and it was named Commonwealth Act 120 created NAPOCOR as a public corporation to undertake the development ofhydraulic power and the production of power from other sources. RA 358 (1949) granted NAPOCOR tax and duty exemption privileges. RA 6395 (1971) revised the charter of the NAPOCOR, tasking it to carry out the policy of the national electrification, and provided in detail NAPOCOR’s tax exceptions. PD 380 (1974) specified that NAPOCOR’s exemption includes all taxes, etc. imposed “directly or indirectly.” PD 938 integrated the exemptions in favor of GOCCs including their subsidiaries; however, empowering the President or the Minister of Finance, upon recommendation of the Fiscal Incentives Review Board (FIRB) to restore, partially or completely, the exemptions withdrawn or revised. The FIRB issued Resolution 10-85 (7 February1985) restoring the duty and tax exemptions privileges of NAPOCOR for period 11 June 1984- 30 June 1985.Resolution 1-86 (1January 1986) restored such exemption indefinitely effective 1 July 1985. EO 93 (1987) again withdrew the exemption. FIRB issued Resolution 17-87 (24 June 1987) restoring NAPOCOR’s exemption, which was approved by the President on 5 October 1987.

Issue:

Whether or not NAPOCOR cease to enjoy exemption from indirect tax when PD 938 was enacted.

Held: According to court ruling NAPOCOR is a non-profit public corporation created for the

general good and welfare, and wholly owned by the government of the Republic of the Philippines. From the very beginning of the corporation’s existence, NAPOCOR enjoyed preferential tax treatment “to enable the corporation to pay the indebtness and obligation” and effective implementation of the policy enunciated in Section 1 of RA 6395. From the preamble of PD 938, it is evident that the provisions of PD 938 were not intended to be strictly construed against NAPOCOR. On the contrary, the law mandates that it should be interpreted liberally so as to enhance the tax exempt status of NAPOCOR.

PBCOM vs. CIR

2

G.R. No.119024

(January 28, 1999)

Facts:

The relevant facts of this case were the following. PBC paid its income tax for the first

and second quarters of 1985. PBC suffered losses so that when it filed its annual income tax for

the year during the end 1986, it reported a net loss and declared no tax payable for the year. PBC

also earned rental income for both 1985 and 1986 and the corresponding tax thereof was

withheld and remitted by the lessees to the BIR. After more than two years from payment of

taxes, PBC filed for a tax refund. Pending investigation of the BIR, petitioner filed a petition for

review with the Court of Tax Appeals. The CTA denied the tax refund on the ground that

application for refund must be made within two years from the payment of tax as provided by the

National Internal Revenue Code. Petitioner contended that the two year period has been changed

to ten years upon a memorandum issued by the Commissioner of Internal Revenue. The Court of

Appeal affirmed in toto the ruling of the CTA.

Issue:

Whether or not the CTA err in denying the plea for tax refund on the ground of prescription?

Held:

According to the ruling of this case the court site a section which was Section 230 of the

National Internal Revenue Code of 1977 which provides for the two year period for filing a

claim for refund or credit. When the Acting Commissioner of Internal Revenue issued a

memorandum changing the prescriptive period of two years to ten years, such circular created a

clear inconsistency with the provision of Section 230 of NIRC. In so doing, the BIR did not

simply interpret the law, rather it legislated guidelines contrary to the statute passed by the

congress

Caltex Philippines vs. Commission on Audit (COA)GR 92585, 8 May 1992

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Facts:

Sometime in 1989, COA sent a letter to Caltex, directing it to remit its collection to the Oil Price Stabilization Fund (OPSF), excluding that unremitted for 1986 and 188 of the additional tax on petroleum products authorized under Section 8 of PD 1956; and that pending such remittance, all its claims for reimbursement from the OPSF shall be held in abeyance. Caltex requested COA, notwithstanding an early release of its reimbursement certificates from the OPSF, which COA denied. On 31 May 1989, Caltex submitted a proposal to COA for the payment and the recovery of claims. COA approved the proposal but prohibited Caltex from further off setting remittances and reimbursements for the current and ensuing years. Caltex moved for reconsideration.

Issue: Whether the amounts due from Caltex to the OPSF may be offsetted against Caltex’

outstanding claims from said funds.

Held:

The court enlightened the case by providing this ruling. Taxation is no longer envisioned as a measure merely to raise revenue to support the existence of government; taxes may be levied with a regulatory purpose to provide means for the rehabilitation and stabilization of a threatened industry which is affected with public interest as to be within the police power of the state. PD 1956, as amended by EO 137, explicitly provides that the source of OPSF is taxation. A taxpayer may not offset taxes due from the claims that he may have against the government. Taxes cannot be the subject of compensation because the government and taxpayer are not mutually creditors and debtors of each other and a claim for taxes is not such a debt, demand, contract or judgment as is allowed to be set-off.

Philex Mining vs. CIR

4

GR 125704, August 28, 1998

Facts:

              According to this case a certain mining company named  Philex Mining Corporation, assails the decision of the court of appeals which affirmed the decision of the court of tax appeals ordering the mining company to pay its excise tax liability Philex refused to pay and contended it has pending claims for vat input credit or refund against the government which should be made compensate or set-off its tax liability.

Issue: Can tax be subject for set-off?

Held: 

              The answer of the court was clear and direct because according to the court; tax cannot be the subject for compensation for simple reason that the government and the tax payer are not mutual creditors and debtors of each other. Debts are due in the government in its’ corporate capacity while taxes are due to the government in its’ sovereign capacity. A tax payer cannot refuse to pay his taxes when they fall due simply because he has a claim against the government that the collection of the tax is contingent on the result of the law suit it filed against the government.

Lutz vs. Araneta GR L-7859, 22 December 1955

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Facts:

According to this case a man named Walter Lutz, a Judicial Administrator of the Intestate Estate of Antonio Jayme Ledesma, sought to recover the sum of P14,6666.40 paid by the estate as taxes from the Commissioner under Section e of Commonwealth Act 567 (the Sugar Adjustment Act), alleging that such tax is unconstitutional as it levied for the aid and support of the sugar industry exclusively, which is in his opinion not a public purpose.

Issue: Whether the tax is valid in supporting an industry.

Held:

The ruling of the court was the tax is valid. Because tax is levied with a regulatory purpose, which provides means for the rehabilitation and stabilization of the threatened sugar industry. The act is primarily an exercise of police power, and is not a pure exercise of taxing power. As sugar production is one of the great industries of the Philippines; and that its promotion, protection and advancement redounds greatly to the general welfare, the legislature found that the general welfare demanded that the industry should be stabilized, and provided that the distribution of benefits there from be readjusted among its component to enable it to resist the added strain of the increase in tax that it had to sustain.

Gomez vs. PalomarG.R. No. L-23645

6

October 29, 1968

Facts:

The facts of the case were the following. Republic Act 1635, as amended by Republic Act 2631 which provides: To help raise funds for the Philippine Tuberculosis Society, the Director of Posts shall order for the period from August nineteen to September thirty every year the printing and issue of semi-postal stamps of different denominations with face value showing the regular postage charge plus the additional amount of five centavos for the said purpose, and during the said period, no mail matter shall be accepted in the mails unless it bears such semi-postal stamps: Provided, That no such additional charge of five centavos shall be imposed on newspapers. The additional proceeds realized from the sale of the semi-postal stamps shall constitute a special fund and be deposited with the National Treasury to be expended by the Philippine Tuberculosis Society in carrying out its noble work to prevent and eradicate tuberculosis.

The particular statute further states that no mail matter of whatever class, and whatever domestic or foreign, posted at any Philippine Post Office and addressed for delivery in this country or abroad, shall be accepted for mailing unless it bears at least one such semi-postal stamp showing the additional value of five centavos intended for the Philippine Tuberculosis Society. It further states that Mails posted during the said period starting in 1958, which are found in street or post-office mail boxes without the required semi-postal stamp, shall be returned to the sender, if known, with a notation calling for the affixing of such stamp. If the sender is unknown, the mail matter shall be treated as nonsalable and forwarded to the Dead Letter Office for proper disposition. On 15 September 1963 the petitioner Benjamin P. Gomez mailed a letter at the post office in San Fernando, Pampanga. Because such letter did not bear the special anti-TB stamp required by the statute, it was returned to the petitioner.

Issue:Whether or not the statute is constitutional.

Held:The court dismissed the complaint because according to the court it is constitutional.

Also the court reiterates that the anti-TB stamp is a distinctive stamp which shows on its face not only the amount of the additional charge but also that of the regular postage. It is likewise true that the statute does not provide for the disposition of mails which do not bear the anti-TB stamp, but a declaration therein that "no mail matter shall be accepted in the mails unless it bears such semi-postal stamp" is a declaration that such mail matter is nonmailable.

Pepsi-Cola Bottling Co. vs. City of ButuanGR L-22814, 28 August 1968

Facts:

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According to this case an ordinance which was ordinance 110 was enacted by the City of Butuan imposing a tax of P0.10 per case of 24 bottles of softdrinks or carbonated drinks. The tax was imposed upon dealers engaged in selling softdrinks or carbonated drinks. When Ordinance 110, the tax was imposed upon an agent or consignee of any person, association, partnership, company or corporation engaged in selling softdrinks or carbonated drinks, with “agent or consignee” being particularly defined on the inserted provision Section 3-A. In effect, merchants engaged in the sale of softdrinks, etc. are not subject to the tax unless they are agents or consignees of another dealer who must be one engaged in business outside the City. Pepsi-Cola Bottling Co. filed suit to recover sums paid by it to the city pursuant to the Ordinance, which it claims to be null and void.

Issue: Whether the Ordinance is discriminatory.

Held:

According to the court the amended ordinance, is discriminatory since only sales by “agents or consignees” of outside dealers would be subject to the tax. Sales by local dealers, not acting for or on behalf of other merchants, regardless of the volume of their sales , and even if the same exceeded those made by said agents or consignees of producers or merchants established outside the city, would be exempt from the tax. The classification made in the exercise of the authority to tax, to be valid must be reasonable, which would be satisfied if the classification is based upon substantial distinctions which makes real differences; these are germane to the purpose of legislation or ordinance; the classification applies not only to present conditions but also to future conditions substantially identical to those of the present; and the classification applies equally to all those who belong to the same class.

CIR vs. British Overseas Airways Corporation

G.R. No. 65773-74

8

April 30, 1987

Facts:

In this case the relevant facts were the following. British Overseas Airways Corp. (BOAC) is a 100% British Government-owned corporation engaged in international airline business and is a member of the Interline Air Transport Association, and thus, it operates air transportation service and sells transportation tickets over the routes of the other airline members. From 1959 to 1972, BOAC had no landing rights for traffic purposes in the Philippines and thus did not carry passengers and/or cargo to or from the Philippines but maintained a general sales agent in the Philippines. The Commissioner of Internal Revenue assessed deficiency income taxes against BOAC.

Issue: Whether the revenue derived by BOAC from ticket sales in the Philippines for air

transportation, while having no landing rights in the Philippines, constitute income of BOAC from Philippine sources, and accordingly, taxable.

Held:

The court enlightened the case by providing this ruling. For the source of income to be considered as coming from the Philippines, it is sufficient that the income is derived from activity within the Philippines. Herein, the sale of tickets in the Philippines is the activity that produced the income. The tickets exchanged hands here and payments for fares were also made here in Philippine currency. The situs of the source of payments is the Philippines. The flow of wealth proceeded from, and occurred within, Philippine territory, enjoying the protection accorded by the Philippine Government. In consideration of such protection, the flow of wealth should share the burden of supporting the government. PD 68, inrelation to PD 1355, ensures that international airlines are taxed on their income from Philippine sources. The 2 1/2 %tax on gross billings is an income tax. If it had been intended as an excise or percentage tax, it would have been placed under Title V of the Tax Code covering taxes on business

Villegas vs, HiuChiong Tsai PaoHoGR L-29646, 10 November 1978

Facts:

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According to the case the Municipal Board of Manila enacted Ordinance 6537 requiring aliens (except those employed in the diplomatic and consular missions of foreign countries, in technical assistance programs of the government and another country, and members of religious orders or congregations) to procure the requisite mayor’s permit so as to be employed or engage in trade in the City of Manila. The permit fee is P50, and the penalty for the violation of the ordinance is 3 to 6 months imprisonment or a fine of P100 to P200, or both.

Issue: Whether the ordinance imposes a regulatory fee or a tax.

Held: The court ruled that the ordinance’s purpose is clearly to raise money under the guise of

regulation by exacting P50 fromaliens who have been cleared for employment. The amount is unreasonable and excessive because it fails toconsider difference in situation among aliens required to pay it, i.e. being casual, permanent, part-time, rankand-file or executive.

Province of Abra vs. HernandoGR L-49336, 31 August 1981

Facts:

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The provincial assessor made a tax assessment on the properties of the Roman Catholic Bishop of Bangued. The bishop claims tax exemption from real estate tax, through an action for declaratory relief. A summary judgment was made granting the exemption without hearing the side of the Province of Abra.

Issue: Whether the properties of the Bishop of Bangued are tax-exempt.

Held: According to the ruling the judge accepted at its face the allegation of the Bishop instead

of demonstrating that there is compliance with the constitutional provision that allows an exemption. There was an allegation of lack of jurisdiction and of lack of cause of action, which should have compelled the judge to accord a hearing to the province rather than deciding the case immediately in favor of the Bishop. Exemption from taxation is not favored and is never presumed, so that if granted, it must be strictly construed against the taxpayer. There must be proof of the actual and direct use of the lands, buildings, and improvements for religious (or charitable) purposes to be exempted from taxation. since as to such property “exception is the rule and taxation the exception.

Kapatiran ng mgaNaglilingkod sa Pamahalaang Pilipinas vs. CIRG.R. No. 81311June 30, 1988

Facts:

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According to this case Kapatiran ng mga Naglilingkod sa Pamahalaang Pilipinas wanted to nullify Executive Order 273 (EO 273), issued by the President of the Philippines on 25 July 1987, to take effect on 1 January 1988. Four petitions assailed the validity of the VAT Law from being beyond the President to enact, further, for being oppressive, discriminatory, regressive, and violate of the due process and equal protection clauses, among others, of the Constitution. EO 273 is actually the law on E-VAT, it is a tax levied on a wide range of goods and services. It is a tax on the value, added by every seller, with aggregate gross annual sales of articles and/or services, exceeding P200,00.00, to his purchase of goods and services, unless exempt. VAT is computed at the rate of 0% or 10% of the gross selling price of goods or gross receipts realized from the sale of services.

Issue:Whether or not EO 273 is unconstitutional due to the issuance of the President.

Held:

The court strongly disagreed to Kapatiran because it is no unconstitutional.The court states that it should be recalled that under Proclamation No. 3, which decreed a Provisional Constitution, sole legislative authority was vested upon the President. Art. II, sec. 1 of the Provisional Constitution states: Sec. 1. Until a legislature is elected and convened under a new Constitution, the President shall continue to exercise legislative powers. On 15 October 1986, the Constitutional Commission of 1986 adopted a new Constitution for the Republic of the Philippines which was ratified in a plebiscite conducted on 2 February 1987. Article XVIII, sec. 6 of said Constitution, hereafter referred to as the 1987 Constitution, provides: Sec. 6. The incumbent President shall continue to exercise legislative powers until the first Congress is convened. It should be noted that, under both the Provisional and the 1987 Constitutions, the President is vested with legislative powers until a legislature under a new Constitution is convened. The first Congress, created and elected under the 1987 Constitution, was convened on 27 July 1987. Hence, the enactment of EO 273 on 25 July 1987, two days before Congress convened on 27 July 1987, was within the President's constitutional power and authority to legislate.

Meralco vs. VeraGR L-29987, 22 October 1975

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Facts:

An electricity provider company named Meralco is the holder of a franchise to construct, maintain, and operate an electric light, heat, and power system in the City of Manila and its suburbs. Sometime in 1962 and 1963, Meralco imported and received from abroad copper wires, transformers, and insulators for use in the operation of its business. The Collector of Customs, as deputy of the Commissioner of Internal Revenue, levied and collected a compensating tax. Meralco claimed for refund for the said years, but such claims were either not acted upon or denied by the Commissioner.Issue: Whether Meralco is exempt from payment of a compensating tax on poles, wires, transformers and insulators imported by it for use in the operation of its electric light, heat, and power system.

Issue:

Whether or not Meralco is exempted from paying compensating tax on the imported products.

Held:

The court ruled that Meralco is not exempt from paying the compensation tax provided for in Section 190 of the Tax Code, the prupose of which is to “place casual importers, who are not merchants on equal footing with established merchants who pay sales tax on articles imported by them.” Meralco’s claim for exemption from payment of the compensating tax is not clear or expressed, contrary to the rule that “exemptions from taxation are highly disfavored in law, and he who claims exemption must be able to justify his claim by the clearest grant of organic or statute law.” Tax exemption are strictly construed against the taxpayer, they being highly disfavored and may almost be said to be “odious to the law.” When exemption is claimed, it must be shown indubitably to exist, for every presumption is against it, and a well-founded doubt is fatal to the claim.Nitafan vs. CommissionerGR L-78780, 23 July 1987

Facts:

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In this given case the Chief Justice has previously issued a directive to the Fiscal Management and Budget Office to continue to deduct withholding taxes from the salaries of the Justices of the Supreme Court and other members of the judiciary. This was affirmed by the Supreme Court En Banc on 4 December 1987. RTC judges seek to prohibit or enjoin the Commissioner of the Internal Revenue and the Financial Officer of the Supreme Court from making any deduction of withholding taxes from their salaries.

Issue: Whether the salaries of judges are subject to tax.

Held:

The court clearly states that the salaries of members of the Judiciary are subject to the general income tax applied to all taxpayers. Although such intent was somehow and inadvertently not clearly set forth in the final text of the 1987 Constitution, the deliberations of the 1986 Constitutional Commission negate the contention that the intent of the framers is to revert to the original concept of “non-diminution” of salaries of judicial officers. Justices and judges are not only the citizens whose incomes have been reduced in accepting service in government and yet subject to income tax. Such is true also of Cabinet members and all other employees.

The Collector of Internal Revenue vs. Antonio Campos RuedaG.R. No. L-13250October 29, 1971

Facts:

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In this case Antonio Campos Rueda, who is the administrator of the estate of the deceased Doña Maria de la Estrella Soriano is a Spanish national, by reason of her marriage to a Spanish citizen and was a resident of Tangier, Morocco from 1931 up to her death on 2 January 1955. At the time of her demise she left, among others, intangible personal properties in the Philippines. On 29 September 1955, petitioner filed a provisional estate and inheritance tax return on all the properties of the late Maria Cerdeira.

On the same date, respondent, with pending investigation, issued an assessment for state and inheritance taxes which tax liabilities were paid by petitioner. On 17 November 1955, an amended return was filed wherein intangible personal properties were claimed as exempted from taxes. On 11 January 1956, respondent denied the request for exemption. Hence, respondent demanded the payment representing deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interests and compromise penalties.

Issue:

Whether or not the requisites of statehood, or at least so much thereof as may be necessary for the acquisition of an international personality must be satisfied for a "foreign country" to fall within the exemption of Section 122 of the National Internal Revenue Code.

HELD:

The court ruled that requisites do not suffice to fall within the exemption of Section 122 of the NIRC.The court provides that the controlling legal provision as noted is a proviso in Section122 of the National Internal Revenue Code. It reads thus: "That no tax shall be collected under this Title in respect of intangible personal property

(a) if the decedent at the time of his death was a resident of a foreign country which at the time of his death did not impose a transfer tax or death tax of any character in respect of intangible person property of the Philippines not residing in that foreign country, or

(b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country."

DIZON vs. POSADAS 57 PHIL 465

Facts:

The story of this case was Don Dizon made a donation inter vivos to his only son. When Don Felix Dizon died, the son didn't receive any property from the former. Upon assessment of the inheritance tax against Luis, part of the properties assessed was the gift made to him during the lifetime of the father.

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Issue:

Whether or not section 1540 of the aforementioned code subject the plaintiff-appellant to the payment of inheritance tax?

HELD:

The ruling of the court was the facts warrant the inference that the transfer was advancement upon the inheritance upon the donee, as the sole and forced heir of the donor, which he wou ld o th e rw i se be en t i t l ed t o upon t he dea th o f t he f a t he r .

The a rg ume n t fu r t he r ed tha t he i s no t an he i r bec ause t he r e was no l onge r any p rope r ty i s fallacious. In any event, Luis cannot be deprived of his share in the inheritance because the law confers upon him the status of a forced heir. Furthermore, following previous rulings, when the law says all gifts, it doubtl ess refers to gifts inter vivos, and not mortis causa.

Both the letter and spirit of the law l ea ves no room fo r any o th e r i n t e r p r e t a t i on . Such c l ea r l y , i s t he t eno r o f t he language which refers to donations that took effect before the donor’s death, and not to mortis causa donations, which can only be made with the formalities of a will, and can only take effect after the donor’s death

De Guzman vs. De Guzman

83 SCRA 256

FACTS:

16

In this case one of the properties left by deceased testator was a house and lot which was adjudicated in favour of the eight children. One of the children was appointed as the administrator of the estate. It is to be noted that the probate court orderedt h e a d m i n i s t r a t o r t o r e f r a i n f r o m s p e n d i n g t h e a s s e t s o f t h e e s t a t e f o r recon structuring and remodelling the house of the deceased and to stop spending any a s se t o f t he e s t a t e wi thou t p r i o r au tho r i t y o f t he cou r t . Howeve r , i n t he accounting report submitted by the administrator, several expenses were made for t he r emode l l i ng o f t he house . Th i s was a l l owed by t he l ow er cou r t and th i s prompted the other children to oppose this order.

Issue:

Whether or not the estate was delinquent in paying the inheritance tax.

HELD:

The cou r t r u l ed t ha t an exe cu t o r o r admin i s t r a t o r i s a l l owed t he nec e s s a ry exp ens e s i n t he c a r e , management, and settlement of the estate. He is entitled to possess and manage the decedent’s real and personal estate as long as it is necessary for the payment of the debts and expenses of administration. He is accountable for the whole decedent’s estate which has come into his possession, with all the interest, profit, and income thereof, and with the proceeds of so much of such estate as is sold by him, at the price, at which it was sold. Administration expenses should be those which are necessary for the management of the estate, for protecting it against destruction and deterioration, and possibly. Or the production of fruits. They are expenses entailed for the preservation.

Lorenzo vs. Posadas

64 Phil 353

Facts:

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Some time on 27 May 1922, Thomas Hanley died in Zamboanga, leaving a will and considerable amount of real and personal properties. Hanley’s will, provides that his properties will be given to his nephew, Matthew Hanley, it further provided that the property will only be given ten years after the former’s death. In the testamentary proceedings, the Court of First Instance of Zambaonga appointed Moore as trustee of the estate, when the latter resigned Pablo Lorenzo was appointed in his stead. Respondent Collector of Internal Revenue assessed the inheritance tax against the estate which includes penalty and surcharge. Lorenzo paid the amount in protest claiming that the inheritance tax should have been assessed only after 10 years.

Issue:

Whether or not the estate was delinquent in paying the inheritance tax.

Held:

The court considered that the estate is delinquent. The court states that according to Sec. 1544 (b) of the Revised Administrative Code, payment of the inheritance tax shall be made before delivering to each beneficiary his share. Although the property was only given after 10 years from the death of Hanley, the court considered that delivery to the trustee is delivery to cestuique trust, the beneficiary within the meaning of the said section.

Villanueva vs. Branoco

G.R. No. 172804

January 24, 2011

18

Facts

According to this case Gonzalo Villanueva, represented by his heirs, sued respondents, spouses Froilan and Leonila Branoco, to recover a 3,492 square-meter parcel of land in Amambajag, Culaba, Leyte and to collect damages. Petitioner claimed ownership over the Property through purchase in July 1971 from CasimiroVere, who, in turn, bought the Property from Alvegia Rodrigo in August 1970. Petitioner declared the Property in his name for tax purposes soon after acquiring it. In their Answer, respondents similarly claimed ownership over the Property through purchase in July 1983 from Eufracia Rodriguez to whom Rodrigo donated the Property in May 1965. Respondents entered the Property in 1983 and paid taxes afterwards.

Issue

Whether or not the petitioner’s title over the property is superior to respondents.

Held:

According to this case the petitioner’s title is superior over the respondents. The court thus examine the juridical nature of the Deed whether it passed title to Rodriguez upon its execution or is effective only upon Rodrigo’s death using principles distilled from relevant jurisprudence. Post-mortem dispositions typically (1) Convey no title or ownership to the transferee before the death of the transferor; or, what amounts to the same thing, that the transferor should retain the ownership (full or naked) and control of the property while alive; (2) That before the [donor’s] death, the transfer should be revocable by the transferor at will, ad nutum; but revocability may be provided for indirectly by means of a reserved power in the donor to dispose of the properties conveyed; (3) That the transfer should be void if the transferor should survive the transferee.

Concepcion Vidal de Roces vs, Juan Posadas, Jr.

G.R. No. L-34937

March 13, 1933

19

Facts:

According to this case which was sometime in 1925 Esperanza Tuazon, by means of public documents, donated certain parcels of land situated in Manila to the plaintiffs herein, who, with their respective husbands, accepted them in the same public documents, which were duly recorded in the registry of deeds. On 5 January 1926, the donor died in the City of Manila without leaving any forced heir and her will which was admitted to probate, she bequeathed to each of the donees the sum of P5,000. After the estate had been distributed among the instituted legatees and before delivery of their respective shares, the appellee herein, as Collector of Internal Revenue, ruled that the appellants, as donees and legatees, should pay respective inheritance. Some were levied as tax on the donation to Concepcion Vidal de Roces and the other on her legacy, and, likewise, a sum was imposed upon the donation made to Elvira Vidal de Richards and another on her legacy.

Issue:

Whether or not the appellants is subject to inheritance tax.

Held:

According to the court they are subject to inheritance tax because the court interprets the rule laid down in the case of Tuason and Tuason vs. Posadas, supra. We said therein, as we say now, that the expression "all gifts" refers to gifts inter vivos inasmuch as the law considers them as advances on inheritance, in the sense that they are gifts inter vivos made in contemplation or in consideration of death. In that case, it was not held that that kind of gifts consisted in those made completely independent of death or without regard to it The tax collected by the appellee on the properties donated in 1925 really constitutes an inheritance tax imposed on the transmission of said properties in contemplation or in consideration of the donor's death and under the circumstance that the donees were later instituted as the former's legatees. For this reason, the law considers such transmissions in the form of gifts inter vivos, as advances on inheritance and nothing therein violates any constitutional provision, inasmuch as said legislation is within the power of the Legislature..

Rafael Dizon vs. Court of Tax Appeals

G.R. No. 140944

April 30, 2008

Facts:

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In this case Jose P. Fernandez died. Thereafter, a petition for the probate of his will was filed with Branch 51 of the Regional Trial Court of Manila. The probate court then appointed retired Supreme Court Justice Arsenio P. Dizon and petitioner, Atty. Rafael Arsenio P. Dizon as Special and Assistant Special Administrator, respectively, of the Estate of Jose. In a letter dated October 13, 1988, Justice Dizon informed respondent Commissioner of the Bureau of Internal Revenue of the special proceedings for the Estate. Petitioner alleged that several requests for extension of the period to file the required estate tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to be collated, determined and identified. On 27 April 1990, BIR Regional Director for San Pablo City, Osmundo G. Umali issued Certification Nos. 2052[ and 2053 stating that the taxes due on the transfer of real and personal properties[ of Jose had been fully paid and said properties may be transferred to his heirs. Sometime in August 1990, Justice Dizon passed away. Thus, on 22 October 1990, the probate court appointed petitioner as the administrator of the Estate. However, on 26 November 1991, the Assistant Commissioner for Collection of the BIR, Themistocles Montalban, issued Estate Tax Assessment Notice No. FAS-E-87-91-003269, demanding the payment for the deficiency of the estate tax.

Issue:

Whether or not the Court of Appeals erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed against the Estate.

Held:

The court ruled by affirming the decision because there is no deficiency tax. The court provides that "Claims against the estate," as allowable deductions from the gross estate under Section 79 of the Tax Code, are basically a reproduction of the deductions allowed under Section 89 (a) (1) (C) and (E) of Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue Code of 1939, and which was the first codification of Philippine tax laws. Further, the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.

Republic Bank vs. Court of AppealsG.R. No. 62554-55 September 2, 1992

Facts:

The facts of thi case were the following. Respondent Commissioner assessed petitioner the amounts of P1,060,615.06, plus 25% surcharge in the amount of P265,153.76, or a total of P1,325,768.82, as 1% monthly bank reserve deficiency tax for taxable year 1969 and

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P1,562,506.14, plus 25% surcharge in the amount of P390,626.53, or a total of P1,953,132.67, as 1% monthly bank reserve deficiency tax for taxable year 1970.

In a letter dated 16 May 1973, petitioner requested reconsideration of the assessment which respondent Commissioner denied in a letter dated 6 May 1974. Petitioner contends that Section 249 of the Tax Code is no longer enforceable, because Section 126 of Act 1459, which was allegedly the basis for the imposition of the 1% reserve deficiency tax, was repealed by Section 90 of Republic Act 337, the General Banking Act, and by Sections 100 and 101 of Republic Act 265.

Issue:Whether section 249 of the tax code has been rendered inoperative by the repeal of the aforesaid referred provision, i.e., section one hundred twenty-six of the corporation law

Held: The court ruled that it is clear from the statutes then in force that there was no double

taxation involved one was a penalty and the other was a tax. At any rate, The payment of 1/10 of 1% for incurring reserve deficiencies (Section 106, Central Bank Act) is a penalty as the primary purpose involved is regulation, while the payment of 1% for the same violation is a tax for the generation of revenue which is the primary purpose in this instance. Petitioner should not complain that it is being asked to pay twice for incurring reserve deficiencies. It can always avoid this predicament by not having reserve deficiencies.

Vera vs. Navarro, 79 SCRA 408

Facts: In this case Elsie M. Gaches died on March 9, 1966 without a child. The deceased, however, left a last will and testament in which she made relevant disposition of her estate. Then Judge Tan was appointed as executor of the testate estate of Elsie M. Gaches without a bond. He preliminarily submitted a motion for advance payment of allowances, inheritance, etc. pending

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the finality of probate of the will. He maintained that there are sufficient assets to cover whatever liability to the government for taxes and other charges. The Commissioner opposed this motion and showed some proof of claims for estate taxes and inheritance taxes. The court then disapproved the motion of Tan. On a later date, Tan paid the taxes due but there was deficiency in payment of the inheritance taxes. Upon payment, he moved again that he be allowed to pay advance inheritance, allowances, etc. This time, the court allowed him to do so. The Commissioner tried to oppose this but to no avail. He then tried to garnish the bank accounts of the estate but wasn’t able to do so due to the quick thinking of Tan to have the writ of garnishment discharged.

Issue:

Whether or not the respondent heirs are required to pay first the inheritance tax before the probate court may authorize the delivery of the hereditary share pertaining to each of them

Held:

The court ruled in favor to the respondents heirs and the court ruled the case by citing a certain provision of the Rules of Court, together with the provision in the tax code, the distribution of a decedent's assets may only be ordered under the following circumstances: (1) When the inheritance tax, among others, is paid; (2) when a sufficient bond is given to meet the payment of the inheritance tax and all other obligations of the nature enumerated; (3) when the payment of the said tax and all other obligations mentioned in the Rule has been provided for. None of these were present when the questioned orders were issued at the case at bar.

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