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Tax Digest

Tax Digest

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Published by: pvpogi on Jun 22, 2012
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G.R. No. L-31364 March 30, 1979MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as RegionalDirector, Revenue Region No. 14, Bureau of Internal Revenue,
HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V,and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY
respondents.Jaime Araneta in his capacity as Regional Director of BIR filed a Motion for allowance of claim against theestate of Luis D. Tongoy. The claim represents the indebtedness to the Government of the late Luis D.Tongoy for deficiency income taxes in the total sum of P3,254.80. The Administrator opposed the motionsolely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. The motionwas denied by respondent Judge Fernandez and a motion for reconsideration was also denied.Petitioners filed an appeal on certiorari contending that the claim for taxes was filed beyond the periodprovided in Section 2, Rule 86 of the Rules of Court and that the same was barred by the said provision.
Whether or not the Government through BIR can claim unpaid taxes from a decedent’s estate
In the case of
Pineda vs. CFI of Tayabas,
52 Phil. 803, it was even more pointedly held that"taxes assessed against the estate of a deceased person ... need not be submitted to the committee onclaims in the ordinary course of administration. In the exercise of its control over the administrator, thecourt may direct the payment of such taxes upon motion showing that the taxes have been assessedagainst the estate."The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form ofexception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood ofthe Government and their prompt and certain availability are imperious need.Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected.To safeguard such interest, neglect or omission of government officials entrusted with the collection oftaxes should not be allowed to bring harm or detriment to the people, in the same manner as privatepersons may be made to suffer individually on account of his own negligence, the presumption being thatthey take good care of their personal affairs. This should not hold true to government officials with respectto matters not of their own personal concern. This is the philosophy behind the government's exception,as a general rule, from the operation of the principle of estoppel. Wherefore the decision appealed from isreversed
respondents.Citytrust filed a claim for refund with BIR in the amount of P19,971,745.00 representing the allegedoverpayment of income tax as computed in its final income tax return for the calendar year endingDecember 31, 1985. To interrupt the prescriptive period, Citytrust filed a petition with the Court of TaxAppeals, claiming the refund of its income tax overpayments for the years 1983, 1984 and 1985. TheOSG in their answer contended that the claim of Citytrust from 1983 was not properly documented andthat even if they are entitled for such claim the right to claim the same has prescribed with respect toincome tax payments prior to August 28, 1984, pursuant to Sections 292 and 295 of the National InternalRevenue Code of 1977, as amended, since the petition was filed only on August 28, 1986. The case wassubmitted for decision based solely on the pleadings and evidence submitted by herein privaterespondent Citytrust because the petitioner failed to present evidence due to the failure of TaxCredit/Refund Division of the BIR to transmit the records of the case, as well as the investigation reportthereon, to the Solicitor General. The petitioner filed a motion to suspend the proceedings but the samewas denied. The case was decided and the Tax court ruled in ordering BIR to refund the overpaid tax forthe year 1984 and 1985 only. Petitioner filed a motion for reconsideration contending that Citytrust hasan outstanding tax liability amounting to P56M in 1984. Both parties filed a motion for reconsiderationwhich was denied by the CA and the court affirmed the decision of CTA. Hence this petition.
Whether or not the state is bound to the mistakes committed by its agents
It is a long and firmly settled rule of law that the Government is not bound by the errorscommitted by its agents.
In the performance of its governmental functions, the State cannot be estoppedby the neglect of its agent and officers. Although the Government may generally be estopped through theaffirmative acts of public officers acting within their authority, their neglect or omission of public duties asexemplified in this case will not and should not produce that effect.Nowhere is the aforestated rule more true than in the field of taxation. It is axiomatic that the Governmentcannot and must not be estopped particularly in matters involving taxes.
Taxes are the lifeblood of thenation through which the government agencies continue to operate and with which the Stateeffects its functions for the welfare of its constituents.
 The errors of certain administrative officersshould never be allowed to jeopardize the Government's financial position, especially in the case at barwhere the amount involves millions of pesos the collection whereof, if justified, stands to be prejudiced just because of bureaucratic lethargy. Wherefore the Judgment of CA is hereby set aside and the case isremanded to CTA
respondents.ALGUE INC received a letter from petitioner stating that it has delinquency of income taxes amounting toP83,183.85 for the years 1958 and 1959. ALGUE filed a request for reconsideration to deduct P75,000contending that it was a legitimate business expense used as promotional fees. The request wasreceived by the office of the petitioner and was duly stamped. A warrant of distraint and levy waspresented to ALGUE through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on theground of the pending protest. A search of the protest in the dockets of the case proved fruitless. Atty.Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred serviceof the warrant. BIR informed ALGUE that they are not taking any action on the protest and it was onlythen that he accepted the warrant of distraint and levy earlier sought to be served. After 16 days ALGUEfiled a petition for review before the CTA. CTA ruled in favor of ALGUE and that the deduction waslegitimately paid by ALGUE for actual service rendered in the form of promotional fees. Hence thispetition.
Whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deductionclaimed by private respondent Algue as legitimate business expenses in its income tax returns
It should be remembered that this was a family corporation where strict business procedureswere not applied and immediate issuance of receipts was not required. Even so, at the end of the year,when the books were to be closed, each payee made an accounting of all of the fees received by him orher, to make up the total of P75,000.00. Admittedly, everything seemed to be informal. This arrangementwas understandable, however, in view of the close relationship among the persons in the familycorporation.Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance. Onthe other hand, such collection should be made in accordance with law as any arbitrariness will negatethe very reason for government itself. It is therefore necessary to reconcile the apparently conflictinginterests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotionof the common good, may be achieved. ACCORDINGLY, the appealed decision of the Court of TaxAppeals is AFFIRMED
in toto,
without costs.

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