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July 31, 1965
MARIA CARLA PIROVANO, etc., et al., petitioners-appellants, vs.THE COMMISSIONER OF INTERNAL REVENUE, respondent-appellee. Angel S. Gamboa for petitioners-appellants.Office of the Solicitor General for respondent-appellee. REYES, J.B.L., J.: This case is a sequel to the case of Pirovano vs. De la Rama Steamship Co., 96 Phil. 335. Briefly, the facts of the aforestated case may be stated as follows: Enrico Pirovano was the father of the herein petitioners-appellants. Sometime in the early part of 1941, De la Rama Steamship Co. insured the life of said Enrico Pirovano, who was then its President and General Manager until the time of his death, with various Philippine and American insurance companies for a total sum of one million pesos, designating itself as the beneficiary of the policies, obtained by it. Due to the Japanese occupation of the Philippines during the second World War, the Company was unable to pay the premiums on the policies issued by its Philippine insurers and these policies lapsed, while the policies issued by its American insurers were kept effective and subsisting, the New York office of the Company having continued paying its premiums from year to year. During the Japanese occupation , or more particularly in the latter part of 1944, said Enrico Pirovano died. After the liberation of the Philippines from the Japanese forces, the Board of Directors of De la Rama Steamship Co. adopted a resolution dated July 10, 1946 granting and setting aside, out of the proceeds expected to be collected on the insurance policies taken on the life of said Enrico Pirovano, the sum of P400,000.00 for equal division among the four (4) minor children of the deceased, said sum of money to be convertible into 4,000 shares of stock of the Company, at par, or 1,000 shares for each child. Shortly thereafter, the Company received the total sum of P643,000.00 as proceeds of the said life insurance policies obtained from American insurers. Upon receipt of the last stated sum of money, the Board of Directors of the Company modified, on January 6, 1947, the above-mentioned resolution by renouncing all its rights title, and interest to the said amount of P643,000.00 in favor of the minor children of the deceased, subject to the express condition that said amount should be retained by the Company in the nature of a loan to it, drawing interest at the rate of five per centum (5%) per annum, and payable to the Pirovano children after the Company shall have first settled in full the balance
of its present remaining bonded indebtedness in the sum of approximately P5,000,000.00. This latter resolution was carried out in a Memorandum Agreement on January 10, 1947 and June 17, 1947., respectively, executed by the Company and Mrs. Estefania R. Pirovano, the latter acting in her capacity as guardian of her children (petitioners-appellants herein) find pursuant to an express authority granted her by the court. On June 24, 1947, the Board of Directors of the Company further modified the last mentioned resolution providing therein that the Company shall pay the proceeds of said life insurance policies to the heirs of the said Enrico Pirovano after the Company shall have settled in full the balance of its present remaining bonded indebtedness, but the annual interests accruing on the principal shall be paid to the heirs of the said Enrico Pirovano, or their duly appointed representative, whenever the Company is in a position to meet said obligation. On February 26, 1948, Mrs. Estefania R. Pirovano, in behalf of her children, executed a public document formally accepting the donation; and, on the same date, the Company through its Board of Directors, took official notice of this formal acceptance. On September 13, 1949, the stockholders of the Company formally ratified the various resolutions hereinabove mentioned with certain clarifying modifications that the payment of the donation shall not be effected until such time as the Company shall have first duly liquidated its present bonded indebtedness in the amount of P3,260,855.77 with the National Development Company, or fully redeemed the preferred shares of stock in the amount which shall be issued to the National Development Company in lieu thereof; and that any and all taxes, legal fees, and expenses in any way connected with the above transaction shall be chargeable and deducted from the proceeds of the life insurance policies mentioned in the resolutions of the Board of Directors. On March 8, 1951, however, the majority stockholders of the Company voted to revoke the resolution approving the donation in favor of the Pirovano children. As a consequence of this revocation and refusal of the Company to pay the balance of the donation amounting to P564,980.90 despite demands therefor, the herein petitioners-appellants represented by their natural guardian, Mrs. Estefania R. Pirovano, brought an action for the recovery of said amount, plus interest and damages against De la Rama Steamship Co., in the Court of First Instance of Rizal, which case ultimately culminated to an appeal to this Court. On December 29, 1954, this court rendered its decision in the appealed case (96 Phil. 335) holding that the donation was valid and remunerative in nature, the dispositive part of which reads: Wherefore, the decision appealed from should be modified as follows: (a) that the donation in favor of the children of the late Enrico Pirovano of the proceeds of the
On January 31. inclusive of surcharges.813. 1955. 1955.68. In compliance therewith. 1962. the latter presented two (2) petitions for review against respondent's rulings before the Court of Tax Appeals. hence.371. including interest. against each of the petitioners-appellants. as it appears in the books of the corporation as of August 31. On March 6. we are of the opinion. (4) the surcharge of 5% is legally due.869. 1947. Respondent Commissioner overruled petitioners' claims. a partial payment on the amount of the judgment and paid the balance thereof on May 12.. 1949. made. the Court of Tax Appeals rendered its decision in the two cases.813. the two cases. that (1) the donor's gift tax in the sum of P34.76 was also assessed against De la Rama Steamship Co.478. and (c) defendant shall pay to plaintiffs an additional amount equivalent to 10 per cent of said amount of P583. should be paid to the plaintiffs after the defendant corporation shall have fully redeemed the preferred shares issued to the National Development Company under the terms and conditions stared in the resolutions of the Board of Directors of January 6. (3) the imposition of the surcharge of 25% is not proper. De la Rama Steamship Co. (b) that said donation. Petitioners-appellants herein contested respondent Commissioner's assessment and imposition of the donees' gift taxes and donor's gift tax and also made a claim for refund of the donor's gift tax so collected.insurance policies taken on his life is valid and binding on the defendant corporation. the dispositive part of which reads: In resume.59 as damages by way of attorney's fees. CTA Case No. a donor's gift tax in the total amount of P34. 1955. hence.67 as donees' gift tax. De la Rama Steamship Co. and (5) the interest of 1% per month on the deficiency donees' gift . (Pirovano et al. 347 and 375. or for the total sum of P243. 1955. which amounts to a total of P583. plus interest thereon at the rate of 5 per cent per annum from the filing of the complaint. on April 23. After the filing of respondent's usual answers to the petitions. 367368) The above decision became final and executory. 1947 and June 24.. on April 6. 96 Phil. being interrelated to each other. and to pay the costs of action. 1951. respondent Commissioner of Internal Revenue assessed the amount of P60. as amended by the resolution of the stockholders adopted on September 13.371.76 was erroneously assessed and collected. and. (2) the donees' gift taxes were correctly assessed. vs. interests and other penalties. 375 refers to the claim for refund of the donor's gift tax already paid. were tried jointly and terminated. which the latter paid. petitioners are entitled to the refund thereof. said petitions having been docketed as CTA Cases Nos. 347 relates to the petition disputing the legality of the assessment of donees' gift taxes and donor's gift tax while CTA Case No.59.
. Petitioners-appellants herein filed a motion to reconsider the above decision.. title.76 which is refundable to petitioners. IN LINE WITH THE FOREGOING OPINION. they dispute the factual finding of the lower court that De la Rama Steamship Company's renunciation of its rights. With costs against petitioners in Case No.. provided they do not constitute a demandable debt. In the instant appeal. an act of pure liberality. express or implied. 335) had already declared that the transfer to the Pirovano children was a remuneratory donation. against the amount due from petitioners. 347. . Petitioners further contend that the same was made not for an insufficient or inadequate consideration but rather it a was made for a full and adequate compensation for the valuable services rendered by the late Enrico Pirovano to the De la Rama Steamship Co. The argument for petitioners-appellants fails to take into account the fact that neither in Spanish nor in Anglo-American law was it considered that past services.. which the lower court denied. In their brief and memorandum. . Respondent is ordered to apply the sum of P34. this appeal before us. plus 5% surcharge and interest at the rate of 1% per month from March 8. rendered without relying on a coetaneous promise. 1955 to the date of payment of said donees' gift taxes. the donation does not constitute a taxable gift under the provisions of Section 108 of the National Internal Revenue Code. 1955 until the taxes are paid.taxes is due from petitioners from March 8. and not to pay additional compensation for services inadequately paid for...371. This conclusion flows from the text of Article 619 of the Code of 1889 (identical with Article 726 of the present Civil Code of the Philippines): When a person gives to another a thing . constituted cause or consideration that would make a conveyance of property anything else but a gift or donation. and interest over the proceeds of said life insurance policies in favor of the Pirovano children "was motivated solely and exclusively by its sense of gratitude. hence." Petitioners now contend that the lower court's finding was erroneous in seemingly considering the disputed grant as a simple donation. petitioners-appellants herein question only that portion of the decision of the lower court ordering the payment of donees' gift taxes as assessed by respondent as well as the imposition of surcharge and interest on the amount of donees' gift taxes. there is also a donation. . Hence. There is nothing on record to show that when the late Enrico Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. since our previous decision (96 Phil.. on account of the latter's merits or of the services rendered by him to the donor.. . petitioners are hereby ordered to pay the donees' gift taxes as assessed by respondent. that such services would be paid for in the future.
Corbin on Contracts. whether remuneratory or simple. Boston vs. 1947. 1946).B... is but an innocuous error. because they were "largely responsible for the rapid and very successful development of the activities of the company" (Res. and the conveyances made by the company to his heirs remain a gift or donation. Vol. . 3 Q. The fact that his services contributed in a large measure to the success of the company did not give rise to a recoverable debt. But then appellants contend. the term consideration used in this section refers to the technical "consideration" defined by the American Law Institute (Restatement of Contracts) as "anything that is bargained for by the promisor and given by the promisee in exchange for the promise" (Also. since the services were rendered long before the Company ceded the value of the life policies to said heirs. that "out of gratitude" the company decided to renounce in favor of Pirovano's heirs the proceeds of the life insurance policies in question. And the Anglo-American law treats a subsequent promise to pay for past services (like one to pay for improvements already made without prior request from the promisor) to be a nudum pactum (Roscorla vs. the entire property or right donated should not be considered as a gift for taxation purposes. cession and services were not the result of one bargain or of a mutual exchange of promises. therefore. only that portion of the value of the property or right transferred. The flaw in this argument lies in the fact that. Carson vs. . Pirovano's successful activities as officer of the De la Rama Steamship Co. the conveyance remained a gift. That the tax court regarded the conveyance as a simple donation. Title III of the Internal Revenue Code. 12 Am. They cite in support Section 111 of the Tax Code which provides that — Where property is transferred for less. 25 ALR 615. as we have seen. and not the services themselves. 234. Thomas.he was not fully compensated for such services. be deemed a gift. than an adequate and full consideration in money or money's worth. Dodge. The true consideration for the donation was. 79. which is in excess of the value of the services rendered should be considered as a taxable gift. 25 Am. then the amount by which the value of the property exceeded the value of the consideration shall. Pirovano expected or was promised further compensation over and in addition to his regular emoluments as President and General Manager. Dec. one that is unenforceable in view of the common law rule that consideration must consist in a legal benefit to the promisee or . the company's gratitude for his services. instead of a remuneratory one as it was declared to be in our previous decision. cannot be deemed such consideration for the gift to his heirs. I. Clark.. taxable under Chapter 2. for the purpose of the tax imposed by this Chapter. 206). p.e. Poro. Peters vs. 359). But. This is emphasized by the directors' Resolution of January 6. i. if any. or that. as copied from American law. Dec. of July 10.
the actual consideration for the cession of the policies. they should not be held liable for such surcharge and interest. It has been well said that if a moral obligation were alone sufficient it would remove the necessity for any consideration at all." Section 111 of the Tax Code has in view situations of this kind. even assuming that the donation in question is subject to donees' gift taxes. 726 of the Tax Code) when it provides that there is also a donation "when the gift imposes upon the donee a burden which is less than the value of the thing given. was the Company's gratitude to Pirovano." It is of course perfectly possible that a donation or gift should at the same time impose a burden or condition on the donee involving some economic liability for him. What is more. 204) — Love and affection are not considerations of value — they are not estimable in terms of value. . As stated by Chief Justice Griffith of the Supreme Court of Mississippi in his wellknown book.some legal detriment to the promisor. In other words. 1955 was not justified because the proceeds of the life insurance policies were actually received on April 6. the filing of the returns of such tax became due on March 1. petitioners maintain that the assessment and demand for donees' gift taxes was prematurely made and of no legal effect. for example. A. the moral obligation to perform it. since it also prescribes that "the amount by which the value of the property exceeded the value of the consideration" shall be deemed a gift for the purpose of the tax. may donate a parcel of land to B on condition that the latter assume a mortgage existing on the donated land. hence. that petitioners-donees have failed to file any gift tax return and that they also failed to pay the amount of the assessment made against them by respondent in 1955. as provided for in Section 116(a) of the same Code. so that under section 111 of the Code there is no consideration the value of which can be deducted from that of the property transferred as a gift. Nor are sentiments of gratitude for gratuitous part favors or kindnesses. Like "love and affection. nor are obligations which are merely moral. in fact. is contemplated by Article 619 of the Civil Code of 1889 (Art. This. It is well to note. 1956. "Outlines of the Law" (p. 1955 only and in accordance with Section 115(c) of the Tax Code. Petitioners finally contend that. In this case the donee may rightfully insist that the gift tax be computed only on the value of the land less the value of the mortgage. since the fact of making a promise impose. as previously shown." gratitude has no economic value and is not "consideration" in the sense that the word is used in this section of the Tax Code. and it is not disputed. 1955 and May 12. the imposition of the surcharge of 5% and interest of 1% per month from March 8. This situation is covered by Section . 1956 and the tax became payable on May 15.
Section 119. can be brought. (section 119) (c) Surcharge. The . bring an action for recovery against him. Republic Act No. the remedy being to pay the tax first. Said section provides that the tax. On this score. (David v. unlike said Section 120. there shall be collected in addition to the interest prescribed above as a part of the taxes a surcharge of five per centum of the unpaid amount. formerly under protest and now without need of protect.119(b) (1) and (c) and Section 120 of the Tax Code: (b) Deficiency. — If any amount of the taxes included in the notice and demand from the Commissioner of Internal Revenue is not paid in full within thirty days after such notice and demand. and if he denies it. (sec. et al. disputed or undisputed. 351) Section 306 of the National Internal Revenue Code . Rule 12.. Ramos. It should further be noted that — It has been the uniform holding of this Court that no suit for enjoining the collection of a tax. since said Section 120 vests in the Commissioner of Internal Revenue or in the tax court power and authority to impose or not to impose such penalty depending upon whether or not reasonable cause has been shown in the non-filing of such return. lays down the procedure to be followed in those cases wherein a taxpayer entertains some doubt about the correctness of a tax sought to be collected. 11. interest upon the unpaid amount at the rate of one per centum a month from the date of such notice and demand until it is paid. paragraphs (b) (1) and (c) of the Tax Code. or any interest assessed in connection therewith. It is likewise provided for by law that an appeal to the Court of Tax Appeals from a decision of the Commissioner of Internal Revenue shall not suspend the payment or collection of the tax liability of the taxpayer unless a motion to that effect shall have been presented to the court and granted by it on the ground that such collection will jeopardize the interest of the taxpayer (Sec. does not confer on the Commissioner of Internal Revenue or on the courts any power and discretion not to impose such interest and surcharge. — Where a deficiency. 1125. there shall be collected as a part of the taxes. 119) The failure to file a return was found by the lower court to be due to reasonable cause and not to willful neglect. should first be paid and the taxpayer should sue for its recovery afterwards. the elimination by the lower court of the 25% surcharge is ad valorem penalty which respondent Commissioner had imposed pursuant to Section 120 of the Tax Code was proper... (1) Payment not extended. file the claim with the Collector. or any addition to the taxes provided for in section one hundred twenty is not paid in full within thirty days from the date of the notice and demand from the Commissioner. On the other hand. Rules of the Court of Tax Appeals). 90 Phil.
.J. upon which the Government depends for its existence. Makalintal. the decision of the Court of Tax Appeals is affirmed. is on leave.Barrera. Dizon. 265) Petitioners did not file in the lower court any motion for the suspension of payment or collection of the amount of assessment made against them. petition).P. Hence.. J. JJ. Annex XIV. J. (National Dental Supply Co.Concepcion. Regala. C. and Zaldivar. Bengzon.purpose of the law obviously is to prevent delay in the collection of taxes.. Bengzon. said imposition of interest and surcharge by the lower court should be upheld. . took no part. J. said imposition is "mandatory and may not be waived by the Commissioner of Internal Revenue or by the courts" (Resolution on petitioners' motion for reconsideration. Paredes. Meer. it is evident that the imposition of 1% interest monthly and 5% surcharge is justified and legal. Bautista Angelo. Costs against petitioners Pirovano. On the basis of the above-stated provisions of law and applicable authorities.. concur. vs.. To allow a taxpayer to first secure a ruling as regards the validity of the tax before paying it would be to defeat this purpose. As succinctly stated by the court below. WHEREFORE. 90 Phil.
on November 18. the court a quo issued an Order relieving Mr. R-82-6994. Cruz. Subsequently. her business affairs were managed by the Philippine Trust Company (Philtrust). Branch XXXVIII. 1981. The petition was filed by the Estate of the Late Juliana Diez Vda. The court a quo appointed one of the heirs as Special Administrator. 1979. Philtrust also filed a verified petition for appointment as Special Administrator with the Regional Trial Court of Manila.R. Branch XXXVIII. 1981. As correctly summarized by the Court of Appeals. docketed as Sp. respondent. R-82-6994.1 which reversed the November 19. No response was made by Philtrust.93. and appointed Antonio Lantin to take over as Special Administrator. No. 1979. Manila" which was the address stated in her 1978 Income Tax Return. filed her Income Tax Return for 1978. Juliana Vda. De Gabriel. Proc. On May 22. No. the BIR sent by registered mail a demand letter and Assessment Notice No. 1982. CV No. 2004 ESTATE OF THE LATE JULIANA DIEZ VDA. in Sp. 1995 Order of Regional Trial Court of Manila. J. Thus. Proc.: This petition for review on certiorari assails the decision of the Court of Appeals in CA-G. The decedent died on April 3.R. Diez of his appointment. 2002. petitioner. the Bureau of Internal Revenue conducted an administrative investigation on the decedent’s tax liability and found a deficiency income tax for the year 1977 in the amount of P318. No. represented by Prudential Bank as its duly appointed and qualified Administrator. entitled "Testate Estate of Juliana Diez Vda. 155541 January 27. the relevant facts are as follows: During the lifetime of the decedent. Philtrust’s motion for reconsideration was denied by the probate court. and Atty. Lantin was also relieved of his appointment. Sta. DECISION YNARES-SANTIAGO. On January 26. DE GABRIEL. Antonio M. vs. Philtrust. Nuyles. The return did not indicate that the decedent had died. through its Trust Officer. The BIR was not informed that the decedent had actually passed away. COMMISSIONER OF INTERNAL REVENUE. . Atty. Vicente Onosa was appointed in his stead. NARD78-82-00501 addressed to the decedent "c/o Philippine Trust Company. In the meantime. dated September 30. Two days after her death. De Gabriel. Mr. on July 30.G.233. De Gabriel". 09107.
the Court of Appeals rendered a decision in favor of the respondent. pursuant to Section 104 of the National Internal Revenue . 2002.8 Claiming that Philtrust had been remiss in not notifying respondent of the decedent’s death. 1984 was within the five-year prescriptive period for assessment and collection of taxes under Section 318 of the 1977 National Internal Revenue Code (NIRC). On September 30. Ambrosio. 1984. Although acknowledging that the bond of agency between Philtrust and the decedent was severed upon the latter’s death. 1985. in filing the decedent’s 1978 income tax return on April 5. through Mr. 09107. The BIR filed its Reply. executory and incontestable. v. had "constituted itself as the administrator of the estate of the deceased at least insofar as said return is concerned. but not that the taxpayer actually receive said assessment within the five-year prescriptive period. Mr. petitioner. mail and send the notice of the assessment to the taxpayer at the address stated in the return filed.R. filed a formal opposition to the BIR’s Motion for Allowance of Claim based on the ground that there was no proper service of the assessment and that the filing of the aforesaid claim had already prescribed. 1986. On November 22.4 assailing the Order of the probate court dated November 19. 1985. which were served upon her heir. two days after the taxpayer’s death.2 after finding that there was no notice of its tax assessment on the proper party.3 On July 2. the Estate of the decedent. 1985. which was not acted upon because the assessment notice had allegedly become final. and that the filing of the claim against the Estate on November 22. respondent filed a "Motion for Allowance of Claim and for an Order of Payment of Taxes" with the court a quo. On November 19. and that petitioner Estate was liable therefor. 1983. the court a quo issued an Order denying respondent’s claim against the Estate. it was ruled that the administrator of the Estate had failed in its legal duty to inform respondent of the decedent’s death."5 Citing Basilan Estate Inc. executory and incontestable.In an Order dated September 5. docketed as CA-G. 1985. It was claimed that Philtrust. On January 7. the court a quo appointed Antonio Ambrosio as the Commissioner and Auditor Tax Consultant of the Estate of the decedent. 1984. Francisco Gabriel. respondent therefore argued that the deficiency tax assessment had already become final. On May 16. CV No. contending that service to Philippine Trust Company was sufficient service. On June 18. 1979.6 respondent argued that the legal requirement of notice with respect to tax assessments7 requires merely that the Commissioner of Internal Revenue release. respondent filed an appeal with the Court of Appeals. Commissioner of Internal Revenue. respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce collection of the decedent’s deficiency income tax liability. Ambrosio filed a letter of protest with the Litigation Division of the BIR.
never became final.223. 1985 and in addition thereto 10% surcharge on the basic tax of P169. Whether or not the Court of Appeals erred in holding that the service of deficiency tax assessment against Juliana Diez Vda. 1982 were sent to Philtrust. raising the following issues: 1.11 Respondent. which requirement is found in Section 104 of the NIRC of 1977. upon the lapse of the statutory thirty-day period to question this claim.14 Since Philtrust did not. respondent contends that petitioner Estate should not be allowed to profit from this omission. the instant petition.10 Petitioner further contends that respondent’s failure to file its claim against the Estate within the proper period prescribed by the Rules of Court is a fatal error.9 Hence. 2.15 Respondent further argues that Philtrust’s failure to protest the aforementioned assessment within the 30-day period provided in Section 319-A of the NIRC of 1977 meant that the assessment had already become final. Philtrust was the de facto administrator of her Estate. Consequently.Code of 1977. the assessment became final. representing the deficiency income tax liability for the year 1978.93. petitioner argues that there was no proper notice of the assessment which. Petitioner Estate denies that Philtrust had any legal personality to represent the decedent after her death. the appealed decision is REVERSED AND SET ASIDE. finding merit in the appeal. and b. de Gabriel through the Philippine Trust Company was a valid service in order to bind the Estate. plus 20% interest per annum from November 2.12 Consequently. As such. executory and incontestable. executory and incontestable. there was proper service on the Estate. . SO ORDERED. the BIR’s service to Philtrust of the demand letter and Notice of Assessment was binding upon the Estate. when the Assessment Notice and demand letter dated November 18. The costs of the suit. Another one is entered ordering the Administrator of the Estate to pay the Commissioner of Internal Revenue the following: a. The amount of P318.13 Respondent further asserts that Philtrust had the legal obligation to inform petitioner of the decedent’s death. Whether or not the Court of Appeals erred in holding that the deficiency tax assessment and final demand was already final. The dispositive portion of said decision reads: WHEREFORE. therefore. 1982 up to November 2.155. which forever bars its claim against the Estate. claims that because Philtrust filed the decedent’s income tax return subsequent to her death.34 pursuant to Section 51(e)(2) and (3) of the Tax Code as amended by PD 69 and 1705. and. on the other hand. executory and incontestable.
The said Section reads: SEC. Notice of death to be filed.16 The resolution of this case hinges on the legal relationship between Philtrust and the decedent. In this instance. 1982. the death of the decedent on April 3. indeed. 104. and such could not be revived by the mere fact that Philtrust continued to act as her agent when. on April 5. the executor. If both sub-issues are answered in the affirmative. – In all cases of transfers subject to tax or where. though exempt from tax. administrator. NARD-78-82-00501 was valid service on petitioner. as a consequence of which legal proceedings may then be initiated for collection thereof. Since the relationship between Philtrust and the decedent was automatically severed at the moment of the Taxpayer’s death. Respondent claims that Section 104 of the National Internal Revenue Code of 1977 imposed the legal obligation on Philtrust to inform respondent of the decedent’s death. Under Article 1919 (3) of the Civil Code. between Philtrust and petitioner Estate. as the case may be. Subsumed under this primary issue is the sub-issue of whether or not service on Philtrust of the demand letter and Assessment Notice No. none of Philtrust’s acts or omissions could bind the estate of the Taxpayer. the legal relationship between the decedent and Philtrust had already been non-existent for three years. by extension. respondent’s contention as to the finality of Assessment Notice No. 1979. which is a personal relationship between agent and principal. that the court a quo twice rejected Philtrust’s motion to be thus appointed. 1979 automatically severed the legal relationship between her and Philtrust. the gross value of the estate exceeds three thousand pesos. and the issue of whether Philtrust’s inaction thereon could bind petitioner. or within a like period . Failure to file such a protest within said period means that the assessment ipso jure becomes final and unappealable. and. We find in favor of the petitioner. This is because Section 319-A of the NIRC of 1977 provides a clear 30-day period within which to protest an assessment. or any of the legal heirs. within two months after the decedent’s death. It must be noted that Philtrust was never appointed as the administrator of the Estate of the decedent. death of the agent or principal automatically terminates the agency. the date of the demand letter and Assessment Notice.executory and incontestable. As of November 18. and. The first point to be considered is that the relationship between the decedent and Philtrust was one of agency. NARD-78-8200501 must be answered in the affirmative. Service on Philtrust of the demand letter and Assessment Notice No. NARD-78-82-00501 was improperly done. it filed her Income Tax Return for the year 1978.
executory and incontestable. the date of the demand letter and Assessment Notice No. never had the legal obligation. The foregoing provision falls in Title III. It has absolutely no applicability to a case for deficiency income tax. Chapter I of the National Internal Revenue Code of 1977. in fact. there was absolutely no legal obligation on the part of Philtrust to either (1) respond to the demand letter and assessment notice. it could not have become final. as provided in Section 119 of the National Internal Revenue Code of 1977. and pertains to "all cases of transfers subject to tax" or where the "gross value of the estate exceeds three thousand pesos". It further lacks applicability since Philtrust was never the executor. for failure to make the assessment within the five-year period provided in Section 318 of the National Internal Revenue Code of 1977. or (3) inform petitioner that it had received said demand letter and assessment notice. 1982. shall give written notice thereof to the Commissioner of Internal Revenue. 318. For the purpose of this section. merely refer to the imposition of certain penal sanctions on the administrator. based on the above provision. the consequences thereof. These do not include the indefinite tolling of the prescriptive period for making deficiency tax assessments. Period of limitation upon assessment and collection. Respondent argues that an assessment is deemed made for the purpose of giving effect to such assessment when the notice is released. That this limitation shall not apply to cases already investigated prior to the approval of this Code. respondent’s claim against the petitioner Estate is barred. administrator of the decedent’s estate. as of November 18. NARD-78-82-00501.after qualifying as such executor or administrator. rendered its assailed decision on grounds of "equity". to inform respondent of her death. a return filed before the last day prescribed by law for the filing thereof shall be considered as filed on such last day: Provided. which. such as the case at bar. Although the administrator of the estate may have been remiss in his legal obligation to inform respondent of the decedent’s death. (2) inform respondent of the decedent’s death. mailed or sent to the taxpayer to effectuate the assessment. and no proceeding in court without assessment for the collection of such taxes shall be begun after the expiration of such period. and. Said Section 18 reads: SEC. and. or the chapter on Estate Tax. or the waiver of the notice requirement for such assessments.17 Since there was never any valid notice of this assessment. internal revenue taxes shall be assessed within five years after the return was filed. – Except as provided in the succeeding section. as such. and there is no legal requirement that . This lack of legal obligation was implicitly recognized by the Court of Appeals. Thus.
but also a demand for payment within a prescribed period. In that case. respondent is arguing in circles.20 we clarified that. as representative of the estate. mailed or sent to the taxpayer for the purpose of giving effect to said assessment. In Commissioner of Internal Revenue v. Although there is no specific requirement that the taxpayer should receive the notice within the said period. De le Rama. The most crucial point to be remembered is that Philtrust had absolutely no legal relationship to the deceased. and (4) the assessment notice is therefore binding on the Estate. notice must be sent to the administrator of the estate. or to her Estate. no proceedings could be initiated in court for the collection of said tax. due process requires at the very least that such notice actually be received. Absent this assessment. Pascor Realty and Development Corporation. when an estate is under administration. but on a completely disinterested third party. It also signals the time when penalties and interests begin to accrue against the taxpayer. since it is the said administrator. that the foregoing rule requires that the notice be sent to the taxpayer.18 It must be noted. due process requires that it must be served on and received by the taxpayer. filed with the probate court only on November 22.) In this case. In Republic v. 21 and respondent’s claim for collection.the taxpayer actually receive said notice within the five-year period. who has the legal obligation to pay and discharge all debts of the estate and to perform all orders of the court. the assessment was served not even on an heir of the Estate. 1984. legal notice of the assessment was sent to two heirs. . This improper service was clearly not binding on the petitioner. was barred for having been made beyond the five-year prescriptive period set by law. We said: The notice was not sent to the taxpayer for the purpose of giving effect to the assessment. By arguing that (1) the demand letter and assessment notice were served on Philtrust. In the case of Bautista and Corrales Tan v. (2) Philtrust was remiss in its obligation to respond to the demand letter and assessment notice." It appearing that the person liable for the payment of the tax did not receive the assessment. emphasis supplied. the assessment could not become final and executory.19 we had occasion to say: An assessment contains not only a computation of tax liabilities. There was therefore no assessment served on the Estate as to the alleged underpayment of tax. (3) Philtrust was remiss in its obligation to inform respondent of the decedent’s death. however. To enable the taxpayer to determine his remedies thereon. neither one of whom had any authority to represent the estate. and said notice could not produce any effect. (Citations omitted. and not merely to a disinterested party. Collector of Internal Revenue … this Court had occasion to state that "the assessment is deemed made when the notice to this effect is released.
Azcuna. Davide. Jr. on official leave. is REVERSED and SET ASIDE. in Sp. De Gabriel for the deficiency income tax of the decedent for the year 1977 in the amount of P318. The Order of the Regional Trial Court of Manila. No. 1985.. 2002.. and Carpio. SO ORDERED.93. 09107. CV No. concur.R. R-82-6994. the petition is GRANTED.WHEREFORE. Proc.. No pronouncement as to costs. (Chairman).. Branch XXXVIII. dated September 30. The Decision of the Court of Appeals in CA-G. C. which denied the claim of the Bureau of Internal Revenue against the Estate of Juliana Diez Vda. is AFFIRMED.J. dated November 19. Panganiban. JJ. . J.223.
VALLE DECISION QUISUMBING. The latter case was an appeal by the petitioner from the judgment of the Municipal Trial Court (MTC) in an ejectment case filed by the respondent spouses against him. J. 17785. are as follows: Spouses Salvador and Carmencita Valle filed an action for Annulment of Affidavit of Self-adjudication.R. The first resolution dismissed petitioner's appeal. the Regional Trial Court (RTC) rendered a Decision which affirmed the judgment of the MTC. COURT OF APPEALS (Former Fifteenth Division). Third Judicial Region. The RTC ruled that the deed of donation. docketed as Civil Case No.G. Lingayen. SALVADOR C. On July 31.: This petition for review on certiorari seeks to annul the resolutions dated September 9.R. VALLE and CARMENCITA S.Hon. 5752. was a donation inter vivos because. 2002 and January 15. 156894 December 2. Cancellation of Tax Declaration and Quieting of Title.versus . REGIONAL TRIAL COURT. 2003 of the Court of Appeals in CAG. Branch 38. 72600. ordered the cancellation of Tax Declaration No. annulled the Affidavit of Self-Adjudication. CV No. 2005 GUILLERMO A. on which the respondents based their claim. 2001. as borne by the records. while the second denied his motion for reconsideration. No. The antecedent facts. other than the title and the phrase 'to take . Pangasinan. The case was consolidated with Civil Case No. 17720 against the petitioner. CRUZ . and declared Spouses Salvador and Carmencita Valle as the absolute owner of the land in dispute.
petitioner filed the required Appellant's Brief only on August 21. as it was worded. already disposes of the thing donated and cannot again dispose of the thing in favor of another. the deed. Petitioner appealed said decision of the trial court to the Court of Appeals. CV No. 72600 DESPITE THE ATTENDANT JUSTIFYING REASON(S) IN THE BELATED SUBMISSION OF APPELLANT'S BRIEF WITH APPROPRIATE MOTION TO ADMIT AND IN GROSS DISREGARD TO THE MERITS FAVORING APPELLANT THEREIN. 2002 to file the Appellant's Brief. The appellate court granted the motion. such as the donation effecting at one's death. clearly disposed of the property with finality and without reservation.R. the only issue for our resolution is whether the Court of Appeals erred in dismissing the appeal. Simply. On September 9. 2002. . petitioner filed a motion for extension of at least 90 days from May 3. Petitioner now comes before us raising the sole issue that: THE HONORABLE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION IN DISMISSING THE APPEAL IN CA-G. he received notice to file a brief within 45 days from receipt of said notice. Mata and Magno stating that one who donates with a term. Within the period. It cited the landmark case of Laureta v. However. On March 19. Petitioner sought reconsideration but it was denied. with an explanation that his collaborating counsel was sick with acute periodontosis. the appellate court dismissed the appeal for failure to file the required brief within the prescribed period.effect after her death'. but without reservation. 2002 or until August 1. 2002. 2002.
 where the Court suspended the rules with the following to serve as guidelines: (1) the case involves life. (6) there is lack of any showing that the review sought is merely frivolous and dilatory. there was only a short time left before the deadline. (3) there are compelling circumstances. Petitioner contends that the failure of an appellant to file his brief within the prescribed time does not result in the automatic dismissal of the appeal since the appellate court has discretion to dismiss it or not. substantial rights and interests are at stake. The lack of time was compounded by the illness (acute periodontosis) of his collaborating counsel. the appellate court should have allowed his appeal. He argues that since there were compelling reasons for his delay. He invokes the case of Baylon v. (4) there is merit in the case. and there could neither be any injury nor prejudice to appellees. He said that by then. Respondents Salvador and Carmencita Valle argue that the right to appeal is . and (7) the other party will not be unjustly prejudiced. liberty. in the middle of July 2002. (5) the cause is not entirely attributable to the fault or negligence of the party favored by the suspension of the Rules. he discovered that his counsel of record had not yet started the preparation of his brief. honor or property. (2) counsel's negligence without any participatory negligence on the part of the client caused the delay.Petitioner explains that he sought the services of a collaborating counsel when. He suggests that procedural rules may be relaxed in the interest of justice. Fact-Finding Intelligence Bureau.
As a statutory privilege. considering that he actually had 135 days within which to file his brief. .neither a natural right nor a part of due process. They maintain that petitioner's excuse is unacceptable. The Rules of Court are designed for the proper and prompt disposition of cases before the appellate court. We cannot just turn a blind eye and tolerate its contravention. Rule 44 of the Rules of Court provides that it shall be the duty of the appellant to file his brief within 45 days from receipt of notice. They aver that in all prior proceedings there was only one lawyer representing the petitioner and that the collaborating counsel had never entered his appearance formally. would be to fault the appellate court for acting in faithful compliance with the rules of procedure which the court has been mandated to observe. however. Petitioner does not deny the procedural infraction on his part. Section 7. Respondents also question the claimed appearance of petitioner's collaborating counsel. We find the instant petition bereft of merit. Granting his plea. but he asks for the relaxation of the rules. Respondents argue that even petitioner's allegation ' that it was only in the middle of July 2002 when he discovered that his counsel of record had not started working on his brief ' is unacceptable since a client is bound by the negligence of his counsel and that a prudent party should constantly be in touch with his counsel. it is exercised only in the manner and in accordance with the provisions of law.
we find that the Court of Appeals committed no reversible error of . Petitioner actually had 135 days to prepare his brief which is a considerable period of time. we relaxed the rigid application of the rules of procedure. here we must stress that negligence of counsel binds the client. We note. that petitioner's counsel failed to distinguish between a petition for review on certiorari under Rule 45 from a petition for certiorari under Rule 65 of the Rules of Court. In Baylon. 'Negligence of petitioner's counsel and his own failure to enter the appearance of his collaborating counsel are.His failure to comply with this mandate is a ground for the dismissal of his appeal as provided under Section 1(e). Rule 50 of the Rules of Court. so that the ends of justice may be better served. the court a quo's grave abuse of discretion is not a proper issue. Under Rule 45. unacceptable reasons for relaxing the observance of the period set for filing briefs. at this juncture. Further. there was no negligence on the part of the client. and cause needless delay. such liberality may not be invoked if it would result in the wanton disregard of the rules. In this case. However. Moreover. Baylon cannot be applied in this case. Save for the most persuasive of reasons. This is especially true where the client has been as negligent as the lawyer. the issue involves reversible error of law. Under Rule 45. to our mind. strict compliance with the rules is enjoined to facilitate the orderly administration of justice. In not a few instances. if any.
The assailed resolutions dated September 9.law when it dismissed the appeal for petitioner's failure to file the appellant's brief on time. Costs against petitioner. SO ORDERED. 2003 of the Court of Appeals in CA-G. QUISUMBING Associate Justice . WHEREFORE. CV No. 72600 are AFFIRMED.R. 2002 and January 15. LEONARDO A. the instant petition is DENIED.
the Court of Appeals reversed and set aside the CTA decision on April 20. 27134. petitioners questioned the assessment through a letter to the BIR. The claim for exemption was denied by the Commissioner. On August 2. Regala and Cruz (ACCRA) law firm. Abello. Teodoro D. 1988 and August 4. No. assessed.66 each. reasoning as follows: The National Internal Revenue Code.11ªvvphi1.COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS. During the 1987 national elections. Abello. 1988. the CTA ordered the Commissioner to desist from collecting donor’s taxes from the petitioners. . TEODORO D. petitioners filed a petition for review with the CTA.31 each to the campaign funds of Senator Edgardo Angara. assailing the decision of the Court of Appeals in CA –G.nét On September 12.661. JOSE C. and that. 91. therefore. provides: Sec. and paid upon the transfer by any person. (b) The tax shall apply whether the transfer is in trust or otherwise. (a) There shall be levied. as amended.G. computed as provided in Section 92. tangible or intangible. entitled "Comissioner of Internal Revenue v. or non-resident. contributed P882.66 for their contributions. whether the gift is direct or indirect. Jose C. of the property by gift. Imposition of Tax." which reversed and set aside the decision of the Court of Tax Appeals (CTA). and whether the property is real or personal. They claimed that political or electoral contributions are not considered gifts under the National Internal Revenue Code (NIRC).032.2 On appeal. 1991 in favor of the petitioners.R. which was decided on October 7. J. AVELINO V. petitioners. In letters dated April 21.: This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure. they are not liable for donor’s tax. a tax. ordering the Commissioner of Internal Revenue (Commissioner) to withdraw his letters dated April 21. Cruz and Court of Tax Appeals. who are partners in the Angara. CONCEPCION.032. 1988. CRUZ. 1988 assessing donor’s taxes and to desist from collecting donor’s taxes from petitioners. Avelino V. 1994. resident. DECISION AZCUNA. Concepcion. Concepcion. 120721 February 23. respondents.3 The appellate Court ordered the petitioners to pay donor’s tax amounting to P263. 2005 MANUEL G. petitioners. Manuel G. ABELLO.R. 1988. the Bureau of Internal Revenue (BIR) assessed each of the petitioners P263. collected. SP No. Regala. then running for the Senate. REGALA. As aforestated. vs.
is subject to donor’s or gift tax. the taxability of political contributions was. But more importantly he receives financial advantages gratuitously. A donor’s or gift tax is imposed on the transfer of property by gift. they squarely fall under the definition of donation or gift. His purpose is to give and to bolster the morals. and whether the property is real or personal. the transfer of property by gift. but bestowed only because of motives of philanthropy or charity.1awphi1. Angara does not affect the character of the fund transfers as donation or gift.Pursuant to the above-quoted provisions of law. There was thereby no retention of control over the disposition of the contributions. political contributions in the Philippines are considered taxable gift rather than taxable income. Santos vs. Hence. 28 Phil.S. Angara had complete and absolute power to dispose of the contributions. 620. whether the gift is direct or indirect. whether the transfer is in trust or otherwise. because a political contribution is indubitably not intended by the giver or contributor as a return of value or made because of any intent to repay another what is his due. In the instant case. Section 91 of the Tax Code is very clear. an unsettled issue. well-settled is the rule that the Philippines need not . For as long as the contributions were used for the purpose for which they were intended. tangible or intangible. without considerations therefor. gift tax law was adopted in the Philippines (before May 7. This is so. the winning chance of the candidate and/or his party. A gift is generally defined as a voluntary transfer of property by one to another without any consideration or compensation therefor (28 C. Angara. 344 on July 20. hence. which reads: Political Contributions. and not to employ or buy. 1974). There was simply an indication of the purpose for which they were to be used. Moreover. When the U. He was fully entitled to the economic benefits of the contributions. Robledo. On the other hand. 250).J. it cannot be presumed that the Philippine Congress then had intended to consider or treat political contributions as non-taxable gifts when it adopted the said gift tax law. Sen. – For internal revenue purposes. 1988. the contributions are voluntary transfers of property in the form of money from private respondents to Sen.nét The Bureau of Internal Revenue issued Ruling No. admittedly. the recipient-donee does not regard himself as exchanging his services or his product for the money contributed. As correctly pointed out by the Solicitor General: The fact that the contributions were given to be used as campaign funds of Sen.
it is clear that the political contributions of the private respondents to Sen. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE AMERICAN JURISPRUDENCE RELIED UPON BY THE COURT OF TAX APPEALS AND BY THE PETITIONERS TO THE EFFECT THAT POLITICAL CONTRIBUTIONS ARE NOT TAXABLE GIFTS? 6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE ADMINISTRATIVE PRACTICE OF CLOSE TO HALF A CENTURY OF NOT SUBJECTING POLITICAL CONTRIBUTIONS TO DONORS TAX? 5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE INTENTION OF THE GIVERS IN DETERMINING WHETHER OR NOT THE PETITIONERS’ POLITICAL CONTRIBUTIONS WERE GIFTS SUBJECT TO DONORS TAX? 3. de Leon. p. in the absence of an express exempting provision of law. Edgardo Angara are taxable gifts. 546. political contributions in the Philippines are subject to the donor’s gift tax.5 Petitioners thereupon filed the instant petition on July 26. Sutherland. Hence.necessarily adopt the present rule or construction in the United States on the matter. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER IN ITS DECISION THE PURPOSE BEHIND THE ENACTMENT OF OUR GIFT TAX LAW? 2. there is no doubt that political contributions are taxable gifts. In the light of the above BIR Ruling.. p. statutes of different states relating to the same class of persons or things or having the same purposes are not considered to be in pari materia because it cannot be justifiably presumed that the legislature had them in mind when enacting the provision being construed. (5206. 290). (cited in National Internal Revenue Code Annotated by Hector S.) Accordingly. Statutory Construction. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER THE DEFINITION OF AN "ELECTORAL CONTRIBUTION" UNDER THE OMNIBUS ELECTION CODE IN DETERMINING WHETHER OR NOT POLITICAL CONTRIBUTIONS ARE TAXABLE? 4. 1995. The vagueness of the law as to what comprise the gift subject to tax was made concrete by the above-quoted BIR ruling. Raised are the following issues: 1. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYING .4 Petitioners filed a motion for reconsideration. 1991 ed. 1995. Generally. which the Court of Appeals denied in its resolution of June 16.
AMERICAN JURISPRUDENCE ON THE GROUND THAT THIS WAS NOT KNOWN AT THE TIME THE PHILIPPINES GIFT TAX LAW WAS ADOPTED IN 1939? 7. All three elements of a donation are present. (b) the increase in the patrimony of the donee. The patrimony of the four petitioners were reduced by P882. a tax. who accepts it. each gave P882. resident or nonresident. Article 725 of said Code defines donation as: . and. . Thus.31 to the campaign funds of Senator Edgardo Angara. of the property by gift. Teodoro D.661. The NIRC does not define transfer of property by gift. DID THE HONORABLE COURT OF APPEALS ERR IN RESOLVING THE CASE MAINLY ON THE BASIS OF A RULING ISSUED BY THE RESPONDENT ONLY AFTER THE ASSESSMENTS HAD ALREADY BEEN MADE? 8. their deficiency shall be supplied by the provisions of this Code. Abello8 . and whether the property is real or personal. Jose C. computed as provided in Section 92 (B) The tax shall apply whether the transfer is in trust or otherwise. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT DID NOT CONSTRUE THE GIFT TAX LAW LIBERALLY IN FAVOR OF THE TAXPAYER AND STRICLTY AGAINST THE GOVERNMENT IN ACCORDANCE WITH APPLICABLE PRINCIPLES OF STATUTORY CONSTRUCTION?6 First. . states: In matters which are governed by the Code of Commerce and special laws. Regala and Avelino V. Concepcion. Fifth and Sixth Issues Section 91 of the National Internal Revenue Code (NIRC) reads: (A) There shall be levied. collected and paid upon the transfer by any person. without any material consideration. assessed. Article 18 of the Civil Code. However. Petitioners.7 The present case falls squarely within the definition of a donation.661.31 . the late Manuel G. an act of liberality whereby a person disposes gratuitously of a thing or right in favor of another. Donation has the following elements: (a) the reduction of the patrimony of the donor. (c) the intent to do an act of liberality or animus donandi. Cruz. tangible or intangible. whether the gift is direct or indirect. reference may be made to the definition of a donation in the Civil Code.
As has been our consistent ruling. or of referring to two or more things at the same time. In Rizal Commercial Banking Corporation v. the Court is called upon to exercise one of its judicial functions. Quijano v. Senator Edgardo Angara’s patrimony correspondingly increased by P3. When the law is clear and free from any doubt or ambiguity. it must be taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees Association v. Municipality of Naga. A statute is ambiguous if it is admissible of two or more possible meanings. where the law speaks in clear and categorical language. Inc. v. donative intent is a creature of the mind. v. donative intent is presumed present when one gives a part of ones patrimony to another without consideration.645.l^vvphi1. there was no donative intent. in which case. there is no room for construction or interpretation. Petitioners’ argument is not tenable.249 . of being understood in more than one way. which is to interpret the law according to its true intent. thereby leaving no room for construction. The fact that their purpose for donating was to aid in the election of the donee does not negate the . De Garcia.530. Second. Section 91 of the NIRC is clear and unambiguous.. This being the case. Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Second Issue Since animus donandi or the intention to do an act of liberality is an essential element of a donation. Petitioners’ contribution of money without any material consideration evinces animus donandi.net Ambiguity is a condition of admitting two or more meanings. Luzon Surety Co. This Court is not convinced that since the purpose of the contribution was to help elect a candidate. Taken together with the Civil Code definition of donation. 35 SCRA 270 ). Ople.each. 138 SCRA 273 . there is no occasion for interpretation. Intermediate Appellate Court10 the Court enunciated: It bears stressing that the first and fundamental duty of the Court is to apply the law. There was intent to do an act of liberality or animus donandi was present since each of the petitioners gave their contributions without any consideration. donative intent is not negated when the person donating has other intentions. Development Bank of the Philippines. 30 SCRA 111 . there is only room for application (Cebu Portland Cement Co. First of all. motives or purposes which do not contradict donative intent. petitioners argue that it is important to look into the intention of the giver to determine if a political contribution is a gift. It cannot be perceived except by the material and tangible acts which manifest its presence. 24 SCRA 708 ) Where the law is clear and unambiguous.
motives or purposes which do not contradict donative intent. Petitioners would distinguish a gift from a political donation by saying that the consideration for a gift is the liberality of the donor. Senator Angara was under no obligation to benefit the petitioners. Since the purpose of an electoral contribution is to influence the results of the election. This Court reiterates that donative intent is not negated by the presence of other intentions. . for the benefit of the greater good. In fine. made for the purpose of influencing the results of the elections but shall not include services rendered without compensation by individuals volunteering a portion or all of their time in behalf of a candidate or political party. in no way amounts to a valuable material consideration so as to remove political contributions from the purview of a donation. The proper performance of his duties as a legislator is his obligation as an elected public servant of the Filipino people and not a consideration for the political contributions he received. promise or agreement to contribute. advance or deposit of money or anything of value. the money value of which can be assessed based on the rates prevailing in the area. while the consideration for a political contribution is the desire of the giver to influence the result of an election by supporting candidates who. in the perception of the giver. including the giver himself. cannot be considered as a material consideration so as to negate a donation.11 Section 94(a) of the said Code defines electoral contribution as follows: The term "contribution" includes a gift. loan. Third Issue Petitioners maintain that the definition of an "electoral contribution" under the Omnibus Election Code is essential to appreciate how a political contribution differs from a taxable gift. whether or not legally enforceable. or a contract. donation. The fact that petitioners will somehow in the future benefit from the election of the candidate to whom they contribute.presence of donative intent. It shall also include the use of facilities voluntarily donated by other persons. would influence the shaping of government policies that would promote the general welfare and economic well-being of the electorate. In fact. which was to fund the campaign of Senator Angara in his bid for a senatorial seat. Petitioners’ attempt is strained. Petitioners attempt to place the barrier of mutual exclusivity between donative intent and the purpose of political contributions. petitioners again claim that donative intent is not present. he may even be called to enact laws that are contrary to the interests of his benefactors. subscription. the purpose for which the sums of money were given. as a public servant.
erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute (PLDT v. namely BIR Ruling No. as stated. As discussed above. there is here no room for construction since the law is clear and unambiguous. . . Benguet Consolidated Mining Co. providing in Section 13 thereof that political/electoral contributions.12 This Court holds that the BIR is not precluded from making a new interpretation of the law. however. 711. 52 Phil. entitled to great weight and the highest respect. v. and needs no further elucidation. This rule of construction. . and that the Government is never estopped by mistake or error on the part of its agents (Pineda v. is an authoritative interpretation thereof. 724). They argue that: . 98 Phil. . Congress approved Republic Act No. up to 1988 the BIR never attempted to subject political contributions to donor’s tax. 7166 on November 25. duly reported to the Commission on Elections. . . Eighth Issue Petitioners next contend that tax laws are construed liberally in favor of the taxpayer and strictly against the government. . acquiesced in and relied upon by all concerned over an appreciable period of time. are not subject to the payment of any gift tax. This all the more shows that the political contributions herein made are subject to the payment of gift taxes. It is immaterial whether or not the Court of Appeals based its decision on the BIR ruling because it is not pivotal in deciding this case. Court of First Instance of Tayabas. Pineda. 88-344. Finally. 803. 7166 provides no retroactive effect . is clear and unambiguous. Section 91 (now Section 98) of the NIRC as supplemented by the definition of a donation found in Article 725 of the Civil Code.13 Seventh Issue Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling. 676).Fourth Issue Petitioners raise the fact that since 1939 when the first Tax Code was enacted. Collector of Internal Revenue. 1991. It is a wellentrenched rule that . 807. especially when the old interpretation was flawed. which was issued after the petitioners were assessed for donor’s tax. since the same were made prior to the exempting legislation. 90 Phil. this Court takes note of the fact that subsequent to the donations involved in this case. This Court does not need to delve into this issue. It is a familiar principle of law that prolonged practice by the government agency charged with the execution of a statute. does not benefit petitioners because. and Republic Act No.
. (Chairman). Davide. C.. J. and Carpio. the petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are AFFIRMED. No costs. Quisumbing. WHEREFORE..J.. Ynares-Santiago. Jr. SO ORDERED.on this point. JJ. concur.. no part.
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