CIR vs Gonzales GR L-19495

Facts:
In 1948, Matias Yusay died leaving behind two heirs,
namely, Jose Yusay and Lilia Yusay Gonzales. Jose
was appointed as administrator. He filed an estate
and inheritance tax return in 1949. The Bureau of
Internal Revenue (BIR) conducted a tax audit and the
BIR found that there was an under-declaration in the
return filed. In 1953 however, a project of partition
between the two heirs was submitted to the BIR. The
estate was to be divided as follows: 1/3 for
Gonzales and 2/3 for Jose. The BIR then conducted
another investigation in July 1957 with the same result
– there was a huge under-declaration. In February
1958, the Commissioner of Internal Revenue issued a
final assessment notice (FAN) against the entire
estate. In November 1959, Gonzales questioned the
validity of the FAN issued in 1958. She averred that
it was issued way beyond the prescriptive period of
5 years (under the old tax code). The return was filed
by Jose in 1949 and so the CIR’s right to make an
assessment has already prescribed in 1958.

Issue:
Whether or not Gonzales is correct Commissioner vs Pineda

Ruling: By virtue of such lien, the Government has the right to

No. It was found that Jose filed a return which was so
defective that the CIR cannot make a correct
computation on the taxes due. When a tax return is
so defective, it is as if there is no return filed, hence,
it is considered that the taxpayer omitted to file a
return. As such, the five year prescriptive period to
make an assessment (NOTE: Under the National
Internal Revenue Code of 1997, prescriptive period
for normal assessment is 3 years) is extended to 10
years. And the counting of the prescriptive period
shall run from the discovery of the omission (or fraud
or falsity in appropriate cases). In the case at bar, the
omission was deemed to be discovered in the re-
investigation conducted in July 1957. Hence, the FAN
issued in February 1958 was well within the ten year
prescriptive period. Gonzales was adjudged to pay
the deficiency tax in the FAN, without prejudice to her
right to ask reimbursement from Jose’s estate (Jose
already died).
subject the property in Pineda's possession, i.e., the
P2, 500.00, to satisfy the income tax assessment in
the sum of P760.28. After such payment, Pineda will
have a right of contribution from his co-heirs, to
achieve an adjustment of the proper share of each
heir in the distributable estate.
All told, the Government has two ways of collecting
the tax in question. One, by going after all the heirs
and collecting from each one of them the amount of
the tax proportionate to the inheritance received. This
action rests on the concept that hereditary property
consists only of that part which remains after the
settlement of all lawful claims against the estate, for
the settlement of which the entire estate is first liable.
Another remedy, pursuant to the lien created by
Section 315 of the Tax Code upon all property and
rights to property belonging to the taxpayer for
unpaid income tax, is by subjecting said property of
the estate which is in the hands of an heir or
transferee to the payment of the tax due, the estate.
This second remedy is the very avenue the
Government took in this case to collect the tax. The
Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion
to avail itself of the most expeditious way to collect
the tax as may be envisioned in the particular
provision of the Tax Code above quoted, because
taxes are the lifeblood of government and their
prompt and certain availability is an imperious need.
Facts:
Atanasio Pineda died, survived by his wife, Felicisima
Bagtas, and 15 children, the eldest of whom is Manuel
B. Pineda, a lawyer. Estate proceedings were had in
the Court of First Instance of Manila wherein the
surviving widow was appointed administratrix. The
estate was divided among and awarded to the heirs
and the proceedings terminated on June 8, 1948.
Manuel B. Pineda's share amounted to about P2,
500.00.
After the estate proceedings were closed, the Bureau
of Internal Revenue investigated the income tax
liability of the estate for the years 1945, 1946, 1947
and 1948 and it found that the corresponding income
tax returns were not filed. Thereupon, the
representative of the Collector of Internal Revenue
filed said returns for the estate on the basis of
information and data obtained from the aforesaid
estate proceedings and issued an assessment for
deficiency taxes.
Manuel B. Pineda, who received the assessment,
contested the same. Subsequently, he appealed to
the Court of Tax Appeals alleging that he was
appealing "only that proportionate part or portion
pertaining to him as one of the heirs."
The Court of Tax Appeals rendered judgment
reversing the decision of the Commissioner on the
ground that his right to assess and collect the tax has
prescribed. The Commissioner appealed and this
Court affirmed the findings of the Tax Court in respect
to the assessment for income tax for the year 1947
but held that the right to assess and collect the taxes
for 1945 and 1946 has not prescribed. Accordingly,
the case was remanded to the Tax Court for further
appropriate proceedings.
On November 29, 1963 the Court of Tax Appeals
rendered judgment holding Manuel B. Pineda liable
for the payment corresponding to his share of the
deficiency taxes.
The Commissioner of Internal Revenue has appealed
this case before the SC and has proposed to hold
Manuel B. Pineda liable for the payment of all the
taxes found by the Tax Court to be due from the
estate in the total amount of P760.28 instead of only
for the amount of taxes corresponding to his share in
the estate. Manuel B. Pineda opposes the proposition
on the ground that as an heir he is liable for unpaid
income tax due the estate only up to the extent of
and in proportion to any share he received.
ISSUE: Whether or not Pineda can be held liable for
the payment of all the taxes found by the Tax Court
to be due from the estate of his deceased father?
(YES)
RULING: We hold that the Government can require
Manuel B. Pineda to pay the full amount of the taxes
assessed.
Pineda is liable for the assessment as an heir and as
a holder-transferee of property belonging to the
estate/taxpayer.
As an heir he is individually answerable for the part
of the tax proportionate to the share he received
from the inheritance. His liability, however, cannot
exceed the amount of his share.
As a holder of property belonging to the estate,
Pineda is liable for the tax up to the amount of the
property in his possession. The reason is that the
Government has a lien on the P2, 500.00 received by
him from the estate as his share in the inheritance, for
unpaid income taxes for which said estate is liable,
pursuant to the last paragraph of Section 315 of the
Tax Code.
By virtue of such lien, the Government has the right to
subject the property in Pineda's possession, i.e., the
P2, 500.00, to satisfy the income tax assessment in
the sum of P760.28. After such payment, Pineda will
have a right of contribution from his co-heirs, to
achieve an adjustment of the proper share of each
heir in the distributable estate.
All told, the Government has two ways of collecting
the tax in question. One, by going after all the heirs
and collecting from each one of them the amount of
the tax proportionate to the inheritance received. This
remedy was adopted in Government of the Philippine
Islands v. Pamintuan, supra. In said case, the
Government filed an action against all the heirs for
the collection of the tax. This action rests on the
concept that hereditary property consists only of that
part which remains after the settlement of all lawful
claims against the estate, for the settlement of which
the entire estate is first liable. The reason why in case
suit is filed against all the heirs the tax due from the
estate is levied proportionately against them is to
achieve thereby two results: first, payment of the tax;
and second, adjustment of the shares of each heir in
the distributed estate as lessened by the tax.
Another remedy, pursuant to the lien created by
Section 315 of the Tax Code upon all property and
rights to property belonging to the taxpayer for
unpaid income tax, is by subjecting said property of
the estate which is in the hands of an heir or
transferee to the payment of the tax due, the estate.
This second remedy is the very avenue the
Government took in this case to collect the tax. The
Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion
to avail itself of the most expeditious way to collect
the tax as may be envisioned in the particular
provision of the Tax Code above quoted, because
taxes are the lifeblood of government and their
prompt and certain availability is an imperious need.
And as afore-stated in this case the suit seeks to
achieve only one objective: payment of the tax. The
adjustment of the respective shares due to the heirs
from the inheritance, as lessened by the tax, is left to
await the suit for contribution by the heir from whom
the Government recovered said tax.
Abello v. CIR
G.R. No. 120721
February 23, 2005
Topics: gift not defined in the Tax Code – Civil Code
definition on donation applies; election contributions
are subject to gift tax – they are not exempt even if
such transfers are with intentions, motives or purpose
Facts: During the 1987 national elections, petitioners,
who are partners in the Angara, Abello, Concepcion,
Regala and Cruz (ACCRA) law firm, contributed
P882,661.31 each to the campaign funds of Senator
Edgardo Angara, then running for the Senate. BIR
assessed each of the petitioners P263,032.66 for
their contributions. Petitioners questioned the
assessment to the BIR, claiming that political or
electoral contributions are not considered gifts under
the NIRC so they are not liable for donor’s tax. The
claim for exemption was denied by the Commissioner.
The CTA ruled in favor of the petitioners, but such
ruling was overturned by the CA, thus this petition for
review.
Issue: Whether or not electoral contributions are
subject to donor’s tax.
Held: Yes, they are. The NIRC does not define
transfer of property by gift. However, Article 18 of
the Civil Code, states: “In matters which are governed
by the Code of Commerce and special laws, their
deficiency shall be supplied by the provisions of this
Code.” Thus, reference may be made to the definition
of a donation in the Civil Code. Article 725 of said
Code defines donation as: “. . . an act of liberality
whereby a person disposes gratuitously of a thing or
right in favor of another, who accepts it.”
Donation has the following elements: (a) the reduction
of the patrimony of the donor; (b) the increase in the
patrimony of the donee; and, (c) the intent to do an
act of liberality or animus donandi.
The present case falls squarely within the definition of
a donation. Petitioners each gave P882,661.31 to
the campaign funds of Senator Edgardo Angara,
without any material consideration. All three elements
of a donation are present. The patrimony of the four
petitioners were reduced by P882,661.31 each.
Senator Angara’s patrimony correspondingly
increased by P3,530,645.24. 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. Taken together with the
Civil Code definition of donation, Section 91 of the
NIRC is clear and unambiguous, thereby leaving no
room for construction.
Since animus donandi or the intention to do an act of
liberality is an essential element of a donation,
petitioners argue that it is important to look into the
intention of the giver to determine if a political
contribution is a gift. Petitioners’ argument is not
tenable. First of all, donative intent is a creature of
the mind. It cannot be perceived except by the
material and tangible acts which manifest its
presence. This being the case, donative intent is
presumed present when one gives a part of ones
patrimony to another without consideration. Second,
donative intent is not negated when the person
donating has other intentions, motives or purposes
which do not contradict donative intent. This Court is
not convinced that since the purpose of the
contribution was to help elect a candidate, there was
no donative intent. Petitioners’ contribution of money
without any material consideration evinces animus
donandi.
Petitioner’s claim that since the purpose of electoral
contributions is to influence the results of the elections,
donative intent is not present. They claim that the
purpose of electoral contributions is brought on by the
desire of the giver to influence the result of an election
by supporting candidates who would influence the
shaping of government policies that would promote
the general welfare and economic well-being of the
electorate, including the giver himself. Petitioners
attempt to place the barrier of mutual exclusivity
between donative intent and the purpose of political
contributions. This Court reiterates that donative intent
is not negated by the presence of other intentions,
motives or purposes which do not contradict donative
intent. Petitioners’ attempt is strained. The fact that
petitioners will somehow in the future benefit from the
election of the candidate to whom they contribute, in
no way amounts to a valuable material consideration
so as to remove political contributions from the
purview of a donation. Senator Angara was under no
obligation to benefit the petitioners. 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. In fact, as a public servant,
he may even be called to enact laws that are contrary
to the interests of his benefactors, for the benefit of
the greater good.