Tax 2 Cases Donors Tax

B.
Donor’s Tax
1. General Principles & Determination of the Donor’s Tax
 Sections 98-100,102, and 104, Tax Code (as amended by Republic Act 10963)
 Philippine American Life and General Insurance Company vs. Commissioner of Internal Revenue
(November 24, 2014)
 Spouses Gestopa vs. Court of Appeals (October 5, 2000)
 Tang Ho vs. The Board of Tax Appeals (November 19, 1955)
 Gibbs vs. Collector of Internal Revenue (April 28, 1962)
 Pirovano vs. Commissioner of Internal Revenue (July 31, 1965)
 Revenue Regulations 12-18 (January 25, 2018)
2. Exemptions
 Section 101, Tax Code (as amended by Republic Act 10963)
 Republic Act 7166, Section 13
 Republic Act 10165, Sections 3-5 & 22-24 only
3. Administrative Requirements Section 103, Tax Code
C. Estates and Trusts

 Section 60-66, Tax Code (as amended by Republic Act 10963)
 General Rule on Taxability: Fiduciary or Beneficiary
 Decedent's Estate Administration
 Revocable Trusts
 Income for Benefit of Grantor
 Revenue Regulations No. 2 (February 10, 1940), Sections 207-213 only
 BIR Ruling 522-17 (November 7, 2017)
[ G.R. No. 210987, November 24, 2014 ]
Page 1 of 48
THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, PETITIONER, VS. THE
SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.
DECISION
VELASCO JR., J.:
Nature of the Case
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing and seeking
the reversal of the Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 127984, dated May 23, 2013 [1] and
January 21, 2014, which dismissed outright the petitioner’s appeal from the Secretary of Finance’s review of BIR
Ruling No. 015-12[2] for lack of jurisdiction.
The Facts
Petitioner The Philippine American Life and General Insurance Company (Philamlife) used to own 498,590 Class
A shares in Philam Care Health Systems, Inc. (PhilamCare), representing 49.89% of the latter’s outstanding
capital stock. In 2009, petitioner, in a bid to divest itself of its interests in the health maintenance organization
industry, offered to sell its shareholdings in Philam Care through competitive bidding.Thus, on September 24,
2009,petitioner’s Class A shares were sold for USD 2,190,000, or PhP 104,259,330 based on the prevailing
exchange rate at the time of the sale, to STI Investments, Inc., who emerged as the highest bidder. [3]
After the sale was completed and the necessary documentary stamp and capital gains taxes were paid,
Philamlife filed an application for a certificate authorizing registration/tax clearance with the Bureau of Internal
Revenue (BIR) Large Taxpayers Service Division to facilitate the transfer of the shares. Months later, petitioner
was informed that it needed to secure a BIR ruling in connection with its application due to potential donor’s tax
liability. In compliance, petitioner, on January 4, 2012,requested a ruling [4] to confirm that the sale was not
subject to donor’s tax, pointing out, in its request, the following: that the transaction cannot attract donor’s tax
liability since there was no donative intent and, ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-
09] dated November 27, 2009;[5] that the shares were sold at their actual fair market value and at arm’s length;
that as long as the transaction conducted is at arm’s length––such that a bonafide business arrangement of the
Page 2 of 48
dealings is done in the ordinary course of business––a sale for less than an adequate consideration is not subject
to donor’s tax; and that donor’s tax does not apply to sale of shares sold in an open bidding process.
On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied

Philamlife’s request through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the
shares thus sold was lower than their book value based on the financial statements of Philam Care as of the end
of 2008.[6] As such,the Commisioner held, donor’s tax became imposable on the price difference pursuant to Sec.
100 of the National Internal Revenue Code (NIRC), viz:
SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other than real
property referred to in Section 24(D), is transferred for less than an adequate and full consideration in money or
money’s worth, then the amount by which the fair market value of the property exceeded the value of the
consideration shall, for the purpose of the tax imposed by this Chapter, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year.
The afore-quoted provision, the Commissioner added, is implemented by Revenue Regulation 6-2008 (RR 6-
2008), which provides:
SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT TRADED THROUGH A LOCAL STOCK
EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE,
AS AMENDED. —
xxxx
(c) Determination of Amount and Recognition of Gain or Loss –
(c.1) In the case of cash sale, the selling price shall be the consideration per deed of sale.
xxxx
(c.1.4) In case the fair market value of the shares of stock sold, bartered, or exchanged is greater than the
amount of money and/or fair market value of the property received, the excess of the fair market value of the
Page 3 of 48
shares of stock sold, bartered or exchanged over the amount of money and the fair market value of the property,
if any, received as consideration shall be deemed a gift subject to the donor’s tax under Section 100 of the Tax
Code, as amended.
x x x x
(c.2) Definition of ‘fair market value’ of Shares of Stock. – For purposes of this Section, ‘fair market value’ of the
share of stock sold shall be:
xxxx
(c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the book value of the
shares of stock as shown in the financial statements duly certified by an independent certified public accountant
nearest to the date of sale shall be the fair market value.
In view of the foregoing, the Commissioner ruled that the difference between the book value and the selling
price in the sales transaction is taxable donation subject toa 30% donor’s tax under Section 99(B) of the NIRC.
[7]
Respondent Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-09], on which petitioner anchored
its claim,has already been revoked by Revenue Memorandum Circular (RMC) No. 25-2011. [8]
Aggrieved, petitioner requested respondent Secretary of Finance (Secretary) to review BIR Ruling No. 015-12,
but to no avail.For on November 26, 2012, respondent Secretary affirmed the Commissioner’s assailed ruling in
its entirety.[9]
Ruling of the Court of Appeals
Not contented with the adverse results, petitioner elevated the case to the CA via a petition for review under
Rule 43, assigning the following errors:[10]
Page 4 of 48
A. The Honorable Secretary of Finance gravely erred in not finding that the application of Section 7(c.2.2) of RR
06-08 in the Assailed Ruling and RMC 25-11 is void insofar as it alters the meaning and scope of Section 100 of
the Tax Code.
B. The Honorable Secretary of Finance gravely erred in finding that Section 100 of the Tax Code is applicable to
the sale of the Sale of Shares.
1. The Sale of Shares were sold at their fair market value and for fair and full consideration in money or money’s
worth.
2. The sale of the Sale Shares is a bona fide business transaction without any donative intent and is therefore
beyond the ambit of Section 100 of the Tax Code.
3. It is superfluous for the BIR to require an express provision for the exemption of the sale of the Sale Shares
from donor’s tax since Section 100 of the Tax Code does not explicitly subject the transaction to donor’s tax.
C. The Honorable Secretary of Finance gravely erred in failing to find that in the absence of any of the grounds
mentioned in Section 246 of the Tax Code, rules and regulations, rulings or circulars – such as RMC 25-11 –
cannot be given retroactive application to the prejudice of Philamlife.
On May 23, 2013, the CA issued the assailed Resolution dismissing the CA Petition, thusly:
WHEREFORE, the Petition for Review dated January 9, 2013 is DISMISSED for lack of jurisdiction.
SO ORDERED.
In disposing of the CA petition, the appellate court ratiocinated that it is the Court of Tax Appeals (CTA),
pursuant to Sec. 7(a)(1) of Republic Act No. 1125 (RA 1125),[11] as amended,which has jurisdiction over the
issues raised. The outright dismissal, so the CA held, is predicated on the postulate that BIR Ruling No. 015-
12was issued in the exercise of the Commissioner’s power to interpret the NIRC and other tax laws.
Consequently,requesting for its review can be categorized as “other matters arising under the NIRC or other
laws administered by the BIR,”which is under the jurisdiction of the CTA, not the CA.
Page 5 of 48
Philamlife eventually sought reconsideration but the CA, in its equally assailed January 21, 2014 Resolution,
maintained its earlier position.Hence, the instant recourse.
Issues
Stripped to the essentials, the petition raises the following issues in both procedure and substance:
1. Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction; and
2. Whether or not the price difference in petitioner’s adverted sale of shares in PhilamCare attracts donor’s
tax.
Procedural Arguments
Petitioner’s contentions
Insisting on the propriety of the interposed CA petition, Philamlife, while conceding that respondent
Commissioner issued BIR Ruling No. 015-12in accordance with her authority to interpret tax laws, argued
nonetheless that such ruling is subject to review by the Secretary of Finance under Sec. 4 of the NIRC, to wit:
SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to interpret
the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the
Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof
administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive
appellate jurisdiction of the Court of Tax Appeals.
Petitioner postulates that there is a need to differentiate the rulings promulgated by the respondent
Commissioner relating to those rendered under the first paragraph of Sec. 4 of the NIRC, which are appealable to
the Secretary of Finance, from those rendered under the second paragraph of Sec. 4 of the NIRC, which are
subject to review on appeal with the CTA. This distinction, petitioner argues, is readily made apparent by
Department Order No. 7-02,[12] as circularized by RMC No. 40-A-02.
Page 6 of 48
Philamlife further averred that Sec. 7 of RA 1125, as amended, does not find application in the case at bar since it
only governs appeals from the Commissioner’s rulings under the second paragraph and does not encompass
rulings from the Secretary of Finance in the exercise of his power of review under the first,as what was elevated
to the CA. It added that under RA 1125, as amended, the only decisions of the Secretary appealable to the CTA
are those rendered in customs cases elevated to him automatically under Section 2315 of the Tariff and Customs
Code.[13]
There is, thus, a gap in the law when the NIRC, as couched, and RA 1125, as amended, failed to supply where the
rulings of the Secretary in its exercise of its power of review under Sec. 4 of the NIRC are appealable to. This gap,
petitioner submits, was remedied by Bristish American Tabacco v. Camacho[14] wherein the Court ruled that
where what is assailed is the validity or constitutionality of a law, or a rule or regulation issued by the
administrative agency, the regular courts have jurisdiction to pass upon the same.
In sum, appeals questioning the decisions of the Secretary of Finance in the exercise of its power of review under
Sec. 4 of the NIRC are not within the CTA’s limited special jurisdiction and, according to petitioner, are
appealable to the CA via a Rule 43 petition for review.
Respondents’ contentions
Before the CA, respondents countered petitioner’s procedural arguments by claiming that even assuming
arguendo that the CTA does not have jurisdiction over the case, Philamlife, nevertheless, committed a fatal error
when it failed to appeal the Secretary of Finance’s ruling to the Office of the President (OP). As made apparent
by the rules, the Department of Finance is not among the agencies and quasi-judicial bodies enumerated under
Sec. 1, Rule 43 of the Rules of Court whose decisions and rulings are appealable through a petition for review.
[15]
This is in stark contrast to the OP’s specific mention under the same provision, so respondents pointed out.
To further reinforce their argument, respondents cite the President’s power of review emanating from his
power of control as enshrined under Sec. 17 of Article VII of the Constitution, which reads:
Page 7 of 48
Section 17. The President shall have control of all the executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed.
The nature and extent of the President’s constitutionally granted power of control have been defined in a
plethora of cases, most recently in Elma v. Jacobi,[16] wherein it was held that:
x x x This power of control, which even Congress cannot limit, let alone withdraw, means the power of the Chief
Executive to review, alter, modify, nullify, or set aside what a subordinate, e.g., members of the Cabinet and
heads of line agencies, had done in the performance of their duties and to substitute the judgment of the former
for that of the latter.
In their Comment on the instant petition, however, respondents asseverate that the CA did not err in its holding
respecting the CTA’s jurisdiction over the controversy.
The Court’s Ruling
The petition is unmeritorious.
Reviews by the Secretary of

Finance pursuant to Sec. 4 of the
NIRC are appealable to the CTA
To recapitulate, three different, if not conflicting, positions as indicated below have been advanced by the parties
and by the CA as the proper remedy open for assailing respondents’ rulings:
Petitioners: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of the NIRC, and
that of the Secretary to the CA via Rule 43;
Respondents: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4 of the NIRC, and
that of the Secretary to the Office of the President before appealing to the CA via a Rule 43 petition; and
CA: The ruling of the Commissioner is subject to review by the CTA.
We now resolve.
Page 8 of 48
Preliminarily,it bears stressing that there is no dispute that what is involved herein is the respondent
Commissioner’s exercise of power under the first paragraph of Sec. 4 of the NIRC––the power to interpret tax
laws. This, in fact, was recognized by the appellate court itself, but erroneously held that her action in the
exercise of such power is appealable directly to the CTA. As correctly pointed out by petitioner, Sec. 4 of the
NIRC readily provides that the Commissioner’s power to interpret the provisions of this Code and other tax laws
is subject to review by the Secretary of Finance. The issue that now arises is this––where does one seek
immediate recourse from the adverse ruling of the Secretary of Finance in its exercise of its power of
review under Sec. 4?
Admittedly, there is no provision in law that expressly provides where exactly the ruling of the Secretary of
Finance under the adverted NIRC provision is appealable to. However,We find that Sec. 7(a)(1) of RA 1125, as
amended, addresses the seeming gap in the law as it vests the CTA, albeit impliedly, with jurisdiction over the CA
petition as “other matters”arising under the NIRC or other laws administered by the BIR. As stated:
Sec. 7. Jurisdiction. - The CTA shall exercise:
Exclusive appellate jurisdiction to review by appeal, as herein provided:
1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the
National Internal Revenue or other laws administered by the Bureau of Internal Revenue. (emphasis supplied)
Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is,
nonetheless, sufficient enough to include appeals from the Secretary’s review under Sec. 4 of the NIRC.
It is axiomatic that laws should be given a reasonable interpretation which does not defeat the very purpose for
which they were passed.[17] Courts should not follow the letter of a statute when to do so would depart from the
true intent of the legislature or would otherwise yield conclusions inconsistent with the purpose of the act.
[18]
This Court has, in many cases involving the construction of statutes, cautioned against narrowly interpreting
a statute as to defeat the purpose of the legislator, and rejected the literal interpretation of statutes if to do so
would lead to unjust or absurd results.[19]
Page 9 of 48
Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would be an injustice to
taxpayers prejudiced by his adverse rulings. To remedy this situation, We imply from the purpose of RA 1125
and its amendatory laws that the CTA is the proper forum with which to institute the appeal. This is not, and
should not, in any way, be taken as a derogation of the power of the Office of President but merely as recognition
that matters calling for technical knowledge should be handled by the agency or quasi-judicial body with
specialization over the controversy. As the specialized quasi-judicial agency mandated to adjudicate tax,
customs, and assessment cases, there can be no other court of appellate jurisdiction that can decide the issues
raised in the CA petition, which involves the tax treatment of the shares of stocks sold.
Petitioner, though, next invites attention to the ruling in Ursal v. Court of Tax Appeals[20] to argue against
granting the CTA jurisdiction by implication, viz:
Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any and all
tax disputes. Defining such special court’s jurisdiction, the Act necessarily limited its authority to those matters
enumerated therein. In line with this idea we recently approved said court’s order rejecting an appeal to it by
Lopez & Sons from the decision of the Collector of Customs, because in our opinion its jurisdiction extended only
to a review of the decisions of the Commissioner of Customs, as provided by the statute — and not to decisions
of the Collector of Customs. (Lopez & Sons vs. The Court of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] 3065).
x x x x x x x Republic Act No. 1125 is a complete law by itself and expressly enumerates the matters which the
Court of Tax Appeals may consider; such enumeration excludes all others by implication. Expressio unius est
exclusio alterius.
Petitioner’s contention is untenable. Lest the ruling in Ursal be taken out of context, but worse as a precedent, it
must be noted that the primary reason for the dismissal of the said case was that the petitioner therein lacked
the personality to file the suit with the CTA because he was not adversely affected by a decision or ruling of the
Collector of Internal Revenue, as was required under Sec. 11 of RA 1125.[21] As held:
We share the view that the assessor had no personality to resort to the Court of Tax Appeals. The rulings of the
Board of Assessment Appeals did not “adversely affect” him. At most it was the City of Cebu that had been
adversely affected in the sense that it could not thereafter collect higher realty taxes from the abovementioned
property owners. His opinion, it is true had been overruled; but the overruling inflicted no material damage
Page 10 of 48
upon him or his office. And the Court of Tax Appeals was not created to decide mere conflicts of opinion between
administrative officers or agencies. Imagine an income tax examiner resorting to the Court of Tax Appeals
whenever the Collector of Internal Revenue modifies, or lower his assessment on the return of a tax payer! [22]
The appellate power of the

CTA includes certiorari
Petitioner is quick to point out, however, that the grounds raised in its CA petition included the nullity of Section
7(c.2.2) of RR 06-08 and RMC 25-11. In an attempt to divest the CTA jurisdiction over the controversy, petitioner
then cites British American Tobacco, wherein this Court has expounded on the limited jurisdiction of the CTA in
the following wise:
While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not
include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the
validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in the
performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same.
The determination of whether a specific rule or set of rules issued by an administrative agency contravenes the
law or the constitution is within the jurisdiction of the regular courts. Indeed, the Constitution vests the power
of judicial review or the power to declare a law, treaty, international or executive agreement, presidential
decree, order, instruction, ordinance, or regulation in the courts, including the regional trial courts. This is
within the scope of judicial power, which includes the authority of the courts to determine in an appropriate
action the validity of the acts of the political departments. Judicial power includes the duty of the courts of
justice to settle actual controversies involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government.[23]
Vis-a-vis British American Tobacco, it bears to stress what appears to be a contrasting ruling in Asia
International Auctioneers, Inc. v. Parayno, Jr., to wit:
Similarly, in CIR v. Leal, pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal Revenue
Code, as amended) which states that “[d]ealers in securities shall pay a tax equivalent to six (6%) per centum of
their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent, of their gross income,” the
Page 11 of 48
CIR issued Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending investor’s tax on pawnshops
based on their gross income and requiring all investigating units of the BIR to investigate and assess the lending
investor’s tax due from them. The issuance of RMO No. 15-91 was an offshoot of the CIR’s finding that the
pawnshop business is akin to that of “lending investors” as defined in Section 157(u) of the Tax Code.
Subsequently, the CIR issued RMC No. 43-91 subjecting pawn tickets to documentary stamp tax. Respondent
therein, Josefina Leal, owner and operator of Josefina’s Pawnshop, asked for a reconsideration of both RMO No.
15-91 and RMC No. 43-91, but the same was denied by petitioner CIR. Leal then filed a petition for prohibition
with the RTC of San Mateo, Rizal, seeking to prohibit petitioner CIR from implementing the revenue orders. The
CIR, through the OSG, filed a motion to dismiss on the ground of lack of jurisdiction. The RTC denied the motion.
Petitioner filed a petition for certiorari and prohibition with the CA which dismissed the petition “for lack of
basis.” In reversing the CA, dissolving the Writ of Preliminary Injunction issued by the trial court and ordering
the dismissal of the case before the trial court, the Supreme Court held that “[t]he questioned RMO No. 15-91
and RMC No. 43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code on
the taxability of pawnshops.” They were issued pursuant to the CIR’s power under Section 245 of the Tax
Code “to make rulings or opinions in connection with the implementation of the provisions of internal
revenue laws, including ruling on the classification of articles of sales and similar purposes.” The Court
held that under R.A. No. 1125 (An Act Creating the Court of Tax Appeals), as amended, such rulings of the CIR
are appealable to the CTA.
In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually
rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the
SSEZ to implement Section 12 of R.A. No. 7227 which provides that “exportation or removal of goods from the
territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and taxes
under the Customs and Tariff Code and other relevant tax laws of the Philippines.” They were issued pursuant
to the power of the CIR under Section 4 of the National Internal Revenue Code x x x.[24] (emphasis added)
The respective teachings in British American Tobacco and Asia International Auctioneers, at first blush, appear
to bear no conflict––that when the validity or constitutionality of an administrative rule or regulation is assailed,
the regular courts have jurisdiction; and if what is assailed are rulings or opinions of the Commissioner on tax
treatments, jurisdiction over the controversy is lodged with the CTA.The problem with the above postulates,
Page 12 of 48
however, is that they failed to take into consideration one crucial point––a taxpayer can raise both issues
simultaneously.
Petitioner avers that there is now a trend wherein both the CTA and the CA disclaim jurisdiction over tax cases:
on the one hand, mere prayer for the declaration of a tax measure’s unconstitutionality or invalidity before the
CTA can result in a petition’s outright dismissal, and on the other hand, the CA will likewise dismiss the same
petition should it find that the primary issue is not the tax measure’s validity but the assessment or taxability of
the transaction or subject involved.To illustrate this point, petitioner cites the assailed Resolution, thusly:
Admittedly, in British American Tobacco vs. Camacho, the Supreme Court has ruled that the determination of
whether a specific rule or set of rules issued by an administrative agency contravenes the law or the constitution
is within the jurisdiction of the regular courts, not the CTA.
x x x x Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under
Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned
incidentally since it was used by the CIR as bases for its unfavourable opinion. Clearly, the Petition involves an
issue on the taxability of the transaction rather than a direct attack on the constitutionality of Sec. 100, Sec.7
(c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA
9282.
As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a
quandary on what mode of appeal should be taken, to which court or agency it should be filed, and which case
law should be followed.
Petitioner’s above submission is specious.
In the recent case of City of Manila v. Grecia-Cuerdo,[25] the Court en banc has ruled that the CTA now has the
power of certiorari in cases within its appellate jurisdiction. To elucidate:
The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied from the
mere existence of appellate jurisdiction. Thus, xxx this Court has ruled against the jurisdiction of courts or
Page 13 of 48
tribunals over petitions for certiorari on the ground that there is no law which expressly gives these tribunals
such power. It must be observed, however, that xxx these rulings pertain not to regular courts but to tribunals
exercising quasi-judicial powers. With respect to the Sandiganbayan, Republic Act No. 8249 now provides that
the special criminal court has exclusive original jurisdiction over petitions for the issuance of the writs of
mandamus, prohibition, certiorari, habeas corpus, injunctions, and other ancillary writs and processes in aid of
its appellate jurisdiction.
In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court, in
the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With respect to
the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate court, also in the
exercise of its original jurisdiction, the power to issue, among others, a writ of certiorari, whether or not in aid of
its appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ of certiorari, in the exercise of
their original jurisdiction, is provided under Section 21 of BP 129.
The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA, Section 1,
Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested in one Supreme
Court and in such lower courts as may be established by law and that judicial power includes the duty of the
courts of justice to settle actual controversies involving rights which are legally demandable and enforceable,
and to determine whether or not there has been a grave abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality of the Government.
On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the CTA
includes that of determining whether or not there has been grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within
the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue writs of certiorari in these cases.
Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed tax
cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as is deemed
Page 14 of 48
necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable reason why the
transfer should only be considered as partial, not total. (emphasis added)
Evidently, City of Manila can be considered as a departure from Ursal in that in spite of there being no express
grant in law, the CTA is deemed granted with powers of certiorari by implication. Moreover, City of
Manila diametrically opposes British American Tobacco to the effect that it is now within the power of the CTA,
through its power of certiorari, to rule on the validity of a particular administrative rule or regulation so long as
it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety of an assessment or
tax treatment of a certain transaction, but also on the validity of the revenue regulation or revenue
memorandum circular on which the said assessment is based.
Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only contested the
applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the validity of Sec.
7(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the controversy, contrary to
petitioner’s arguments.
The price difference is

subject to donor’s tax
Petitioner’s substantive arguments are unavailing. The absence of donative intent, if that be the case, does not
exempt the sales of stock transaction from donor’s tax since Sec. 100 of the NIRC categorically states that the
amount by which the fair market value of the property exceeded the value of the consideration shall
be deemed a gift. Thus, even if there is no actual donation, the difference in price is considered a donation by
fiction of law.
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the parameters for
determining the “fair market value” of a sale of stocks. Such issuance was made pursuant to the Commissioner’s
power to interpret tax laws and to promulgate rules and regulations for their implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was being applied
Page 15 of 48
retroactively in contravention to Sec. 246 of the NIRC. [26] Instead, it merely called for the strict application of Sec.
100, which was already in force the moment the NIRC was enacted.
WHEREFORE, the petition is hereby DISMISSED. The Resolutions of the Court of Appeals in CA-G.R. SP No.
127984 dated May 23, 2013 and January 21, 2014 are hereby AFFIRMED. SO ORDERED.
SECOND DIVISION
G.R. No. 111904. October 5, 2000
SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, Petitioners, v. COURT OF APPEALS and
MERCEDES DANLAG y PILAPIL, Respondents.
DECISION
QUISUMBING, J.:
This petition for review,1 under Rule 45 of the Rules of Court, assails the decision2of the Court of Appeals dated
August 31, 1993, in CA-G.R. CV No. 38266, which reversed the judgment3 of the Regional Trial Court of Cebu City,
Branch 5.
The facts, as culled from the records, are as follows:
Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They executed three
deeds of donation mortis causa, two of which are dated March 4, 1965 and another dated October 13, 1966, in
favor of private respondent Mercedes Danlag-Pilapil.4 The first deed pertained to parcels 1 & 2 with Tax
Declaration Nos. 11345 and 11347, respectively. The second deed pertained to parcel 3, with TD No. 018613.
The last deed pertained to parcel 4 with TD No. 016821. All deeds contained the reservation of the rights of the
donors (1) to amend, cancel or revoke the donation during their lifetime, and (2) to sell, mortgage, or encumber
the properties donated during the donors' lifetime, if deemed necessary.
On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a deed of
donation inter vivos5 covering the aforementioned parcels of land plus two other parcels with TD Nos. 11351
and 11343, respectively, again in favor of private respondent Mercedes. This contained two conditions, that (1)
the Danlag spouses shall continue to enjoy the fruits of the land during their lifetime, and that (2) the donee can
not sell or dispose of the land during the lifetime of the said spouses, without their prior consent and approval.
Mercedes caused the transfer of the parcels' tax declaration to her name and paid the taxes on them.
Page 16 of 48
On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag sold parcels 3 and 4 to herein petitioners, Mr.
and Mrs. Agripino Gestopa. On September 29, 1979, the Danlags executed a deed of revocation6recovering the
six parcels of land subject of the aforecited deed of donation inter vivos.
On March 1, 1983, Mercedes Pilapil (herein private respondent) filed with the RTC a petition against the
Gestopas and the Danlags, for quieting of title7 over the above parcels of land. She alleged that she was an
illegitimate daughter of Diego Danlag; that she lived and rendered incalculable beneficial services to Diego and
his mother, Maura Danlag, when the latter was still alive. In recognition of the services she rendered, Diego
executed a Deed of Donation on March 20, 1973, conveying to her the six (6) parcels of land. She accepted the
donation in the same instrument, openly and publicly exercised rights of ownership over the donated
properties, and caused the transfer of the tax declarations to her name. Through machination, intimidation and
undue influence, Diego persuaded the husband of Mercedes, Eulalio Pilapil, to buy two of the six parcels covered
by the deed of donation. Said donation inter vivos was coupled with conditions and, according to Mercedes,
since its perfection, she had complied with all of them; that she had not been guilty of any act of ingratitude; and
that respondent Diego had no legal basis in revoking the subject donation and then in selling the two parcels of
land to the Gestopas.
In their opposition, the Gestopas and the Danlags averred that the deed of donation dated January 16, 1973was
null and void because it was obtained by Mercedes through machinations and undue influence. Even assuming it
was validly executed, the intention was for the donation to take effect upon the death of the donor. Further, the
donation was void for it left the donor, Diego Danlag, without any property at all.
On December 27, 1991, the trial court rendered its decision, thus:
"WHEREFORE, the foregoing considered, the Court hereby renders judgment in favor of the defendants and
against the plaintiff:
1. Declaring the Donations Mortis Causa and Inter Vivos as revoked, and, therefore, has (sic) no legal effect and
force of law.
2. Declaring Diego Danlag the absolute and exclusive owner of the six (6) parcels of land mentioned in the Deed
of revocation (Exh. P-plaintiff, Exh. 6-defendant Diego Danlag).
3. Declaring the Deeds of Sale executed by Diego Danlag in favor of spouses Agripino Gestopa and Isabel Gestopa
dated June 28, 1979 (Exh. S-plaintiff; Exh. 18-defendant); Deed of Sale dated December 18, 1979 (Exh. T plaintiff;
Exh. 9-defendant); Deed of Sale dated September 14, 1979 (Exh. 8); Deed of Sale dated June 30, 1975 (Exh. U);
Page 17 of 48
Deed of Sale dated March 13, 1978 (Exh. X) as valid and enforceable duly executed in accordance with the
formalities required by law.
4. Ordering all tax declaration issued in the name of Mercedes Danlag Y Pilapil covering the parcel of land
donated cancelled and further restoring all the tax declarations previously cancelled, except parcels nos. 1 and 5
described, in the Deed of Donation Inter Vivos (Exh. "1") and Deed of Sale (Exh. "2") executed by defendant in
favor of plaintiff and her husband.
[5.] With respect to the contract of sale of abovestated parcels of land, vendor Diego Danlag and spouse or their
estate have the alternative remedies of demanding the balance of the agreed price with legal interest, or
rescission of the contract of sale.
SO ORDERED."8crä lä wvirtualibrä ry
In rendering the above decision, the trial court found that the reservation clause in all the deeds of donation
indicated that Diego Danlag did not make any donation; that the purchase by Mercedes of the two parcels of land
covered by the Deed of Donation Inter Vivos bolstered this conclusion; that Mercedes failed to rebut the
allegations of ingratitude she committed against Diego Danlag; and that Mercedes committed fraud and
machination in preparing all the deeds of donation without explaining to Diego Danlag their contents.
Mercedes appealed to the Court of Appeals and argued that the trial court erred in (1) declaring the donation
dated January 16, 1973 as mortis causa and that the same was already revoked on the ground of ingratitude; (2)
finding that Mercedes purchased from Diego Danlag the two parcels of land already covered by the above
donation and that she was only able to pay three thousand pesos, out of the total amount of twenty thousand
pesos; (3) failing to declare that Mercedes was an acknowledged natural child of Diego Danlag.
On August 31, 1993, the appellate court reversed the trial court. It ruled:
"PREMISES CONSIDERED, the decision appealed from is REVERSED and a new judgment is hereby rendered as
follows:
1. Declaring the deed of donation inter vivos dated January 16, 1973 as not having been revoked and
consequently the same remains in full force and effect;
2. Declaring the Revocation of Donation dated June 4, 1979 to be null and void and therefore of no force and
effect;
3. Declaring Mercedes Danlag Pilapil as the absolute and exclusive owner of the six (6) parcels of land specified
in the above-cited deed of donation inter vivos;
Page 18 of 48
4. Declaring the Deed of Sale executed by Diego Danlag in favor of spouses Agripino and Isabel Gestopa dated
June 28, 1979 (Exhibits S and 18), Deed of Sale dated December 18, 1979 (Exhibits T and 19), Deed of Sale dated
September 14, 1979 (Exhibit 8), Deed of Sale dated June 30, 1975 (Exhibit U), Deed of Sale dated March 13, 1978
(Exhibit X) as well as the Deed of Sale in favor of Eulalio Danlag dated December 27, 1978 (Exhibit 2) not to have
been validly executed;
5. Declaring the above-mentioned deeds of sale to be null and void and therefore of no force and effect;
6. Ordering spouses Agripino Gestopa and Isabel Silerio Gestopa to reconvey within thirty (30) days from the
finality of the instant judgment to Mercedes Danlag Pilapil the parcels of land above-specified, regarding which
titles have been subsequently fraudulently secured, namely those covered by O.C.T. T-17836 and O.C.T. No.
17523.
7. Failing to do so, ordering the Branch Clerk of Court of the Regional Trial Court (Branch V) at Cebu City to effect
such reconveyance of the parcels of land covered by O.C.T. T-17836 and 17523.
SO ORDERED."9crä lä wvirtualibrä ry
The Court of Appeals held that the reservation by the donor of lifetime usufruct indicated that he transferred to
Mercedes the ownership over the donated properties; that the right to sell belonged to the donee, and the
donor's right referred to that of merely giving consent; that the donor changed his intention by donating inter
vivos properties already donated mortis causa; that the transfer to Mercedes' name of the tax declarations
pertaining to the donated properties implied that the donation was inter vivos; and that Mercedes did not
purchase two of the six parcels of land donated to her.
Hence, this instant petition for review filed by the Gestopa spouses, asserting that:
"THE HONORABLE COURT OF APPEALS, TWELFTH DIVISION, HAS GRAVELY ERRED IN REVERSING THE
DECISION OF THE COURT A QUO."10crä lä wvirtualibrä ry
Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only reserve the
right to enjoy the fruits of the properties, but also prohibited the donee from selling or disposing the land
without the consent and approval of the Danlag spouses. This implied that the donor still had control and
ownership over the donated properties. Hence, the donation was post mortem.
Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of whether the
donor intended to transfer the ownership over the properties upon the execution of the
deed.11crä lä wvirtualibrä ry
Page 19 of 48
In ascertaining the intention of the donor, all of the deed's provisions must be read together. 12 The deed of
donation dated January 16, 1973, in favor of Mercedes contained the following:
"That for and in consideration of the love and affection which the Donor inspires in the Donee and as an act of
liberality and generosity, the Donor hereby gives, donates, transfer and conveys by way of donation unto the
herein Donee, her heirs, assigns and successors, the above-described parcels of land;
That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land during his
lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands without the prior
consent and approval by the Donor and her spouse during their lifetime.
xxx
That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for himself
sufficient properties in full ownership or in usufruct enough for his maintenance of a decent livelihood in
consonance with his standing in society.
That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and
generosity of the Donor."13
Note first that the granting clause shows that Diego donated the properties out of love and affection for the
donee. This is a mark of a donation inter vivos.14 Second, the reservation of lifetime usufruct indicates that the
donor intended to transfer the naked ownership over the properties. As correctly posed by the Court of Appeals,
what was the need for such reservation if the donor and his spouse remained the owners of the properties?
Third, the donor reserved sufficient properties for his maintenance in accordance with his standing in society,
indicating that the donor intended to part with the six parcels of land. 15 Lastly, the donee accepted the donation.
In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that an acceptance clause is a mark that the
donation is inter vivos. Acceptance is a requirement for donations inter vivos. Donations mortis causa, being in
the form of a will, are not required to be accepted by the donees during the donors' lifetime.
Consequently, the Court of Appeals did not err in concluding that the right to dispose of the properties belonged
to the donee. The donor's right to give consent was merely intended to protect his usufructuary interests.
In Alejandro, we ruled that a limitation on the right to sell during the donors' lifetime implied that ownership
had passed to the donees and donation was already effective during the donors' lifetime.
The attending circumstances in the execution of the subject donation also demonstrated the real intent of the
donor to transfer the ownership over the subject properties upon its execution. 16 Prior to the execution of
donation inter vivos, the Danlag spouses already executed three donations mortis causa. As correctly observed
Page 20 of 48
by the Court of Appeals, the Danlag spouses were aware of the difference between the two donations. If they did
not intend to donate inter vivos, they would not again donate the four lots already donated mortis causa.
Petitioners' counter argument that this proposition was erroneous because six years after, the spouses changed
their intention with the deed of revocation, is not only disingenious but also fallacious. Petitioners cannot use
the deed of revocation to show the spouses' intent because its validity is one of the issues in this case.
Petitioners aver that Mercedes' tax declarations in her name can not be a basis in determining the donor's intent.
They claim that it is easy to get tax declarations from the government offices such that tax declarations are not
considered proofs of ownership. However, unless proven otherwise, there is a presumption of regularity in the
performance of official duties.17 We find that petitioners did not overcome this presumption of regularity in the
issuance of the tax declarations. We also note that the Court of Appeals did not refer to the tax declarations as
proofs of ownership but only as evidence of the intent by the donor to transfer ownership.
Petitioners assert that since private respondent purchased two of the six parcels of land from the donor, she
herself did not believe the donation was inter vivos. As aptly noted by the Court of Appeals, however, it was
private respondent's husband who purchased the two parcels of land.
As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on record, is
binding on us.18 On the alleged purchase by her husband of two parcels, it is reasonable to infer that the
purchase was without private respondent's consent. Purchase by her husband would make the properties
conjugal to her own disadvantage. That the purchase is against her self-interest, weighs strongly in her favor and
gives credence to her claim that her husband was manipulated and unduly influenced to make the purchase, in
the first place.
Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account of
officiousness, failure by the donee to comply with the charges imposed in the donation, or ingratitude.19 The
donor-spouses did not invoke any of these reasons in the deed of revocation. The deed merely stated:
"WHEREAS, while the said donation was a donation Inter Vivos, our intention thereof is that of Mortis Causa so
as we could be sure that in case of our death, the above-described properties will be inherited and/or succeeded
by Mercedes Danlag de Pilapil; and that said intention is clearly shown in paragraph 3 of said donation to the
effect that the Donee cannot dispose and/or sell the properties donated during our life-time, and that we are the
one enjoying all the fruits thereof."20crä lä wvirtualibrä ry
Petitioners cited Mercedes' vehemence in prohibiting the donor to gather coconut trees and her filing of instant
petition for quieting of title. There is nothing on record, however, showing that private respondent prohibited
Page 21 of 48
the donors from gathering coconuts. Even assuming that Mercedes prevented the donor from gathering
coconuts, this could hardly be considered an act covered by Article 765 of the Civil Code. 21 Nor does this Article
cover respondent's filing of the petition for quieting of title, where she merely asserted what she believed was
her right under the law.
Finally, the records do not show that the donor-spouses instituted any action to revoke the donation in
accordance with Article 769 of the Civil Code.22 Consequently, the supposed revocation on September 29, 1979,
had no legal effect.
WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of Appeals dated
August 31, 1993, is AFFIRMED.
Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.
G.R. No. L-5949 November 19, 1955
TANG HO, WILLIAM LEE, HENRI LEE, SOFIA LEE TEEHANKEE, THOMAS LEE, ANTHONY LEE, JULIA LEE
KAW, CHARLES LEE, VALERIANA LEE YU, VICTOR LEE, SILVINO LEE, MARY LEE, JOHN LEE, and PETER LEE,
for themselves and as heirs of LI SENG GIAP, deceased Petitioners, vs. THE BOARD OF TAX APPEALS and
THE COLLECTOR OF INTERNAL REVENUE, Respondents.
Ozaeta, Roxas, Lichauco and Picazo for petitioners.

Office of the Solicitor General Juan R. Liwag and Solicitor Jose P. Alejandro for respondents.
REYES, J.B.L., J.:
This is a petition for the review of the decision of the defunct Board of Tax Appeals holding petitioners Li Seng
Giap, et al. liable for gift taxes in accordance with the assessments made by the respondent Collector of Internal
Revenue.
Petitioners Li Seng Giap (who died during the pendency of this appeal) and his wife Tang Ho and their thirteen
children appear to be the stockholders of two close family corporations named Li Seng Giap & Sons, Inc. and Li
Seng Giap & Co. On or about May, 1951, examiners of the Bureau of Internal Revenue, then detailed to the Alias
Committee of the Congress of the Philippines, made an examination of the books of the two corporations
aforementioned and found that each of Li Seng Giap's 13 children had a total investment therein of
Page 22 of 48
approximately P63,195.00, in shares issued to them by their father Li Seng Giap (who was the manager and
controlling stockholder of the two corporations) in the years 1940, 1942, 1948, 1949, and 1950 in the following
amounts:
Donees 1940 1942 1948 1949 1950
William Lee ..................................... 7,500 12,500 6,750 27,940 7,500
Henry Lee ....................................... 7,500 12,500 6,750 27,940 7,500
Sofia Lee ......................................... 7,500 12,500 16,500 26,690
Thomas Lee ..................................... 7,500 12,500 7,500 28,190 7,500
Anthony Lee .................................... 18,000 7,500 28,190 7,500
Julia Lee........................................... 20,000 15,000 25,690 2,500
Charles Lee...................................... 20,000 7,500 28,190 7,500
Valeriana Lee .................................. 60,690 2,500
Victor Lee ........................................ 63,190
Silvino Lee........................................ 63,190
Mary Lee ......................................... 63,190
John Lee ......................................... 63,190
Peter Lee ........................................ 63,190
The Collector of Internal Revenue regarded these transfers as undeclared gifts made in the respective years, and
assessed against Li Seng Giap and h ischildren donor's and donee's taxes in the total amount of P76,985.31,
including penalties, surcharges, interests, and compromise fee due to the delayed payment of the taxes. The
petitioners paid the sum of P53,434.50, representing the amount of the basic taxes, and put up a surety bond to
guarantee payment of the balance demanded. And on June 25, 1951, they requested the Collector of Internal
Revenue for a revision of their tax assessments, and submitted donor's and donee's gift tax returns showing that
each child received by way of gift inter vivos, every year from 1939 to 1950 (except in 1947 and 1948) P4,000 in
cash; that each of the eight children who married during the period aforesaid, were given an additional P20,000
as dowry or gift propter nuptias; that the unmarried children received roughly equivalent amounts in 1949, also
by way of gifts inter vivos, so that the total donations made to each and every child, as of 1950, stood at P63,190.
Appellants admit that these gifts were not reported; but contend that as the cash donated came from the
conjugal funds, they constituted individual donations by each of the spouses Li Seng Giap and Tang Ho, of one-
Page 23 of 48
half of the amount received by the donees in each instance, up to a total of P31,505 to each of the thirteen
children from each parent. They further alleged that the children's stockholdings in the two family corporations
were purchased by them with savings from the aforesaid cash donations received from their parents.
Claiming the benefit of gift tax exemptions (under sections 110 and 112 of the Internal Revenue Code) at the
rate of P2,000 a year for each donation, plus P10,000 for each gift propter nuptias made by either parent, the
appellants' aggregate tax liability, according to their returns, would only be P4,599.94 for the year 1949, and
P228.28 for the year 1950, or a total of P4,838.22, computed aa follows:
DONORS 1939-44 1945-46 1949 1950 TOTAL
Li Seng Giap........ Exempt Exempt P1,110.72 P74.14 P1,184.86
Tan Ho .............. Exempt Exempt 1,110.72 74.14 1,184.86
Total .......... None None P2,221.44 P148.28 P2,369.72

William Lee ........ Exempt Exempt P253.80 P30.00 P283.80
Henry Lee ............ Exempt Exempt Exempt 15.00 15.00
Sofia Lee .......... Exempt Exempt P51.90 None 51.90
Thomas Lee ........ Exempt Exempt Exempt 15.00 15.00
Anthony Lee ........ Exempt Exempt Exempt 15.00 15.00
Julia Lee .......... Exempt Exempt 26.90 Exempt 26.90
Charles Lee ......... Exempt Exempt Exempt 15.00 15.00
Valeriana Lee ...... Exempt Exempt 26.90 Exempt 26.90
Victor Lee ........... Exempt Exempt 403.80 None 403.80
Silvino Lee ......... Exempt Exempt 403.80 None 403.80
Mary Lee.............. Exempt Exempt 403.80 None 403.80
John Lee ............. Exempt Exempt 403.80 None 403.80
Peter Lee ............ Exempt Exempt 403.80 None 403.80
Total .......... None None P2378.50 P90.00 2,468.50
Grand total liability of Donors and Donees...... P4,599.94 P238.28 P4,838.22
The Collector refused to revise his original assessments; and the petitioners appealed to the then Board of Tax
Appeals (created by Executive Order 401-A, in 1951) insisting that the entries in the books of the corporation do
Page 24 of 48
not prove donations; that the true amount and date of the donation were those appearing in their tax returns;
and that the donees merely bought stocks in the corporation out of savings made from the money received from
their parents. The Board of Tax Appeals upheld the decision of the respondent Collector of Internal Revenue;
hence, this petition for review.
The questions in this appeal may be summarized as follows:
(1) Whether or not the dates and amounts of the donations taxable against petitioners were as found by the
Collector of Internal Revenue from the books of the corporations Li Seng Giap & Sons, Inc. and Li Seng Giap & Co.,
or as set forth in petitioners' gift tax returns;
(2) Whether or not the donations made by petitioner Li Seng Giap to his children from the conjugal property
should be taxed against the husband alone, or against husband and wife; and
(3) Whether or not petitioners should be allowed the tax deductions claimed by them.
On the first question, which is of fact, the appellants take the preliminary stand that because the Collector failed
to specifically deny the allegations of their petition in the Tax Board, he must be deemed to have admitted the
annual and propter nuptias donations alleged by them, and that he is estopped from denying their existence. As
the proceedings before the Tax Board were administrative in character, not governed by the Rules of Court (see
Sec. 10, Executive Order 401-A), and as the Collector actually submitted his own version of the transactions, we
do not consider that the Collector's failure to make specific denials should be given the same binding effect as in
strict court pleadings.
Going now to the merits of the issue. The appealed findings of the Board of Tax Appeals and of the Collector of
Internal Revenue (that the stock transfers from Li Seng Giap to his children were donations) appear supported
by the following circumstances:
(1) That the transferor Li Seng Giap (now deceased) had in fact conveyed shares of stock to his 13 children on
the dates and in the amounts shown in the table on page 2 of this decision.
(2) That none of the transferees appeared to possess adequate independent means to buy the shares, so much so
that they claim now to have purchased the shares with the cash donations made to them from time to time.
(3) That the total of the alleged cash donations to each child is practically identical to the value of the shares
supposedly purchased by each donee.
(4) That there is no evidence other than the belated sworn gift tax returns of the spouses Li Seng Giap and Ang
Tang Ho, and their children, appellants herein, to support their contention that the shares were acquired by
Page 25 of 48
purchase. No contracts of sale or other documents were presented, nor any witnesses introduced; not even the
claimants themselves have testified.
(5) The claim that the shares were acquired by the children by purchase was first advanced only after the
assessment of gift taxes and penalties due thereon (in the sum of P76,995.31) had been made, and after the
appellants had paid P53,434.50 on account, and had filed a bond to guarantee the balance.
(6) That for a parent to donate cash to enable the donee to buy from him shares of equivalent value is, for all
intents and purposes, a donation of such shares to the purchaser donee.
We cannot say, under the circumstances, that there is no sufficient evidence on record to support the findings of
the Tax Board that the stock transfers above indicated were made by way of donation, as would entitle us to
disregard or reverse the Board's findings.
The filing of the gift tax returns only after assessment and part payment of the taxes demanded by the Collector,
and the lack of corroboration of the alleged donations in cash, amply justify the Tax Board's distrust of the
veracity of the appellants' belated tax returns. The Internal Revenue Code (C. A. 466 as amended) requires
donors and donees to file gift tax returns "on or before the first of March followingfthe close of the calendar
year" when the gifts were made (Sec. 115, par. [c]; and besides the return a written notice to the Collector of
each donation of P10,000 or more, must be given within thirty days after the donation, Sec. 114). These yearly
returns and notices are evidently designed to enable the Collector to verify promptly their truth and correctness,
while the gifts are still recent and proof of the circumstances surrounding the making thereof is still fresh and
accessible. On their own admission, appellants failed to file for ten successive years, the corresponding returns
for the alleged yearly gifts of P4,000 to each child, and likewise failed to give the notices for the P20,000
marriage gifts to each married child. Hence, they are now scarcely in a position to complain if their contentions
are not accepted as truthful without satisfactory corroboration. Any other view would leave the collection of
taxes at the mercy of explanations concocted ex post facto by evading taxpayers, drafted to suit any facts
disclosed upon investigation, and safe from contradiction because the passing years have erased all trace of the
truth.
The second and third issues in this appeal revolve around appellants' thesis that inasmuch as the property
donated was community property (gananciales), and such property is jointly owned by their parents, the total
amount of the gifts made in each year should be divided between the father and the mother, as separate donors,
and should be taxed separately to each one of them.
Page 26 of 48
In assessing the worth of this contention, it must be ever borne in mind that appellants have not only failed to
prove that the donations were actually made by both spouses, Li Seng Giap and Tang Ho, but that precisely the
contrary appears from their own evidence. In the original claim for tax refund, filed with the Collector of Internal
Revenue, under date of June 25, 1951 (copied in pages 6 and 7 of the appellants' petition for review addressed to
the Board of Tax Appeals), the father, Li Seng Giap, describes himself as "the undersigned donor" (par. 1) and
speaks of "cash donations made by the undersigned" (par. 3), without in any way mentioning his wife as a co-
participant in the donation. The issue is thus reduced to the following: Is a donation of community property by
the father alone equivalent in law to a donation of one-half of its value by the father and one-half by the mother ?
Appellants submit that all such donations of community property are to be regarded, for tax purposes, as
donations by both spouses, for which two separate exemptions may be claimed in each instance, one for each
spouse.
This pretension should be viewed in the light of the provisions of the Spanish Civil Code of 1889, which was the
governing law in the years herein involved, 1939 to 1950. The determinative rule is that of Arts. 1409 and 1415,
reading as follows:
"Art. 1409. The conjugal partnership shall also be chargeable with anything which may have been given or
promised by the husband to the children born of the marriage solely in order to obtain employment for them or
give them a profession, or by both spouses by common consent, should they not have stipulated that such
expenditures should be borne in whole or in part by the separate property of one of them."
"Art. 1415, p. 1. The husband may dispose of the property of the conjugal partnership for the purposes
mentioned in Art. 1409."
In effect, these Articles clearly refute the appellants' theory that because the property donated is community
property, the donations should be viewed as made by both spouses. First, because fhe law clearly differentiates
the donations of such property "by the husband" from the "donations by both spouses by common consent"
("por el marido ... o por ambos conyuges de coimin acuerdo," in the Spanish text).
Next, the wording of Arts. 1409 and 1415 indicates that the lawful donations by the husband to the common
children are valid and are chargeable to the community property, irrespective of whether the wife agrees or
objects thereto. Obviously, should the wife object to the donation, she can not be regarded as a donor at all.
Even more: Suppose that the husband should make a donation of some community property to a concubine or
paramour. Undeniably, the wife cannot be regarded as joining in any such donation. Yet under the old Civil Code,
the donation would stand, with the only limitation that the wife should not be prejudiced in the division of the
Page 27 of 48
profits after the conjugal partnership affairs are liquidated. So that if the value of the donation should be found
to fit within the limits of the husband's ultimate share in the conjugal partnership profits, the donation by the
husband would remain unassailable, over and against the nonparticipation of the wife therein. This Court has so
ruled in Baello vs. Villanueva (54 Phil. 213, 214) :
"According to article 1413 of the Civil Code, any transfer or agreement upon conjugal property made by the
husband in contravention of its provisions, shall not prejudice his wife or her heirs. As the conjugal property
belongs equally to husband and wife, the donation of this property made by the husband prejudices tbe wife in
so far as it includes a part or the whole of the wife's half, and is to that extent invalid. Hence article 1419, in
providing for the liquidation of the conjugal partnership, directs that all illegal donations made by the husband
be charged against his estates and deducted from his capital. But it is only then, when the conjugal partnership is
in the process of liquidation, that it can be discovered whether or not an illegal donation made by the husband
prejudices the wife. And inasmuch as these gifts are only to be held invalid in so far as they prejudice the wife,
their nullity cannot be decided until after the liquidation of the conjugal partnership and it is found that they
encroach upon the wife's portion.'
Appellants herein are therefore in error when they contend that it is enough that the property donated should
belong to the conjugal partnership in order that the donation be considered and taxed as a donation of both
husband and wife, even if the husband should appear as the sole donor. There is no blinking the fact that, under
the old Civil Code, to be a donation by both spouses, taxable to both, the wife must expressly join the husband in
making the gift; her participation therein cannot be implied.
It is true, as appellants stress, that in Gibbs vs. Government of the Philippines, 59 Phil., 293, this Court ruled that
"the wife, upon acquisition of any conjugal property, becomes immediately vested with an interest and title
equal to that of the husband"; but this Court was careful to immediately add, "subject to the power of
management and disposition which the law vests on the husband." As has been shown, this power of disposition
may, within the legal limits, override the objections of the wife and render the donation of the husband fully
effective without need of the wife's joining therein. (Civil Code of 1889, Arts 1409, 1415.)
It becomes unnecessary to discuss the nature of a conjugal partnership, there being specific rules on donations
of property belonging to it. The consequence of the husband's legal power to donate community property is that,
where made by the husband alone, the donation is taxable as his own exclusive act. Hence, only one exemption
or deduction can be claimed for every such gift, and not two, as claimed by appellants herein. In thus holding, the
Board of Tax Appeals committed no error.
Page 28 of 48
Premises considered, we are of the opinion and so declare:
(a) That the finding of the defunct Board of Tax Appeals to the effect that shares transferred from Li Seng
Giap to his children were conveyed to them by way of donation inter vivos is supported by adequate
evidence, and therefore cannot be reviewed by this Court (Comm. of Internal Revenue vs. Court Holding
Co., L. Ed. 981; Comm. of Internal Revenue vs. Scottish American Investment Co., 89 L. Ed. 113; Comm. of
Internal Revenue vs. Tower, 90 L. Ed. 670; Helvering vs. Tax Penn. Oil Co., 81 L. Ed. 755).
(b) That under the old Civil Code, a donation by the husband alone does not become, in law a donation by
both spouses merely because it involves property of the conjugal partnership;
(c) That such a donation of property belonging to the conjugal partnership, made during its existence, by
the husband alone in favor of the common children, is taxable to him exclusively as sole donor.
Wherefore, the decision appealed from is affirmed with costs to the appellants. So ordered.
Paras, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Jugo, Labrador, and Concepcion,
JJ., concur. 114 Phil. 1105
G.R. No. L-14166 April 28, 1962
FINLEY J. GIBBS, as Trustee for JOHNSON KELLEY GIBBS, ALLISON DEFRANCE GIBBS,
CANDACE GIBBS, DOUGLAS FLETCHER GIBBS, and REGINALD KELLEY GIBBS, plaintiff-petitioner;
ALLISON J. GIBBS and ESTHER K. GIBBS, intervenors-petitioners, vs. COLLECTOR OF INTERNAL REVENUE
and COURT of TAX APPEALS, Respondents.
-----------------------------
G.R. No. L-14320 April 28, 1962
COLLECTOR OF INTERNAL REVENUE, Petitioner, vs. FINLEY J. GIBBS, as Trustee for JOHNSON KELLEY

GIBBS, ALLISON DEFRANCE GIBBS,
CANDACE GIBBS, DOUGLAS FLETCHER GIBBS and REGINALD KELLEY GIBBS, respondent;
ALLISON J. GIBBS and ESTHER K. GIBBS, respondents-intervenors.
Page 29 of 48
Ozaeta, Gibbs and Ozaeta for petitioner Finley J. Gibbs, et al.
Office of the Solicitor General for respondent Collector of Internal Revenue.
CONCEPCION, J.:chanrobles
These are two (2) appeals one by the plaintiff and the plaintiffs-intervenors and the other by the Government,
from a decision of the Court of Tax Appeals, hereafter referred to as the lower court, promulgated on February
28, 1958, the dispositive part of which reads:
"IN VIEW OF THE FOREGOING, the decision appealed from is modified and the defendant Collector of Internal
Revenue is hereby ordered to refund to the plaintiff the sum of P5,381.88, as computed in Annex 'A' hereof, with
interest at the legal rate from date of payment. Without special pronouncement as to costs."
as amended by a resolution of said lower court, dated July 25, 1958, the concluding paragraph of which is as
follows:
"WHEREFORE, our decision of February 28, 1958 is modified in the sense that the delinquency interest of one-
half (1/2) of one (1%) percent should be computed on the deficiency taxes only from July 1, 1954 to July 30,
1954, and the defendant Collector of Internal Kevenue ia hereby ordered to refund to plaintiff the sum of
P9,387.54 as computed in Annex 'A' hereof, with interest at the legal rate from the date of payment. Without
special pronouncement as to costs."
On September 25, 1950, Allison J. Gibbs and his wife Esther K. Gibbs, hereinafter referred to as trustors,
executed five (5) separate documents each, entitled "Deed of Sale and Declaration of Trust", whereby the
respective trustors transferred, sold and assigned, in trust, 53,000 shares of stock of the Lepanto Consolidated
Mining Co., in favor of each one of their five (5) children, namely, Johnson Kelly Gibbs, Allison De France Gibbs,
Candace Gibbs, Douglas Fletcher Gibbs and Reginald Kelley Gibbs, in consideration of the sum of P26,227.70, to
be paid "on or before December 23, 1950, by selling, mortgaging, hypothecating, or pledging part or all of the
corpus of the trust." The market value of said 53,000 shares on September 25, 1950 was P34,980.00
The terms and conditions of the ten (10) deeds of trust were identical. Instituted trustee, without bond, in said
ten (10) deeds, was Finnley J. Gibbs, a brother of trustor Allison J. Gibbs, who, as attorney-in-fact of the former,
accepted the trust, in his (Finnley J. Gibbs') name, for and on behalf of the aforementioned beneficiaries. The
trust was to terminate upon the respective beneficiary reaching the age of 35. If the beneficiary died beforei
reaching that age, leaving legitimate issue, the trust would continue, but for the benefit of the latter, and the full
Page 30 of 48
distribution and termination of the trust with respect to such issue would be effected not later than 20 years
after the death of said beneficiary. If the beneficiary died before reaching the age of 35 leaving no legitimate
issue, the trustee would turn over the trust corpus or the remainder thereof and any accumulated income, share
and share alike, to the other beneficiaries or children of the trustors.
On October 24,1950, the trustors gave notice to the then Collector of Internal Revenue, hereafter referred to as
defendant, of the execution of the ten (10) deeds of trust and requested a ruling on whether or not gift taxes
were due thereon. Soon thereafter, or on December 14, 1950, defendant assessed a donee gift tax of P75.04 on
each of the beneficiaries in said trust agreements, or a total of P750.40 and a donor gift tax of P774.04 on each of
the trustors, or P1,548.08 for both. These assessments were based upon the difference between said market
value of the shares of stock and the stipulated consideration for the transfer thereof. On December 22, 1950,
defendant revised his assessment of the donor gift tax by increasing tt from P774.04, P842.84 for each trustor,
or a total of P1,685.68. The next day, the donee gift taxes were, also, increased, from the aforementioned total
sum of P750.40 to P7,856.90.
Within the period fixed by law, or on May 15, 1951, said donor and donee gift taxes in the sum of P1,685.68 and
P17,856.90, respectively, were paid. Subsequently, the refund of P17,106.50, representing the difference
between the amount of the first assessment (P750.40) for donee gift taxes and that of the second assessment
thereof (P17,856.90), was demanded, but the demand was, on August 23, 1951, turned down by the defendant.
The trustee appealed to the Secretary of Finance. Before the latter could pass upon the appeal, however, the
Board of Tax Appeals was created by Executive Order No. 401 of the President of the Philippines. The pertinent
records were then forwarded to said Board. Alleging fear of expiration of the two-year period for the refund of
said sum of P17,106.50, on May 12, 1953, the trustee instituted Civil Case No. 19541 of the Court of First
Instance of Manila against the defendant for the recovery of such amount.
Meanwhile, or on December 28, 1951, the trustors, by five (5) separate documents each, had created ten (10)
additional and separate trusts, each involving 22,400 shares of stock of the same mining company, in favor of
each of the aforementioned beneficiaries, for the stipulated consideration of P17,430, to be paid by the trustee
within 120 days after the transfer of said stock has been effected in the books of the mining company. In all
other respects, the terms and conditions of this second set of deeds of trust are identical to those of the first set.
Admittedly, the market value of said 22,400 shares was then P19,264.00.
Page 31 of 48
These additional deeds of trust impelled the defendant to assess, on April 8, 1952, a donor gift tax of P304.42 on
each trustor, or a total of P608.84 for both trustors, and a donee gift tax of P36.69, on each of the beneficiaries,
or a total of P366.90. These amounts were paid on May 15, 1952, within the statutory period therefor.
Holding that gift taxes are leviable on the full market value of all the shares of stock thus placed in trust instead
of upon the difference between said market value and the stipulated considerations on June 16, 1954, defendant
assessed additional donor gift taxes in the sums of P5,093.71 on each trustor, or a total of P10,187.42, for the ten
(10) trusts created on September 25, 1950, and P8,788.78, on each trustor, or a total of P17,577.56 for the trusts
created on December 28, 1951. Additional donee gift taxes were, likewise, assessed in the sum of P12,040.30 for
the ten (10) additional trusts created on December 28, 1951. The corresponding assessment notices demanded
that these three (3) sums be paid on or before June 30, 1954. Upen request of the taxpayers, they were given an
extension up to July 31, 1954, on which date said sums were paid under protest. Thus, the amounts paid under
protest for the two (2) sets of trusts in question aggregate P56,911.78, itemized as follows:
Donee gift taxes on the trusts created on September 25, P17,106.5

1950 ........................ 0
Donor gift taxes on the trusts created on September 25,
10,187.42
1950 ........................
Donee gift taxes on the trusts created on December 28,
12,040.30
1951 .........................
Donor gift taxes on the trusts created on December 28,
17,577.56
1951 ..........................
P56,911.7
Total
8
In the meantime, or on June 16, 1954, Republic Act No. 1125, creating the Court of Tax Appeals, had been
approved and become effective. Pursuant to section 22 of said Act, the records of Civil Case No. 19541 of the
Court of First Instance of Manila were, on August 26, 1954, forwarded to the Court of Tax Appeals. In October,
1955, the trustors intervened in the case as plaintiffs-intervenors. In their complaint in intervention they prayed
for the refund of the additional donor gift taxes paid by them in the aggregate sum of P27,76498, with interest
and attorney's fees. In July, 1956, the trustee amended his complaint to include therein the claim for refund of
the aggregate sum of P56,911.78 specified above. In due course, thereafter, the Court of Tax Appeals rendered
its aforementioned decision, which on motion for reconsideration was amended as adverted to above. Hence,
Page 32 of 48
these appeals, one by the trustee (plaintiff) and the trustors (plaintiffs-intervenors), G. R. No. L-14166, and
another by the defendant, G. R. No. L-14320.
The main issue raised in the first appeal is whether the gift taxes on the transfer of the shares of stock
aforementioned should be based on the full market value of said shares of stock at the time of the respective
transfers thereof or only upon the difference between said market value and the consideration, stipulated in the
trust agreements. The defendant adhered to the first alternative, which the Court of Tax Appeals, likewise,
adopted, upon the ground that the stipulated consideration were except as to the aggregate sum of P52,277.00
allegedly paid by the trustee in June 1953 in effect, simulated.
Indeed, the stipulated consideration of P262,277.00, for the transfer of the 530,000 shares of stock involved in
the first set of deeds of trust were to be paid, pursuant thereto, "on or before December 23, 1950, by selling,
mortgaging, hypothecating or pledging part or all of the corpus of the trust". On December 2, 1950, the Central
Bank granted plaintiff's application for license to sell, assign or encumber said shares of stock. Yet nothing was
done to pay the stipulated consideration on the date set therefor. What is more, the trustors did not demand
payment of, or do anything to collect, said consideration.
It is true that on June 15, 1953, or about three and a half years (3 1/2) after the latter had become due, Allison J.
Gibbs, as one of the trustors and as attorney-in-fact for the trustee, as well as the other trustor, his wife, Esther
K. Gibbs, executed ten (10) documents entitled "Compromise Agreement", stating that the parties had agreed to
suspend and defer payment of the sum of P26,277.70 stipulated in each of the first ten (10) trust agreements,
and to liquidate the obligation to make said payment as follows: (a) the trustee would pay P5,227.70 on or
before June 30, 1953; and (b) the balance of P21,000.00 would be paid on or before the 21st birthday of the
respective beneficiaries or the date of termination of the trust, whichever date came first. The trustee and the
trustors have, likewise, introduced in evidence, ten (10) promissory notes of the trustee, for said sum of
P21.000, allegedly executed in compliance with said compromise agreements.
These did not merit, however, full faith and credence from the Court of Tax Appeals, which regarded such
agreements, as well as said-promissory notes, as a mere devise to avoid and evade payment of the
corresponding gift taxes. Considering that the trustee is a brother of trustor Allison J. Gibbs; that the ten (10)
cash payments of P5,277.70 each, referred to in the compromise agreements aforementioned, were seemingly
made to trustors Esther K. Gibbs and Allison J. Gibbs by the latter as attorney-infact of the trustee, his brother
Finley J. Gibbs; that there was absolutely no consideration for the release of the trustee from the obligation to
pay P26,227.70 on or before December 23, 1950, under each of the deeds of trust executed on September 25,
Page 33 of 48
1950; that the promissory notes adverted to above bear no date and were not executed before any witness; and
that the date of maturity therein set is so distant, in relation to the due dates under said deeds of trust, we find
no justification for disturbing the conclusion reached by the lower court. In fact, said conclusion is borne out by
the following circumstances:
In answer to the following question propounded by a Judge of said court
"If the trusts were created for the benefit of your children and as you said, one of the consequences of which was
your love and affection for your children, what need was there for you to impose this burden of requiring them
to pay for those shares?"
trustor Allison J. Gibbs answered:
"Well, there were tax considerations involved, Your Honor. I have not only to think of the Philippine tax
problems but also the United States tax problems. I very carefully went into the whole matter before my wife
and I decided on doing what we did. I studied and came to the conclusion that we could not afford to make an
outright gift of these shares, that the taxes that would result not only to the Philippine government but to the
United States government would be too big for us to shoulder, considering the fact that we also are letting off
our control of transfers of our right into these substantial portion of our assets. We could not have afforded to do
it. It calls by way of future interest under the United States gift tax laws for payment of gifts taxes. We were
allowed an exemption both for both my wife for each of my wife and myself of $30,000.00 under the United
States Federal gift tax law. But these gifts, had they been accepted * * * had they been made 100% * * * rather,
these transfers had they been made without any consideration would have been taxable 100% at the market
value on that date. That would have resulted on a tremendous tax both to the Philippine Government and to the
United States Government. We could not afford to pay those taxes, and that is fundamentally one reason for
fixing the price that we did fix which was premised upon our cost."
The deeds of trust state that the purpose thereof is "to establish an endowment for the support, maintenance,
care, health, higher education and travel of the beneficiary and the launching of his career after he becomes of
age". These purposes would be materially impaired, if not entirely defeated, if the beneficiaries were to pay the
stipulated consideration aggregating P262,277, under the first set of deeds of trust, and P174,300 under the
second set, or a total of P436,577. If we deduct this sum from,the aggregate market value of all the shares of
stock in question which is P542,440 the net value of the whole trust would be reduced to P105,863 and the net
value of the aggregate trust for each beneficiary would be no more than P21,172.60. And, if as the trustee and
the trustors maintain, the taxes under consideration (P56,911.78) should be deducted from the corpus of the
Page 34 of 48
trust, the net value of the aggregate trust for each beneficiary would be further reduced to P9,790.244. Certainly,
this amount, as well as the aforementioned sum of P21,172.60 could hardly be sufficient for the "support,
maintenance, care, health, higher education and travel" of each beneficiary and "the launching of his career after
he has become of age".
The trustors are financially well off. When the firat set of deeds of trust were executed (September 25, 1950),
their assets in the Philippines and United States were worth P1,500,000.00 and P500,000.00 respectively, at the
rate of P2.00 to a $1.00. If the trustors were earnestly concerned, as they seemingly were, in providing ample
funds to assure the support, maintenance, care, health, higher education and travel of their children and the
launching of their career after they had become of age, the trustors would not have really meant to require them
to pay the consideration stipulated in the trust agreements. The subsequent acts of the trustors showed that
they did not intend to collect said consideration. As the lower court had correctly observed:
"* * * We assume that the trustors were indeed serious about the purpose of the trusts. With this in mind, we
cannot conceive how the purpose of the trust may readily and liberally be achieved if the trust were to be
burdened by such onerous monetary consideration. Without the consideration, the purpose or purposes of the
trusts could have been more readily obtained. Consequently, we feel constrained to treat the monetary
considerations of the trusts as an intended superfluity, if not subtlety, to becloud the donative intent of trustors.'
The corpus of the trust was never totally or partially sold, hypothecated or encumbered. Instead, after December
7, 1950, when the Central Bank authorized the conversion of the shares of stock covered by the first set of trust
agreements from resident stocks to non-resident stocks, the corresponding cash dividends and stock dividends
declared by the mining company were sent directly to the trustee in the United States, thus enabling the trustors
to create dollar assets in the United States. The testimony of trustor Allison J. Gibbs on this point is illuminating.
We quote:
"JUDGE LUCIANO
If, as you said, one of the purpose of imposing a consideration on the trustee in your favor and that of your wife,
was to protect the interest of both you and your wife, why is it that when these dividends were declared by the
Lepanto Consolidated Mining Company, and were so declared, you did not collect the consideration from these
dividends to offset the stipulated consideration in the series of trust agreements?
"A
Page 35 of 48
Because that would defeat the very objectives for which we created the trusts and at least, one of the objectives
was to transfer as much as possible of our Philippine assets to the United States in the form of dollars so as to
create dollar assets in the United States on which our children could rely under the trust indentures'. In fact, that
was the prime basis upon which I secured the eventual licensing by the Central Bank of the transactions. In fact, I
told the Central Bank if they did not license it on the basis on which I had proposed which I considered
absolutely legal, that I would find some other way of accomplishing the objective. If necessary, I would leave the
Philippine Islands and become a resident of the United States. And, in that instance, under their regulations,
there could be no question that all of my assets in the Philippines which were earning dividends would be
entitled to have the dividends remitted to the United States. They saw the logic of my reasoning and they finally
agreed on the transaction of issuing the license, XL-530 on December 2, 1950, Exhibit 3-2, plaintiff. There has
been no question from the very beginning of one of the prime purposes of this transaction it was to create a
dollar estate for our children in the United States, premised upon our conviction that Lepanto Consolidated
Mining Company was going to pay dividends and that the Central Bank regulations would allow the remittance
of dividends to non-resident stockholders."
The trustors could have easily collected the stipulated consideration or part of it from said dividends, yet they
did not do so they even saw to it that the dividends were sent to the United States.
In connection with the trust agreements executed on December 28, 1951, the trustee, represented by his
attorneyin-fact, Allison J. Gibbs, and the latter, as one of the trustors, as well as his wife, trustor Esther K. Gibbs,
executed on July 15, 1953, another set of deeds, entitled "Compromise Agreement", stating that the trustee
thereby resold, retransf erred and reassigned to the trustor the 22,400 shares covered by each of said trust
agreements, for and in consideration of the sum of P19,264 to be paid by the trustors by crediting to the trustee
the sum of P17,430, the consideration stipulated in each one of said trust agreements, thereby leaving a balance
of P1,843 to be paid to the trustee upon the trustors' repossession of the corresponding stock certificates.
The main reason given in said compromise agreements for the provisions thereof is the alleged inability of the
trustee to sell, mortgage, hypothecate, or pledge the said shares of stock or otherwise deal with third parties
with a view to raising funds for the payment of the consideration stipulated in the trust agreements, pending
registration of the transfer of said stock in the books of the mining company, in view of the conditions not
described in the compromise agreements imposed by the Central Bank for the issuance of a license authorizing
said transfer, which according to the compromise agreements are rightly unacceptable to the trustee.
Page 36 of 48
This reason is clearly artificious. The stock involved in the trust agreements of September 25, 1950 were so
transferred. Still no payment was made thereon. Moreover, the trustee could have authorized the trustors to sell,
mortgage, hypothecate or otherwise dispose of said stock to raise the necessary funds, if the intent was really
that the stipulated consideration be paid. Indeed, as attorneyr in-fact for the trustee, trustor Allison J. Gibbs, with
the ample powers that his acts revealed he had, could have simply granted such authority to himself and his
wife, Esther K. Gibbs, an trosters. Considering that ane of the prime objectives of the trustors in executing the
trust agreements was "to transfer as much as possible of our Philippine assets to the United States in the form of
dollars", it is understandable that they did not wish the stock in question to be disposed of in the Philippines, for
this would surely defeat the accomplishment of said objectives. At the same time, it is apparent that the reason
given in said compromise agreements for the execution thereof is not true.
It may not be amiss to note, also, that the compromise agreements affecting the trusts constituted on December
28, 1951, virtually revoked said trusts, contrary to the explicit provision in the trust agreements, to the effect
that the trusts therein established are "irrevocable".
Another factor that affects adversely the credence and weight due to all of the compromise agreements is that
the the same were made with knowledge of the fact that the defendant was already investigating whether the
stipulated consideration was real or fictitious and entertaining the idea o£ asceicing the corresponding gift taxes
on the basis of the full market value of the stock involved.
The trustee and the trustors maintain that the lower court erred in not deducting the amount of the donor gift
taxes from the value of the property subject to the donee gift taxes, in view of the provision of the trust
agreements to the effect
"In addition to the foraging, the TRUSTEE shall pay out of the property and/or the gross income of the trust
estate all income, estate, gift, succession or inheritance taxes, if any, payable by the VENDOR, TRUSTEE or
BENEFICIARY by reason of this trust."
We find no merit in this pretense. The question as to who shall pay any given tax and what shall be the basis
thereof are determined by law, the operation of which can not be affected by the provisions of a contract to
which the Government is not a party. This, of course, is without prejudice to the right, if any, of a party to the
trust agreements to demand reimbursement from the other party. But such right of reimbursement is
independent of, and foreign to, the right and duty of the defendant to collect the taxes in the manner and under
the conditions prescribed by law.
Page 37 of 48
The appeal taken up by the defendant refers to the interest chargeable on the amounts representing the taxes in
question, and the interest on the sum to be refunded by the Government.
In its resolution of June 25, 1958, the Court of Tax Appeals held that interest of one-half (1/2) of one (1%)
percent should be charged on the deficiency taxes only from July 1, 1954 to July 30, 1954, because the defendant
had demanded payment on or before June 30, 1954, of the deficiency donor gift taxes amounting to P10,187.42
and P17,577.56 assessed on the first and the second set of trust agreements, respectively, and the deficiency
donee gift taxes of P12,040.30, assessed on the second set of trust agreements. The defendant maintains that
said interest should be charged from the 15th day of May following the calendar year in which the gifts in
question had been made, for section 116 of the Tax Code provides;
"The gift taxes imposed by sections one hundred nine and one hundred ten of this Chapter shall be due and
payable on or before the fifteenth day of May following the close of the calendar year and shall be paid by the
donor or donee, as the case may be, to the Collector of Internal Revenue or to the treasurer of the province, city
or municipality of which the donor or the donee is a resident."
Upon the other hand, section 118(b) of the same Code, on which the lower court relied, reads:
"In case an extension for the payment of a deficiency is granted, there shall be collected, as a part of the taxes,
interest on the part of the deficiency the time for payment of which is so extended, at the rate of six per centum
per annum for the period of the extension." (Italics supplied.)
At this juncture, it should be noted that the taxes assessed on the basis of the difference between the market
value and the consideration were paid within the period fixed by law, or on May 15, 1951, as regards the trusts
created in 1950, and on May 15, 1952, as regards the trusts constituted in 1951. Even the donor gift taxes, under
a revised assessment, and the deficiency donee gift taxes due on the first set of trusts were paid in due time (May
15, 1951). With respect to the deficiency donor gift taxes on the two sets of trust agreements and the deficiency
donee gift taxes assessed on the second set of trust agreements, the defendant demanded payment thereof on or
before June 30, 1954. Had these assessments been paid on that date, no interest whatsoever would have been
due thereon. It is but fair and just, therefore, that interest be charged only for the period of the extension
secured for the payment of the last assessments, pursuant to section 113(b). In support of the theory that
interest is due, not only for said period of extension, but, also, from the fifteenth day of May of the year following
that in which the trust had been constituted, defendant cites setcion 119(b) (2) of the Tax Code, according to
which:
Page 38 of 48
"If the part of the deficiency the time for payment of which is extended is not paid in accordance with the terms
of the extension, there shall be collected, as a part of the taxes, interest on such unpaid amount at the rate of one
per centum a month from the date the same was originally due until it is paid."
This provision applies only when the taxes are not paid within the extension granted by the Collector or
Commissioner of Internal Revenue. It is inapplicable to the case at bar, for the taxes involved herein were
paid within said extension of time.
It is urged by the defendant that the Government should not be required to pay interest on the amount
refundable to the trustee and the trustors. The matter of payment of interest on sums collected by way of taxes,
which the Government is subsequently sentenced to refund to the taxpayer, depends upon whether or not the
collection of said sums is manifestly unwarranted (Collector of Internal Revenue vs. Convention of the Philippine
Baptist Churches, et al. 110 Phil., 711; 61 Off. Gaz. [14] 2007 (Resolution); Collector of Internal Revenue vs.
Sweeney, 106 Phil., 59; 57 Off. Gaz., [7] 1221; Collector of Internal Revenue vs. St. Paul's Hospital, etc., L-12127,
May 21, 1959). In the case at bar, it is clearly not so, in the light of the attending circumstances. Hence, the
amount refundable by the Government, pursuant to the decision appealed from, should draw no interest, and
said decision should be modified accordingly.
Thus modified, said decision should be, as it is hereby affirmed, in all other respects, without pronouncement as
to costs. It is so ordered.
Bengzon, C. J., Padilla, Bautista Angelo, Reyes, J. B. L., Paredes, and Dizon, JJ., concur.
G.R. No. L-19865 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.:chanrobl
This case is a sequel to the case of Pirovano, vs. De la Rama Steamship Co., 96 Phil. 335.
Page 39 of 48
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 its 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) and pursuant to
Page 40 of 48
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 stockholder of the Company voted to revoke the resolution
approving 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 (v. 96 Phil. 385) holding that the donation was valid and remunerative in the dispositive part of
Page 41 of 48
which reads:
"Wherefore, the decision appealled from should be modified as follows: (a) the, the donation in favor of the
children of the late Enrico Pirovano of the proceeds of the insurance policies taken on his life is valid and binding
on the defendant corporation, (b) that said donation which amounts to a total of P583,813.59, including interest,
as it appears in the, books of the corporation as of August 31, 1951, plus interest thereon at the rate of 5 per cent
per annum from the filing of the complaint, should be paid to the plaintiff after the defendant corporation shall
have fully redeemed the preferred shares issued to the National Development Company under the terms and
conditions stated in the resolutions of the Board of Directors of January 6, 1947 and June 24, 1947, as amended
by the resolution of the stockholders adopted on September 13, 1949; and (c) defendant shall pay to plaintiff an
additional amount equivalent to 10 per cent of said amount of P583,813.59 as damages by way of attorney's
fees, and to pay the costs of action."
(Pirovana, et al vs. De la Rama Steamship Co., 96 Phil. 367-368)

The above decision become final and executory. In compliance therewith, De la Rama Steamship Co. made on
April 6, 1955, a partial payment on the amount of the judgment and paid the balance thereof on May 12, 1955.
On March 6, 1955, respondent Commissioner of Internal Revenue assessed the amount of P60,869.67 as donee's
gift tax, inclusive of surcharges, interests and other penalties, against each of the petitioners-appellants, or for
the total sum of P243,478.68; and, on April 23, 1955 a donor's gift tax in the total amount of P34,871.76 was also
assessed against De la Rama Steamship Co., which the latter paid.
Petitioners-appellants herein contested respondent Commisioner's assessment and imposition of the donee's
gift taxes and donor's gift tax and also made a claim for refund of the donor's gift tax so collected. Respondent
Commissioner overruled petitioners' claim; hence, the latter presented two (2) petitions for review against
respondent's rulings before the Court of Tax Appeala, said petitions having been docketed as CTA Cases Nos. 347
and 375, CTA Case No. 347 relates to the petition disputing the legality of the assessment of donees's gift taxes
and donor's gift tax while CTA Case No. 375 refers to the claim for refund of the donor's gift tax already paid.
After the filing of respondent's usual answers to the claim for petitions, the two cases, being interrelated to each
Page 42 of 48
other, were tried jointly and terminated.
On January 31, 1962, the Court of Tax Appeals rendered its decision in the two cases, the dispositive part of
which reads:
"In resume, we are of the opinion, that (1) the donor's gift tax in the sum of P34,371.76 was erroneously
assessed and collected hence, petitioners are entitled to the refund thereof; (2) the donees' gift taxes were
correctly assessed; (3) the imposition of the surcharge of 25% is not proper; (4) the surcharge of 5% is legally
due and (5) the interest of 1 per cent per month on the deficiency donees' gift taxes is due from petitioners from
March 8, 1955 until the taxes are paid.
"IN LINE WITH THE FOREGOING OPINION, petitioners are hereby ordered to pay the donees' gift taxes as
assessed by respondent, plus 5% surcharge and interest at the rate of 1% per month from March 8, 1955
to the date of payment of said donees' gift taxes. Respondent is ordered to apply the sum of P34,371.76
which in refundable to petitioners, against the amount due from petitioners. With cost against petitioners
in Case No. 347."
Petitioners-appellants herein filed a motion to reconsider the above decision which the lower court denied.
Hence, this appeal before us.
In the instant appeal, 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.
In their brief and memorandum, they dispute the factual finding of the lower court that De la Rama Steamship
Company's renunciation of its rights, title, 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, an act of pure liberality,
and not to pay additional compensation for services: inadequately paid for". Petitioners now contend that the
lower court's finding was erroneous in seemingly considering the disputed grant as a simple donation, since our
previous decision (96 Phil. 335) had already declared that the transfer to the Pirovano children was a
Page 43 of 48
remuneration donation. Petitioners further contend that the same was not for an insufficient or inadequate
consideration but rather it 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.; hence, the donation does not constitute a taxable gift
under the provisions of Section 108 of the National Internal Revenue Code.
The argument for petitioners-appellants fails to take into account the fact that neither in Spanish nor Anglo-
American law was it considered that past services, rendered without relying on a coetaneous promise, express
or implied, that such services would be paid for the future, constituted cause or consideration that would make a
conveyance of property anything else but a gift or donation. 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):
"A thing given to a person in consideration of his merits oar for services rendered to the donor provided they do
not constitute recoverable debts, is also a donation" * * *."
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, he was not fully compensated for such services, or that,
because they were "largely responsible for the rapid and very successful development of the activities of the
company" (Resol. of July 10, 1946), Pirovano expected or was promised further compensation over and in
addition to his regular emoluments as President and General Manager. The fact that his services contributed in a
large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made
by the company to his heirs remain a gift or donation. This is emphasized by the director's Resolution of January
6, 1947, that "out of gratitude" the company decided to renounce in favor of Pirovano's heirs the proceeds of the
life insurance policies in question. The true consideration for the donation was, therefore, the company's
gratitude for his services, and not the services themselves.
That the tax court regarded the conveyance as a simple donation, instead of a remuneratory one as it was
declared to be in our previous decision, is but innocuous error; whether remuneratory or simple, the
conveyance remained a gift, taxable under Chapter 2, Title III, of the Internal Revenue Code.
But then, appellants contend, the entire properly or right donated should not be considered as a gift for taxation
purposes; only that portion of the value of the property or right transferred, if any, which is in excess of the
Page 44 of 48
value of the services rendered should be considered as a taxable gift. They cite in support Section III of the Tax
Code which provides that
"when property is transferred for less than the adequate and full consideration in money or money's worth, then
the amount by which the value of the property exceeded the value of the consideration shall, for the purpose of
the tax imposed by this chapter, be deemed a gift."
The flaw in this argument lies in the fact that, as copied from American law, 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,
v. Corbin on Contracts, vol. I, p. 359). But, as we have seen, Pirovano's successful activities as of the De la Rama
Steamship Co. can not be such consideration for the gift to his heirs, since the services were rendered long
before the Company ceded the value of the life policies to said heirs; cession services were not the result of one
bargain or of a mutual exchange of promises.
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.
Thomas, 3 O.B. 234; Peters vs. Poro, 25 ALR 615; Carson vs. Clark 25 Am. Dec. 79; Boston vs. Dodge, 12 Am. Dec.
205), i.e. one that is unenforceable in view of the common law rule that consideration must consist in a legal
benefit to the promise or some legal detriment to the promisor.
What is more, the actual consideration for the cession of the policies, as previously shown, was the Company's
gratitude to Pirovano; so that under section III of the Tax Code there is no consideration the value Of which be
deducted from that of the property transferred as a gift. Like "love and affection", gratitude has no economic
value and is not "consideration" in the sense that the word is used in this section of the Tax Code.
As stated by Chief Justice Griffith of the Supreme Court of Mississippi in his well-known book, ''Outline of the
Law' (p. 204)
"Love and affection are not considerations of value-they are not estimable in terms of value. Nor are sentiments
of gratitude for gratuitous past favors or kindnesses; nor are obligations which are merely moral. It has been
Page 45 of 48
well said that if a moral obligation were alone sufficient it would remove the necessity for any consideration at
all, since the fact of making a promise imposes the moral obligation to perform it."
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. A, for example, may donate a parcel of land to B on
condition that the latter assume a mortgage existing on the donated land. 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. This, in fact, is
contemplated by Article 619 of the Civil Code of 1889 (Art. 726) of the New 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".
Section III of the Tax Code has in view situations of this kind, 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.
Petitioners finally contend that, even assuming that the donation in question is subject to donees's gift taxes, the
imposition of the surcharge of 5% and interest of 1% per month from March 8, 1955 was not justified because
the proceeds of the life insurance policies were actually received on April 6, 1955 and May 12, 1955 only and in
accordance with Section 115(c) of the Tax Code; the filing of the returns of such tax became due on March 1,
1956 and the tax became payable on May 15, 1956, as provided for in Section 116(a) of the same Code. In other
words, petitioners maintain that the assessment and demand for donees' gift taxes was prematurely made and
of no legal effect; hence, they should not be held liable for such surcharge and interest.
It is well to note, and it is not disputed, that petitioners-donee 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. This situation is
covered by Section 119(b) (1) and (c) and Section 120 of the Tax Code.
"(b) Deficiency.
(1) Payment not extended. Where a deficiency, or any interest Assessed in connection therewith, or any addition
to the tax provided in section one hundred twenty is not paid in full within thirty days from the date of the
notice and demand from the Collector, there shall be collected as a part of the taxes, 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, (section
Page 46 of 48
119)
"(c) Surcharge. If any amount of the taxes included in the notice and demand from the Collector of Internal
Revenue is not paid in full within thirty days after such notice and demand, 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."
(sec.119)
The failure to file a return was found by the lower court to be due to reasonable cause and not to willful neglect.
On this score, the elimination by the lower court of the 25% surcharge as ad valorem penalty which respondent
Commissioner had imposed pursuant to Section 120 of the Tax Code was proper, 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.
On the other hand, unlike said Section 120, Section 119, paragraphs (b) (1) and (c) of the Tax Code, does not
confer on the Commissioner of Internal Revenue or on the courts any power and discretion not to impose such
interest and surcharge. 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. 11, Republic Act No. 1125; Rule 12,
Rules of the Court of Tax Appeals). It should further be noted that
"It has been the uniform holding of this Court that no suit for adjoining the collection of a tax, disputed or
undisputed, can be brought, the remedy being to pay the tax first, formerly under protest and now without need
of protest, Ale the claim with the Collector, and if he denies it, bring an action for recovery against him." (David
vs. Ramos, et al., .90 Phil. 351)
"Section 306 of the National Internal Revenue Code * * * lays down the procedure to be followed in those cases
wherein a tax payer entertains some doubt about the correctness of a tax sought to be collected. Said section
provides that the tax should first be paid and the taxpayer should sue for its recovery afterwards. The purpose of
the law obviously is to prevent delay in the collection of taxes upon which the Government depends for its
Page 47 of 48
existence. 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." (National Dental Supply Co. vs. Meer 90 Phil. 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.
On the basis of the above stated provisions of law and applicable authorities, it is evident that the imposition of
1% interest monthly and 5% surcharge is justified and legal. As succinctly stated by the court below, 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, Annex XIV, petition). Hence, said imposition of interest
and surcharge by the lower court should be upheld.
Wherefore, the decision of the Court of Tax Appeals is affirmed. Costs against petitioners Pirovano.
Bengzon, C. J., Bautista Angelo, Paredes, Dizon, Regala, Makalintal, Bengzon, J. P., and Zaldivar, JJ., concur.
Page 48 of 48

Tax 2 Cases Donors Tax

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tax 2 Cases Donors Tax

Uploaded by

Copyright:

Available Formats

B.

C. Estates and Trusts

[ G.R. No. 210987, November 24, 2014 ]

On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied

(c) Determination of Amount and Recognition of Gain or Loss –

The petition is unmeritorious.

Reviews by the Secretary of

The appellate power of the

Petitioner’s above submission is specious.

The price difference is

G.R. No. L-5949 November 19, 1955

Ozaeta, Roxas, Lichauco and Picazo for petitioners.

G.R. No. L-14166 April 28, 1962

G.R. No. L-14320 April 28, 1962

COLLECTOR OF INTERNAL REVENUE, Petitioner, vs. FINLEY J. GIBBS, as Trustee for JOHNSON KELLEY

G.R. No. L-19865 July 31, 1965

MARIA CARLA PIROVANO, etc., et al., petitioners-appellants, vs. THE COMMISSIONER OF INTERNAL

Angel S. Gamboa for petitioners-appellants.

(Pirovana, et al vs. De la Rama Steamship Co., 96 Phil. 367-368)

You might also like