Tax 2 MTE Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No.

120721 February 23, 2005

MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V. CRUZ, petitioners, vs. COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents. DECISION AZCUNA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, assailing the decision of the Court of Appeals in CA G.R. SP No. 27134, entitled "Comissioner of Internal Revenue v. Manuel G. Abello, Jose C. Concepcion, Teodoro D. Regala, Avelino V. Cruz and Court of Tax Appeals," which reversed and set aside the decision of the Court of Tax Appeals (CTA), ordering the Commissioner of Internal Revenue (Commissioner) to withdraw his letters dated April 21, 1988 and August 4, 1988 assessing donor s taxes and to desist from collecting donor s taxes from petitioners. During the 1987 national elections, petitioners, who are partners in the Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contributed P882,661.31 each to the campaign funds of Senator Edgardo Angara, then running for the Senate. In letters dated April 21, 1988, the Bureau of Internal Revenue (BIR) assessed each of the petitionersP263,032.66 for their contributions. On August 2, 1988, petitioners questioned the assessment through a letter to the BIR. They claimed that political or electoral contributions are not considered gifts under the National Internal Revenue Code (NIRC), and that, therefore, they are not liable for donor s tax. The claim for exemption was denied by the Commissioner.11ªvvphi1.nét On September 12, 1988, petitioners filed a petition for review with the CTA, which was decided on October 7, 1991 in favor of the petitioners. As aforestated, the CTA ordered the Commissioner to desist from collecting donor s taxes from the petitioners.2 On appeal, the Court of Appeals reversed and set aside the CTA decision on April 20, 1994.3 The appellate Court ordered the petitioners to pay donor s tax amounting to P263,032.66 each, reasoning as follows: The National Internal Revenue Code, as amended, provides: Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and paid upon the transfer by any person, resident, or non-resident, of the property by gift, a tax, computed as provided in Section 92. (b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible. Pursuant to the above-quoted provisions of law, the transfer of property by gift, whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible, is subject to donor s or gift tax.

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Tax 2 MTE A gift is generally defined as a voluntary transfer of property by one to another without any consideration or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250). In the instant case, the contributions are voluntary transfers of property in the form of money from private respondents to Sen. Angara, without considerations therefor. Hence, they squarely fall under the definition of donation or gift. As correctly pointed out by the Solicitor General: The fact that the contributions were given to be used as campaign funds of Sen. Angara does not affect the character of the fund transfers as donation or gift. There was thereby no retention of control over the disposition of the contributions. There was simply an indication of the purpose for which they were to be used. For as long as the contributions were used for the purpose for which they were intended, Sen. Angara had complete and absolute power to dispose of the contributions. He was fully entitled to the economic benefits of the contributions. Section 91 of the Tax Code is very clear. A donor s or gift tax is imposed on the transfer of property by gift.1awphi1.nét The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads: Political Contributions. For internal revenue purposes, political contributions in the Philippines are considered taxable gift rather than taxable income. This is so, because a political contribution is indubitably not intended by the giver or contributor as a return of value or made because of any intent to repay another what is his due, but bestowed only because of motives of philanthropy or charity. His purpose is to give and to bolster the morals, the winning chance of the candidate and/or his party, and not to employ or buy. On the other hand, the recipient-donee does not regard himself as exchanging his services or his product for the money contributed. But more importantly he receives financial advantages gratuitously. When the U.S. gift tax law was adopted in the Philippines (before May 7, 1974), the taxability of political contributions was, admittedly, an unsettled issue; hence, it cannot be presumed that the Philippine Congress then had intended to consider or treat political contributions as non-taxable gifts when it adopted the said gift tax law. Moreover, well-settled is the rule that the Philippines need not necessarily adopt the present rule or construction in the United States on the matter. Generally, statutes of different states relating to the same class of persons or things or having the same purposes are not considered to be in pari materia because it cannot be justifiably presumed that the legislature had them in mind when enacting the provision being construed. (5206, Sutherland, Statutory Construction, p. 546.)Accordingly, in the absence of an express exempting provision of law, political contributions in the Philippines are subject to the donor s gift tax. (cited in National Internal Revenue Code Annotated by Hector S. de Leon, 1991 ed., p. 290). In the light of the above BIR Ruling, it is clear that the political contributions of the private respondents to Sen. Edgardo Angara are taxable gifts. The vagueness of the law as to what comprise the gift subject to tax was made concrete by the above-quoted BIR ruling. Hence, there is no doubt that political contributions are taxable gifts. 4 Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its resolution of June 16, 1995.5 Petitioners thereupon filed the instant petition on July 26, 1995. Raised are the following issues: Page 2 of 27


which is to interpret the law according to its true intent. Municipality of Naga. Abello8 . of being understood in more than one way.661. Second Issue Since animus donandi or the intention to do an act of liberality is an essential element of a donation.661. v. Taken together with the Civil Code definition of donation. donative intent is not negated when the person donating has other intentions. There was intent to do an act of liberality or animus donandi was present since each of the petitioners gave their contributions without any consideration. v. there is no room for construction or interpretation. Regala and Avelino V. Concepcion.l^vvphi1.31 each. Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Quijano v. petitioners argue that it is important to look into the intention of the giver to determine if a political contribution is a gift. Second. Intermediate Appellate Court10 the Court enunciated: It bears stressing that the first and fundamental duty of the Court is to apply the law. De Garcia. Third Issue Page 4 of 27 .645. This being the case. (c) the intent to do an act of liberality or animus donandi. Petitioners contribution of money without any material consideration evinces animus donandi. it must be taken to mean exactly what it says and the court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees Association v. or of referring to two or more things at the same time. where the law speaks in clear and categorical language.31 to the campaign funds of Senator Edgardo Angara. the Court is called upon to exercise one of its judicial functions. Jose C. Inc.530. there is only room for application (Cebu Portland Cement Co. Senator Edgardo Angara s patrimony correspondingly increased by P3. donative intent is a creature of the mind. 24 SCRA 708 [1968]) Where the law is clear and unambiguous. each gave P882.Tax 2 MTE Donation has the following elements: (a) the reduction of the patrimony of the donor. 35 SCRA 270 [1970]). motives or purposes which do not contradict donative intent. Cruz. In Rizal Commercial Banking Corporation v. It cannot be perceived except by the material and tangible acts which manifest its presence. When the law is clear and free from any doubt or ambiguity. All three elements of a donation are present. Petitioners argument is not Ambiguity is a condition of admitting two or more meanings. donative intent is presumed present when one gives a part of ones patrimony to another without consideration. First of all. A statute is ambiguous if it is admissible of two or more possible meanings.. The patrimony of the four petitioners were reduced by P882. This Court is not convinced that since the purpose of the contribution was to help elect a candidate. Teodoro D. 30 SCRA 111 [1969]. As has been our consistent ruling. Development Bank of the Philippines. there is no occasion for interpretation. The fact that their purpose for donating was to aid in the election of the donee does not negate the presence of donative intent. and.249 . without any material consideration. thereby leaving no room for construction. there was no donative intent. the late Manuel G.7 The present case falls squarely within the definition of a donation.Luzon Surety Co. Section 91 of the NIRC is clear and unambiguous. 138 SCRA 273 [1985]. Ople. (b) the increase in the patrimony of the donee. in which case. Petitioners.

petitioners again claim that donative intent is not present. It is a familiar principle of law that prolonged practice by the government agency charged with the execution of a statute. . . loan.12 This Court holds that the BIR is not precluded from making a new interpretation of the law. especially when the old interpretation was flawed. or a contract. erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute (PLDT v. in no way amounts to a valuable material consideration so as to remove political contributions from the purview of a donation. motives or purposes which do not contradict donative intent. made for the purpose of influencing the results of the elections but shall not include services rendered without compensation by individuals volunteering a portion or all of their time in behalf of a candidate or political party. . The proper performance of his duties as a legislator is his obligation as an elected public servant of the Filipino people and not a consideration for the political contributions he received. including the giver himself. while the consideration for a political contribution is the desire of the giver to influence the result of an election by supporting candidates who. . and that the Government is never estopped by mistake or error on the part of its agents (Pineda v. Petitioners would distinguish a gift from a political donation by saying that the consideration for a gift is the liberality of the donor. the money value of which can be assessed based on the rates prevailing in the area. It shall also include the use of facilities voluntarily donated by other persons. It is a well-entrenched rule that . Fourth Issue Petitioners raise the fact that since 1939 when the first Tax Code was enacted. the purpose for which the sums of money were given. They argue that: . Since the purpose of an electoral contribution is to influence the results of the election. in the perception of the giver. whether or not legally enforceable. as a public servant. 90 Phil. subscription. . Collector of Internal Revenue. In fine.11 Section 94(a) of the said Code defines electoral contribution as follows: The term "contribution" includes a gift. up to 1988 the BIR never attempted to subject political contributions to donor s tax. is an authoritative interpretation thereof. would influence the shaping of government policies that would promote the general welfare and economic well-being of the electorate. acquiesced in and relied upon by all concerned over an appreciable period of time. 676). he may even be called to enact laws that are contrary to the interests of his benefactors. which was to fund the campaign of Senator Angara in his bid for a senatorial seat. Petitioners attempt to place the barrier of mutual exclusivity between donative intent and the purpose of political contributions. Senator Angara was under no obligation to benefit the petitioners. .Tax 2 MTE Petitioners maintain that the definition of an "electoral contribution" under the Omnibus Election Code is essential to appreciate how a political contribution differs from a taxable gift. . donation. Court of First Page 5 of 27 . promise or agreement to contribute. In fact. for the benefit of the greater good. advance or deposit of money or anything of value. Petitioners attempt is strained. cannot be considered as a material consideration so as to negate a donation. This Court reiterates that donative intent is not negated by the presence of other intentions. The fact that petitioners will somehow in the future benefit from the election of the candidate to whom they contribute. entitled to great weight and the highest respect.

Finally.J. namely BIR Ruling No. Jr. the petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are AFFIRMED. since the same were made prior to the exempting legislation. and Carpio. 1991.13 Seventh Issue Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling. providing in Section 13 thereof that political/electoral contributions. It is immaterial whether or not the Court of Appeals based its decision on the BIR ruling because it is not pivotal in deciding this case. this Court takes note of the fact that subsequent to the donations involved in this case. C. Benguet Consolidated Mining Co. 803. duly reported to the Commission on Elections. Section 91 (now Section 98) of the NIRC as supplemented by the definition of a donation found in Article 725 of the Civil Code. 711. does not benefit petitioners because. 807. is clear and unambiguous.. are not subject to the payment of any gift tax. 7166 provides no retroactive effect on this point. No costs. 88-344. Page 6 of 27 . Ynares-Santiago. JJ. as stated. SO ORDERED. and Republic Act No. no part. 52 Phil.. 7166 on November 25. As discussed above. v. Davide. however. Eighth Issue Petitioners next contend that tax laws are construed liberally in favor of the taxpayer and strictly against the government. WHEREFORE. J. Congress approved Republic Act No.. 98 Phil. 724). This Court does not need to delve into this issue. there is here no room for construction since the law is clear and unambiguous. and needs no further elucidation.. This all the more shows that the political contributions herein made are subject to the payment of gift taxes. This rule of construction.Tax 2 MTE Instance of Tayabas. Quisumbing. concur. (Chairman). Pineda. which was issued after the petitioners were assessed for donor s tax.

Tax 2 MTE Republic of the Philippines SUPREME COURT Manila EN BANC G. (3) The term "foreign country" in Section 122 of the Tax Code. Among the properties in the Philippines are several parcels of land and many shares of stock. J.00 as estate tax and the sum of P151. for short). on January 2. At the time of her demise. respondent. paid the sum of P111. (Maria Cerdeira.R.: Doña Maria de la Estrella Soriano Vda. without costs. The real estate situated in the Philippines had a market value of P1. vs. could avail of the reciprocal provisions of our Tax Code. RESOLUTION PAREDES. 1955. 1955.874. (2) The international zone of Tangier. (North Africa). On appeal the Court of Tax Appeals reversed the decision of the Collector. No. Office of the Solicitor General for petitioner. but refused to pay the corresponding deficiency estate and inheritance taxes due on the transfer of her intangible personal properties. 1962 THE COLLECTOR OF INTERNAL REVENUE.90.582.791. died in Tangier. Ramirez and Ortigas for respondent. as administrator of her estate. (4) There exists reciprocity between Tangier and Philippine Laws on the matter of death taxes on intangible personal property. on the transfer of intangible personal properties of Maria Cerdeira. the respondent Antonio Campos Rueda. On the real estate.109. L-13250 May 30.874. on January 2. on the transfer of her real properties in the Philippines. ANTONIO CAMPOS RUEDA. the sum of P161. claiming that the estate is exempt from the payment of said taxes pursuant to section 122 of the Tax Code. as deficiency estate and inheritance taxes. refers to a foreign government competent to levy taxes without any consideration for the international status of said government. petitioner.95. She left properties in Tangier as well as in the Philippines. The Collector of Internal Revenue in a decision assessed the estate of the deceased.48 as inheritance tax. who elevated the case to Us for review.308.483. alleging that the Court of Tax Appeals erred in holding that (1) The testate estate of Maria Cerdeira is not liable for the payment of deficiency estate and inheritance taxes in the sum of P161. Page 7 of 27 .95 including interest and penalties. she was married to a Spanish Citizen and a permanent resident of Tangier from 1931 up to her death. accounts receivable and other intangible personal properties.50 and her personal properties also in the Philippines had a value of P396. de Cerdeira. even if it is not recognized by the Philippine Government as a state.

. The undersigned do hereby certify that neither Moroccan nor foreign legatees at Tangier and its province. "I"). G-1. are subject to any tax on movables. xxx xxx xxx In order to show the status of the law on the subject. sea cualquiera la nacionalidad de los interesados en la sucesion (Exh. . And provided. recites as follows: SEC. "Q-1"). Act No. no estan sujetas a ningun impuesto sucesorio conforme al Dahir del 15 de Mayo de 1925 y Ley del 30 de Enero de 1932. The law of January 30. Exh. "d-1").ñët The pertinent portion of section 122. "G-1"). the contents of which are quoted hereunder Que las transmisiones hereditarias de bienes muebles situados en Tanger. al preceptuarse. further. published in Official Bulletin No. . by the Governor at the Province of Tangier. 83. 1932. Praise be to God. with exception of real estate which is liable to inheritance tax by virtue of the law of January 10. however. las transmisiones hereditarias de bienes muebles radicantes en Tanger. Definitions. Provided. or (b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character in respect of intangible personal property owned by citizens of the Philippines not residing in that foreign country. que "quedan sujetos al pago del impuesto de derechos reales. of the Tax Code. as of January 1. as amended by section 6. That no tax shall be collected under This Title in respect of intangible personal property (a) if the decedent at the time of his death was a resident of a foreign country which at the time of his death did not impose a transfer tax or death tax of any character in respect of intangible personal property of citizens of the Philippines not residing in the foreign country. 1932. 1932 modifying the Dahir of May 15. the transmission or transfer of any intangible personal property. 1925 subjecting the transfer of real estate through deaths to the payment of registration taxes. 72 (Exh. is subject to the taxes prescribed in this Title. Q-1 by the Acting Administrator and Lands Registrar at Tangier. Que conforme la ley del 30 de Enero de 1932. in the Sherifian State. vigentes en la Zona Internacional de Tanger. Rep. Exhibit D-1 is certified by the Register of Properties and Chief of the Bureau of Taxes at Tangier. whatever may be the nationality of those interested in the succession (Exh. establecido para las donaciones entre vivos.. are sufficient proof on the non-liability of movable property located in Tangier for inheritance tax properties. las transmisiones de inmuebles por causa de muerte acontecida a partir del 10 de Enero de 1932" deja como actos no sujetos a ningun impuesto sucesorio. en relacion con el Dahir de 15 de Mayo de 1925. Q-1. subjects to no inheritance tax the successional transfers of movable property. 122. the respondent submitted certificates. Exhibit Q-1 by the Judge of the International Court at Tangier and Exhibit T. Page 8 of 27 .1äwphï1. That in the case of a resident. and T. in force or existing in Tangier at the time of Maria Cerdeira's death in 1955. considered together. sea cualquiera la nacionalidad de los intersesados en la sucesion (Exh.Tax 2 MTE (5) The certification Exhibits D-1. . regardless of its location.

Bautista Angelo.B.. Padilla. for the time being. J. Concepcion.Tax 2 MTE While section 122 of the Philippine Tax Code aforequoted speaks of "intangible personal property" in both subdivisions (a) and (b). "bienes muebles radicantes en Tanger" "movables" and "movable property". Labrador.. include or embrace "intangible personal property".L. and without. C. going into the merits of the issues raised by the petitioner-appellant. Barrera and Dizon.. Page 9 of 27 . concur. No costs. "movables" and "movable property" as used in the Tangier laws. the case is REMANDED to the Court of Tax Appeals for the reception of evidence or proofs on whether or not the words "bienes muebles". Bengzon. Reyes.J. JJ. as used in the Tax Code. the alleged laws of Tangier refer to "bienes muebles situados en Tanger". is on leave. In order that this Court may be able to determine whether the alleged laws of Tangier grant the reciprocal tax exemptions required by Section 122 of the Tax Code.

Carlos P. charges and penalties. as Administratrix of the Intestate Estate of the late Walter Scott Price. L-14674. Esguerra. amounting to P40. 14 entitled "In the matter of the Intestate Estate of the Late Walter Scott Price. 1961.55. directing the latter to pay to Mrs. Office of the Solicitor General and Atty. 1958.: This is a petition for certiorari and mandamus against the Judge of the Court of First Instance of Leyte. as Commissioner of Internal Revenue. J. Mantolino for petitioner. No. LORENZO C. G. No. 2700 appropriating the sum of P262. be deducted from the amount of P262.R. this Court declared as final and executory the order for the payment by the estate of the estate and inheritance taxes..R. 1956 and acknowledged before Notary Public Salvador V.00. Considering these facts.00 for the payment to the Leyte Cadastral Survey. special proceedings No. vs. Price. Simeona K. respondents. Administratrix of the estate of her late husband Walter Scott Price and Director Zoilo Castrillo of the Bureau of Lands dated September 19. the note of His Excellency. 1956.Tax 2 MTE Republic of the Philippines SUPREME COURT Manila EN BANC G. PRICE. No. 1960 in accordance with the order of the Supreme Court promulgated July 30. Ron. 1963 MELECIO R.55 due the Collector of Internal Revenue as ordered paid by this Court on July 5. Judge S. to Director Castrillo dated August 2. Hon. (Order of August 20.140. C. Benedicto submitted a copy of the contract between Mrs. It appears that in Melecio R.200. Price. as directed in the above note of the President. represented by the administratrix Simeona K. H. 1960 in G. 1960. L-18994 June 29. legal adviser in Malacañang to Executive Secretary De Leon dated December 14.200. in his capacity as Judge of the Court of First Instance of Leyte. Lorenzo C. presiding. Benedicto and Martinez for respondents. 1960. however. Garcia. HON. and an extract of page 765 of Republic Act No. GARLITOS. Domingo vs. and SIMEONA K. issued by the Court of First Instance of Leyte in. 1960 and September 28.200.00 due and payable to the Administratrix Simeona K. L14674. respectively. Garlitos. Pres.058. denied by the court which held that the execution is not justifiable as the Government is indebted to the estate under administration in the amount of P262. Moscoso. The orders of the court below dated August 20. Price.R. DOMINGO. are as follows: Atty. LABRADOR. The petition was. January 30. to the court below for the execution of the judgment. 1960) Page 10 of 27 . petitioner. Price the sum ofP368. seeking to annul certain orders of the court and for an order in this Court directing the respondent court below to execute the judgment in favor of the Government against the estate of Walter Scott Price for internal revenue taxes. the balance to be paid by the Government to her without further delay.058. G. Inc. in this estate." In order to enforce the claims against the estate the fiscal presented a petition dated June 21. the Court orders that the payment of inheritance taxes in the sum of P40.

00.1äwphï1.ñët Execution may issue only where the devisees. the regulations contained in Rule 90. Emphasis supplied. During the pendency of the proceedings all the estate is in custodia legis and the proper procedure is not to allow the sheriff. to its accounts to its citizens-creditors before it can insist in the prompt payment of the latter's account to it. section 7. 1949. The ordinary procedure by which to settle claims of indebtedness against the estate of a deceased person. legatees or heirs have entered into possession of their respective portions in the estate prior to settlement and payment of the debts and expenses of administration and it is later ascertained that there are such debts and expenses to be paid. is for the claimant to present a claim before the probate court so that said court may order the administrator to pay the amount thereof. thus: Page 11 of 27 . as an inheritance tax. and both debts are extinguished to the concurrent amount. It may not be amiss to repeat that it is only fair for the Government.200 has already been appropriated for the purpose by a corresponding law (Rep. And when sale or mortgage of real estate is to be made. to seize the properties but to ask the court for an order to require the administrator to pay the amount due from the estate and required to be paid. see also Rule 74.200. in which case "the court having jurisdiction of the estate may. Under the above circumstances. after hearing. in accordance with the provisions of Articles 1279 and 1290 of the Civil Code. L-2360. section 3. section 6. and order how much and in what manner each person shall contribute. 29. Dec.R. 1960) The petition to set aside the above orders of the court below and for the execution of the claim of the Government against the estate must be denied for lack of merit. settle the amount of their several liabilities. . and Rule 90. both the claim of the Government for inheritance taxes and the claim of the intestate for services rendered have already become overdue and demandable is well as fully liquidated. Compensation. should be complied with. 1960 and it orders that the payment of the claim of the Collector of Internal Revenue be deferred until the Government shall have paid its accounts to the administratrix herein amounting to P262. the properties belonging to the estate are under the jurisdiction of the court and such jurisdiction continues until said properties have been distributed among the heirs entitled thereto. specially taking into consideration that the amount due to the Government draws interests while the credit due to the present state does not accrue any interest. according to Rule 89. by order for that purpose. 2700). Judge of the Court of First Instance of Mindoro. To such effect is the decision of thisCourt in Aldamiz vs. The proper procedure is for the court to order the sale of personal estate or the sale or mortgage of real property of the deceased and all debts or expenses of administrator and with the written notice to all the heirs legatees and devisees residing in the Philippines.Tax 2 MTE The Court has nothing further to add to its order dated August 20. thus: . The legal basis for such a procedure is the fact that in the testate or intestate proceedings to settle the estate of a deceased person. No. as a debtor. takes place by operation of law. section 2. Another ground for denying the petition of the provincial fiscal is the fact that the court having jurisdiction of the estate had found that the claim of the estate against the Government has been recognized and an amount of P262. . Section 4. therefore. a writ of execution is not the proper procedure allowed by the Rules of Court for the payment of debts and expenses of administration. and may issue execution if circumstances require" (Rule 89. in case of the court judgment. Act No. G. (Order of September 28.) And this is not the instant case.

concur. therefore. compensation takes effect by operation of law.J. Furthermore. C. dismissed. It is clear. Regala and Makalintal. JJ. Paredes. Barrera. Padilla.. When all the requisites mentioned in article 1279 are present. therefore.Tax 2 MTE ART. The petition is.. Page 12 of 27 . eventhough the creditors and debtors are not aware of the compensation. Bengzon. Appeal is the remedy. and extinguished both debts to the concurrent amount. that the petitioner has no clear right to execute the judgment for taxes against the estate of the deceased Walter Scott Price. the petition for certiorari and mandamus is not the proper remedy for the petitioner. Concepcion. without costs. Bautista Angelo. Dizon. took no part. 1200.

315. 1997. FERNANDEZ. petitioner. 1990. respectively. 1987.2) Taxable Transfer (Sch. had yet to be collated. a petition for the probate of his will5 was filed with Branch 51 of the Regional Trial Court (RTC) of Manila (probate court). in his capacity as the Judicial Administrator of the Estate of the deceased JOSE P. Jesus M. DECISION NACHURA. determined and identified. COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL REVENUE. Jose P. Gonzales) to sign and file on behalf of the Estate the required estate tax return and to represent the same in securing a Certificate of Tax Clearance.34 187. of the Estate of Jose (Estate).00 3.591. Dizon (Justice Dizon) and petitioner. Fernandez (Jose) died. on April 17. 140944 April 30.822. [6] The probate court then appointed retired Supreme Court Justice Arsenio P.4 The Facts On November 7. In a letter7 dated October 13. Eventually. Gonzales (Atty.020. Rafael Arsenio P. computed as follows: COMPUTATION OF TAX Conjugal Real Property (Sch.34 .: Before this Court is a Petition for Review on Certiorari1 under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA) Decision2 dated April 30. 1) Conjugal Personal Property (Sch.Tax 2 MTE Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. Dizon (petitioner) as Special and Assistant Special Administrator. Atty.576. 1999 which affirmed the Decision3 of the Court of Tax Appeals (CTA) dated June 17.06 NIL NIL. DIZON. 4) Net Conjugal Estate Less: Share of Surviving Spouse 14. Page 13 of 27 P10. 1988.R. showing therein a NIL estate tax liability. Gonzales wrote a letter9 addressed to the BIR Regional Director for San Pablo City and filed the estate tax return10 with the same BIR Regional Office. 3) Gross Conjugal Estate Less: Deductions (Sch. Thus. Thereafter. 1990. respondents. J. vs. as well as the claims against it. No. Petitioner alleged that several requests for extension of the period to file the required estate tax return were granted by the BIR since the assets of the estate. Atty.460. in a letter8 dated March 14.855.611. 2008 RAFAEL ARSENIO S. Justice Dizon informed respondent Commissioner of the Bureau of Internal Revenue (BIR) of the special proceedings for the Estate. Justice Dizon authorized Atty.

46 as of February 28.00 25. 1989) and State Investment House. Thus. petitioner filed a petition for review 21 before respondent CTA.973.967.973.000. 1994. BIR Regional Director for San Pablo City. 1991.16 However. As found by the CTA. namely: Equitable Banking Corporation (P19.103.414. Manila Banking Corporation (P84.15 Petitioner requested the probate court's authority to sell several properties forming part of the Estate.868. petitioner did not present testimonial evidence but merely documentary evidence consisting of the following: Nature of Document (sic) Exhibits Page 14 of 27 . 1991.00 P66.985. de Suez (US$4. as it did not file a claim with the probate court since it had security over several real estate properties forming part of the Estate. petitioner received the letter of denial.103. Petitioner manifested that Manila Bank.973.428.048. the Assistant Commissioner for Collection of the BIR.828. Banque de L'Indochine et. 1994.00 15. a major creditor of the Estate was not included. 1990. (P6. Sometime in August 1990.985.905.68 25. Justice Dizon passed away.985. itemized as follows: Deficiency Estate Tax.40 as deficiency estate tax.4018 In his letter19 dated December 12. issued Estate Tax Assessment Notice No.756. for the purpose of paying its creditors.000.199. Gonzales moved for the reconsideration of the said estate tax assessment. 1990. On May 3.967.11 On April 27. On June 2. 1988). 1994. 2052[12] and 2053[13] stating that the taxes due on the transfer of real and personal properties[14] of Jose had been fully paid and said properties may be transferred to his heirs. Trial on the merits ensued. FAS-E-87-91-003269. Inc. Umali issued Certification Nos.006. on October 22. in her letter20 dated April 12. Atty. the respective parties presented the following pieces of evidence. on November 26.90 as of January 31. the probate court appointed petitioner as the administrator of the Estate.62 19. NIL.Tax 2 MTE Net Share in Conjugal Estate xxx Net Taxable Estate Estate Tax Due NIL NIL. However.160.31).1987 Estate tax 25% surcharge.121. the BIR Commissioner denied the request and reiterated that the estate is liable for the payment of P66.17 demanding the payment of P66.00 300.62 7.280.48 7.21).late filing late payment Interest Compromise-non filing non payment no notice of death no CPA Certificate Total amount due & collectible P31. to wit: In the hearings conducted.40 as deficiency estate tax. Themistocles Montalban. Osmundo G.

107-108. represented by Jose P. Letter dated March 14. in the total amount ofP240.54. Dizon addressed to Atty. (p. Claim of State Investment House.479. 200-215." (pp. BIR records). BIR records). 64-88. 87-42980 (pp. Fernandez. BIR records). 89-105. 1988 from Arsenio P.158. 194-197. together with the Annexes to the claim (pp. versus Maritime Company Overseas. Attachment to Exh. BIR records). "D" to "D-24" 6.199.756. "L" Page 15 of 27 . docketed as Sp. BIR records). "G" & "G-1" 9. 184. Petition for the probate of the will and issuance of letter of administration filed with the Regional Trial Court (RTC) of Manila. Letter dated April 17. Inc. Atty. 1990 from J.46. Pleading entitled "Compliance" filed with the probate Court submitting the final inventory of all the properties of the deceased (p. filed with the RTC. Jesus M. Inc. Claim of the Manila Banking Corporation (MBC) which as of November 7. Dizon.023. Defendants. BIR records). Dizon addressed to the Commissioner of Internal Revenue informing the latter of the special proceedings for the settlement of the estate (p. Estate Tax Return filed by the estate of the late Jose P. Claims against the estate filed by Equitable Banking Corp. 11. Plaintiff. 1988. together with the demand letter from MBC's lawyer (pp. Gonzales. 1989 at a total amount ofP84. BIR records). BIR records). 262-265. with attachments (pp. Gonzales addressed to the Regional Director of BIR in San Pablo City (p. 86-38599 entitled "State Investment House. "I" "J" 12.. BIR rec. and/or Jose P. Proc. "E" to "E-3" 7.693. BIR records). Demand letter of Manila Banking Corporation prepared by Asedillo. Letter dated October 13. with the probate Court in the amount of P19. 1990 of Arsenio P. Inc. Claim filed by Banque de L' Indochine et de Suez with the probate Court in the amount of US $4. Ramos and Associates Law Offices addressed to Fernandez Hermanos. Branch VII of Manila. Fernandez. Inc.428. 1988 (pp.17 as of February 28. "C" 4. 177-182. "C" which is the detailed and complete listing of the properties of the deceased (pp. BIR records).905. but recomputed as of February 28.). BIR records). "H" to "H-16" 10. docketed as Civil Case No. 106.31 as of March 31. 1989 (pp. Gonzales. "C-1" to "C-17" 5. No. Jesus M. Fernandez through its authorized representative. 183. 1987 amounts to P65.. "B" & "B-1" 3. "K" to "K-5" 13.M. "F" to "F-3" 8. 186-187.828. as mortgagors. Certified true copy of the Letter of Administration issued by "A" 2.160. 126.90 as of January 31.Tax 2 MTE 1. for Arsenio P.

Summary of revenue Enforcement Officers Audit Report. dated July 19. "2". Abuloc. 143-144 4. 169-17022 . Anabella Abuloc and Alberto Enriquez. Anabella A. Gallardo. -do-do-do-dop. Abuloc appearing at the lower portion on p. Tagle Signature of Alberto S. 7. San Pablo City. Signature of Maximino V. Abuloc at the lower portion of Exh. "3". 1991. 13. Fernandez.). demanding payment of the amount ofP66. 12. "3". Commissioner for Collection for the Commissioner of Internal Revenue.973. Fernandez. Tagle also appearing on p. Estate Tax Return prepared by the BIR. Memorandum for the Commissioner. 103-104. "3". 3. 11. Enriquez appearing at the lower portion on p. 2052 and 2053. 4-C. Branch 51. he identified the following: Documents/Signatures 1. signed by the Asst.Tax 2 MTE RTC Manila. Certification of Payment of estate taxes Nos. Signature of Maximino V. 8. 87-42980 appointing Atty. "1". "2". issued by the Office of the Regional Director. 138 -dopp. 2 of Exh. Signature of Alberto Enriquez at the lower portion of Exh. 2 of Exh. Proc. 1990. 2 of Exh. Gallardo at the lower portion of Exh. 10. Demand letter (FAS-E-87-91-00). and Assessment Notice FAS-E-87-91-00 The CTA's Ruling Page 16 of 27 BIR Record p. Signature of Ma. Ma. In the course of the direct examination of the witness.985. 1991. 139 -do-do-do-dop. Jr. "3". Signatures of Ma. Gallardo appearing at the Lower portion on p. CTA records) and 14. 102. (p. 9. "2". "M" to "M-5" Respondent's [BIR] counsel presented on June 26. appearing at the lower Portion of Exh. Dizon as Judicial Administrator of the estate of Jose P. Alberto S. dated July 19. Signature of Ma. Anabella A. Anabella A. Revenue Region No. 5. No. Signature of Raymund S. Rafael S.40. 1995 one witness in the person of Alberto Enriquez. 169 14. Signature of Raymond S. Reviewed by Maximino V. "2". 6. pp. prepared by revenue examiners. in Sp. both dated April 27. CTA records. who was one of the revenue examiners who conducted the investigation on the estate tax case of the late Jose P. 2. with attachments (pp. Enriquez and Raymund S. Tagle at the lower portion of Exh. 2 of Exh.

24 Nevertheless. Tax Code of 1987].007. 283 (b).652.419.000. the Court finds the petition unmeritorious and denies the same. Besides. the documents marked as respondent's exhibits formed part of the BIR records of the case.00 33. 1987. the CTA did not fully adopt the assessment made by the BIR and it came up with its own computation of the deficiency estate tax. Page 17 of 27 .084.016. Gross Conjugal Estate Less: Deductions Net Conjugal Estate Less: Share of Surviving Spouse Net Share in Conjugal Estate Add: Capital/Paraphernal Properties P44. still they could be considered as evidence for respondent since they were properly identified during the presentation of respondent's witness.021. Citing this Court's ruling in Vda.007.062.813.66 Less: Capital/Paraphernal Deductions Net Taxable Estate 44.569. whose testimony was duly recorded as part of the records of this case.999.93 26. Petitioner and/or the heirs of Jose P.015. Fernandez who died on November 7.74 15.419.23 the CTA opined that the aforementioned pieces of evidence introduced by the BIR were admissible in evidence.342.62 ============ P 5. 1997.93 5.97 Add: 25% Surcharge for Late Filing Add: Penalties for-No notice of death No CPA certificate Total deficiency estate tax 7.835.813. Fernandez are hereby ordered to pay to respondent the amount ofP37.71 plus 20% interest from the due date of its payment until full payment thereof as estate tax liability of the estate of Jose P.93 38.935.71 ============ exclusive of 20% interest from due date of its payment until full payment thereof [Sec.66 P 50.493. the CTA denied the said petition for review.96 Estate Tax Due P 29.00 300.483.917.821. 1996.00 P 11.493. considering that respondent has been declared to have waived the presentation thereof during the hearing on March 20. Court of Appeals. the CTA disposed of the case in this wise: WHEREFORE.917. viewed from all the foregoing.015. The CTA ratiocinated: Although the above-mentioned documents were not formally offered as evidence for respondent.00 P 37.25 Thus.250.Tax 2 MTE On June 17. de Oñate v. to wit: Conjugal Real Property Conjugal Personal Prop.834.652.96 P 5.

as lawful deductions despite clear and convincing evidence thereof. that the BIR failed to consider that although the actual payments made to the Estate creditors were lower than their respective claims. 1999. the CA affirmed the CTA's ruling. Whether or not the admission of evidence which were not formally offered by the respondent BIR by the Court of Tax Appeals which was subsequently upheld by the Court of Appeals is contrary to the Rules of Court and rulings of this Honorable Court. Whether or not the Court of Tax Appeals and the Court of Appeals erred in validating erroneous double imputation of values on the very same estate properties in the estate tax return it prepared and filed which effectively bloated the estate's assets.Tax 2 MTE SO ORDERED. that assuming arguendo that the ruling in Vda. petitioner.28 On May 31.31 The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate. petitioner filed a Motion for Reconsideration29 which the CA denied in its Resolution30 dated November 3. render the same inadmissible in evidence. 3. Whether or not the Court of Tax Appeals and the Court of Appeals erred in disallowing the valid and enforceable claims of creditors against the estate. 1999. de Oñate has already been abandoned in a long line of cases in which the Court held that evidence not formally offered is without any weight or value. 2052 and 2053 did not deprive the BIR Commissioner of her authority to reexamine or re-assess the said return filed on behalf of the Estate. while BIR's witness Alberto Enriquez (Alberto) in his testimony before the CTA identified the pieces of evidence aforementioned such that the same were marked. de Oñate is still applicable. 1999. such were compromise agreements reached long after the Estate's liability had been settled by the filing of its estate tax return and the issuance of BIR Certification Nos. Hence. the instant Petition raising the following issues: 1.27 The CA's Ruling On April 30. Fernandez had previously filed one as in fact. 2052 and 2053 had been issued in the estate's favor. BIR's failure to formally offer said pieces of evidence and depriving petitioner the opportunity to cross-examine Alberto. no estate tax was due. Whether or not the Court of Tax Appeals and the Court of Appeals erred in recognizing/considering the estate tax return prepared and filed by respondent BIR knowing that the probate court appointed administrator of the estate of Jose P. and 4. BIR Certification Clearance Nos. went to the CA via a petition for review. the CA ruled that the petitioner's act of filing an estate tax return with the BIR and the issuance of BIR Certification Nos. 2052 and 2053. on March 2. 1998. that Section 34 of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is mandatory in character.26 Aggrieved. and that the reckoning date of the claims against the Estate and the settlement of the estate tax due should be at the time the estate tax return was filed by the Page 18 of 27 . that the lack of a formal offer of evidence is fatal to BIR's cause. 2. BIR failed to comply with the doctrine's requisites because the documents herein remained simply part of the BIR records and were not duly incorporated in the court records. Adopting in full the CTA's findings. that. that the doctrine laid down in Vda.

de Oñate.39 the Court made reference to said doctrine in resolving the issues therein.38 this Court. de Oñate.33 The Issues There are two ultimate issues which require resolution in this case: First. As cases filed before it are litigated de novo. Likewise.Tax 2 MTE judicial administrator and the issuance of said BIR Certifications and not at the time the aforementioned Compromise Agreements were entered into with the Estate's creditors. the CTA is categorically described as a court of record. that the filing of the estate tax return by the Estate and the issuance of BIR Certification Nos. Rule 132 of the Revised Rules on Evidence which reads: SEC. respondent counters that the documents. no evidentiary value can be given the pieces of evidence submitted by the BIR. The purpose for which the evidence is offered must be specified. Aviles [186 SCRA 385]. Although in a long line of cases many of which were decided after Vda. In Vda. Dizon. being part of the records of the case and duly identified in a duly recorded testimony are considered evidence even if the same were not formally offered. Indubitably. in Ramos v. in Far East Bank & Trust Company v. petitioner cannot validly assume that the doctrine laid down in Vda. v. we held that: From the foregoing provision. 34. party-litigants shall prove every minute aspect of their cases.32 On the other hand. Commissioner of Internal Revenue. Inc. The court shall consider no evidence which has not been formally offered. it is clear that for evidence to be considered. the doctrine laid down in Vda. and that the factual findings of the CTA as affirmed by the CA may no longer be reviewed by this Court via a petition for review.34 Pertinent is Section 34. Under Section 8 of RA 1125. Offer of evidence. The Court s Ruling The Petition is impressed with merit. de Oñate has already been abandoned. we held that courts cannot consider evidence which has not been formally offered.37 nevertheless. ruled that the trial court judge therein committed no error when he admitted and considered the respondents' exhibits in the resolution of the case. The CTA and the CA rely solely on the case of Vda. notwithstanding the fact that the same were not formally offered. applying the said doctrine. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally offered by the BIR. Whether or not the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed against the Estate. De Oñate still subsists in this jurisdiction. 2052 and 2053 did not deprive the BIR of its authority to examine the return and assess the estate tax. In Interpacific Transit. Recently. Mate36 on the admission and consideration of exhibits which were not formally offered during the trial. Napat-a35 and People v. de Oñate. as the rules on documentary evidence require that these documents must be formally offered before the CTA. Corollarily. and Second. the same must be formally offered. Indubitably. which reiterated this Court's previous rulings in People v. the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. we had the occasion to make a distinction between identification of documentary evidence and its formal offer as an Page 19 of 27 .

44 While the CTA is not governed strictly by technical rules of evidence. we find that these requirements have not been satisfied. Being an exception. second. however. one Ma. Moreover. viz.Tax 2 MTE exhibit. Napat-a [179 SCRA 403] citing People v. Alberto identified these pieces of evidence in his direct testimony. may opt to formally offer his evidence if he believes that it will advance his cause or not to do so at all. The assailed pieces of evidence were presented and marked during the trial particularly when Alberto took the witness stand. the same must have been incorporated in the records of the case.41 He was also subjected to crossexamination and re-cross examination by petitioner. In the aforementioned cases. the trial court is not authorized by the Rules to consider the same. xxxx But what further defeats petitioner's cause on this issue is that respondents' exhibits were marked and admitted during the pre-trial stage as shown by the Pre-Trial Order quoted earlier. we take against the BIR. it is clear that Vda. In the event he chooses to do the latter. it may be applied only when there is strict compliance with the requisites mentioned therein. Thus.47 Such failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such fatal omission. the general rule in Section 34 of Rule 132 of the Rules of Court should prevail. A party. In fact. inasmuch as Alberto was incompetent to answer questions relative to the working papers. Further. the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate.. petitioner sought that the lead examiner. However. otherwise.45 as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice.43 The lead examiner never testified. Elpidio himself explained the contents of these exhibits when he was interrogated by respondents' counsel. is fatal to its cause.42 But Alberto s account and the exchanges between Alberto and petitioner did not sufficiently describe the contents of the said pieces of evidence presented by the BIR. In this case. be summoned to testify. Mate [103 SCRA 484]. We said that the first is done in the course of the trial and is accompanied by the marking of the evidence as an exhibit while the second is done only when the party rests its case and not before.: first. de Oñate is merely an exception to the general rule.. the BIR documents themselves were not incorporated in the records of the case. Anabella A. despite CTA's directives. in People v. we held in Ramos: In this case. we find and so rule that these requirements have been satisfied. while Alberto's testimony identifying the BIR's evidence was duly recorded. Abuloc. Page 20 of 27 .46 The BIR's failure to formally offer these pieces of evidence. A common fact threads through Vda. This. they have been incorporated into the records.40 From the foregoing declaration. de Oñate and Ramos that does not exist at all in the instant case. the same must have been duly identified by testimony duly recorded and. The exhibits in question were presented and marked during the pre-trial of the case thus. we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present. therefore. the exhibits were marked at the pre-trial proceedings to warrant the pronouncement that the same were duly incorporated in the records of the case.

Despite several extensions of time to make their formal offer. Having disposed of the foregoing procedural issue. Again.Tax 2 MTE Per the records of this case. that there is no equivalent received for the benefit given. in its Resolution51 dated March 21. the CTA considered the BIR to have waived presentation of its evidence. 55 condonation or remission of debt56 is defined as: an act of liberality. the creditor renounces the enforcement of the obligation. or novation. On the other hand. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. in the hearing of March 20. with a warning to BIR that such presentation would be considered waived if BIR's evidence would not be presented at the next hearing. this allows opposing parties to examine the evidence and object to its admissibility. effective. by virtue of which. It is admitted that the claims of the Estate's aforementioned creditors have been condoned. we proceed to discuss the merits of the case. which is extinguished in its entirety or in that part or aspect of the same to which the remission refers. and expeditious dispensation of justice. It explained that the court cannot admit an offer of evidence made after a lapse of three (3) months because to do so would "condone an inexcusable laxity if not non-compliance with a court order which.49 The CTA denied petitioner's motion to consider BIR's presentation of evidence as waived. Petitioners' failure to comply with the rule on admissibility of evidence is anathema to the efficient.52 In all of these proceedings. or compromise. we find the decision of the CA affirming that of the CTA tainted with palpable error. it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court. 1996. when the object or principal conditions of the obligation should be changed. as affirmed by the CA. the CTA's findings. Strict adherence to the said rule is not a trivial matter. would encourage needless delays and derail the speedy administration of justice. the BIR was directed to present its evidence48 in the hearing of February 21. Hence. BIR was duly notified. but BIR's counsel failed to appear. 1996. Parocha:53 A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Court of Appeals ruled thatthe formal offer of one's evidence is deemed waived after failing to submit it within a considerable period of time. we are constrained to apply our ruling in Heirs of Pedro Pasag v." Applying the aforementioned principle in this case. without receiving any equivalent. however. we find that the trial court had reasonable ground to consider that petitioners had waived their right to make a formal offer of documentary or object evidence. The Court in Constantino v. when the Page 21 of 27 . BIR's counsel failed to appear. in this case. in effect. are entitled to the highest respect and will not be disturbed on appeal unless it is shown that the lower courts committed gross error in the appreciation of facts. In the same Resolution. As a mode of extinguishing an obligation. It is an essential characteristic of remission that it be gratuitous. once such equivalent exists. Moreover. Ordinarily. It may become dation in payment when the creditor receives a thing different from that stipulated. Petitioner complied but BIR failed to do so.50 Thus.54 In this case. the parties were directed to file their respective memorandum. petitioners failed to comply with their commitment and allowed almost five months to lapse before finally submitting it. 1996. the nature of the act changes.

based on the federal tax laws of the United States. the Internal Revenue Service (Service) opines that post-death settlement should be taken into consideration and the claim should be allowed as a deduction only to the extent of the amount actually paid." as allowable deductions from the gross estate under Section 79 of the Tax Code. when the Supreme Court announced the date-of-death valuation principle. tax statutes being construed strictissimi juris against the government. Supreme Court in Ithaca Trust Co. These pronouncements essentially confirm the general principle that postdeath developments are not material in determining the amount of the deduction. nor do we discern any legislative intent in our tax laws. and which was the first codification of Philippine tax laws. the instance of death. 61 On one hand. as of that time. nor presumed to be imposed.S. there is some dispute as to whether the deductible amount for a claim against the estate is fixed as of the decedent's death which is the general rule. article or Page 22 of 27 . such as where a settlement between the parties results in the reduction of the amount actually paid. the net value of the property transferred should be ascertained. as held in Propstra v.S. made pursuant to the ruling of the U.Tax 2 MTE matter renounced is in litigation or dispute and in exchange of some concession which the creditor receives. the second issue in this case involves the construction of Section 7958 of the National Internal Revenue Code59 (Tax Code) which provides for the allowable deductions from the gross estate of the decedent.60 It is noteworthy that even in the United States. pursuant to established rules of statutory construction. the decisions of American courts construing the federal tax code are entitled to great weight in the interpretation of our own tax Propstra correctly apply the Ithaca Trust date-of-death valuation principle to enforceable claims against the estate..e.69 Any doubt on whether a person.. the Service released Proposed Regulations in 2007 mandating that the deduction would be limited to the actual amount paid. 63 where a lien claimed against the estate was certain and enforceable on the date of the decedent's death. because the act on which the tax is levied occurs at a discrete time..66 the U. Thus.57 Verily.62 Also. that it is a tax imposed on the act of transferring property by will or intestacy and. The specific question is whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors. United States. court ruled that the appropriate deduction is the "value" that the claim had at the date of the decedent's death. 466 (CA 466).S. It bears emphasis that tax burdens are not to be imposed. "Claims against the estate. As we interpret Ithaca Trust. are basically a reproduction of the deductions allowed under Section 89 (a) (1) (C) and (E) of Commonwealth Act No. as nearly as possible. i. which disregards the date-of-death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the estate.65 In announcing its agreement with Propstra. it was making a judgment about the nature of the federal estate tax specifically. Philippine tax laws were. There is no law. This analysis supports broad application of the date-of-death valuation rule.S. or the same should be adjusted to reflect post-death developments. 5th Circuit Court of Appeals held: We are persuaded that the Ninth Circuit's decision. the U. the fact that the claimant subsequently settled for lesser amount did not preclude the estate from deducting the entire amount of the claim for estate tax purposes. otherwise known as the National Internal Revenue Code of 1939. in turn. 64Recognizing the dispute.67 We express our agreement with the date-of-death valuation rule. On the other hand.68 First. beyond what the statute expressly and clearly imports. v.. U.

1999 of the Court of Appeals in CA-G.70 Second. Such construction finds relevance and consistency in our Rules on Special Proceedings wherein the term "claims" required to be presented against a decedent's estate is generally construed to mean debts or demands of a pecuniary nature which could have been enforced against the deceased in his lifetime. SO ORDERED. the instant Petition is GRANTED.Tax 2 MTE activity is taxable is generally resolved against taxation. Fernandez is hereby NULLIFIED.P. WHEREFORE. 46947 are REVERSED and SET ASIDE. No costs. NACHURA Associate Justice Page 23 of 27 .71 Therefore. The Bureau of Internal Revenue's deficiency estate tax assessment against the Estate of Jose P. 1999 and the Resolution dated November 3. the assailed Decision dated April 30. the determination of allowable deductions. Accordingly. ANTONIO EDUARDO B. and should be made the basis of. the claims existing at the time of death are significant to. No. or liability contracted by the deceased before his death. S.R.

should pay as inheritance tax the sums of P16. to pay them under protest. which were duly recorded in the registry of deeds.95 was imposed upon the donation made to Elvira Vidal de Richards and P1. JUAN POSADAS. as Collector of Internal Revenue. accepted them in the same public documents. plaintiff-appellants. received the fruits thereof and obtained the corresponding transfer certificates of title. In their brief. JR. likewise. donated certain parcels of land situated in Manila to the plaintiffs herein. certain sums of money paid by them under protest as inheritance tax. The judgment appealed from was based on the provisions of section 1540 Administrative Code which reads as follows: Page 24 of 27 . the court sustained the demurrer and ordered the amendment of the complaint which the appellants failed to do. by means of public documents.50 on her legacy.Tax 2 MTE Republic of the Philippines SUPREME COURT Manila EN BANC G. After the legal questions raised therein had been discussed. By virtue of said donations. the appellee herein. defendant-appellee. the plaintiffs took possession of the said lands. Feria and La O for appellants. After the estate had been distributed among the instituted legatees and before delivery of their respective shares. They appealed from the judgment rendered by the Court of First Instance of Manila dismissing the action. as donees and legatees. whereupon the trial court dismissed the action on the ground that the aforementioned appellants did not really have a right of action. at the insistence of the appellee and in order not to delay the adjudication of the legacies. No. Esperanza Tuazon. 1933 CONCEPCION VIDAL DE ROCES and her husband. Attorney-General Jaranilla for appellee. who. L-34937 March 13.191. and ELVIRA VIDAL DE RICHARDS. respectively. Collector of Internal Revenue. Of these sums P15.45. P12. ruled that the appellants.951.52 on her legacy. the appellants assign only one alleged error.R. The appellee filed a demurrer to the complaint on the ground that the facts alleged therein were not sufficient to constitute a cause of action. On January 5.462.: The plaintiffs herein brought this action to recover from the defendant. MARCOS ROCES. they agreed at last. the donor died in the City of Manila without leaving any forced heir and her will which was admitted to probate. IMPERIAL. she bequeathed to each of the donees the sum of P5. Collector of Internal Revenue. At first the appellants refused to pay the aforementioned taxes but. 1926. without costs. to wit: that the demurrer interposed by the appellee was sustained without sufficient ground.673 and P13.481.388.000.48 was levied as tax on the donation to Concepcion Vidal de Roces and P1. with their respective husbands. vs. and. On March 10 and 12. J. 1925..

we wish to state that such is not the case in these instance. (Lewis' Sutherland Statutory Construction. cites the doctrine laid in the case of Tuason and Tuason vs.) The appellants question the power of the Legislature to impose taxes on the transmission of real estate that takes effect immediately and during the lifetime of the donor. devisees.. Without making express pronouncement on this question. Furthermore. in a compilation of laws such as the Administrative Code. there shall be added to the resulting amount the value of all gifts or advances made by the predecessor to any those who. or donees mortis causa." which is the title of Article XI. (Ayson and Ignacio vs. the transmission of which is not made in contemplation of the donor's death should not be understood as included within the said legal provision for the reason that it would amount to imposing a direct tax on property and not on the transmission thereof.Tax 2 MTE SEC. in the sense that they are gifts inter vivos made in contemplation or in consideration of death. for it is unnecessary. 289). null and void for the following reasons: first. "Tax on Inheritance. the constitutional provision cited should not be strictly construed as to make it necessary that the title contain a full index to all the contents of the law.. those donations inter vivos that take effect immediately or during the lifetime of the donor but are made in consideration or in contemplation of death. and allege as their reason that such tax partakes of the nature of the land tax which the law has already created in another part of the Administrative Code. shall prove to be his heirs. Provincial Board of Rizal and Municipal Council of Navotas. and third. it was not held that that kind of gifts consisted in those made completely independent of death or without regard to it. because a legal provision of this character contravenes the fundamental rule of uniformity of taxation. after his death. the circumstance that the Administrative Code was prepared and compiled strictly in accordance with the provisions of the Jones Law on that matter should not be overlooked and that. Posadas. Additions of gifts and advances.) Lastly. For this reason. After the aforementioned deductions have been made.supra. legatees. contends that the words "all gifts" refer clearly to donations inter vivos and. The gifts referred to in section 1540 of the Revised Administration Code are. etc. The tax collected by the appellee on the properties donated in 1925 really constitutes an inheritance tax imposed on the transmission of said properties in contemplation or in consideration of the donor's death and under the circumstance that the donees were later instituted as the former's legatees. After a careful study of the law and the authorities applicable thereto. We said therein. in turn. Vol. Gifts inter vivos. as we say now. On the contrary. 651. Said legal provision is not null and void on the alleged ground that the subject matter thereof is not embraced in the title of the section under which it is enumerated. Posadas (54 Phil. The appellee. It is sufficient if the language used therein is expressed in such a way that in case of doubt it would afford a means of determining the legislators intention. it is unconstitutional. 1540. second that the Legislature has no authority to impose inheritance tax on donations inter vivos. In that case. it is but natural and proper that provisions referring to diverse matters should be found. legacies and other acquisitions mortis causa. Our interpretation of the law is not in conflict with the rule laid down in the case of Tuason and Tuason vs. obviously. the Page 25 of 27 . we are the opinion that neither theory reflects the true spirit of the aforementioned provision. p. in support of his theory. 931. that the expression "all gifts" refers to gifts inter vivos inasmuch as the law considers them as advances on inheritance. because it violates section 3 of the Jones Law which provides that no law should embrace more than one subject. 39 Phil. and that subject should be expressed in the title thereof. its provisions are perfectly summarized in the heading. The appellants contend that the above-mentioned legal provision does not include donations inter vivos and if it does. II. which act does not come within the scope of the provisions contained in Article XI of Chapter 40 of the Administrative Code which deals expressly with the tax on inheritances.

1925. or a donee mortis causa of the predecessor. and that the donees were instituted legatees in the donor's will which was admitted to probate. Posadas. 208." The last question of a procedural nature arising from the case at bar. concur. corporeal or incorporeal. par.Tax 2 MTE law considers such transmissions in the form of gifts inter vivos. it was said: "At any rate the argument adduced against its constitutionality. while a donee inter vivos who. Hence the necessity of ascertaining whether the complaint contains an allegation to that effect. is whether the case. the demurrer interposed by the appellee was well-founded because it appears that the complaint did not allege fact sufficient to constitute a cause of action. if the gifts received by the appellants would have the right to recover the sums of money claimed by them. Hull.. whether such property be real or personal. We refer to the allegations that such transmissions were effected in the month of March. does not seem to be well founded. C. would be exempt from such a tax. the principle of uniformity is inapplicable to them. Property Subject to Inheritance Tax. In the case cited above. can be decided on the merits or should be remanded to the court a quo for further proceedings. are subject to the payment of inheritance tax. legatees or donees mortis causa by the will of the donor. According to our view of the case. It cannot be null and void on this ground because it equally subjects to the same tax all of those donees who later become heirs. as such. Avanceña. they voluntarily waived the opportunity offered them and they are not now entitled to have the case remanded for further proceedings. Vickers and Buttes. Wherefore. as it now stands. which is the lack of Uniformity. It is from these allegations. So ordered. or a donee mortis causa. Wherefore. supra. it be may be inferred from the allegations contained in paragraphs 2 and 7 thereof that said donations inter vivos were made in consideration of the donor's death.L. another donee inter vivos who did not prove to he an heir.C. 177. with costs of this instance against the appellants. On the contrary. which should be passed upon. We have examined said complaint and found nothing of that nature.) In the case of Tuason and Tuason vs. When the appellants refused to amend the same. especially the last.J. after the predecessor's death proved to be an heir. 1926. Separate Opinions Page 26 of 27 . a legatee. tangible or intangible. (26 R. a legatee. JJ. It was said that under such an interpretation. it was also held that section 1540 of the Administrative Code did not violate the constitutional provision regarding uniformity of taxation. inasmuch as said legislation is within the power of the Legislature. Ostrand. spite of the court's order to that effect.. as advances on inheritance and nothing therein violates any constitutional provision. But as these are two different cases. that the donor died in January. that we infer a presumption juris tantum that said donations were made mortis causa and. which would serve no purpose altogether in view of the insufficiency of the complaint. There would be a repugnant and arbitrary exception if the provisions of the law were not applicable to all donees of the same kind. the judgment appealed from is hereby affirmed. it follows that.. p. Abad Santos. would have to pay the tax. The inheritance tax ordinarily applies to all property within the power of the state to reach passing by will or the laws regulating intestate succession or by gift inter vivos in the manner designated by statute. Villamor.

. Page 27 of 27 . mode of making and effects of donations inter vivos. The presumption which majority opinion wishes to draw from said section 1540 of the Administrative Code can neither be found in this Code nor in any of the aforementioned Civil Code and Code of Civil Procedure. (Escriche. should be presumed as not made mortis causa. In view of the nature. said presumption cannot be called legal or of law. unless the contrary is proven. Therefore.Tax 2 MTE VILLA-REAL. It is therefore. but who are instituted legatees in the donor's will. Vol. and another which is formed by the judge from circumstances antecedent to. J. Presumptions are of two kinds: One determined by law which is also called presumption of law or of right. 662. the undersigned's humble opinion that the order appealed from should be reversed and the demurrer overruled.) The Civil Code as well as the code of Civil Procedure establishes presumptions juris et de jure and juris tantum which the courts should take into account in deciding questions of law submitted to them for decision. have been made in contemplation of the donor's death. IV. in other words. Posadas (54 Phil. by interpreting section 1540 of the Administrative Code in the sense that it establishes the legal presumption juris tantum that all gifts inter vivos made to persons who are not forced heirs but who are instituted legatees in the donor's will. which is also called presumption of man (presuncion de hombre). p. dissenting: I sustain my concurrence in Justice Street's dissenting opinion in the case of Tuason and Tuason vs. coincident with or subsequent to the principal fact with is the donation itself. the contrary presumption would be more reasonable and logical. coincident with or subsequent to the principal fact under investigation. In the case under consideration.. and the defendant ordered to file his answer to the complaint. Neither can it be called a presumption of man (presuncion de hombre) inasmuch as the majority opinion did not infer it from circumstances antecedent to. The majority opinion to distinguish the present case from above-mentioned case of Tuason and Tuason vs. 289). Posadas. the burden of the proof rests with the person who contends that the donation inter vivos has been mademortis causa. donations inter vivos made to persons who are not forced heirs.