CIR vs. Pilipinas Shell
That excise tax as presently understood is a tax on property has no
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
PILIPINAS SHELL PETROLEUM CORPORATION, respondent.
G.R. No. 188497
February 19, 2014
Case Brief:
MOTION FOR RECONSIDERATION of a decision of the Supreme Court and
SUPPLEMENTAL MOTION FOR RECONSIDERATION of a decision of the
Supreme Court.
Facts:
For resolution are the Motion for Reconsideration dated May 2012 and
Supplemental Motion for Reconsideration dated December 12, 2012 filed by
Pilipinas Shell Petroleum Corp. SC promulgated on April 25, 2012 that the CTA
erred in granting respondent’s claim for tax refund because the latter failed
to establish a tax exemption in its favor under Section 135(a) of the NIRC.
Contentions:
Respondent: Excise tax being an indirect tax, Section 135 in relation to
Section 148 should be interpreted as referring to a tax exemption
SolGen: Petroleum manufacturers selling petroleum products to international
carriers are exempt from paying excise taxes.
Actions of the Court:
CTA: Granted Pilipinas Shell’s claim for tax refund
Issue:
Whether Pilipinas Shell is entitled for a refund the excise taxes it paid on
petroleum products sold to international carriers
Ruling:
Yes.
bearing at all on the issue of respondent’s entitlement to refund. Nor does
the nature of excise tax as an indirect tax supports respondent’s postulation
that the tax exemption provided in Sec. 135 attaches to the petroleum
products themselves and consequently the domestic petroleum manufacturer
is not liable for the payment of excise tax at the point of production.
With the prospect of declining sales of aviation jet fuel sales to international
carriers on account of major domestic oil companies’ unwillingness to
shoulder the burden of excise tax, or of petroleum products being sold to
said carriers by local manufacturers or sellers at still high prices, the practice
of “tankering” would not be discouraged. This scenario does not augur well
for the Philipppines’ growing economy and the booming tourism industry.
Worse, our Government would be risking retaliatory action under several
bilateral agreements with various countries. Evidently, construction of the tax
exemption provision in question should give primary consideration to its
broad implications on our commitment under international agreements.
Respondent, as the statutory taxpayer who is directly liable to pay the excise
tax on its petroleum products, is entitled to a refund or credit of the excise
taxes it paid for petroleum products sold to international carriers, the latter
having been granted exemption from the payment of said excise tax under
Sec. 135 (a) of the NIRC.
SC Ruling:
WHEREFORE, the Court hereby resolves to:
(1) GRANT the original and supplemental motions for reconsideration filed by
respondent Pilipinas Shell Petroleum Corporation; and
(2) AFFIRM the Decision dated March 25, 2009 and Resolution dated June 24,
2009 of the Court of Tax Appeals En Banc in CTA EB No. 415; and DIRECT
petitioner Commissioner of Internal Revenue to refund or to issue a tax
credit certificate to Pilipinas Shell Petroleum Corporation in the amount of
P95,014,283.00 representing the excise taxes it paid on petroleum products
sold to international carriers from October 2001 to June 2002. SO ORDERED.

COLLECTOR OF INTERNAL REVENUE VS CAMPOS RUEDA
42 SCRA 238 [GR NO. L-13250 October 19, 1971]
NATURE OF CASE
Requisites of statehood, or at least so much thereof as may be necessary for the
acquisition of an international personality, must be satisfied for a "foreign
country" to fall within the exemption of Section 122 of the National Internal
Revenue Code
BRIEF
This is an appeal interposed by herein respondent Antonio Campos Rueda as
administrator of the estate of the deceased Doña Maria de la Estrella Soriano Vda
de Cedeira, from the decision of the petitioner, collector of internal revenue,
assessing against and demanding from the former the sum of Php161,874.95 as
deficiency estate and inheritance taxes, including interest therein and penalties, on
the transfer of intangible personal properties situated in the Philippines and
belonging to said Maria Cedeira.
FACTS
Antonio Campos Rueda was the designated administrator of the estate of Maria
Cerderia who died in Tangier, Moroco (an international zone [foreign country] in
North Africa) on January 2, 1955. At the time of her death, she was a Spanish
citizen and was a resident of Tangier from 1931 up to the time of her death in 1955.
She however left some personal properties (shares of stocks and other
intangibles) in the Philippines.
On September 29, 1955, petitioner filed a provisional estate and inheritance tax
return on all the properties of the late Maria Cerdeira. On the same date,
respondent, pending investigation, issued an assessment for state and inheritance
taxes in the respective amounts of P111,592.48 and P157,791.48, or a total of
P369,383.96 which tax liabilities were paid by petitioner ... . On November 17, 1955,
an amended return was filed ... wherein intangible personal properties with the
value of P396,308.90 were claimed as exempted from taxes. On November 23,
1955, respondent, pending investigation, issued another assessment for estate and
inheritance taxes in the amounts of P202,262.40 and P267,402.84, respectively, or
a total of P469,665.24 ... . In a letter dated January 11, 1956, respondent denied the
request for exemption on the ground that the law of Tangier is not reciprocal to
Section 122 of the National Internal Revenue Code. Hence, respondent demanded
the payment of the sums of P239,439.49 representing deficiency estate and
inheritance taxes including ad valorem penalties, surcharges, interests and
compromise penalties ... . In a letter dated February 8, 1956, and received by
respondent on the following day, petitioner requested for the reconsideration of
the decision denying the claim for tax exemption of the intangible personal
properties and the imposition of the 25% and 5% ad valorem penalties ... . However,
respondent denied request, in his letter dated May 5, 1956 ... and received by
petitioner on May 21, 1956. Respondent premised the denial on the grounds that
there was no reciprocity [with Tangier, which was moreover] a mere principality,
not a foreign country. Consequently, respondent demanded the payment of the
sums of P73,851.21 and P88,023.74 respectively, or a total of P161,874.95 as
deficiency estate and inheritance taxes including surcharges, interests and
compromise penalties.
Campos Rueda refused to pay the assessed tax as he claimed that the estate is
exempt from the payment of said taxes pursuant to section 122 of the Tax Code
which provides:
“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 person property of the Philippines not residing
in that foreign country, 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.”
Campos Rueda was able to prove that there is reciprocity between Tangier and the
Philippines. However, the CIR still denied any tax exemption in favor of the estate
as it averred that Tangier is not a “state” as contemplated by Section 22 of the Tax
Code and that the Philippines does not recognize Tangier as a foreign country.

CTA Decision
Court of Tax Appeals ruled that the expression 'foreign country,' used in the last
proviso of Section 122 of the National Internal Revenue Code, refers to a
government of that foreign power which, although not an international person in
the sense of international law, does not impose transfer or death taxes upon
intangible personal properties of our citizens not residing therein, or whose law
allows a similar exemption from such taxes. It is, therefore, not necessary that
Tangier should have been recognized by our Government in order to entitle the
petitioner to the exemption benefits of the last proviso of Section 122 of our Tax
Code.
ISSUE of the CASE
Whether or not the requisites of statehood, or at least so much thereof as may be
necessary for the acquisition of an international personality, must be satisfied for a
"foreign country" to fall within the exemption of Section 122 of the National
Internal Revenue Code.
HELD: No, hence tax exempt. (For purposes of the Tax Code, Tangier is a foreign
country)
Supreme Court affirmed Court of tax Appeal’s Ruling.
If a foreign country is to be identified with a state, it is required in line with
Pound's formulation that it be a politically organized sovereign community
independent of outside control bound by ties of nationhood, legally supreme
within its territory, acting through a government functioning under a regime of
law.
It is thus a sovereign person with the people composing it viewed as an organized
corporate society under a government with the legal competence to exact
obedience to its commands.
The stress is on its being a nation, its people occupying a definite territory,
politically organized, exercising by means of its government its sovereign will over
the individuals within it and maintaining its separate international personality.
State is a territorial society divided into government and subjects, claiming within
its allotted area a supremacy over all other institutions. Moreover, similarly would
point to the power entrusted to its government to maintain within its territory the
conditions of a legal order and to enter into international relations. With the latter
requisite satisfied, international law does not exact independence as a condition of
statehood.
The controlling legal provision as noted is a proviso in section 122 of the NIRC. It
reads thus:
That no tax shall be collected under this title in respect of intangible personal
properties
1. 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 properties of the
Philippines not residing in that foreign country; or
2. 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 properties
owned by citizens of the Philippines not residing in that foreign country.
This court commit itself to the doctrine that even a tiny principality, hardly an
international personality in the sense did fall under the exempt category.
The expression “foreign country,” was used in the last proviso of section 122 of
NIRC refers to a government of that foreign power which although not an
international person in the sense of international law does not impose transfer or
death upon intangible person properties of our citizens not residing therein whose
law allow a similar exemption from such taxes. It is therefore not necessary that
Tangier should have been recognized by our government in order to entitle the
respondent to the exemption benefits of the proviso of said section 122 of our tax
code.
GR L-11622
CIR vs. FISHER
January 28, 1961
Ponente: Barrera, J.
FACTS:
Decedent Walter Stevenson has left an estate, among others, executed in
his will wherein Beatrice, his wife, was instituted as the sole heiress of the
property acquired while residing in the Philippines. His administrator filed a
preliminary estate and inheritance tax return wherein the CIR increased the
appraisal of the land by fixing their fair market value.
Later, Beatrice assigned all her rights and interests in the estate to
spouses Fisher. In 1953, the administrator filed a second amended estate and
inheritance tax return. In this last return, they claimed that the estate had overpaid
the government, hence, they are requesting for refund. The collector, however,
denied it. He then filed in the CFI of Manila for the said amount.
CFI ruled that (a) the ½ share of Beatrice should be deducted from the net
estate of Walter, (b) the intangible personal property belonging to the estate of
Walter is exempt from inheritance tax pursuant to the reciprocity proviso in NIRC.
ISSUES:
Whether or not the estate can avail itself of the reciprocity proviso in the
NIRC granting exemption from the payment of taxes for the Mines shares of stock.
RULING:
NO.
Reciprocity must be total. If any of the two states collects or imposes or
does not exempt any transfer, death, legacy or succession tax of any character,
the reciprocity does not work.
In the Philippines, upon the death of any citizen or resident, or non-resident with
properties, there are imposed upon his estate, both an estate and an inheritance
tax. But, under the laws of California, only inheritance tax is imposed. Also,
although the Federal Internal Revenue Code imposes an estate tax, it
does not grant exemption on the basis of reciprocity. Thus, a Filipino citizen shall
always be at a disadvantage. This is not what the legislators intended.
SPECIFICALLY:
Section122 of the NIRC provides 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 of tax or death tax
of any character in respect of intangible personal property of citizens of the
Philippines not residing in that foreign
country, 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." On the other hand, Section
13851 of the California Inheritance Tax Law provides that intangible personal
property is exempt from tax if the decedent at the time of his death was a resident
of a territory or another State of the United States or of a foreign state or country
which then imposed a legacy, succession, or death tax in respect to intangible
personal property of its own
residents, but either: Did not impose a legacy, succession, or death tax of any
character in respect
to intangible personal property of residents of this State, or Had in its laws a
reciprocal provision under which intangible personal property of a non-
resident was exempt from legacy, succession, or death taxes of every character if
the Territory or other State of the United States or foreign state or country in
which the nonresident resided allowed a similar exemption in respect to intangible
personal property of residents of the Territory or State of the United States or
foreign state or country of residence of the decedent."
TOPIC/DOCTRINE:
Section 86: Computation of Net Estate
(A) Deductions Allowed to the Estate of Citizen or a Resident. - In the case of a
citizen or resident of the Philippines, by deducting from the value of the gross
estate -
(1) Expenses, Losses, Indebtedness, and Taxes. - Such amounts –
(c) For claims against the estate: Provided, That at the time the indebtedness was
incurred the debt instrument was duly notarized and, if the loan was contracted
within three (3) years before the death of the decedent, the administrator or
executor shall submit a statement showing the disposition of the proceeds of the
loan;
DIZON VS CTA
GR 140944
30 April 2008
Ponente: Nachura, J.
Nature of Case: Petition for Review on Certiorari under Rule 45 of the ROC seeking
reversal of the fecision of CA which affirmed the decision of the CTA dated June 17,
1997.
Facts:
Decedent Jose Fernandez’s will was probated appointing retired SC Justice
Arsenio Dizon and Atty Rafael Dizon, petitioner in the case, as Special and Asst.
Special Administrator respectively of the estate. Since the assets and claims
against the estate are still being collated, the petitioner petitioned the BIR to allow
for extension of period to file the required estate tax return which petitioner
alleged to have been approved by the BIR. An estate tax return was filed on
behalf of the estate through Atty. Jesus Gonzales, who was authorized by former
Justice Dizon. Upon this submission, a certification was issued stating the taxes
due on the transfer of the properties were duly paid and said properties may be
transferred to the heirs. In August 1990, Justice Dizon passed away and the
probate court appointed Atty Dizon as the administrator of the Estate. He
requested the permission of the probate court to allow the selling of several
properties forming part of the estate to pay its creditors, namely, Equitable
Banking Corporation, Banque de L’indochine et. De Suez, Manila Banking
Corporation, State Investment House, Inc. However, BIR issued an Estate Tax
Assessment in November 1991 demanding payment for deficiency estate taxes
amounting to P66, 973,985.40. This assessment was sought to be reconsidered by
Atty Dizon in a letter dated April 12, 1991 however, this was denied. Thus, a petition
for review was submitted before the CTA.
CTA Action: CTA denied the petition to reverse the decision of BIR. It didn’t adopt
the assessment of the BIR and instead came up with its own computation of the
deficiency taxes which reduced the deficiency estate tax to P37,419,493.71
exclusive of interest from due date of its payment until full payment thereof.
The petitioner went to CA v ia petition for review.
CA Action: The CA affirmed the CTA decision adopting in full its findings stating
that the CTA was with authority to re-examine and re-assess the return filed on
behalf of the estate before the BIR by Atty. Gonzales.
Petitioner filed an MR before the CA but this was denied. Hence a petition was
filed before the SC alleging that in as far as valid claims of creditors exceed the
gross estate, no estate tax was due.
Issue/s:
1. WON the CA erred in affirming the CTA decision in allowing evidence not
formally offered by BIR.
2. WON the CA erred in upholding the CTA’s determination of the deficiency
estate tax against the Estate of deceased Jose Fernandez.
SC Ruling:
1. The court ruled in favor of the petitioner. It held that since the CA is a
court of record and cases before it are litigated de novo, party-litigants
shall prove every minute aspect of their cases. No evidentiary value can be
given the pieces of evidence submitted by BIR as the rules on
documentary evidence require that these be formally offered before the
CTA. In this case, this was not offered by BIR since its counsel failed to
appear on both hearings it was supposed to present its evidence. Its
 failure to comply with the rule on admissibility of evidence was fatal to its
cause.

2. The court ruled that the CA decision affirming the decision of the CTA was
tainted with palpable error. The question was that whether the actual
claims of the creditors may be fully allowed as deductions from the gross
estate of Jose Fernandez despite the fact that the said claims were
reduced or condoned through compromise agreement entered into by
the Estate with its creditors.

The court held that the date-of-death valuation should govern in the
resolution of the case. It ratiocionated that there is no law, nor in the
intent of the legislative in our tax laws, 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. It bears emphasis that the tax burdens are not to be imposed, nor
presumed to be imposed beyond what the tax statutes expressly and
clearly imports. The court further said that this ruling finds relevance and
consistency with the Rules on Special Proceedings that 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 before his death. Therefore, the claims existing at
the time of death are significant to and should be made the basis of, the
determination of allowable deductions.
DOCTRINE
Section 104 of the Internal Revenue Code of 1977, requiring notice of death of
taxpayer to be filed, falls in Title III, Chapter 1 and pertains to “all cases of transfers
subject to tax”or where the “gross value of the estate exceeds three thousand
pesos” and has absolutely no applicability to a case for deficiency income tax.
ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL, petitioner, vs.
COMMISSIONER OF INTERNAL REVENUE, respondent.
G.R. No. 155541, January 27, 2004
NATURE OF CASE
PETITION for review on certiorari of a decision of the Court of Appeals.
FACTS
During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs
were managed by the Philippine Trust Company (PhilTrust). The decedent died on
April 3, 1979 but two days after her death, PhilTrust filed her income tax return for
1978 without indicating that the decedent had died. The BIR conducted an
administrative investigation of the decedent’s tax liability and found a deficiency
income tax for the year 1997 in the amount of P318,233.93. Thus, on November 18,
1982, the BIR sent by registered mail a demand letter and assessment notice
addressed to the decedent “c/o PhilTrust, Sta. Cruz, Manila, which was the address
stated in her 1978 income tax return but no response was made by PhilTrust. On
June 18, 1984, respondent Commissioner of Internal Revenue issued warrants of
distraint and levy to enforce the collection of decedent’s deficiency income tax
liability and serve the same upon her heir, Francisco Gabriel. On November 22,
1984, Commissioner filed a motion to allow his claim with probate court for the
deficiency tax. The Court denied BIR’s claim against the estate on the ground that
no notice of the tax assessment was made on the proper party. On appeal, the CA
held that BIR’s service on PhilTrust of the notice of assessment was binding on the
estate as PhilTrust failed in its legal duty to inform the respondent of the
decedent’s death. Consequently, the BIR’s service to Philtrust of the demand
letter and Notice of Assessment was binding upon the Estate, and, upon the lapse
of the statutory thirty-day period to question this claim, the assessment became
final, executory and incontestable.
ISSUE/s
1. Whether Sec. 104 of the National Internal Revenue Code of 1977 is applicable
to a case of deficiency income tax
2. Whether the tax assessment had become final, executory, and incontestable
HELD
1. No. Respondent claims that Section 104 of the National Internal Revenue Code
of 1977 imposed the legal obligation on Philtrust to inform respondent of the
decedent’s death. The said Section reads:
SEC. 104. Notice of death to be filed.—In all cases of transfers subject to tax or
where, though exempt from tax, the gross value of the estate exceeds three
thousand pesos, the executor, administrator, or any of the legal heirs, as the
case may be, within two months after the decedent’s death, or within a like
period after qualifying as such executor or administrator, shall give written
notice thereof to the Commissioner of Internal Revenue.
The foregoing provision falls in Title III, Chapter I of the National Internal
Revenue Code of 1977, or the chapter on Estate Tax, and pertains to “all cases
of transfers subject to tax” or where the “gross value of the estate exceeds
three thousand pesos.” It has absolutely no applicability to a case for
deficiency income tax, such as the case at bar. It further lacks applicability
since Philtrust was never the executor, administrator of the decedent’s estate,
and, as such, never had the legal obligation, based on the above provision, to
inform respondent of her death.
Although the administrator of the estate may have been remiss in his legal
obligation to inform respondent of the decedent’s death, the consequences
thereof, as provided in Section 119 of the National Internal Revenue Code of
 1977, merely refer to the imposition of certain penal sanctions on the
administrator. These do not include the indefinite tolling of the prescriptive
period for making deficiency tax assessments, or the waiver of the notice
requirement for such assessments.
2. The assessment was served not even on an heir or the estate but on a
completely disinterested party. This improper service was clearly not binding
on the petitioner. The most crucial point to be remembered is that PhilTust
had absolutely no legal relationship with the deceased or to her Estate. There
was therefore no assessment served on the estate as to the alleged
underpayment of tax. Absent this assessment, no proceeding could be
initiated in court for collection of said tax; therefore, it could not have become
final, executory and incontestable. Respondent’s claim for collection filed with
the court only on November 22, 1984 was barred for having been made
beyond the five-year prescriptive period set by law.
 1.Deficiency income tax
COLLECTOR OF INTERNAL REVENUE VS MANUEL B. PINEDA 1945 P135.83
1946 436.95
21 SCRA 105 [GR NO. L-22734 September 15, 1967] 1947 1,206.91 P1,779.69
Add: 5% surcharge 88.98
1% monthly interest from November 30, 1953 to April 15, 1957 720.77
NATURE OF CASE: Compromise for late filing 80.00
Compromise for late payment 40.00
Appeal of the CIR from the decision of the CTA holding Pineda liable for his Total amount due P2,707.44
proportionate share of the assessed deficiency tax.
2.Additional residence tax for 1945 P14.50
BRIEF ===========
3.Real Estate dealer's tax for the fourth quarter of 1946 and the whole year of 1947
After the investigation of the BIR, it found out that income tax returns for the P207.50
estates of Atanasio Pineda for the years 1945-1948 were not filed. Thus, deficiency ===========
taxes were assessed. The CIR held Manuel Pineda, one of the heirs liable for the
entire deficiency tax in the amount of P760.28 being the holder-transferee of the Manuel B. Pineda, who received the assessment, contested the same.
estate/property. He contested on the ground that he should only be liable for his Subsequently, he appealed to the Court of Tax Appeals alleging that he was
proportionate share only. appealing "only that proportionate part or portion pertaining to him as one of the
heirs."
FACTS
ACTION OF THE COURT
On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and
15 children, the eldest of whom is Manuel B. Pineda, a lawyer. Estate proceedings CTA Decision- rendered judgment holding Manuel B. Pineda liable for the payment
were had in the Court of First Instance of Manila (Case No. 71129) wherein the corresponding to his share.
surviving widow was appointed administratrix. The estate was divided among and
awarded to the heirs and the proceedings terminated on June 8, 1948. Manuel B. SC: Pineda is ordered to pay to the CIR for the entire deficiency amount of
Pineda's share amounted to about P2,500.00. P760.28, without prejudice to his right of contribution for his co-heirs.

After the estate proceedings were closed, the Bureau of Internal Revenue ISSUE of the CASE
investigated the income tax liability of the estate for the years 1945, 1946, 1947 and
1948 and it found that the corresponding income tax returns were not filed. Whether or not Pineda can be held liable for the full payment of the assessed tax
Thereupon, the representative of the Collector of Internal Revenue filed said of the estate.
returns for the estate on the basis of information and data obtained from the
aforesaid estate proceedings and issued an assessment for the following: HELD: Yes.

Pineda is liable for the assessment as an heir and as a holder-transferee of
property belonging to the estate/taxpayer.
As an heir he is individually answerable for the part of the tax proportionate to the
share he received from the inheritance. His liability, however, cannot exceed the
amount of his share.
As a holder of property belonging to the estate, Pineda is liable for he tax up to the
amount of the property in his possession. The reason is that the Government has a
lien on the P2,500.00 received by him from the estate as his share in the
inheritance, for unpaid income taxes4a for which said estate is liable, pursuant to
the last paragraph of Section 315 of the Tax Code, which we quote hereunder:
If any person, corporation, partnership, joint-account (cuenta en participacion),
association, or insurance company liable to pay the income tax, neglects or refuses
to pay the same after demand, the amount shall be a lien in favor of the
Government of the Philippines from the time when the assessment was made by
the Commissioner of Internal Revenue until paid with interest, penalties, and costs
that may accrue in addition thereto upon all property and rights to property
belonging to the taxpayer: . . .
second, adjustment of the shares of each heir in the distributed estate as lessened
by the tax.
Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon
all property and rights to property belonging to the taxpayer for unpaid income
tax, is by subjecting said property of the estate which is in the hands of an heir or
transferee to the payment of the tax due, the estate. This second remedy is the
very avenue the Government took in this case to collect the tax. The Bureau of
Internal Revenue should be given, in instances like the case at bar, the necessary
discretion to avail itself of the most expeditious way to collect the tax as may be
envisioned in the particular provision of the Tax Code above quoted, because
taxes are the lifeblood of government and their prompt and certain availability is
an imperious need. And as afore-stated in this case the suit seeks to achieve only
one objective: payment of the tax. The adjustment of the respective shares due to
the heirs from the inheritance, as lessened by the tax, is left to await the suit for
contribution by the heir from whom the Government recovered said tax.

By virtue of such lien, the Government has the right to subject the property in
Pineda's possession, i.e., the P2,500.00, to satisfy the income tax assessment in
the sum of P760.28. After such payment, Pineda will have a right of contribution
from his co-heirs, to achieve an adjustment of the proper share of each heir in the
distributable estate.
All told, the Government has two ways of collecting the tax in question. One, by
going after all the heirs and collecting from each one of them the amount of the
tax proportionate to the inheritance received. This remedy was adopted in
Government of the Philippine Islands v. Pamintuan, supra. In said case, the
Government filed an action against all the heirs for the collection of the tax. This
action rests on the concept that hereditary property consists only of that part
which remains after the settlement of all lawful claims against the estate, for the
settlement of which the entire estate is first liable. The reason why in case suit is
filed against all the heirs the tax due from the estate is levied proportionately
against them is to achieve thereby two results: first, payment of the tax; and
FERDINAND R. MARCOS II, petitioner, vs. COURT OF APPEALS, THE
COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and HERMINIA D. DE
GUZMAN, respondents.
273 SCRA 47[GR NO. 120880 June 5, 1997]
NATURE OF CASE
"The approval of the court sitting in probate is not a mandatory requirement in the
collection of estate taxes."
"In case of failure to file a return, the tax may be assessed at anytime within 10
years after the omission."
BRIEF
Ferdinand R. Marcos II assailed the decision of the Court of Appeals declaring the
deficiency income tax assessments and estate tax assessments upon the estate
and properties of his late father despite the pendency of the probate proceedings
of the will of the late President. On the other hand, the BIR argued that the State’s
authority to collect internal revenue taxes is paramount.
FACTS
More than seven years since the demise of the late Ferdinand E. Marcos, the
former President of the Republic of the Philippines, the matter of the settlement
of his estate, and its dues to the government in estate taxes, are still unresolved,
the latter issue being now before this Court for resolution. Specifically, petitioner
Ferdinand R. Marcos II, the eldest son of the decedent, questions the actuations of
the respondent Commissioner of Internal Revenue in assessing, and collecting
through the summary remedy of Levy on Real Properties, estate and income tax
delinquencies upon the estate and properties of his father, despite the pendency
of the proceedings on probate of the will of the late president, which is docketed
as Sp. Proc. No. 10279 in the Regional Trial Court of Pasig, Branch 156.
Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari
and Prohibition with an application for writ of preliminary injunction and/or
temporary restraining order on June 28, 1993, seeking to -
I. Annul and set aside the Notices of Levy on real property dated February 22, 1993
and May 20, 1993, issued by respondent Commissioner of Internal Revenue;
II. Annul and set aside the Notices of Sale dated May 26, 1993;
III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service),
from proceeding with the Auction of the real properties covered by Notices of
Sale.
Petitioner argues in this case that "the numerous pending court cases questioning
the late president's ownership or interests in several properties (both real and
personal) make the total value of his estate, and the consequent estate tax due,
incapable of exact pecuniary determination at this time. Thus, respondents'
assessment of the estate tax and their issuance of the Notices of Levy and sale are
premature and oppressive." He points out the pendency of Sandiganbayan Civil
Case Nos. 0001-0034 and 0141, which were filed by the government to question
the ownership and interests of the late President in real and personal properties
located within and outside the Philippines. Petitioner, however, omits to allege
whether the properties levied upon by the BIR in the collection of estate taxes
upon the decedent's estate were among those involved in the said cases pending
in the Sandiganbayan. Indeed, the court is at a loss as to how these cases are
relevant to the matter at issue. The mere fact that the decedent has pending
cases involving ill-gotten wealth does not affect the enforcement of tax
assessments over the properties indubitably included in his estate.
After the parties had pleaded their case, the Court of Appeals rendered its
Decision on November 29, 1994, ruling that the deficiency assessments for estate
and income tax made upon the petitioner and the estate of the deceased
President Marcos have already become final and unappealable, and may thus be
enforced by the summary remedy of levying upon the properties of the late
President, as was done by the respondent Commissioner of Internal Revenue.
ISSUE of the CASE impose transfer or death upon intangible person properties of our citizens not
residing therein whose law allow a similar exemption.
Whether the contention of Ferdinand R. Marcos II are correct? The applicable provision in regard to the prescriptive period for the assessment
and collection of tax deficiency in this instance is Article 223 of the NIRC, which
HELD: No pertinently provides:
"Sec. 223. Exceptions as to a period of limitation of assessment and collection of
The approval of the court, sitting in probate or as a settlement tribunal over the taxes.- (a) In the case of a false or fraudulent return with intent to evade tax or of
deceased’s estate, is not a mandatory requirement in the collection of estate a failure to file a return, the tax may be assessed, or a proceeding in court for the
taxes. collection of such tax may be begun without assessment, at any time within ten
There is nothing in the Tax Code, and in the pertinent remedial laws that implies (10) years after the discovery of the falsity, fraud, or omission: Provided, That, in a
the necessity of the probate or estate settlement court's approval of the state's fraud assessment which has become final and executory, the fact of fraud shall be
claim for estate taxes, before the same can be enforced and collected. judicially taken cognizance of in the civil or criminal action for the collection
The enforcement of tax laws and the collection of taxes are of paramount thereof.
importance for the sustenance of government. Taxes are the lifeblood of xxx
government and should be collected without unnecessary hindrance. However, (c) Any internal revenue tax which has been assessed within the period of
such collection should be made in accordance with law as any arbitrariness will limitation above prescribed, may be collected by distraint or levy or by a
negate the existence of government itself. proceeding in court within three years following the assessment of the tax.
It is not the Department of Justice which is the government agency tasked to
determine the amount of taxes due upon the subject estate, but the Bureau of
Internal Revenue whose determinations and assessments are presumed correct
and made in good faith. The taxpayer has the duty of proving otherwise. In the
absence of proof of any irregularities in the performance of official duties, an
assessment will not be disturbed. Even an assessment based on estimates is prima
facie valid and lawful where it does not appear to have been arrived at arbitrarily
or capriciously. The burden of proof is upon the complaining party to show clearly
that the assessment is erroneous. Failure to present proof of error in the
assessment will justify the judicial affirmance of said assessment. In this instance,
petitioner has not pointed out one single provision in the Memorandum of the
Special Audit Team which gave rise to the questioned assessment, which bears a
trace of falsity. Indeed, the petitioner's attack on the assessment bears mainly on
the alleged improbable and unconscionable amount of the taxes charged. But
mere rhetoric cannot supply the basis for the charge of impropriety of the
assessments made.The expression “foreign country,” was used in the last proviso
of section 122 of NIRC refers to a government of that foreign power which
although not an international person in the sense of international law does not
G.R. No. 208293
December 10, 2014
PHILIPPINE NATIONAL BANK, petitioner
vs.
CARMELITA S. SANTOS, REYME L. SANTOS, ANGEL L. SANTOS, NONENG S.
DIANCO, et al., respondents.
G.R. No. 208295
December 10, 2014
LINA B. AGUILAR, petitioner,
vs.
CARMELITA S. SANTOS, REYME L. SANTOS, ANGEL L. SANTOS, BUENVENIDO L.
SANTOS, et al., respondents.
Facts:
Respondents are children of Angel C. Santos who died on March 21, 1991.1
They discovered that their father maintained a premium savings account with
PNB-Sta. Elena-Marikina City Branch. As of July 14, 1996, the deposit
amounted to P1,759,082.63.3 Later, respondents would discover that their
father also had a time deposit of P1,000,000.00 with PNB. Respondents went
to PNB to withdraw their father’s deposit. Aguilar, the Branch Manager
required them to submit the following: “(1) original or certified true copy of
the Death Certificate of Angel C. Santos; (2) certificate of payment of, or
exemption from, estate tax issued by the Bureau of Internal Revenue (BIR);
(3) Deed of Extrajudicial Settlement; (4) Publisher’s Affidavit of publication of
the Deed of Extrajudicial Settlement; and (5) Surety bond effective for 2 years
and in an amount equal to the balance of the deposit to be withdrawn.”
Respondents had already obtained the necessary documents.7 They tried to
withdraw the deposit.8 However, Aguilar informed them that the deposit had
already “been released to a certain Bernardito Manimbo. A special power of
attorney was purportedly executed by Reyme L. Santos in favor of Manimbo
and a certain Angel P. Santos for purposes of withdrawing and receiving the
proceeds of the certificate of time deposit.
Respondents filed before the Regional Trial Court of Marikina City a
complaint for sum of money and damages against PNB, Aguilar, and a John
Doe.
Actions of the Court:
RTC: ordering the defendants PNB and LINA B. AGUILAR jointly and severally
liable to pay the plaintiffs the amount of P1,882,002.05 with payment of moral
damages
CA: Held that PNB and Aguilar were negligent in handling the deposit
Issue:
Whether Philippine National Bank was negligent in releasing the deposit to
Bernardito Manimbo
Ruling:
Yes. The trial court and the Court of Appeals correctly found that petitioners
PNB and Aguilar were negligent in handling the deposit of Angel C. Santos.
The contractual relationship between banks and their depositors is governed
by the Civil Code provisions on simple loan. Once a person makes a deposit
of his or her money to the bank, he or she is considered to have lent the
bank that money. The bank becomes his or her debtor, and he or she
becomes the creditor of the bank, which is obligated to pay him or her on
demand. The default standard of diligence in the performance of obligations
is “diligence of a good father of a family.” The Supreme Court (SC) has
recognized the fiduciary nature of the banks’ functions, and attached a
special standard of diligence for the exercise of their function.
Taxes are created primarily to generate revenues for the maintenance of the
government. However, estate tax may also serve as guard against the release
of deposits to persons who have no sufficient and valid claim over the
deposits. Based on the assumption that only those with sufficient and valid
claim to the deposit will pay the taxes for it, requiring the certificate from
the BIR increases the chance that the deposit will be released only to them.
SC Ruling:
WHEREFORE, the Court of Appeals’ decision dated July 25, 2013 is AFFIRMED
with the MODIFICATIONS in that petitioners Philippine National Bank and Lina
B. Aguilar are ordered solidarily liable to pay respondents P100,000.00 as
exemplary damages. Further, the interest rate for the amount of
P1,882,002.05, representing the face value of PNB Manager’s Check No. AF-
974686B is modified to 12% from April 26, 1998 until June 30, 2013, and 6%
from July 1, 2013 until satisfaction. All monetary awards shall then earn
interest at the rate of 6% per annum from finality of the decision until full
satisfaction.
SO ORDERED.