07 - CIR vs. CA and Pajonar

7/25/2019 07 - CIR vs. CA and Pajonar

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[G.R. No. 123206. March 22, 2000]COMMISSIONER OF INTERNAL REVENUE,petitioner, vs.COURT OF APPEALS, COURT OF TA APPEALS a!"#OSEFINA P. PA#ONAR, a$ A"%&!&$'ra'r&( o) 'h* E$'a'* o)P*"ro P. Pa+o!ar, respondents.

Facts:

1. P*"ro Pa+o!ar a$ a -ar' o) 'h* &!)a%o$ /*a'hMarch r*a$o! o) h&ch h* $*r*" $hoc a!"*ca%* &!$a!*. 4&$ $&$'*r #o$*5!a Pa+o!ar *ca%*'h* ar"&a! o7*r h&$ -*r$o!, h&8* h&$ -ro-*r'a$ -8ac*" !"*r 'h* ar"&a!$h&- o) 'h* PN9 'h* RTC o) /%a*'*, 9ra!ch 31, S-*c&a8Proc**"&!$ 12:;. 4* "&*" o! #a!. 10, 1$ h*&r$ 'o *(*c'* a! *('ra+"&c&a8 $*''8*%*!'a!" 'o -a 'h* 'a(*$ o! h&$ *$'a'*. O! A-r&8 :,1$*$'a'*, 58*" a -ro'*$' o! #a!ar 11, 1$ Ma 6, 1


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R*$o8'&o!, @*$'&o!&! 'h* 7a8&"&' o) 'h*ao7*%*!'&o!*" "*"c'&o!$. O! /*c*%*r 21,1$ *$'a'* h*! &' a--*ar*" 'ha' $ch'r$'** a$ a--o&!'*" )or 'h* -r-o$* o) %a!a&!

'h* "*c*"*!'>$ r*a8 *$'a'* )or 'h* *!*5' o) 'h*'*$'a%*!'ar h*&r. I! a!o'h*r ca$*, 'h* Courtdisallowed the !remiums-a&" o! 'h* o!" 58*" 'h* a"%&!&$'ra'or a$ a! *(-*!$* o)a"%&!&$'ra'&o! $&!c* 'h* &7&! o) a o!" &$ &! 'h*!a'r* o) a @a8&5ca'&o! )or 'h* oc*, a!" !o'!*c*$$ar &! 'h* $*''8*%*!' o) 'h* *$'a'*. 'eithermay attorney&s fees incident to litigation&!crr*" 'h* h*&r$ &! asserting theirres!ectie rights* c8a&%*" a$ a "*"c'&o! )ro%'h* ro$$ *$'a'*.

:. Co%&! 'o 'h* ca$* a' ar, 'h* notarial fee !aidfor the e#tra$udicial settlement is clearly adeductible e#!ense since such settlemente3ected a distribution of Pedro&s estate'o h&$8a)8 h*&r$.

6. S&%&8ar8, 'h* attorney&s fees !aid to P'4 foracting as the guardian of Pedro.s !ro!ertyduring his lifetime should also be considered


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as a deductible administration e#!ense. PN9-ro7&"*" a "*'a&8*" acco!'&! o) "*c*"*!'>$-ro-*r' a!" a7* a"7&c* a$ 'o 'h* -ro-*r$*''8*%*!' o) 'h* 8a''*r>$ *$'a'*, ac'$ h&chco!'r&'*" 'oar"$ 'h* co88*c'&o! o) "*c*"*!'>$a$$*'$ a!" 'h* $$*@*!' $*''8*%*!' o) 'h*

*$'a'*.

2ther matters: !ortions of CTA decision which iscited by the %C

1. Th&$ Cor' a"o-'$ 'h* 7&* !"*r A%*r&ca!+r&$-r"*!c* 'ha' *(-*!$*$ &!crr*" &! 'h**('ra+"&c&a8 $*''8*%*!' o) 'h* *$'a'* $ho8" *a88o*" a$ a "*"c'&o! )ro% 'h* ro$$ *$'a'*.DTh*r* &$ !o r*@&r*%*!' o) )or%a8 a"%&!&$'ra'&o!.I' &$ $c&*!' 'ha' 'h* *(-*!$* * a !*c*$$ar

co!'r&'&o! 'oar" 'h* $*''8*%*!' o) 'h* ca$*.D

2. Th* a''or!*>$ )**$ o) P:0,000.00, h&ch *r*a8r*a" &!crr*" ' !o' *' -a&", r*)*r$ 'o 'h*ar"&a!$h&- -roc**"&! 58*" PN9, a$ ar"&a!o7*r 'h* ar" o) P*"ro Pa+o!ar, "oc*'*" a$S-*c&a8 Proc**"&! No. 12:; &! 'h* RTC o)/%a*'*.

3. Th* ar"&a!$h&- -roc**"&! ha" **! '*r%&!a'*"-o! "*8&7*r o) 'h* r*$&"ar *$'a'* 'o 'h* h*&r$*!'&'8*" 'h*r*'o. Th*r*a)'*r, PN9 a$ "&$char*" o)a! )r'h*r r*$-o!$&&8&'. Attorney&s fees inorder to be deductible from the gross estatemust be essential to the collection of assets,!ayment of debts or the distribution of the!ro!erty to the !ersons entitled to it. Th*$*r7&c*$ )or h&ch 'h* )**$ ar* char*" %$' r*8a'*'o 'h* -ro-*r $*''8*%*!' o) 'h* *$'a'*. I! 'h&$ ca$*,'h* ar"&a!$h&- -roc**"&! a$ !*c*$$ar )or 'h*

"&$'r&'&o! o) 'h* -ro-*r' o) 'h* 8a'* P*"ro 'o h&$r&h')8 h*&r$.

;. PN9 a$ a--o&!'*" a$ ar"&a! o7*r 'h* a$$*'$ o)'h* 8a'* P*"ro Pa+o!ar, ho, *7*! a' 'h* '&%* o) h&$"*a'h, a$ &!co%-*'*!' r*a$o! o) &!$a!&'. Th*

*(-*!$*$ &!crr*" &! 'h* ar"&a!$h&- -roc**"&!a$ ' a necessary e#!ense in thesettlement of the decedent&s estate(Th*r*)or*, 'h* a''or!*>$ )** &!crr*" &! 'h*ar"&a!$h&- -roc**"&!$ a%o!'&! 'oP:0,000.00 &$ a r*a$o!a8* a!" !*c*$$ar $&!*$$*(-*!$* "*"c'&8* )ro% 'h* ro$$ *$'a'* o) 'h*"*c*"*!'.

:. A''or!*$> a!" ar"&a!$> )**$ &!crr*" &! a'r$'**>$ acco!'&! o) a 'a(a8* inter vivos 'r$'

a''r&'a8* 'o 'h* $a8 &$$*$ &!7o87*" &! $ch a!acco!'&! a$ h*8" 'o * !ro!er deductionsbecause these are e#!enses incurred interminating an inter vivos trust that wasincludible in the decedent&s estate. A''or!*>$)**$ ar* a88oa8* "*"c'&o!$ &) &!crr*" )or 'h*$*''8*%*!' o) 'h* *$'a'*. I' &$ !o'*or'h 'o -o&!''ha' PN9 a$ a--o&!'*" 'h* ar"&a! o7*r 'h*a$$*'$ o) 'h* "*c*a$*". N*c*$$ar&8 'h* a$$*'$ o)'h* "*c*a$*" )or%*" -ar' o) h&$ ro$$ *$'a'*.Accor"&!8, a88 *(-*!$*$ &!crr*" &! r*8a'&o! 'o 'h**$'a'* o) 'h* "*c*a$*" &88 * "*"c'&8* )or *$'a'*'a( -r-o$*$ -ro7&"*" 'h*$* ar* !*c*$$ar a!"or"&!ar *(-*!$*$ )or a"%&!&$'ra'&o! o) 'h*$*''8*%*!' o) 'h* *$'a'*.

6. A8'hoh 'h* Ta( Co"* $-*c&5*$ D+"&c&a8 *(-*!$*$o) 'h* '*$'a%*!'ar or &!'*$'a'* -roc**"&!$,D'h*r* &$ !o r*a$o! h *(-*!$*$ &!crr*" &! 'h*a"%&!&$'ra'&o! a!" $*''8*%*!' o) a! *$'a'* &!*('ra+"&c&a8 -roc**"&!$ $ho8" !o' * a88o*".


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4o*7*r, deduction is limited to suchadministration e#!enses as are actually andnecessarily incurred in the collection of theassets of the estate, !ayment of the debts,and distribution of the remainder amongthose entitled thereto. Sch *(-*!$*$ %a

&!c8"* *(*c'or>$ or a"%&!&$'ra'or>$ )**$,a''or!*>$ )**$, cor' )**$ a!" char*$, a--ra&$*r>$)**$, c8*r h&r*, co$'$ o) -r*$*r7&! a!" "&$'r&'&!'h* *$'a'* a!" $'or&! or %a&!'a&!&! &', ro*ra*)**$ or co%%&$$&o!$ )or $*88&! or "&$-o$&! o) 'h**$'a'*, a!" 'h* 8&*. /*"c'&8* a''or!*>$ )**$ ar*'ho$* &!crr*" 'h* *(*c'or or a"%&!&$'ra'or &!'h* $*''8*%*!' o) 'h* *$'a'* or &! "*)*!"&! or-ro$*c'&! c8a&%$ aa&!$' or "* 'h* *$'a'*.

?. t is clear then that the e#tra$udicialsettlement was for the !ur!ose of !ayment

of ta#es and the distribution of the estate tothe heirs. Th* *(*c'&o! o) 'h* *('ra+"&c&a8$*''8*%*!' !*c*$$&'a'*" 'h* !o'ar&a'&o! o) 'h*$a%*. 4*!c* 'h* Co!'rac' o) L*a8 S*r7&c*$ o)March 2=, 1

Documents

07 - CIR vs. CA and Pajonar