MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as RegionalDirector, Revenue Region No. 14, Bureau of Internal Revenue, petitioners,vs. HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V,and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents. Facts: Jaime Araneta in his capacity as Regional Director of BIR filed a Motion for allowance of claim against the estate of Luis D. Tongoy. The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80. The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court. The motion was denied by respondent Judge Fernandez and a motion for reconsideration was also denied. Petitioners filed an appeal on certiorari contending that the claim for taxes was filed beyond the period provided in Section 2, Rule 86 of the Rules of Court and that the same was barred by the said provision Issue: Whether or not the Government through BIR can claim unpaid taxes from a decedent’s estate HELD: In the case of Pineda vs. CFI of Tayabas,52 Phil. 803, it was even more pointedly held that “taxes assessed against the estate of a deceased person ... need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate."The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. Wherefore the decision appealed from is reversed.

MARCOS II v. CA GR No. 120880, June 5, 1997 293 SCRA 77 FACTS: Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to grant CIR's petition to levy the properties of the late Pres. Marcos to cover the payment of his tax delinquencies during the period of his exile in the US. The Marcos family was assessed by the BIR, and notices were constructively served to the Marcoses, however the assessment were not protested administratively by Mrs. Marcos and the heirs of the late president so that they became final and unappealable after the period for filing of opposition has prescribed. Marcos contends that the properties could not be levied to cover the tax dues because they are still pending probate with the court, and settlement of tax deficiencies could not be had, unless there is an order by the probate court or until the probate proceedings are terminated. ISSUE: Whether or not the State can collect taxes on the estate of the deceased despite the pending probate proceeding HELD: Yes. The deficiency income tax assessments and estate tax assessment are already final and unappealable -and-the subsequent levy of real properties is a tax remedy resorted to by the government, sanctioned by Section 213 and 218 of the National Internal Revenue Code. This summary tax remedy is distinct and separate from the other tax remedies (such as Judicial Civil actions and Criminal actions), and is not affected or precluded by the pendency of any other tax remedies instituted by the government. The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court's sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court's approval of the state's claim for estate taxes, before the same can be enforced and collected. On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent's estate to deliver any distributive share to any party interested in the estate, unless it is shown a Certification by the Commissioner of Internal Revenue that the estate taxes have been paid. This provision disproves the petitioner's contention that it is the probate court which approves the assessment and collection of the estate tax.

PIROVANO VS. COMMISSIONER FACTS: Enrico Pirovano is the father of herein petitioners. In early 1941, De la Rama Steamship Co. insured the life of Enrico, its President and General Manager. During the Japanese Occupation, Enrico died. De la Rama issued a Resolution granting P400,000 to the hiers of Pirovano converted into 4,000 shares of stock. This was modified thereafter. Instead, the company would renounce its title to the proceeds of the insurance in favor of the heirs. Mrs. Estefania Pirovano, in behalf of heir children executed a public document formally accepting the donation and the Board of Directors took official notice of this acceptance. Two years thereafter, the majority stockholders revoked said donation. De La Rama was ordered by the SC in a case (remember Pirovano vs. De La Rama Steamship!) to pay. The CIR assessed the amount as donees’ gift tax inclusive of surcharges, interests and other penalties. The heirs contested the assessment and imposition of the donees’ gift taxes and donor’s gift tax and also made a claim for refund of the said collected taxes. The claims were denied by the CIR. CTA affirmed. Hence, this petition. Petitioners contend that that the proceeds of the insurance was made not for an insufficient or inadequate consideration but rather it a was made for a full and adequate compensation for the valuable services rendered by the late Enrico Pirovano to the De la Rama Steamship Co.; hence, the donation does not constitute a taxable gift under the provisions of the then Section 108 of the National Internal Revenue Code. ISSUE: Whether the donation constitutes a taxable gift? HELD: Yes. As provided in Article 619 of the Code of 1889 (identical with Article 726 of the present Civil Code of the Philippines), “when a person gives to another thing…on account of the latter’s merits or of the services rendered by him to the donor, provided they do not consisted a demandable debt,…, there is also a donation… “There is nothing on record to show that when the late Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. he was not fully compensated for such services. The fact that his services contributed in a large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his heirs remain a gift or donation. Also, whether remuneratory or simple, the conveyance remained a gift, taxable under the Code. But then appellants contend, the entire property or right donated should not be considered as a gift for taxation purposes; only that portion of the value of the property or right transferred, if any, which is in excess of the value of the services rendered should be considered as a taxable gift. But, as we have seen, Pirovano's successful activities as officer of the De la Rama Steamship Co. cannot be deemed such consideration for the gift to his heirs, since the services were rendered long before the Company ceded the value of the life policies to said heirs. What is more, the actual consideration for the cession of the policies, as previously shown, was the Company's gratitude to Pirovano; so that under the Code there is no consideration the value of which can be deducted from that of the property transferred as a gift. Like "love and affection," gratitude has no economic value and is not "consideration" in the sense that the word is used in this section of the Tax Code. (Note: In other words, the whole proceed of the insurance is taxable income given that “gratitude” cannot be deducted for taxation purposes.)

THE COLLECTOR OF INTERNAL REVENUE, petitioner, VS. ANTONIO CAMPOS Facts: Collector of Internal Revenue held Antonio Campos Rueda, as administrator of the estate of the late EstrellaSoriano Vda. de Cerdeira, liable for the stun of P161,974.95 as deficiency estate and inheritance taxes for the transfer of intangible personal properties in the Philippines, the deceased, a Spanish national having been resident of Tangier, Morocco from 1931 up to the time of her death in 1955. Rueda’s request for exemption was denied on the ground that the law of Tangier is not reciprocal to Section122 of the National Internal Revenue Code. Rueda requested for the reconsideration of the decision denying the claim for tax exemption. However, respondent denied this request on the grounds that there was no reciprocity [with Tangier, which was moreover] a mere principality, not a foreign country. 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: 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: 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 apolitically 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. Collector of Internal Revenue v. De Lara: There can be no doubt that California as a state in the American Union was lacking in the alleged requisite of international personality. Nonetheless, it was held to be a foreign country within the meaning of Section 122 of the National Internal Revenue Code. This Court did commit itself to the doctrine that even a tiny principality, that of Liechtenstein, hardly an international personality in the traditional sense, did fall under this exempt category.

Knowlton vs. Moore 178 U.S. 41 May 14, 1900

Facts

The plaintiffs in error were the executors of the will of Edwin F. Knowlton, of Brooklyn, New York. The defendant in error was the United States Collector of Internal Revenue for the First Collection District for the New York.

Mr. Knowlton died at Brooklyn in October, 1898, and his will was duly proved. Under the portion of the Act of Congress of June 13, 1898, which is printed at length in a note to the opinion of the Court in this case, the United States Collector of Internal Revenue demanded (of the executors) a return showing the amount of the personal estate of the deceased and the legatees and distributees thereof. This return the executors made under protest, asserting that the Act of June 13 was unconstitutional. This return showed that the personal estate amounted to over two and a half millions of dollars, and that there were several legacies, ranging from under $10,000 each to over $1,500,000. The collector levied the tax on the legacies and distributive shares, but, for the purpose of fixing the rate of the tax, considered the whole of the personal estate of the deceased as fixing the rate for each, and not the amount coming to each individual legatee under the will.

As the rates under the statute were progressive from a low rate on legacies amounting to $10,000 to a high rate on those exceeding $1,000,000, this decision greatly increased the aggregate amount of the taxation.

Demand having been made by the collector for payment, payment was made under protest, and, after the Commissioner of Internal Revenue had refused to refund any of it, the executors commenced suit to recover the amount so paid.

Issue

The executors protested on the grounds:

(1) that the provisions of the act were unconstitutional;

(2) that legacies amounting to less than $10,000, were not subject to any tax or duty;

(3) that a legacy of $100,000, taxed at the rate of $2.25 per $100, was only subject to the rate of $1.12 1/2.

Ruling

(1) That the statute clearly imposes the duty on the particular legacies or distributive shares, and not on the whole personal estate

(2) That it makes the rate of the tax depend upon the character of the links connecting those taking with the deceased, being primarily determined by the classifications, and progressively increased according to the amount of the legacies or shares.

(3) That the court below erred in denying all relief, and that it should have held the plaintiffs entitled to recover so much of the tax as resulted from taxing legacies not exceeding ten thousand dollars, and from increasing the tax rate with reference to the whole amount of the personal estate of the deceased from which the legacies or distributive shares were derived.

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Death duties were established by the Roman and ancient law, and, by the modern laws of France, Germany, and other continental countries, England and her colonies, and an examination of all shows that tax laws of this nature rest, in their essence, upon the principle that death is the generating source from which the particular taxing power takes its being, and that it is the power to transmit or the transmission from the dead to the living on which such taxes are more immediately vested.

When a particular construction of a statute will occasion great inconvenience or produce inequality and injustice, that view is not to be favored if another and more reasonable interpretation is present in the statute.

The provision in Section 8 of Article I of the Constitution that "all duties, imports and excises shall be uniform throughout the United States" refers purely to a geographical uniformity, and is synonymous with the expression "to operate generally throughout the United States."

G.R. No. L-43082 June 18, 1937

PABLO LORENZO, as trustee of the estate of Thomas Hanley, deceased, plaintiff-appellant, vs. JUAN POSADAS, JR., Collector of Internal Revenue

Facts

On October 4, 1932, the plaintiff Pablo Lorenzo, in his capacity as trustee of the estate of Thomas Hanley, deceased, brought this action in the Court of First Instance of Zamboanga against the defendant, Juan Posadas, Jr., then the Collector of Internal Revenue, for the refund of the amount of P2,052.74, paid by the plaintiff as inheritance tax on the estate of the deceased, and for the collection of interest thereon at the rate of 6 per cent per annum, computed from September 15, 1932, the date when the aforesaid tax was paid under protest. The defendant set up a counterclaim for P1,191.27 alleged to be interest due on the tax in question and which was not included in the original assessment. From the decision of the Court of First Instance of Zamboanga dismissing both the plaintiff's complaint and the defendant's counterclaim, both parties appealed to this court.

It appears that on May 27, 1922, one Thomas Hanley died in Zamboanga, Zamboanga, leaving a will and considerable amount of real and personal properties. On June 14, 1922, proceedings for the probate of his will and the settlement and distribution of his estate were begun in the Court of First Instance of Zamboanga. The will was admitted to probate.

The Court of First Instance of Zamboanga considered it proper for the best interests of their estate to appoint a trustee to administer the real properties which, under the will, were to pass to Matthew Hanley.

During the incumbency of the plaintiff as trustee, the defendant Collector of Internal Revenue, alleging that the estate left by the deceased at the time of his death consisted of realty valued at P27,920 and personalty valued at P1,465, and allowing a deduction of P480.81, assessed against the estate an inheritance tax in the amount of P1,434.24 which, together with the penalties for deliquency in payment consisting of a 1 per cent monthly interest from July 1, 1931 to the date of payment and a surcharge of 25 per cent on the tax, amounted to P2,052.74.

The plaintiff paid said amount under protest, notifying the defendant at the same time that unless the amount was promptly refunded suit would be brought for its recovery. The defendant overruled the plaintiff's protest and refused to refund the said amount exhausted, plaintiff went to court with the result herein above indicated.

The following are the principal questions to be decided by this court in this appeal:

(a) When does the inheritance tax accrue and when must it be satisfied?

The accrual of the inheritance tax is distinct from the obligation to pay the same. Section 1536 as amended, of the Administrative Code, imposes the tax upon "every transmission by virtue of inheritance, devise, bequest, gift mortis causa, or advance in anticipation of inheritance, devise, or bequest." The tax therefore is upon transmission or the transfer or devolution of property of a decedent, made effective by his death. It is in reality an excise or privilege tax imposed on the right to succeed to, receive, or take property by or under a will or the intestacy law, or deed, grant, or gift to become operative at or after death.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not follow that the obligation to pay the tax arose as of the date. The time for the payment on inheritance tax is clearly fixed by section 1544 of the Revised Administrative Code as amended by Act No. 3031, in relation to section 1543 of the same Code.

SEC. 1544. When tax to be paid. — The tax fixed in this article shall be paid:

(b) In other cases, within the six months subsequent to the death of the predecessor; but if judicial testamentary or intestate proceedings shall be instituted prior to the expiration of said period, the payment shall be made by the executor or administrator before delivering to each beneficiary his share.

Under the subsection, the tax should have been paid before the delivery of the properties in question to P. J. M. Moore as trustee on March 10, 1924.

(b) Should the inheritance tax be computed on the basis of the value of the estate at the time of the testator's death, or on its value ten years later?

Whatever may be the rule in other jurisdictions, we hold that a transmission by inheritance is taxable at the time of the predecessor's death, notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary, and the tax measured by the value of the property transmitted at that time regardless of its appreciation or depreciation.

(c) In determining the net value of the estate subject to tax, is it proper to deduct the compensation due to trustees?

A trustee, no doubt, is entitled to receive a fair compensation for his services1. But from this it does not follow that the compensation due him may lawfully be deducted in arriving at the net value of the estate subject to tax. There is no statute in the Philippines which requires trustees' commissions to be deducted in determining the net value of the estate subject to inheritance tax. Furthermore, though a testamentary trust has been created, it does not appear that the testator intended that the duties of his executors and trustees should be separated.

(d) What law governs the case at bar? Should the provisions of Act No. 3606 favorable to the tax-payer be given retroactive effect?

It is well-settled that inheritance taxation is governed by the statute in force at the time of the death of the decedent. The taxpayer can not foresee and ought not to be required to guess the outcome of pending measures. Of course, a tax statute may be made retroactive in its operation. Liability for taxes under retroactive legislation has been "one of the incidents of social life."2 But legislative intent that a tax statute should operate retroactively should be perfectly clear. Act No. 3606 itself contains no provisions indicating legislative intent to give it retroactive effect. No such effect can be given the statute by this court.

(e) Has there been delinquency in the payment of the inheritance tax? If so, should the additional interest claimed by the defendant in his appeal be paid by the estate?

There is no doubt that the testator intended to create a trust. He ordered in his will that certain of his properties be kept together undisposed during a fixed period, for a stated purpose. The probate court certainly exercised sound judgment in appointment a trustee to carry into effect the provisions of the will. P. J. M. Moore became trustee on March 10, 1924. On that date trust estate vested in him. The mere fact that the estate of the deceased was placed in trust did not remove it from the operation of our inheritance tax laws or exempt it from the payment of the inheritance tax. The corresponding inheritance tax should have been paid on or before March 10, 1924, to escape the penalties of the laws. This is so for the reason already stated that the delivery of the estate to the trustee was in esse delivery of the same estate to the cestui que trust, the beneficiary in this case. A trustee is but an instrument or agent for the cestui que trust. When Moore accepted the trust and took possesson of the trust estate he thereby admitted that the estate belonged not to him but to his cestui que trust3. He did not acquire any beneficial interest in the estate. He took such legal estate only as the proper execution of the trust required and, his estate ceased upon the fulfillment of the testator's wishes. The estate then vested absolutely in the beneficiary.

It results that the estate which plaintiff represents has been delinquent in the payment of inheritance tax and, therefore, liable for the payment of interest and surcharge provided by law in such cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore became trustee. The interest due should be computed from that date and it is error on the part of the defendant to compute it one month later. The provisions cases is mandatory, and neither the Collector of Internal Revenue or this court may remit or decrease such interest, no matter how heavily it may burden the taxpayer.

The judgment of the lower court is accordingly modified, with costs against the plaintiff in both instances. So ordered.

1 Barney vs. Saunders, 16 How., 535; 14 Law. ed., 1047 2 Seattle vs. Kelleher, 195 U. S., 360; 49 Law. ed., 232 Sup. Ct. Rep., 44. 3 Tolentino vs. Vitug, 39 Phil.,126, cited in 65 C. J., p. 692, n. 63

G.R. No. L-15499 February 28, 1962

ANGELA M. BUTTE, plaintiff-appellant, vs. MANUEL UY and SONS, INC., defendant-appellee.

Facts

Appeal from a decision of the Court of First instance of Manila dismissing the action for legal redemption filed by plaintiff-appellant.

It appears that Jose V. Ramirez, during his lifetime, was a co-owner of a house and lot located at Sta. Cruz, Manila, issued in the name of the following co-owners: Marie Garnier Vda. de Ramirez, 1/6; Jose V. Ramirez, 1/6; Jose E. Ramirez, 1/6; Rita de Ramirez, 1/6; and Jose Ma. Ramirez, 1/6.

On October 20, 1951, Jose V. Ramirez died. Subsequently, Special Proceeding No. 15026 was instituted to settle his estate, that included the one-sixth (1/6) undivided share in the aforementioned property. And although his last will and testament, wherein he bequeathed his estate to his children and grandchildren and one-third (1/3) of the free portion to Mrs. Angela M. Butte, hereinafter referred to as plaintiff-appellant, has been admitted to probate, the estate proceedings are still pending up to the present on account of the claims of creditors which exceed the assets of the deceased. The Bank of the Philippine Islands was appointed judicial administrator.

Meanwhile, on December 9, 1958, Mrs. Marie Garnier Vda. de Ramirez, one of the co-owners of the late Jose V. Ramirez in the Sta. Cruz property, sold her undivided 1/6 share to Manuel Uy & Sons, Inc. defendant-appellant herein, for the sum of P500,000.00. After the execution by her attorney-in-fact, Mrs. Elsa R. Chambers, of an affidavit to the effect that formal notices of the sale had been sent to all possible redemptioners, the deed of sale was duly registered and Transfer Certificate of Title No. 52789 was cancelled in lieu of which a new one was issued in the name of the vendee and the other-co-owners.

On January 15, 1959, Mrs. Angela M. Butte, thru Atty. Resplandor Sobretodo, sent a letter and a Philippine National Bank cashier's check in the amount of P500,000.00 to Manuel Uy & Sons, Inc. offering to redeem the 1/6 share sold by Mrs. Marie Garnier Vda. de Ramirez. This tender having been refused, plaintiff on the same day consigned the amount in court and filed the corresponding action for legal redemption. Without prejudice to the determination by the court of the reasonable and fair market value of the property sold which she alleged to be grossly excessive, plaintiff prayed for conveyance of the property, and for actual, moral and exemplary damages.

After the filing by defendant of its answer containing a counterclaim, and plaintiff's reply thereto, trial was held, after which the court rendered decision on May 13, 1959, dismissing plaintiff's complaint on the grounds that she has no right to redeem the property and that, if ever she had any, she exercised the same beyond the statutory 30-day period for legal redemptions provided by the Civil Code. The counterclaim of defendant for damages was likewise dismissed for not being sufficiently established. Both parties appealed directly to this Court.

Based on the foregoing facts, the main issues posed in this appeal are:

(1) whether or not plaintiff-appellant, having been bequeathed 1/3 of the free portion of the estate of Jose V. Ramirez, can exercise the right of legal redemption over the 1/6 share sold by Mrs. Marie Garnier Vda. de Ramirez despite the presence of the judicial administrator and pending the final distribution of her share in the testate proceedings;

The appellant Angela M. Butte is entitled to exercise the right of legal redemption is clear. As testamentary heir of the estate of J.V. Ramirez, she and her co-heirs acquired an interest in the undivided one-sixth (1/6) share owned by her predecessor (causante) in the Santa Cruz property, from the moment of the death of the aforesaid co-owner, J.V. Ramirez. By law, the rights to the succession of a deceased persons are transmitted to his heirs from the moment of his death, and the right of succession includes all property rights and obligations that survive the decedent.

As co-owners of the property, the heirs of Jose V. Ramirez, or any one of them, became personally vested with right of legal redemption as soon as Mrs. Garnier sold her own pro-indiviso interest to Uy & Sons.

(2) Whether or not she exercised the right of legal redemption within the period prescribed by law.

The right of appellant Angela M. Butte to make the redemption being established, the next point of inquiry is

whether she had made or tendered the redemption price within the 30 days from notices as prescribed by law. This period, be it noted, is peremptory, because the policy of the law is not to leave the purchaser's title in uncertainty beyond the established 30-day period. In considering whether or not the offer to redeem was timely, we think that the notice given by the vendee (buyer) should not be taken into account.

The notice which became operative is that given by Mrs. Chambers, in her capacity as attorney-in-fact of the vendor Marie Garnier Vda. de Ramirez. Under date of December 11, 1958, she wrote the Administrator Bank of the Philippine Islands that her principal's one-sixth (1/6) share in the Sta. Cruz property had been sold to Manuel Uy & Sons, Inc. for P500,000.00. The Bank received this notice on December 15, 1958, and on the same day endorsed it to Mrs. Butte, care of Delgado, Flores and Macapagal (her attorneys), who received the same on December 16, 1958. Mrs. Butte tendered redemption and upon the vendee's refusal, judicially consigned the price of P500,000.00 on January 15, 1959. The latter date was the last one of the thirty days allowed by the Code for the redemption, counted by excluding December 16, 1958 and including January 15, 1959, pursuant to Article 13 of the Civil Code. Therefore, the redemption was made in due time.

The date of receipt of the vendor's notice by the Administrator Bank (December 15) can not be counted as determining the start of thirty days; for the Administrator of the estate was not a proper redemptioner, since, as previously shown, the right to redeem the share of Marie Garnier did not form part of the estate of Jose V. Ramirez.

G.R. No. L-21642 July 30, 1966

SOCIAL SECURITY SYSTEM, petitioner-appellee, vs. CANDELARIA D. DAVAC, ET AL., respondents; LOURDES Tuplano, respondent-appellant.

Facts

This is an appeal from the resolution of the Social Security Commission declaring respondent Candelaria Davac as the person entitled to receive the death benefits payable for the death of Petronilo Davac.

The facts of the case as found by the Social Security Commission, briefly are: The late Petronilo Davac, a former employee of Lianga Bay Logging Co., Inc. became a member of the Social Security System (SSS for short) on September 1, 1957. As such member, he designated respondent Candelaria Davac as his beneficiary and indicated his relationship to her as that of "wife". He died on April 5, 1959 and, thereupon, each of the respondents (Candelaria Davac and Lourdes Tuplano) filed their claims for death benefit with the SSS. It appears from their respective claims and the documents submitted in support thereof, that the deceased contracted two marriages, the first, with claimant Lourdes Tuplano on August 29, 1946, who bore him a child, Romeo Davac, and the second, with Candelaria Davac on January 18, 1949, with whom he had a minor daughter Elizabeth Davac. Due to their conflicting claims, the processing thereof was held in abeyance, whereupon the SSS filed this petition praying that respondents be required to interpose and litigate between themselves their conflicting claims over the death benefits in question.

On February 25, 1963, the Social Security Commission issued the resolution referred to above, Not satisfied with the said resolution, respondent Lourdes Tuplano brought to us the present appeal.

Issue

The only question to be determined herein is whether or not the Social Security Commission acted correctly in declaring respondent Candelaria Davac as the person entitled to receive the death benefits in question.

Ruling

Section 13, Republic Act No. 1161, as amended by Republic Act No. 1792, in force at the time Petronilo Davac's death on April 5, 1959, provides:

1. SEC. 13. Upon the covered employee's death or total and permanent disability under such conditions as the Commission may define, before becoming eligible for retirement and if either such death or disability is not compensable under the Workmen's Compensation Act, he or, in case of his death, his beneficiaries, as recorded by his employer shall be entitled to the following benefit: ... . (emphasis supplied.)

Under this provision, the beneficiary "as recorded" by the employee's employer is the one entitled to the death benefits.

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Appellant contends that the designation herein made in the person of the second and, therefore, bigamous wife is null and void, because

(1) it contravenes the provisions of the Civil Code;

As to the first point, appellant argues that a beneficiary under the Social Security System partakes of the nature of a beneficiary in life insurance policy and, therefore, the same qualifications and disqualifications should be applied.

Without deciding whether the naming of a beneficiary of the benefits accruing from membership in the Social Security System is a donation, or that it creates a situation analogous to the relation of an insured and the beneficiary under a life insurance policy, it is enough, for the purpose of the instant case, to state that the disqualification mentioned in Article 7394 is not applicable to herein appellee Candelaria Davac because she was not guilty of concubinage, there being no proof that she had knowledge of the previous marriage of her husband Petronilo.

4 ART. 739. The following donations shall be void: (1) Those made between persons who were guilty of adultery or

concubinage at the time of the donation;

and (2) It deprives the lawful wife of her share in the conjugal property as well as of her own and her child's legitime in the inheritance.

Regarding the second point raised by appellant, the benefits accruing from membership in the Social Security System do not form part of the properties of the conjugal partnership of the covered member. They are disbursed from a public special fund created by Congress in pursuance to the declared policy of the Republic "to develop, establish gradually and perfect a social security system which ... shall provide protection against the hazards of disability, sickness, old age and death."

Additionally, Section 21 of the Social Security Act, as amended by Republic Act 1792, provides:

SEC. 21. Government Guarantee. — The benefits prescribed in this Act shall not be diminished and to guarantee said benefits the Government of the Republic of the Philippines accepts general responsibility for the solvency of the System.

From the foregoing provisions, it appears that the benefit receivable under the Act is in the nature of a special privilege or an arrangement secured by the law, pursuant to the policy of the State to provide social security to the workingmen. The amounts that may thus be received cannot be considered as property earned by the member during his lifetime. His contribution to the fund, it may be noted, constitutes only an insignificant portion thereof. Then, the benefits are specifically declared not transferable, and exempted from tax legal processes, and lien. Furthermore, in the settlement of claims thereunder the procedure to be observed is governed not by the general provisions of law, but by rules and regulations promulgated by the Commission. Thus, if the money is payable to the estate of a deceased member, it is the Commission, not the probate or regular court that determines the person or persons to whom it is payable.

If there is a named beneficiary and the designation is not invalid (as it is not so in this case), it is not the heirs of the employee who are entitled to receive the benefits (unless they are the designated beneficiaries themselves). It is only when there is no designated beneficiaries or when the designation is void, that the laws of succession are applicable. And we have already held that the Social Security Act is not a law of succession.

Wherefore, in view of the foregoing considerations, the resolution of the Social Security Commission appealed from is hereby affirmed, with costs against the appellant.

BPI v Posadas GR No. L-34583; October 22, 1931 [56 Phil 215] Villa-Real, J.: ----------------------------------------------------------------- FACTS: BPI was assigned as the administrator of the estate of the late Adolphe Oscar Schuetze who died in the Philippines, is a German citizen and married to Rosario GelanoVda. deSchuetze, Filipina, of legal age and currently residing in Germany. Schuetze before marrying Rosario, acquired a life insurance from Sun Life Assurance Company of Canada and continued to pay for it after their marriage. The insurance policy named the estate of Schuetze as the beneficiary. Also, before his death, Schuetze executed a will wherein Rosario was named as his universal heir. BPI rendered an accounting of all the assets of Schuetze, including the said insurance policy wherein they received the amount of P 20,150, representing the proceeds of the said policy. BPI delivered it to Rosario. However CIR (Collection of Tax Revenue) imposed and inheritance tax upon the transmission of the proceeds of the policy and BPI, as the administrator of the estate of Schuetze, under protest paid the said tax (P1,209). Issue: Whether the life insurance policy of Schuetze is subject to tax. Held: The court held that if the proceeds of the life-insurance policy taken out by the decedent and made payable to his estate were delivered to BPI for administration and distribution, they were not intransit but were more or less permanently located in the Philippine Islands, according to the foregoing rules. If this be so, half of the proceeds which is community property, belongs to the estate of the deceased and is subject to the inheritance tax, in accordance with the legal provision quoted above, irrespective of whether or not the late Adolphe Oscar Schuetze was domiciled in the Philippine Islands at the time of his death.

The court also held that: (1) That the proceeds of a life-insurance policy payable to the insured's estate, on which the premiums were paid by the conjugal partnership, constitute community property, and belong one-half to the husband and the other half to the wife, exclusively; (2) that if the premiums were paid partly with paraphernal and partly conjugal funds, the proceeds are likewise in like proportion paraphernal in part and conjugal in part; and (3) that the proceeds of a life-insurance policy payable to the insured's estate as the beneficiary, if delivered to the testamentary administrator of the former as part of the assets of said estate under probate administration, are subject to the inheritance tax according to the law on the matter, if they belong to the assured exclusively, and it is immaterial that the insured was domiciled in these islands or outside. Wherefore, CIR was ordered to return ½ of the tax collected to BPI.

TAGARAO v GARCIA GR No. L-40064 December 4, 1934 Diaz, J.: ------------------------------------------------- FACTS: Vidal Saravia owns a land in Occidental Negros with an area of 31 hectares, 3 ares and 65 centares. Vidal sold it through a pacto de retro sale to brothers Marcos Garcia (respondent) and Ventura Garcia on July 20, 1900. Who later became the absolute owners of the said land. When they bought the land, Marcos was still single. Then after Marcos got married to his first wife and had 3 children, herein co-respondents: Margarita, Rosario and Caralina (deceased) represented by Dolores Rufino. Later, married again to his second wife Paula Tabifranca. Ventura was also married and had 2 children, Claro and Merced. Merced got married to Rafael and had 3 children, herein petitioners: Resurrection, Serafin and Buenaventura. During the lifetime of Merced, Marcos had been delivering to her and Claro the shares from the products harvested from the land co-owned by their father (deceased). However, upon her death the delivery have ceased and Marcos claimed the property as his own without the knowledge of the respondents. Respondents found out that the property have been transferred to Marcos and they were unable to receive their share of the property. Hence a complaint for recovery was filed, and the court ruled the recovery of the ¼ shares of the petitioner and the annulment of the sale having been permeated by fraud. Issue: Whether petitioners right over the property still exist. Held: Court held that the sale was void, however Resurrection could no longer entitled to acquire the land having slept on her right over the property. Since upon knowledge of the fraud committed, she allowed 10 years to pass, which ripened the possession and right over the property by Marcos.

Testate Estate of the Late Felix J. De Guzman v De Guzman GR No. L-29276 May 18, 1978 [83 SCRA 256] Aquino, J.: ----------------------------------------------------------------------------- FACTS: The decedent, Felix De Guzman, estate consisted of a house and lot which was subdivided to his eight children: Victorino, Severino, Librada, Margarita, Josefina, Honorata, Arsenio and Crispina. Victorino was assigned by the court as the administrator of the estate, and in the exercise of his power as administrator spent the assets of the estate for reconstructing and remodeling the house of the decedent, which was ordered to stop by the court since he was not given the authority to do so. The court however allowed the expenses incurred by Victorino since it was for the care, management and settlement of the estate. However, respondent contended the said decision by the court. Hence the petition. Issue: Whether or not the probate court erred in approving the use of the income of the estate to defray the expenses. Held: The court held that the probate court erred in approving the whole accounting and rendered an order modifying that the sum of (a) P1,603.11 as the living expenses of Librada de Guzman. (b) P100 for stenographic notes, (c) P26.25 as representation expenses, and (d) P268.65 as expenses for the celebration of the first anniversary of the decedent's death are disallowed in the administrator's accounts.

COMMISSIONER V. PALANCA18 SCRA 496REGALA, October 29, 1966 NATURE Petition for Review by certiorari of CTA Decision FACTS -Ju ly 1950, Don Car los Palanca, Sr. , donated to h isson Car los Jr . , shares of s tock in La Tondeña, Inc.amounting to 12,500 shares. Carlos Jr. failed to file areturn on the donation within the statutory period soC a r l o s J r . w a s a s s e s s e d P 9 7 , 6 9 1 . 2 3 ( g i f t t a x ) , P24,442.81 (25% surcharge), P47,868.70 (interest),which he paid on June 22, 1955.-March 1,1956, Car los Jr . f i led wi th BIR his ITR for1955 claiming a deduction for interest of P9,706.45 and report ing a taxable income of P65,982.12. He was assessed P21,052.01 as income tax.-November 1956, Carlos Jr. filed an amended return f o r 1 9 5 5 , c l a i m i n g a n a d d i t i o n a l d e d u c t i o n o f P 4 7 , 8 6 8 . 7 0 ( a l l e g e d l y t h e in t e r e s t p a i d o n t h e donee’s g i f t tax based on Sec.30(b)(1) of the TaxC o d e ) s o t a x a b l e i n c o m e i s P 1 8 , 1 1 3 . 4 2 ( n o t P 6 5 , 9 8 2 . 1 2 ) a n d t a x d u e t h e r e o n i n s u m o f P3,167.00. He c la imed for a refund of P17,885.01(P21,052.01 - P3,167.00) – BIR denied-Carlos Jr. reiterated claim for refund, BIR denied- B I R c o n s i d e r e d t h e d o n a t i o n b y C a r l o s S r . a s a t ransfer in contemplat ion of death so Car los Jr . wasassessed P191,591.62 as estate and inher i tance taxes. Car los paid P17,002.74 on June 22, 1955 asgift tax (includes interest and surcharge) which was appl ied to h is estate and inher i tance tax l iab i l i ty . P e t i t i o n e r p a i d P 6 0 , 5 8 1 . 8 0 a s i n t e r e s t f o r delinquency. -August 1958, Carlos Jr. filed again an amended ITR for 1955 claiming the following: As interest deductions: P9,706.45 (as in the originalI T R ) + P 6 0 , 5 8 1 . 8 0 ( i n t e r e s t o n t h e e s t a t e a n d inher i tance taxes); Net Taxable income: P5,400.32;Income tax due: P428.00; claimed a refund of P20,624.01 (P21,052.01 – P428) . Even before BIRruled on his claim, Carlos Jr. filed petition for reviewbefore CTA-CTA: BIR refund Carlos P20,624.01 ISSUES 1. WON there is a difference between “indebtedness”and “ taxes” to determine the deduct ib le in terest(WON Palanca could claim interest deductions basedon tax liability) 2. WON claim for refund of Palanca already expired HELD1. NO. Distinction became inconsequential. Interest o n t a x e s s h o u l d b e c o n s i d e r e d a s i n t e r e s t s o f indebtedness Ratio. Whi le the d ist inct ion between “ taxes” and“ d e b t s ” w a s r e c o g n i z e d i n t h i s j u r i s d i c t i o n , t h e variance in their legal conception does not extend to t h e i n t e r e s t s p a i d o n t h e m , a t l e a s t i n s o f a r a s S e c . 3 0 ( b ) ( 1 ) o f t h e N I R C 1 i s c o n c e r n e d ( w h i c h author izes deduct ion f rom gross income of in terest paid within the taxable year on indebtedness). Reasoning. CIR argues that Carlos Jr. cannot deduct the interest due to i ts tax l iab i l i t ies f rom his gross income since it is not interest ON INDEBTEDNESS but interest on TAX (liabilities).-however, in CIR v. PRIETO (wherein deduct ions of interest on donor’s tax was allowed) it was held that t h e t e r m “ i n d e b t e d n e s s ” w a s d e f i n e d a s t h e unconditional and legally enforceable obligation for the payment of money. It Thus, it is apparent that a tax may be considered an indebtedness. 2. NO Ratio. Where the claim for refund was filed with the CTA even before it had been denied by the BIR, then t h e 3 0 -d a y p r e s c r i p t i o n p e r i o d u n d e r S e c . 1 1 , R A 1124(25) did not even commence to run. Where the t a x a c c o u n t w a s p a i d b y i n s t a l l m e n t , t h e n t h e c o m p u t a t i o n o f t h e t w o -

y e a r p r e s c r i p t i v e p e r i o d under Sec. 306 of the Tax Code should be f rom the date of the last installment Reasoning. C I R a r g u e d t h a t u n d e r S e c . 1 1 ( m a y appeal to CTA within 30-days from receipt of decisiono r r u l i n g ) , c l a i m f o r r e f u n d a l r e a d y p r e s c r i b e d because outside 30-day period. Under Sec.306 of Tax Code (No suit/proceeding shall be begun for recovery of tax erroneously or i l legal ly col lected af ter the expiration of 2years from the date of payment of the tax penalty) CIR claims that under Palanca’s withheld tax and under Receipt dated May 11, 1956, amounts paid by Car los Jr . may no longer be refunded as I t was f i led in court only on August 13, 1958 (beyond2yr period)-on 30-day per iod: d id not even commence when case was f i led because there was no f inal decis ion from BIR yet when Carlos Jr. filed case with CTA-on 2yr period: Palanca paid on installment. His last payment was on August 14, 1956. Therefore, s ince 1 "Sec. 30.Deductions from gross income. — In computing net income there shall be allowed as deductions —xxx xxx xxx 'Interest:'(1) In general. — The amount of interest paid within the taxable year on indebtedness, except on indebtedness incurred or continued to purchase or carry obligations the interest upon which is exempt from taxation as income under this Title. the per iod of count ing should be f rom t ime of last installment, he still filed claim on time on August 13,1958! Disposition. WHEREFORE, the decis ion appealed f rom is af f i rmed in fu l l w i thout pronouncements as to costs.

Commissioner of Internal Revenue vs. Vda. De Prieto (1960) FACTS: • On December 4, 1945, Consuelo L. Vda. De Prieto conveyed by way of gifts to her four children (Antonio,

Benito, Carmen and Mauro), real property with total assessed value of 892,497.50. • CIR appraised the real property donated for gift tax purposes at 1,231.268.00, and assessed the total sum of

117,706.50 as donor’s gift tax, interests and compromises due thereon. • Of the total sum of 117,706.50 paid by Consuelo, the sum of 55,978.65 represents the total interest on

account of delinquency. Said sum of the total interest was claimed as deduction by Consuelo in her 1954 income tax return.

• CIR disallowed the claim and as a consequence, assessed Consuelo the total sum of 21,410.38 as deficiency income tax due on the aforesaid 55,978.65, including interest up to March 1957, surcharge and compromise for the late payment.

• Under the law, for interest to be deductible, it must be shown that there be an indebtedness, that there should be interest upon it, and that what is claimed as an interest deduction should have been paid or accrued within the year. It is here conceded that the interest paid by Consuelo was in consequence of the late payment of her donor’s tax, and the same was paid within the year it is sought to be deducted.

• To sustain the proposition that the interest payment is not deductible, CIR relies heavily on section 80 of the Revenue Regulation No. 2( Income Tax Regulation) promulgated by the Department of Finance, which provides that “the word ‘taxes’ means taxes proper and no deductions should be allowed for amounts representing interest, surcharge, or penalties incident to delinquency.”

• CTA reversed the decision of CIR.

ISSUES: 1. WON such interest was paid upon indebtedness within the contemplation of section 30(b) (1) of the Tax Code. 2. WON the interest paid for the late payment of the donor’s tax is deductible from the gross income under

section 30(b) of the Tax Code. 3. WON section 80 of the Revenue Regulation No. 2 is applicable in this case, thus the deduction should not be

allowed. HELD: 1. Yes, the donor’s tax may be considered as indebtedness within the contemplation of the Tax Code. 2. Yes, given that the donor’s tax may be considered as indebtedness, the interest paid for the late payment of

the donor’s tax is deductible from the gross income under section 30(b) of the Tax Code. 3. No, section 80 of RR2 is not applicable in this case because the said section of RR2 pertains to or implements

section 30(c) of the Tax Code, governing deduction of taxes, and not section 30 (b) on deduction of interest on indebtedness, which is the provision invoked by Consuelo.

RATIO: 1. The term “indebtedness” as used in the US Tax Code containing similar provisions as in the Phil Tax Code

has been defined as an unconditional and legally enforceable obligation for the payment of money. Within the meaning of that definition, it is apparent that a tax may be considered an indebtedness. As stated by the SC in the case of Santiago Sambrano vs. CTA and CIR: “Although taxes already due have not, strictly speaking, the same concept as debts, they are, however, obligations that may be considered as such.”

2. This conclusion finds support in the established jurisprudence in the US. Under section 23(b) of the Internal Revenue Code of 1939, as amended, which contains similarly worded provisions as section 30(b) of Phil Tax Code, the uniform ruling in the US jurisprudence is that interest on taxes is interest on indebtedness and is deductible. This rule applies even though the tax is nondeductible, like the donor’s tax.

3. Section 80 is inapplicable to the instant case because while it implements section 30(c) of the Tax Code governing deduction of taxes, Consuelo seeks to come under section 30(b) providing for deduction of interest on indebtedness.

In conclusion, the SC is of the opinion that although interest payment for delinquent taxes is not deductible as tax under section 30(c) of the Tax Code and Section 80 of RR2, the taxpayer is not precluded thereby from claiming said interest payment as deduction under section (b) of the same code. Dispositive: CTA’s decision AFFIRMED.

DOUGLAS FISHER AND BETTINA FISHER vs. THE COLLECTOR OF INTERNAL REVENUE, and the COURT OF TAX APPEALS Facts: On December 1, 1952, Beatrice Mauricia Stevenson assigned all her rights and interests in the estate to the spouses, Douglas and Bettina Fisher, respondents herein. On September 7, 1953, the ancillary administrator filed a second amended estate and inheritance tax return (Exh. "M-N"). This return declared the same assets of the estate stated in the amended return of September 22, 1952, except that it contained new claims for additional exemption and deduction to wit: (1) deduction in the amount of P4,000.00 from the gross estate of the decedent as provided for in Section 861 (4) of the U.S. Federal Internal Revenue Code which the ancillary administrator averred was allowable by way of the reciprocity granted by Section 122 of the National Internal Revenue Code, as then held by the Board of Tax Appeals in case No. 71 entitled "Housman vs. Collector," August 14, 1952; and (2) exemption from the imposition of estate and inheritance taxes on the 210,000 shares of stock in the Mindanao Mother Lode Mines, Inc. also pursuant to the reciprocity proviso of Section 122 of the National Internal Revenue Code. In this last return, the estate claimed that it was liable only for the amount of P525.34 for estate tax and P238.06 for inheritance tax and that, as a consequence, it had overpaid the government. The refund of the amount of P15,259.83, allegedly overpaid, was accordingly requested by the estate. The Collector denied the claim. For this reason, action was commenced in the Court of First Instance of Manila by respondents, as assignees of Beatrice Mauricia Stevenson, for the recovery of said amount. Pursuant to Republic Act No. 1125, the case was forwarded to the Court of Tax Appeals which court. Issue: Whether or not the estate can avail itself of the reciprocity proviso embodied in Section 122 of the National Internal Revenue Code granting exemption from the payment of estate and inheritance taxes on the 210,000 shares of stock in the Mindanao Mother Lode Mines Inc. Held: Section 122 of our National Internal Revenue Code, in pertinent part, provides: ... And, provided, further, 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." (Emphasis supplied). On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:. "SEC. 13851, Intangibles of nonresident: Conditions. Intangible personal property is exempt from the tax imposed by this part 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:. (a) Did not impose a legacy, succession, or death tax of any character in respect to intangible personal property of residents of this State, or (b) 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." We are not unaware of our ruling in the case of Collector of Internal Revenue vs. Lara (G.R. Nos. L-9456 & L-9481, prom. January 6, 1958, 54 O.G. 2881) exempting the estate of the deceased Hugo H. Miller from payment of the inheritance tax imposed by the Collector of Internal Revenue. It will be noted, however, that the issue of reciprocity between the pertinent provisions of our tax law and that of the State of California was not there squarely raised, and the ruling therein cannot control the determination of the case at bar. Be that as it may, we now declare that in view of the express provisions of both the Philippine and California laws that the exemption would apply only if the law of the other grants an exemption from legacy, succession, or death taxes of every character, there could not be partial reciprocity. It would have to be total or none at all.

ALBERTO F. LACSON, EDITHA F. LACSON, ROMEO F. LACSON and ZENA F. VELASCO, petitioners, vs. HON. LUIS R. REYES, in his capacity as presiding judge of Branch 22 of the Regional Trial Court of Cavite, Branch 22, and/or Multiple Sala, Imus, Cavite, and EPHRAIM J. SERQUINA, respondents. FACTS

On August 26, 1987, the private respondent, Ephraim Serquina, petitioned the respondent court for the probate of the last will and testament of Carmelita Farlin. The petition was not opposed and hence, on November 17, 1987, the respondent court issued a "certificate of allowance. On March 14, 1988, Atty. Ephraim Serquina filed a "motion for attorney's fees" 3 against the petitioners, alleging that the heirs had agreed to pay, as and for his legal services rendered, the sum of P68,000.00. Thereafter, the heirs filed their answer and denied the claim for P68,000.00 alleging that the sum agreed upon was only P7,000.00, a sum they had allegedly already paid. Respondent court rendered a judgment awarding P65,000 pesos.

ISSUE

WON a lawyer who is also the executor or administrator is entitled to receive legal/professional fees

HELD

It is pointed out that an attorney who is concurrently an executor of a will is barred from recovering attorney's fees from the estate. The Rule is specifically as follows:

SEC. 7. What expenses and fees allowed executor or administrator. Not to charge for services as attorney. Compensation provided by will controls unless renounced. — An executor or administrator shall be allowed the necessary expenses in the care, management and settlement of the estate, and for his services, four pesos per day for the time actually and necessarily employed, or a commission upon the value of so much of the estate as comes into his possession and is finally disposed of by him in the payment of debts, expenses, legacies, or distributive shares, or by delivery to heirs or devisees, of two per centum of the first five thousand pesos of such value, one per centum of so much of such value as exceeds five thousand pesos and does not exceed thirty thousand pesos, one-half per centum of so much of such value as exceeds thirty thousand pesos and does not exceed one hundred thousand pesos, and one-quarter per centum of so much of such value as exceeds one hundred thousand pesos. But in any special case, where the estate is large, and the settlement has been attended with great difficulty, and has required a high degree of capacity on the part of the executor or administrator, a greater sum may be allowed. If objection to the fees allowed be taken, the allowance may be reexamined on appeal.

If there are two or more executors or administrators, the compensation shall be apportioned among them by the court according to the services actually rendered by them respectively.

When the executor or administrator is an attorney, he shall not charge against the estate any professional fees for legal services rendered by him.

When the deceased by will makes some other provision for the compensation of his executor, that provision shall be a full satisfaction for his services unless by a written instrument filed in the court he renounces all claim to the compensation provided by the will. 17

The rule is therefore clear that an administrator or executor may be allowed fees for the necessary expenses he has incurred as such, but he may not recover attorney's fees from the estate. His compensation is fixed by the rule but such a compensation is in the nature of executor's or administrator's commissions, and never as attorney's fees. In one case, 18 we held that "a greater sum [other than that established by the rule] may be allowed 'in any special case, where the estate is large, and the settlement has been attended with great difficulty, and has required a high degree of capacity on the part of the executor or administrator.'" 19 It is also left to the sound discretion of the court. 20 With respect to attorney's fees, the rule, as we have seen, disallows them. Accordingly, to the extent that the trial court set aside the sum of P65,000.00 as and for Mr. Serquina's attorney's fees, to operate as a "lien on the subject properties," 21 the trial judge must be said to have gravely abused its discretion (apart from the fact that it never acquired jurisdiction, in the first place, to act on said Mr. Serquina's "motion for attorney's fees").

CLEOTILDE LAT, petitioner, vs. THE HONORABLE COURT OF APPEALS AND MARCIAL BANZUELA, respondents.

On February 15, 1958, the Court of Appeals rendered a decision in CA-G.R. No. 9490-R, entitled "In re Intestate Estate of the Deceased Mariano M. Lat, Marcial Banzuela, administrator-appellant vs. Cleotilde Lat, respondent- appellee", reversing an order of the Court of First instance of Batangas, dated October 31, 1951, in Special Proceeding No. 3961 thereof and ordering said Cleotilde Lat "to deliver to administrator-appellant the sum of P4,700, with costs of both instances against her", but, "without prejudice to her rights as compulsory heir" of the deceased Mariano M. Lat.

On July 7, 1958, the administrator of said estate, Marcial Banzuela, hereinafter referred to as the administrator, filed with the lower court a motion for the execution of said decision, which had, meanwhile, become final and executory. Cleotilde Lat — hereinafter referred to as the petitioner — opposed the motion mainly upon the ground that, before the rendition of the aforementioned decision, or on September 29, 1957, the heirs of Mariano M. Lat had executed the deed Exhibit 1, whereby they agreed "to withdraw the appeal" taken by the administrator in said case CA-G.R. 9490-R. This notwithstanding, the court of first instance ordered, on July 18, 1958, the writ of execution issued. On the part of the administrator, he alleged that although the heirs of the deceased had met several times with a view to settling their differences, and in one of their meetings Exhibit 1 was executed "for the purpose of showing the willingness of everyone to settle" said differences, "no definite settlement had been reached between the parties".

ISSUE:

WON the CA erred in sanctioning the execution of its decision in CA-G.R. No. 9490-R, because the agreement contained in Exhibit 1 is a "virtual renunciation of any interest or participation which the heirs (of Mariano M. Lat) may have in the . . . sum of P7,400" involved in CA-G.R. No. 9490-R

HELD

We find no merit in petitioner's pretense. Regardless of whether or not the agreement, Exhibit 1, amounts to a renunciation by the heirs of the deceased of their respective shares in the amount of the judgment rendered in CA-G.R. No. 9490-R, the Court of Appeals did not err in legalizing the execution thereof, said decision having been rendered in favor, not of said heirs, but of the administrator of the estate of Mariano M. Lat, who, admittedly, is not a party to said agreement. What is more, as such administrator, he could not have validly renounced his rights under said decision without the approval of the probate court, aside from the fact that the heirs who signed Exhibit 1 were not parties in said case, and, hence, had no authority to settle the same. It is, therefore, unnecessary for us to determine whether or not the administrator had verbally promised to move for the withdrawal of the appeal in CA G.R. No. 9490-R, as contended by petitioner, for even if he had actually made said promise, the same would not bind the estate of the deceased.

Without merit is appellant's contention that inasmuch as Mariano M. Lat's heirs, the signers of exhibit 1, became the owners of the amount of P7,400.00 upon Mariano's death, with a perfect right to renounce their participation in the same amount, their right should be respected by appellee, who is merely their alter ego. While it is true, according to article 777 of the New Civil Code (657 of the old), that the right of succession is transmitted from the moment of the death of the decedent, the participation of Mariano M. Lat's heirs in the amount of P7,400.00 is purely prospective and contingent depending upon the results of the liquidation of his estate. The heirs may or may not receive any portion of the said sum, depending upon the demands of the administration expenses. And appellee as administrator is not a mere alter ego of the heirs, but is an officer of the probate court entrusted with the management and settlement of the estate until, with the court's approval, he has distributed and delivered to the heirs their respective shares of the inheritance; which distribution and delivery should be made only "after, not before, the payment of all debts, funeral charges, expenses of administration, allowance to the widow, and inheritance tax is effected" and after, not before, the declaration of the heirs had been made ). Before the completion of the liquidation of Mariano M. Lat's estate, his heirs have no right to interfere in its administration by appellee.

Rafael Arsenio S. Dizon, v. CTA and CIR G.R. No. 140944; April 30, 2008 Facts: Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the probate of his will was filed. The probate court appointed Atty. Rafael Arsenio P. Dizon as administrator of the Estate of Jose Fernandez. An estate tax return was filed later on which showed ZERO estate tax liability. BIR thereafter issued a deficiency estate tax assessment, demanding payment of Php 66.97 million as deficiency estate tax. This was subsequently reduced by CTA to Php 37.42 million. The CA affirmed the CTA’s ruling, hence, the instant petition. The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax was due. On the other hand, respondents argue that since the claims of the Estate’s creditors have been condoned, such claims may no longer be deducted from the gross estate of the decedent. Issue: Whether the actual claims of 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 Held: YES. Following the US Supreme Court’s ruling in Ithaca Trust Co. v. United States, the Court held that post-death developments are not material in determining the amount of deduction. This is because estate tax is a tax imposed on the act of transferring property by will or intestacy and, because the act on which the tax is levied occurs at a discrete time, i.e., the instance of death, the net value of the property transferred should be ascertained, as nearly as possible, as of the that time. This is the date-of-death valuation rule. The Court, in adopting the date-of-death valuation principle, explained that: First. There is no law, nor do we discern any legislative intent 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 tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictissimi juris against the government. 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, or liability contracted by 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.

CIR vs De Lara G.R. Nos. L-9456 and L-9481 January 6, 1958 Facts: Hugo H. Miller, an American citizen, was born in SantaCruz, California, U.S.A., in 1883. In 1905, he came to the Philippines. From 1906 to 1917, he was connected with thepublic school system, first as a teacher and later as a division superintendent of schools. After his retirement, Miller accepted an executive position in the local branch of Ginn & Co., book publishers with principal offices in New York and Boston,U.S.A., up to the outbreak of the Pacific War. Miller lived at the Manila Hotel. He never lived in any residential house in the Philippines. After the death of his wife in 1931, he transferred from the Manila Hotel to the Army and Navy Club, where hewas staying at the outbreak of the Pacific War. On January 17, 1941, Miller executed his last will and testament in Santa Cruz,California, in which he declared that he was "of Santa Cruz,California". On December 7, 1941, because of the Pacific War, the office of Ginn & Co. was closed, and Miller joined the Board of Censors of the United States Navy. During the war, he was taken prisoner by the Japanese forces in Leyte, and inJanuary, 1944, he was transferred to Catbalogan, Samar,where he was reported to have been executed by said forces on March 11, 1944.Testate proceedings were instituted before the Court of California in Santa Cruz County, which subsequently issued an order and decree of settlement of final account and final distribution. The Bank of America, National Trust and Savings Association of San Francisco California, co-executor named in Miller’s will, filed an estate and inheritance tax return with the Collector, covering only the shares of stock issued by Philippine corporations. After due investigation, the Collector assessed estate and inheritance taxes, which was received by the said executor. The estate of Miller protested said assessment. This assessment was appealed by De Lara asAncilliary Administrator before the Board of Tax Appeals, which appeal was later heard and decided by the Court of Tax Appeals. Issue: W/N the estate is liable to file an estate and inheritance tax return besides those covering shares of stocks issued by Philippine corporations Held: No. The Court agrees with the Court of Tax Appeals that at the time that The National Internal Revenue Code was promulgated in 1939, the prevailing construction given by the courts to the "residence" was synonymous with domicile. and that the two were used interchangeably. Moreover, there is reason to believe that the Legislature adopted the American(Federal and State) estate and inheritance tax system (see e.g.Report to the Tax Commision of the Philippines, Vol. II, pages122-124, cited in I Dalupan, National Internal Revenue Code Annotated, p. 469-470).

In the United States, for estate tax purposes, a resident is considered one who at the time of his death had his domicile in the United States, and in American jurisprudence, for purposes of estate and taxation, "residence” is interpreted as synonymous with domicile, and that— The incidence of estate and succession has historically been determined by domicile and situs and not by the fact of actual residence.(Bowring vs. Bowers)At the time of his death, Miller had his residence or domicile in Santa Cruz, California. During his stay in the country, Miller never acquired a house for residential purposes for he stayed at the Manila Hotel and later on at the Army and Navy Club. The bulk of his savings and properties were in the United States. To his home in California, he had been sending souvenirs. In November, 1940, Miller took out a property insurance policy and indicated therein his address as SantaCruz, California; this aside from the fact that Miller, as already stated, executed his will in Santa Cruz, California, wherein he stated that he was "of Santa Cruz, California".

*** As to the shares of stocks issued by Philippine corporations, an exemption was granted to the estate

by virtue of Section 122 of the Tax Code, which provides as follows:. . ."And Provided, however, 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 that country, or (b) if the laws of the foreign country of which the decedent was 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 citizen, of the Philippine not residing in that foreign country.

PASTOR, JR. VS CA (122 SCRA 885) June 24, 1983 G.R. No. L 56340 Facts: Spouses Alvaro Pastor, Sr. and Sofia Bossio were survived by their two legitimate children Alvaro Pastor, Jr. (Pastor Jr.) and Sofia Pastor (Sofia), and an illegitimate child, Lewellyn Quemada. Quemada filed a petition for the probate and allowance of an alleged holographic will of Pastor Sr. with the CFI which contained only one testamentary disposition: a legacy in favor of Quemada consisting of 30% of Pastor Sr.’s 42% share in the operation by ATLAS. Thereafter, the probate court appointed Quemada as special administrator of the entire estate of Pastor Sr. whether or not covered or affected by the holographic will. Consequently, Quemada instituted against Pastor Jr., and his wife an action for reconveyance of alleged properties of estate which included the properties subject of the legacy which were in the names of spouses Pastor Sr. and Ma. Elena, who claimed to be the owners in their own rights, and not by inheritance. The probate court issued an order allowing the will to probate. The order was affirmed by CA and on petition for review, the SC dismissed the petition and remanded the same to the probate court after denying reconsideration. For two years after remand of the case to the probate court, all pleadings of both parties remained unacted upon. Not long after, the probate court set the hearing on the intrinsic validity of the will but upon objection of Pastor Jr.and Sofia on the ground of pendency of the reconveyance suit, no hearing was held. Instead, the probate court required the parties to submit their respective position papers. While the reconveyance suit was still pending in another court, the probate court issued Order of Execution and Garnishment, resolving the question of ownership of the royalties payable by ATLAS and ruling in effect that the legacy to Quemada was not inofficious. Pursuant to said order, ATLAS was directed to remit directly to Quemada the 42% royalties due to decedent’s estate, of which Quemada was authorized to retain 75% for himself as legatee. Further, the 33% share of Pastor Jr. and/or his assignees was ordered garnished to answer for the accumulated legacy of Quemada. Being “immediately executory”, Quemada succeeded in obtaining a Writ of Execution and Garnishment. The oppositors sought reconsideration thereof but in the meantime, the probate court ordered suspension of payment of all royalties due Pastor Jr. and/or his assignees until after resolution of oppositor’s motion for reconsideration. Pending motion, Pastor Jr. And his wife filed with the CA a petition for certiorari and prohibition with a prayer for writ of preliminary injunction assailing the writ of execution and garnishment issued by the probate court. However, said petition was denied as well as their motion for reconsideration. Hence, this petition for review by certiorari with prayer for a writ of preliminary injunction Issue: 1. WON QUEMADA was entitled to be paid his legacy prior liquidation of Pastor, Sr.’s estate and payment of estate taxes. 2. WON the probate court resolved with finality the questions of ownership and intrinsic validity. Held: 1. Legacy made in a will cannot be distributed without a prior liquidation of the decedent’s estate and payment of debts and taxes. Section 107 (c) National Internal Revenue Code requires payment of estate tax before delivery to any beneficiary of his distributive share of the estate. 2. In a special proceeding for the probate of a will, the issue by and large is restricted to the extrinsic validity of the will. As a rule,the question of ownership is an extraneous matter which the Probate Court cannot resolve with finality. Thus, for the purpose of determining whether a certain property should or should not be included in the inventory of estate properties, the Probate Courtmay pass upon the title thereto, but such determination is provisional, not conclusive, and is subject to the final decision in aseparate action to resolve title.

October 11, 1930 G.R. No. L-33139 THE GOVERNMENT OF THE PHILIPPINE ISLANDS, vs. JOSE MA. PAMINTUAN, ET AL. Facts: The following are the agreed statement of facts: I. That on February 27, 1920, Florentino Pamintuan, represented by J. V. Ramirez or his attorney-in-fact charged with the administration of his property, filed income-tax return for the year 1919, paying the amount of P 672.99 on the basis of said return, and the additional sum of P151.01 as a result of a subsequent assessment received from the Collector of Internal Revenue. II. That on April 24, 1925, Florentino Pamintuan died in Washington, D. C., U. S. A., leaving the defendants herein as his heirs. III. That on April 24, 1925, intestate proceedings were instituted in the Court of First Instance of Manila in civil case No. 27948, intestate of the late Florentino Pamintuan. IV. That on April 28,1925, the Court of First Instance of Manila appointed Maximo de la Paz and Candido Ilagan commissioners of appraisal of the property left by the deceased Pamintuan, the said appointees taking their oaths of office on May 4 and May 9, 1925, respectively, and letters of appointment to the committee on claims and appraisals were made on May 9,1925. V. That the said committee on claims and appraisals after the publications of the notices required by law held the necessary sessions in accordance with said notices for the presentation and determination of all claims and credits against the estate of the deceased Pamintuan. VI. That on December 1, 1925, the above-mentioned committee rendered its report which was duly approved by the court, and in which report it appears that he only claims presented and that were approved were those of Tomasa Centeno, Jose, Paz, Caridad, and Natividad Pamintuan and Cavanna, Aboitiz and Agan. VII. That on June 12, 1926, Jose V. Ramirez, the duly appointed judicial administrator of the estate of the deceased Florentino Pamintuan presented a proposed partition of the decedent's estate which proposed partition was approved by the court on July 6,1926, the court ordering the delivery to the heirs, the defendants herein, of their respective shares of the inheritance after paying the corresponding inheritance taxes which were duly paid on September 2, 1926, in the amount of P25,047.19 as appears on the official receipt No. 4421361. VIII. That the defendants herein inherited from the deceased Florentino Pamintuan in the following proportions: Tomasa Pamintuan inherited 0.0571 per cent of the decedent's estate and the other defendants 0.0784 per cent each according to the partition approved by the court in civil case No. 27948. IX. That during the pendency of the intestate proceedings, the administrator filed income-tax returns for the estate of the deceased corresponding to the years 1925 and 1926. X. That the intestate proceedings in civil case No. 27948 were definitely closed on October 27, 1926, by order of the court of the same date. XI. That subsequent to the distribution of the decedent's estate to the defendants herein, that is, on February 16, 1927, the plaintiff discovered the fact that the deceased Florentino Pamintuan has not paid the amount of four hundred and sixty-two pesos (P462) as additional income tax and surcharge for the calendar year 1919, on account of the sale made by him on November 14, 1919, of his house and lot located at 922 M. H. del Pilar, Manila, from which sale he realized a net profit or income of P11,000, which was not included in his income-tax return filed for said year 1919. XII. That the defendants cannot disprove that the deceased Florentino Pamintuan made a profit of P11,000 in the sale of the house referred to in paragraph Xl hereof because they have destroyed the voluminous records and evidences regarding the sale in question and other similar transactions which might show repairs on the house, commissions, and other expenses tending to reduce the profit obtained as mentioned above. XIII. That demand for the payment of the income tax referred to herein was made on February 24, 1927, on the defendants but they refused and still refuse to pay the same either in full or in part. Issue: WON the Government is barred from collecting the tax when it failed to file its claim with the committee on claims and appraisals. Held: No, the government is not barred from collecting said tax. Claims for income taxes need not be filed with the committee on claims and appraisals appointed in the course of testate proceedings and may be collected even after the distribution of the decedent's estate among his heirs, who shall be liable therefor in proportion to their share in the inheritance. after the partition of an estate, heirs and distributees are liable individually for the payment of all lawful outstanding claims against the estate in proportion to the amount or value of the property they have respectively received from the estate.

SPOUSES PANLILIO VS CITIBANK, N.A. 539 SCRA 69 November 28, 2007 G.R. No. 156335 Facts: Spouses Raul and Amalia Panlilio's initial intention was to invest money in a Citibank product which had a high interest but since it was not available, they put their PhP1,000,000.00 in a savings account instead. More than a month later, petitioners placed another amount of PhP2,134,635.8 7 in the Citibank’s Long-Term Commercial Paper (LTCP), a debt instrument that paid a high interest, issued by the corporation Camella and Palmera Homes (C&PHomes). Months after signing with the debt instrument and after receiving interests, petitioners contested the investment contract and demanded that the respondent bank to return their investment money. This happened when newspaper reports came out that C&P Homes' stock had plunged in value. Issue: 1. What does the word “in trust for” (ITF) signifies in the documents signed? Held: The ITF (“in trust for”) device allows the children to obtain the money without the need of paying estate taxes in case the parents meet a premature death. The court gives credence to respondent’s explanation that the word “TRUST” appearing in the TIA simply means that the amount is to be handled by the bank’s trust department, which handles not only the trust business but also the other fiduciary business and investment management activities of the bank, while the ITF or “ in trust for” appearing in the other documents only signifies that the money was invested by Amalia in trust for her two children, a device that she uses even in her ordinary deposit accounts with other banks. The ITF device allows the children to obtain money without the need of paying estate taxes in case Amalia meets a premature death. However it creates a trustee-beneficiary relationship only between Amalia and her children, and not between Amalia, her children, and CITIBANK.

CIR v Palanca, Jr. GR No. L-16626 October 29, 1966 [18 SCRA 496] REGALA, J.: ---------------------------------------------------------------- FACTS: The late Don Carlos Palanca, Sr., donated to his son Carlos Palanca, Jr. shares of stock in La Tondena, Inc. amounting to 12,500 shares. However, Carlos failed to file a return on the donation within For failure to file a return on the donation within the statutory period, the petitioner was assessed the sums of P97,691.23, P24,442.81 and P47,868.70 as gift tax, 25% surcharge and interest, respectively, which he paid on June 22, 1955.

On March 1, 1956, the petitioner filed with the Bureau of Internal Revenue his income tax return for the calendar year 1955, claiming, among others, a deduction for interest amounting to P9,706.45 and reporting a taxable income of P65,982.12.

Subsequently, on November 10, 1956, the petitioner filed an amended return for the calendar year 1955, claiming therein an additional deduction in the amount of P47,868.70 representing interest paid on the donee's gift tax, thereby reporting a taxable net income of P18,113.42 and a tax due thereon in the sum of P3,167.00. The claim for deduction was based on the provisions of Section 30(b) (1) of the Tax Code, which authorizes the deduction from gross income of interest paid within the taxable year on indebtedness. A claim for the refund of alleged overpaid income taxes for the year 1955 amounting to P17,885.01, which is the difference between the amount of P21,052.01 he paid as income taxes under his original return and of P3,167.00, was filed together with this amended return. In a communication dated June 20, 1957, the respondent (BIR) denied the claim for refund.

Then after BIR considered the transfer of the 12,500 shares of stock of La Tondena Inc. to be a transfer in contemplation of death and assessed the petitioner the sum of P191,591.62 as estate and inheritance taxes on the transfer of the said stock. Carlos paid the amount of P17,002.74 on June 22, 1955 as gift tax, including the interest and surcharge applied to his estate and inheritance tax liability. Then after paid a total of P60,581.80 as interest for delinquency. Respondent again filed for a refund, but said request was denied by the petitioner. CTA however ruled infavor of the respondent, which the petitioner contended that the petitioner’s claim for refund have already prescribed. Hence the issue. ISSUE: Whether or not respondent may claim for a tax refund. Whether or not the transfer of the stock was in contemplation of death. HELD: The court held on the issue of prescription: There were actually two claims for refund filed by the herein respondent, Carlos Palanca, Jr., anent the case at bar. The first one was on November 10, 1956, when he filed a claim for refund on the interest paid by him on the donee's gift tax of P17,885.10, as originally demanded by the Bureau of Internal Revenue. The second one was the one filed by him on August 12, 1958, which was a claim for refund on the interest paid by him on the estate and inheritance tax assessed by the same Bureau in the amount of P20,624.01. Actually, this second assessment by the Bureau was for the same transaction as that for which they assessed respondent Palanca the above donee's gift tax. The Bureau, however, on further consideration, decided that the donation of the stocks in question was made in contemplation of death, and hence, should be assessed as an inheritance. Thus the second assessment. The first claim was denied by the petitioner for the first time on June 20, 1957. Thereafter, the said denial was twice reiterated, on October 14, 1957 and November 7, 1957, upon respondent Palanca's plea for the reconsideration of the ruling of June 20,

1957. The second claim was filed with the Court of Tax Appeals on August 13, 1958, or even before the same had been denied by the petitioner. Respondent Palanca's second claim was denied by the latter on July 24, 1959.

The petitioner contends that under Section 11 of Republic Act 1124,the herein claimant's claim for refund has prescribed since the same was filed outside the thirty-day period provided for therein. According to the petitioner, the said prescriptive period commenced to run on October 14, 1947 when the denial by the Bureau of Internal Revenue of the respondent Palanca's claim for refund, under his letter of November 10, 1956, became final. Considering that the case was filed with the Court of Tax Appeals only on August 13, 1958, then it is urged that the same had prescribed.

The petitioner also invokes prescription, at least with respect to the sum of P17,112.21, under Section 306 of the Tax Code.

Therefore, the petitioner contends, the amounts paid by claimant Palanca under his withheld tax and under Receipt No. 677395 dated May 11, 1956 may no longer be refunded since the claim therefor was filed in court only on August 13, 1958, or beyond two years of their payment.

We find the petitioner's contention on prescription untenable.

In the first place, the 30-day period under Section 11 of Republic Act 1125 did not even commence to run in this incident. It should be recalled that while the herein petitioner originally assessed the respondent-claimant for alleged gift tax liabilities, the said assessment was subsequently abandoned and in its lieu, a new one was prepared and served on the respondent-taxpayer. In this new assessment, the petitioner charged the said respondent with an entirely new liability and for a substantially different amount from the first. While initially the petitioner assessed the respondent for donee's gift tax in the amount of P170,002.74, in the subsequent assessment the latter was asked to pay P191,591.62 for delinquent estate and inheritance tax. Considering that it is the interest paid on this latter- assessed estate and inheritance tax that respondent Palanca is claiming refund for, then the thirty-day period under the abovementioned section of Republic Act 1125 should be computed from the receipt of the final denial by the Bureau of Internal Revenue of the said claim. As has earlier been recited, respondent Palanca's claim in this incident was filed with the Court of Tax Appeals even before it had been denied by the herein petitioner or the Bureau of Internal Revenue. The case was filed with the said court on August 13, 1958 while the petitioner denied the claim subject of the said case only on July 24, 1959.

In the second place, the claim at bar refers to the alleged overpayment by respondent Palanca of his 1955 income tax. Inasmuch as the said account was paid by him by installment, then the computation of the two-year prescriptive period, under Section 306 of the National Internal Revenue Code, should be from the date of the last installment. (Antonio Prieto, et al. vs. Collector of Internal Revenue, G.R. No. L-11976, August 29, 1961) Respondent Palanca paid the last installment on his 1955 income tax account on August 14, 1956. His claim for refund of the alleged overpayment on it was filed with the court on August 13, 1958. It was, therefore, still timely instituted.

WHEREFORE, the decision appealed from is affirmed in full, without pronouncement on costs.