COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.

MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO

PINEDA, respondent.
G.R. No. L-22734 September 15, 1967; BENGZON, J.P., J

Facts:

Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15
children, the eldest of whom is Manuel B. Pineda, a lawyer. The estate was
divided among the heirs and Manuel B. Pineda's share amounted to about
P2,500.00. After the estate proceedings were closed, the BIR investigated
the income tax liability of the estate for the years 1945, 1946, 1947 and 1948
and it found that the corresponding income tax returns were not filed. The
representative of the Collector of Internal Revenue filed said returns for the
estate and issued an assessment. Manuel B. Pineda, who received the
assessment, contested the same. He appealed to the Court of Tax Appeals
alleging that he was appealing "only that proportionate part or portion
pertaining to him as one of the heirs." The Court of Tax Appeals rendered
judgment holding Manuel B. Pineda liable for the payment corresponding
to his share of the taxes. The Commissioner of Internal Revenue has
appealed to the SC and has proposed to hold Manuel B. Pineda liable for
the payment of all the taxes found by the Tax Court to be due from the
estate instead of only for the amount of taxes corresponding to his share in
the estate. Manuel B. Pineda opposes the proposition on the ground that as
an heir he is liable for unpaid income tax due the estate only up to the
extent of and in proportion to any share he received.

Issue: Can BIR collect the full amount of estate taxes from an heir's
inheritance

Ruling:

Yes. The Government can require Atty. Pineda to pay the full amount of the
taxes assessed. Pineda is liable for the assessment as an heir and as a
holder-transferee of property belonging to the estate/taxpayer. As an heir
he is individually answerable for the part of the tax proportionate to the
share he received from the inheritance. His liability, however, cannot
exceed the amount of his share. As a holder of property belonging to the
estate, Pineda is liable for he tax up to the amount of the property in his
possession. The reason is that the Government has a lien on the P2,500.00
received by him from the estate as his share in the inheritance, for unpaid
income taxes a for which said estate is liable.

All told, the Government has two ways of collecting the tax in
question. One, by going after all the heirs and collecting from each one of
them the amount of the tax proportionate to the inheritance received.
Another remedy, is by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the tax due, the estate.
This second remedy is the very avenue the Government took in this case to
collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the
most expeditious way to collect the tax as may be envisioned in the
particular provision of the Tax Code above quoted, because taxes are the
lifeblood of government and their prompt and certain availability is an
imperious need. And as afore-stated in this case the suit seeks to achieve
only one objective: payment of the tax. The adjustment of the respective
shares due to the heirs from the inheritance, as lessened by the tax, is left to
await the suit for contribution by the heir from whom the Government
recovered said tax.


Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-22734 September 15, 1967
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO
PINEDA, respondent.
Office of the Solicitor General for petitioner.
Manuel B. Pineda for and in his own behalf as respondent.

BENGZON, J.P., J.:
On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima
Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda, a lawyer.
Estate proceedings were had in the Court of First Instance of Manila (Case
No. 71129) wherein the surviving widow was appointed administratrix. The
estate was divided among and awarded to the heirs and the proceedings
terminated on June 8, 1948. Manuel B. Pineda's share amounted to about
P2,500.00.
After the estate proceedings were closed, the Bureau of Internal Revenue
investigated the income tax liability of the estate for the years 1945, 1946,
1947 and 1948 and it found that the corresponding income tax returns were
not filed. Thereupon, the representative of the Collector of Internal
Revenue filed said returns for the estate on the basis of information and
data obtained from the aforesaid estate proceedings and issued an
assessment for the following:
1. Deficiency income tax
1945 P135.83

1946 436.95

1947 1,206.91 P1,779.69
Add: 5%
surcharge 88.98

1% monthly
interest
from
November
30, 1953 to
April 15,
1957 720.77

Compromise
for late
filing 80.00

Compromise
for late
payment 40.00
Total amount due

P2,707.44
===========
2.
Additional
residence tax for
1945
P14.50
===========
3. Real Estate
dealer's tax for
the fourth quarter
of 1946 and the
whole year of
1947
P207.50
===========
Manuel B. Pineda, who received the assessment, contested the same.
Subsequently, he appealed to the Court of Tax Appeals alleging that he was
appealing "only that proportionate part or portion pertaining to him as one
of the heirs."
After hearing the parties, the Court of Tax Appeals rendered judgment
reversing the decision of the Commissioner on the ground that his right to
assess and collect the tax has prescribed. The Commissioner appealed and
this Court affirmed the findings of the Tax Court in respect to the
assessment for income tax for the year 1947 but held that the right to assess
and collect the taxes for 1945 and 1946 has not prescribed. For 1945 and
1946 the returns were filed on August 24, 1953; assessments for both
taxable years were made within five years therefrom or on October 19,
1953; and the action to collect the tax was filed within five years from the
latter date, on August 7, 1957. For taxable year 1947, however, the return
was filed on March 1, 1948; the assessment was made on October 19, 1953,
more than five years from the date the return was filed; hence, the right to
assess income tax for 1947 had prescribed. Accordingly, We remanded the
case to the Tax Court for further appropriate proceedings.
1

In the Tax Court, the parties submitted the case for decision without
additional evidence.
On November 29, 1963 the Court of Tax Appeals rendered judgment
holding Manuel B. Pineda liable for the payment corresponding to his share
of the following taxes:
Deficiency income tax
1945
P135.8
3
1946 436.95

Real estate
dealer's fixed
tax 4th
quarter of
1946 and
whole year of
1947 P187.50

The Commissioner of Internal Revenue has appealed to Us and has
proposed to hold Manuel B. Pineda liable for the payment of all the taxes
found by the Tax Court to be due from the estate in the total amount of
P760.28 instead of only for the amount of taxes corresponding to his share
in the estate.1awphl.nt
Manuel B. Pineda opposes the proposition on the ground that as an heir he
is liable for unpaid income tax due the estate only up to the extent of and in
proportion to any share he received. He relies on Government of the
Philippine Islands v. Pamintuan
2
where We held that "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."
We hold that the Government can require Manuel B. Pineda to pay the full
amount of the taxes assessed.
Pineda is liable for the assessment as an heir and as a holder-transferee of
property belonging to the estate/taxpayer. As an heir he is individually
answerable for the part of the tax proportionate to the share he received
from the inheritance.
3
His liability, however, cannot exceed the amount of
his share.
4

As a holder of property belonging to the estate, Pineda is liable for he tax up
to the amount of the property in his possession. The reason is that the
Government has a lien on the P2,500.00 received by him from the estate as
his share in the inheritance, for unpaid income taxes
4a
for which said estate
is liable, pursuant to the last paragraph of Section 315 of the Tax Code,
which we quote hereunder:
If any person, corporation, partnership, joint-account (cuenta en
participacion), association, or insurance company liable to pay the
income tax, neglects or refuses to pay the same after demand, the
amount shall be a lien in favor of the Government of the Philippines
from the time when the assessment was made by the Commissioner
of Internal Revenue until paid with interest, penalties, and costs that
may accrue in addition thereto upon all property and rights to
property belonging to the taxpayer: . . .
By virtue of such lien, the Government has the right to subject the property
in Pineda's possession, i.e., the P2,500.00, to satisfy the income tax
assessment in the sum of P760.28. After such payment, Pineda will have a
right of contribution from his co-heirs,
5
to achieve an adjustment of the
proper share of each heir in the distributable estate.
All told, the Government has two ways of collecting the tax in question.
One, by going after all the heirs and collecting from each one of them the
amount of the tax proportionate to the inheritance received. This remedy
was adopted in Government of the Philippine Islands v. Pamintuan, supra.
In said case, the Government filed an action against all the heirs for the
collection of the tax. This action rests on the concept that hereditary
property consists only of that part which remains after the settlement of all
lawful claims against the estate, for the settlement of which the entire estate
is first liable.
6
The reason why in case suit is filed against all the heirs the
tax due from the estate is levied proportionately against them is to achieve
thereby two results: first, payment of the tax; and second, adjustment of the
shares of each heir in the distributed estate as lessened by the tax.
Another remedy, pursuant to the lien created by Section 315 of the Tax
Code upon all property and rights to property belonging to the taxpayer for
unpaid income tax, is by subjecting said property of the estate which is in
the hands of an heir or transferee to the payment of the tax due, the estate.
This second remedy is the very avenue the Government took in this case to
collect the tax. The Bureau of Internal Revenue should be given, in
instances like the case at bar, the necessary discretion to avail itself of the
most expeditious way to collect the tax as may be envisioned in the
particular provision of the Tax Code above quoted, because taxes are the
lifeblood of government and their prompt and certain availability is an
imperious need.
7
And as afore-stated in this case the suit seeks to achieve
only one objective: payment of the tax. The adjustment of the respective
shares due to the heirs from the inheritance, as lessened by the tax, is left to
await the suit for contribution by the heir from whom the Government
recovered said tax.
WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is
hereby ordered to pay to the Commissioner of Internal Revenue the sum of
P760.28 as deficiency income tax for 1945 and 1946, and real estate dealer's
fixed tax for the fourth quarter of 1946 and for the whole year 1947, without
prejudice to his right of contribution for his co-heirs. No costs. So ordered.