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: Is the contention of Bongbong Marcos correct?
HELD: No. 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.
CIR v. CA and Pajonar
G.R. No. 123206

March 22, 2000

Facts: Private respondent Josefina Pajonar was the guardian of the person of decedent Pedro
Pajonar. The property of the decedent was put by the RTC- Dumaguete, under the guardianship
of the Philippine National Bank via special proceeding, wherein 50, 000 was spent therein for
payment of attorney's fees.
When the decedent died, instead of filing a estate tax return, PNB advised Josefina to extrajudicially settle the estate of his brother. The decedent's estate was extra-judicially settled and
the heirs paid an amount of 60, 753 for the notarization of the deed of extra-judicial settlement of
estate.
The private paid the estate tax, however, they were subsequently assessed of deficiency taxes
because the amount paid in the special proceeding [50, 000] and the notarization fee [60, 753]
cannot be claimed as a deduction to the decedent's estate. Private respondent paid the said
taxes under protest. While the case is under review by the BIR, she filed a claim for refund in the
CTA which was granted.
BLOG_SUMMARY_END
Issue: whether or not the notarial fee paid for the extrajudicial settlement in the amount of

P60,753 and the attorney's fees in the guardianship proceedings in the amount of P50,000 may
be allowed as deductions from the gross estate of decedent in order to arrive at the value of the
net estate.
Held: Yes.
As to the deductibility of the amount spent for notarization of the deed of extra-judicial
settlement of estate- Explained the SC, administration expenses, as an allowable deduction
from the gross estate of the decedent for purposes of arriving at the value of the net estate, have
been construed by the federal and state courts of the United States [which the law on allowable
deductions from gross estate was copied!] to include all expenses "essential to the collection of
the assets, payment of debts or the distribution of the property to the persons entitled to it."
In other words, the expenses must be essential to the proper settlement of the estate.
Expenditures incurred for the individual benefit of the heirs, devisees or legatees are not
deductible. This distinction has been carried over to our jurisdiction. Thus, in Lorenzo v. Posadas
the Court construed the phrase "judicial expenses of the testamentary or intestate proceedings"
as not including the compensation paid to a trustee of the decedent's estate when it appeared
that such trustee was appointed for the purpose of managing the decedent's real estate for the
benefit of the testamentary heir. In another case, the Court disallowed the premiums paid on the
bond filed by the administrator as an expense of administration since the giving of a bond is in the
nature of a qualification for the office, and not necessary in the settlement of the estate. Neither
may attorney's fees incident to litigation incurred by the heirs in asserting their respective rights
be claimed as a deduction from the gross estate.
In this case, it is clear that the extrajudicial settlement was for the purpose of payment of taxes
and the distribution of the estate to the heirs. The execution of the extrajudicial settlement
necessitated the notarization of the same. It follows then that the notarial fee of P60,753.00 was
incurred primarily to settle the estate of the deceased Pedro Pajonar. Said amount should then be
considered an administration expenses actually and necessarily incurred in the collection of the
assets of the estate, payment of debts and distribution of the remainder among those entitled
thereto. Thus, the notarial fee of P60,753 incurred for the Extrajudicial Settlement should be
allowed as a deduction from the gross estate.
Deductible expenses of administration of the estate may include executor's or administrator's
fees, attorney's fees, court fees and charges, appraiser's fees, clerk hire, costs of preserving and
distributing the estate and storing or maintaining it, brokerage fees or commissions for selling or
disposing of the estate, and the like. Deductible attorney's fees are those incurred by the executor
or administrator in the settlement of the estate or in defending or prosecuting claims against or
due the estate.
As to the deductibility of attorney's fees in the Special proceedings- As a rule attorney's fees in
order to be deductible from the gross estate must be essential to the collection of assets,
payment of debts or the distribution of the property to the persons entitled to it. The services for
which the fees are charged must relate to the proper settlement of the estate. [34 Am. Jur. 2d
767.] In this case, the guardianship proceeding was necessary for the distribution of the property
of the late Pedro Pajonar to his rightful heirs. It is noteworthy to point that PNB was appointed the
guardian over the assets of the deceased. Necessarily the assets of the deceased formed part of
his gross estate. Accordingly, all expenses incurred in relation to the estate of the deceased will
be deductible for estate tax purposes provided these are necessary and ordinary expenses for
administration of the settlement of the estate. Hence the attorney's fees of 50, 000 is deductible
from the gross estate of the decedent.
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 CTAs 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 Estates 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 Courts 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.
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V. CRUZ v.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS. G.R. No. 120721.
February 23, 2005
FACTS:
During the 1987 national elections, petitioners, who are partners in the ACCRA law firm,
contributed P882,661.31 each to the campaign funds of Senator Edgardo Angara, then running
for the Senate. The BIR then assessed each of the petitioners P263,032.66 for their contributions.
Petitioners questioned the assessment claiming that political or electoral contributions are not
considered gifts under NIRC therefore, not liable for donors tax. The claim for exemption was
denied by the Commissioner.
The BIR denied their motion. They then filed a petition with the CTA, which was granted.
On appeal, the CA again held in favor of the BIR.
ISSUE: Whether the contributions are liable for donor's tax.

RULING:
Yes. The NIRC does not define transfer of property by gift. However, the Civil Code, by reference,
considers such as donations. The present case falls squarely within the definition of a donation.
There was intent to do an act of liberality or animus donandi was present since each of the
petitioners gave their contributions without any consideration.
Taken together with the Civil Code definition of donation, Section 91 of the NIRC is clear and
unambiguous, thereby leaving no room for construction.
Petitioners contribution of money without any material consideration evinces animus donandi.
The fact that their purpose for donating was to aid in the election of the donee does not negate
the presence of donative intent.
Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the
BIR never attempted to subject political contributions to donors tax.
This Court holds that the BIR is not precluded from making a new interpretation of the law,
especially when the old interpretation was flawed. It is a well-entrenched rule that
"erroneous application and enforcement of the law by public officers do not block subsequent
correct application of the statute" (PLDT v. Collector of Internal Revenue, 90 Phil. 676), "and that
the Government is never estopped by mistake or error on the part of its agents" (Pineda v. Court
of First Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. v. Pineda, 98
Phil. 711, 724).
PhilAm LIFE vs. Secretary of Finance, G.R. No. 210987, Case Digest
Philam Life sold its shares in Philam Care Health Systems to STI Investments Inc., the highest
bidder. After the sale was completed, Philam life applied for a tax clearance and was informed by
BIR that there is a need to secure a BIR Ruling due to a potential donors tax liability on the sold
shares.
ISSUE on DONORS TAX:
W/N the sales of shares sold for less than an adequate consideration be subject to donors tax?
PETITIONERS CONTENTION:
The transaction cannot attract donors tax liability since there was no donative intent and, ergo,
no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the
shares were sold at their actual fair market value and at arms length; that as long as the
transaction conducted is at arms lengthsuch that a bonafide business arrangement of the
dealings is done in the ordinary course of businessa sale for less than an adequate
consideration is not subject to donors tax; and that donors tax does not apply to sale of shares
sold in an open bidding process.
CIR DENYING THE REQUEST:
Through BIR Ruling No. 015-12. As determined by the Commissioner, the selling price of the
shares thus sold was lower than their book value based on the financial statements of Philam
Care as of the end of 2008. The Commissioner held donors tax became imposable on the price
difference pursuant to Sec. 100 of the National Internal Revenue Code (NIRC):
SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where property, other
than real property referred to in Section 24(D), is transferred for less than an adequate and full
consideration in money or moneys worth, then the amount by which the fair market value of the
property exceeded the value of the consideration shall, for the purpose of the tax imposed by this

Chapter, be deemed a gift, and shall be included in computing the amount of gifts made during
the calendar year.
RULING:
The price difference is subject to donors tax.
Petitioners substantive arguments are unavailing. The absence of donative intent, if that be the
case, does not exempt the sales of stock transaction from donors tax since Sec. 100 of the NIRC
categorically states that the amount by which the fair market value of the property exceeded the
value of the consideration shall be deemed a gift. Thus, even if there is no actual donation, the
difference in price is considered a donation by fiction of law.
Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC but merely sets the
parameters for determining the fair market value of a sale of stocks. Such issuance was made
pursuant to the Commissioners power to interpret tax laws and to promulgate rules and
regulations for their implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued after the sale, was
being applied retroactively in contravention to Sec. 246 of the NIRC.26 Instead, it merely called
for the strict application of Sec. 100, which was already in force the moment the NIRC was
enacted.
ISSUE on TAX REMEDIES:
The issue that now arises is thiswhere does one seek immediate recourse from the adverse
ruling of the Secretary of Finance in its exercise of its power of review under Sec. 4?
Petitioner essentially questions the CIRs ruling that Petitioners sale of shares is a taxable
donation under Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and
RMC 25-11 is merely questioned incidentally since it was used by the CIR as bases for its
unfavourable opinion. Clearly, the Petition involves an issue on the taxability of the transaction
rather than a direct attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and
RMC 25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA 9282.
As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are
now at a quandary on what mode of appeal should be taken, to which court or agency it should
be filed, and which case law should be followed.
Petitioners above submission is specious (erroneous).
CTA, through its power of certiorari, to rule on the validity of a particular administrative rule or
regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the
propriety of an assessment or tax treatment of a certain transaction, but also on the validity of the
revenue regulation or revenue memorandum circular on which the said assessment is based.
Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only
contested the applicability of Sec. 100 of the NIRC over the sales transaction but likewise
questioned the validity of Sec. 7(c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of its
jurisdiction over the controversy, contrary to petitioners arguments.

Commissioner of Internal Revenue v. Seagate Technology

9/1/2014
0 Comments
Statutory Construction. Quando aliquid prohibetur ex directo prohibetur et per obliquum.
Commissioner of Internal Revenue v. Seagate Technology
G.R. No. 153866. February 11, 2005
FACTS:
Respondent is a resident foreign corporation duly registered with the Securities and Exchange
Commission to do business in the Philippines and is registered with the Philippine Export Zone
Authority (PEZA). The respondent is Value Added Tax-registered entity and filed for the VAT
returns. An administrative claim for refund of VAT input taxes in the amount of P28,369,226.38
with supporting documents (inclusive of the P12,267,981.04 VAT input taxes subject of this
Petition for Review), was filed on 4 October 1999 and no final action has been received by the
respondent from the petitioner on the claim for VAT refund. Hence, petitioner is sued in his official
capacity. The Tax Court rendered a decision granting the claim for refund and CTA affirmed the
decision. Hence, the present petition for certiorari.
ISSUE:
Whether or not respondent is entitled to the refund or issuance of Tax Credit Certificate in the
amount of P12,122,922.66 representing alleged unutilized input VAT paid on capital goods
purchased for the period April 1, 1998 to June 30, 1999
HELD:
The Petition is unmeritorious. As a PEZA-registered enterprise within a special economic
zone, respondent is entitled to the fiscal incentives and benefit provided for in either PD 66 or EO
226. It shall, moreover, enjoy all privileges, benefits, advantages or exemptions under both
Republic Act Nos. (RA) 7227 and 7844. Respondent as an entity is exempt from internal revenue
laws and regulations. This exemption covers both direct and indirect taxes, stemming from the
very nature of the VAT as a tax on consumption, for which the direct liability is imposed on one
person but the indirect burden is passed on to another. Respondent, as an exempt entity, can
neither be directly charged for the VAT on its sales nor indirectly made to bear, as added cost to
such sales, the equivalent VAT on its purchases. The exemption is both express and pervasive,
among other reasons, since RA 7916 states that no taxes, local and national, shall be imposed
on business establishments operating within the ecozone. Even though the VAT is not imposed
on the entity but on the transaction, it may still be passed on and, therefore, indirectly imposed on
the same entity -- a patent circumvention of the law. That no VAT shall be imposed directly upon
business establishments operating within the ecozone under RA 7916 also means that no VAT
may be passed on and imposed indirectly. Quando aliquid prohibetur ex directo prohibetur et per
obliquum. When anything is prohibited directly, it is also prohibited indirectly. Special laws
expressly grant preferential tax treatment to business establishments registered and operating
within an ecozone, which by law is considered as a separate customs territory. As such,
respondent is exempt from all internal revenue taxes, including the VAT, and regulations
pertaining thereto. Thus, the petition is denied and the decision of lower courts affirmed.