THIRD DIVISION
|
RAFAEL
ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate
of the deceased JOSE P. FERNANDEZ, Petitioner, - versus - COURT OF TAX APPEALS and Respondents. |
G.R. No.
140944
Present: YNARES-SANTIAGO, J.,
Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: April 30,
2008 |
x------------------------------------------------------------------------------------x
DECISION
NACHURA, J.:
Before this
Court is a Petition for Review on Certiorari[1]
under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court
of Appeals (CA) Decision[2]
dated
The Facts
On
Petitioner
alleged that several requests for extension of the period to file the required
estate tax return were granted by the BIR since the assets of the estate, as
well as the claims against it, had yet to be collated, determined and
identified. Thus, in a letter[8] dated
COMPUTATION OF TAX
Conjugal Real Property (Sch. 1) P10,855,020.00
Conjugal Personal Property (Sch.2) 3,460,591.34
Taxable Transfer (Sch. 3)
Gross Conjugal Estate 14,315,611.34
Less: Deductions (Sch. 4) 187,822,576.06
Net Conjugal Estate NIL
Less: Share of Surviving Spouse NIL .
Net Share in Conjugal Estate NIL
x x x
Net Taxable Estate NIL .
Estate Tax Due NIL .[11]
On
Petitioner requested the probate
court's authority to sell several properties forming part of the Estate, for
the purpose of paying its creditors, namely: Equitable Banking Corporation (P19,756,428.31),
Banque de L'Indochine et. de Suez (US$4,828,905.90 as of January 31, 1988),
Manila Banking Corporation (P84,199,160.46 as of February 28, 1989) and
State Investment House, Inc. (P6,280,006.21). Petitioner manifested that
Manila Bank, a major creditor of the
Estate was not included, as it did not file a claim with the probate
court since it had security over several real estate properties forming part of
the Estate.[16]
However, on P66,973,985.40 as deficiency estate tax,
itemized as follows:
Deficiency Estate Tax- 1987
Estate tax P31,868,414.48
25% surcharge- late filing 7,967,103.62
late payment
7,967,103.62
Interest 19,121,048.68
Compromise-non filing 25,000.00
non payment
25,000.00
no notice of death 15.00
no CPA Certificate 300.00
Total amount due & collectible P66,973,985.40[18]
In
his letter[19] dated P66,973,985.40
as deficiency estate tax. On
As
found by the CTA, the respective parties presented the following pieces of
evidence, to wit:
In
the hearings conducted, petitioner did not present testimonial evidence but
merely documentary evidence consisting of the following:
Nature
of Document (sic) Exhibits
1. Letter dated
from
Arsenio P. Dizon addressed
to
the Commissioner of Internal
Revenue
informing the latter of
the
special proceedings for the
settlement
of the estate (p. 126,
BIR
records); "A"
2. Petition for the probate of the
will
and issuance of letter of
administration
filed with the
Regional
Trial Court (
No.
87-42980 (pp. 107-108, BIR
records); "B"
& "B-1”
3. Pleading entitled "Compliance"
filed
with the probate Court
submitting
the final inventory
of
all the properties of the
deceased
(p. 106, BIR records); "C"
4. Attachment to Exh. "C" which
is
the detailed and complete
listing
of the properties of
the
deceased (pp. 89-105, BIR rec.); "C-1"
to "C-17"
5. Claims against the estate filed
by
Equitable Banking Corp. with
the
probate Court in the amount
of
P19,756,428.31 as of March 31,
1988,
together with the Annexes
to
the claim (pp. 64-88, BIR records); "D"
to "D-24"
6. Claim filed by Banque de L'
Indochine
et de Suez with the
probate
Court in the amount of
US
$4,828,905.90 as of January 31,
1988
(pp. 262-265, BIR records); "E"
to "E-3"
7. Claim of the
Corporation
(MBC) which as of
November
7, 1987 amounts to
P65,158,023.54,
but recomputed
as
of February 28, 1989 at a
total
amount of P84,199,160.46;
together
with the demand letter
from
MBC's lawyer (pp. 194-197,
BIR
records); "F"
to "F-3"
8. Demand letter of Manila Banking
Corporation
prepared by Asedillo,
Ramos
and Associates Law Offices
addressed
to Fernandez Hermanos,
Inc.,
represented by Jose P.
Fernandez,
as mortgagors, in the
total
amount of P240,479,693.17
as
of February 28, 1989
(pp.
186-187, BIR records); "G"
& "G-1"
9. Claim of State Investment
House,
Inc. filed with the
docketed
as Civil Case No.
86-38599
entitled "State
Investment
House, Inc.,
Plaintiff,
versus Maritime
Company
Overseas, Inc. and/or
Jose
P. Fernandez, Defendants,"
(pp.
200-215, BIR records); "H"
to "H-16"
10. Letter dated March 14, 1990
of
Arsenio P. Dizon addressed
to
Atty. Jesus M. Gonzales,
(p.
184, BIR records); "I"
11. Letter dated April 17, 1990
from
J.M. Gonzales addressed
to
the Regional Director of
BIR
in
(p.
183, BIR records); "J"
12. Estate Tax Return filed by
the
estate of the late Jose P.
Fernandez
through its authorized
representative,
Atty. Jesus M.
Gonzales, for
Arsenio P. Dizon,
with attachments (pp. 177-182,
BIR
records); "K"
to "K-5"
13. Certified true copy of the
Letter
of Administration
issued
by
51,
in Sp. Proc. No. 87-42980
appointing
Atty. Rafael S.
Dizon
as Judicial Administrator
of
the estate of Jose P.
Fernandez;
(p. 102, CTA records)
and "L"
14. Certification of Payment of
estate
taxes Nos. 2052 and
2053,
both dated April 27, 1990,
issued
by the Office of the
Regional
Director, Revenue
Region
No. 4-C,
City,
with attachments
(pp.
103-104, CTA records.). "M"
to "M-5"
Respondent's
[BIR] counsel presented on June 26, 1995 one witness in the person of Alberto
Enriquez, who was one of the revenue examiners who conducted the investigation
on the estate tax case of the late Jose P. Fernandez. In the course of the
direct examination of the witness, he identified the following:
Documents/
Signatures BIR
Record
1. Estate Tax Return prepared by
the
BIR; p.
138
2. Signatures of Ma. Anabella
Abuloc and Alberto Enriquez,
Jr. appearing at the lower
Portion
of Exh. "1"; -do-
3. Memorandum for the Commissioner,
dated
July 19, 1991, prepared by
revenue
examiners, Ma. Anabella A.
Abuloc, Alberto S. Enriquez and
Raymund S. Gallardo; Reviewed by
Maximino
V. Tagle pp.
143-144
4. Signature of Alberto S.
Enriquez
appearing at the
lower
portion on p. 2 of Exh. "2"; -do-
5. Signature of Ma. Anabella A.
Abuloc
appearing at the
lower
portion on p. 2 of Exh. "2"; -do-
6. Signature of Raymund S.
Gallardo
appearing at the
Lower
portion on p. 2 of Exh. "2"; -do-
7. Signature of Maximino V.
Tagle
also appearing on
p.
2 of Exh. "2"; -do-
8. Summary of revenue
Enforcement
Officers Audit
Report,
dated July 19, 1991; p.
139
9. Signature of Alberto
Enriquez
at the lower
portion
of Exh. "3"; -do-
10. Signature of Ma. Anabella A.
Abuloc
at the lower
portion
of Exh. "3"; -do-
11. Signature of Raymond S.
Gallardo
at the lower
portion
of Exh. "3"; -do-
12. Signature of Maximino
V.
Tagle at the lower
portion
of Exh. "3"; -do-
13. Demand letter (FAS-E-87-91-00),
signed
by the Asst. Commissioner
for
Collection for the Commissioner
of
Internal Revenue, demanding
payment
of the amount of
P66,973,985.40;
and p.
169
14. Assessment Notice FAS-E-87-91-00 pp. 169-170[22]
The CTA's Ruling
On June 17, 1997, the CTA denied the
said petition for review. Citing this Court's ruling in Vda. de Oñate v.
Court of Appeals,[23]
the CTA opined that the aforementioned pieces of evidence introduced by the BIR
were admissible in evidence. The CTA ratiocinated:
Although the above-mentioned
documents were not formally offered as evidence for respondent, considering
that respondent has been declared to have waived the presentation thereof
during the hearing on March 20, 1996, still they could be considered as
evidence for respondent since they were properly identified during the
presentation of respondent's witness, whose testimony was duly recorded as part
of the records of this case. Besides, the documents marked as respondent's
exhibits formed part of the BIR records of the case.[24]
Nevertheless,
the CTA did not fully adopt the assessment made by the BIR and it came up with
its own computation of the deficiency estate tax, to wit:
Conjugal Real Property P 5,062,016.00
Conjugal Personal Prop.
33,021,999.93
Gross Conjugal Estate 38,084,015.93
Less: Deductions
26,250,000.00
Net
Conjugal Estate P 11,834,015.93
Less: Share of Surviving Spouse 5,917,007.96
Net
Share in Conjugal Estate P 5,917,007.96
Add: Capital/Paraphernal
Properties
– P44,652,813.66
Less: Capital/Paraphernal
Deductions 44,652,813.66
Net
Taxable Estate P 50,569,821.62
============
Estate
Tax Due P 29,935,342.97
Add: 25% Surcharge for Late Filing 7,483,835.74
Add: Penalties for-No notice of death 15.00
No CPA
certificate 300.00
Total
deficiency estate tax P 37,419,493.71
=============
exclusive of 20% interest from due date of its payment until full payment thereof
[Sec. 283 (b), Tax Code of 1987].[25]
Thus,
the CTA disposed of the case in this wise:
WHEREFORE,
viewed from all the foregoing, the Court finds the petition unmeritorious and
denies the same. Petitioner and/or the heirs of Jose P. Fernandez are hereby
ordered to pay to respondent the amount of P37,419,493.71 plus
20% interest from the due date of its payment until full payment thereof as
estate tax liability of the estate of Jose P. Fernandez who died on November 7,
1987.
SO
ORDERED.[26]
Aggrieved, petitioner, on March 2,
1998, went to the CA via a petition for review.[27]
The CA's
Ruling
On April 30, 1999, the CA affirmed the
CTA's ruling. Adopting in full the CTA's findings, the CA ruled that the
petitioner's act of filing an estate tax return with the BIR and the issuance
of BIR Certification
Nos. 2052 and 2053 did not deprive the BIR Commissioner of her authority to
re-examine or re-assess the said return filed on behalf of the Estate.[28]
On May 31, 1999, petitioner filed a
Motion for Reconsideration[29] which the CA denied in its Resolution[30]
dated November 3, 1999.
Hence,
the instant Petition raising the following issues:
1.
Whether
or not the admission of evidence which were not formally offered by the
respondent BIR by the Court of Tax Appeals which was subsequently upheld by the
Court of Appeals is contrary to the Rules of Court and rulings of this
Honorable Court;
2. Whether
or not the Court of Tax Appeals and the Court of Appeals erred in
recognizing/considering the estate tax return prepared and filed by respondent
BIR knowing that the probate court appointed administrator of the estate of
Jose P. Fernandez had previously filed one as in fact, BIR Certification
Clearance Nos. 2052 and 2053 had been issued in the estate's favor;
3. Whether or not the Court of Tax Appeals
and the Court of Appeals erred in disallowing the valid and enforceable claims
of creditors against the estate, as lawful deductions despite clear and
convincing evidence thereof; and
4. Whether or not the Court of Tax Appeals
and the Court of Appeals erred in validating erroneous double imputation of
values on the very same estate properties in the estate tax return it prepared
and filed which effectively bloated the estate's assets.[31]
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; that the lack of a formal offer of evidence is
fatal to BIR's cause; that the doctrine laid down in Vda. de Oñate has
already been abandoned in a long line of cases in which the Court held that
evidence not formally offered is without any weight or value; that Section 34
of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is
mandatory in character; that, while BIR's witness Alberto Enriquez (Alberto) in
his testimony before the CTA identified the pieces of evidence aforementioned
such that the same were marked, BIR's failure to formally offer said pieces of
evidence and depriving petitioner the opportunity to cross-examine Alberto,
render the same inadmissible in evidence; that assuming arguendo that
the ruling in Vda. de Oñate is still applicable, BIR failed to comply
with the doctrine's requisites because the documents herein remained simply
part of the BIR records and were not duly incorporated in the court records; that
the BIR failed to consider that although the actual payments made to the Estate
creditors were lower than their respective claims, such were compromise
agreements reached long after the Estate's liability had been settled by the
filing of its estate tax return and the issuance of BIR Certification Nos. 2052 and 2053; and
that the reckoning date of the claims against the Estate and the settlement of
the estate tax due should be at the time the estate tax return was filed by the
judicial administrator and the issuance of said BIR Certifications and not at
the time the aforementioned Compromise Agreements were entered into with the
Estate's creditors.[32]
On the other hand, respondent counters
that the documents, being part of the records of the case and duly identified
in a duly recorded testimony are considered evidence even if the same were not
formally offered; that the filing of the estate tax return by the Estate and
the issuance of BIR Certification
Nos. 2052 and 2053 did not deprive the BIR of its authority to examine the
return and assess the estate tax; and that the factual findings of the CTA as
affirmed by the CA may no longer be reviewed by this Court via a petition for
review.[33]
The Issues
There are two ultimate issues which
require resolution in this case:
First. Whether or not the CTA
and the CA gravely erred in allowing the admission of the pieces of evidence
which were not formally offered by the BIR; and
Second. Whether or not the CA
erred in affirming the CTA in the latter's determination of the deficiency
estate tax imposed against the Estate.
The Court’s
Ruling
The Petition is impressed with merit.
Under Section 8 of RA 1125, the CTA is
categorically described as a court of record. As cases filed before it are
litigated de novo, party-litigants shall prove every minute aspect of
their cases. Indubitably, no evidentiary value can be given the pieces of
evidence submitted by the BIR, as the rules on documentary evidence require
that these documents must be formally offered before the CTA.[34]
Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence which
reads:
SEC. 34. Offer of evidence. — The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified.
The CTA and the CA rely solely on the
case of Vda. de Oñate, which reiterated this Court's previous rulings in
People v. Napat-a[35]
and People v. Mate[36]
on the admission and consideration of exhibits which were not formally offered
during the trial. Although in a long
line of cases many of which were decided after Vda. de Oñate, we held
that courts cannot consider evidence which has not been formally offered,[37] nevertheless, petitioner cannot
validly assume that the doctrine laid down in Vda. de Oñate has already
been abandoned. Recently, in Ramos v. Dizon,[38]
this Court, applying the said doctrine, ruled that the trial court judge
therein committed no error when he admitted and considered the respondents'
exhibits in the resolution of the case, notwithstanding the fact that the same
were not formally offered. Likewise, in Far East Bank & Trust Company v.
Commissioner of Internal Revenue,[39]
the Court made reference to said doctrine in resolving the issues therein.
Indubitably, the doctrine laid down in Vda. De Oñate still subsists in
this jurisdiction. In Vda. de Oñate, we held that:
From the foregoing provision, it is clear that for evidence to be considered, the same must be formally offered. Corollarily, the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles [186 SCRA 385], we had the occasion to make a distinction between identification of documentary evidence and its formal offer as an exhibit. We said that the first is done in the course of the trial and is accompanied by the marking of the evidence as an exhibit while the second is done only when the party rests its case and not before. A party, therefore, may opt to formally offer his evidence if he believes that it will advance his cause or not to do so at all. In the event he chooses to do the latter, the trial court is not authorized by the Rules to consider the same.
However, in People v. Napat-a [179 SCRA 403] citing People v. Mate [103 SCRA 484], we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz.: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case.[40]
From the foregoing declaration,
however, it is clear that Vda. de Oñate
is merely an exception to the general rule.
Being an exception, it may be applied only when there is strict
compliance with the requisites mentioned therein; otherwise, the general rule
in Section 34 of Rule 132 of the Rules of Court should prevail.
In
this case, we find that these requirements have not been satisfied. The
assailed pieces of evidence were presented and marked during the trial
particularly when Alberto took the witness stand. Alberto identified these
pieces of evidence in his direct testimony.[41] He was also subjected to cross-examination
and re-cross examination by petitioner.[42]
But Alberto’s account and the exchanges between Alberto and petitioner did not
sufficiently describe the contents of the said pieces of evidence presented by
the BIR. In fact, petitioner sought that
the lead examiner, one Ma. Anabella A. Abuloc, be summoned to testify, inasmuch as Alberto was incompetent to answer
questions relative to the working papers.[43] The lead examiner never testified. Moreover,
while Alberto's testimony identifying the BIR's evidence was duly recorded, the
BIR documents themselves were not incorporated in the records of the case.
A
common fact threads through Vda. de Oñate and Ramos that does not exist at all in
the instant case. In the aforementioned
cases, the exhibits were marked at the pre-trial proceedings to warrant the
pronouncement that the same were duly incorporated in the records of the case. Thus,
we held in Ramos:
In this case, we find and so rule that these
requirements have been satisfied. The exhibits in question were presented
and marked during the pre-trial of the case thus, they have been incorporated
into the records. Further, Elpidio himself explained the contents of these
exhibits when he was interrogated by respondents' counsel...
x x x x
But what further defeats
petitioner's cause on this issue is that respondents' exhibits were marked and
admitted during the pre-trial stage as shown by the Pre-Trial Order quoted
earlier.[44]
While the CTA is not governed strictly
by technical rules of evidence,[45]
as rules of procedure are not ends in themselves and are primarily intended as
tools in the administration of justice, the presentation of the BIR's evidence
is not a mere procedural technicality which may be disregarded considering that
it is the only means by which the CTA may ascertain and verify the truth of
BIR's claims against the Estate.[46]
The BIR's failure to formally offer these pieces of evidence, despite CTA's
directives, is fatal to its cause.[47]
Such failure is aggravated by the fact that not even a single reason was
advanced by the BIR to justify such fatal omission. This, we take against the
BIR.
Per the records of this case, the BIR
was directed to present its evidence[48]
in the hearing of February 21, 1996, but BIR's counsel failed to appear.[49]
The CTA denied petitioner's motion to consider BIR's presentation of evidence
as waived, with a warning to BIR that such presentation would be considered
waived if BIR's evidence would not be presented at the next hearing. Again, in
the hearing of March 20, 1996, BIR's counsel failed to appear.[50]
Thus, in its Resolution[51]
dated March 21, 1996, the CTA considered the BIR to have waived presentation of
its evidence. In the same Resolution,
the parties were directed to file their respective memorandum. Petitioner
complied but BIR failed to do so.[52]
In all of these proceedings, BIR was
duly notified. Hence, in this case, we are constrained to apply our ruling in Heirs
of Pedro Pasag v. Parocha:[53]
A formal
offer is necessary because judges are mandated to rest their findings of facts
and their judgment only and strictly upon the evidence offered by the parties
at the trial. Its function is to enable the trial judge to know the purpose or
purposes for which the proponent is presenting the evidence. On the other hand,
this allows opposing parties to examine the evidence and object to its
admissibility. Moreover, it facilitates review as the appellate court will not
be required to review documents not previously scrutinized by the trial court.
Strict
adherence to the said rule is not a trivial matter. The Court in Constantino
v. Court of Appeals ruled that the formal offer of one's evidence is
deemed waived after failing to submit it within a considerable period of time.
It explained that the court cannot admit an offer of evidence made after a
lapse of three (3) months because to do so would "condone an inexcusable
laxity if not non-compliance with a court order which, in effect, would
encourage needless delays and derail the speedy administration of justice."
Applying
the aforementioned principle in this case, we find that the trial court had
reasonable ground to consider that petitioners had waived their right to make a
formal offer of documentary or object evidence. Despite several extensions of
time to make their formal offer, petitioners failed to comply with their
commitment and allowed almost five months to lapse before finally submitting
it. Petitioners' failure to comply with the rule on admissibility of
evidence is anathema to the efficient, effective, and expeditious dispensation
of justice.
Having
disposed of the foregoing procedural issue, we proceed to discuss
the merits of the case.
Ordinarily,
the CTA's findings, as affirmed by the CA, are entitled to the highest respect
and will not be disturbed on appeal unless it is shown that the lower courts
committed gross error in the appreciation of facts.[54]
In this case, however, we find the
decision of the CA affirming that of the CTA tainted with palpable error.
It is admitted that the claims of the
Estate's aforementioned creditors have been condoned. As a mode of
extinguishing an obligation,[55]
condonation or remission of debt[56]
is defined as:
an act of liberality, by virtue
of which, without receiving any equivalent, the creditor renounces the
enforcement of the obligation, which is extinguished in its entirety or in that
part or aspect of the same to which the remission refers. It is an essential
characteristic of remission that it be gratuitous, that there is no equivalent
received for the benefit given; once such equivalent exists, the nature of the
act changes. It may become dation in payment when the creditor receives a thing
different from that stipulated; or novation, when the object or principal
conditions of the obligation should be changed; or compromise, when the matter
renounced is in litigation or dispute and in exchange of some concession which
the creditor receives.[57]
Verily, the second issue in this case
involves the construction of Section 79[58]
of the National Internal Revenue Code[59]
(Tax Code) which provides for the allowable deductions from the gross estate of
the decedent. The specific question is whether the actual claims of the
aforementioned 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.
“Claims against the estate,” as
allowable deductions from the gross estate under Section 79 of the Tax Code, are
basically a reproduction of the deductions allowed under Section 89 (a) (1) (C)
and (E) of Commonwealth Act No. 466 (CA 466), otherwise known as the National
Internal Revenue Code of 1939, and which was the first codification of
Philippine tax laws. Philippine tax laws were, in turn, based on
the federal tax laws of the
It is noteworthy that even in the
United States, there is some dispute as to whether the deductible amount for a
claim against the estate is fixed as of the decedent's death which is the
general rule, or the same should be adjusted to reflect post-death
developments, such as where a settlement between the parties results in the
reduction of the amount actually paid.[61]
On one hand, the
On the
other hand, the Internal Revenue Service (Service) opines that post-death
settlement should be taken into consideration and the claim should be allowed
as a deduction only to the extent of the amount actually paid.[64]
Recognizing the dispute, the Service released Proposed Regulations in 2007
mandating that the deduction would be limited to the actual amount paid.[65]
In announcing its agreement with Propstra,[66]
the
We are persuaded that the Ninth
Circuit's decision...in Propstra correctly apply the Ithaca Trust
date-of-death valuation principle to enforceable claims against the estate. As
we interpret Ithaca Trust, when the Supreme Court announced the
date-of-death valuation principle, it was making a judgment about the nature of
the federal estate tax specifically, that it 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 that time. This analysis supports broad application of the
date-of-death valuation rule.[67]
We express our agreement with the
date-of-death valuation rule, made pursuant to the ruling of the U.S. Supreme
Court in Ithaca Trust Co. v. United States.[68]
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.[69]
Any doubt on whether a person, article or activity is taxable is generally
resolved against taxation.[70]
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.[71]
Therefore, the claims existing at the time of death are significant to, and
should be made the basis of, the determination of allowable deductions.
WHEREFORE, the instant Petition
is GRANTED. Accordingly, the assailed
Decision dated April 30, 1999 and
the Resolution dated November 3, 1999 of the Court of Appeals in CA-G.R. S.P.
No. 46947 are REVERSED and SET ASIDE. The Bureau of Internal
Revenue's deficiency estate tax assessment against the Estate of Jose P. Fernandez is hereby NULLIFIED.
No costs.
SO ORDERED.
ANTONIO
EDUARDO B. NACHURA
Associate
Justice
WE CONCUR:
CONSUELO YNARES-SANTIAGO
Associate
Justice
Chairperson
|
MA. ALICIA AUSTRIA-MARTINEZ Associate Justice |
MINITA V.
CHICO-NAZARIO Associate Justice |
RUBEN T. REYES
Associate
Justice
A T T E S T A T I O N
I attest that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate
Justice
Chairperson,
Third Division
C E R T I F I C A T I O
N
Pursuant to Section 13,
Article VIII of the Constitution and the Division Chairperson's Attestation, I
certify that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO
S. PUNO
Chief Justice
[1] Dated January 20, 2000, rollo, pp. 8-20.
[2] Particularly docketed as CA-G.R. SP No. 46947; penned by Associate Justice Marina L. Buzon, with Presiding Justice Jesus M. Elbinias (now retired) and Associate Justice Eugenio S. Labitoria (now retired), concurring; id. at 22-31.
[3] Particularly docketed as CTA Case No. 5116; penned by Associate Judge Ramon O. De Veyra and concurred in by Presiding Judge Ernesto D. Acosta and Associate Judge Amancio Q. Saga; id. at 33-61.
[4] This case was decided before the CTA was elevated by law to the same level as the CA by virtue of Republic Act (RA) No. 9282 otherwise known as "An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as amended, otherwise known as The Law Creating the Court of Tax Appeals, and for other purposes," which was approved on March 30, 2004. Hence, upon its effectivity, decisions of the CTA are now appealable directly to the Supreme Court.
[5] BIR Records, pp. 1-88.
[6] The said petition is entitled: In the Matter of the Petition to Approve the Will of Jose P. Fernandez, Carlos P. Fernandez, Petitioner, particularly docketed as Special Proceedings No. 87-42980; BIR Record, pp. 107-108.
[7]
[8]
[9]
[10]
[11]
[12] Rollo, p. 68.
[13]
[14] Lists of Personal and Real Properties of Jose; id. at 70-73.
[15] CTA Record, p. 102.
[16] Rollo, p. 10.
[17] BIR Records, p. 169.
[18]
[19]
[20] By then BIR Commissioner Liwayway Vinzons-Chato; id. at 277-278.
[21] CTA Records, pp. 1-7.
[22] Rollo, pp. 37-40 (Emphasis supplied).
[23] G.R.
No. 116149, November 23, 1995, 250 SCRA 283, 287, citing People v. Napat-a,
179 SCRA 403 (1989) and People v. Mate, 103 SCRA 484 (1981).
[24] CTA Records, p. 148.
[25]
[26]
[27] CA rollo, pp. 3-17.
[28] Citing Section 16 of the 1993 National Internal Revenue Code.
[29] Rollo, pp. 22-31.
[30]
[31]
[32]
[33] Respondent BIR's Memorandum dated October 16, 2000; id. at 140-144.
[34] Commissioner
of Internal Revenue v. Manila Mining Corporation, G.R. No. 153204, August 31, 2005, 468 SCRA 571,
588-589.
[35] Supra note 23.
[36] Supra note 23.
[37] Far East Bank & Trust Company v. Commissioner of Internal Revenue, G.R. No. 149589, September 15, 2006, 502 SCRA 87; Ala-Martin v. Sultan, G.R. No. 117512, October 2, 2001, 366 SCRA 316, citing Ong v. Court of Appeals, 301 SCRA 391 (1999), which further cited Candido v. Court of Appeals, 253 SCRA 78, 82-83 (1996); Republic v. Sandiganbayan, 255 SCRA 438, 456 (1996); People v. Peralta, 237 SCRA 218, 226 (1994); Vda. De Alvarez vs. Court of Appeals, 231 SCRA 309, 317-318 (1994); and People v. Cariño, et al., 165 SCRA 664, 671 (1988); See also De los Reyes v. Intermediate Appellate Court, G.R. No.74768, August 11, 1989, 176 SCRA 394, 401-402 (1989) and People v. Mate, supra note 23, at 493.
[38] G.R.
No. 137247, August 7, 2006, 498 SCRA 17, 30-31.
[39] Supra
note 29, at 91.
[40] Underscoring supplied.
[41] TSN, June 26, 1995.
[42] TSN, July 12, 1995.
[43]
[44] Supra note 29, at 31 and 34, citing Marmont Resort Hotel Enterprises v. Guiang, 168 SCRA 373, 379-380 (1988).
[45] Calamba Steel Center, Inc. (formerly JS Steel Corporation) v. Commissioner of Internal Revenue, G.R. No. 151857, April 28, 2005, 457 SCRA 482, 494.
[46] Commissioner
of Internal Revenue v.
[47]
[48] CTA Resolution dated January 19, 1996; CTA Records, p. 113-114.
[49] CTA Records, p. 117.
[50]
[51]
[52] CTA Order dated June 17, 1996, CTA Records, p. 138.
[53] G.R. No. 155483, April 27, 2007, 522 SCRA 410, 416, citing Constantino v. Court of Appeals, G.R. No. 116018, November 13, 1996, 264 SCRA 59 (Other citations omitted; Emphasis supplied ).
[54] Filinvest
Development Corporation v. Commissioner of Internal Revenue and Court of Tax
Appeals, G.R. No. 146941, August 9,
2007, 529 SCRA 605, 609-610, citing Carrara Marble Philippines, Inc. v.
Commissioner of Customs, 372 Phil. 322, 333-334 (1999) and Commissioner
of Internal Revenue v. Court of Appeals, 358 Phil. 562, 584 (1998).
[55] Article 1231 of the Civil Code of
the
Art. 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and debtor;
(5) By compensation;
(6) By novation. (Emphasis ours.)
[56] Article 1270 of the Civil Code of
the
Art. 1270. Condonation or remission is essentially gratuitous, and requires the acceptance by the obligor. It may be made expressly or impliedly.
One and the other kind shall be subject to the rules which govern inofficious donations. Express condonation shall, furthermore, comply with the forms of donation.
[57] Tolentino, Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. IV, 1991 ed., p. 353, citing 8 Manresa 365.
[58] SEC. 79. Computation of net estate and estate tax. — For the purpose of the tax imposed in this Chapter, the value of the net estate shall be determined:
(a) In
the case of a citizen or resident of the
(1) Expenses, losses, indebtedness, and taxes. — Such amounts —
(A) For
funeral expenses in an amount equal to five per centum of the gross
estate but in no case to exceed P50,000.00;
(B) For judicial expenses of the testamentary or intestate proceedings;
(C) For claims against the estate; Provided, That at the time the indebtedness was incurred the debt instrument was duly notarized and, if the loan was contracted within three years before the death of the decedent, the administrator or executor shall submit a statement showing the disposition of the proceeds of the loan. (As amended by PD No. 1994)
(D) For claims of the deceased against insolvent persons where the value of decedent's interest therein is included in the value of the gross estate; and
(E) For unpaid mortgages upon, or any indebtedness in respect to property, where the value of decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate, but not including any income taxes upon income received after the death of the decedent, or property taxes not accrued before his death, or any estate tax. The deduction herein allowed in the case of claims against the estate, unpaid mortgages, or any indebtedness, shall when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full reconsideration in money or money's worth. There shall also be deducted losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualties, or from robbery, theft, or embezzlement, when such losses are not compensated for by insurance or otherwise, and if at the time of the filing of the return such losses have not been claimed as a deduction for income tax purposes in an income tax return, and provided that such losses were incurred not later than last day for the payment of the estate tax as prescribed in subsection (a) of Section 84.
[59] This refers to the 1977 National Internal Revenue Code, as amended which was effective at the time of Jose's death on November 7, 1987.
[60] Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 123206, March 22, 2000, 328 SCRA 666, 676-677 (citations omitted).
[61] 47B Corpus Juris Secundum, Internal Revenue § 533.
[62] Smith v. C.I.R., 82 T.C.M. (CCH) 909 (2001), aff'd 54 Fed. Appx. 413.
[63] 680 F.2d 1248.
[64] 47B Corpus Juris Secundum, Internal Revenue § 524.
[65] Prop. Treas. Reg. §. 20.2053-1 (b) (1), published as REG-143316-03.
[66] Supra note 63.
[67] `Smith's Est. v. CIR, 198 F3d 515,
525 (5th Cir. 1999). See also O'Neal's Est. v.
US, 228 F. Supp. 2d 1290 (ND Ala. 2002).
[68] 279
[69] Commissioner
of Internal Revenue v. The Court of Appeals, Central Vegetable Manufacturing
Co., Inc., and the Court of Tax Appeals,
G.R. No. 107135, February 23, 1999, 303 SCRA 508, 516-517, citing Province
of Bulacan v. Court of Appeals, 299 SCRA 442 (1998); Republic v. IAC,
196 SCRA 335 (1991); CIR v. Firemen's Fund Ins. Co., 148 SCRA 315
(1987); and CIR v. CA, 204 SCRA 182 (1991).
[70] Manila International Airport Authority v. Court of Appeals, G.R. No. 155650, July 20, 2006, 495 SCRA 591, 619.
[71] Quirino
v. Grospe, G.R. No. 58797, January
31, 1989, 169 SCRA 702, 704-705, citing Gabin v. Melliza, 84 Phil. 794,
796 (1949).