Separate Opinion of Justice Bersamin in CIR vs.

Pilipinas Shell,

GR No. 188497 dated February 19, 2014

In its Supplemental Motion for Reconsideration, Pilipinas Shell reiterates that what is being
exempted under Section 135 of the NIRC is the petroleum product that is sold to international
carriers; that the exemption is not given to the producer or the buyer but to the product itself
considering that the excise taxes, according to the NIRC, are taxes applicable to certain specific
goods or articles for domestic sale or consumption or for any other disposition, whether
manufactured in or imported into the Philippines; that the excise tax that is passed on to the buyer is
no longer in the nature of a tax but of an added cost to the purchase price of the product sold; that
what is contemplated under Section 135 of the NIRC is an exemption from the excise tax, not an
exemption from the burden to shoulder the tax; and that inasmuch as the exemption can refer only to
the imposition of the tax on the statutory seller, like Pilipinas Shell, a contrary interpretation renders
Section 135 of the NIRC nugatory because the NIRC does not impose the excise tax on subsequent
holders of the product like the international carriers.

As I earlier said, I agree to GRANT Pilipinas Shell’s motions for reconsideration.

Excise tax is essentially a tax

on goods, products or articles

Taxes are classified, according to subject matter or object, into three groups, to wit: (1) personal,
capitation or poll taxes; (2) property taxes; and (3) excise or license taxes. Personal, capitation or
poll taxes are fixed amounts imposed upon residents or persons of a certain class without regard to
their property or business, an example of which is the basic community tax.  Property taxes are
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assessed on property or things of a certain class, whether real or personal, in proportion to their
value or other reasonable method of apportionment, such as the real estate tax.  Excise or license
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taxes are imposed upon the performance of an act, the enjoyment of a privilege, or the engaging in
an occupation, profession or business.  Income tax, value-added tax, estate and donor’s tax fall
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under the third group.

Excise tax, as a classification of tax according to object, must not be confused with the excise tax
under Title VI of the NIRC. The term "excise tax" under Title VI of the 1997 NIRC derives its
definition from the 1986 NIRC,  and relates to taxes applied to goods manufactured or produced in
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the Philippines for domestic sale or consumption or for any other disposition and to things
imported.  In contrast, an excise tax that is imposed directly on certain specified goods – goods
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manufactured or produced in the Philippines, or things imported – is undoubtedly a tax on property. 18

The payment of excise taxes is the direct

liability of the manufacturer or producer

The production, manufacture or importation of the goods belonging to any of the categories
enumerated in Title VI of the NIRC (i.e., alcohol products, tobacco products, petroleum products,
automobiles and non-essential goods, mineral products) are not the sole determinants for the proper
levy of the excise tax. It is further required that the goods be manufactured, produced or imported for
domestic sale, consumption or any other disposition.  The accrual of the tax liability is, therefore,
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contingent on the production, manufacture or importation of the taxable goods and the intention of
the manufacturer, producer or importer to have the goods locally sold or consumed or disposed in
any other manner. This is the reason why the accrual and liability for the payment of the excise tax
are imposed directly on the manufacturer or producer of the taxable goods,  and arise before the
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removal of the goods from the place of their production. 21

The manufacturer’s or producer’s direct liability to pay the excise taxes similarly operates although
the goods produced or manufactured within the country are intended for export and are "actually
exported without returning to the Philippines, whether so exported in their original state or as
ingredients or parts of any manufactured goods or products." This is implied from the grant of a tax
credit or refund to the manufacturer or producer by Section 130(4)(D) of the NIRC, thereby
presupposing that the excise tax corresponding to the goods exported were previously paid. Section
130(4)(D) reads:

xxxx

(D) Credit for Excise Tax on Goods Actually Exported. - When goods locally produced or
manufactured are removed and actually exported without returning to the Philippines, whether so
exported in their original state or as ingredients or parts of any manufactured goods or products, any
excise tax paid thereon shall be credited or refunded upon submission of the proof of actual
exportation and upon receipt of the corresponding foreign exchange payment: Provided, That the
excise tax on mineral products, except coal and coke, imposed under Section 151 shall not be
creditable or refundable even if the mineral products are actually exported. (Emphasis supplied.)

Simply stated, the accrual and payment of the excise tax under Title VI of the NIRC materially rest
on the fact of actual production, manufacture or importation of the taxable goods in the Philippines
and on their presumed or intended domestic sale, consumption or disposition. Considering that the
excise tax attaches to the goods upon the accrual of the manufacturer’s direct liability for its
payment, the subsequent sale, consumption or other disposition of the goods becomes relevant only
to determine whether any exemption or tax relief may be granted thereafter.

The actual sale, consumption or disposition

of the taxable goods confirms the proper tax
treatment of goods previously subjected
to the excise tax

Conformably with the foregoing discussion, the accrual and payment of the excise tax on the goods
enumerated under Title VI of the NIRC prior to their removal from the place of production are
absolute and admit of no exception. As earlier mentioned, even locally manufactured goods intended
for export cannot escape the imposition and payment of the excise tax, subject to a future claim for
tax credit or refund once proof of actual exportation has been submitted to the Commissioner of
Internal Revenue (CIR).  Verily, it is the actual sale, consumption or disposition of the taxable goods
22

that confirms the proper tax treatment of goods previously subjected to the excise tax. If any of the
goods enumerated under Title VI of the NIRC are manufactured or produced in the Philippines and
eventually sold, consumed, or disposed of in any other manner domestically, therefore, there can be
no claim for any tax relief inasmuch as the excise tax was properly levied and collected from the
manufacturer-seller.

Here, the point of interest is the proper tax treatment of the petroleum products sold by Pilipinas
Shell to various international carriers. An international carrier is engaged in international
transportation or contract of carriage between places in different territorial jurisdictions.
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Pilipinas Shell, the statutory taxpayer, is

the proper party to claim the refund of
the excise taxes paid on petroleum
products sold to international carriers
When Petron removes its petroleum products from its refinery in Limay, Bataan, it pays the excise
tax due on the petroleum products thus removed. Petron, as manufacturer or producer, is the person
liable for the payment of the excise tax as shown in the Excise Tax Returns filed with the BIR. Stated
otherwise, Petron is the taxpayer that is primarily, directly and legally liable for the payment of the
excise taxes. However, since an excise tax is an indirect tax, Petron can transfer to its customers the
amount of the excise tax paid by treating it as part of the cost of the goods and tacking it on to the
selling price.

As correctly observed by the CTA, this Court held in Philippine Acetylene Co., Inc. v. Commissioner
of Internal Revenue:

It may indeed be that the economic burden of the tax finally falls on the purchaser; when it does the
tax becomes part of the price which the purchaser must pay.

Even if the consumers or purchasers ultimately pay for the tax, they are not considered the
taxpayers. The fact that Petron, on whom the excise tax is imposed, can shift the tax burden to its
purchasers does not make the latter the taxpayers and the former the withholding agent.

Petitioner, as the purchaser and end-consumer, ultimately bears the tax burden, but this does not
transform petitioner's status into a statutory taxpayer.

In the refund of indirect taxes, the statutory taxpayer is the proper party who can claim the refund.

Applying the foregoing, the Court concludes that: (1) the exemption under Section 135(a) of the
NIRC is conferred on the petroleum products on which the excise tax was levied in the first place; (2)
Pilipinas Shell, being the manufacturer or producer of petroleum products, was the statutory
taxpayer of the excise tax imposed on the petroleum products; (3) as the statutory taxpayer,
Pilipinas Shell’s liability to pay the excise tax accrued as soon as the petroleum products came into
existence, and Pilipinas Shell accordingly paid its excise tax liability prior to its sale or disposition of
the taxable goods to third parties, a fact not disputed by the CIR; and (3) Pilipinas Shell’s sale of the
petroleum products to international carriers for their use or consumption outside the Philippines
confirmed the proper tax treatment of the subject goods as exempt from the excise tax. 1âwphi1
 The Collector Of Internal Revenue vs Campos Rueda
42 SCRA 238 [GR No. L-13250 October 29, 1971]

Facts: This is an appeal interposed by herein respondent Antonio Campos Rueda as

administrator of the estate of the deceased Doña Maria de la Estrella Soriano Vda de Cedeira,
from the decision of the petitioner, collector of internal revenue, assessing against and
demanding from the former the sum of Php161,874.95 as deficiency estate and inheritance taxes,
including interest therein and penalties, on the transfer of intangible personal properties situated
in the Philippines and belonging to said Maria Cedeira. She is a spanish national, by reason of
her marriage to a spanish citizen and was a resident of Tangier, Morocco from 1931 up to her
death on January 2, 1955. At the time of her demise, she left among others, intangible personal
properties in the Philippines. On September 29, 1955, respondent filed a provisional estate and
inheritance tax return on all the properties of Maria Cedeira. On the same date, petitioner,
pending investigation issued an assessment for estate and inheritance tax in the respective
amounts of Php111,592.48 and Php 157,791.48 or a total of Php369,383.96 which tax liabilities
were paid by respondent. On November 27, 1955, an amended return was filed wherein
intangible personal properties with the value of Php396,308.90 were claimed as exempt from
taxes. On November 23, 1955, petitioner issued another assessment for estate and inheritance
taxes in the amounts of Php 202,262.40 and Php267,402.84 respectively or a total of
Php469,665.24. In a letter dated January 11, 1956, respondent denied the request for the
exemption on the ground that the law of Tangier is not reciprocal with section 122 of the
National Internal Revenue Code. Hence, respondent demanded the payment of the sums of
Php239,439.79 representing the deficiency estate and inheritance taxes including ad valorem
penalties, surcharges, interest and compromise penalties. In a letter dated February 8, 1956,
respondent requested for the reconsideration of the decision denying the claim for the tax
exemption. However, the same was denied. The denial was premised on the ground that there
was no reciprocity with Tangier, which was moreover a mere principality, not a foreign country.

Issue: Whether or not the intangible personal properties of Maria Cedeira are exempt from estate
and inheritance tax.

Held: Yes. The controlling legal provision as noted is a proviso in section 122 of the NIRC. It
reads thus:

that no tax shall be collected under this title in respect of intangible personal properties

1. 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 properties of the Philippines not residing in that
foreign country; or
2. 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 properties owned by citizens of the
Philippines not residing in that foreign country.
3. This court commit itself to the doctrine that even a tiny principality, hardly an
international personality in the sense did fall under the exempt category.
4. The expression “foreign country,” was used in the last proviso of section 122 of NIRC
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 upon intangible person
properties of our citizens not residing therein whose law allow 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 respondent to the exemption benefits of the proviso of
said section 122 of our tax code.
Collector of Internal Revenue vs. Fisher
GR. No. L-11622 January 28, 1961

DOCTRINE: “Reciprocity must be total. If any of the two states collects or imposes or does not
exempt any transfer, death, legacy or succession tax of any character, the reciprocity does not
work.”

FACTS:
Walter G. Stevenson was born in the Philippines of British parents, married in Manila to another
British subject, Beatrice. He died in 1951 in California where he and his wife moved to.
In his will, he instituted Beatrice as his sole heiress to certain real and personal properties,
among which are 210,000 shares of stocks in Mindanao Mother Lode Mines (Mines).
Ian Murray Statt (Statt), the appointed ancillary administrator of his estate filed an estate and
inheritance tax return. He made a preliminary return to secure the waiver of the CIR on the
inheritance of the Mines shares of stock.
In 1952, Beatrice assigned all her rights and interests in the estate to the spouses Fisher.
Statt filed an amended estate and inheritance tax return claiming ADDITIONAL EXEMPTIONS,
one of which is the estate and inheritance tax on the Mines’ shares of stock pursuant to a
reciprocity proviso in the NIRC, hence, warranting a refund from what he initially paid. The
collector denied the claim. He then filed in the CFI of Manila for the said amount.
CFI ruled that (a) the ½ share of Beatrice should be deducted from the net estate of Walter, (b)
the intangible personal property belonging to the estate of Walter is exempt from inheritance
tax pursuant to the reciprocity proviso in NIRC.
ISSUE/S: Whether or not the estate can avail itself of the reciprocity proviso in the NIRC
granting exemption from the payment of taxes for the Mines shares of stock.
RULING: NO. Reciprocity must be total. If any of the two states collects or imposes or does not
exempt any transfer, death, legacy or succession tax of any character, the reciprocity does not
work.
In the Philippines, upon the death of any citizen or resident, or non-resident with properties,
there are imposed upon his estate, both an estate and an inheritance tax.
In the Philippines, upon the death of any citizen or resident, or non-resident with properties therein,
there are imposed upon his estate and its settlement, both an estate and an inheritance tax. Under
the laws of California, only inheritance tax is imposed. On the other hand, the Federal Internal
Revenue Code imposes an estate tax on non-residents not citizens of the United States, 7 but does
not provide for any exemption on the basis of reciprocity. Applying these laws in the manner the
Court of Tax Appeals did in the instant case, we will have a situation where a Californian, who is
non-resident in the Philippines but has intangible personal properties here, will the subject to the
payment of an estate tax, although exempt from the payment of the inheritance tax. This being the
case, will a Filipino, non-resident of California, but with intangible personal properties there, be
entitled to the exemption clause of the California law, since the Californian has not been exempted
from every character of legacy, succession, or death tax because he is, under our law, under
obligation to pay an estate tax? Upon the other hand, if we exempt the Californian from paying the
estate tax, we do not thereby entitle a Filipino to be exempt from a similar estate tax in California
because under the Federal Law, which is equally enforceable in California he is bound to pay the
same, there being no reciprocity recognized in respect thereto. In both instances, the Filipino citizen
is always at a disadvantage. We do not believe that our legislature has intended such an unfair
situation to the detriment of our own government and people. We, therefore, find and declare that
the lower court erred in exempting the estate in question from payment of the inheritance tax.
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.
 RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial
Administrator of the Estate of the deceased JOSE P. FERNANDEZ v.
COURT OF TAX APPEALS and COMMISSIONER OF INTERNAL
REVENUE. G.R. No. 140944. April 30, 2008
FACTS:

Decedent Jose P. Fernandez's estate was administered by Arsenio P. Dizon and petitioner Rafael
Dizon (petitioner) as Special and Assistant Special Administrator, respectively. Petitioner filed a
request for extension with the BIR to determine and collate the assets and claims of the estate, which
the BIR granted. Jesus Gonzales, an agent of Arsenio filed the estate tax return with the same BIR
Regional Office, showing therein a NIL estate tax liability.

The BIR then issued Certifications allowing decedent's properties may be transferred to his heirs.

Petitioner requested the probate court's authority to sell several properties forming part of the
Estate, for the purpose of paying its creditors. 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. However, the BIR issued an
Estate Tax Assessment Notice demanding the payment of P66,973,985.40 as deficiency estate tax.
Gonzales moved for the reconsideration but was denied.

The CTA and CA who affirmed, ruled that the evidence introduced by the BIR were admissible.

ISSUES: 

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.

Whether the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax
imposed against the Estate.

RULING: 

YES. 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. As such, those evidence
submitted by the BIR has no evidentiary weight, as the rules on documentary evidence require that
these documents must be formally offered before the CTA. 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 Oate, which reiterated this Court's previous
rulings in People v. Napat-a and People v. Mate on the admission and consideration of exhibits
which were not formally offered during the trial.

The Court reiterates that Vda. de Oate 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.
A common fact threads through Vda. de Oate 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. 

YES. Verily, the second issue in this case involves the construction of Section 79 58 of the National
Internal Revenue Code59 (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 United States. Thus, pursuant to established rules of
statutory construction, the decisions of American courts construing the federal tax code are entitled
to great weight in the interpretation of our own tax laws.60

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 U.S.
court ruled that the appropriate deduction is the "value" that the claim had at the date of the
decedent's death.62 Also, as held in Propstra v. U.S., 63 where a lien claimed against the estate was
certain and enforceable on the date of the decedent's death, the fact that the claimant subsequently
settled for lesser amount did not preclude the estate from deducting the entire amount of the claim
for estate tax purposes. These pronouncements essentially confirm the general principle that post-
death developments are not material in determining the amount of the deduction.

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 U.S. 5th Circuit Court of Appeals held:

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.
ESTATE OF THE LATE JULIANA DIEZ VDA. DE GABRIEL vs. COMMISSIONER OF INTERNAL REVENUE
GR. No. 155541. January 27, 2004

Facts: During the lifetime of the decedent Juliana vda. De Gabriel, her business affairs were managed by
the Philippine Trust Company (PhilTrust). The decedent died on April 3, 1979 but two days after her
death, PhilTrust filed her income tax return for 1978 not indicating that the decedent had died. The BIR
conducted an administrative investigation of the decedent’s tax liability and found a deficiency income
tax for the year 1997 in the amount of P318,233.93. Thus, in November 18, 1982, the BIR sent by
registered mail a demand letter and assessment notice addressed to the decedent “c/o PhilTrust, Sta.
Cruz, Manila, which was the address stated in her 1978 income tax return. On June 18, 1984,
respondent Commissioner of Internal Revenue issued warrants of distraint and levy to enforce the
collection of decedent’s deficiency income tax liability and serve the same upon her heir, Francisco
Gabriel. On November 22, 1984, Commissioner filed a motion to allow his claim with probate court for
the deficiency tax. The Court denied BIR’s claim against the estate on the ground that no proper notice
of the tax assessment was made on the proper party. On appeal, the CA held that BIR’s service on
PhilTrust of the notice of assessment was binding on the estate as PhilTrust failed in its legal duty to
inform the respondent of antecedent’s death. Consequently, as the estate failed to question the
assessment within the statutory period of thirty days, the assessment became final, executory, and
incontestable.

Issue: (1) Whether or not the CA erred in holding that the service of deficiency tax assessment on Juliana
through PhilTrust was a valid service as to bind the estate.
(2) Whether or not the CA erred in holding that the tax assessment had become final, executory, and
incontestable.

Held: (1) Since the relationship between PhilTrust and the decedent was automatically severed the
moment of the taxpayer’s death, none of the PhilTrust’s acts or omissions could bind the estate of the
taxpayer. Although the administrator of the estate may have been remiss in his legal obligation to
inform respondent of the decedent’s death, the consequence thereof merely refers to the imposition of
certain penal sanctions on the administrator. These do not include the indefinite tolling of the
prescriptive period for making deficiency tax assessment or waiver of the notice requirement for such
assessment.
(2) The assessment was served not even on an heir or the estate but on a completely disinterested
party. This improper service was clearly not binding on the petitioner. The most crucial point to be
remembered is that PhilTust had absolutely no legal relationship with the deceased or to her Estate.
There was therefore no assessment served on the estate as to the alleged underpayment of tax. Absent
this assessment, no proceeding could be initiated in court for collection of said tax; therefore, it could
not have become final, executory and incontestable. Respondent’s claim for collection filed with the
court only on November 22, 1984 was barred for having been made beyond the five-year prescriptive
period set by law.
CIR v. PINEDA
GR No. L-22734, September 15, 1967
21 SCRA 105

FACTS: Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is
Atty. Manuel Pineda. Estate proceedings were had in Court so that the estate was divided among and awarded
to the heirs. Atty 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. Thereupon, the representative of the Collector of
Internal Revenue filed said returns for the estate issued an assessment and charged the full amount to the
inheritance due to Atty. Pineda who argued that he is liable only to extent of his proportional share in the
inheritance.

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

HELD: Yes. The Government can require Atty. Pineda to pay the full amount of the taxes assessed.
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 for which said estate is liable. By virtue of such lien, the Government
has the right to subject the property in Pineda's possession to satisfy the income tax assessment. After such
payment, Pineda will have a right of contribution from his co-heirs, 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; and second,
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. 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.
Marcos II v. CA 273 SCRA 47
MARCOS II v. CA
Doctrine:

Facts:
Petitioner Bongbong Marcos questions the actuations of the respondent CIR in assessing, and
collecting through the summary remedy of Levy on Real Properties, estate and income tax
delinquencies upon the estate and properties of his father, despite the pendency of the
proceedings on probate of the will of the late president.

A Special Tax Audit Team was created to conduct investigations and examinations of the tax
liabilities and obligations of the late president, as well as that of his family, associates and
"cronies".

The investigation disclosed that the Marcoses failed to file a written notice of the death of the
decedent, estate tax return, as well as several income tax returns covering the years 1982 to 1986,
-all in violation of the NIRC.

The CIR thereby caused the preparation and filing of the Estate Tax Return for the estate of the
late president, the Income Tax Returns of the Spouses Marcos for the years 1985 to 1986, and
the Income Tax Returns of petitioner Ferdinand 'Bongbong' Marcos II for the years 1982 to
1985.

The BIR issued the following:

(1) Deficiency estate tax assessment  against the estate of the late president Ferdinand Marcos in
the amount of P23,293,607,638.00;

(2) Deficiency income tax assessment against the Spouses Ferdinand and Imelda Marcos in the
amounts of P149,551.70 and P184,009,737.40 representing deficiency income tax for the years
1985 and 1986;

(3) Deficiency income tax assessment against petitioner Ferdinand 'Bongbong' Marcos II in the
amounts of P258.70 pesos; P9,386.40 Pesos; P4,388.30 Pesos; and P6,376.60 Pesos representing
his deficiency income taxes for the years 1982 to 1985.

The CIR avers that copies of the deficiency estate and income tax assessments were all
personally and constructively served upon Imelda and Bongbong through their respective
caretakers at their last known addresses.

Thereafter, Formal Assessment notices were served upon Mrs. Marcos c/o petitioner, at his
office, House of Representatives, Batasan Pambansa, Quezon City. Moreover, a notice to
Taxpayer inviting Mrs. Marcos (or her duly authorized representative or counsel), to a
conference, was furnished the counsel of Mrs. Marcos, Dean Antonio Coronel - but to no avail.
The deficiency tax assessments were not protested administratively, by Mrs. Marcos and the
other heirs of the late president, within 30 days from service of said assessments.

The BIR Commissioner issued several notices of levy on real property against certain parcels of
land owned by the Marcoses - to satisfy the alleged estate tax and deficiency income taxes.

The foregoing tax remedies were resorted to pursuant to Sections 205 and 213 of the NIRC.

Notices of sale at public auction were posted at the lobby of the City Hall of Tacloban City.
There being no bidder, the lots were declared forfeited in favor of the government.

Bongbong filed the instant petition for certiorari and prohibition under Rule 65 of the Rules of
Court, with prayer for temporary restraining order and/or writ of preliminary injunction."

Contentions:
Petitioner- posits that notices of levy, notices of sale, and subsequent sale of properties of the late
President Marcos effected by the BIR are null and void for disregarding the established
procedure for the enforcement of taxes due upon the estate of the deceased.

Domingo v. Garlitos "the ordinary procedure by which to settle claims of indebtedness against
the estate of a deceased, person, as in an inheritance (estate) tax, is for the claimant to present a
claim before the probate court so that said court may order the administrator to pay the amount
therefor." This remedy is allegedly, exclusive, and cannot be effected through any other means.

Petitioner goes further, submitting that the probate court is not precluded from denying a request
by the government for the immediate payment of taxes, and should order the payment of the
same only within the period fixed by the probate court for the payment of all the debts of the
decedent. In this regard, petitioner cites the case of Collector of Internal Revenue vs. The
Administratrix of the Estate of Echarri (67 Phil 502), where it was held that:

“where during the pendency of judicial administration over the estate of a deceased person a
claim for taxes is presented by the government, the court has the authority to order payment by
the administrator; but, in the same way that it has authority to order payment or satisfaction, it
also has the negative authority to deny the same xxx”

BIR- that the state's authority to collect internal revenue taxes is paramount. Thus, the pendency
of probate proceedings over the estate of the deceased does not preclude the assessment and
collection, through summary remedies, of estate taxes over the same.

Claims for payment of estate and income taxes due and assessed after the death of the decedent
need not be presented in the form of a claim against the estate. These can and should be paid
immediately. The probate court is not the government agency to decide whether an estate is
liable for payment of estate of income taxes. Well-settled is the rule that the probate court is a
court with special and limited jurisdiction.

Issues:
(1)   WON the BIR has the authority to collect by the summary remedy of levying upon, and sale of
real properties of the decedent, estate tax deficiencies, without the cognition and authority of the
court sitting in probate over the supposed will of the deceased

(2)   WON the BIR's Notices of Levy on the Marcos properties, were issued beyond the allowed
period, and are therefore null and void

(3)   WON respondents' assessment of the estate tax and their issuance of the Notices of Levy and
sale are premature and oppressive.

(4)   WON there was sufficient service of Notices of Assessment to the petitioner,

(5)   WON Notices of Levy must be nullified for having been issued without validly serving copies
thereof to the petitioner.

Ruling:
(1) YES
The Government has two ways of collecting the taxes 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, pursuant to the lien created by Section 315 of the Tax Code upon all
property and rights to property belong 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.

From the foregoing, it is discernible that 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.

If there is any issue as to the validity of the BIR's decision to assess the estate taxes, this should
have been pursued through the proper administrative and judicial avenues provided for by law.

"Sec. 229. Protesting of assessment.-When the Commissioner of Internal Revenue or his duly
authorized representative finds that proper taxes should be assessed, he shall first notify the
taxpayer of his findings. Within a period to be prescribed by implementing regulations, the
taxpayer shall be required to respond to said notice. If the taxpayer fails to respond, the
Commissioner shall issue an assessment based on his findings.

Such assessment may be protested administratively by filing a request for reconsideration or

reinvestigation in such form and manner as may be prescribed by implementing regulations
within (30) days from receipt of the assessment; otherwise, the assessment shall become final
and unappealable.

If the protest is denied in whole or in part, the individual, association or corporation adversely
affected by the decision on the protest may appeal to the Court of Tax Appeals within thirty (30)
days from receipt of said decision; otherwise, the decision shall become final, executory and
demandable. Apart from failing to file the required estate tax return within the time required for
the filing of the same, petitioner, and the other heirs never questioned the assessments served
upon them, allowing the same to lapse into finality, and prompting the BIR to collect the said
taxes by levying upon the properties left by President Marcos.

(2) NO
The Notices of Levy upon real property were issued within the prescriptive period and in
accordance with the provisions of the present Tax Code. The deficiency tax assessment, having
already become final, executory, and demandable, the same can now be collected through the
summary remedy of distraint or levy pursuant to Section 205 of the NIRC.

The applicable provision in regard to the prescriptive period for the assessment and collection of
tax deficiency in this instance is Article 223 of the NIRC, which pertinently provides:

"Sec. 223. Exceptions as to a period of limitation of assessment and collection of taxes.- (a) In
the case of a false or fraudulent return with intent to evade tax or of a failure to file a return, the
tax may be assessed, or a proceeding in court for the collection of such tax may be begun without
assessment, at any time within ten (10) years after the discovery of the falsity, fraud, or
omission: Provided, That, in a fraud assessment which has become final and executory, the fact
of fraud shall be judicially taken cognizance of in the civil or criminal action for the collection
thereof.
xxx
(c) Any internal revenue tax which has been assessed within the period of limitation above
prescribed, may be collected by distraint or levy or by a proceeding in court within three years
following the assessment of the tax.

The omission to file an estate tax return, and the subsequent failure to contest or appeal the
assessment made by the BIR is fatal to the petitioner's cause, as under the above-cited provision,
in case of failure to file a return, the tax may be assessed at any time within ten years after the
omission, and any tax so assessed may be collected by levy upon real property within three years
following the assessment of the tax.

Since the estate tax assessment had become final and unappealable by the petitioner's default as
regards protesting the validity of the said assessment, there is now no reason why the BIR cannot
continue with the collection of the said tax. Any objection against the assessment should have
been pursued following the avenue paved in Section 229 of the NIRC on protests on assessments
of internal revenue taxes.

(3) NO
Petitioner further argues that "the numerous pending court cases questioning the late president's
ownership or interests in several properties make the total value of his estate, and the consequent
estate tax due, incapable of exact pecuniary determination at this time.

Petitioner, however, omits to allege whether the properties levied upon by the BIR in the
collection of estate taxes upon the decedent's estate were among those involved in the said cases
pending in the Sandiganbayan. Indeed, the court is at a loss as to how these cases are relevant to
the matter at issue. The mere fact that the decedent has pending cases involving ill-gotten wealth
does not affect the enforcement of tax assessments over the properties indubitably included in his
estate.

It is not the Department of Justice which is the government agency tasked to determine the
amount of taxes due upon the subject estate, but the BIR whose determinations and assessments
are presumed correct and made in good faith. The taxpayer has the duty of proving otherwise. In
the absence of proof of any irregularities in the performance of official duties, an assessment will
not be disturbed.

In this instance, petitioner has not pointed out one single provision in the Memorandum of the
Special Audit Team which gave rise to the questioned assessment, which bears a trace of falsity.
Indeed, the petitioner's attack on the assessment bears mainly on the alleged improbable and
unconscionable amount of the taxes charged. But mere rhetoric cannot supply the basis for the
charge of impropriety of the assessments made.
Moreover, these objections to the assessments should have been raised, considering the ample
remedies afforded the taxpayer by the Tax Code, with the Bureau of Internal Revenue and the
Court of Tax Appeals, as described earlier, and cannot be raised now via Petition for Certiorari,
under the pretext of grave abuse of discretion.

The subject tax assessments having become final, executory and enforceable, the same can no
longer be contested by means of a disguised protest. In the main, Certiorari may not be used as a
substitute for a lost appeal or remedy.

(4) YES
We find, after considering the facts and circumstances, as well as evidences, that there was
sufficient, constructive and/or actual notice of assessments, levy and sale, sent to Bongbong as
well as to his mother.

Even if we are to rule out the notices of assessments personally given to the caretakers, the
subsequent notices given thereafter could no longer be ignored as they were sent at a time when
petitioner was already here in the Philippines, and at a place where said notices would surely be
called to petitioner's attention, and received by responsible persons of sufficient age and
discretion.
Thus, on October 20, 1992, formal assessment notices were served upon Mrs. Marcos c/o the
petitioner, at his office, House of Representatives, Batasan Pambansa, Q.C Moreover, a notice to
taxpayer dated October 8, 1992 inviting Mrs. Marcos to a conference relative to her tax
liabilities, was furnished the counsel of Mrs. Marcos - Dean Antonio Coronel

There being sufficient service of Notices to herein petitioner (and his mother) and it appearing
that petitioner continuously ignored said Notices despite several opportunities given him to file a
protest and to thereafter appeal to the Court of Tax Appeals, - the tax assessments subject of this
case, upon which the levy and sale of properties were based, could no longer be contested
(directly or indirectly) via this instant petition for certiorari."

(5) NO
Petitioner argues that as a mandatory heir of the decedent, he has an interest in the subject estate,
and notices of levy upon its properties should have been served upon him.

We do not agree. In the case of notices of levy issued to satisfy the delinquent estate tax, the
delinquent taxpayer is the Estate of the decedent, and not necessarily, and exclusively, the
petitioner as heir of the deceased. In the same vein, in the matter of income tax delinquency of
the late president and his spouse, petitioner is not the taxpayer liable. Thus, it follows that service
of notices of levy in satisfaction of these tax delinquencies upon the petitioner is not required by
law, as under

Section 213 of the NIRC, which pertinently states:

"xxx
...Levy shall be effected by writing upon said certificate a description of the property upon which
levy is made. At the same time, written notice of the levy shall be mailed to or served upon the
Register of Deeds of the province or city where the property is located and upon the delinquent
taxpayer, or if he be absent from the Philippines, to his agent or the manager of the business in
respect to which the liability arose, or if there be none, to the occupant of the property in
question.
xxx"

The foregoing notwithstanding, the record shows that notices of warrants of distraint and levy of
sale were furnished the counsel of petitioner on April 7, 1993, and June 10, 1993, and the
petitioner himself on April 12, 1993 at his office at the Batasang Pambansa.