PASCUA, KIM KENNETH P.

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CASES ON ESTATE & DONORS TAX

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G.R. No. L-34937: March 13, 1933
Vidal de Roces vs. Poasadas
IMPERIAL, J.
FACTS:
Sometime in 1925, plaintiffs Concepcion Vidal de Roces and her
husband, as well as one Elvira Richards, received as donation several parcels
of land from Esperanza Tuazon. They took possession of the lands thereafter
and likewise obtained the respective transfer certificates.
The donor died a year after without leaving any forced heir. In her
will, which was admitted to probate, she bequeathed to each of the donees
the sum of P5,000. After the distribution of the estate but before the delivery
of their shares, the CIR, appellee, ruled that plaintiffs as donees and legatees
should pay inheritance taxes. The plaintiffs paid the taxes under protest.

ISSUE:
Whether or not the donations should be subjected to inheritance tax.
HELD:
YES.
Section 1540 Additions of gifts and advances, After the
aforementioned deductions have been made, there shall be added to the
resulting amount the value of all gifts or advances made by the predecessor
to any those who, after his death, shall prove to be his heirs, devisees,
legatees, or donees mortis causa.
Sec. 1540 of the Administrative Code clearly refers to those donations
inter vivos that take effect immediately or during the lifetime of the donor,
but made in consideration of the death of the decedent. Those donations not
made in contemplation of the decedent's death are not included as it would
be equivalent to imposing a direct tax on property and not on its
transmission.

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G.R. No. L-36770: November 4, 1932
Dizon vs. Posadas
BUTTE, J.
FACTS:
Plaintiff Luis Dison filed a suit against CIR to recover inheritance tax
paid under protest amounting to P2,808.73. Felix Dison, plaintiff's father
executed a deed of gift which transferred 22 tracts of land, reserving to
himself during his lifetime the usufruct of three tracts. The donatios was
formally accepted by plaintiff.
The plaintiff, herein petitioner, alleged in his complaint that the tax is
illegal since he received the property by a deed of gift inter vivos duly
accepted and registered before the death of his father. He also contended that
Act 2601 being an inheritance tax statute, does not tax gifts. The defendant
answered in general denial with a countermand. The court dismissed the
countermand. Both sides appealed, but the CIR appeal was dismissed.

ISSUE:
Whether or not the gifts inter vivos are taxable (inheritance tax).

HELD:
YES.
Inheritance tax is imposed upon the gift inter vivos that plaintiff
received from his father as this was really an advancement upon the
inheritance to which he would be entitled upon the death of the latter. Sec.
1540 of the Administrative Code did not tax gifts per se but only those
which are made to those who shall prove to be heirs, devisees, legatees and
donees mortis causa of the donor. The term 'heirs' include those given the
status of heirs irrespective of the quantity of property they may receive as
such.

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G.R. No. L-29276 May 18, 19783

De Guzman vs. De Guzman
AQUINO, J
FACTS:
One of the properties left by deceased testator was a house and lot in
which was adjudicated in favor of the eight children. One of the children
was appointed as the administrator of the estate. It is to be noted that the
probate court ordered the administrator to refrain from spending the assets of
the estate for reconstructing and remodeling the house of the deceased and to
stop spending any asset of the estate without prior authority of the court
However, in the accounting report submitted by the administrator,
several expenses were made for the remodeling of the house. It was allowed
by the lower court and this prompted the other children to oppose this order.

ISSUE:
Whether or not they were allowable administration expenses.

HELD:
An executor or administrator is allowed the necessary expenses in the
care, management, and settlement of the estate. He is entitled to possess and
manage the decedents real and personal estate as long as it is necessary for
the payment of the debts and expenses of administration. He is accountable
for the whole decedents estate which has come into his possession, with all
the interest, profit, and income thereof, and with the proceeds of so much of
such estate as is sold by him, at the price, at which it was sold.

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79 SCRA 408
Vera vs. Navarro
FACTS:
Judge Tan was appointed as the executor of the estate of Elsie Gaches.
He preliminarily submitted a motion for advance payment of allowances,
inheritance, etc. pending the finality of probate of the will. He maintained
that there are sufficient assets to cover whatever liability to the government
for taxes and other charges. The Commissioner opposed this motion and
showed some proof of claims for estate taxes and inheritance taxes. The
court then disapproved the motion of Tan. On a later date, Tan paid the taxes
due but there was deficiency in payment of the inheritance taxes. Upon
payment, he moved again that he be allowed to pay advance inheritance,
allowances, etc. This time, the court allowed him to do so. The
Commissioner tried to oppose this but to no avail. He then tried to garnish
the bank accounts of the estate but wasn't able to do so due to the quick
thinking of Tan to have the writ of garnishment discharged.

ISSUE:
Whether or not should the respondent heirs be required to pay the
inheritance tax before the probate court may authorize the delivery of the
hereditary share pertaining to each of them?

HELD:
Under the provisions of the Rules of Court, together with the
provision in the tax code, the distribution of a decedents assets may only be
ordered under the following circumstances
1. When the inheritance tax, among others, is paid.
2. When a sufficient bond is given to meet the payment of the
inheritance tax and all other obligations of the nature enumerated.
3. When the payment of the said tax and all the other obligations
mentioned in the Rule has been provided for.
None of these were present when the questioned orders were issued at the
case at bar. On the issue of attorneys fees, these should be shouldered by the
heirs and not by the estate. The attorneys fees payable were not for the
benefit of the estate and thus, need not be paid by the estate.

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G.R. No. L-43082: June 18, 1937
Lorenzo vs. Posadas
LAUREL, J.
FACTS:
Hanleydied and left property forhis nephew. It was indicated thatthe
nephewwouldhavepossessionandownershipofthepropertyonly after10years
fromthe death of Hanley. The BIR assessed the nephew for estate tax,
counting from the date of death of Hanley. The nephew questioned this,
averring that he should be assessed instead from the period when he gets
possession and ownership of the property.

ISSUE:
Has there been delinquency in the payment of the inheritance tax?

HELD:
The accrual of the inheritance tax is distinct from the obligation to pay
the same. This tax is imposed on every transmission by virtue of inheritance,
devise, bequest, gift mortis causa, or advance in anticipation of inheritance,
devise or bequest. The tax therefore is upon or the transfer or devolution of
property of a decedent, made effective by his death.
If death is the generating source from which the power of the state to
impose inheritance taxes takes its being and if upon death of the decedent,
succession takes place and the right of the state to tax vests instantly, the tax
should be measured by the value of the estate as it stood at the time of the
decedents death, regardless of any subsequent contingency affecting value
or any subsequent increase or decrease in value.

18 SCRA 757

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Commissioner vs. Gonzales
FACTS:
Matias Yusay, a resident of Pototan, Iloilo, died intestate on May 13,
1948, leaving two heirs, namely, Jose S. Yusay, a legitimate child, and Lilia
Yusay Gonzales, an acknowledged natural child. Intestate proceedings for
the settlement of his estate were instituted in the Court of First Instance of
Iloilo. Jose S. Yusay was therein appointed administrator.
The estate was to be divided as follows: 1/3 for Gonzales and 2/3 for
Jose. The BIR then conducted another investigation in July 1957 with the
same result, there was a huge under-declaration. In February 1958, the
Commissioner of Internal Revenue issued a final assessment notice against
the entire estate. In November 1959, Gonzales questioned the validity of the
final assessment notice issued in 1958. She averred that it was issued way
beyond the prescriptive period of 5 years (under the old tax code). The
return was filed by Jose in 1949 and so the CIRs right to make an
assessment has already prescribed in 1958.
ISSUE:
Whether or not Gonzales is correct?
HELD:
NO.
It was found that Jose filed a return which was so defective that the
CIR cannot make a correct computation on the taxes due. When a tax return
is so defective, it is as if there is no return filed, hence, it is considered that
the taxpayer omitted to file a return. As such, the five year prescriptive
period to make an assessment is extended to 10 years. And the counting of
the prescriptive period shall run from the discovery of the omission. In the
case at bar, the omission was deemed to be discovered in the re-investigation
conducted in July 1957. Hence, the final assessment notice issued in
February 1958 was well within the ten year prescriptive period. Gonzales
was adjudged to pay the deficiency tax in the final assessment notice,
without prejudice to her right to ask reimbursement from Joses estate when
Jose already died

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CASES ON VALUE-ADDED TAX (VAT)

163 SCRA 371

PASCUA, KIM KENNETH P.

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Kapatiran vs. Tan
FACTS:
These four (4) petitions, which have been consolidated because of the
similarity of the main issues involved therein, seek to nullify Executive
Order No. 273 (EO 273, for short), issued by the President of the Philippines
on 25 July 1987, to take effect on 1 January 1988, and which amended
certain sections of the National Internal Revenue Code and adopted the
value-added tax (VAT, for short), for being unconstitutional in that its
enactment is not allegedly within the powers of the President; that the VAT
is oppressive, discriminatory, regressive, and violates the due process and
equal protection clauses and other provisions of the 1987 Constitution

ISSUE:
Whether or not EO 273 is in violation of the 1987 constitution

HELD:
The court sees that EO 273 satisfies all the requirements of a valid tax.
A tax is considered uniform when it operates with the same force and effect
in every place where the subject may be found. Also, equity and uniformity
in taxation means that all taxable articles or kinds of property of the same
class shall be taxed at the same rate; therefore, it does not violate the 1987
constitution.

235 SCRA 630

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Tolentino et.al. vs. Secretary of Finance
FACTS:
The value-added tax (VAT) is levied on the sale, barter or exchange of
goods and properties as well as on the sale or exchange of services. It is
equivalent to 10% of the gross selling price or gross value in money of
goods or properties sold, bartered or exchanged or of the gross receipts from
the sale or exchange of services. Republic Act No. 7716 seeks to widen the
tax base of the existing VAT system and enhance its administration by
amending the National Internal Revenue Code.
Among the Petitioners was the Philippine Press Institute which claim
that R.A.7716 violates their press freedom and religious liberty, having
removed them from the exemption to pay Value Added Tax. It is contended
by the PPI that by removing the exemption of the press from the VAT while
maintaining those granted to others, the law discriminates against the press.
At any rate, it is averred, "even nondiscriminatory taxation of
constitutionally guaranteed freedom is unconstitutional." PPI argued that the
VAT is in the nature of a license tax.

ISSUE:
Whether or not the purpose of the VAT is the same as that of a license
tax.

HELD:
A license tax, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on
the exercise of its right. Hence, although its application to others, such those
selling goods, is valid, its application to the press or to religious groups, such
as the Jehovahs Witnesses, in connection with the latters sale of religious
books and pamphlets, is unconstitutional.
The VAT is, however, different. It is not a license tax. It is not a tax on
the exercise of a privilege, much less a constitutional right. It is imposed on
the sale, barter, lease or exchange of goods or properties or the sale or
exchange of services and the lease of properties purely for revenue purposes.
To subject the press to its payment is not to burden the exercise of its right
any more than to make the press pay income tax or subject it to general
regulation is not to violate its freedom under the Constitution.

G.R. No. 168056: September 1, 2005

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ABAKADA-GURO Partylist vs. Ermita
AUSTRIA-MARTINEZ, J.
FACTS:
Before R.A. No. 9337 took effect, petitioners ABAKADA GURO
Party List, et al., filed a petition for prohibition on May 27, 2005 questioning
the constitutionality of Sections 4, 5 and 6 of R.A. No. 9337, amending
Sections 106, 107 and 108, respectively, of the National Internal Revenue
Code (NIRC). Section 4 imposes a 10% VAT on sale of goods and
properties, Section 5 imposes a 10% VAT on importation of goods, and
Section 6 imposes a 10% VAT on sale of services and use or lease of
properties. These questioned provisions contain a uniform provision
authorizing the President, upon recommendation of the Secretary of Finance,
to raise the VAT rate to 12%, effective January 1, 2006, after specified
conditions have been satisfied. Petitioners argue that the law is
unconstitutional.

ISSUE:
1. Whether or not there is a violation of Article VI, Section 24 of the
Constitution.
2. Whether or not there is undue delegation of legislative power in
violation of Article VI Sec 28(2) of the Constitution.
HELD:
1.

Since there is no question that the revenue bill exclusively

originated in the House of Representatives, the Senate was acting
within its constitutional power to introduce amendments to the House
bill when it included provisions in Senate Bill No. 1950 amending
corporate income taxes, percentage, and excise and franchise taxes.

2.

There is no undue delegation of legislative power but only of

the discretion as to the execution of a law. This is constitutionally
permissible. Congress does not abdicate its functions or unduly
delegate power when it describes what job must be done, who must do
it, and what is the scope of his authority; in our complex economy that
is frequently the only way in which the legislative process can go
forward.

GR Nos. 141104 & 148763: June 8, 2007

PASCUA, KIM KENNETH P.

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Atlas Consolidated Mining vs. CIR
CHICO-NAZARIO, J.
FACTS:
Petitioner corporation, a VAT-registered taxpayer engaged in mining,
production, and sale of various mineral products, filed claims with the BIR
for refund/credit of input VAT on its purchases of capital goods and on its
zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did
not immediately act on the matter prompting the petitioner to file a petition
for review before the CTA. The latter denied the claims on the grounds that
for zero-rating to apply, 70% of the company's sales must consists of
exports, that the same were not filed within the 2-year prescriptive period
(the claim for 1992 quarterly returns were judicially filed only on April 20,
1994), and that petitioner failed to submit substantial evidence to support its
claim for refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider
the following: sales to PASAR and PHILPOS within the EPZA as zero-rated
export sales; the 2-year prescriptive period should be counted from the date
of filing of the last adjustment return which was April 15, 1993, and not on
every end of the applicable quarters; and that the certification of the
independent CPA attesting to the correctness of the contents of the summary
of suppliers invoices or receipts examined, evaluated and audited by said
CPA should substantiate its claims.
ISSUE:
Did the petitioner corporation sufficiently establish the factual bases
for its applications for refund/credit of input VAT?
HELD:
NO. Although the Court agreed with the petitioner corporation that the
two-year prescriptive period for the filing of claims for refund/credit of input
VAT must be counted from the date of filing of the quarterly VAT return, and
that sales to PASAR and PHILPOS inside the EPZA are taxed as exports
because these export processing zones are to be managed as a separate
customs territory from the rest of the Philippines, and thus, for tax purposes,
are effectively considered as foreign territory, it still denies the claims of
petitioner corporation for refund of its input VAT on its purchases of capital
goods and effectively zero-rated sales during the period claimed for not
being established and substantiated by appropriate and sufficient evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in
derogation of the sovereign authority. The taxpayer who claims for
exemption must justify his claim by the clearest grant of organic or statute
law and should not be permitted to stand on vague implications.
478 SCRA 61

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CIR vs. PLDT
FACTS:
PLDT is a grantee of a franchise under Republic Act (R.A.) No. 7082
to install, operate and maintain a telecommunications system throughout the
Philippines. For equipment, machineries and spare parts it imported for its
business on different dates from October 1, 1992 to May 31, 1994, PLDT
paid the BIR certain amount; compensation tax, advance sales tax and other
internal revenue taxes. For similar importations made between March 1994
and May, 31 1994, PLDT paid a certain amount of value added tax.

ISSUE:
Whether or not PLDT, given the tax component of its franchise, is
exempt from paying VAT, compensating taxes, advance sales taxes and
internal revenue taxes on its importations?

HELD:
NO. The liability for the payment of the indirect tax lies only with the
seller of the goods or services, not in the buyer thereof. In indirect taxes,
when the seller passes on the tax to his buyer, he, in effect, shifts the burden,
not the liability to pay it, to the purchaser as part of the price of goods sold
or rendered.
Indirect taxes are those that are demanded, in the first instance, from,
or are paid by, one person in the expectation and intention that he can shift
the burden to someone else. Stated elsewise, indirect taxes are taxes wherein
the liability for the payment of the tax falls on one person but the burden
thereof can be shifted or passed on to another person, such as when the tax is
imposed upon goods before reaching the consumer who ultimately pays for
it. When the seller passes on the tax to his buyer, he, in effect, shifts the tax
burden, not the liability to pay it, to the purchaser as part of the price of
goods sold or services rendered.
Advance sales tax has the attributes of an indirect tax because the taxpaying importer of goods for sale or of raw materials to be processed into
merchandise can shift the tax or, to borrow, lay the economic burden of the
tax, on the purchaser, by subsequently adding the tax to the selling price of
the imported article or finished product.

G.R. No. 173425: September 4, 2012

PASCUA, KIM KENNETH P.

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Fort Bonifacio Dev. Corp. vs. CIR
DEL CASTILLO, J.
FACTS:
Petitioner was a real estate developer that bought from the national
government a parcel of land that used to be the Fort Bonifacio military
reservation. At the time of the said sale there was as yet no VAT imposed so
Petitioner did not pay any VAT on its purchase. Subsequently, Petitioner sold
two parcels of land to Metro Pacific Corp. In reporting the said sale for VAT
purposes (because the VAT had already been imposed in the interim),
Petitioner claimed transitional input VAT corresponding to its inventory of
land. The BIR disallowed the claim of presumptive input VAT and thereby
assessed Petitioner for deficiency VAT.

ISSUE:
Is Petitioner entitled to claim the transitional input VAT on its sale of
real properties given its nature as a real estate dealer and if so (i) is the
transitional input VAT applied only to the improvements on the real property
or is it applied on the value of the entire real property and (ii) should there
have been a previous tax payment for the transitional input VAT to be
creditable?
HELD:
YES.
Petitioner is entitled to claim transitional input VAT based on the
value of not only the improvements but on the value of the entire real
property and regardless of whether there was in fact actual payment on the
purchase of the real property or not.
The amendments to the VAT law do not show any intention to make
those in the real estate business subject to a different treatment from those
engaged in the sale of other goods or properties or in any other commercial
trade or business. On the scope of the basis for determining the available
transitional input VAT, the CIR has no power to limit the meaning and
coverage of the term "goods" in Section 105 of the Tax Code without
statutory authority or basis. The transitional input tax credit operates to
benefit newly VAT-registered persons, whether or not they previously paid
taxes in the acquisition of their beginning inventory of goods, materials and
supplies

632 SCRA 422

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CIR vs. Aichi Fong Company of Asia
FACTS:
Respondent Aichi Forging Company of Asia, Inc., a corporation duly
organized and existing under the laws of the Republic of the Philippines, is
engaged in the manufacturing, producing, and processing of steel and its byproducts. It is registered with the Bureau of Internal Revenue (BIR) as a
Value-Added Tax (VAT) entity and its products, close impression die steel
forgings and tool and dies, are registered with the Board of Investments
(BOI) as a pioneer status. On September 30, 2004, respondent filed a claim
for refund/credit of input VAT for the period July 1, 2002 to September 30,
2002 in the total amount of P3,891,123.82 with the petitioner Commissioner
of Internal Revenue (CIR), through the Department of Finance (DOF) OneStop Shop Inter-Agency Tax Credit and Duty Drawback Center.
ISSUE:
Whether or not the Petitioners administrative claim filed out of time

HELD:
NO.
The right to claim the refund must be reckoned from the close of the
taxable quarter when the sales were made. In this case September 30,
2004, The Court added that the rules under Sections 204 (C) and 229 as
cross-referred to Section 114 do not apply as they only cover erroneous
payments or illegal collections of taxes which is not the case for refund of
unutilized input VAT. Thus, the claim was filed on time even if 2004 was a
leap year since the sanctioned method of counting is the number of months.

613 SCRA 774

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CIR vs. SM PRIME HOLDINGS
FACTS:
Respondents SM Prime Holdings, Inc. (SM Prime) and First Asia
Realty Development Corporation (First Asia) are domestic corporations duly
organized and existing under the laws of the Republic of the Philippines.
Both are engaged in the business of operating cinema houses, among others.
On September 26, 2003, the Bureau of Internal Revenue (BIR) sent SM
Prime a Preliminary Assessment Notice (PAN) for value added tax (VAT)
deficiency on cinema ticket sales in the amount of P119,276,047.40 for
taxable year 2000.8 In response, SM Prime filed a letter-protest dated
December 15, 2003.9On December 12, 2003, the BIR sent SM Prime a
Formal Letter of Demand for the alleged VAT deficiency, which the latter
protested in a letter dated January 14, 2004.10On September 6, 2004, the
BIR denied the protest filed by SM Prime and ordered it to pay the VAT
deficiency for taxable year 2000 in the amount of P124,035,874.12.

ISSUE:
Whether the gross receipts derived by operators or proprietors of
cinema/theater houses from admission tickets are subject to VAT?

HELD:
The power of taxation is sometimes called also the power to destroy.
Therefore, it should be exercised with caution to minimize injury to the
proprietary rights of a taxpayer. It must be exercised fairly, equally and
uniformly, lest the tax collector kill the "hen that lays the golden egg." And,
in order to maintain the general public's trust and confidence in the
Government this power must be used justly and not treacherously.