A.

Estate Tax
1.
Ferdinand E. Marcos II vs. Court of Appeals
G.R. No. 120880, June 5, 1997

Q: Is the BIR authorized to collect estate tax deficiencies by the summary

remedy of levy upon and sale of real properties of the decedent without first
securing the authority of the court sitting in probate court over the supposed will
of the decedent?
A: YES. The BIR is authorized to collect estate tax deficiency through the summary
remedy of levying upon the sale of real properties of a decedent, without the cognition
and authority of the court sitting in probate over the supposed will of the deceased,
because the collection of estate tax is executive in character. As such, the estate tax is
exempted from the application of the statute of non-claims, and this is justified by the
necessity of government funding, immortalized in the maxim that taxes are the lifeblood
of the government.
Re: Failure To Question Assessment Served Upon the Decedent’s Heirs
Apart from failing to file the required estate tax return, petitioner and the other Marcos
heirs failed to question the assessment served on them as heirs of the late President
Ferdinand Marcos, thereby allowing said assessment to lapse into finality. Said
assessments having become the final and executory, the same may be collected by
summary remedy of distraint or levy.
FACTS:
1. Bongbong Marcos sought for the reversal of the ruling of the Court of Appeals to
grant CIR's petition to levy the properties of the late Pres. Marcos to cover the
payment of his tax delinquencies during the period of his exile in the US.
2. The Marcos family was assessed by the BIR after it failed to file estate tax
returns.
3. The assessment were not protested administratively, by Mrs. Marcos and the
heirs of the late president, so, they became final and unappealable after the
period for filing of opposition has prescribed.
4. Bongbong argues that "the numerous pending court cases questioning the late
president's ownership or interests in several properties (both real and personal)
make the total value of his estate, and the consequent estate tax due, incapable
of exact pecuniary determination at this time.
5. Bongbong further argues respondents' assessment of the estate tax and their
issuance of the Notices of Levy and sale are premature and oppressive. He
points out the pendency of Sandiganbayan Civil Case Nos. 0001-0034 and 0141,
which were filed by the government to question the ownership and interests of
the late President in real and personal properties located within and outside the
Philippines.
6. On the other hand, the BIR argued that the State’s authority to collect internal
revenue taxes is paramount.
7. Bongbong Marcos contends that the properties could not be levied to cover the
tax dues because they are still pending probate with the court and settlement of
tax deficiencies could not be had unless there is an order by the probate court or
until the probate proceedings are terminated.
8. Petitioner also pointed out that applying Memorandum Circular No. 38-68, the
BIR's notices of levy on the Marcos properties were issued beyond the
allowed period and are therefore null and void.
1
ISSUE:
1. WON the assessments were final and unappealable.
2. WON the BIR has authority to collect by the summary remedy of levying upon,
and sale of real properties of the decedent, estate tax deficiencies, even pending
probate proceeding on the decedent’s will.

HELD:
1. YES.

The deficiency income tax assessments and estate tax assessment are already
final and unappealable and the subsequent levy of real properties is a tax remedy
resorted to by the government sanctioned by Section 213 and 218 of the National
Internal Revenue Code. This summary tax remedy is distinct and separate from the
other tax remedies such as judicial Civil actions and Criminal actions and is not
affected or precluded by the pendency of any other tax remedies instituted by the
government.

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 Bureau of
Internal Revenue 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. Even an assessment based on estimates
is prima facie valid and lawful where it does not appear to have been arrived at
arbitrarily or capriciously. The burden of proof is upon the complaining party to
show clearly that the assessment is erroneous. Failure to present proof of error in
the assessment will justify the judicial affirmance of said assessment. 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.

2. YES.

The approval of the court sitting in probate or as a settlement tribunal over

the deceased's estate is not a mandatory requirement in the collection of estate
taxes. 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.

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
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 for estate taxes, before the same can be enforced and collected. The enforcement
of tax laws and the collection of taxes are of paramount importance for the
sustenance of government. Taxes are the lifeblood of government and should be
collected without unnecessary hindrance. However, such collection should be made
in accordance with law as any arbitrariness will negate the existence of government
itself.

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. Even an assessment based on the estimate is prima facie valid
and lawful where it does not appear to have been arrived at arbitrarily or capriciously.
The burden of proof is upon the complaining party to show clearly that the assessment
is erroneous.

Additional notes:

The nature of the process of estate tax collection: The inheritance tax does not
directly involve the administration of the decedent’s estate although it may be viewed
as an incident to the complete settlement of an estate, and under some statutes, it is
made the duty of the probate court to make the amount of the inheritance tax a part of
the final decree of distribution of the estate. It is not against the property of decedent,
nor it is a claim against the estate as much, but it is against the interest or property
right which the heir has in the property formerly held by decedent. it is a proceeding in
rem.

On prescription: 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 Sec. 223 of the NIRC in case of failure to file a return the tax may be
assessed at anytime within 10 years after the omission and any tax so assessed may
be collected by levy upon real property within 3 years (now 5 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 no reason why the BIR cannot continue with the collection of the
said tax.

2.
Commission of Internal Revenue vs. Court of Appeals, Josefina Pajonar, et. al.
G.R. No. 123206, March 22, 2000

Doctrine: [Judicial Expenses] Expenses on extrajudicial settlement of the estate are

allowed as deductions. They come within the meaning of administration expenses.

Summary:
By reason of the Bataan Death March during World War II, Pedro Pajonar became
insane. His property was placed under the guardianship of PNB, while his sister
Josefina became the guardian over his person, and eventually the administratrix of his
estate when he died. After his death, his heirs executed an extrajudicial settlement and
paid the estate tax. Thereafter, BIR assessed the estate of Pedro deficiency taxes. The
estate paid under protest and filed a case with the CTA, which in turn allowed P60,753
3
representing the notarial fee for the Extrajudicial Settlement and P50,000 attorney's
fees for guardianship proceedings as among the allowed deductions from the gross
estate.

Issue is WON the notarial fee and attorney's fees allowed as deductions from the gross
estate. – YES.

The notarial fee paid for the extrajudicial settlement is a deductible expense since such
settlement effected a distribution of Pedro’s estate to his lawful heirs. Similarly,
attorney's fees paid to PNB for acting as the guardian of Pedro’s property during his
lifetime should also be considered as a deductible administration expense. This is
because PNB provided a detailed accounting of decedent's property and gave advice
as to the proper settlement of the latter's estate, acts which contributed towards the
collection of decedent's assets and the subsequent settlement of the estate.

FACTS:
Pedro Pajonar was a member of the Philippine Scout, Bataan Contingent, during World
War II and was a part of the infamous Death March by reason of which he suffered
shock and became insane. His sister Josefina became the guardian over his person,
while his property was placed under the guardianship of the Philippine National Bank
(PNB) by RTC of Dumaguete.

After his death, PNB filed an accounting of his property under guardianship valued at
P3,037,672.09 in a Special Proceeding. However, PNB did NOT file an estate tax
return, instead it advised Pedro's heirs to execute an extrajudicial settlement and to
pay the taxes on his estate.

Pursuant to the assessment by the BIR, the estate of Pedro paid taxes in the amount
of P2,557. Josefina then filed a petition with RTC of Dumaguete for the issuance in her
favor of letters of administration of the estate of her brother. This was granted and she
was appointed as the regular administratrix of Pedro’s estate.

The BIR then made a second assessment for deficiency estate tax which Josefina, in
her capacity as administratrix and heir of Pedro’s estate, paid under protest. And
without waiting for her protest to be resolved by the BIR, she filed a petition for review
with the Court of Tax Appeals (CTA), praying for the refund of P1,527,790.98, or in the
alternative, P840,202.06, as erroneously paid estate tax.

The CTA ordered the Commissioner of Internal Revenue to refund Josefina

P252,585.59, representing erroneously paid estate tax for the year 1988. Among the
deductions from the gross estate allowed by the CTA were P60,753 representing the
notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the
attorney's fees for guardianship proceedings. CIR filed a MR which the CTA denied. It
then filed with the CA a petition for review which was also denied Hence, the present
appeal.

ISSUE: Whether or not the notarial fee paid for the extrajudicial settlement of P60,753
and the attorney's fees in the guardianship proceedings of P50,000 may be allowed as

4
deductions from the gross estate of decedent in order to arrive at the value of the net
estate.

RULING:
YES. Extrajudicial expenses are expenses of administration.

Administration expenses, as an allowable deduction from the gross estate of the

decedent for purposes of arriving at the value of the net estate, have been construed
by the federal and state courts of the United States to include all expenses
"essential to the collection of the assets, payment of debts or the distribution of
the property to the persons entitled to it." In other words, the expenses must be
essential to the proper settlement of the estate.

This Court adopts the view under American jurisprudence that expenses incurred in the
extrajudicial settlement of the estate should be allowed as a deduction from the gross
estate. There is no requirement of formal administration. It is sufficient that the
expense be a necessary contribution toward the settlement of the estate.

Although the Tax Code specifies "judicial expenses of the testamentary or intestate
proceedings," there is no reason why expenses incurred in the administration and
settlement of an estate in extrajudicial proceedings should not be allowed. However,
deduction is limited to such administration expenses as are actually and
necessarily incurred in the collection of the assets of the estate, payment of the debts,
and distribution of the remainder among those entitled thereto.

Such expenses may include executor's or administrator's fees, attorney's fees, court
fees and charges, appraiser's fees, clerk hire, costs of preserving and distributing the
estate and storing or maintaining it, brokerage fees or commissions for selling or
disposing of the estate, and the like.
Deductible attorney's fees are those incurred by the executor or administrator in the
settlement of the estate or in defending or prosecuting claims against or due the
estate. It is clear then that the extrajudicial settlement was for the purpose of payment
of taxes and the distribution of the estate to the heirs.

The execution of the extrajudicial settlement necessitated the notarization of the

same. Hence the Contract of Legal Services entered into between Josefina and
counsel was presented in evidence for the purpose of showing that the amount of
P60,753.00 was for the notarization of the Extrajudicial Settlement.

The notarial fee of P60,753.00 was incurred primarily to settle the estate of Pedro. Said
amount should then be considered an administration expenses actually and
necessarily incurred in the collection of the assets of the estate, payment of debts and
distribution of the remainder among those entitled thereto.

Attorney's fees, on the other hand, in order to be deductible from the gross estate
must be essential to the collection of assets, payment of debts or the distribution of the
property to the persons entitled to it. The services for which the fees are charged must
relate to the proper settlement of the estate.

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The amount of P50,000.00 was incurred as attorney's fees in the guardianship
proceedings. The guardianship proceeding in this case was necessary for the
distribution of the property of the deceased Pedro. PNB was appointed guardian over
the assets of the deceased, and that necessarily the assets of the deceased formed
part of his gross estate. PNB provided a detailed accounting of decedent's property
and gave advice as to the proper settlement of the latter's estate, acts which
contributed towards the collection of decedent's assets and the subsequent settlement
of the estate. WHEREFORE, the December 21, 1995 Decision of the Court of Appeals
is AFFIRMED.

3.
Dizon vs. Court of Tax Appeals
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:
1. 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.
2. Whether the CA erred in affirming the CTA in the latter's determination of the
deficiency estate tax imposed against the Estate.

RULING:
1. 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

6
 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.

2. YES. 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.

The Court agreed with an American ruling relating to the date-of-death

valuation, 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, to be followed. Also the Court,
emphasized the definition of claims which are debts or demands of a pecuniary
nature which could have been enforced against the deceased in his lifetime, or
liability contracted by the deceased before his death. Therefore, the claims
existing at the time of death are significant to, and should be made the basis of,
the determination of allowable deductions.

B. Donor’s Tax
1.
Manuel Abello vs. Commission of Internal Revenue
G.R. No. 120721, February 23, 2005

FACTS:

7
Due to the 1987 national elections Angara, Abello, Concepcion, Regala and Cruz
[ACCRA] law firm contributed 882, 661 pesos to the campaign funds of Senator
Edgardo Angara, of which a donor’s tax was imposed by an assessment of the BIR.

Petitioner claimed they should not be liable of donor’s tax because electoral
contributions are not considered gifts under the NIRC. The BIR Commissioner denied
such argument, however it was overturned by the CTA.

Petitioners argue that since the definition of contribution under the Omnibus Election
Code is that it is for he purposes of influencing the results of the election, it is not a gift
or donation for the lack of a donative intent. They argue that a consideration for a gift is
liberality while in a political contribution is the desire to influence the result of the
election.

ISSUE: Whether or not petitioners are liable for donor’s tax.

HELD:

Yes. The present case falls squarely within the definition of a donation. Petitioners, the
late Manuel G.

Abello, Jose C. Concepcion, Teodoro D. Regala and Avelino V. Cruz, each gave
P882,661.31 to the campaign funds of Senator Edgardo Angara, without any material
consideration. All three elements of a donation are present. The patrimony of the four
petitioners were reduced by P882,661.31 each.

Senator Edgardo Angaras patrimony correspondingly increased by P3,530,645.24.

There was intent to do an act of liberality or animus donandi was present since each of
the petitioners gave their contributions without any consideration.

Taken together with the Civil Code definition of donation, Section 91 of the NIRC is
clear and unambiguous, thereby leaving no room for construction.

Donative intent is presumed present when one gives a part of ones patrimony to
another without consideration. Second, donative intent is not negated when the person
donating has other intentions, motives or purposes which do not contradict donative
intent.

The fact that petitioners will somehow in the future benefit from the election of the
candidate to whom they contribute, in no way amounts to a valuable material
consideration so as to remove political contributions from the purview of a donation.
Senator Angara was under no obligation to benefit the petitioners.

Notes:

What is a gift?
- A gift is generally defined as a voluntary transfer of property by one to another without
any consideration or compensation therefor [General definition]

What is a donation?
8
-Art. 725 of the NCC provides that a donation is an act of liberality whereby a person
disposes gratuitously of a thing or right in favor of another, who accepts it.
- Donation has the following elements: (a) the reduction of the patrimony of the donor;
(b) the increase in the patrimony of the donee; and, (c) the intent to do an act of
liberality or animus donandi

2.
Philippine American Life and General Insurance vs. Secretary of Finance
G.R. No. 210987, November 24, 2014

Facts:
* Petitioner The Philippine American Life and General Insurance Company (Philamlife)
used to own 498,590 Class A shares in Philam Care Health Systems, Inc.
(PhilamCare), representing 49.89% of the latter's outstanding capital stock.

* In 2009, petitioner, in a bid to divest itself of its interests in the health maintenance
organization industry, offered to sell its shareholdings in PhilamCare through
competitive bidding. Thus, on September 24, 2009, petitioner's Class A shares were
sold for USD 2,190,000, or PhP 104,259,330 based on the prevailing exchange rate at
the time of the sale, to STI Investments, Inc., who emerged as the highest bidder.
After the sale was completed and the necessary documentary stamp and capital gains
taxes were paid, Philamlife filed an application for a certificate authorizing
registration/tax clearance with the Bureau of Internal Revenue (BIR) Large Taxpayers
Service Division to facilitate the transfer of the shares.

*Months later, petitioner was informed that it needed to secure a BIR ruling in
connection with its application due to potential donor’s tax liability. Petitioner requested
a ruling to confirm that the sale was not subject to donor’s tax, pointing out, in its
request, the following:
1. that the transaction cannot attract donor’s tax liability since there was no donative
intent and, ergo, no taxable donation, citing BIR Ruling [DA-(DT-065) 715-09] dated
November 27, 2009
2. that the shares were sold at their actual fair market value and at arm’s length
3. that as long as the transaction conducted is at arm’s length––such that a bona fide
business arrangement of the dealings is done in the ordinary course of business––a
sale for less than an adequate consideration is not subject to donor’s tax;
4. that donor’s tax does not apply to sale of shares sold in an open bidding process.

*Respondent Commissioner on Internal Revenue (Commissioner) denied Philamlife’s

request through BIR Ruling No. 015-12. As determined by the Commissioner, the
selling price of the shares thus sold was lower than their book value based on the
financial statements of PhilamCare as of the end of 2008. Commissioner ruled that the
difference between the book value and the selling price in the sales transaction is
taxable donation subject to a 30% donor’s tax under Section 99(B) of the NIRC.
Respondent Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-09], on
which petitioner anchored its claim, has already been revoked by Revenue
Memorandum Circular (RMC) No. 25-2011. Commissioner held that donor’s tax

9
became imposable on the price difference pursuant to Sec. 100 of the National Internal
Revenue Code:
Where property, other than real property referred to in Section 24(D), is
transferred for less than an adequate and full consideration in money or
money’s worth, then the amount by which the fair market value of the property
exceeded the value of the consideration shall, for the purpose of the tax imposed
by this Chapter, be deemed a gift, and shall be included in computing the amount
of gifts made during the calendar year.

The afore-quoted provision, the Commissioner added, is implemented by

Revenue Regulation 6-2008 (RR 6-2008):
SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT
TRADED THROUGH A LOCAL STOCK EXCHANGE PURSUANT TO SECS.
24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE, AS
AMENDED. —
xxxx
(c) Determination of Amount and Recognition of Gain or Loss –
(c.1) In the case of cash sale, the selling price shall be the consideration per
deed of sale.
xxxx
(c.1.4) In case the fair market value of the shares of stock sold, bartered, or
exchanged is greater than the amount of money and/or fair market value of
the property received, the excess of the fair market value of the shares of stock
sold, bartered or exchanged over the amount of money and the fair market value
of the property, if any, received as consideration shall be deemed a gift
subject to the donor’s tax under Section 100 of the Tax Code, as
amended.
xxxx
(c.2) Definition of ‘fair market value’ of Shares of Stock. – For purposes of this
Section, ‘fair market value’ of the share of stock sold shall be:
xxxx
(c.2.2) In the case of shares of stock not listed and traded in the local stock
exchanges, the book value of the shares of stock as shown in the financial
statements duly certified by an independent certified public accountant
nearest to the date of sale shall be the fair market value.

*Petitioner requested respondent Secretary of Finance (Secretary) to review BIR

Ruling No. 015-12, but to no avail. For on November 26, 2012, respondent Secretary
affirmed the Commissioner’s assailed ruling in its entirety.

*Petitioner elevated the case to the CA via a petition for review, which later dismissed
the petition. In disposing of the CA petition, the appellate court ratiocinated that it is the
Court of Tax Appeals (CTA), pursuant to Sec. 7(a)(1) of Republic Act No. 1125 (RA
1125), as amended, which has jurisdiction over the issues raised. The outright
dismissal, so the CA held, is predicated on the postulate that BIR Ruling No. 015-12
was issued in the exercise of the Commissioner’s power to interpret the NIRC and
other tax laws. Consequently, requesting for its review can be categorized as "other
matters arising under the NIRC or other laws administered by the BIR," which is under
the jurisdiction of the CTA, not the CA.
10
Issues:
1. Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction;
and
2. Whether or not the price difference in petitioner’s adverted sale of shares in
PhilamCare attracts donor’s tax.

Held:
1. No, because reviews by the Secretary of Finance pursuant to Sec. 4 of the
NIRC are appealable to the CTA
Admittedly, there is no provision in law that expressly provides where exactly
the ruling of the Secretary of Finance under the adverted NIRC provision is
appealable to. However, We find that Sec. 7(a)(1) of RA 1125, as amended,
addresses the seeming gap in the law as it vests the CTA, albeit impliedly, with
jurisdiction over the CA petition as "other matters" arising under the NIRC or other
laws administered by the BIR. As stated:
Sec. 7. Jurisdiction.- The CTA shall exercise:
a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

Decisions of the Commissioner of Internal Revenue in cases involving

disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties in relation thereto, or other matters arising under the National Internal
Revenue or other laws administered by the Bureau of Internal Revenue.
(emphasis supplied)

Even though the provision suggests that it only covers rulings of the
Commissioner, We hold that it is, nonetheless, sufficient enough to include
appeals from the Secretary’s review under Sec. 4 of the NIRC.

It is axiomatic that laws should be given a reasonable interpretation which

does not defeat the very purpose for which they were passed.17 Courts should
not follow the letter of a statute when to do so would depart from the true intent of
the legislature or would otherwise yield conclusions inconsistent with the purpose
of the act.18

Indeed, to leave undetermined the mode of appeal from the Secretary of

Finance would be an injustice to taxpayers prejudiced by his adverse rulings. To
remedy this situation, We imply from the purpose of RA 1125 and its amendatory
laws that the CTA is the proper forum with which to institute the appeal. This is
not, and should not, in any way, be taken as a derogation of the power of the
Office of President but merely as recognition that matters calling for technical
knowledge should be handled by the agency or quasi-judicial body with
specialization over the controversy. As the specialized quasi-judicial agency
mandated to adjudicate tax, customs, and assessment cases, there can be no
other court of appellate jurisdiction that can decide the issues raised in the CA
petition, which involves the tax treatment of the shares of stocks sold.

11
 The respective teachings in British American Tobacco and Asia
International Auctioneers, at first blush, appear to bear no conflict––that when the
validity or constitutionality of an administrative rule or regulation is assailed, the
regular courts have jurisdiction; and if what is assailed are rulings or opinions of
the Commissioner on tax treatments, jurisdiction over the controversy is lodged
with the CTA. The problem with the above postulates, however, is that they
failed to take into consideration one crucial point––a taxpayer can raise
both issues simultaneously.

In this case, petitioner essentially questions the CIR’s ruling that

Petitioner’s sale of shares is a taxable donation under Sec. 100 of the NIRC. The
validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely
questioned incidentally since it was used by the CIR as bases for its
unfavourable opinion. Clearly, the Petition involves an issue on the taxability of
the transaction rather than a direct attack on the constitutionality of Sec. 100,
Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly
pertains to the CTA under Sec. 7 of RA 9282.

2. Yes, the price difference is subject to donor's tax

Petitioner's substantive arguments are unavailing. The absence of donative

intent, if that be the case, does not exempt the sales of stock transaction from
donor's tax since Sec. 100 of the NIRC categorically states that the amount by
which the fair market value of the property exceeded the value of the
consideration shall be deemed a gift. Thus, even if there is no actual donation,
the difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC
but merely sets the parameters for determining the "fair market value" of a sale of
stocks. Such issuance was made pursuant to the Commissioner's power to
interpret tax laws and to promulgate rules and regulations for their
implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been issued
after the sale, was being applied retroactively in contravention to Sec. 246 of the
NIRC.26 Instead, it merely called for the strict application of Sec. 100, which was
already in force the moment the NIRC was enacted.

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