FERDINAND R. MARCOS II, petitioner, vs. COURT OF APPEALS, THE COMMISSIONER OF THE BUREAU OF INTERNAL REVENUE and HERMINIA D. DE GUZMAN, respondents.

D E C I S I O N

TORRES, JR., J.:

In this Petition for Review on Certiorari, Government action is once again assailed as precipitate and unfair, suffering the basic and oftly implored requisites of due process of law.Specifically, the petition assails the Decision[1] of the Court of Appeals dated November 29, 1994 in CA-G.R. SP No. 31363, where the said court held:

"In view of all the foregoing, we rule that the deficiency income tax assessments and estate tax assessment, are already final and (u)nappealable -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.

WHEREFORE, premises considered, judgment is hereby rendered DISMISSING the petition for certiorari with prayer for Restraining Order and Injunction.

No pronouncements as to costs.

SO ORDERED."

More than seven years since the demise of the late Ferdinand E. Marcos, the former President of the Republic of the Philippines, the matter of the settlement of his estate, and its dues to the government in estate taxes, are still unresolved, the latter issue being now before this Court for resolution. Specifically, petitioner Ferdinand R. Marcos II, the eldest son of the decedent, questions the actuations of the respondent Commissioner of Internal Revenue 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, which is docketed as Sp. Proc. No. 10279 in the Regional Trial Court of Pasig, Branch 156.

Petitioner had filed with the respondent Court of Appeals a Petition for Certiorari and Prohibition with an application for writ of preliminary injunction and/or temporary restraining order on June 28, 1993, seeking to -

I. Annul and set aside the Notices of Levy on real property dated February 22, 1993 and May 20, 1993, issued by respondent Commissioner of Internal Revenue;

II. Annul and set aside the Notices of Sale dated May 26, 1993;

III. Enjoin the Head Revenue Executive Assistant Director II (Collection Service), from proceeding with the Auction of the real properties covered by Notices of Sale.

After the parties had pleaded their case, the Court of Appeals rendered its Decision [2] on November 29, 1994, ruling that the deficiency assessments for estate and income tax made upon the petitioner and the estate of the deceased President Marcos have already become final and unappealable, and may thus be enforced by the summary remedy of levying upon the properties of the late President, as was done by the respondent Commissioner of Internal Revenue.

"WHEREFORE, premises considered judgment is hereby rendered DISMISSING the petition for Certiorari with prayer for Restraining Order and Injunction.

No pronouncements as to cost.

SO ORDERED."

Unperturbed, petitioner is now before us assailing the validity of the appellate court's decision, assigning the following as errors:

A. RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT THE SUMMARY TAX REMEDIES RESORTED TO BY THE GOVERNMENT ARE NOT AFFECTED AND PRECLUDED BY THE PENDENCY OF THE SPECIAL PROCEEDING FOR THE ALLOWANCE OF THE LATE

PRESIDENT'S ALLEGED WILL. TO THE CONTRARY, THIS PROBATE PROCEEDING PRECISELY PLACED ALL PROPERTIES WHICH FORM PART OF THE LATE PRESIDENT'S ESTATE IN CUSTODIA LEGIS OF THE PROBATE COURT TO THE EXCLUSION OF ALL OTHER COURTS AND ADMINISTRATIVE AGENCIES.

B. RESPONDENT COURT ARBITRARILY ERRED IN SWEEPINGLY DECIDING THAT SINCE THE TAX ASSESSMENTS OF PETITIONER AND HIS PARENTS HAD ALREADY BECOME FINAL AND UNAPPEALABLE, THERE WAS NO NEED TO GO INTO THE MERITS OF THE GROUNDS CITED IN THE PETITION. INDEPENDENT OF WHETHER THE TAX ASSESSMENTS HAD ALREADY BECOME FINAL, HOWEVER, PETITIONER HAS THE RIGHT TO QUESTION THE UNLAWFUL MANNER AND METHOD IN WHICH TAX COLLECTION IS SOUGHT TO BE ENFORCED BY RESPONDENTS COMMISSIONER AND DE GUZMAN. THUS, RESPONDENT COURT SHOULD HAVE FAVORABLY CONSIDERED THE MERITS OF THE FOLLOWING GROUNDS IN THE PETITION:

(1) The Notices of Levy on Real Property were issued beyond the period provided in the Revenue Memorandum Circular No. 38-68.

(2) [a] The numerous pending court cases questioning the late President's ownership or interests in several properties (both personal and real) make the total value of his estate, and the consequent estate tax due, incapable of exact pecuniary determination at this time. Thus, respondents assessment of the estate tax and their issuance of the Notices of Levy and Sale are premature, confiscatory and oppressive.

[b] Petitioner, as one of the late President's compulsory heirs, was never notified, much less served with copies of the Notices of Levy, contrary to the mandate of Section 213 of the NIRC. As such, petitioner was never given an opportunity to contest the Notices in violation of his right to due process of law.

C. ON ACCOUNT OF THE CLEAR MERIT OF THE PETITION, RESPONDENT COURT MANIFESTLY ERRED IN RULING THAT IT HAD NO POWER TO GRANT INJUNCTIVE RELIEF TO PETITIONER. SECTION 219 OF THE NIRC NOTWITHSTANDING, COURTS POSSESS THE POWER TO ISSUE A WRIT OF PRELIMINARY INJUNCTION TO RESTRAIN RESPONDENTS COMMISSIONER'S AND DE GUZMAN'S ARBITRARY METHOD OF COLLECTING THE ALLEGED DEFICIENCY ESTATE AND INCOME TAXES BY MEANS OF LEVY.

The facts as found by the appellate court are undisputed, and are hereby adopted:

"On September 29, 1989, former President Ferdinand Marcos died in Honolulu, Hawaii, USA.

On June 27, 1990, 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". Said audit team concluded its investigation with a Memorandum dated July 26, 1991. The investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent, an estate tax returns [sic], as well as several income tax returns covering the years 1982 to 1986, -all in violation of the National Internal Revenue Code (NIRC).

Subsequently, criminal charges were filed against Mrs. Imelda R. Marcos before the Regional Trial of Quezon City for violations of Sections 82, 83 and 84 (has penalized under Sections 253 and 254 in relation to Section 252- a & b) of the National Internal Revenue Code (NIRC).

The Commissioner of Internal Revenue 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.

On July 26, 1991, the BIR issued the following: (1) Deficiency estate tax assessment no. FAC-2-89-91-002464 (against the estate of the late president Ferdinand Marcos in the amount of P23,293,607,638.00 Pesos); (2) Deficiency income tax assessment no. FAC-1-85-91-002452 and Deficiency income tax assessment no. FAC-1-86-91-002451 (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 nos. FAC-1-82-91-002460 to FAC-1-85-91-002463 (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 Commissioner of Internal Revenue avers that copies of the deficiency estate and income tax assessments were all personally and constructively served on August 26, 1991 and September 12, 1991 upon Mrs. Imelda Marcos (through her caretaker Mr. Martinez) at her last known address at No.

204 Ortega St., San Juan, M.M. (Annexes 'D' and 'E' of the Petition). Likewise, copies of the deficiency tax assessments issued against petitioner Ferdinand 'Bongbong' Marcos II were also personally and constructively served upon him (through his caretaker) on September 12, 1991, at his last known address at Don Mariano Marcos St. corner P. Guevarra St., San Juan, M.M. (Annexes 'J' and 'J-1' of the Petition). Thereafter, Formal Assessment notices were served on October 20, 1992, 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.

On February 22, 1993, the BIR Commissioner issued twenty-two 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 of Spouses Marcos.

On May 20, 1993, four more Notices of Levy on real property were issued for the purpose of satisfying the deficiency income taxes.

On May 26, 1993, additional four (4) notices of Levy on real property were again issued. The foregoing tax remedies were resorted to pursuant to Sections 205 and 213 of the National Internal Revenue Code (NIRC).

In response to a letter dated March 12, 1993 sent by Atty. Loreto Ata (counsel of herein petitioner) calling the attention of the BIR and requesting that they be duly notified of any action taken by the BIR affecting the interest of their client Ferdinand 'Bongbong Marcos II, as well as the interest of the late president - copies of the aforesaid notices were served on April 7, 1993 and on June 10, 1993, upon Mrs. Imelda Marcos, the petitioner, and their counsel of record, 'De Borja, Medialdea, Ata, Bello, Guevarra and Serapio Law Office'.

Notices of sale at public auction were posted on May 26, 1993, at the lobby of the City Hall of Tacloban City. The public auction for the sale of the eleven (11) parcels of land took place on July 5, 1993.There being no bidder, the lots were declared forfeited in favor of the government.

On June 25, 1993, petitioner Ferdinand 'Bongbong' Marcos II 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."

It has been repeatedly observed, and not without merit, that the enforcement of tax laws and the collection of taxes, is of paramount importance for the sustenance of government.Taxes are the lifeblood of the government and should be collected without unnecessary hindrance. However, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved."[3]

Whether or not the proper avenues of assessment and collection of the said tax obligations were taken by the respondent Bureau is now the subject of the Court's inquiry.

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. The case of Domingo vs. Garlitos[4] is specifically cited to bolster the argument that "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:

"The case of Pineda vs. Court of First Instance of Tayabas and Collector of Internal Revenue (52 Phil 803), relied upon by the petitioner-appellant is good authority on the proposition that the court having control over the administration proceedings has jurisdiction to entertain the claim presented by the government for taxes due and to order the administrator to pay the tax should it find that the assessment

was proper, and that the tax was legal, due and collectible. And the rule laid down in that case must be understood in relation to the case of Collector of Customs vs. Haygood, supra., as to the procedure to be followed in a given case by the government to effectuate the collection of the tax. Categorically stated, 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. While there are cases where courts are required to perform certain duties mandatory and ministerial in character, the function of the court in a case of the present character is not one of them; and here, the court cannot be an organism endowed with latitude of judgment in one direction, and converted into a mere mechanical contrivance in another direction."

On the other hand, it is argued by the 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. According to the respondent, 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.

Concededly, the authority of the Regional Trial Court, sitting, albeit with limited jurisdiction, as a probate court over estate of deceased individual, is not a trifling thing. The court's jurisdiction, once invoked, and made effective, cannot be treated with indifference nor should it be ignored with impunity by the very parties invoking its authority.

In testament to this, it has been held that it is within the jurisdiction of the probate court to approve the sale of properties of a deceased person by his prospective heirs before final adjudication; [5] to determine who are the heirs of the decedent;[6] the recognition of a natural child;[7] the status of a woman claiming to be the legal wife of the decedent;[8] the legality of disinheritance of an heir by the testator;[9] and to pass upon the validity of a waiver of hereditary rights.[10]

The pivotal question the court is tasked to resolve refers to the authority of the Bureau of Internal Revenue 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.

The nature of the process of estate tax collection has been described as follows:

"Strictly speaking, the assessment of an inheritance tax does not directly involve the administration of a 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 is it a claim against the estate as such, but it is against the interest or property right which the heir, legatee, devisee, etc., has in the property formerly held by decedent. Further, under some statutes, it has been held that it is not a suit or controversy between the parties, nor is it an adversary proceeding between the state and the person who owes the tax on the inheritance. However, under other statutes it has been held that the hearing and determination of the cash value of the assets and the determination of the tax are adversary proceedings. The proceeding has been held to be necessarily a proceeding in rem.[11]

In the Philippine experience, the enforcement and collection of estate tax, is executive in character, as the legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Section 3 of the National Internal Revenue Code attests to this:

"Sec. 3. Powers and duties of the Bureau.-The powers and duties of the Bureau of Internal Revenue shall comprehend the assessment and collection of all national internal revenue taxes, fees, and charges, and the enforcement of all forfeitures, penalties, and fines connected therewith, including the execution of judgments in all cases decided in its favor by the Court of Tax Appeals and the ordinary courts. Said Bureau shall also give effect to and administer the supervisory and police power conferred to it by this Code or other laws."

Thus, it was in Vera vs. Fernandez[12] that the court recognized the liberal treatment of claims for taxes charged against the estate of the decedent. Such taxes, we said, were 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.Vectigalia nervi sunt rei publicae - taxes are the sinews of the state.

"Taxes assessed against the estate of a deceased person, after administration is opened, need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control

over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate."

Such liberal treatment of internal revenue taxes in the probate proceedings extends so far, even to allowing the enforcement of tax obligations against the heirs of the decedent, even after distribution of the estate's properties.

"Claims for taxes, whether assessed before or after the death of the deceased, can be collected from the heirs even after the distribution of the properties of the decedent. They are exempted from the application of the statute of non-claims. The heirs shall be liable therefor, in proportion to their share in the inheritance."[13]

"Thus, 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. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105, September 15, 1967.)

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.

Section 229 of the NIRC tells us how:

"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. (As inserted by P.D. 1773)"

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.

Petitioner submits, however, that "while the assessment of taxes may have been validly undertaken by the Government, collection thereof may have been done in violation of the law.Thus, the manner and method in which the latter is enforced may be questioned separately, and irrespective of the finality of the former, because the Government does not have the unbridled discretion to enforce collection without regard to the clear provision of law."[14]

Petitioner specifically points out that applying Memorandum Circular No. 38-68, implementing Sections 318 and 324 of the old tax code (Republic Act 5203), the BIR's Notices of Levy on the Marcos properties, were issued beyond the allowed period, and are therefore null and void:

"...the Notices of Levy on Real Property (Annexes 0 to NN of Annex C of this Petition) in satisfaction of said assessments were still issued by respondents well beyond the period mandated in Revenue Memorandum Circular No. 38-68. These Notices of Levy were issued only on 22 February 1993 and 20 May 1993 when at least seventeen (17) months had already lapsed from the last service of tax assessment on 12 September 1991. As no notices of distraint of personal property were first issued by respondents, the latter should have complied with Revenue Memorandum Circular No. 38-68 and issued these Notices of Levy not earlier than three (3) months nor later than six (6) months from 12 September 1991. In accordance with the Circular, respondents only had until 12 March 1992 (the last day of the sixth month) within which to issue these Notices of Levy. The Notices of Levy, having been issued beyond the period allowed by law, are thus void and of no effect."[15]

We hold otherwise. 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.

xxx

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.

Petitioner further 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. Thus, 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. 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.

Petitioner also expresses his reservation as to the propriety of the BIR's total assessment of P23,292,607,638.00, stating that this amount deviates from the findings of the Department of Justice's Panel of Prosecutors as per its resolution of 20 September 1991. Allegedly, this is clear evidence of the uncertainty on the part of the Government as to the total value of the estate of the late President.

This is, to our mind, the petitioner's last ditch effort to assail the assessment of estate tax which had already become final and unappealable.

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 [16] whose determinations and assessments are presumed correct and made in good faith. [17] 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. [18] 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 course of action taken by the petitioner reflects his disregard or even repugnance of the established institutions for governance in the scheme of a well-ordered society. 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.[19]This judicial policy becomes more pronounced in view of the absence of sufficient attack against the actuations of government.

On the matter of sufficiency of service of Notices of Assessment to the petitioner, we find the respondent appellate court's pronouncements sound and resilient to petitioner's attacks.

"Anent grounds 3(b) and (B) - both alleging/claiming lack of notice - 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 herein petitioner Ferdinand "Bongbong" Marcos as well as to his mother Mrs. Imelda Marcos.

Even if we are to rule out the notices of assessments personally given to the caretaker of Mrs. Marcos at the latter's last known address, on August 26, 1991 and September 12, 1991, as well as the notices of assessment personally given to the caretaker of petitioner also at his last known address on September 12, 1991 - 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. (Annexes "A", "A-1", "A-2", "A-3"; pp. 207-210, Comment/Memorandum of OSG). 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 (Annex "B", p. 211, ibid). Thereafter, copies of Notices were also served upon Mrs. Imelda Marcos, the petitioner and their counsel "De Borja, Medialdea, Ata, Bello, Guevarra and Serapio Law Office", on April 7, 1993 and June 10, 1993. Despite all of these Notices, petitioner never lifted a finger to protest the assessments, (upon which the Levy and sale of properties were based), nor appealed the same to the Court of Tax Appeals.

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."[20]

Petitioner argues that all the questioned Notices of Levy, however, must be nullified for having been issued without validly serving copies thereof to the petitioner. As a mandatory heir of the decedent, petitioner avers that 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. [21] We cannot therefore, countenance petitioner's insistence that he was denied due process. Where there was an opportunity to raise objections to government action, and such opportunity was disregarded, for no justifiable reason, the party claiming oppression then becomes the oppressor of the orderly functions of government. He who comes to court must come with clean hands. Otherwise, he not only taints his name, but ridicules the very structure of established authority.

IN VIEW WHEREOF, the Court RESOLVED to DENY the present petition. The Decision of the Court of Appeals dated November 29, 1994 is hereby AFFIRMED in all respects.

SO ORDERED.

[G.R. No. 123206. March 22, 2000]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS, COURT OF TAX APPEALS and JOSEFINA P. PAJONAR, as Administratrix of the Estate of Pedro P. Pajonar, respondents.

R E S O L U T I O N

GONZAGA-REYES, J.: Supr-ema

Assailed in this petition for review on certiorari is the December 21, 1995 Decision[1] of the Court of Appeals[2] in CA-G.R. Sp. No. 34399 affirming the June 7, 1994 Resolution of the Court of Tax Appeals in CTA Case No. 4381 granting private respondent Josefina P. Pajonar, as administratrix of the estate of Pedro P. Pajonar, a tax refund in the amount of P76,502.42, representing erroneously paid estate taxes for the year 1988.

Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World War, was a part of the infamous Death March by reason of which he suffered shock and became insane. His sister Josefina Pajonar became the guardian over his person, while his property was placed under the guardianship of the Philippine National Bank (PNB) by the Regional Trial Court of Dumaguete City, Branch 31, in Special Proceedings No. 1254. He died on January 10, 1988. He was survived by his two brothers Isidro P. Pajonar and Gregorio Pajonar, his sister Josefina Pajonar, nephews Concordio Jandog and Mario Jandog and niece Conchita Jandog.

On May 11, 1988, the PNB filed an accounting of the decedent's property under guardianship valued at P3,037,672.09 in Special Proceedings No. 1254. However, the PNB did not file an estate tax return, instead it advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to pay the taxes on his estate. On April 5, 1988, pursuant to the assessment by the Bureau of Internal Revenue (BIR), the estate of Pedro Pajonar paid taxes in the amount of P2,557.

On May 19, 1988, Josefina Pajonar filed a petition with the Regional Trial Court of Dumaguete City for the issuance in her favor of letters of administration of the estate of her brother. The case was docketed as Special Proceedings No. 2399. On July 18, 1988, the trial court appointed Josefina Pajonar as the regular administratrix of Pedro Pajonar's estate.

On December 19, 1988, pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro Pajonar paid estate tax in the amount of P1,527,790.98. Josefina Pajonar, in her capacity as administratrix and heir of Pedro Pajonar's estate, filed a protest on January 11, 1989 with the BIR praying that the estate tax payment in

the amount of P1,527,790.98, or at least some portion of it, be returned to the heirs. [3] Jur-is

However, on August 15, 1989, without waiting for her protest to be resolved by the BIR, Josefina Pajonar 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.[4] The case was docketed as CTA Case No. 4381.

On May 6, 1993, the CTA ordered the Commissioner of Internal Revenue to refund Josefina Pajonar the amount of P252,585.59, representing erroneously paid estate tax for the year 1988.[5]

Among the deductions from the gross estate allowed by the CTA were the amounts of P60,753 representing the notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the attorney's fees in Special Proceedings No. 1254 for guardianship. [6]Juri-ssc

On June 15, 1993, the Commissioner of Internal Revenue filed a motion for reconsideration[7] of the CTA's May 6, 1993 decision asserting, among others, that the notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship proceedings are not deductible expenses.

On June 7, 1994, the CTA issued the assailed Resolution [8] ordering the Commissioner of Internal Revenue to refund Josefina Pajonar, as administratrix of the estate of Pedro Pajonar, the amount of P76,502.42 representing erroneously paid estate tax for the year 1988. Also, the CTA upheld the validity of the deduction of the notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship proceedings.

On July 5, 1994, the Commissioner of Internal Revenue filed with the Court of Appeals a petition for review of the CTA's May 6, 1993 Decision and its June 7, 1994 Resolution, questioning the validity of the abovementioned deductions. On December 21, 1995, the Court of Appeals denied the Commissioner's petition. [9]

Hence, the present appeal by the Commissioner of Internal Revenue.

The sole issue in this case involves the construction of section 79 [10] of the National Internal Revenue Code[11] (Tax Code) which provides for the allowable deductions from the gross estate of the decedent. More particularly, the question is whether the notarial fee paid for the extrajudicial settlement in the amount of P60,753 and the attorney's fees in the guardianship proceedings in the amount of P50,000 may be allowed as deductions from the gross estate of decedent in order to arrive at the value of the net estate.

We answer this question in the affirmative, thereby upholding the decisions of the appellate courts. J-jlex

In its May 6, 1993 Decision, the Court of Tax Appeals ruled thus:

Respondent maintains that only judicial expenses of the testamentary or intestate proceedings are allowed as a deduction to the gross estate. The amount of P60,753.00 is quite extraordinary for a mere notarial fee.

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 case." [ 34 Am. Jur. 2d, p.765; Nolledo, Bar Reviewer in Taxation, 10th Ed. (1990), p. 481 ]

xxx.....xxx.....xxx

The attorney's fees of P50,000.00, which were already incurred but not yet paid, refers to the guardianship proceeding filed by PNB, as guardian over the ward of Pedro Pajonar, docketed as Special Proceeding No. 1254 in the RTC (Branch XXXI) of Dumaguete City. x x x

xxx.....xxx.....xxx

The guardianship proceeding had been terminated upon delivery of the residuary estate to the heirs entitled thereto. Thereafter, PNB was discharged of any further responsibility.

Attorney's fees in order to be deductible from the gross estate must be essential to the collection of assets, payment of debts or the distribution of the property to the persons entitled to it. The services for which the fees are charged must relate to the proper settlement of the estate. [ 34 Am. Jur. 2d 767. ] In this case, the guardianship proceeding was necessary for the distribution of the property of the late Pedro Pajonar to his rightful heirs. Sc-juris

xxx.....xxx.....xxx

PNB was appointed as guardian over the assets of the late Pedro Pajonar, who, even at the time of his death, was incompetent by reason of insanity. The expenses incurred in the guardianship proceeding was but a necessary expense in the settlement of the decedent's estate. Therefore, the attorney's fee incurred in the guardianship proceedings amounting to P50,000.00 is a reasonable and necessary business expense deductible from the gross estate of the decedent.[12]

Upon a motion for reconsideration filed by the Commissioner of Internal Revenue, the Court of Tax Appeals modified its previous ruling by reducing the refundable amount to P76,502.43 since it found that a deficiency interest should be imposed and the compromise penalty excluded.[13] However, the tax court upheld its previous ruling regarding the legality of the deductions -

It is significant to note that the inclusion of the estate tax law in the codification of all our national internal revenue laws with the enactment of the National Internal Revenue Code in 1939 were copied from the Federal Law of the United States. [UMALI, Reviewer in Taxation (1985), p. 285 ] The 1977 Tax Code, promulgated by Presidential Decree No. 1158, effective June 3, 1977, reenacted substantially all the provisions of the old law on estate and gift taxes, except the sections relating to the meaning of gross estate and gift. [ Ibid, p. 286. ] Nc-mmis

In the United States, [a]dministrative expenses, executor's commissions and attorney's fees are considered allowable deductions from the Gross Estate. Administrative expenses are limited to such expenses as are actually and necessarily incurred in the administration of a decedent's estate. [PRENTICE-HALL, Federal Taxes Estate and Gift Taxes (1936), p. 120, 533. ] Necessary expenses of administration are such expenses as are entailed for the preservation and productivity of the estate and for its management for purposes of liquidation, payment of debts and distribution of the residue among the persons entitled thereto. [Lizarraga Hermanos vs. Abada, 40 Phil. 124. ] They must be incurred for the settlement of the estate as a whole. [34 Am. Jur. 2d, p. 765. ] Thus, where there were no

substantial community debts and it was unnecessary to convert community property to cash, the only practical purpose of administration being the payment of estate taxes, full deduction was allowed for attorney's fees and miscellaneous expenses charged wholly to decedent's estate. [ Ibid., citing Estate of Helis, 26 T .C. 143 (A). ]

Petitioner stated in her protest filed with the BIR that "upon the death of the ward, the PNB, which was still the guardian of the estate, (Annex 'Z' ), did not file an estate tax return; however, it advised the heirs to execute an extrajudicial settlement, to pay taxes and   to post a bond equal to the value of the estate, for which the estate paid P59,341.40 for the premiums. (See Annex 'K')." [p. 17, CTA record. ] Therefore, it would appear from the records of the case that the only practical purpose of settling the estate by means of an extrajudicial settlement pursuant to Section 1 of Rule 74 of the Rules of Court was for the payment of taxes and the distribution of the estate to the heirs. A fortiori, since our estate tax laws are of American origin, the interpretation adopted by American Courts has some persuasive effect on the interpretation of our own estate tax laws on the subject.

Anent the contention of respondent that the attorney's fees of P50,000.00 incurred in the guardianship proceeding should not be deducted from the Gross Estate, We consider the same unmeritorious. Attorneys' and guardians' fees incurred in a trustee's accounting of a taxable inter vivos trust attributable to the usual issues involved in such an accounting was held to be proper deductions because these are expenses incurred in terminating an inter vivos trust that was includible in the decedent's estate. (Prentice Hall, Federal Taxes on Estate and Gift, p.120, 861] Attorney's fees are allowable deductions if incurred for the settlement of the estate. It is noteworthy to point that PNB was appointed the guardian over the assets of the deceased. Necessarily the assets of the deceased formed part of his gross estate. Accordingly, all expenses incurred in relation to the estate of the deceased will be deductible for estate tax purposes provided these are necessary and ordinary expenses for administration of the settlement of the estate.[14]

In upholding the June 7, 1994 Resolution of the Court of Tax Appeals, the Court of Appeals held that: Newmiso

2. 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. (Estate and Gift Taxation in the Philippines, T. P. Matic, Jr., 1981 Edition, p. 176 ).

xxx.....xxx.....xxx

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 of March 28, 1988 entered into between respondent Josefina Pajonar 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. It follows then that the notarial fee of P60,753.00 was incurred primarily to settle the estate of the deceased Pedro Pajonar. Said amount should then be considered an administration expenses actually and necessarily incurred in the collection of the assets of the estate, payment of debts and distribution of the remainder among those entitled thereto. Thus, the notarial fee of P60,753 incurred for the Extrajudicial Settlement should be allowed as a deduction from the gross estate.

3. Attorney's fees, on the other hand, in order to be deductible from the gross estate must be essential to the settlement of the estate. Acctmis

The amount of P50,000.00 was incurred as attorney's fees in the guardianship proceedings in Spec. Proc. No. 1254. Petitioner contends that said amount are not expenses of the testamentary or intestate proceedings as the guardianship proceeding was instituted during the lifetime of the decedent when there was yet no estate to be settled.

Again , this contention must fail.

The guardianship proceeding in this case was necessary for the distribution of the property of the deceased Pedro Pajonar. As correctly pointed out by respondent CTA, the PNB was appointed guardian over the assets of the deceased, and that necessarily the assets of the deceased formed part of his gross estate. x x x

xxx.....xxx.....xxx

It is clear therefore that the attorney's fees incurred in the guardianship proceeding in Spec. Proc. No. 1254 were essential to the distribution of the property to the persons entitled thereto. Hence, the attorney's fees incurred in the guardianship proceedings in the amount of P50,000.00 should be allowed as a deduction from the gross estate of the decedent. [15]

The deductions from the gross estate permitted under section 79 of the Tax Code basically reproduced the deductions allowed under Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue Code of 1939, [16] and which was the first codification of Philippine tax laws. Section 89 (a) (1) (B) of CA 466 also provided for the deduction of the "judicial expenses of the testamentary or intestate proceedings" for purposes of determining the value of the net estate. Philippine tax laws were, in turn, based on the federal tax laws of the United States. [17] In accord with 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.[18] Scc-alr

Judicial expenses are expenses of administration. [19] 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." [20] In other words, the expenses must be essential to the proper settlement of the estate. Expenditures

incurred for the individual benefit of the heirs, devisees or legatees are not deductible.[21] This distinction has been carried over to our jurisdiction. Thus, in Lorenzo v. Posadas[22] the Court construed the phrase "judicial expenses of the testamentary or intestate proceedings" as not including the compensation paid to a trustee of the decedent's estate when it appeared that such trustee was appointed for the purpose of managing the decedent's real estate for the benefit of the testamentary heir. In another case, the Court disallowed the premiums paid on the bond filed by the administrator as an expense of administration since the giving of a bond is in the nature of a qualification for the office, and not necessary in the settlement of the estate. [23] Neither may attorney's fees incident to litigation incurred by the heirs in asserting their respective rights be claimed as a deduction from the gross estate. [24]

Coming to the case at bar, the notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such settlement effected a distribution of Pedro Pajonar's estate to his lawful heirs. Similarly, the attorney's fees paid to PNB for acting as the guardian of Pedro Pajonar's property during his lifetime should also be considered as a deductible administration expense. 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.

We find that the Court of Appeals did not commit reversible error in affirming the questioned resolution of the Court of Tax Appeals.

WHEREFORE, the December 21, 1995 Decision of the Court of Appeals is AFFIRMED. The notarial fee for the extrajudicial settlement and the attorney's fees in the guardianship proceedings are allowable deductions from the gross estate of Pedro Pajonar.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur. Calrs-pped

[1] Entitled "Commissioner of Internal Revenue v. Josefina P. Pajonar, as Administratrix of the Estate of Pedro P. Pajonar, and Court of Tax Appeals." Rollo, 35-46.[2] Eighth Division composed of J. Jaime M. Lantin, ponente; and JJ Eduardo G. Montenegro and Jose C. De la Rama, concurring.[3] CA Records, 45-53.[4] Ibid., 37-44.

[5] The CTA made the following computations

Estate of Pedro P. PajonarLagtangon, Siaton, Negros Oriental

Died January 10, 1998

I. Real Properties P102,966.59

II. Personal Properties

a. Refrigerator P7,500.00

b. Wall Clock, Esso Gasul Tables and Chairs 3,090.00

c.Beddings, Stereo Cassette, TV, Betamax 15,700.00

d. Karaoke, Electric Iron, Fan,Transformer and Corner Set 7,400.00

e. Toyota Tamaraw 27,500.00 61,190.00

Additional Personal Properties:

f. Time Deposit-PNB P200,000.00

g. Stocks and Bonds-PNB 201,232.37

h. Money Market 2,300,000.00

i. Cash Deposit 114,101.83 2,815,334.20

GROSS ESTATE P 2,979,490.79

Less: Deductions:

A a. Funeral expenses P50,000.00

b. Commission to Trustee (PNB) 18,335.93

Bc. Notarial Fee for the Extra-judicial Settlement 60,753.00

d. Attorneys Fees in Special Proceeding No. 1254 for guardianship 50,000.00

e.Filing Fees in Special Proceeding No. 2399 6,374.88

f.Publication of Notice to Creditors September 7, 14 and 21, 1988 issues of the Dumaguete Star Informer 600.00

g.Certification fee for Publication on the Bulletin Board of the Municipal Building of Siaton, Negros Oriental 2.00

h.Certification fee for Publication in the Capitol 5.00

i.Certification fee for publication of Notice to Creditors 5.00 186,075.81

NET ESTATE 2,793,414.98

Estate Tax Due P1,277,762.39

Less: Estate Tax Paid:

CB Confirmation Receipt Nos.

.....B 14268064 P2,557.00

.....B 15517625 1,527,790.98 1,530,347.98

AMOUNT REFUNDABLE P252,585.59

Rollo, 86-88.

 

[6] Ibid., 78-79, 81-83.[7] CA Records, 118-130.[8] Rollo, 47-56.[9] Ibid., 35-46.

[10] SEC. 79 Computation of net estate and estate tax. For the purpose of the tax imposed in this Chapter, the value of the net estate shall be determined:

(a).....In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate-

(1)..... Expenses, losses, indebtedness, and taxes. Such amounts-

(A).....For funeral expenses in an amount equal to five per centum of the gross estate but in no case to exceed P50,000.00;

(B).....For judicial expenses of the testamentary or intestate proceedings;

xxx.....xxx.....xxx[11] This refers to the 1977 National Internal Revenue Code, as amended. On the date of decedents death (January 10, 1988), the latest amendment to the Tax Code was introduced by Executive Order No. 273, which became effective on January 1, 1988.[12] Rollo, 78-79, 81-83.[13]

Estate tax Due P1,277,762.39

Less : estate tax paid 04.05.88........ [CBCR No. 14268054] 2,557.00

Deficiency estate tax P1,275,205.39

Add: Additions to tax ........Interest on deficiency [Sec. 249 (b)]........04.12.88 to 12.19.88 ........(1,275,205.39 x 20% x 252/365) 176,083.16

Total deficiency tax P1,451,288.55

Less: estate tax paid 12.19.88........ (CBCR No. 15517625) 1,527,790.98

Amount Refundable P76,502.43

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of the Estate of the deceased JOSE P. FERNANDEZ,

Petitioner,

- versus -

COURT OF TAX APPEALS andCOMMISSIONER OF INTERNAL REVENUE,Respondents.

G.R. No. 140944

Present:

YNARES-SANTIAGO, J.,Chairperson,AUSTRIA-MARTINEZ,CHICO-NAZARIO,NACHURA, andREYES, JJ.

Promulgated:

April 30, 2008

x------------------------------------------------------------------------------------x

  

DECISION 

NACHURA, J.: Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Civil Procedure seeking the reversal of the Court of Appeals (CA) Decision[2] datedApril 30, 1999 which affirmed the Decision[3] of the Court of Tax Appeals (CTA) dated June 17, 1997.[4]

 The Facts

  

On November 7, 1987, Jose P. Fernandez (Jose) died. Thereafter, a petition for the probate of his will[5] was filed with Branch 51 of the Regional Trial Court (RTC) of Manila(probate court).[6] The probate court then appointed retired Supreme Court Justice Arsenio P. Dizon (Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon (petitioner) as Special and Assistant Special Administrator, respectively, of the Estate of Jose (Estate). In a letter[7] dated October 13, 1988, Justice Dizon informed respondent Commissioner of the Bureau of Internal Revenue (BIR) of the special proceedings for the Estate. Petitioner alleged that several requests for extension of the period to file the required estate tax return were granted by the BIR since the assets of the estate, as well as the claims against it, had yet to be collated, determined and identified. Thus, in a letter[8] dated March 14, 1990, Justice Dizon authorized Atty. Jesus M. Gonzales (Atty. Gonzales) to sign and file on behalf of the Estate the required estate tax return and to represent the same in securing a Certificate of Tax Clearance. Eventually, on April 17, 1990, Atty. Gonzales wrote a letter[9] addressed to the BIR Regional Director for San Pablo City and filed the estate tax return[10] with the same BIR Regional Office, showing therein a NIL estate tax liability, computed as follows: 

 COMPUTATION OF TAX

 Conjugal Real Property (Sch. 1) P10,855,020.00Conjugal Personal Property (Sch.2) 3,460,591.34Taxable Transfer (Sch. 3)Gross Conjugal Estate 14,315,611.34Less: Deductions (Sch. 4) 187,822,576.06Net Conjugal Estate NILLess: Share of Surviving Spouse NIL   .

Net Share in Conjugal Estate NILx x xNet Taxable Estate NIL   . Estate Tax Due NIL   .[11]

   

On April 27, 1990, BIR Regional Director for San Pablo City, Osmundo G. Umali issued Certification Nos. 2052[12] and 2053[13] stating that the taxes due on the transfer of real and personal properties[14] of Jose had been fully paid and said properties may be transferred to his heirs. Sometime in August 1990, Justice Dizon passed away. Thus, onOctober 22, 1990, the probate court appointed petitioner as the administrator of the Estate.[15]

 Petitioner requested the probate court's authority to sell several properties

forming part of the Estate, for the purpose of paying its creditors, namely: Equitable Banking Corporation (P19,756,428.31), Banque de L'Indochine et. de Suez (US$4,828,905.90 as of January 31, 1988), Manila Banking Corporation (P84,199,160.46 as of February 28, 1989) and State Investment House, Inc. (P6,280,006.21). Petitioner manifested that Manila Bank, a major creditor of the Estate was not included, as it did not file a claim with the probate court since it had security over several real estate properties forming part of the Estate.[16]

  However, on November 26, 1991, the Assistant Commissioner for

Collection of the BIR, Themistocles Montalban, issued Estate Tax Assessment Notice No. FAS-E-87-91-003269,[17] demanding the payment of P66,973,985.40 as deficiency estate tax, itemized as follows:

 Deficiency Estate Tax- 1987

 Estate tax P31,868,414.4825% surcharge- late filing 7,967,103.62late payment 7,967,103.62Interest 19,121,048.68Compromise-non filing 25,000.00non payment 25,000.00no notice of death 15.00no CPA Certificate  300.00  Total amount due & collectible P 66,973,985.40 [18]   

In his letter[19] dated December 12, 1991, Atty. Gonzales moved for the reconsideration of the said estate tax assessment. However, in her letter[20] dated April 12, 1994, the BIR Commissioner denied the request and

reiterated that the estate is liable for the payment of P66,973,985.40 as deficiency estate tax. On May 3, 1994, petitioner received the letter of denial. On June 2, 1994, petitioner filed a petition for review[21] before respondent CTA. Trial on the merits ensued.  As found by the CTA, the respective parties presented the following pieces of evidence, to wit: 

In the hearings conducted, petitioner did not present testimonial evidence but merely documentary evidence consisting of the following:

 Nature of Document (sic) Exhibits 1. Letter dated October 13, 1988from Arsenio P. Dizon addressedto the Commissioner of InternalRevenue informing the latter ofthe special proceedings for thesettlement of the estate (p. 126,BIR records); "A" 2. Petition for the probate of thewill and issuance of letter ofadministration filed with theRegional Trial Court (RTC) ofManila, docketed as Sp. Proc.No. 87-42980 (pp. 107-108, BIRrecords); "B" & "B-1 3. Pleading entitled "Compliance"filed with the probate Courtsubmitting the final inventoryof all the properties of thedeceased (p. 106, BIR records); "C" 4. Attachment to Exh. "C" whichis the detailed and completelisting of the properties ofthe deceased (pp. 89-105, BIR rec.); "C-1" to "C-17" 5. Claims against the estate filedby Equitable Banking Corp. withthe probate Court in the amountof P19,756,428.31 as of March 31,1988, together with the Annexesto the claim (pp. 64-88, BIR records); "D" to "D-24" 6. Claim filed by Banque de L'

Indochine et de Suez with theprobate Court in the amount ofUS $4,828,905.90 as of January 31,1988 (pp. 262-265, BIR records); "E" to "E-3" 7. Claim of the Manila BankingCorporation (MBC) which as ofNovember 7, 1987 amounts toP65,158,023.54, but recomputedas of February 28, 1989 at atotal amount of P84,199,160.46;together with the demand letterfrom MBC's lawyer (pp. 194-197,BIR records); "F" to "F-3" 8. Demand letter of Manila BankingCorporation prepared by Asedillo,Ramos and Associates Law Officesaddressed to Fernandez Hermanos,Inc., represented by Jose P.Fernandez, as mortgagors, in thetotal amount of P240,479,693.17as of February 28, 1989(pp. 186-187, BIR records); "G" & "G-1" 9. Claim of State InvestmentHouse, Inc. filed with theRTC, Branch VII of Manila,docketed as Civil Case No.86-38599 entitled "StateInvestment House, Inc.,Plaintiff, versus MaritimeCompany Overseas, Inc. and/orJose P. Fernandez, Defendants,"(pp. 200-215, BIR records); "H" to "H-16" 10. Letter dated March 14, 1990of Arsenio P. Dizon addressedto Atty. Jesus M. Gonzales,(p. 184, BIR records); "I" 11. Letter dated April 17, 1990from J.M. Gonzales addressedto the Regional Director ofBIR in San Pablo City(p. 183, BIR records); "J" 12. Estate Tax Return filed bythe estate of the late Jose P.Fernandez through its authorized

representative, Atty. Jesus M.Gonzales, for Arsenio P. Dizon,with attachments (pp. 177-182,BIR records); "K" to "K-5"

13. Certified true copy of theLetter of Administrationissued by RTC Manila, Branch51, in Sp. Proc. No. 87-42980appointing Atty. Rafael S.Dizon as Judicial Administratorof the estate of Jose P.Fernandez; (p. 102, CTA records)and "L" 14. Certification of Payment ofestate taxes Nos. 2052 and2053, both dated April 27, 1990,issued by the Office of theRegional Director, RevenueRegion No. 4-C, San PabloCity, with attachments(pp. 103-104, CTA records.). "M" to "M-5"

 Respondent's [BIR] counsel presented on June 26, 1995 one witness in the person of Alberto Enriquez, who was one of the revenue examiners who conducted the investigation on the estate tax case of the late Jose P. Fernandez. In the course of the direct examination of the witness, he identified the following:

 Documents/Signatures BIR Record 1. Estate Tax Return prepared bythe BIR; p. 138 2. Signatures of Ma. AnabellaAbuloc and Alberto Enriquez,Jr. appearing at the lowerPortion of Exh. "1"; -do- 3. Memorandum for the Commissioner,dated July 19, 1991, prepared byrevenue examiners, Ma. Anabella A.Abuloc, Alberto S. Enriquez andRaymund S. Gallardo; Reviewed byMaximino V. Tagle pp. 143-144 4. Signature of Alberto S.Enriquez appearing at the

lower portion on p. 2 of Exh. "2"; -do- 5. Signature of Ma. Anabella A.Abuloc appearing at thelower portion on p. 2 of Exh. "2"; -do- 6. Signature of Raymund S.Gallardo appearing at theLower portion on p. 2 of Exh. "2"; -do- 7. Signature of Maximino V.Tagle also appearing onp. 2 of Exh. "2"; -do- 8. Summary of revenueEnforcement Officers AuditReport, dated July 19, 1991; p. 139 9. Signature of AlbertoEnriquez at the lowerportion of Exh. "3"; -do- 10. Signature of Ma. Anabella A.Abuloc at the lowerportion of Exh. "3"; -do- 11. Signature of Raymond S.Gallardo at the lowerportion of Exh. "3"; -do- 12. Signature of MaximinoV. Tagle at the lowerportion of Exh. "3"; -do- 13. Demand letter (FAS-E-87-91-00),signed by the Asst. Commissionerfor Collection for the Commissionerof Internal Revenue, demandingpayment of the amount ofP66,973,985.40; and p. 169 14. Assessment Notice FAS-E-87-91-00 pp. 169-170[22]

  

The CTA's Ruling  

On June 17, 1997, the CTA denied the said petition for review. Citing this Court's ruling in Vda. de Oate v. Court of Appeals,[23] the CTA opined that the

aforementioned pieces of evidence introduced by the BIR were admissible in evidence. The CTA ratiocinated:

Although the above-mentioned documents were not formally offered as evidence for respondent, considering that respondent has been declared to have waived the presentation thereof during the hearing on March 20, 1996, still they could be considered as evidence for respondent since they were properly identified during the presentation of respondent's witness, whose testimony was duly recorded as part of the records of this case. Besides, the documents marked as respondent's exhibits formed part of the BIR records of the case.[24]

   

Nevertheless, the CTA did not fully adopt the assessment made by the BIR and it came up with its own computation of the deficiency estate tax, to wit: 

Conjugal Real Property P 5,062,016.00Conjugal Personal Prop. 33,021,999.93Gross Conjugal Estate 38,084,015.93Less: Deductions 26,250,000.00Net Conjugal Estate P 11,834,015.93Less: Share of Surviving Spouse 5,917,007.96Net Share in Conjugal Estate P 5,917,007.96Add: Capital/ParaphernalProperties P44,652,813.66Less: Capital/ParaphernalDeductions 44,652,813.66Net Taxable Estate P 50,569,821.62============ Estate Tax Due P 29,935,342.97Add: 25% Surcharge for Late Filing 7,483,835.74Add: Penalties for-No notice of death 15.00No CPA certificate 300.00Total deficiency estate tax P 37,419,493.71============= exclusive   of 20% interest from due date of its payment until full payment thereof[Sec. 283 (b), Tax Code of 1987].[25]

  

Thus, the CTA disposed of the case in this wise:  

WHEREFORE, viewed from all the foregoing, the Court finds the petition unmeritorious and denies the same. Petitioner and/or the heirs of Jose P. Fernandez are hereby ordered to pay to respondent the amount of P37,419,493.71 plus 20% interest from the due date of its payment

until full payment thereof as estate tax liability of the estate of Jose P. Fernandez who died on November 7, 1987. SO ORDERED.[26]

  

Aggrieved, petitioner, on March 2, 1998, went to the CA via a petition for review.[27]

 The CA's Ruling

On April 30, 1999, the CA affirmed the CTA's ruling. Adopting in full the CTA's findings, the CA ruled that the petitioner's act of filing an estate tax return with the BIR and the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR Commissioner of her authority to re-examine or re-assess the said return filed on behalf of the Estate.[28]

  On May 31, 1999, petitioner filed a Motion for Reconsideration[29] which the CA denied in its Resolution[30] dated November 3, 1999. Hence, the instant Petition raising the following issues: 

1.      Whether or not the admission of evidence which were not formally offered by the respondent BIR by the Court of Tax Appeals which was subsequently upheld by the Court of Appeals is contrary to the Rules of Court and rulings of this Honorable Court;

 2. Whether or not the Court of Tax Appeals and the Court of Appeals

erred in recognizing/considering the estate tax return prepared and filed by respondent BIR knowing that the probate court appointed administrator of the estate of Jose P. Fernandez had previously filed one as in fact, BIR Certification Clearance Nos. 2052 and 2053 had been issued in the estate's favor;

 3. Whether or not the Court of Tax Appeals and the Court of Appeals

erred in disallowing the valid and enforceable claims of creditors against the estate, as lawful deductions despite clear and convincing evidence thereof; and

 4. Whether or not the Court of Tax Appeals and the Court of Appeals

erred in validating erroneous double imputation of values on the very same estate properties in the estate tax return it prepared and filed which effectively bloated the estate's assets.[31]

  

The petitioner claims that in as much as the valid claims of creditors against the Estate are in excess of the gross estate, no estate tax was due; that the lack of a formal offer of evidence is fatal to BIR's cause; that the doctrine laid down in Vda. de Oate has already been abandoned in a long line of cases in which the Court held that evidence not formally offered is without any weight or value; that Section 34 of Rule 132 of the Rules on Evidence requiring a formal offer of evidence is mandatory in character; that, while BIR's witness Alberto Enriquez (Alberto) in his testimony before the CTA identified the pieces of evidence aforementioned such that the same were marked, BIR's failure to formally offer said pieces of evidence and depriving petitioner the opportunity to cross-examine Alberto, render the same inadmissible in evidence; that assuming arguendo that the ruling in Vda. de Oate is still applicable, BIR failed to comply with the doctrine's requisites because the documents herein remained simply part of the BIR records and were not duly incorporated in the court records; that the BIR failed to consider that although the actual payments made to the Estate creditors were lower than their respective claims, such were compromise agreements reached long after the Estate's liability had been settled by the filing of its estate tax return and the issuance of BIR Certification Nos. 2052 and 2053; and that the reckoning date of the claims against the Estate and the settlement of the estate tax due should be at the time the estate tax return was filed by the judicial administrator and the issuance of said BIR Certifications and not at the time the aforementioned Compromise Agreements were entered into with the Estate's creditors.[32]

  On the other hand, respondent counters that the documents, being part of the records of the case and duly identified in a duly recorded testimony are considered evidence even if the same were not formally offered; that the filing of the estate tax return by the Estate and the issuance of BIR Certification Nos. 2052 and 2053 did not deprive the BIR of its authority to examine the return and assess the estate tax; and that the factual findings of the CTA as affirmed by the CA may no longer be reviewed by this Court via a petition for review.[33]

 The Issues

 There are two ultimate issues which require resolution in this case: First. Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally offered by the BIR; and Second. Whether or not the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed against the Estate. 

The Courts Ruling 

The Petition is impressed with merit. Under Section 8 of RA 1125, the CTA is categorically described as a court of record. As cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents must be formally offered before the CTA.[34] Pertinent is Section 34, Rule 132 of the Revised Rules on Evidence which reads: 

SEC. 34. Offer of evidence. The court shall consider no evidence which has not been formally offered. The purpose for which the evidence is offered must be specified.   The CTA and the CA rely solely on the case of Vda. de Oate, which

reiterated this Court's previous rulings in People v. Napat-a[35] and People v. Mate[36] on the admission and consideration of exhibits which were not formally offered during the trial. Although in a long line of cases many of which were decided after Vda. de Oate, we held that courts cannot consider evidence which has not been formally offered,[37] nevertheless, petitioner cannot validly assume that the doctrine laid down in Vda. de Oate has already been abandoned. Recently, in Ramos v. Dizon,[38] this Court, applying the said doctrine, ruled that the trial court judge therein committed no error when he admitted and considered the respondents' exhibits in the resolution of the case, notwithstanding the fact that the same were not formally offered. Likewise, in Far East Bank & Trust Company v. Commissioner of Internal Revenue,[39] the Court made reference to said doctrine in resolving the issues therein. Indubitably, the doctrine laid down in Vda. De Oate still subsists in this jurisdiction. In Vda. de Oate, we held that: 

 From the foregoing provision, it is clear that for evidence to be considered, the same must be formally offered. Corollarily, the mere fact that a particular document is identified and marked as an exhibit does not mean that it has already been offered as part of the evidence of a party. In Interpacific Transit, Inc. v. Aviles [186 SCRA 385], we had the occasion to make a distinction between identification of documentary evidence and its formal offer as an exhibit. We said that the first is done in the course of the trial and is accompanied by the marking of the evidence as an exhibit while the second is done only when the party rests its case and not before. A party, therefore, may opt to formally offer his evidence if he believes that it will advance his cause or not to do so at all. In the event he chooses to do the latter, the trial court is not authorized by the Rules to consider the same.

 However, in People v. Napat-a [179 SCRA 403] citing People v. Mate [103 SCRA 484], we relaxed the foregoing rule and allowed evidence not formally offered to be admitted and considered by the trial court provided the following requirements are present, viz.: first, the same must have been duly identified by testimony duly recorded and, second, the same must have been incorporated in the records of the case.[40]

 From the foregoing declaration, however, it is clear that Vda. de 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. In this case, we find that these requirements have not been satisfied. The assailed pieces of evidence were presented and marked during the trial particularly when Alberto took the witness stand. Alberto identified these pieces of evidence in his direct testimony.[41] He was also subjected to cross-examination and re-cross examination by petitioner.[42]But Albertos account and the exchanges between Alberto and petitioner did not sufficiently describe the contents of the said pieces of evidence presented by the BIR. In fact, petitioner sought that the lead examiner, one Ma. Anabella A. Abuloc, be summoned to testify, inasmuch as Alberto was incompetent to answer questions relative to the working papers.[43] The lead examiner never testified. Moreover, while Alberto's testimony identifying the BIR's evidence was duly recorded, the BIR documents themselves were not incorporated in the records of the case. A common fact threads through Vda. de 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. Thus, we held in Ramos:

  In this case, we find and so rule that these requirements have been satisfied. The exhibits in question were presented and marked during the pre-trial of the case thus, they have been incorporated into the records. Further, Elpidio himself explained the contents of these exhibits when he was interrogated by respondents' counsel... x x x x But what further defeats petitioner's cause on this issue is that respondents' exhibits were marked and admitted during the pre-trial stage as shown by the Pre-Trial Order quoted earlier.[44]

  

While the CTA is not governed strictly by technical rules of evidence,[45] as rules of procedure are not ends in themselves and are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the CTA may ascertain and verify the truth of BIR's claims against the Estate.[46] The BIR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause.[47] Such failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such fatal omission. This, we take against the BIR. Per the records of this case, the BIR was directed to present its evidence [48] in the hearing of February 21, 1996, but BIR's counsel failed to appear. [49] The CTA denied petitioner's motion to consider BIR's presentation of evidence as waived, with a warning to BIR that such presentation would be considered waived if BIR's evidence would not be presented at the next hearing. Again, in the hearing of March 20, 1996, BIR's counsel failed to appear.[50] Thus, in its Resolution[51] dated March 21, 1996, the CTA considered the BIR to have waived presentation of its evidence. In the same Resolution, the parties were directed to file their respective memorandum. Petitioner complied but BIR failed to do so.[52] In all of these proceedings, BIR was duly notified. Hence, in this case, we are constrained to apply our ruling in Heirs of Pedro Pasag v. Parocha:[53]

A formal offer is necessary because judges are mandated to rest their findings of facts and their judgment only and strictly upon the evidence offered by the parties at the trial. Its function is to enable the trial judge to know the purpose or purposes for which the proponent is presenting the evidence. On the other hand, this allows opposing parties to examine the evidence and object to its admissibility. Moreover, it facilitates review as the appellate court will not be required to review documents not previously scrutinized by the trial court. Strict adherence to the said rule is not a trivial matter. The Court in Constantino v. Court of Appeals ruled that the formal offer of one's evidence is deemed waived after failing to submit it within a considerable period of time. It explained that the court cannot admit an offer of evidence made after a lapse of three (3) months because to do so would "condone an inexcusable laxity if not non-compliance with a court order which, in effect, would encourage needless delays and derail the speedy administration of justice."Applying the aforementioned principle in this case, we find that the trial court had reasonable ground to consider that petitioners had waived their right to make a formal offer of documentary or object evidence. Despite several extensions of time to make their formal offer, petitioners failed to comply with their commitment and allowed almost five months to lapse before finally submitting it. Petitioners' failure to comply with the

rule on admissibility of evidence is anathema to the efficient, effective, and expeditious dispensation of justice.   

Having disposed of the foregoing procedural issue, we proceed to discuss the merits of the case. 

Ordinarily, the CTA's findings, as affirmed by the CA, are entitled to the highest respect and will not be disturbed on appeal unless it is shown that the lower courts committed gross error in the appreciation of facts.[54] In this case, however, we find the decision of the CA affirming that of the CTA tainted with palpable error. It is admitted that the claims of the Estate's aforementioned creditors have been condoned. As a mode of extinguishing an obligation,[55] condonation or remission of debt[56] is defined as: 

an act of liberality, by virtue of which, without receiving any equivalent, the creditor renounces the enforcement of the obligation, which is extinguished in its entirety or in that part or aspect of the same to which the remission refers. It is an essential characteristic of remission that it be gratuitous, that there is no equivalent received for the benefit given; once such equivalent exists, the nature of the act changes. It may become dation in payment when the creditor receives a thing different from that stipulated; or novation, when the object or principal conditions of the obligation should be changed; or compromise, when the matter renounced is in litigation or dispute and in exchange of some concession which the creditor receives.[57]

  

Verily, the second issue in this case involves the construction of Section 79[58] of the National Internal Revenue Code[59] (Tax Code) which provides for the allowable deductions from the gross estate of the decedent. The specific question is whether the actual claims of the aforementioned creditors may be fully allowed as deductions from the gross estate of Jose despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors. Claims against the estate, as allowable deductions from the gross estate under Section 79 of the Tax Code, are basically a reproduction of the deductions allowed under Section 89 (a) (1) (C) and (E) of Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue Code of 1939, and which was the first codification of Philippine tax laws. Philippine tax laws were, in turn, based on the federal tax laws of the 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. WHEREFORE, the instant Petition is GRANTED. Accordingly, the assailed Decision dated April 30, 1999 and the Resolution dated November 3, 1999 of the Court of Appeals in CA-G.R. S.P. No. 46947 are REVERSED and SET ASIDE. The Bureau of Internal Revenue's deficiency estate tax assessment against the Estate of Jose P. Fernandez is hereby NULLIFIED. No costs.