G.R. Nos. L-12710 and L-12721. February 28, 1961
THE COLLECTOR OF INTERNAL REVENUE, PETITIONER, VS. ELLEN WOOD McGRATH, RESPONDENT. ELLEN WOOD MCGRATH, PETITIONER, VS. COLLECTOR OF INTERNAL REVENUE AND COURT OF TAX APPEALS, RE…
LABRADOR, J.:
decision of the Court of Tax Appeals, declaring the estate of Dora Anna
Wood exempt from the payment of the inheritance tax, and by Ellen Wood
McGrath administratrix of the estate of Dora Anna Wood, in G. R. No.
L-12721 against the same decision of the Court of Tax Appeals,
dismissing her claim of having been discharged from paying the taxes
assessed by the Collector of Internal Revenue on the estate of the
deceased.
On January 10, 1956, the Collector of Internal
Revenue assessed against the estate of Dora Anna Wood, of which Ellen
Wood McGrath is the administratrix, the following taxes, interests and
surcharges:
“Estate tax
1/2% int. on P12.260.74 from 1-22-64 to 12-22-65
Total
Less amount paid
Amount still due
Inheritance tax
5% surcharge on P13.00 1% int. from 4-22-54 to 1-22-56 1/2% int. on P32.841.40 from 4-22-54 to 12-22-55
Compromise for late payment Amount due
Total P49,815.64″ (p. 12 ROA)
On
March 9, 1956, upon petition of counsel for McGrath, the Collector of
Internal Revenue, in answer to the objections of counsel for McGrath
against the original assessment made by the Collector of Internal
Revenue, rendered a final decision on the said subject, which reads as
follows:
“In view thereof, you are
requested to urge your client to pay the sum of P36,144.91 as
inheritance tax and penalties, plus the corresponding interest from
December 23, 1955 up to the date of payment in order that this case may
be closed, without prejudice, however, to your filing of a request for
refund in accordance with section 309 of the Tax Code in the event that
the decision of the Court of Tax Appeals in the aforesaid Miller case
is affirmed by the Supreme Court.” (p. 15, ROA)
On April 2, 1956, Ellen Wood McGrath filed a petition for review with
the Court of Tax Appeals, alleging that the assessment of the taxes
made by the Collector of Internal Revenue on the estate of Dora Anna
Wood are excessive and illegal, and praying for the refund of
P13,670.73. Respondent Collector answered the petition alleging that
Dora Anna Wood left properties worth P326,707.49, and asked, for the
dismissal of the petition. Trial was held and on July 5, 1957, the
Court of Tax Appeals rendered judgment declaring the estate of Dora
Anna Wood exempt from the payment of the inheritance tax, but subject
to the estate tax in the amount of P13,160.55, and as petitioner had
already paid P20,572.19, the respondent Collector of Internal Revenue
was ordered to refund to her the amount of P7,411.64, with interest
from the date of the payment.
The Collector of Internal
Revenue insists in his appeal before us that the Court of Tax Appeals
erred in two principal respects, namely, (1) in holding that there
exists reciprocity between the California and Philippine laws on the
matter of the death tax on intangible personal property, (2) in holding
that the estate of Dora Anna Wood is not liable for the payment of the
inheritance tax, and (3) in ordering him to refund the amount of
P7,411.04, with interest from the date of payment.
In
holding that the estate of Dora Anna Wood is not liable for the payment
of inheritance tax, the Court of Tax Appeals followed our decision in
the case of Lara vs. Collector of Internal Revenue, C.T.A. Case No. 181, dated June 25, 1955; Norton, et al. vs. Collector of Internal Revenue, C. T. A. Case No. 73, January 12, 1956, and Fisher vs. Collector of Internal Revenue, Manila Civil Case No. 23029, September 26, 1956.
The above decisions were carefully considered by us in the cases of The Collector of Internal Revenue vs. Fisher, et al., and Fisher, et al., vs.
The Collector of Internal Revenue et al., 110 Phil., 686, 61 Off. Gaz.,
[18] 2624 penned by Mr. Justice Barrera, and we have come to the
conclusion that no reciprocity can be extended in the case of the
estate of Dora Anna Wood because the law of California does not grant
full exemption from the estate and inheritance taxes to Filipino
residents, in that state. Here is what this Court declared in said case:
“Section 122 of our National Internal Revenue Code, in pertinent part, provides:
‘* * * And, provided further, That no tax shall be collected under this Title in respect of intangible personal property (a)
if the decedent at the time of his death was a resident or a foreign
country which at the time of his death did not impose a transfer tax of
death tax of any character in respect of intangible personal property
of citizens of the Philippines not residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent was a resident at the time of his death allow a similar exemption from transfer taxes or death taxes of every character
in respect of intangible personal property owned by citizens of the
Philippines not residing in that foreign country.’ (Italics supplied.)“On the other hand, Section 13851 of the California Inheritance Tax Law, insofar as pertinent, reads:
‘Sec. 13851. Intangibles of nonresident:
Conditions. Intangible personal property is exempt from the tax imposed
by this part if the decedent at the time of his death was a resident of
a Territory or another State of the United States or of a foreign state
or country which then imposed a legacy, succession, or death tax in
respect to intangible personal property of its own residents, but
either:‘(a) Did not impose a legacy,
succession, or death tax of any character in respect to intangible
property of residents of this State, or‘(b) Had in its laws a reciprocal provision under which intangible personal property of a non-resident was exempt from legacy, succession or death taxes of every character if the Territory or other State of the United States or foreign state or country in which the non-resident resided allowed a similar exemption
in respect to intangible personal property of residents of the
Territory or State of the United States or foreign state or country of
residence of the decedent.’ (Id.)“It is clear from both these quoted provisions that the reciprocity must be total, that is, with respect to transfer or death taxes of any and every character, in the case of the Philippine law, and to legacy, succession, or death tax of any and every character,
in the case of the California law. Therefore, if any of the two slates
collects or imposes and does not exempt any transfer, death, legacy, or
succession tax of any character, the reciprocity does not work. This is
the underlying principle of the reciprocity clauses in both laws.”
following the above-quoted decision, the judgment of the Court of Tax
Appeals’ should be reversed insofar as it exempts the estate of Dora
Anna Wood from the inheritance tax assessed by the Collector of
Internal Revenue against said estate. The inheritance tax as found by
the Court of Tax Appeals is P24,041.96, and together with the 5 per
cent surcharge and interest thereon, and the P20 compromise for late
payment, amounts to a total of P29,612.15. There having been a payment
of P6,249.26, the amount due on September 23, 1956 is hereby fixed at
P23,362.79.
One procedural point must be considered in
connection with the petition for review of the Collector of Internal
Revenue, and this is the claim of the respondent that the Collector
received the notice of the decision of the Court of Tax Appeals on July
19, 1957 and filed his notice of appeal only on August 15, 1957 and his
petition for review with this Court on August 20, 1957, and that,
therefore, said petition for review was filed after the 30-day period
within which such a petition must be filed. Upon examining the record,
we find that while it is true that the Collector of Internal Revenue
himself received the decision of the Court, of Tax Appeals on July 19,
1957, the Office of the Solicitor General which represented the
Collector, received the same decision on July 22, 1957. Decisions or
orders in ordinary cases are to be notified to counsel, not to the
parties themselves. The notice to the Collector of Internal Revenue,
which was three days ahead of the notice to his lawyer, the Solicitor
General, should not be considered as the period from which the petition
for review must be considered filed with us. The objection to the
appeal of the Collector of Internal Revenue, on the ground: that the
petition for review was filed out of time, must therefore be overruled.
In her appeal petitioner McGrath claims that since the Collector of
Internal Revenue accepted a check tendered by her in the amount of
P6,901.46, “in full settlement of all death taxes due and payable,” the
Collector of Internal Revenue, after accepting said payment, can no
longer collect the alleged deficiency taxes because the acceptance by
the Collector of petitioner’s tender of the above amount on February 2,
1955, constitutes a compromise on the obligation of the estate of the
deceased Dora Anna Wood, which compromise extinguished petitioner’s
obligation to pay additional death taxes. We find no merit in this
contention. It is true that the check for P6,901.46 forwarded to the
Collector of Internal Revenue, on January 22, 1954, and which was
received by him on February 2, 1954, was offered by counsel for the
petitioner McGrath “in full settlement of estate tax due the above
estate.” The letter of acceptance of the amount made by the Collector
of Internal Revenue on February 2, 1954 is to the effect that the
amount should be accounted for as part payment of the estate
tax due. There was, therefore, no agreement between the taxpayer and
the Collector of Internal Revenue that the amount offered was to be
accepted to compromise a tax liability. Taxes are fixed by law and are
not subject to contract between the taxpayer and the tax officer,
except when there is an actual compromise, which in the case at bar
does not exist. The acceptance of any amount by employees or officials,
which does not constitute a full payment of the amount fixed by law, is
no ground or reason for the claim for exemption by the taxpayer from
liability for the remaining amount due under the law. Taxes are not
subject to agreements between the taxpayer and the tax officer, and if
any such agreements are made, they cannot serve to defeat or discharge
the liability that the law fixes as the full amount of the tax.
Furthermore, any error made by a tax official in the assessment or
computation of taxes does not have the effect of relieving the taxpayer
from the full amount of liability as fixed by law. Errors of tax
officers or officials of the Government do not bind the Government or
prejudice its rights to the taxes or dues collectible by it from its
citizens. (Canlubang Sugar Estate vs. Standard Alcohol Co. [Phil.], Inc., G. R. No. L-10887, April 16, 1958; Philippine American Drug Co. vs. Collector of Internal Revenue, et al., 106 Phil., 161; 57 Off. Gaz., [21] 3915; Teodore Lewin vs. Emilio Galang, 109 Phil., 1045.)
In short, we find that the claim of release of the taxpayer because of
the acceptance of an amount offered by the taxpayer, even if the
taxpayer made the offer in full payment of the tax liability, which
payment was not in pursuance of compromise under Section 309 of the
National Internal Revenue Code, is without any merit and the same is
hereby overruled.
It is next claimed that the failure of the
Collector of Internal Revenue to make a revised assessment pursuant to
Sections 96 and 97 of the National Internal Revenue Code relieves the
administratrix from paying any deficiency in the inheritance taxes. We
also find no merit in this contention. Section 97 of the National
Internal Revenue Code, upon which the claim is founded, refers to the personal liability of an administratrix from any deficiency tax, not the liability of the estate under administration. Granting that the administratrix may not be personally liable, it does not follow therefrom that the estate under administration would also be free from liability.
In the last assignment of error, counsel for petitioner, McGrath claims
that the estate is exempt from the payment of any deficiency tax
because of the failure of the Collector to make the assessment of the
deficiency death taxes and to demand their payment, in accordance with
Section 94 of the National Internal Revenue Code. Section 94 of the
National Internal Revenue Code applies to a case where there is no
return filed or where one is filed but is false or fraudulent. In the
case at bar there was a return and the same was not false or
fraudulent. Hence the assessment indicated in Section 94 of the
.National Internal Revenue Code is not required. In any case, the
assessment made in the letters of the respondent Collector, dated
January 10, 1956 and March 9, 1956, are sufficiently clear and
specific, and are a valid assessment of the taxes on the estate upon
the facts and figures given by the counsel for petitioner McGrath. This
assignment of error must also be dismissed for lack of merit.
Wherefore, in G. R. No. L-12710, the decision, of the Court of Tax
Appeals is hereby reversed and the respondent Ellen Wood McGrath is
required to pay P23,362.79. In G. R. No. L-12721, the appeal of Ellen
Wood McGrath is dismissed. With costs in both instances against Ellen
Wood McGrath.
Bengzon, Acting C. J., Padilla, Bautista Angelo, Concepcion, Reyes, J. B. L., Barrera, Paredes, and Dizon, JJ., concur.