IN THE MATTER OF THE INTESTATE ESTATE OF TOMAS SLY CONG BIENG (ALIAS SIY CHONG LIN), DECEASED. SIY CHONG KENG, ADMINISTRATOR AND APPELLEE, VS. THE COLLECTOR OP INTERNAL REVENUE …

This is an appeal by the Collector of
Internal Revenue from an order of the Court of First Instance of Manila
dated October 2, 1933, in special proceedings No. 41435, directing the
administrator of the estate of Tomas Siy Cong Bieng (alias Siy
Chong Lin), deceased, to pay an inheritance tax to be based on the
value of the property of the estate as appraised by the commissioners
on claims and appraisals.

The Collector of Internal Revenue, through the
Solicitor-General, filed in said special proceedings a motion for the
reconsideration of said order, which is as follows:

“Comes now the Collector of Internal Revenue by the
undersigned Solicitor-General and respectfully prays that the order of
this court dated October 2, 1933, be reconsidered on the following
grounds:

“That on October 2, 1933, this court issued an
order requiring the administrator to pay the corresponding inheritance
tax in this case based on the value of the properties of the estate as
appraised by the commissioners of claims and appraisals in their report;

“That the court issued said order upon the theory that the Collector of
Internal Revenue can no longer question the value given by the
commissioners to said properties for the purpose of assessing the
inheritance tax, in view of the fact that the report of said
commissioners and the project of partition in this case had been
approved by this court;

“That the Bureau of Internal Revenue
has never been notified of the report submitted by the commissioners in
this ease, and that said report, in so far as the value of the
properties fixed by the commissioners is concerned, is not binding upon
the Collector of Internal Revenue;

“That the law governing
the determination of the value of the property of a deceased, for
purposes of taxation, is section 1542 of the Administrative Code, which
provides that the assessed value of the property as shown by the tax
rolls shall be taken as the minimum, in relation with regulations No.
42, section 7, of the Department of Finance, promulgated in accordance
with the Inheritance Tax Law, which reads:

” ‘As a general
rule the valuation of the estate given by the committee of appraisals
and allowances may be taken as the fair market value of the estate unless otherwise shown by proper evidence that such is not the case. The
administrator or the heirs shall show that the said valuation is true
and correct, or adduce proof that it is not so and prove the true
valuation, the Collector of Internal Revenue reserving the right to
accept either or substitute his own valuation upon which the taxes
shall be based. For this purpose, however, the assessed value of the estate as shown by the tax rolls shall be taken as the minimum.’ (Italics ours.)

“That when the Collector of Internal Revenue was informed by the
administrator in this case of the order of this court requiring the
latter to pay the inheritance tax that may be due from the estate in
these proceedings, said Collector immediately proceeded to assess the
corresponding inheritance tax as required by law;

“That the
inheritance tax assessed by the Collector of Internal Revenue in this
case is P57,914.81 and the 25 per cent surcharge thereon is P14,478.70,
as evidenced by the proof of debt subscribed and sworn to by the
Collector of Internal Revenue hereto attached and made a part hereof as
Exhibit A;

“That the administrator has already been notified
by the Collector x>f Internal Revenue of the inheritance tax
assessed against the estate as stated in the preceding paragraph but
failed to pay the same;

“That said tax of P57,914.81 bears
an interest of 1 per cent per month from February 24, 1933, the date
the administrator was notified of its assessment, to the date of
payment.

“Wherefore, the undersigned prays that the order of
this court dated October 2, 1933, be reconsidered and the administrator
be ordered to pay said sum of P57,914.81 as inheritance tax, plus 25
per cent surcharge thereon of P14,478.70, and 1 per cent monthly
interest on said sum of P57,914.81 from February 24,1933, to the date
of payment.

“Manila, October 31,1933.”

To this motion is attached a sworn proof of debt in which the
Collector of Internal Revenue certifies that the estate of the said
deceased is indebted to the Government of the Philippine Islands for
inheritance tax, surcharge and interest, upon the following valuations
of the estate:

Real property ………………………………………………………………….	P65,221.00
Personal property …………………………………………………………..	481,569.89
	______________
Total inventoried property………………………………………………	546,790.89
Total deduction ………………………………………………………………	59,823.31
	______________
Net inventoried property ……………………………………..	486,967.58
	=============

The report of the commissioners on claims and appraisals shows the net value of the estate to be P170,397.06.

The court having denied the motion of the Solicitor-General for
reconsideration of the order of October 2, 1933, he appeals to this
court making the following assignments of error:

“1. The lower court erred in holding that the
inheritance tax should be determined by taking as a basis the value of
the estate of the deceased as appraised by the commissioners on claims
and appraisals.

“2. The lower court erred in holding that
the Collector of Internal Revenue had been notified of the submission
to the court of the report of the commissioners on claims and
appraisals in these proceedings, or that said collector should have
taken official notice of the submission of said report;

“3.
The lower court erred in ordering the judicial administrator to pay the
inheritance tax in accordance with the value of the estate as appraised
by the commissioners on claims and appraisals/’

It appears from the record that the commissioners on claims and
appraisals in the said special proceedings No. 41435, rendered their
report on December 7, 1932, and on December 28, 1932, the administrator
submitted a project of partition. On December 31,1932, the court
approved the final account of the administrator and his project of
partition and likewise ordered him to make the corresponding
distribution of the estate, subject, however, to prior payment of the
inheritance tax.

On January 20, 1933, the court issued an order requiring the
administrator to appear immediately and show cause why he should not be
disciplined for having failed to comply with the said order of December
31, 1932. On January 26,1933, he reported that he requested his
attorneys to prepare the inheritance tax return which he presented to
the Collector of Internal Revenue tendering at the same time a check
for the amount shown to be due by said return but that the Collector of
Internal Revenue refused to accept the check until he had verified the
correctness of the items and the valuations which were stated in said
return. On February 2,1933, the court extended the time for compliance
with the order of December 31, 1932, to February 25, 1933. On February
24,1933, the administrator prayed for another extension alleging that
the Collector of Internal Revenue had not yet completed his
investigation and the court granted an extension to March 10, 1933. On
May 17, 1933, the court issued an order on the administrator to show
cause why he should not be punished for contempt for failure to comply
with the previous orders of the court within the time limited. On May
27, 1933, the administrator filed another statement to the effect that
he could not comply with the orders requiring him to produce the
inheritance tax receipts because he and the Collector of Internal
Revenue could not agree as to the value of the properties belonging to
the estate. Nothing further was done in the case after May 27, 1933,
until the court, apparently on its own motion, entered the order of
October 2, 1933, which is the subject matter of this appeal. This order
is as follows:

“Se halla pendiente de resolution un incidente que
se refiere al pago de impuesto de herencia. Despues de considerar el
escrito del administrador judicial asi como la carta del Director de
Rentas Internas, somos de opinion que, bajo las disposiciones de la
ley, el impuesto de herencia debe tomar por base el avaluo hecho por la
Comision de Avaluo y Reclamaciones. En virtud de la notificacidn del
aviso que se sirve a la Oficina de Rentas Internas en estos asuntos,
dicha Oficina debe tener conocimiento del report de la
Comision y es entonces cuando el Juzgado podrla considerar la cuestidn
del valor de los bienes, pero no en el presente momento en que ha sido
ya aprobado el proyecto de particion en estas actuaciones.

“Por tanto, se ordena el administrador judicial que pague el impuesto
de herencia de acuerdo con los valores que resulten del informe de la
Comision de Avaluo y Reclamaciones.”

There is no provision of law which makes it the duty of the
Collector of Internal Revenue .to take part in the deliberations of the
commissioners on claims and appraisals nor is he required to take
exceptions to the report of such a committee and appeal to the court
for a revision of its appraisals. The statute provides that the
committee, after being sworn to make a true appraisal, shall appraise
the value of the estate in money and return their warrants with such
appraisal to the court and shall deliver a copy of the appraisal to the
executor or administrator. (Section 670, Code of Civil Procedure.)
Apparently the statute does not require approval of the committee’s
appraisals by the court; but doubtless exceptions thereto might be
taken by the executor or administrator upon whom a copy was served. The
purpose of the inventory and appraisal of the estate of the decedent is
to aid the court in revising the accounts and determining the
liabilities of the executor or administrator and in making a final and
equitable distribution (partition) of the estate and otherwise to
facilitate the administration of the estate. Although by Act No. 3606,
which amends section 1544 of the Administrative Code, relating to taxes
on inheritances, legacies and other acquisitions mortis causa,
it is provided that d Certified copy of letters testamentary or of
administration as well as certified copies of the schedule of partition
and the order of the court approving the same shall be furnished to the
Collector of Internal Revenue by the clerk of the court within thirty
days after the issuance of such letters testamentary or of
administration or after the promulgation of such orders, these
provisions do not in any sense make the Collector of Internal Revenue a
party in all of the cases of testate or intestate successions pending
in these Islands. The object of these notices is to inform the
collector of estates that might be subject to inheritance taxes and to
enable him to perform his duty as such collector to make the
assessments and perform the specific duties as prescribed in section
1544 of the Administrative Code, as amended by said Act No. 3606,
particularly paragraph (b) thereof, and section 1545 of the Administrative Code.

Section 7 of regulations No. 42 of the Department of Finance provides:

“As a general rule the valuation of the estate
given by the Committee of Appraisals and Allowances may be taken as the
fair market value of the estate unless otherwise shown by proper
evidence that such is not the case. The administrator or the heirs
shall show that the said valuation is true and correct, or adduce proof
that it is not so and prove the true valuation, the Collector of
Internal Revenue reserving the right to accept either or substitute his
own valuation upon which the taxes shall be based. For this purpose,
however, the assessed value of the estate as shown by the tax rolls
shall be taken as the minimum.” This regulation is in harmony with
section 1542 of the Administrative Code.

In accordance with this regulation, the value of the estate given
by the commissioners on claims and appraisals may be taken by the
collector as the basis for determination of the inheritance tax
provided it is not less than the assessed value of the estate. If it is
less, the assessed value as shown by the tax rolls must be taken as the
minimum. The Collector of Internal Revenue is not bound by the
appraisals made by the commissioners on claims and appraisals, in which
he took no part, and the lower court erred in denying the motion for
reconsideration of its order of October 2, 1933, filed by the
Solicitor-General on behalf of the Collector of Internal Revenue.

The order of October 2, 1933, appealed from is therefore reversed
and the cause is remanded with instructions to the trial court to
determine the true and correct amount of inheritance tax due and owing
in this case after hearing, upon due notice, at which the administrator
and the Collector of Internal Revenue may present their respective
claims. Without special pronouncement as to costs.

Malcolm, Villa-Real, Imperial, and Goddard, JJ., concur.