Rafael Dizon vs.

CTA, CIR
G.R. No. 140940, 30 April 2008
Facts: Jose P. Fernandez died in November 7, 1987. Thereafter, a petition for the
probate of his will was filed. The probate court appointed Atty. Rafael Arsenio P.
Dizon as administrator of the Estate of Jose Fernandez. An estate tax return was
filed later on which showed ZERO estate tax liability. BIR thereafter issued a
deficiency estate tax assessment, demanding payment of Php 66.97 million as
deficiency estate tax. This was subsequently reduced by CTA to Php 37.42
million. The CA affirmed the CTAs ruling, hence, the instant petition.
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. On the other
hand, respondents argue that since the claims of the Estates creditors have
been condoned, such claims may no longer be deducted from the gross estate of
the decedent.
Issue: Whether the actual claims of 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
Held: YES. Following the US Supreme Courts ruling in Ithaca Trust Co. v. United
States, the Court held that post-death developments are not material in
determining the amount of deduction. This is because estate tax 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 the that time. This is the date-of-death valuation rule.
The Court, in adopting the date-of-death valuation principle, explained that: 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. 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. Therefore, the claims existing at
the time of death are significant to, and should be made the basis of, the
determination of allowable deductions.
Abello vs. CIR
452 SCRA 162
Facts: During the 1987 national elections, petitioners, who are partners in the
Angara, Abello, Concepcion, Regala and Cruz (ACCRA) law firm, contributed
P882,661.31 each to the campaign funds of Senator Edgardo Angara, then
running for the Senate. BIR assessed each of the petitioners P263,032.66 for
their contributions. Petitioners questioned the assessment to the BIR, claiming
that political or electoral contributions are not considered gifts under the NIRC so

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they are not liable for donors tax. The claim for exemption was denied by the
Commissioner. The CTA ruled in favor of the petitioners, but such ruling was
overturned by the CA, thus this petition for review.
Issue: Whether or not electoral contributions are subject to donors tax.
Held: Yes, they are. The NIRC does not define transfer of property by gift.
However, Article 18 of the Civil Code, states: In matters which are governed by
the Code of Commerce and special laws, their deficiency shall be supplied by the
provisions of this Code. Thus, reference may be made to the definition of a
donation in the Civil Code. Article 725 of said Code defines donation as: . . . an
act of liberality whereby a person disposes gratuitously of a thing or right in
favor of another, who accepts it. Donation has the following elements: (a) the
reduction of the patrimony of the donor; (b) the increase in the patrimony of the
donee; and, (c) the intent to do an act of liberality or animus donandi.
The present case falls squarely within the definition of a donation. Petitioners
each gave P882,661.31 to the campaign funds of Senator Edgardo Angara,
without any material consideration. All three elements of a donation are present.
The patrimony of the four petitioners were reduced by P882,661.31 each.
Senator Angaras patrimony correspondingly increased by P3,530,645.24. There
was intent to do an act of liberality or animus donandi was present since each of
the petitioners gave their contributions without any consideration. Taken
together with the Civil Code definition of donation, Section 91 of the NIRC is clear
and unambiguous, thereby leaving no room for construction. Since animus
donandi or the intention to do an act of liberality is an essential element of a
donation, petitioners argue that it is important to look into the intention of the
giver to determine if a political contribution is a gift. Petitioners argument is not
tenable. First of all, donative intent is a creature of the mind. It cannot be
perceived except by the material and tangible acts which manifest its presence.
This being the case, donative intent is presumed present when one gives a part
of ones patrimony to another without consideration. Second, donative intent is
not negated when the person donating has other intentions, motives or purposes
which do not contradict donative intent. This Court is not convinced that since
the purpose of the contribution was to help elect a candidate, there was no
donative intent. Petitioners contribution of money without any material
consideration evinces animus donandi.
Petitioners claim that since the purpose of electoral contributions is to influence
the results of the elections, donative intent is not present. They claim that the
purpose of electoral contributions is brought on by the desire of the giver to
influence the result of an election by supporting candidates who would influence
the shaping of government policies that would promote the general welfare and
economic well-being of the electorate, including the giver himself. Petitioners
attempt to place the barrier of mutual exclusivity between donative intent and
the purpose of political contributions. This Court reiterates that donative intent is
not negated by the presence of other intentions, motives or purposes which do
not contradict donative intent. Petitioners attempt is strained. The fact that
petitioners will somehow in the future benefit from the election of the candidate
to whom they contribute, in no way amounts to a valuable material consideration
so as to remove political contributions from the purview of a donation. Senator
Angara was under no obligation to benefit the petitioners. The proper
performance of his duties as a legislator is his obligation as an elected public
servant of the Filipino people and not a consideration for the political

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contributions he received. In fact, as a public servant, he may even be called to

enact laws that are contrary to the interests of his benefactors, for the benefit of
the greater good.
Kapatiran vs. Tan
163 SCRA 371
Facts: EO 273 was issued by the President of the Philippines which amended the
Revenue Code, adopting the value-added tax (VAT) effective 1 January 1988.
Four petitions assailed the validity of the VAT Law fro being beyond the President
to enact; for being oppressive, discriminatory, regressive, and violative of the
due process and equal protection clauses, among others, of the Constitution. The
Integrated Customs Brokers Association particularly contend that it unduly
discriminate against customs brokers (Section 103 [r]) as the amended provision
of the Tax Code provides that service performed in the exercise of profession or
calling (except custom brokers) subject to occupational tax under the Local Tax
Code, and professional services performed by registered general professional
partnerships are exempt from VAT.
Issue: Whether the E-VAT law discriminates against customs brokers.
Held: The phrase except custom brokers is not meant to discriminate against
custom brokers but to avert a potential conflict between Sections 102 and 103 of
the Tax Code, as amended. The distinction of the customs brokers from the other
professionals who are subject to occupation tax under the Local Tax Code is
based upon material differences, in that the activities of customs brokers partake
more of a business, rather than a profession and were thus subjected to the
percentage tax under Section 174 of the Tax Code prior to its amendment by EO
273. EO 273 abolished the percentage tax and replaced it with the VAT. If the
Association did not protest the classification of customs brokers then, there is no
reason why it should protest now.
Rufino Tan vs. Del Rosario
237 SCRA 324
Facts: These two consolidated special civil actions for prohibition challenge, in
G.R. No.109289, the constitutionality of Republic Act No. 7496, also commonly
known as the Simplified Net Income Taxation Scheme (SNIT), amending
certain provisions of the National Internal Revenue Regulations No. 293,
promulgated by public respondents pursuant to said law. Petitioner intimates that
Republic Act No. 7496 desecrates the constitutional requirement that taxation
shall be uniform and equitable in that the law would now attempt to tax single
proprietorships and professionals differently from the manner it imposes the tax
on corporations and partnerships. Petitioners claim to be taxpayers adversely
affected by the continued implementation of the amendatory legislation
Issue: Does Republic Act No. 7496 violate the Constitution for imposing taxes
that are not uniform and equitable?
Held: The Petition is dismissed. Uniformity of taxation, like the kindred concept of
equal protection, merely requires that all subjects or objects of taxation, similarly
situated, are to be treated alike both in privileges and liabilities (Juan Luna
Subdivision vs. Sarmiento, 91 Phil. 371). Uniformity does not forfend

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classification as long as: (1) the standards that are used therefor are substantial
and not arbitrary, (2) the categorization is germane to achieve the legislative
purpose, (3) the law applies, all things being equal, to both present and future
conditions, and (4) the classification applies equally well to allthose belonging to
the same class (Pepsi Cola vs. City of Butuan, 24 SCRA 3; Bascovs. PAGCOR, 197
SCRA 771).What may instead be perceived to be apparent from the amendatory
law is the legislative intent to increasingly shift the income tax system towards
the schedular approach in the income taxation of individual taxpayers and to
maintain, by and large, the present global treatment on taxable corporations. We
certainly do not view this classification to be arbitrary and inappropriate. Having
arrived at this conclusion, the plea of petitioner to have the law declared
unconstitutional for being violative of due process must perforce fail. The due
process clause may correctly be invoked only when there is a clear contravention
of inherent or constitutional limitations in the exercise of the tax power.
Misamis Oriental vs. Finance Secretary
238 SCRA 63
FACTS: Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic
corporation whose members, are engaged in the buying and selling of copra. The
petitioner alleges that prior to the issuance of Revenue Memorandum Circular
47-91, which implemented VAT Ruling 190-90, copra was classified as
agricultural food product under 103(b) of the National Internal Revenue Code
and, therefore, exempt from VAT at all stages of production or distribution. Said
circular classified copra as an agricultural nonfood product and declared it
"exempt from VAT only if the sale is made by the primary producer pursuant to
Section 103(a) of the Tax Code, as amended." The reclassification had the effect
of denying to the petitioner the exemption it previously enjoyed when copra was
classified as an agricultural food product under 103(b) of the NIRC.
ISSUES: WON the petitioner is exempt from the tax.
RULING: NO. In interpreting 103(a) and (b) of the NIRC, the Commissioner of
Internal Revenue gave it a strict construction consistent with the rule that tax
exemptions must be strictly construed against the taxpayer and liberally in favor
of the state. As the government agency charged with the enforcement of the
law, the opinion of the Commissioner of Internal Revenue, in the absence of any
showing that it is plainly wrong, is entitled to great weight. Indeed, the ruling was
made by the Commissioner of Internal Revenue in the exercise of his power
under 245 of the NIRC to "make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including rulings on
the classification of articles for sales tax and similar purposes."
Tolentino vs. Secretary of Finance
235 SCRA 631
Facts: There are various suits challenging the constitutionality of RA 7716 on
various grounds. The value-added tax (VAT) is levied on the sale, barter or
exchange of goods and properties as well as on the sale or exchange of services.
It is equivalent to 10% of the gross selling price or gross value in money of goods
or properties sold, bartered or exchanged or of the gross receipts from the sale
or exchange of services. Republic Act No. 7716 seeks to widen the tax base of
the existing VAT system and enhance its administration by amending the
National Internal Revenue Code. Among the Petitioners was the Philippine Press
Institute which claim that R.A.7716 violates their press freedom and religious

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liberty, having removed them from the exemption to pay Value Added Tax. It is
contended by the PPI that by removing the exemption of the press from the VAT
while maintaining those granted to others, the law discriminates against the
press. At any rate, it is averred, "even non discriminatory taxation of
constitutionally guaranteed freedom is unconstitutional." PPI argued that the VAT
is in the nature of a license tax.
Issue: Whether or not the purpose of the VAT is the same as that of a license tax.
Ruling: A license tax, which, unlike an ordinary tax, is mainly for regulation. Its
imposition on the press is unconstitutional because it lays a prior restraint on the
exercise of its right. Hence, although its application to others, such those selling
goods, is valid, its application to the press or to religious groups, such as the
Jehovahs Witnesses, in connection with the latters sale of religious books and
pamphlets, is unconstitutional. As the U.S. Supreme Court put it, it is one thing
to impose a tax on income or property of a preacher. It is quite another thing to
exact a tax on him for delivering a sermon. The VAT is, however, different. It is
not a license tax. It is not a tax on the exercise of a privilege, much less a
constitutional right. It is imposed on the sale, barter, lease or exchange of goods
or properties or the sale or exchange of services and the lease of properties
purely for revenue purposes. To subject the press to its payment isnot to burden
the exercise of its right any more than to make the press pay income taxor
subject it to general regulation is not to violate its freedom under the
Constitution.

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