FERDINAND MARCOS, II vs.

CA, COMMISSIONER OF BIR AND HERMINIA DE GUZMAN

Facts:
The case is a Petition for Review on Certiorari which assails that the respondent CA erred in its
Decision dated November 29, 1994 which held that “the deficiency income tax assessments and estate
tax assessment are already unappealable and the subsequent levy of real properties is a tax remedy
resorted to by the government x x x.” The case involves the estate of the late Ferdinand Marcos which
became the subject of an alleged tax deficiency investigated by a Special Tax Audit Team. The
investigation disclosed that the Marcoses failed to file a written notice of the death of the decedent,
an estate tax returns, as well as several income tax returns covering the years 1982-1986 – a violation
of the NIRC. Because of the investigated deficiencies, a Notice to Taxpayer was given to Mrs. Marcos
inviting her to a conference which was furnished to her Counsel but to no avail. Two notices of levy on
real property was issued to the Marcoses on February 22, 1993. Four notices of levy on real property
was issued again to the Marcoses on May 20, 1993. Another four notices of levy on real property was
issued to the Marcoses on May 26, 1993. No response was given by the Petitioner in all the Notices of
Levy. On May 26, 1993, Notice of sale at public auction were posted on the lobby of the City Hall of
Tacloban City. There being no bidder in the auction, the lots were forfeited in favor of the government.
Hence, the petitioner filed the instant petition for Certiorari with the prayer of TRO and/or writ of
preliminary injunction.

Issue:
Whether or not the Respondent CA and BIR erred in ruling that there is a deficiency in tax
assessment of the petitioner subjecting the respondent to levy on the real properties of the Petitioner
as a tax remedy for the said deficiency.

Held:
No. Section 3 of the NIRC provides that:

Sec 3. Powers of and duties of the bureau – the powers and duties of the Bureau of Internal
Revenue shall comprehend the assessment and collections 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.

Thus, the court recognizes the liberal treatment of claims for taxes against estate of the
decedent. 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. It cannot therefore be argued that the tax Bureau erred in
proceeding with the levying of the properties.

The issue on the deficiency tax assessment, on the other hand, should have been pursued
through proper administrative and judicial avenues. Additionally, aside from the failure to file the estate
return, the Petitioner never questioned the assessments served upon them until it lapsed into finality.
Hence, prompting the BIR to perform the necessary levying acts.
COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, CITYTRUST BANKING CORPORATION
AND COURT OF TAX APPEALS

Facts:
The case is a review on certiorari seeking to nullify and/or set aside the CA judgment in case no.
26839 affirming the Court of Tax Appeals order to grant refund to the herein private respondent City
Trust Banking Corporation in the amount of P13,314,506.14 by the herein petitioner Commissioner of
Internal Revenue. In a letter dated, Citytrust filed a claim for refund with the BIR amounting to
P19,971,745.00 representing the alleged aggregate of the excess of its carried-over total quarterly
payments over the actual income tax. Two days later, Citytrust filed a petition with Court of Tax Appeals
claiming such refund. The Office of the Solicitor General, in behalf of the commissioner, asserted that
mere averment that Citytrust incurred a net loss does not merit a refund and that prescription has
already set in, hence Citytrust can not refund. On February 20, 1991, the case was submitted for
decision based solely on the evidences submitted by Citytrust. Herein Commissioner can not present
evidence by reason of the repeated failure of the Tax Credit/Refund Division of BIR to transmit records
of the case, as well as investigation report of the Solicitor General. The Petitioner filed with Tax Court a
Manifestation and Motion praying for the suspension of the proceedings on the grounds that the claim
for refund is already being processed by the BIR and that the said bureau was awaiting submission by
the Citytrust of the required confirmation receipts which would show whether or not the aforestated
amount was actually paid and remitted by the BIR. Such manifestation and motion was denied on the
grounds that the case is submitted for decision. The decision ordered refund for the Citytrust. Hence
this instant petition contending that the respondent erred in affirming refund for Citytrust.

Issue:
Whether or not the respondent Court of Appeals and Court of Tax Appeal erred in its decision
ordering the refund in favor of the Citytust.

Held:
Yes. The Court of Tax Appeals erred in denying the petitioner’s motion for reconsideration
alleging the existence of deficiency in tax of the Citytrust. To award such refund despite the existence
of such deficiency is an absurdity and a polarity of concepts. One can not avail refund while at the same
time proven to have tax deficiencies. Hence, it is equitable that both the Government and the private
respondent be given equal opportunities to be heard and avail the remedies under the law. The case is
REMANDED to the court of tax appeals.
COMMISSIONER OF INTERNAL REVENUE vs. ALGUE INC., AND CTA

Facts:
A l g u e , I n c . , a d o m e s t i c c o r p o r a t i o n e n g a g e d i n engineering, construction and
other allied activities. Philippine Sugar Estate Development
Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories
andoil manufacturing process. Algue received as agent a commission of P126,000.00, and it
was from this commission that the P75,000.00 promotional
fees w e r e p a i d t o t h e a f o r e n a m e d i n d i v i d u a l s . T h e p a y e e s d u l y reported their
respective shares of the fees in their income taxreturns and paid the corresponding taxes
thereon, and there was no distribution of dividends was involved.

Issue:
Whether or not the Collector of Internal Revenue correctly disallowed
the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in
its income tax returns.

Held:
N O – C I R i s n o t c o r r e c t . T h e b u r d e n i s o n t h e taxpayer to prove the validity
of the claimed deduction. In
thep r e s e n t c a s e , h o w e v e r , w e f i n d t h a t t h e o n u s h a s b e e n discharged
satisfactorily. The private respondent has proved that the payment of the fees was
necessary and reasonable in t h e l i g h t o f t h e e f f o r t s e x e r t e d b y t h e
payees in inducingi n v e s t o r s a n d p r o m i n e n t b u s i n e s s m e n t o v e n t u r e i n a n e
x p e r i m e n t a l e n t e r p r i s e a n d i n v o l v e t h e m s e l v e s i n a n e w business requiring
millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.

Taxes are the lifeblood of the government and so should be collected

without unnecessary hindrance. On the other hand, 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.