CIR vs. Algue Inc.

Commissioner of Internal Revenue vs. Algue Inc.

GR No. L-28896 | Feb. 17, 1988

Facts:
Algue Inc. is a domestic corp engaged in engineering, construction and other allied
activities
On Jan. 14, 1965, the corp received a letter from the CIR regarding its delinquency
income taxes from 1958-1959, amtg to P83,183.85
A letter of protest or reconsideration was filed by Algue Inc on Jan 18
On March 12, a warrant of distraint and levy was presented to Algue Inc. thru its
counsel, Atty. Guevara, who refused to receive it on the ground of the pending
protest
Since the protest was not found on the records, a file copy from the corp was
produced and given to BIR Agent Reyes, who deferred service of the warrant
On April 7, Atty. Guevara was informed that the BIR was not taking any action on
the protest and it was only then that he accepted the warrant of distraint and levy
earlier sought to be served
On April 23, Algue filed a petition for review of the decision of the CIR with the
Court of Tax Appeals
CIR contentions:
- the claimed deduction of P75,000.00 was properly disallowed because it was not
an ordinary reasonable or necessary business expense
- payments are fictitious because most of the payees are members of the same
family in control of Algue and that there is not enough substantiation of such
payments
CTA: 75K had been legitimately paid by Algue Inc. for actual services rendered in
the form of promotional fees. These were collected by the Payees for their work in
the creation of the Vegetable Oil Investment Corporation of the Philippines and its
subsequent purchase of the properties of the Philippine Sugar Estate Development
Company.

Issue: W/N the Collector of Internal Revenue correctly disallowed the P75,000.00
deduction claimed by Algue as legitimate business expenses in its income tax
returns

Ruling:
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance, made in accordance with law.
RA 1125: the appeal may be made within thirty days after receipt of the decision
or ruling challenged
During the intervening period, the warrant was premature and could therefore not
be served.
Originally, CIR claimed that the 75K promotional fees to be personal holding
company income, but later on conformed to the decision of CTA
There is no dispute that the payees duly reported their respective shares of the
fees in their income tax returns and paid the corresponding taxes thereon. CTA also
found, after examining the evidence, that no distribution of dividends was involved
CIR suggests a tax dodge, an attempt to evade a legitimate assessment by
involving an imaginary deduction
Algue Inc. was a family corporation where strict business procedures were not
applied and immediate issuance of receipts was not required. at the end of the
year, when the books were to be closed, each payee made an accounting of all of
the fees received by him or her, to make up the total of P75,000.00. This
arrangement was understandable in view of the close relationship among the
persons in the family corporation
The amount of the promotional fees was not excessive. The total commission paid
by the Philippine Sugar Estate Development Co. to Algue Inc. was P125K. After
deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from
the transaction. The amount of P75,000.00 was 60% of the total commission. This
was a reasonable proportion, considering that it was the payees who did practically
everything, from the formation of the Vegetable Oil Investment Corporation to the
actual purchase by it of the Sugar Estate properties.
Sec. 30 of the Tax Code: allowed deductions in the net income Expenses - All the
ordinary and necessary expenses paid or incurred during the taxable year in
carrying on any trade or business, including a reasonable allowance for salaries or
other compensation for personal services actually rendered xxx
the burden is on the taxpayer to prove the validity of the claimed deduction
In this case, Algue Inc. has proved that the payment of the fees was necessary and
reasonable in the light of the efforts exerted by the payees in inducing investors
and prominent businessmen to venture in an experimental enterprise and involve
themselves in a new business requiring millions of pesos.
Taxes are what we pay for civilization society. Without taxes, the government
would be paralyzed for lack of the motive power to activate and operate it. Hence,
despite the natural reluctance to surrender part of one's hard earned income to
the taxing authorities, every person who is able to must contribute his share in the
running of the government. The government for its part, is expected to respond in
the form of tangible and intangible benefits intended to improve the lives of the
people and enhance their moral and material values
Taxation must be exercised reasonably and in accordance with the prescribed
procedure. If it is not, then the taxpayer has a right to complain and the courts will
then come to his succor

Algue Inc.s appeal from the decision of the CIR was filed on time with the CTA in
accordance with Rep. Act No. 1125. And we also find that the claimed deduction by
Algue Inc. was permitted under the Internal Revenue Code and should therefore
not have been disallowed by the CIR

CIR vs. BPI
G.R. No. 134062 April 17, 2007
Corona, J.:
FACTS:
In October 28, 1988, petitioner assessed BPI of deficiency percentage and
documentary stamp tax for the year 1986, in the total amount of P129,488,056.63.
A letter reply by respondent was sent on December 10, 1988 stating among other:
... we shall inform you the taxpayers decision on whether to pay of protest the
assessment, CTA ruled that BPI failed to protest on time under Sec 270 of NIRC of
1986.
ISSUE:
Whether or not the assessments issued to BPI for deficiency percentage
and documentary stamp taxes for 1986 had already become final and un-
appealable.
RULING:
In merely notifying BPI of his findings. CIR relied on the provisions of the
former Section 270 prior to its amendment by RA 8424. The sentence
the taxpayers shall be informed in writing of the law and the facts on which the
assessment is made
Was not in the old Section 270 but was only later on inserted in the
renumbered Section 228 in 1997.
Tax assessments by tax examiners are presumed correct and are made in
good faith. The taxpayer has the duty to prove otherwise. In the absence of proof
of any irregularities in the performance of duties, an assessment duly made by BIR
examiner and approved by his superior officers will not be distributed. All
presumptions are in favor of the correctness of tax assessments.

TIO VS VIDEOGRAM
Tio is a videogram operator who assailed the constitutionality of PD 1987 entitled
An Act Creating the Videogram Regulatory Board with broad powers to regulate
and supervise the videogram industry. The PD was also reinforced by PD 1994
which amended the National Internal Revenue Code. The amendment provides
that there shall be collected on each processed video-tape cassette, ready for
playback, regardless of length, an annual tax of five pesos; Provided, that locally
manufactured or imported blank video tapes shall be subject to sales tax. The said
law was brought about by the need to regulate the sale of videograms as it has
adverse effects to the movie industry. The proliferation of videograms has
significantly lessened the revenue being acquired from the movie industry, and
that such loss may be recovered if videograms are to be taxed. Sec 10 of the PD
imposes a 30% tax on the gross receipts payable to the LGUs. Tio countered,
among others, that the tax imposition provision is a rider and is not germane to the
subject matter of the PD.
ISSUE: Whether or not the PD embraces only one subject.
HELD: The Constitutional requirement that every bill shall embrace only one
subject which shall be expressed in the title thereof is sufficiently complied with if
the title be comprehensive enough to include the general purpose which a statute
seeks to achieve. It is not necessary that the title express each and every end that
the statute wishes to accomplish. The requirement is satisfied if all the parts of the
statute are related, and are germane to the subject matter expressed in the title, or
as long as they are not inconsistent with or foreign to the general subject and title.
An act having a single general subject, indicated in the title, may contain any
number of provisions, no matter how diverse they may be, so long as they are not
inconsistent with or foreign to the general subject, and may be considered in
furtherance of such subject by providing for the method and means of carrying out
the general object. The rule also is that the constitutional requirement as to the
title of a bill should not be so narrowly construed as to cripple or impede the power
of legislation. It should be given a practical rather than technical construction. In
the case at bar, the questioned provision is allied and germane to, and is
reasonably necessary for the accomplishment of, the general object of the PD,
which is the regulation of the video industry through the VRB as expressed in its
title. The tax provision is not inconsistent with, nor foreign to that general subject
and title. As a tool for regulation it is simply one of the regulatory and control
mechanisms scattered throughout the PD. The express purpose of the PD to
include taxation of the video industry in order to regulate and rationalize the
uncontrolled distribution of videograms is evident from Preambles 2 and 5 of the
said PD which explain the motives of the lawmakers in presenting the measure. The
title of the PD, which is the creation of the VRB, is comprehensive enough to
include the purposes expressed in its Preamble and reasonably covers all its
provisions. It is unnecessary to express all those objectives in the title or that the
latter be an index to the body of the PD.

Fels Energy vs. Batangas
Fels Energy, Inc. vs. Province of Batangas
G.R. No. 168557. February 16, 2007.
Callejo Sr., J.
Doctrine: In Consolidated Edison Company of New York, Inc., et al. v. The City of
New York, et al., a power company brought an action to review property tax
assessment. On the citys motion to dismiss, the Supreme Court of New York held
that the barges on which were mounted gas turbine power plants designated to
generate electrical power, the fuel oil barges which supplied fuel oil to the power
plant barges, and the accessory equipment mounted on the barges were subject to
real property taxation.
Moreover, Article 415 (9) of the New Civil Code provides that docks and structures
which, though floating, are intended by their nature and object to remain at a fixed
place on a river, lake, or coast are considered immovable property. Thus, power
barges are categorized as immovable property by destination, being in the nature
of machinery and other implements intended by the owner for an industry or work
which may be carried on in a building or on a piece of land and which tend directly
to meet the needs of said industry or work.
Facts: On January 18, 1993, NPC entered into a lease contract with Polar Energy,
Inc. over 330 MW diesel engine power barges moored at Balayan Bay in Calaca,
Batangas. The contract, denominated as an Energy Conversion Agreement, was for
a period of five years. Article 10 states that NPC shall be responsible for the
payment of taxes. (other than (i) taxes imposed or calculated on the basis of the
net income of POLAR and Personal Income Taxes of its employees and (ii)
construction permit fees, environmental permit fees and other similar fees and
charges. Polar Energy then assigned its rights under the Agreement to Fels despite
NPCs initial opposition.
FELS received an assessment of real property taxes on the power barges from
Provincial Assessor Lauro C. Andaya of Batangas City. FELS referred the matter to
NPC, reminding it of its obligation under the Agreement to pay all real estate taxes.
It then gave NPC the full power and authority to represent it in any conference
regarding the real property assessment of the Provincial Assessor. NPC filed a
petition with the LBAA. The LBAA ordered Fels to pay the real estate taxes. The
LBAA ruled that the power plant facilities, while they may be classified as movable
or personal property, are nevertheless considered real property for taxation
purposes because they are installed at a specific location with a character of
permanency. The LBAA also pointed out that the owner of the bargesFELS, a
private corporationis the one being taxed, not NPC. A mere agreement making
NPC responsible for the payment of all real estate taxes and assessments will not
justify the exemption of FELS; such a privilege can only be granted to NPC and
cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed
out of time.
Fels appealed to the CBAA. The CBAA reversed and ruled that the power barges
belong to NPC; since they are actually, directly and exclusively used by it, the
power barges are covered by the exemptions under Section 234(c) of R.A. No.
7160. As to the other jurisdictional issue, the CBAA ruled that prescription did not
preclude the NPC from pursuing its claim for tax exemption in accordance with
Section 206 of R.A. No. 7160. Upon MR, the CBAA reversed itself.
Issue: Whether or not the petitioner may be assessed of real property taxes.
Held: YES. The CBAA and LBAA power barges are real property and are thus subject
to real property tax. This is also the inevitable conclusion, considering that G.R. No.
165113 was dismissed for failure to sufficiently show any reversible error. Tax
assessments by tax examiners are presumed correct and made in good faith, with
the taxpayer having the burden of proving otherwise. Besides, factual findings of
administrative bodies, which have acquired expertise in their field, are generally
binding and conclusive upon the Court; we will not assume to interfere with the
sensible exercise of the judgment of men especially trained in appraising property.
Where the judicial mind is left in doubt, it is a sound policy to leave the assessment
undisturbed. We find no reason to depart from this rule in this case.
In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et
al., a power company brought an action to review property tax assessment. On the
citys motion to dismiss, the Supreme Court of New York held that the barges on
which were mounted gas turbine power plants designated to generate electrical
power, the fuel oil barges which supplied fuel oil to the power plant barges, and
the accessory equipment mounted on the barges were subject to real property
taxation.
Moreover, Article 415 (9) of the New Civil Code provides that docks and structures
which, though floating, are intended by their nature and object to remain at a fixed
place on a river, lake, or coast are considered immovable property. Thus, power
barges are categorized as immovable property by destination, being in the nature
of machinery and other implements intended by the owner for an industry or work
which may be carried on in a building or on a piece of land and which tend directly
to meet the needs of said industry or work.
Petitioners maintain nevertheless that the power barges are exempt from real
estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly
and exclusively used by petitioner NPC, a government- owned and controlled
corporation engaged in the supply, generation, and transmission of electric power.
We affirm the findings of the LBAA and CBAA that the owner of the taxable
properties is petitioner FELS, which in fine, is the entity being taxed by the local
government. As stipulated under Section 2.11, Article 2 of the Agreement:
OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the
fixtures, fittings, machinery and equipment on the Site used in connection with the
Power Barges which have been supplied by it at its own cost. POLAR shall operate,
manage and maintain the Power Barges for the purpose of converting Fuel of
NAPOCOR into electricity.
It follows then that FELS cannot escape liability from the payment of realty taxes by
invoking its exemption in Section 234 (c) of R.A. No. 7160. Indeed, the law states
that the machinery must be actually, directly and exclusively used by the
government owned or controlled corporation; nevertheless, petitioner FELS still
cannot find solace in this provision because Section 5.5, Article 5 of the Agreement
provides:
OPERATION. POLAR undertakes that until the end of the Lease Period, subject to
the supply of the necessary Fuel pursuant to Article 6 and to the other provisions
hereof, it will operate the Power Barges to convert such Fuel into electricity in
accordance with Part A of Article 7.
It is a basic rule that obligations arising from a contract have the force of law
between the parties. Not being contrary to law, morals, good customs, public order
or public policy, the parties to the contract are bound by its terms and conditions.
Time and again, the Supreme Court has stated that taxation is the rule and
exemption is the exception. The law does not look with favor on tax exemptions
and the entity that would seek to be thus privileged must justify it by words too
plain to be mistaken and too categorical to be misinterpreted. Thus, applying the
rule of strict construction of laws granting tax exemptions, and the rule that doubts
should be resolved in favor of provincial corporations, we hold that FELS is
considered a taxable entity.
The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that
it shall be responsible for the payment of all real estate taxes and assessments,
does not justify the exemption. The privilege granted to petitioner NPC cannot be
extended to FELS. The covenant is between FELS and NPC and does not bind a third
person not privy thereto, in this case, the Province of Batangas.
It must be pointed out that the protracted and circuitous litigation has seriously
resulted in the local governments deprivation of revenues. The power to tax is an
incident of sovereignty and is unlimited in its magnitude, acknowledging in its very
nature no perimeter so that security against its abuse is to be found only in the
responsibility of the legislature which imposes the tax on the constituency who are
to pay for it. The right of local government units to collect taxes due must always
be upheld to avoid severe tax erosion. This consideration is consistent with the
State policy to guarantee the autonomy of local governments and the objective of
the Local Government Code that they enjoy genuine and meaningful local
autonomy to empower them to achieve their fullest development as self-reliant
communities and make them effective partners in the attainment of national goals.
In conclusion, we reiterate that the power to tax is the most potent instrument to
raise the needed revenues to finance and support myriad activities of the local
government units for the delivery of basic services essential to the promotion of
the general welfare and the enhancement of peace, progress, and prosperity of the
people.
Caveat: Anyone who claims this digest as his own without proper authority shall
be held liable under the law of Karma.





CIR V TOKYO SHIPPING CO., LTD. May 26, 1995
Sunday, January 25, 2009 Posted by Coffeeholic Writes
Labels: Case Digests, Taxation

Facts: Private respondent is a foreign corporation represented in the Philippines by
Soriamont Steamship Agencies, Inc. It owns and operates tramper vessel M/V
Gardenia. In December 1980, NASUTRA chartered M/V Gardenia to load 16,500
metric tons of raw sugar in the Philippines. On December 23, 1980 Mr. Edilberto
Lising, the operations supervisor of Soriamont Agency, paid the required income
and common carriers taxes in the sum total of P107,142.75 based on the expected
gross receipts of the vessel. Upon arriving, however, at Guimaras Port of Iloilo, the
vessel found no sugar for loading. On January 10, 1981, NASUTRA and private
respondents agent mutually agreed to have the vessel sail for Japan without any
cargo.

Claiming the pre-payment of income and common carriers taxes as erroneous
since no receipt was realized from the charter agreement private respondent
instituted a claim for tax credit or refund of the sum of P107,142,75 before
petitioner commissioner of Internal Revenue on March 23, 1981. Petitioner failed
to act promptly on the claim, hence, on May 14, 1981, private respondent filed a
petition for review before public respondent CTA.

Petitioner contested the petition. As special and affirmative defenses, it alleged the
following: that taxes are presumed to have been collected in accordance with law;
that in an action for refund, the burden of proof is upon the taxpayer to show that
taxes are erroneously or illegally collected and the taxpayers failure to sustain said
burden is fatal to the action for refund; and that claims for refund are construed
strictly against tax claimants.

After trial, respondent tax court decided in favor of the private respondent.
Issue: Whether or not tax claimants has the burden of proof to support its claim of
refund.
Held: A claim for refund is in the nature of a claim for exemption and should be
construed in strictissimi juris against the taxpayer. Likewise, there can be no
disagreement with petitioners stance that private respondent has the burden of
proof to establish the factual basis of its claim for tax refund.





Coconut Oil Refiners Association, Inc. vs. Ruben Torres (Case Digest)
Facts:
This is a Petition to enjoin and prohibit the public respondent Ruben Torres in his
capacity as Executive Secretary from allowing other private respondents to
continue with the operation of tax and duty-free shops located at the Subic Special
Economic Zone (SSEZ) and the Clark Special Economic Zone (CSEZ). The petitioner
seeks to declare Republic Act No. 7227 as unconstitutional on the ground that it
allowed only tax-free (and duty-free) importation of raw materials, capital and
equipment. It reads:
The Subic Special Economic Zone shall be operated and managed as a separate
customs territory ensuring free flow or movement of goods and capital within, into
and exported out of the Subic Special Economic Zone, as well as provide incentives
such as tax and duty-free importations of raw materials, capital and equipment.
However, exportation or removal of goods from the territory of the Subic Special
Economic Zone to the other parts of the Philippine territory shall be subject to
customs duties and taxes under the Customs and Tariff Code and other relevant tax
laws of thePhilippines [RA 7227, Sec 12 (b)].
Petitioners contend that the wording of Republic Act No. 7227 clearly limits the
grant of tax incentives to the importation of raw materials, capital and equipment
only thereby violating the equal protection clause of the Constitution.
He also assailed the constitutionality of Executive Order No. 97-A for being violative
of their right to equal protection. They asserted that private respondents operating
inside the SSEZ are not different from the retail establishments located outside.
The respondent moves to dismiss the petition on the ground of lack of legal
standing and unreasonable delay in filing of the petition.
Issues:
(1) Statutory Construction; Political Law; Taxation Law:
Whether or not there is a violation of equal protection clause.
(2) Political Law:
Whether or not the case can be dismiss due to lack of the petitioners legal
standing.
(3) Remedial Law:
Whether or not the case can be dismissed due to unreasonable delay in filing of the
petition.
Held:
(1) The SC ruled in the negative. The phrase tax and duty-free importations of raw
materials, capital and equipment was merely cited as an example of incentives that
may be given to entities operating within the zone. Public respondent SBMA
correctly argued that the maxim expressio unius est exclusio alterius, on which
petitioners impliedly rely to support their restrictive interpretation, does not apply
when words are mentioned by way of example.
The petition with respect to declaration of unconstitutionality of Executive Order
No. 97-A cannot be, likewise, sustained. The guaranty of the equal protection of
the laws is not violated by a legislation based which was based on reasonable
classification. A classification, to be valid, must (1) rest on substantial distinction,
(2) be germane to the purpose of the law, (3) not be limited to existing conditions
only, and (4) apply equally to all members of the same class. Applying the foregoing
test to the present case, this Court finds no violation of the right to equal
protection of the laws. There is a substantial distinctions lying between the
establishments inside and outside the zone. There are substantial differences in a
sense that, investors will be lured to establish and operate their industries in the
so-called secured area and the present business operators outside the area. There
is, then, hardly any reasonable basis to extend to them the benefits and incentives
accorded in R.A. 7227.
(2) No. Anent the claim on lack of legal standing, respondents argue that
petitioners, being mere suppliers of the local retailers operating outside the special
economic zones, do not stand to suffer direct injury in the enforcement of the
issuances being assailed herein. Assuming this is true, this Court has nevertheless
held that in cases of paramount importance where serious constitutional questions
are involved, the standing requirements may be relaxed and a suit may be allowed
to prosper even where there is no direct injury to the party claiming the right of
judicial review.
(3) No. With respect to the other alleged procedural flaws, even assuming the
existence of such defects, this Court, in the exercise of its discretion, brushes aside
these technicalities and takes cognizance of the petition considering the
importance to the public of the present case and in keeping with the duty to
determine whether the other branches of the government have kept themselves
within the limits of the Constitution

LORENZO vs. POSADAS JR.
G.R. No. L-43082
June 18, 1937


FACTS: Thomas Hanley died, leaving a will and a considerable amount of real and
personal properties. Proceedings for the probate of his will and the settlement and
distribution of his estate were begun in the CFI of Zamboanga. The will was
admitted to probate.

The CFI considered it proper for the best interests of the estate to appoint a trustee
to administer the real properties which, under the will, were to pass to nephew
Matthew ten years after the two executors named in the will was appointed
trustee. Moore acted as trustee until he resigned and the plaintiff Lorenzo herein
was appointed in his stead.

During the incumbency of the plaintiff as trustee, the defendant Collector of
Internal Revenue (Posadas) assessed against the estate an inheritance tax, together
with the penalties for deliquency in payment. Lorenzo paid said amount under
protest, notifying Posadas at the same time that unless the amount was promptly
refunded suit would be brought for its recovery. Posadas overruled Lorenzos
protest and refused to refund the said amount. Plaintiff went to court. The CFI
dismissed Lorenzos complaint and Posadas counterclaim. Both parties appealed
to this court.

ISSUE:
(e) Has there been delinquency in the payment of the inheritance tax?
HELD: The judgment of the lower court is accordingly modified, with costs against
the plaintiff in both instances

YES
The defendant maintains that it was the duty of the executor to pay the inheritance
tax before the delivery of the decedents property to the trustee. Stated otherwise,
the defendant contends that delivery to the trustee was delivery to the cestui que
trust, the beneficiary in this case, within the meaning of the first paragraph of
subsection (b) of section 1544 of the Revised Administrative Code. This contention
is well taken and is sustained. A trustee is but an instrument or agent for the cestui
que trust
The appointment of Moore as trustee was made by the trial court in conformity
with the wishes of the testator as expressed in his will. It is true that the word
trust is not mentioned or used in the will but the intention to create one is clear.
No particular or technical words are required to create a testamentary trust. The
words trust and trustee, though apt for the purpose, are not necessary. In fact,
the use of these two words is not conclusive on the question that a trust is created.
To constitute a valid testamentary trust there must be a concurrence of three
circumstances:

(1) Sufficient words to raise a trust;

(2) a definite subject;

(3) a certain or ascertain object; statutes in some jurisdictions expressly or in effect
so providing.

There is no doubt that the testator intended to create a trust. He ordered in his
will that certain of his properties be kept together undisposed during a fixed
period, for a stated purpose. The probate court certainly exercised sound judgment
in appointmening a trustee to carry into effect the provisions of the will



As the existence of the trust was already proven, it results that the estate which
plaintiff represents has been delinquent in the payment of inheritance tax and,
therefore, liable for the payment of interest and surcharge provided by law in such
cases.

The delinquency in payment occurred on March 10, 1924, the date when Moore
became trustee. On that date trust estate vested in him. The interest due should be
computed from that date.

NOTES: Other issues:

(a) When does the inheritance tax accrue and when must it be satisfied?

The accrual of the inheritance tax is distinct from the obligation to pay the same.

Acording to article 657 of the Civil Code, the rights to the succession of a person
are transmitted from the moment of his death. In other words, said Arellano, C.
J., . . . the heirs succeed immediately to all of the property of the deceased
ancestor. The property belongs to the heirs at the moment of the death of the
ancestor as completely as if the ancestor had executed and delivered to them a
deed for the same before his death.

Whatever may be the time when actual transmission of the inheritance takes place,
succession takes place in any event at the moment of the decedents death. The
time when the heirs legally succeed to the inheritance may differ from the time
when the heirs actually receive such inheritance. Thomas Hanley having died on
May 27, 1922, the inheritance tax accrued as of the date.

From the fact, however, that Thomas Hanley died on May 27, 1922, it does not
follow that the obligation to pay the tax arose as of the date. The time for the
payment on inheritance tax is clearly fixed by section 1544 of the Revised
Administrative Code as amended by Act No. 3031, in relation to section 1543 of the
same Code. The two sections follow:

SEC. 1543. Exemption of certain acquisitions and transmissions. The following
shall not be taxed:

(a) The merger of the usufruct in the owner of the naked title.

(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or
legatee to the trustees.

(c) The transmission from the first heir, legatee, or donee in favor of another
beneficiary, in accordance with the desire of the predecessor. xx

SEC. 1544. When tax to be paid. The tax fixed in this article shall be paid:

(a) In the second and third cases of the next preceding section, before entrance
into possession of the property.

(b) In other cases, within the six months subsequent to the death of the
predecessor; but if judicial testamentary or intestate proceedings shall be
instituted prior to the expiration of said period, the payment shall be made by the
executor or administrator before delivering to each beneficiary his share.
The instant case does[not] fall under subsection (a), but under subsection (b), of
section 1544 above-quoted, as there is here no fiduciary heirs, first heirs, legatee or
donee. Under the subsection, the tax should have been paid before the delivery of
the properties in question to Moore as trustee.

(b) Should the inheritance tax be computed on the basis of the value of the estate
at the time of the testators death, or on its value ten years later?

If death is the generating source from which the power of the estate to impose
inheritance taxes takes its being and if, upon the death of the decedent, succession
takes place and the right of the estate to tax vests instantly, the tax should be
measured by the value of the estate as it stood at the time of the decedents death,
regardless of any subsequent contingency value of any subsequent increase or
decrease in value

(c) In determining the net value of the estate subject to tax, is it proper to deduct
the compensation due to trustees?
A trustee, no doubt, is entitled to receive a fair compensation for his services. But
from this it does not follow that the compensation due him may lawfully be
deducted in arriving at the net value of the estate subject to tax. There is no statute
in the Philippines which requires trustees commissions to be deducted in
determining the net value of the estate subject to inheritance tax

(d) What law governs the case at bar? Should the provisions of Act No. 3606
favorable to the tax-payer be given retroactive effect?



A statute should be considered as prospective in its operation, whether it enacts,
amends, or repeals an inheritance tax, unless the language of the statute clearly
demands or expresses that it shall have a retroactive effect, . . . . Act No. 3606
itself contains no provisions indicating legislative intent to give it retroactive effect.
No such effect can be given the statute by this court.