CIR v Pineda, 21 SCRA 105

Facts:
Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom is Manuel B. Pineda,
a lawyer. The estate was divided among the heirs and Manuel B. Pineda's share amounted to about P2,500.00. After
the estate proceedings were closed, the BIR investigated the income tax liability of the estate for the years 1945,
1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed. The representative of the
Collector of Internal Revenue filed said returns for the estate and issued an assessment. Manuel B. Pineda, who
received the assessment, contested the same. He appealed to the Court of Tax Appeals alleging that he was appealing
"only that proportionate part or portion pertaining to him as one of the heirs." The Court of Tax Appeals rendered
judgment holding Manuel B. Pineda liable for the payment corresponding to his share of the taxes. The Commissioner
of Internal Revenue has appealed to the SC and has proposed to hold Manuel B. Pineda liable for the payment of all the
taxes found by the Tax Court to be due from the estate instead of only for the amount of taxes corresponding to his
share in the estate. Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid
income tax due the estate only up to the extent of and in proportion to any share he received.
Issue: Can BIR collect the full amount of estate taxes from an heir's inheritance
Ruling:
Yes. The Government can require Atty. Pineda to pay the full amount of the taxes assessed. Pineda is liable for the
assessment as an heir and as a holder-transferee of property belonging to the estate/taxpayer. As an heir he is
individually answerable for the part of the tax proportionate to the share he received from the inheritance. His liability,
however, cannot exceed the amount of his share. As a holder of property belonging to the estate, Pineda is liable for
he tax up to the amount of the property in his possession. The reason is that the Government has a lien on the
P2,500.00 received by him from the estate as his share in the inheritance, for unpaid income taxes a for which said
estate is liable.
All told, the Government has two ways of collecting the tax in question. One, by going after all the heirs and
collecting from each one of them the amount of the tax proportionate to the inheritance received. Another remedy,
is by subjecting said property of the estate which is in the hands of an heir or transferee to the payment of the tax
due, the estate. This second remedy is the very avenue the Government took in this case to collect the tax. The
Bureau of Internal Revenue should be given, in instances like the case at bar, the necessary discretion to avail itself of
the most expeditious way to collect the tax as may be envisioned in the particular provision of the Tax Code above
quoted, because taxes are the lifeblood of government and their prompt and certain availability is an imperious need.
And as afore-stated in this case the suit seeks to achieve only one objective: payment of the tax. The adjustment of
the respective shares due to the heirs from the inheritance, as lessened by the tax, is left to await the suit for
contribution by the heir from whom the Government recovered said tax.

Commissioner of Internal Revenue vs. Cebu Portland Cement Co.

G.R. No. L-29059, 15 December 1987
Facts: CTA decision ordered the petitioner CIR to refund to the Cebu Portland Cement Company,
respondent, P 359,408.98 representing overpayments of ad valorem taxes on cement sold by it.
Execution of judgement was opposed by the petitioner citing that private respondent had an outstanding
sales tax liability to which the judgment debt had already been credited. In fact, there was still a P4 M plus
balance they owed. The Court of Tax Appeals, in holding that the alleged sales tax liability of the private
respondent was still being questioned and therefore could not be set-off against the refund, granted
private respondent's motion. The private respondent questioned the assessed tax based on Article 186 of
the Tax Code, contending that cement was adjudged a mineral and not a manufactured product; and
thusly they were not liable for their alleged tax deficiency. Thereby, petitioner filed this petition for review.
Issue: Whether or not assessment of taxes can be enforced even if there is a case contesting it.

Held: The argument that the assessment cannot as yet be enforced because it is still being contested
loses sight of the urgency of the need to collect taxes as "the lifeblood of the government." If the payment

of taxes could be postponed by simply questioning their validity, the machinery of the state would grind to
a halt and all government functions would be paralyzed. That is the reason why, save for the exception in
RA 1125 , the Tax Code provides that injunction is not available to restrain collection of tax. Thereby, w e
hold that the respondent Court of Tax Appeals erred in its order.

Commissioner vs. Algue, Inc.

COMMISSIONER v. ALGUE, INC.
GR No. L-28896, February 17, 1988
158 SCRA 9
FACTS: Private respondent corporation Algue Inc. filed its income tax returns for 1958 and
1959showing deductions, for promotional fees paid, from their gross income, thus lowering their
taxable income. The BIR assessed Algue based on such deductions contending that the claimed
deduction is disallowed because it was not an ordinary, reasonable and necessary expense.
ISSUE: Should an uncommon business expense be disallowed as a proper deduction in computation of
income taxes, corollary to the doctrine that taxes are the lifeblood of the government?
HELD: No. Private respondent 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 xperimental enterprise and involve themselves in a new business requiring millions of
pesos. This was no mean feat and should be, as it was, sufficiently recompensed.
It is well-settled that 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.
But even as we concede the inevitability and indispensability of taxation, it is a requirement in all
democratic regimes that it 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. For
all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can
demonstrate, as it has here, that the law has not been observed.

VERA v. FERNANDEZ
GR No. L-31364 March 30, 1979
89 SCRA 199
FACTS: The BIR filed on July 29, 1969 a motion for allowance of claim and for payment of taxes
representing the estate's tax deficiencies in 1963 to 1964 in the intestate proceedings of Luis Tongoy.
The administrator opposed arguing that the claim was already barred by the statute of limitation,
Section 2 and Section 5 of Rule 86 of the Rules of Court which provides that all claims for money
against the decedent, arising from contracts, express or implied, whether the same be due, not due,
or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and
judgment for money against the decedent, must be filed within the time limited in the notice;
otherwise they are barred forever.
ISSUE: Does the statute of non-claims of the Rules of Court bar the claim of the government for
unpaid taxes?
HELD: No. The reason for the more liberal treatment of claims for taxes against a decedent's estate in
the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are

the lifeblood of the Government and their prompt and certain availability are imperious need. (CIR vs.
Pineda, 21 SCRA 105). Upon taxation depends the Government ability to serve the people for whose
benefit taxes are collected. To safeguard such interest, neglect or omission of government officials
entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people,
in the same manner as private persons may be made to suffer individually on account of his own
negligence, the presumption being that they take good care of their personal affairs. This should not
hold true to government officials with respect to matters not of their own personal concern. This is the
philosophy behind the government's exception, as a general rule, from the operation of the principle
of estoppel

Municipality of Makati vs. Court of Appeals

G.R. Nos. 89898-99 October 1, 1990
Facts: Petitioner Municipality of Makati expropriated a portion of land owned by private respondents,
Admiral Finance Creditors Consortium, Inc. After proceedings, the RTC of Makati determined the cost of
the said land which the petitioner must pay to the private respondents amounting to P5,291,666.00 minus
the advanced payment of P338,160.00. It issued the corresponding writ of execution accompanied with a
writ of garnishment of funds of the petitioner which was deposited in PNB. However, such order was
opposed by petitioner through a motion for reconsideration, contending that its funds at the PNB could
neither be garnished nor levied upon execution, for to do so would result in the disbursement of public
funds without the proper appropriation required under the law, citing the case of Republic of the
Philippines v. Palacio.The RTC dismissed such motion, which was appealed to the Court of Appeals; the
latter
affirmed
said
dismissal
and
petitioner
now
filed
this
petition
for
review.
Issue: Whether or not funds of the Municipality of Makati are exempt from garnishment and levy upon
execution.
Held: It is petitioner's main contention that the orders of respondent RTC judge involved the net amount of
P4,965,506.45, wherein the funds garnished by respondent sheriff are in excess of P99,743.94, which are
public fund and thereby are exempted from execution without the proper appropriation required under the
law. There is merit in this contention. In this jurisdiction, well-settled is the rule that public funds are not
subject to levy and execution, unless otherwise provided for by statute. Municipal revenues derived from
taxes, licenses and market fees, and which are intended primarily and exclusively for the purpose of
financing the governmental activities and functions of the municipality, are exempt from execution. Absent
a showing that the municipal council of Makati has passed an ordinance appropriating the said amount
from its public funds deposited in their PNB account, no levy under execution may be validly effected.
However, this court orders petitioner to pay for the said land which has been in their use already. This
Court will not condone petitioner's blatant refusal to settle its legal obligation arising from expropriation of
land they are already enjoying. The State's power of eminent domain should be exercised within the
bounds
of
fair
play
and
justice.
.

SISON VS ANCHETA
Equal Protection
Sison assails the validity of BP 135 w/c further amended Sec 21 of the NationalInternal Revenue Code of
1977. The law provides that thered be a higher tax impost against income derived from professional
income as opposed to regular income earners. Sison, as a professional businessman, and as taxpayer
alleges that by virtue thereof, he would be unduly discriminated against by the imposition of higher rates
of tax upon his income arising from the exercise of his profession vis-a-vis those which are imposed upon
fixed income or salaried individual taxpayers. He characterizes the above section as arbitrary amounting
to class legislation, oppressive and capricious in character. There is a transgression of both the equal
protection and due process clauses of the Constitution as well as of the rule requiring uniformity in
taxation.

ISSUE: Whether the imposition of a higher tax rate on taxable net income derived from business or
profession than on compensation is constitutionally infirm.

HELD: The SC ruled against Sison. The power to tax, an inherent prerogative, has to be availed of to
assure the performance of vital state functions. It is the source of the bulk of public funds. Taxes, being the
lifeblood of the government, their prompt and certain availability is of the essence. According to the
Constitution: The rule of taxation shall be uniform and equitable. However, the rule of uniformity does not
call for perfect uniformity or perfect equality, because this is hardly attainable. Equality and uniformity in
taxation means that all taxable articles or kinds of property of the same class shall be taxed at the same
rate. The taxing power has the authority to make reasonable and natural classifications for purposes of
taxation. Where the differentiation complained of conforms to the practical dictates of justice and equity
it is not discriminatory within the meaning of this clause and is therefore uniform. There is quite a
similarity then to the standard of equal protection for all that is required is that the tax applies equally to
all persons, firms and corporations placed in similar situation.

What misled Sison is his failure to take into consideration the distinction between a tax rate and a tax
base. There is no legal objection to a broader tax base or taxable income by eliminating all deductible
items and at the same time reducing the applicable tax rate. Taxpayers may be classified into different
categories. In the case of the gross income taxation embodied in BP 135, the discernible basis of
classification is the susceptibility of the income to the application of generalized rules removing all
deductible items for all taxpayers within the class and fixing a set of reduced tax rates to be applied to all
of them. Taxpayers who are recipients of compensation income are set apart as a class. As there is
practically no overhead expense, these taxpayers are not entitled to make deductions for income
tax purposes because they are in the same situation more or less. On the other hand, in the case of
professionals in the practice of their calling and businessmen, there is no uniformity in the costs or
expenses necessary to produce their income. It would not be just then to disregard the disparities by
giving all of them zero deduction and indiscriminately impose on all alike the same tax rates on the basis

of gross income. There is ample justification then for the Batasang Pambansa to adopt the gross system
of income taxation to compensation income, while continuing the system of net income taxation as
regards professional and business income.