SOCIEDAD DE LIZARRAGA HERMANOS, vs. FELICISIMA ABADA, ET AL., G.R.

No. 13910

Facts:

Plaintiff is a creditor to Defendant Felicisima Abada, the administratrix to her deceased

husband’s estate. Prior to closing up the estate, the Defendant Abada incurred
additional debts with the plaintiff for the management of the estate’s hacienda in
Negros. Due however to poor agricultural production, the Defendant was unable to pay
the debt which ballooned from P12,783.74 to P62,437.15. The defendant's answer in
that case admits she owed P8,555.78 as administratrix, and alleges that the balance
was due by her personally.

On 1914, the parties presented a motion in court stating that they had made an
amicable settlement of the litigation where the P52,437.15 would be divided into ten
installments. The Defendants failed to pay two installments which compelled the
Plaintiff to install a receiver and satisfy the loan from the properties of the estate. The
defendants claim that the settlement agreement was fraudulent

The trial court under Judge Romualdez largely sustained defendants' claim and charged
separately P8,555.78 with interest to the estate and the remaining P79,970.21 as a
personal judgment against Abada plus damages incurred in the duration of the
receivership. Said judgment was later appealed.

Issues:

1. Was the court in error to dismiss the settlement agreement?

2. Can an administrator place a mortgage on an estate?

Held:

1. No, the court was not in error to dismiss the settlement agreement. The law
declares that commissioners shall pass upon all claims against the estate. They
had done so in this case. The law fixed the limit of the estate's liability. The court
could not charge it with debts that were never owed by it. The administratrix
could only charge the estate with the reasonable and proper expenses of
administration.

The court could not approve a settlement saddling upon the estate debts it never
owed, and if it did, its approval would be a nullity.

2. No mortgage can be placed by an administrator on the estate of a descendant,

unless it is specifically authorized by statute. There is no statute in the Philippine
Islands authorizing it.

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RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial Administrator of
the Estate of the deceased JOSE P. FERNANDEZ, vs. COURT OF TAX APPEALS
and COMMISSIONER OF INTERNAL REVENUE,

G.R. No. 140944 April 30, 2008

Facts: Jose P. Fernandez died leaving an estate to which Petitioner Dizon and later Jose
Fernandez were made administrators. Since the debts of the estate exceeded its gross
value, the BIR then issued a Certificate of Tax Clearance. During the pendency of the

demanding the payment of P66,973,985.40 as deficiency estate tax

CTA: made its own computation P 37,419,493.71 but allowed the introduction of the
questioned evidence as it formed part of the case.

Aggrieved, petitioner, went to the CA via a petition for review

Issues:

1. Whether or not the CTA and the CA gravely erred in allowing the admission of the
pieces of evidence which were not formally offered by the BIR; and

2. Whether or not the actual claims of the aforementioned 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:

1. Yes, the BIR's failure to formally offer these pieces of evidence, despite CTA's
directives, is fatal to its cause.47 Such failure is aggravated by the fact that not
even a single reason was advanced by the BIR to justify such fatal omission.
This, we take against the BIR.

2. Yes, applying rules of statutory construction in regards to Tax Code, which was
patterned after the American tax Code, the decisions of American courts
construing the federal tax code are entitled to great weight in the interpretation
of our own tax laws. In Ithaca vs United States 279 US 151 (1929), "Claims
against the estate," as allowable deductions from the gross estate under Section
79 of the NIRC have been interpreted to mean that post-death developments are
not material in determining the amount of the deduction. The “date-of-death
valuation rule” 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

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 claims existing at the time of death should be made the basis of, the
determination of allowable deductions.

COMMISSIONER OF INTERNAL REVENUE vs. COURT OF APPEALS, COURT OF

TAX APPEALS and JOSEFINA P. PAJONAR, as Administratrix of the Estate of
Pedro P. Pajonar,.

G.R. No. 123206 March 22, 2000

Facts: Pedro Pajonar died on January 10, 1988. He was a survivor of the Bataan Death March
which led to his shock and insanity. His sister Josefina Pajonar became the guardian over his
person, while his property was placed under the guardianship of the Philippine National Bank
(PNB. After paying erroneously charged estate tax, Petitioner Pajonar appealed and was
refunded P252,585.59. Among the deductions from the gross estate allowed by the CTA were
the amounts of P60,753 representing the notarial fee for the Extrajudicial Settlement and the
amount of P50,000 as the attorney's fees.

The CTA affirmed the issuance of the refund and so did the Court of Appeals.

Issues: Whether or not the notarial fee paid for the extrajudicial settlement in the
amount of P60,753 and the attorney's fees in the guardianship proceedings in the
amount of P50,000 may be allowed as deductions from the gross estate of decedent in
order to arrive at the value of the net estate.

Held: the notarial fee paid for the extrajudicial settlement is clearly a deductible
expense since such settlement effected a distribution of Pedro Pajonar's estate to his
lawful heirs. Similarly, the attorney's fees paid to PNB for acting as the guardian of
Pedro Pajonar's property during his lifetime should also be considered as a deductible
administration expense. PNB provided a detailed accounting of decedent's property and
gave advice as to the proper settlement of the latter's estate, acts which contributed
towards the collection of decedent's assets and the subsequent settlement of the
estate.

G.R. No. 107135 February 23, 1999

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
THE COURT OF APPEALS, CENTRAL VEGETABLE MANUFACTURING CO., INC.,
and THE COURT OF TAX APPEALS, respondents

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Facts: Private respondent CENVOCO is a manufacturer of edible and coconut/coprameal
cake and such other coconut related oil subject to the miller's tax of 3%. In 1986,
respondent purchased a specified number of containers and packaging materials for its
edible oil from its suppliers and paid the sales tax due thereon. A deficiency miller’s tax
in the amount of P 1,575,514.70 was issued against petitioner after an Assessment
Examination. In reply, Respondent CENVOCO filed a letter requesting for
reconsideration contending the provision of Section 168 of the Tax Code not apply to
sales tax paid on containers and packaging materials, hence the amount paid thereon
should have been credited against the miller’s tax assessed against it.

Nevertheless the BIR pursued its collection of deficiency tax arguing that since the law
specifically does not allow taxes paid on the raw materials or supplies used in the
milling process as a credit against the miller's tax due, with more reasons should the
sales taxes paid on materials not used in the milling process be allowed as a credit
against the miller's tax due. There is no provision of law which allows such a credit-to-
be made. Dissatisfied with the ruling, CENVOCO filed a petition for review with the
Court of Tax Appeals, which came out in favor of Respondent CENVOCO and
subsequently affirmed in toto by the Court of Appeals.

Issue: WHETHER OR NOT THE SALES TAX PAID BY CENVOCO WHEN IT PURCHASED
CONTAINERS AND PACKAGING MATERIALS FOR ITS MILLED PRODUCTS CAN BE
CREDITED AGAINST THE DEFICIENCY MILLER'S TAX DUE THEREON.

Held: No, tested in the light of the foregoing statutory definition, it is evident that
containers and packages used by Cenvoco are not "raw materials" and do not fall within
the purview of the final proviso of Section 168 of the NIRC

Notably, the law relied upon by the BIR Commissioner as the basis for not allowing
Cenvoco's tax credit is just a proviso of Section 168 of the old Tax Code. The restriction
in the said proviso, however, is limited only to sales, miller's or excise taxes paid "on
raw materials used in the milling process".

The exception provided for in Section 168 of the old Tax Code should thus be strictly
construed. Conformably, the sales, miller's and excise taxes paid on all Other materials
(except on raw materials used in the milling process), such as the sales taxes paid on
containers and packaging materials of the milled products under consideration, may be
credited against the miller's tax due therefor.