DIGESTS
Estate and Donor’s Taxes
The approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate tax.
The pivotal question the court is tasked to resolve refers to the authority of the BIR to collect by the summary remedy of levying upon, and sale of real properties of the decedent, estate tax deficiencies, without the cognition and authority of the court sitting in probate over the supposed will of the deceased.
The nature of the process of estate tax collection has been described as follows:
“Strictly speaking, the assessment of an inheritance tax does not directly involve the administration of a decedent’s estate, although it may be viewed as an incident to the complete settlement of an estate, and, under some statutes, it is made the duty of the probate court to make the amount of the inheritance tax a part of the final decree of distribution of the estate. It is not against the property of decedent, nor is it a claim against the estate as such, but it is against the interest or property right which the heir, legatee, devisee, etc., has in the property formerly held by decedent. Further, under some statutes, it has been held that it is not a suit or controversy between the parties, nor is it an adversary proceeding between the state and the person who owes the tax on the inheritance. However, under other statutes it has been held that the hearing and determination of the cash value of the assets and the determination of the tax are adversary proceedings. The proceeding has been held to be necessarily a proceeding in rem. (85 C.J.S. # 1191, pp. 1056-1057)
In the Philippine experience, the enforcement and collection of estate tax, is executive in character, as the legislature has seen it fit to ascribe this task to the Bureau of Internal Revenue. Section 3 of the NIRC attests to this:
“Sec. 3. Powers and duties of the Bureau.-The powers and duties of the Bureau of Internal Revenue shall comprehend the assessment and collection 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. Said Bureau shall also give effect to and administer the supervisory and police power conferred to it by this Code or other laws.”
Thus, it was in Vera vs. Fernandez (No. L-31364, 30 March 1979) that the court recognized the liberal treatment of claims for taxes charged against the estate of the decedent. Such taxes, we said, were exempted from the application of the statute of non-claims, and this is justified by the necessity of government funding, immortalized in the maxim that taxes are the lifeblood of the government. Vectigalia nervi sunt rei publicae – taxes are the sinews of the state.
“Taxes assessed against the estate of a deceased person, after administration is opened, need not be submitted to the committee on claims in the ordinary course of administration. In the exercise of its control over the administrator, the court may direct the payment of such taxes upon motion showing that the taxes have been assessed against the estate.”
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.
“Claims for taxes, whether assessed before or after the death of the deceased, can be collected from the heirs even after the distribution of the properties of the decedent. They are exempted from the application of the statute of non-claims. The heirs shall be liable therefor, in proportion to their share in the inheritance.”
“Thus, the Government has two ways of collecting the taxes 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, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property belong to the taxpayer for unpaid income tax, 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. (Commissioner of Internal Revenue vs. Pineda, 21 SCRA 105, September 15, 1967.)
From the foregoing, it is discernible that the approval of the court, sitting in probate, or as a settlement tribunal over the deceased is not a mandatory requirement in the collection of estate taxes. It cannot therefore be argued that the Tax Bureau erred in proceeding with the levying and sale of the properties allegedly owned by the late President, on the ground that it was required to seek first the probate court’s sanction. There is nothing in the Tax Code, and in the pertinent remedial laws that implies the necessity of the probate or estate settlement court’s approval of the state’s claim for estate taxes, before the same can be enforced and collected.
On the contrary, under Section 87 of the NIRC, it is the probate or settlement court which is bidden not to authorize the executor or judicial administrator of the decedent’s estate to deliver any distributive share to any party interested in the estate, unless it is shown a Certification by the CIR that the estate taxes have been paid. This provision disproves the petitioner’s contention that it is the probate court which approves the assessment and collection of the estate tax.
~~~Marcos II vs. Court of Appeals, et al. (G.R. No. 120880, 5 June 1997, 2nd Div., J. Torres, Jr.)
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The authority of the probate court is not one that negate the application of the Tax Code.
Regrettably for petitioner, the need for an authority from the probate court in the payment of the deficiency estate tax, over which respondent Commissioner has hardly any control, is not one that can negate the application of the Tax Code provisions aforequoted. Taxes, the lifeblood of the government, are meant to be paid without delay and often oblivious to contingencies or conditions.
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When Section 89 of the NIRC of 1997 is not applicable.
Respondent claims that Section 104 of the National Internal Revenue Code of 1977 (now Section 89 of the NIRC of 1977) imposed the legal obligation on Philtrust to inform respondent of the decedent’s death. The said Section reads:
SEC. 104. Notice of death to be filed. – In all cases of transfers subject to tax or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos, the executor, administrator, or any of the legal heirs, as the case may be, within two months after the decedent’s death, or within a like period after qualifying as such executor or administrator, shall give written notice thereof to the Commissioner of Internal Revenue.
The foregoing provision falls in Title III, Chapter I of the NIRC of 1977, or the chapter on Estate Tax, and pertains to “all cases of transfers subject to tax” or where the “gross value of the estate exceeds three thousand pesos”. It has absolutely no applicability to a case for deficiency income tax, such as the case at bar. It further lacks applicability since Philtrust was never the executor, administrator of the decedent’s estate, and, as such, never had the legal obligation, based on the above provision, to inform respondent of her death.
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