EN BANC
[G.R. No. L-12710. February 28, 1961.]
THE COLLECTOR OF INTERNAL REVENUE , petitioner, vs. ELLEN
WOOD McGRATH , respondent.
[G.R. No. 12721. February 28, 1961.]
ELLEN WOOD McGRATH , petitioner, vs. COLLECTOR OF INTERNAL
REVENUE and COURT OF TAX APPEALS , respondents.
Solicitor General for petitioner.
Ozaeta, Gibbs & Ozaeta for respondents.
SYLLABUS
1. TAXATION; INHERITANCE TAXES; RECIPROCITY CLAUSES IN PHILIPPINE
AND CALIFORNIA LAW. — The reciprocity must be total, that is, with respect to transfer
or death taxes of any and every character, in the case of the Philippine law, and to
legacy, succession, or death tax of any and every character, in the case of the California
law. If any of the two states collects or imposes and does not exempt any transfer,
death legacy or succession tax of any character, the reciprocity does not work. This is
underlying principle of the reciprocity clauses in Section 122 of the National Internal
Revenue Code and Section 13851 of the California Inheritance Tax Law (The Collector
of Internal Revenue vs. Fisher, et al., and Fisher, et al., vs. Collector of Internal Revenue,
61 Off. Gaz., [18] 2624).
2. ID.; PETITION FOR REVIEW OF DECISIONS OF COLLECTOR OF INTERNAL
REVENUE; PERIOD WITHIN WHICH TO FILE PETITION COUNTED FROM RECEIPT OF
NOTICE BY COUNSEL. — Decision or orders in ordinary cases must be sent to counsel,
not to the parties themselves. In the case at bar, the Solicitor General represented the
Collector of Internal Revenue. The 30-day period within which a petition for review
should be led with the Supreme Court should start from the date of notice to the
Solicitor General, not from the date of notice to the Collector which was three days
ahead.
3. ID.; TAXES FIXED BY LAW AND NOT SUBJECT TO CONTRACT; ERRORS OF TAX
OFFICERS NOT BINDING ON GOVERNMENT. — Taxes are xed by law and are not
subject to contract between the taxpayer and the tax o cer, except when there is an
actual compromise. Agreements made between the taxpayer and the tax o cer cannot
serve to defeat or discharge the liability that the law xes as the full amount of the tax.
Errors of tax o cers or o cials of the Government do not bind the Government or
prejudice its rights to the taxes or dues collectible by it from its citizens. (Canlubang
Sugar Estate vs. Standard Alcohol Co. [Phil.], Inc., G.R. No. L-10087, April 16, 1958;
Philippine American Drug Co. vs. Collector of Internal Revenue. et al., 106 Phil., 161; 57
Off. Gaz. [21] 3915; Teodore Lewin vs. Emilio Galang, 109 Phil., 1045).
3. ID.; FAILURE TO FILE A RETURN OR FALSE OR FRAUDULENT RETURNS;
ASSESSMENT UNDER SECTION 94 OF TAX CODE. — Section 94 of National Internal
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Revenue Code applies to a case where there is no return filed or where one is filed but is
false or fraudulent. In the case at bar, there was a return and the same was not false or
fraudulent. Hence, the assessment indicated in the said section is not required.
DECISION
LABRADOR , J : p
Appeal by the Collector of Internal Revenue in G. R. No. L-12710 from a decision
of the Court of Tax Appeals, declaring the estate of Dora Anna Wood exempt from the
payment of the inheritance tax, and by Ellen Wood McGrath administratrix of the estate
of Dora Anna Wood, in G. R. No. L-12721 against the same decision of the Court of Tax
Appeals, dismissing her claim of having been discharged from paying the taxes
assessed by the Collector of Internal Revenue on the estate of the deceased.
On January 10, 1956, the Collector of Internal Revenue assessed against the
estate of Dora Anna Wood, of which Ellen Wood McGrath is the administratrix, the
following taxes, interests and surcharges:
"Estate tax P19,182.20
1/2% int. on P12,260.74 from 1-22-54 to 12-
1,400.99
22-55
—————
Total P20,572.19
Less amount paid 6,901.46
—————
Amount still due P13,670.73
Inheritance tax P32,834.40
5% surcharge on P13.00 .65
1% int. from 4-22-54 to 1-22-56 2.73
1/2% int. on P32,341.40 from 4-22-54 to 12-
5,284.14
22-55
Compromise for late payment 3.00
—————
Amount due P38,144.91
TOTAL P49,815.64"
(p. 12 ROA)
On March 9, 1956, upon petition of counsel for McGrath, the Collector of Internal
Revenue, in answer to the objections of counsel for McGrath against the original
assessment made by the Collector of Internal Revenue, rendered a nal decision on the
said subject, which reads as follows:
"In view thereof, you are requested to urge your client to pay the sum of
P36,144.91 as inheritance tax and penalties, plus the corresponding interest from
December 23, 1955 up to the date of payment in order that this case may be
closed, without prejudice, however, to your ling of a request for refund in
accordance with section 309 of the Tax Code in the event that the decision of the
Court of Tax Appeals in the aforesaid Miller case is a rmed by the Supreme
Court." (p. 15, ROA).
On April 2, 1956, Ellen Wood McGrath led a petition for review with the Court of
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Tax Appeals, alleging that the assessment of the taxes made by the Collector of
Internal Revenue on the estate of Dora Anna Wood are excessive and illegal, and praying
for the refund of P13,670.73. Respondent Collector answered the petition alleging that
Dora Anna Wood left properties worth P326,707.49, and asked for the dismissal of the
petition. Trial was held and on July 5, 1957, the Court of Tax Appeals rendered
judgment declaring the estate of Dora Anna Wood exempt from the payment of the
inheritance tax, but subject to the estate tax in the amount of P13,160.55, and as
petitioner had already paid P20,572.19, the respondent Collector of Internal Revenue
was ordered to refund to her the amount of P7,411.64, with interest from the date of
the payment.
The Collector of Internal Revenue insists in his appeal before Us that the Court of
Tax Appeals erred in two principal respects, namely, (1) in holding that there exists
reciprocity between the California and Philippine laws on the matter of the death tax on
intangible personal property, (2) in holding that the estate of Dora Anna Wood is not
liable for the payment of the inheritance tax, and (3) in ordering him to refund the
amount of P7,411.04, with interest from the date of payment.
In holding that the estate of Dora Anna Wood is not liable for the payment of
inheritance tax, the Court of Tax Appeals followed our decision in the case of Lara vs.
Collector of Internal Revenue, C.T.A. Case No. 181, dated June 25, 1955; Norton, et al.
vs. Collector of Internal Revenue, C.T.A. Case No. 73, January 12, 1956, and Fisher vs.
Collector of Internal Revenue, Manila Civil Case No. 23029, September 26, 1956.
The above decisions were carefully considered by us in the cases of The
Collector of Internal Revenue vs. Fisher, et al., G.R. No. L-11622 and Fisher, et al., vs. The
Collector of Internal Revenue et al., G.R. No. L-11668, promulgated on January 30, 1961,
penned by Mr. Justice Barrera, and we have come to the conclusion that no reciprocity
can be extended in the case of the estate of Dora Anna Wood because the law of
California does not grant full exemption from the estate and inheritance taxes to
Filipino residents in that state. Here is what this Court declared in said case:
Section 122 of our National Internal Revenue Code, in pertinent part, provides:
'. . . And, provided further, That no tax shall be collected under this Title in
respect of intangible personal property (a) if the decedent at the time of his death
was a resident of a foreign country which at the time of his death did not impose
a transfer tax or death tax of any character in respect of intangible personal
property of citizens of the Philippines not residing in that foreign country, or (b) if
the laws of the foreign country of which the decedent was a resident at the time
of his death allow a similar exemption from transfer taxes or death taxes of every
character in respect of intangible personal property owned by citizens of the
Philippines not residing in that foreign country.' (Emphasis supplied.)
"On the other hand, Section 13851 of the California Inheritance Tax Law,
insofar as pertinent, reads:
'SEC. 13851. Intangibles of nonresident: Conditions. Intangible personal
property is exempt from the tax imposed by this part if the decedent at the time of
his death was a resident of a Territory or another State of the United States or of a
foreign state or country which then imposed a legacy, succession, or death tax in
respect to intangible personal property of its own residents, but either:
'(a) Did not impose a legacy, succession, or death tax of any character in
respect to intangible property of residents of this State, or
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'(b) Had in its laws a reciprocal provision under which intangible personal
property of a non-resident was exempt from legacy, succession, or death taxes of
every character if the Territory or other State of the United States or foreign state
or country in which the non-resident resided allowed a similar exemption in
respect to intangible personal property of residents of the Territory or State of the
United States or foreign state or country of residence of the decedent.' (Id.)
"It is clear from both these quoted provisions that the reciprocity must be
total, that is, with respect to transfer or death taxes of any and every character, in
the case of the Philippine law, and to legacy, succession, or death tax of any and
every character, in the case of the California law. Therefore, if any of the two
states collects or imposes and does not exempt any transfer, death, legacy, or
succession tax of any character, the reciprocity does not work. This is the
underlying principle of the reciprocity clauses in both laws."
Following the above-quoted decision, the judgment of the Court of Tax Appeals'
should be reversed insofar as it exempts the estate of Dora Anna Wood from the
inheritance tax assessed by the Collector of Internal Revenue against said estate. The
inheritance tax as found by the Court of Tax Appeals is P24,041.96, and together with
the 5% surcharge and interest thereon, and the P20 compromise for late payment,
amounts to a total of P29,612.15. There having been a payment of P6,249.26, the
amount due on September 23, 1956 is hereby fixed at P23,362.79.
One procedural point must be considered in connection with the petition for
review of the Collector of Internal Revenue, and this is the claim of the respondent that
the Collector received the notice of the decision of the Court of Tax Appeals on July 19,
1957 and led his notice of appeal only on August 15, 1957 and his petition for review
with this Court on August 20, 1957, and that, therefore, said petition for review was filed
after the 30-day period within which such a petition must be led. Upon examining the
record, we nd that while it is true that the Collector of Internal Revenue himself
received the decision of the Court of Tax Appeals on July 19, 1957, the O ce of the
Solicitor General which represented the Collector, received the same decision on July
22, 1957. Decisions or orders in ordinary cases are to be noti ed to counsel, not to the
parties themselves. The notice to the Collector of Internal Revenue, which was three
days ahead of the notice to his lawyer, the Solicitor General, should not be considered
as the period from which the petition for review must be considered led with us. The
objection to the appeal of the Collector of Internal Revenue, on the ground that the
petition for review was filed out of time, must therefore be overruled.
In her appeal petitioner McGrath claims that since the Collector of Internal
Revenue accepted a check tendered by her in the amount of P6,901.46, "in full
settlement of all death taxes due and payable," the Collector of Internal Revenue, after
accepting said payment, can no longer collect the alleged de ciency taxes because the
acceptance by the Collector of petitioner's tender of the above amount on February 2,
1955, constitutes a compromise on the obligation of the estate of the deceased Dora
Anna Wood, which compromise extinguished petitioner's obligation to pay additional
death taxes. We nd no merit in this contention. It is true that the check for P6,901.46
forwarded to the Collector of Internal Revenue on January 22, 1954, and which was
received by him on February 2, 1954, was offered by counsel for the petitioner McGrath
"in full settlement of estate tax due the above estate." The letter of acceptance of the
amount made by the Collector of Internal Revenue on February 2, 1954 is to the effect
that the amount should be accounted for as part payment of the estate tax due. There
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was, therefore, no agreement between the taxpayer and the Collector of Internal
Revenue that the amount offered was to be accepted to compromise a tax liability.
Taxes are xed by law and are not subject to contract between the taxpayer and the tax
o cer, except when there is an actual compromise, which in the case at bar does not
exist. The acceptance of any amount by employees or o cials, which does not
constitute a full payment of the amount xed by law, is no ground or reason for the
claim for exemption by the taxpayer from liability for the remaining amount due under
the law. Taxes are not subject to agreements between the taxpayer and the tax o cer,
and if any such agreements are made, they cannot serve to defeat or discharge the
liability that the law xes as the full amount of the tax. Furthermore, any error made by a
tax o cial in the assessment or computation of taxes does not have the effect of
relieving the taxpayer from the full amount of liability as xed by law. Errors of tax
officers or officials of the Government do not bind the Government or prejudice its right
to the taxes or dues collectible by it from its citizens. (Canlubang Sugar Estate v.
Standard Alcohol Co. [Phil.], Inc., G. R. No. L-10887, April 16, 1958; Philippine American
Drug Co. v. Collector of Internal Revenue, et al., G.R. No. L-13032, August 31, 1959;
Teodoro Lewin v. Emilio Galang, G.R. No. L-15253, Oct. 31, 1960.)
In short, we nd that the claim of release of the taxpayer because of the
acceptance of an amount offered by the taxpayer, even if the taxpayer made the offer in
full payment of the tax liability, which payment was not in pursuance of compromise
under Section 309 of the National Internal Revenue Code, is without any merit and the
same is hereby overruled.
It is next claimed that the failure of the Collector of Internal Revenue to make a
revised assessment pursuant to Sections 96 and 97 of the National Internal Revenue
Code relieves the administratrix from paying any de ciency in the inheritance taxes. We
also nd no merit in this contention. Section 97 of the National Internal Revenue Code,
upon which the claim is founded, refers to the personal liability of an administratrix
from any deficiency tax, not the liability of the estate under administration. Granting that
the administratrix may not be personally liable, it does not follow therefrom that the
estate under administration would also be free from liability.
In the last assignment of error, counsel for petitioner McGrath claims that the
estate is exempt from the payment of any de ciency tax because of the failure of the
Collector to make the assessment of the de ciency death taxes and to demand their
payment, in accordance with Section 94 of the National Internal Revenue Code. Section
94 of the National Internal Revenue Code applies to a case where there is no return led
or where one is led but is false or fraudulent. In the case at bar there was a return and
the same was not false or fraudulent. Hence the assessment indicated in Section 94 of
the National Internal Revenue Code is not required. In any case, the assessment made in
the letters of the respondent Collector, dated January 10, 1956 and March 9, 1956, are
su ciently clear and speci c, and are a valid assessment of the taxes on the estate
upon the facts and gures given by the counsel for petitioner McGrath. This
assignment of error must also be dismissed for lack of merit.
WHEREFORE, in G.R. No. L-12710, the decision of the Court of Tax Appeals is
hereby reversed and the respondent Ellen Wood McGrath is required to pay
P23,362.79. In G.R. No. L-12721, the appeal of Ellen Wood McGrath is dismissed. With
costs in both instances against Ellen Wood McGrath.
Bengzon, Acting C . J ., Padilla, Bautista Angelo, Concepcion, Reyes, J.B.L.,
Barrera, Paredes and Dizon, JJ ., concur.
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