Arellano Law SchoolSchool Year 2013-2014Second SemesterTaxation 2: Case DigestTable of ContentESTATE TAX....................................................................................3KNOWLTON VS. MOORE................................................................................. 4PABLO LORENZO, AS TRUSTEE OF THE ESTATE OF THOMAS HANLEY VS. JUAN POSAAS, JR., COLLECTOR OF !NTERNAL REVENUE............................."AN#ELA M. BUTTE V. MANUEL UY AN SONS, !NC.,......................................$%SOC!AL SECUR!TY SYSTEM, VS. CANELAR!A . AVAC, ET AL.,..................$&YAM KA LIM V. THE INSULAR COLLECTOR OF CUSTOMS................................%'LUIS W. DISON VS. JUAN POSADAS, JR., COLLECTOR OF INTERNAL REVENUE. %%UNITED STATES V. WELLS............................................................................ %4MORGAN V. COMMISSIONER.........................................................................%&BPI V POSADAS............................................................................................... %(TAGARAO VGARCIA.................................................................................... )'TESTATE ESTATE OF THE LATE FELIX J. DE GUZMAN V DE GUZMAN.............................)%CIR V PALANCA, JR.......................................................................................... )4DONORS TAX................................................................................38ABELLO V CIR................................................................................................ )*VALUE ADDED TAX (VAT).................................................................42CIR V SM PRIME HOLDINGS...............................................................................4)PANASONIC V CIR......................................................................................... 4&INTEL TECHNOLOGY PHILS. INC. V CIR..........................................................4*SAN ROQUE POWER CORP. V CIR...................................................................+4SEAOIL VS. AUTOCORP................................................................................. +(SOUTHERN PHILIPPINES POWER CORP VS. CIR...............................................&'PAGCOR V BIR.............................................................................................. &%%ESTATE TAX- a tax imposed upon the privilege of individuals to transfer properties occasionedby death.)KNOWLTON VS. MOORE178 U.S. 41May 14, 1900---------------------------------------FactsThe plaintiffs in error were the executors of the will of Edwin F. Knowlton, of Brooklyn,New York. The defendant in error was the United States ollector of !nternal "e#enue forthe First ollection $istrict for the New York. %r. Knowlton died at Brooklyn in &cto'er, ()*), and his will was duly pro#ed. Underthe portion of the +ct of on,ress of -une (., ()*), which is printed at len,th in a note tothe opinionof the ourtinthiscase,theUnitedStatesollectorof !nternal"e#enuede/anded 0of the executors1 a return showin, the a/ount of the personal estate of thedeceased and the le,atees and distri'utees thereof. This return the executors /ade underprotest, assertin, that the +ct of -une (. was unconstitutional. This return showed that thepersonal estate a/ounted to o#er two and a half /illions of dollars, and that there werese#eral le,acies, ran,in,fro/under2(3,333eachtoo#er2(,433,333.Thecollectorlevied the tax on the legacies and distributive shares, but, for the purpose of fixingthe rate of the tax, considered the whole of the personal estate of the deceased asfixing the rate for each, and not the amount coming to each individual legatee underthe will. +s the rates under the statute were pro,ressi#e fro/ a low rate on le,acies a/ountin, to2(3,333 to a hi,h rate on those exceedin, 2(,333,333, this decision ,reatly increased thea,,re,ate a/ount of the taxation. 4$e/andha#in,'een/ade'ythecollector for pay/ent, pay/ent was /adeunderprotest, and, after the o//issioner of !nternal "e#enue had refused to refund any of it,the executors co//enced suit to reco#er the a/ount so paid.IssueThe executors protested on the ,rounds50(1 that the pro#isions of the act were unconstitutional6071 that le,acies a/ountin, to less than 2(3,333, were not su'8ect to any tax or duty60.1 that a le,acy of 2(33,333, taxed at the rate of 27.74 per 2(33, was only su'8ect to therate of 2(.(7 (97.Ruling0(1 That thestatuteclearlyi/posesthedutyontheparticularle,aciesordistri'uti#eshares, and not on the whole personal estate071 That it /akes the rate of the tax depend upon the character of the links connectin,thosetakin, withthe deceased,'ein,pri/arily deter/ined 'y theclassifications,andpro,ressi#ely increased accordin, to the a/ount of the le,acies or shares.0.1That thecourt 'elowerredindenyin,all relief, andthat it shouldha#eheldthe+plaintiffsentitledtoreco#erso/uchofthetaxasresultedfro/taxin,le,aciesnotexceedin, ten thousand dollars, and fro/ increasin, the tax rate with reference to thewhole a/ount of the personal estate of the deceased fro/which the le,acies ordistri'uti#e shares were deri#ed.::::::::$eath duties were esta'lished 'y the "o/an and ancient law, and, 'y the /odern laws ofFrance, ;er/any, andother continental countries, En,landandher colonies, andanexa/ination of all showsthat tax laws of this nature rest, in their essence, upon theprinciple that death is the generating source from which the particular taxing powertakes its being, and that it is the power to transmit or the transmission from the dead tothe living on which such taxes are more immediately vested.to operate ,enerally throu,hout theUnited States.>&PABLO LORENZO, AS TRUSTEE OF THE ESTATE OF THOMAS HANLEY VS. JUAN POSADAS, JR., COLLECTOR OF INTERNALREVENUEG.R. No. L!"#$% &une '$, '(")

Facts&n &cto'er ?, (*.7, the plaintiff @a'lo AorenBo, in his capacity as trustee of the estate ofTho/as Canley, deceased, 'rou,ht this action in the ourt of First !nstance ofDa/'oan,a a,ainst the defendant, -uan@osadas, -r., thenthe ollector of !nternal"e#enue, for the refund of the a/ount of @7,347.E?, paid 'y the plaintiff as inheritancetax on the estate of the deceased, and for the collection of interest thereon at the rate of Fper cent per annu/, co/puted fro/ Septe/'er (4, (*.7, the date when the aforesaid taxwas paid under protest. The defendant set up a counterclai/ for @(,(*(.7E alle,ed to 'einterest due on the tax in =uestion and which was not included in the ori,inal assess/ent.Fro/thedecisionof theourt of First !nstanceof Da/'oan,adis/issin,'oththeplaintiffGs co/plaint and the defendantGs counterclai/, 'oth parties appealed to this court.!t appears that on %ay 7E, (*77, one Tho/as Canley died in Da/'oan,a, Da/'oan,a,lea#in, a will and considera'le a/ount of real and personal properties. &n -une (?, (*77,proceedin,s for the pro'ate of his will and the settle/ent and distri'ution of his estatewere'e,unintheourt of First !nstanceof Da/'oan,a. Thewill wasad/ittedtopro'ate. The ourt of First !nstance of Da/'oan,a considered it proper for the 'est interests oftheir estate to appoint a trustee to ad/inister the real properties which, under the will,were to pass to %atthew Canley.$urin,theincu/'encyoftheplaintiffastrustee, thedefendant ollectorof!nternal""e#enue, alle,in, that the estate left 'y the deceased at the ti/e of his death consisted ofrealty #alued at @7E,*73 and personalty #alued at @(,?F4, and allowin, a deduction of@?)3.)(, assessed a,ainst the estate an inheritance tax in the a/ount of @(,?.?.7? which,to,ether with the penalties for deli=uency in pay/ent consistin, of a ( per cent /onthlyinterest fro/ -uly (, (*.( to the date of pay/ent and a surchar,e of 74 per cent on thetax, a/ounted to @7,347.E?. The plaintiff paid said a/ount under protest, notifyin, the defendant at the sa/e ti/e thatunless the a/ount was pro/ptly refunded suit would 'e 'rou,ht for its reco#ery. Thedefendant o#erruled the plaintiffGs protest and refused to refund the said a/ountexhausted, plaintiff went to court with the result herein a'o#e indicated.The following are the principal questions to be decided by this court in this appeal: *a+ ,hen does the inheritance tax accrue and when must it be satisfied- The accrual of the inheritance tax is distinct fro/ the o'li,ation to pay the sa/e. Section(4.F as a/ended, of the +d/inistrati#e ode, i/poses the tax upon >e#ery trans/ission'y #irtue of inheritance, de#ise, 'e=uest, ,ift mortis causa, or ad#ance in anticipation ofinheritance, de#ise, or 'e=uest.> The tax therefore is upon trans/ission or the transfer orde#olution of property of a decedent, /ade effecti#e 'y his death. !t is in reality an exciseor pri#ile,e tax i/posed on the ri,ht to succeed to, recei#e, or take property 'y or under awill or the intestacy law, or deed, ,rant, or ,ift to 'eco/e operati#e at or after death.Fro/ the fact, howe#er, that Tho/as Canley died on %ay 7E, (*77, it does not followthat theo'li,ationtopaythetaxaroseasofthedate. Theti/eforthepay/ent oninheritance tax is clearly fixed 'y section (4?? of the "e#ised +d/inistrati#e ode asa/ended 'y +ct No. .3.(, in relation to section (4?. of the sa/e ode. SEC. 1544. hen ta! to be paid. " The ta! fi!ed in this article shall be paid:#b$ %n other cases& within the si! months subsequent to the death of thepredecessor' but if (udicial testamentary or intestate proceedings shall beinstitutedpriortothee!pirationof saidperiod&thepayment shall be(made by the executor or administrator before delivering to eachbeneficiary his share.Under the su'section, the tax should ha#e 'een paid 'efore the deli#ery of the propertiesin =uestion to @. -. %. %oore as trustee on %arch (3, (*7?.*b+ .hould the inheritance tax be computed on the basis of the value of the estate atthe time of the testator/s death, or on its value ten 0ears later- ?=Bero:rated> on the in#oice helps se,re,ate sales that are su'8ect to (3L 0now (7L1 H+T fro/ those sales that are Bero:rated. Una'le to su'/it theproper in#oices, petitioner @anasonic has 'een una'le to su'stantiate its clai/ for refund.@etitioner @anasonicKs citation of %ntel Technology 1hilippines& %nc. 0. Commissioner of %nternal 5e0enue is /isplaced. In that case, the ;IR denied the claim for tax refund on the ground of the taxpa0erCs failure to indicate on its invoices the ADIR authorit0to print.A But Sec. ?.(3):( re=uired only the followin, to 'e reflected on the in#oice5(. The na/e, taxpayerKs identification nu/'er 0T!N1 and address of seller67. $ate of transaction6.. Muantity, unit cost and description of /erchandise or nature of ser#ice6?. The na/e, T!N, 'usiness style, if any, and address of the H+T:re,istered purchaser, custo/er or client6B!" authority to print> is not one of the ite/s re=uired to 'e indicated on the in#oices or receipts, the B!" erred in denyin, the clai/ for refund. Cere, howe#er, the ,round for denial of petitioner @anasonicKs clai/ for tax refundJthe a'sence of the word >Bero:rated> on its in#oicesJis one which is specifically and precisely included in the a'o#e enu/eration. onse=uently, the B!" correctly denied @anasonicKs clai/ for tax refund.This ourt will not set aside li,htly the conclusions reached 'y the T+ which, 'y the #ery nature of its functions, is dedicated exclusi#ely to the resolution of tax pro'le/s andhas accordin,ly de#eloped an expertise on the su'8ect, unless there has 'een an a'use or i/pro#ident exercise of authority. Besides, statutes that ,rant tax exe/ptions are construed strictissimi (uris a,ainst the taxpayer and li'erally in fa#or of the taxin, authority. Tax refunds in relation to the H+T are in the nature of such exe/ptions. The ,eneral rule is that clai/ants of tax refunds 'ear the 'urden of pro#in, the factual 'asis oftheir clai/s. Taxes are the life'lood of the nation. Therefore, statutes that allow exe/ptions are construed strictly a,ainst the ,rantee and li'erally in fa#or of the ,o#ern/ent.