Dizon V CTA

1/23/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 553
Note.—Each co-owner may demand at any time the

partition of the common property unless a co-owner has
repudiated the co-ownership under certain conditions. (De
Guia vs. Court of Appeals, 413 SCRA 114 [2003])
——o0o——
G.R. No. 140944. April 30, 2008.*
RAFAEL ARSENIO S. DIZON, in his capacity as the

Judicial Administrator of the Estate of the deceased JOSE
P. FERNANDEZ, petitioner, vs. COURT OF TAX
APPEALS and COMMISSIONER OF INTERNAL
REVENUE, respondents.
Remedial Law; Evidence; No evidentiary value can be given

the pieces of evidence submitted by the Bureau of Internal Revenue
(BIR), as the rules on documentary evidence require that these
documents must be formally offered before the Court of Tax
Appeals (CTA).—Under Section 8 of RA 1125, the CTA is
categorically described as a court of record. As cases filed before it
are litigated de novo, party-litigants shall prove every minute
aspect of their cases. Indubitably, no evidentiary value can be
given the pieces of evidence submitted by the BIR, as the rules on
documentary evidence require that these documents must be
formally offered before the CTA. Pertinent is Section 34, Rule 132
of the Revised Rules on Evidence which reads: SEC. 34. Offer of
evidence.—The court shall consider no evidence which has not
been formally offered. The purpose for which the evidence is
offered must be specified.
Same; Same; Courts cannot consider evidence which has not
been formally offered; Doctrine laid down in Vda. de Oñate still
subsists in this jurisdiction; Vda. de Oñate is merely an exception
to the general rule; Being an exception, it may be applied only
when there is strict compliance with the requisites mentioned
therein.—The CTA and the CA rely solely on the case of Vda. de
Oñate, 250 SCRA 283 (1995), which reiterated this Court’s
previous rulings in People
central.com.ph/sfsreader/session/000001772e60cf6e4b77d8cf003600fb002c009e/t/?o=False 1/25
_______________
* THIRD DIVISION.
112
112 SUPREME COURT REPORTS ANNOTATED
Dizon vs. Court of Tax Appeals
v. Napat-a, 179 SCRA 403 (1989), and People v. Mate, 103 SCRA
484 (1981), on the admission and consideration of exhibits which
were not formally offered during the trial. Although in a long line
of cases many of which were decided after Vda. de Oñate, we held
that courts cannot consider evidence which has not been formally
offered, nevertheless, petitioner cannot validly assume that the
doctrine laid down in Vda. de Oñate has already been abandoned.
Recently, in Ramos v. Dizon, 498 SCRA 17 (2006), this Court,
applying the said doctrine, ruled that the trial court judge therein
committed no error when he admitted and considered the
respondents’ exhibits in the resolution of the case,
notwithstanding the fact that the same were not formally offered.
Likewise, in Far East Bank & Trust Company v. Commissioner of
Internal Revenue, 502 SCRA 87 (2006), the Court made reference
to said doctrine in resolving the issues therein. Indubitably, the
doctrine laid down in Vda. De Oñate still subsists in this
jurisdiction. In Vda. de Oñate, we held that: x x x However, in
People v. Napat-a [179 SCRA 403] citing People v. Mate [103
SCRA 484], we relaxed the foregoing rule and allowed
evidence not formally offered to be admitted and
considered by the trial court provided the following
requirements are present, viz.: first, the same must have
been duly identified by testimony duly recorded and,
second, the same must have been incorporated in the
records of the case.” From the foregoing declaration, however, it
is clear that Vda. de Oñate is merely an exception to the general
rule. Being an exception, it may be applied only when there is
strict compliance with the requisites mentioned therein;
otherwise, the general rule in Section 34 of Rule 132 of the Rules
of Court should prevail.
Same; Same; The presentation of the Bureau of Internal Revenue’s
(BIR’s) evidence is not a mere procedural technicality which may
be disregarded considering that it is the only means by which the
Court of Tax Appeals (CTA) may ascertain and verify the truth of
BIR’s claims against the Estate.—While the CTA is not governed
strictly by technical rules of evidence, as rules of procedure are
not ends in themselves and are primarily intended as tools in the
administration of justice, the presentation of the BIR’s evidence is

not a mere procedural technicality which may be disregarded
considering that it is the only means by which the CTA may
ascertain and verify the truth of BIR’s claims against the Estate.
The BIR’s failure to formally offer these pieces of evidence,
despite CTA’s directives, is
113
VOL. 553, APRIL 30, 2008 113
fatal to its cause. 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.
Civil Law; Obligations; Condonation or Remission of Debt;
Words and Phrases; Definition of condonation or remission of debt.
—It is admitted that the claims of the Estate’s aforementioned
creditors have been condoned. As a mode of extinguishing an
obligation, condonation or remission of debt is defined as: an act
of liberality, by virtue of which, without receiving any equivalent,
the creditor renounces the enforcement of the obligation, which is
extinguished in its entirety or in that part or aspect of the same to
which the remission refers. It is an essential characteristic of
remission that it be gratuitous, that there is no equivalent
received for the benefit given; once such equivalent exists, the
nature of the act changes. It may become dation in payment when
the creditor receives a thing different from that stipulated; or
novation, when the object or principal conditions of the obligation
should be changed; or compromise, when the matter renounced is
in litigation or dispute and in exchange of some concession which
the creditor receives.
Taxation; Statutory Construction; Court agrees with the date-of-
death valuation rule; Tax burdens are not to be imposed nor
presumed to be imposed beyond what the statute expressly and
clearly imports, tax statutes being construed strictissimi juris
against the government.—We express our agreement with the
date-of-death valuation rule, made pursuant to the ruling of the
U.S. Supreme Court in Ithaca Trust Co. v. United States, 279 U.S.
151, 49 S. Ct. 291, 73 L.Ed. 647 (1929). First. There is no law, nor
do we discern any legislative intent in our tax laws, which
disregards the date-of-death valuation principle and particularly
provides that post-death developments must be considered in
determining the net value of the estate. It bears emphasis that
tax burdens are not to be imposed, nor presumed to be imposed,
beyond what the statute expressly and clearly imports, tax
statutes being construed strictissimi juris against the
government. Any doubt on whether a person, article or activity is

taxable is generally resolved against taxation. Second. Such
construction finds relevance and consistency in our Rules on
Special Proceedings wherein the term “claims” required to be
presented against a decedent’s estate 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
114
the deceased before his death. Therefore, the claims existing at

the time of death are significant to, and should be made the basis
of, the determination of allowable deductions.
PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.
R.A.S. Dizon Law Offices for petitioner.
The Solicitor General for respondents.
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1
under Rule 45 of the Rules of Civil Procedure seeking the
reversal of the Court of Appeals (CA) Decision2 dated April
30, 1999 which affirmed the Decision3 of the Court of Tax
Appeals (CTA) dated June 17, 1997.4
_______________
1 Dated January 20, 2000, Rollo, pp. 8-20.

2 Particularly docketed as CA-G.R. SP No. 46947; penned by Associate
Justice Marina L. Buzon, with Presiding Justice Jesus M. Elbinias (now
retired) and Associate Justice Eugenio S. Labitoria (now retired),
concurring; id., at pp. 22-31.
3 Particularly docketed as CTA Case No. 5116; penned by Associate
Judge Ramon O. De Veyra and concurred in by Presiding Judge Ernesto
D. Acosta and Associate Judge Amancio Q. Saga; id., at pp. 33-61.
4 This case was decided before the CTA was elevated by law to the
same level as the CA by virtue of Republic Act (RA) No. 9282 otherwise
known as “An Act Expanding the Jurisdiction of the Court of Tax Appeals
(CTA), Elevating its Rank to the Level of a Collegiate Court with Special
Jurisdiction and Enlarging its Membership, Amending for the Purpose
Certain Sections of Republic Act No. 1125, as amended, otherwise known
as The Law Creating the Court of Tax Appeals, and for other purposes,”
which was approved on March 30, 2004. Hence, upon its effectivity,
decisions of the CTA are now appealable directly to the Supreme Court.
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VOL. 553, APRIL 30, 2008 115

The Facts
On November 7, 1987, Jose P. Fernandez (Jose) died.

Thereafter, a petition for the probate of his will5 was filed
with Branch 51 of the Regional Trial Court (RTC) of
Manila (probate court).6 The probate court then appointed
retired Supreme Court Justice Arsenio P. Dizon (Justice
Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon
(petitioner) as Special and Assistant Special Administrator,
respectively, of the Estate of Jose (Estate). In a letter7
dated October 13, 1988, Justice Dizon informed respondent
Commissioner of the Bureau of Internal Revenue (BIR) of
the special proceedings for the Estate.
Petitioner alleged that several requests for extension of
the period to file the required estate tax return were
granted by the BIR since the assets of the estate, as well as
the claims against it, had yet to be collated, determined
and identified. Thus, in a letter8 dated March 14, 1990,
Justice Dizon authorized Atty. Jesus M. Gonzales (Atty.
Gonzales) to sign and file on behalf of the Estate the
required estate tax return and to represent the same in
securing a Certificate of Tax Clearance. Eventually, on
April 17, 1990, Atty. Gonzales wrote a letter9 addressed to
the BIR Regional Director for San Pablo City and filed the
estate tax return10 with the same BIR Regional Office,
showing therein a NIL estate tax liability, computed as
follows:
_______________
5 BIR Records, pp. 1-88.

6 The said petition is entitled: In the Matter of the Petition to Approve
the Will of Jose P. Fernandez, Carlos P. Fernandez, Petitioner,
particularly docketed as Special Proceedings No. 87-42980; BIR Record,
pp. 107-108.
7 Id., at p. 126.
8 Id., at p. 184.
9 Id., at p. 183.
10 Id., at p. 182.
116

COMPUTATION OF TAX
Conjugal Real Property (Sch. 1) P10,855,020.00
Conjugal Personal Property (Sch.2) 3,460,591.34
Taxable Transfer (Sch. 3)
Gross Conjugal Estate 14,315,611.34
Less: Deductions (Sch. 4) 187,822,576.06
Net Conjugal Estate NIL
Less: Share of Surviving Spouse ____NIL .____
Net Share in Conjugal Estate NIL
x x x
Net Taxable Estate ____NIL .____
Estate Tax Due ____NIL .___11
On April 27, 1990, BIR Regional Director for San Pablo

City, Osmundo G. Umali issued Certification Nos. 205212
and 205313 stating that the taxes due on the transfer of
real and personal properties14 of Jose had been fully paid
and said properties may be transferred to his heirs.
Sometime in August 1990, Justice Dizon passed away.
Thus, on October 22, 1990, the probate court appointed
petitioner as the administrator of the Estate.15
Petitioner requested the probate court’s authority to sell
several properties forming part of the Estate, for the
purpose of paying its creditors, namely: Equitable Banking
Corporation (P19,756,428.31), Banque de L’Indochine et. de
Suez (US$4,828,905.90 as of January 31, 1988), Manila
Banking Corporation (P84,199,160.46 as of February 28,
1989) and State Investment House, Inc. (P6,280,006.21).
Petitioner manifested that Manila Bank, a major creditor
of the Estate was not included, as it did not file a claim
with the probate
_______________
11 Id.
12 Rollo, p. 68.
13 Id., at p. 69.
14 Lists of Personal and Real Properties of Jose; id., at pp. 70-73.
15 CTA Record, p. 102.
117
VOL. 553, APRIL 30, 2008 117
court since it had security over several real estate

properties forming part of the Estate.16
However, on November 26, 1991, the Assistant
Commissioner for Collection of the BIR, Themistocles
Montalban, issued Estate Tax Assessment Notice No. FAS-
E-87-91-003269,17 demanding the payment of
P66,973,985.40 as deficiency estate tax, itemized as follows:
Deficiency Estate Tax- 1987

Estate tax P31,868,414.48
25% surcharge- late filing 7,967,103.62
late payment 7,967,103.62
Interest 19,121,048.68
Compromise-non filing 25,000.00
non payment 25,000.00
no notice of death 15.00
no CPA Certificate 300.00
Total amount due & collectible P66,973,985.4018
In his letter19 dated December 12, 1991, Atty. Gonzales

moved for the reconsideration of the said estate tax
assessment. However, in her letter20 dated April 12, 1994,
the BIR Commissioner denied the request and reiterated
that the estate is liable for the payment of P66,973,985.40
as deficiency estate tax. On May 3, 1994, petitioner
received the letter of denial. On June 2, 1994, petitioner
filed a petition for review21 before respondent CTA. Trial on
the merits ensued.
As found by the CTA, the respective parties presented
the following pieces of evidence, to wit:
_______________
16 Rollo, p. 10.
17 BIR Records, p. 169.
18 Id.
19 Id., at p. 171.
20 By then BIR Commissioner Liwayway Vinzons-Chato; id., at pp.
277-278.
21 CTA Records, pp. 1-7.
118

“In the hearings conducted, petitioner did not present

testimonial evidence but merely documentary evidence consisting
of the following:
Nature of Document (sic)

Exhibits
1. Letter dated October 13, 1988 from Ar-
senio P. Dizon addressed to the Com-
missioner of Internal Revenue inform-
ing the latter of the special proceedings
for the settlement of the estate (p. 126,
BIR Records); “A”
2. Petition for the probate of the will and
issuance of letter of administration filed
with the Regional Trial Court (RTC) of
Manila, docketed as Sp. Proc. No. 87-
42980 (pp. 107-108, BIR Records); “B” &
“B-1”
3. Pleading entitled “Compliance” filed
with the probate Court submitting the
final inventory of all the properties of
the deceased (p. 106, BIR Records); “C”
4. Attachment to Exh. “C” which is the de-
tailed and complete listing of the prop-
erties of the deceased (pp. 89-105, BIR
Rec.); “C-1”
to “C-17”
5. Claims against the estate filed by Equi-
table Banking Corp. with the probate
Court in the amount of P19,756,428.31
as of March 31, 1988, together with the
Annexes to the claim (pp. 64-88, BIR
Records); “D” to
“D-24”
6. Claim filed by Banque de L’ Indochine
et de Suez with the probate Court in the
amount of US $4,828,905.90 as of Janu-
ary 31, 1988 (pp. 262-265, BIR Records); “E” to
“E-3”
7. Claim of the Manila Banking Corpora-
tion (MBC) which as of November 7,
1987 amounts to P65,158,023.54, but
119
VOL. 553, APRIL 30, 2008 119

recomputed as of February 28, 1989 at a

total amount of P84,199,160.46; to-
gether with the demand letter from
MBC’s lawyer (pp. 194-197, BIR Re-
cords); “F”
to “F-3”
8. Demand letter of Manila Banking Cor-

poration prepared by Asedillo, Ramos
and Associates Law Offices addressed to
Fernandez Hermanos, Inc., represented
by Jose P. Fernandez, as mortgagors, in
the total amount of P240,479,693.17 as
of February 28, 1989 (pp. 186-187, BIR
Records); “G”
& “G-1”
9. Claim of State Investment House, Inc.
filed with the RTC, Branch VII of Ma-
nila, docketed as Civil Case No. 86-
38599 entitled “State Investment
House, Inc., Plaintiff, versus Maritime
Company Overseas, Inc. and/or Jose P.
Fernandez, Defendants,” (pp. 200-215,
BIR Records); “H”
to “H-16”
10. Letter dated March 14, 1990 of Arsenio
P. Dizon addressed to Atty. Jesus M.
Gonzales, (p. 184, BIR Records); “I”
11. Letter dated April 17, 1990 from J.M.
Gonzales addressed to the Regional Di
rector of BIR in San Pablo City (p. 183,
BIR Records); “J”
12. Estate Tax Return filed by the estate of
the late Jose P. Fernandez through its
authorized representative, Atty. Jesus
M. Gonzales, for Arsenio P. Dizon, with
attachments (pp. 177-182, BIR Records); “K” to
“K-5”
13. Certified true copy of the Letter of Ad-
ministration issued by RTC Manila,
Branch 51, in Sp. Proc. No. 87-42980
appointing Atty. Rafael S. Dizon as Ju-
120

dicial Administrator of the estate of

Jose P. Fernandez; (p. 102, CTA Records) and “L”
14. Certification of Payment of estate taxes
Nos. 2052 and 2053, both dated April
27, 1990, issued by the Office of the Re-
gional Director, Revenue Region No. 4-
C, San Pablo City, with attachments
(pp. 103-104, CTA Records.). “M”
to “M-5”
Respondent’s [BIR] counsel presented on June 26, 1995

one witness in the person of Alberto Enriquez, who was
one of the revenue examiners who conducted the
investigation on the estate tax case of the late Jose P.

Fernandez. In the course of the direct examination of the
witness, he identified the following:
Documents/ BIR Record

Signatures
1. Estate Tax Return prepared by p. 138
the BIR;
2. Signatures of Ma. Anabella -do-
Abuloc and Alberto Enriquez,
Jr. appearing at the lower
Portion of Exh. “1”;
3. Memorandum for the Commissioner, pp. 143-144
dated July 19, 1991, prepared by
revenue examiners, Ma. Anabella A.
Abuloc, Alberto S. Enriquez and
Raymund S. Gallardo; Reviewed by
Maximino V. Tagle
4. Signature of Alberto S. -do-
Enriquez appearing at the
lower portion on p. 2 of Exh. “2”;
-do-
5. Signature of Ma. Anabella A.
Abuloc appearing at the
lower portion on p. 2 of Exh. “2”;
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VOL. 553, APRIL 30, 2008 121

6. Signature of Raymund S. -do-

Gallardo appearing at the
Lower portion on p. 2 of Exh. “2”;
7. Signature of Maximino V. -do-
Tagle also appearing on
p. 2 of Exh. “2”;
8. Summary of revenue p. 139
Enforcement Officers Audit
Report, dated July 19, 1991;
9. Signature of Alberto -do-
Enriquez at the lower
portion of Exh. “3”;
10. Signature of Ma. Anabella A. -do-

Abuloc at the lower
11. Signature of Raymond S. -do-
Gallardo at the lower
12. Signature of Maximino -do-
V. Tagle at the lower
13. Demand letter (FAS-E-87-91-00), p. 169
signed by the Asst. Commissioner
for Collection for the Commissioner
of Internal Revenue, demanding
payment of the amount of
P66,973,985.40; and
14. Assessment Notice FAS-E-87-91-00 pp. 169-17022
_______________
22 Rollo, pp. 37-40 (Emphasis supplied).
122

The CTA’s Ruling

On June 17, 1997, the CTA denied the said petition for
review. Citing this Court’s ruling in Vda. de Oñate v. Court
of Appeals,23 the CTA opined that the aforementioned
pieces of evidence introduced by the BIR were admissible in
evidence. The CTA ratiocinated:
“Although the above-mentioned documents were not formally

offered as evidence for respondent, considering that respondent
has been declared to have waived the presentation thereof during
the hearing on March 20, 1996, still they could be considered as
evidence for respondent since they were properly identified during
the presentation of respondent’s witness, whose testimony was
duly recorded as part of the records of this case. Besides, the
documents marked as respondent’s exhibits formed part of the
BIR records of the case.”24
Nevertheless, the CTA did not fully adopt the assessment

made by the BIR and it came up with its own computation
of the deficiency estate tax, to wit:
Conjugal Real Property P 5,062,016.00

Conjugal Personal Prop. 33,021,999.93
Gross Conjugal Estate 38,084,015.93
Less: Deductions 26,250,000.00
Net Conjugal Estate P 11,834,015.93
Less: Share of Surviving Spouse 5,917,007.96
Net Share in Conjugal Estate P 5,917,007.96
Add: Capital/Paraphernal
Properties – P44,652,813.66
Less: Capital/Paraphernal
Deductions 44,652,813.66
Net Taxable Estate P 50,569,821.62
_______________
23 G.R. No. 116149, November 23, 1995, 250 SCRA 283, 287, citing
People v. Napat-a, 179 SCRA 403 (1989) and People v. Mate, 103 SCRA
484 (1981).
24 CTA Records, p. 148.
123
VOL. 553, APRIL 30, 2008 123

Estate Tax Due P 29,935,342.97

Add: 25% Surcharge for Late Filing 7,483,835.74
Add: Penalties for-No notice of death 15.00
No CPA certificate 300.00
Total deficiency estate tax P 37,419,493.71
exclusive of 20% interest from due date of its payment until full
payment thereof
[Sec. 283 (b), Tax Code of 1987].”25
Thus, the CTA disposed of the case in this wise:
“WHEREFORE, viewed from all the foregoing, the Court finds

the petition unmeritorious and denies the same. Petitioner and/or
the heirs of Jose P. Fernandez are hereby ordered to pay to
respondent the amount of P37,419,493.71 plus 20% interest from
the due date of its payment until full payment thereof as estate
tax liability of the estate of Jose P. Fernandez who died on
November 7, 1987.
SO ORDERED.”26
Aggrieved, petitioner, on March 2, 1998, went to the CA

via a petition for review.27
The CA’s Ruling
On April 30, 1999, the CA affirmed the CTA’s ruling.

Adopting in full the CTA’s findings, the CA ruled that the
petitioner’s act of filing an estate tax return with the BIR
and the issuance of BIR Certification Nos. 2052 and 2053
did not deprive the BIR Commissioner of her authority to
re-examine or re-assess the said return filed on behalf of
the Estate.28
_______________
25 Id., at pp. 166-167.

26 Id., at p. 167.
27 CA Rollo, pp. 3-17.
28 Citing Section 16 of the 1993 National Internal Revenue Code.
124

On May 31, 1999, petitioner filed a Motion for

Reconsideration29 which the CA denied in its Resolution30
dated November 3, 1999.
Hence, the instant Petition raising the following issues:
“1. Whether or not the admission of evidence which were not

formally offered by the respondent BIR by the Court of Tax
Appeals which was subsequently upheld by the Court of Appeals
is contrary to the Rules of Court and rulings of this Honorable
Court;
2. Whether or not the Court of Tax Appeals and the Court of
Appeals erred in recognizing/considering the estate tax return
prepared and filed by respondent BIR knowing that the probate
court appointed administrator of the estate of Jose P. Fernandez
had previously filed one as in fact, BIR Certification Clearance
Nos. 2052 and 2053 had been issued in the estate’s favor;
Appeals erred in disallowing the valid and enforceable claims of
creditors against the estate, as lawful deductions despite clear
and convincing evidence thereof; and
Appeals erred in validating erroneous double imputation of values
on the very same estate properties in the estate tax return it
prepared and filed which effectively bloated the estate’s assets.”31
The petitioner claims that in as much as the valid claims

of creditors against the Estate are in excess of the gross
estate, no estate tax was due; that the lack of a formal offer
of evidence is fatal to BIR’s cause; that the doctrine laid

down in Vda. de Oñate has already been abandoned in a
long line of cases in which the Court held that evidence not
formally offered is without any weight or value; that
Section 34 of Rule 132 of the Rules on Evidence requiring a
formal offer of evidence is mandatory in character; that,
while BIR’s witness Alberto Enriquez (Alberto) in his
testimony before the CTA
_______________
29 Rollo, pp. 22-31.

30 Id., at p. 32.
31 Id., at pp. 114-115.
125
VOL. 553, APRIL 30, 2008 125

identified the pieces of evidence aforementioned such that

the same were marked, BIR’s failure to formally offer said
pieces of evidence and depriving petitioner the opportunity
to cross-examine Alberto, render the same inadmissible in
evidence; that assuming arguendo that the ruling in Vda.
de Oñate is still applicable, BIR failed to comply with the
doctrine’s requisites because the documents herein
remained simply part of the BIR records and were not duly
incorporated in the court records; that the BIR failed to
consider that although the actual payments made to the
Estate creditors were lower than their respective claims,
such were compromise agreements reached long after the
Estate’s liability had been settled by the filing of its estate
tax return and the issuance of BIR Certification Nos. 2052
and 2053; and that the reckoning date of the claims against
the Estate and the settlement of the estate tax due should
be at the time the estate tax return was filed by the judicial
administrator and the issuance of said BIR Certifications
and not at the time the aforementioned Compromise
Agreements were entered into with the Estate’s creditors.32
On the other hand, respondent counters that the
documents, being part of the records of the case and duly
identified in a duly recorded testimony are considered
evidence even if the same were not formally offered; that
the filing of the estate tax return by the Estate and the
issuance of BIR Certification Nos. 2052 and 2053 did not
deprive the BIR of its authority to examine the return and
assess the estate tax; and that the factual findings of the
CTA as affirmed by the CA may no longer be reviewed by

this Court via a petition for review.33
_______________
32 Id.
33 Respondent BIR’s Memorandum dated October 16, 2000; id., at pp.
140-144.
126

The Issues
There are two ultimate issues which require resolution
in this case:
First. 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
Second. Whether or not the CA erred in affirming the
CTA in the latter’s determination of the deficiency estate
tax imposed against the Estate.
The Court’s Ruling
The Petition is impressed with merit.

Under Section 8 of RA 1125, the CTA is categorically
described as a court of record. As cases filed before it are
litigated de novo, party-litigants shall prove every minute
aspect of their cases. Indubitably, no evidentiary value can
be given the pieces of evidence submitted by the BIR, as
the rules on documentary evidence require that these
documents must be formally offered before the CTA.34
Pertinent is Section 34, Rule 132 of the Revised Rules on
Evidence which reads:
“SEC. 34. Offer of evidence.—The court shall consider no

evidence which has not been formally offered. The purpose for
which the evidence is offered must be specified.”
The CTA and the CA rely solely on the case of Vda. de

Oñate, which reiterated this Court’s previous rulings in
People v. Napat-a35 and People v. Mate36 on the admission
and consideration of exhibits which were not formally
offered during the trial. Although in a long line of cases
many of which were decided after Vda. de Oñate, we held
that courts
_______________
34 Commissioner of Internal Revenue v. Manila Mining Corporation,

G.R. No. 153204, August 31, 2005, 468 SCRA 571, 588-589.
35 Supra note 23.
36 Supra note 23.
127
VOL. 553, APRIL 30, 2008 127

cannot consider evidence which has not been formally

offered,37 nevertheless, petitioner cannot validly assume
that the doctrine laid down in Vda. de Oñate has already
been abandoned. Recently, in Ramos v. Dizon,38 this Court,
applying the said doctrine, ruled that the trial court judge
therein committed no error when he admitted and
considered the respondents’ exhibits in the resolution of the
case, notwithstanding the fact that the same were not
formally offered. Likewise, in Far East Bank & Trust
Company v. Commissioner of Internal Revenue,39 the Court
made reference to said doctrine in resolving the issues
therein. Indubitably, the doctrine laid down in Vda. de
Oñate still subsists in this jurisdiction. In Vda. de Oñate,
we held that:
“From the foregoing provision, it is clear that for evidence to be

considered, the same must be formally offered. Corollarily, the
mere fact that a particular document is identified and marked as
an exhibit does not mean that it has already been offered as part
of the evidence of a party. In Interpacific Transit, Inc. v. Aviles
[186 SCRA 385], we had the occasion to make a distinction
between identification of documentary evidence and its formal
offer as an exhibit. We said that the first is done in the course of
the trial and is accompanied by the marking of the evidence as an
exhibit while the second is done only when the party rests its case
and not before. A party, therefore, may opt to formally offer his
evidence if he believes that it
_______________
37 Far East Bank & Trust Company v. Commissioner of Internal Revenue, G.R.
No. 149589, September 15, 2006, 502 SCRA 87; Ala-Martin v. Sultan, G.R. No.
117512, October 2, 2001, 366 SCRA 316, citing Ong v. Court of Appeals, 301 SCRA
391 (1999), which further cited Candido v. Court of Appeals, 253 SCRA 78, 82-83
(1996); Republic v. Sandiganbayan, 255 SCRA 438, 456 (1996); People v. Peralta,
237 SCRA 218, 226 (1994); Vda. de Alvarez vs. Court of Appeals, 231 SCRA 309,
317-318 (1994); and People v. Cariño, et al., 165 SCRA 664, 671 (1988); See also De
los Reyes v. Intermediate Appellate Court, G.R. No. 74768, August 11, 1989, 176
SCRA 394, 401-402 (1989) and People v. Mate, supra note 23, at p. 493.
38 G.R. No. 137247, August 7, 2006, 498 SCRA 17, 30-31.
39 Supra note 29, at p. 91.
128

will advance his cause or not to do so at all. In the event he

chooses to do the latter, the trial court is not authorized by the
Rules to consider the same.
However, in People v. Napat-a [179 SCRA 403] citing People v.
Mate [103 SCRA 484], we relaxed the foregoing rule and
allowed evidence not formally offered to be admitted and
considered by the trial court provided the following
requirements are present, viz.: first, the same must have
been duly identified by testimony duly recorded and,
second, the same must have been incorporated in the
records of the case.”40
From the foregoing declaration, however, it is clear that

Vda. de Oñate is merely an exception to the general rule.
Being an exception, it may be applied only when there is
strict compliance with the requisites mentioned therein;
otherwise, the general rule in Section 34 of Rule 132 of the
Rules of Court should prevail.
In this case, we find that these requirements have not
been satisfied. The assailed pieces of evidence were
presented and marked during the trial particularly when
Alberto took the witness stand. Alberto identified these
pieces of evidence in his direct testimony.41 He was also
subjected to cross-examination and re-cross examination by
petitioner.42 But Alberto’s account and the exchanges
between Alberto and petitioner did not sufficiently describe
the contents of the said pieces of evidence presented by the
BIR. In fact, petitioner sought that the lead examiner, one
Ma. Anabella A. Abuloc, be summoned to testify, inasmuch
as Alberto was incompetent to answer questions relative to
the working papers.43 The lead examiner never testified.
Moreover, while Alberto’s testimony identifying the BIR’s
evidence was duly recorded, the BIR documents themselves
were not incorporated in the records of the case.
_______________
40 Underscoring supplied.
41 TSN, June 26, 1995.
42 TSN, July 12, 1995.

43 Id., at pp. 42-49.
129
VOL. 553, APRIL 30, 2008 129

A common fact threads through Vda. de Oñate and

Ramos that does not exist at all in the instant case. In the
aforementioned cases, the exhibits were marked at the pre-
trial proceedings to warrant the pronouncement that the
same were duly incorporated in the records of the case.
Thus, we held in Ramos:
In this case, we “find and so rule that these requirements have

been satisfied. The exhibits in question were presented and
marked during the pre-trial of the case thus, they have
been incorporated into the records. Further, Elpidio himself
explained the contents of these exhibits when he was interrogated
by respondents’ counsel...
x x x x
But what further defeats petitioner’s cause on this issue is that
respondents’ exhibits were marked and admitted during the pre-
trial stage as shown by the Pre-Trial Order quoted earlier.”44
While the CTA is not governed strictly by technical rules

of evidence,45 as rules of procedure are not ends in
themselves and are primarily intended as tools in the
administration of justice, the presentation of the BIR’s
evidence is not a mere procedural technicality which may
be disregarded considering that it is the only means by
which the CTA may ascertain and verify the truth of BIR’s
claims against the Estate.46 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
_______________
44 Supra note 29, at pp. 31 and 34, citing Marmont Resort Hotel
Enterprises v. Guiang, 168 SCRA 373, 379-380 (1988).
45 Calamba Steel Center, Inc. (formerly JS Steel Corporation) v.
Commissioner of Internal Revenue, G.R. No. 151857, April 28, 2005, 457
SCRA 482, 494.
46 Commissioner of Internal Revenue v. Manila Mining Corporation,
supra note 28, at pp. 593-594.
47 Far East Bank & Trust Company v. Commissioner of Internal

Revenue, supra note 29, at p. 90.
130

by the BIR to justify such fatal omission. This, we take

against the BIR.
Per the records of this case, the BIR was directed to
present its evidence48 in the hearing of February 21, 1996,
but BIR’s counsel failed to appear.49 The CTA denied
petitioner’s motion to consider BIR’s presentation of
evidence as waived, with a warning to BIR that such
presentation would be considered waived if BIR’s evidence
would not be presented at the next hearing. Again, in the
hearing of March 20, 1996, BIR’s counsel failed to appear.50
Thus, in its Resolution51 dated March 21, 1996, the CTA
considered the BIR to have waived presentation of its
evidence. In the same Resolution, the parties were directed
to file their respective memorandum. Petitioner complied
but BIR failed to do so.52 In all of these proceedings, BIR
was duly notified. Hence, in this case, we are constrained to
apply our ruling in Heirs of Pedro Pasag v. Parocha:53
‘A formal offer is necessary because judges are mandated to

rest their findings of facts and their judgment only and strictly
upon the evidence offered by the parties at the trial. Its function
is to enable the trial judge to know the purpose or purposes for
which the proponent is presenting the evidence. On the other
hand, this allows opposing parties to examine the evidence and
object to its admissibility. Moreover, it facilitates review as the
appellate court will not be required to review documents not
previously scrutinized by the trial court.
_______________
48 CTA Resolution dated January 19, 1996; CTA Records, pp. 113-114.
49 CTA Records, p. 117.
50 Id., at p. 119.
51 Id., at p. 120.
52 CTA Order dated June 17, 1996, CTA Records, p. 138.
53 G.R. No. 155483, April 27, 2007, 522 SCRA 410, 416, citing Constantino v.
Court of Appeals, G.R. No. 116018, November 13, 1996, 264 SCRA 59 (Other
citations omitted; Emphasis supplied ).
131
VOL. 553, APRIL 30, 2008 131

Strict adherence to the said rule is not a trivial matter. The

Court in Constantino v. Court of Appeals ruled that the formal
offer of one’s evidence is deemed waived after failing to
submit it within a considerable period of time. It explained
that the court cannot admit an offer of evidence made
after a lapse of three (3) months because to do so would
“condone an inexcusable laxity if not non-compliance with
a court order which, in effect, would encourage needless
delays and derail the speedy administration of justice.”
Applying the aforementioned principle in this case, we find
that the trial court had reasonable ground to consider that
petitioners had waived their right to make a formal offer of
documentary or object evidence. Despite several extensions of
time to make their formal offer, petitioners failed to comply with
their commitment and allowed almost five months to lapse before
finally submitting it. Petitioners’ failure to comply with the
rule on admissibility of evidence is anathema to the
efficient, effective, and expeditious dispensation of
justice.’
Having disposed of the foregoing procedural issue, we

proceed to discuss the merits of the case.
Ordinarily, the CTA’s findings, as affirmed by the CA,
are entitled to the highest respect and will not be disturbed
on appeal unless it is shown that the lower courts
committed gross error in the appreciation of facts.54 In this
case, however, we find the decision of the CA affirming that
of the CTA tainted with palpable error.
It is admitted that the claims of the Estate’s
aforementioned creditors have been condoned. As a mode of
extinguish-
_______________
54 Filinvest Development Corporation v. Commissioner of Internal

Revenue and Court of Tax Appeals, G.R. No. 146941, August 9, 2007, 529
SCRA 605, 609-610, citing Carrara Marble Philippines, Inc. v.
Commissioner of Customs, 372 Phil. 322, 333-334; 313 SCRA 453, 462
(1999) and Commissioner of Internal Revenue v. Court of Appeals, 358
Phil. 562, 584; 298 SCRA 83, 91 (1998).
132

ing an obligation,55 condonation or remission of debt56 is

defined as:
“an act of liberality, by virtue of which, without receiving any

equivalent, the creditor renounces the enforcement of the
obligation, which is extinguished in its entirety or in that part or
aspect of the same to which the remission refers. It is an essential
characteristic of remission that it be gratuitous, that there is no
equivalent received for the benefit given; once such equivalent
exists, the nature of the act changes. It may become dation in
payment when the creditor receives a thing different from that
stipulated; or novation, when the object or principal conditions of
the obligation should be changed; or compromise, when the
matter renounced is in litigation or dispute and in exchange of
some concession which the creditor receives.”57
Verily, the second issue in this case involves the

construction of Section 7958 of the National Internal
Revenue
_______________
55 Article 1231 of the Civil Code of the Philippines provides:

Art. 1231. Obligations are extinguished:
(1) By payment or performance;
(2) By the loss of the thing due;
(3) By the condonation or remission of the debt;
(4) By the confusion or merger of the rights of creditor and
debtor;
(5) By compensation;
(6) By novation. (Emphasis ours.)
56 Article 1270 of the Civil Code of the Philippines provides:
Art. 1270. Condonation or remission is essentially gratuitous,
and requires the acceptance by the obligor. It may be made
expressly or impliedly.
One and the other kind shall be subject to the rules which
govern inofficious donations. Express condonation shall,
furthermore, comply with the forms of donation.
57 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines, Vol. IV, 1991 ed., p. 353, citing 8 Manresa 365.
58 SEC. 79. Computation of net estate and estate tax.—For the
purpose of the tax imposed in this Chapter, the value of the net estate
shall be determined:
133
VOL. 553, APRIL 30, 2008 133

Code59 (Tax Code) which provides for the allowable

deductions
_______________
(a) In the case of a citizen or resident of the Philippines, by deducting

from the value of the gross estate—
(1) Expenses, losses, indebtedness, and taxes.—Such amounts—
(A) For funeral expenses in an amount equal to five per centum of the
gross estate but in no case to exceed P50,000.00;
(B) For judicial expenses of the testamentary or intestate proceedings;
(C) For claims against the estate; Provided, That at the time the
indebtedness was incurred the debt instrument was duly notarized and, if
the loan was contracted within three years before the death of the
decedent, the administrator or executor shall submit a statement showing
the disposition of the proceeds of the loan. (As amended by PD No. 1994)
(D) For claims of the deceased against insolvent persons where the
value of decedent’s interest therein is included in the value of the gross
estate; and
(E) For unpaid mortgages upon, or any indebtedness in respect to
property, where the value of decedent’s interest therein, undiminished by
such mortgage or indebtedness, is included in the value of the gross
estate, but not including any income taxes upon income received after the
death of the decedent, or property taxes not accrued before his death, or
any estate tax. The deduction herein allowed in the case of claims against
the estate, unpaid mortgages, or any indebtedness, shall when founded
upon a promise or agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full reconsideration in
money or money’s worth. There shall also be deducted losses incurred
during the settlement of the estate arising from fires, storms, shipwreck,
or other casualties, or from robbery, theft, or embezzlement, when such
losses are not compensated for by insurance or otherwise, and if at the
time of the filing of the return such losses have not been claimed as a
deduction for income tax purposes in an income tax return, and provided
that such losses were incurred not later than last day for the payment of
the estate tax as prescribed in subsection (a) of Section 84.
134

from the gross estate of the decedent. The specific question

is whether 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.
“Claims against the estate,” as allowable deductions
from the gross estate under Section 79 of the Tax Code, are
basically a reproduction of the deductions allowed under
Section 89 (a) (1) (C) and (E) of Commonwealth Act No. 466
(CA 466), otherwise known as the National Internal
Revenue Code of 1939, and which was the first codification
of Philippine tax laws. Philippine tax laws were, in turn,
based on the federal tax laws of the United States. Thus,
pursuant to established rules of statutory construction, the
decisions of American courts construing the federal tax
code are entitled to great weight in the interpretation of
our own tax laws.60
It is noteworthy that even in the United States, there is
some dispute as to whether the deductible amount for a
claim against the estate is fixed as of the decedent’s death
which is the general rule, or the same should be adjusted to
reflect post-death developments, such as where a
settlement between the parties results in the reduction of
the amount actually paid.61 On one hand, the U.S. court
ruled that the appropriate deduction is the “value” that the
claim had at the date of the decedent’s death.62 Also, as
held in Propstra v. U.S.,63 where a
_______________
59 This refers to the 1977 National Internal Revenue Code, as amended

which was effective at the time of Jose’s death on November 7, 1987.
60 Commissioner of Internal Revenue v. Court of Appeals, G.R. No.
123206, March 22, 2000, 328 SCRA 666, 676-677 (citations omitted).
61 47B Corpus Juris Secundum, Internal Revenue § 533.
62 Smith v. C.I.R., 82 T.C.M. (CCH) 909 (2001), aff’d 54 Fed. Appx. 413.
63 680 F.2d 1248.
135
VOL. 553, APRIL 30, 2008 135

lien claimed against the estate was certain and enforceable

on the date of the decedent’s death, the fact that the
claimant subsequently settled for lesser amount did not
preclude the estate from deducting the entire amount of
the claim for estate tax purposes. These pronouncements
essentially confirm the general principle that post-death
developments are not material in determining the amount
of the deduction.
On the other hand, the Internal Revenue Service

(Service) opines that post-death settlement should be taken
into consideration and the claim should be allowed as a
deduction only to the extent of the amount actually paid.64
Recognizing the dispute, the Service released Proposed
Regulations in 2007 mandating that the deduction would
be limited to the actual amount paid.65
In announcing its agreement with Propstra,66 the U.S.
5th Circuit Court of Appeals held:
“We are persuaded that the Ninth Circuit’s decision...in Propstra

correctly apply the Ithaca Trust date-of-death valuation principle
to enforceable claims against the estate. As we interpret Ithaca
Trust, when the Supreme Court announced the date-of-death
valuation principle, it was making a judgment about the nature of
the federal estate tax specifically, that it is a tax imposed on the
act of transferring property by will or intestacy and, because the
act on which the tax is levied occurs at a discrete time, i.e., the
instance of death, the net value of the property transferred should
be ascertained, as nearly as possible, as of that time. This
analysis supports broad application of the date-of-death valuation
rule.”67
_______________
64 47B Corpus Juris Secundum, Internal Revenue § 524.

65 Prop. Treas. Reg. §. 20.2053-1 (b) (1), published as REG-143316-03.
66 Supra note 63.
67 Smith’s Est. v. CIR, 198 F3d 515, 525 (5th Cir. 1999). See also
O’Neal’s Est. v. US, 228 F. Supp. 2d 1290 (ND Ala. 2002).
136

We express our agreement with the date-of-death

valuation rule, made pursuant to the ruling of the U.S.
Supreme Court in Ithaca Trust Co. v. United States.68 First.
There is no law, nor do we discern any legislative intent in
our tax laws, which disregards the date-of-death valuation
principle and particularly provides that post-death
developments must be considered in determining the net
value of the estate. It bears emphasis that tax burdens are
not to be imposed, nor presumed to be imposed, beyond
what the statute expressly and clearly imports, tax
statutes being construed strictissimi juris against the

government.69 Any doubt on whether a person, article or
activity is taxable is generally resolved against taxation.70
Second. Such construction finds relevance and consistency
in our Rules on Special Proceedings wherein the term
“claims” required to be presented against a decedent’s
estate 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.71 Therefore, the claims existing
at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions.
_______________
68 279 U.S. 151, 49 S. Ct. 291, 73 L.Ed. 647 (1929).

69 Commissioner of Internal Revenue v. The Court of Appeals, Central
Vegetable Manufacturing Co., Inc., and the Court of Tax Appeals, G.R. No.
107135, February 23, 1999, 303 SCRA 508, 516-517, citing Province of
Bulacan v. Court of Appeals, 299 SCRA 442 (1998); Republic v.
Intermediate Appellate Court, 196 SCRA 335 (1991); Commissioner of
Internal Revenue v. Firemen’s Fund Ins. Co., 148 SCRA 315 (1987); and
Commissioner of Internal Revenue v. Court of Appeals, 204 SCRA 182
(1991).
70 Manila International Airport Authority v. Court of Appeals, G.R. No.
155650, July 20, 2006, 495 SCRA 591, 619.
71 Quirino v. Grospe, G.R. No. 58797, January 31, 1989, 169 SCRA 702,
704-705, citing Gabin v. Melliza, 84 Phil. 794, 796 (1949).
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1/23/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 553

Note.—Each co-owner may demand at any time the

G.R. No. 140944. April 30, 2008.*

RAFAEL ARSENIO S. DIZON, in his capacity as the

Remedial Law; Evidence; No evidentiary value can be given

112 SUPREME COURT REPORTS ANNOTATED

Dizon vs. Court of Tax Appeals

administration of justice, the presentation of the BIR’s evidence is

VOL. 553, APRIL 30, 2008 113

Dizon vs. Court of Tax Appeals

government. Any doubt on whether a person, article or activity is

114 SUPREME COURT REPORTS ANNOTATED

Dizon vs. Court of Tax Appeals

the deceased before his death. Therefore, the claims existing at

PETITION for review on certiorari of the decision and

1 Dated January 20, 2000, Rollo, pp. 8-20.

VOL. 553, APRIL 30, 2008 115

On November 7, 1987, Jose P. Fernandez (Jose) died.

5 BIR Records, pp. 1-88.

116 SUPREME COURT REPORTS ANNOTATED

On April 27, 1990, BIR Regional Director for San Pablo

VOL. 553, APRIL 30, 2008 117

Dizon vs. Court of Tax Appeals

court since it had security over several real estate

Deficiency Estate Tax- 1987

In his letter19 dated December 12, 1991, Atty. Gonzales

118 SUPREME COURT REPORTS ANNOTATED

“In the hearings conducted, petitioner did not present

Nature of Document (sic)

VOL. 553, APRIL 30, 2008 119

recomputed as of February 28, 1989 at a

8. Demand letter of Manila Banking Cor-

120 SUPREME COURT REPORTS ANNOTATED

dicial Administrator of the estate of

Respondent’s [BIR] counsel presented on June 26, 1995

investigation on the estate tax case of the late Jose P.

Documents/ BIR Record

VOL. 553, APRIL 30, 2008 121

6. Signature of Raymund S. -do-

10. Signature of Ma. Anabella A. -do-

22 Rollo, pp. 37-40 (Emphasis supplied).

122 SUPREME COURT REPORTS ANNOTATED

The CTA’s Ruling

“Although the above-mentioned documents were not formally

Nevertheless, the CTA did not fully adopt the assessment

Conjugal Real Property P 5,062,016.00

VOL. 553, APRIL 30, 2008 123

Estate Tax Due P 29,935,342.97

Thus, the CTA disposed of the case in this wise:

“WHEREFORE, viewed from all the foregoing, the Court finds

Aggrieved, petitioner, on March 2, 1998, went to the CA

The CA’s Ruling

On April 30, 1999, the CA affirmed the CTA’s ruling.

25 Id., at pp. 166-167.

124 SUPREME COURT REPORTS ANNOTATED

On May 31, 1999, petitioner filed a Motion for

“1. Whether or not the admission of evidence which were not

The petitioner claims that in as much as the valid claims

of evidence is fatal to BIR’s cause; that the doctrine laid