8/29/23, 10:16 AM G.R. No.

L-22734

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Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-22734 September 15, 1967

COMMISSIONER OF INTERNAL REVENUE, petitioner,

vs.
MANUEL B. PINEDA, as one of the heirs of deceased ATANASIO PINEDA, respondent.

Office of the Solicitor General for petitioner.

Manuel B. Pineda for and in his own behalf as respondent.

BENGZON, J.P., J.:

On May 23, 1945 Atanasio Pineda died, survived by his wife, Felicisima Bagtas, and 15 children, the eldest of whom
is Manuel B. Pineda, a lawyer. Estate proceedings were had in the Court of First Instance of Manila (Case No.
71129) wherein the surviving widow was appointed administratrix. The estate was divided among and awarded to
the heirs and the proceedings terminated on June 8, 1948. Manuel B. Pineda's share amounted to about P2,500.00.

After the estate proceedings were closed, the Bureau of Internal Revenue investigated the income tax liability of the
estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not
filed. Thereupon, the representative of the Collector of Internal Revenue filed said returns for the estate on the basis
of information and data obtained from the aforesaid estate proceedings and issued an assessment for the following:

1. Deficiency income tax

1945 P135.83
1946 436.95
1947 1,206.91 P1,779.69
Add: 5% surcharge 88.98
1% monthly
interest from
November 30,
1953 to April 15,
1957 720.77
Compromise for
late filing 80.00
Compromise for
late payment 40.00

Total amount due P2,707.44

===========
Additional residence tax for P14.50
2.
1945 ===========
3. Real Estate dealer's tax for
the fourth quarter of 1946 P207.50
and the whole year of 1947 ===========

Manuel B. Pineda, who received the assessment, contested the same. Subsequently, he appealed to the Court of
Tax Appeals alleging that he was appealing "only that proportionate part or portion pertaining to him as one of the
heirs."
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After hearing the parties, the Court of Tax Appeals rendered judgment reversing the decision of the Commissioner
on the ground that his right to assess and collect the tax has prescribed. The Commissioner appealed and this Court
affirmed the findings of the Tax Court in respect to the assessment for income tax for the year 1947 but held that the
right to assess and collect the taxes for 1945 and 1946 has not prescribed. For 1945 and 1946 the returns were filed
on August 24, 1953; assessments for both taxable years were made within five years therefrom or on October 19,
1953; and the action to collect the tax was filed within five years from the latter date, on August 7, 1957. For taxable
year 1947, however, the return was filed on March 1, 1948; the assessment was made on October 19, 1953, more
than five years from the date the return was filed; hence, the right to assess income tax for 1947 had prescribed.
Accordingly, We remanded the case to the Tax Court for further appropriate proceedings.1

In the Tax Court, the parties submitted the case for decision without additional evidence.

On November 29, 1963 the Court of Tax Appeals rendered judgment holding Manuel B. Pineda liable for the
payment corresponding to his share of the following taxes:

Deficiency income tax

1945 P135.83
1946 436.95
Real estate dealer's
fixed tax 4th quarter
of 1946 and whole
year of 1947 P187.50

The Commissioner of Internal Revenue has appealed to Us and has proposed to hold Manuel B. Pineda liable for
the payment of all the taxes found by the Tax Court to be due from the estate in the total amount of P760.28 instead
of only for the amount of taxes corresponding to his share in the estate. 1awphîl.nèt

Manuel B. Pineda opposes the proposition on the ground that as an heir he is liable for unpaid income tax due the
estate only up to the extent of and in proportion to any share he received. He relies on Government of the Philippine
Islands v. Pamintuan2 where We held that "after the partition of an estate, heirs and distributees are liable
individually for the payment of all lawful outstanding claims against the estate in proportion to the amount or value of
the property they have respectively received from the estate."

We hold that the Government can require Manuel B. Pineda to pay the full amount of the taxes assessed.

Pineda is liable for the assessment as an heir and as a holder-transferee of property belonging to the
estate/taxpayer. As an heir he is individually answerable for the part of the tax proportionate to the share he received
from the inheritance.3 His liability, however, cannot exceed the amount of his share.4

As a holder of property belonging to the estate, Pineda is liable for he tax up to the amount of the property in his
possession. The reason is that the Government has a lien on the P2,500.00 received by him from the estate as his
share in the inheritance, for unpaid income taxes4a for which said estate is liable, pursuant to the last paragraph of
Section 315 of the Tax Code, which we quote hereunder:

If any person, corporation, partnership, joint-account (cuenta en participacion), association, or insurance

company liable to pay the income tax, neglects or refuses to pay the same after demand, the amount shall be
a lien in favor of the Government of the Philippines from the time when the assessment was made by the
Commissioner of Internal Revenue until paid with interest, penalties, and costs that may accrue in addition
thereto upon all property and rights to property belonging to the taxpayer: . . .

By virtue of such lien, the Government has the right to subject the property in Pineda's possession, i.e., the
P2,500.00, to satisfy the income tax assessment in the sum of P760.28. After such payment, Pineda will have a right
of contribution from his co-heirs,5 to achieve an adjustment of the proper share of each heir in the distributable
estate.

All told, the Government has two ways of collecting the tax 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. This remedy was
adopted in Government of the Philippine Islands v. Pamintuan, supra. In said case, the Government filed an action
against all the heirs for the collection of the tax. This action rests on the concept that hereditary property consists
only of that part which remains after the settlement of all lawful claims against the estate, for the settlement of which
the entire estate is first liable.6 The reason why in case suit is filed against all the heirs the tax due from the estate is
levied proportionately against them is to achieve thereby two results: first, payment of the tax; and second,
adjustment of the shares of each heir in the distributed estate as lessened by the tax.

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Another remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and rights to property
belonging 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. This second remedy is the very avenue the
Government took in this case to collect the tax. The Bureau of Internal Revenue should be given, in instances like
the case at bar, the necessary discretion to avail itself of the most expeditious way to collect the tax as may be
envisioned in the particular provision of the Tax Code above quoted, because taxes are the lifeblood of government
and their prompt and certain availability is an imperious need.7 And as afore-stated in this case the suit seeks to
achieve only one objective: payment of the tax. The adjustment of the respective shares due to the heirs from the
inheritance, as lessened by the tax, is left to await the suit for contribution by the heir from whom the Government
recovered said tax.

WHEREFORE, the decision appealed from is modified. Manuel B. Pineda is hereby ordered to pay to the
Commissioner of Internal Revenue the sum of P760.28 as deficiency income tax for 1945 and 1946, and real estate
dealer's fixed tax for the fourth quarter of 1946 and for the whole year 1947, without prejudice to his right of
contribution for his co-heirs. No costs. So ordered.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

Footnotes
1Collector of Internal Revenue v. Manuel B. Pineda as one of the heirs of the deceased Atanasio Pineda, L-
14522, May 31, 1961.
255 Phil. 13.

3Government of the Philippine Islands v. Santos, 56 Phil. 827.

4Art. 1311, Civil Code of the Philippines.

4aReal estate dealer's fixed tax is subject to the same lien pursuant to the first paragraph of Sec. 355, Tax
Code.
5Government of the Philippine Islands v. Santos, G.R. No. 34152, Dec. 15, 1931, 56 Phil. 827.

6Lopez v. Enriquez, 16 Phil. 336.

7Bull v. United States, 295 U.S. 247, 15 AFTR 1069, 1073.

The Lawphil Project - Arellano Law Foundation

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