Tax

(1) BANK OF THE PHILIPPINE ISLANDS,Petitioner,vs.COMMISSIONER OF INTERNAL REVENUE,Respondent.D E C I S I O NCARPIO,J.:The CaseThis petition for review1assails the Decision2promulgated on 29 May 2007 as well as the Resolution3promulgated on 12 February 2008 by the Court of Appeals (CA) in CA-G.R. SP No. 63640. The CA reversed the Decision4of the Court of Tax Appeals (CTA), dated 12 February 2001, and reinstated Assessment No. FAS-5-85-89-000988 requiring petitioner Bank of the Philippine Islands (BPI) to pay the amount of Pl,259,884.50 as deficiency documentary stamp tax (DST) for the taxable year 1985, inclusive of the compromise penalty.The FactsBPI, successor-in-interest of Citytrust Banking Corporation, is a commercial banking corporation organized and existing under the laws of the Philippines.On 19 May 1989, the Bureau ofInternal Revenue (BIR) issued Assessment No. FAS-5-85-89-0009885finding BPI liable for deficiency DST on its sales of foreign bills of exchange to the Central Bank, computed as follows:1985 Deficiency Documentary Stamp Tax

Foreign Bills of Exchange..................................P 839,723,000.00

Tax Due Thereon:P 839,723,000.00x P0.30 (Sec. 182 NIRC)..P200.00P 1,259,584.50

Add: Suggested compromise penalty.300.00

TOTAL AMOUNT DUE....................................P 1,259,884.50

On 16 June 1989, BPI received the assessment notice and demand letter from the BIR.On 23 June 1989, BPI, through itscounsel, filed a protest letter6requesting for the reinvestigation and/or reconsideration of the assessment for lack of legal and factual bases. The BPI alleged that it should not be liable for the assessed DST because: (1) based on recognized business practice incorporated in the Bankers Association of the Philippines (BAP) Foreign Exchange Trading Center Rule 2(e), DST was for the account of the buyer; (2) BIR Ruling No. 135-87stated that neither the tax-exempt entity nor the other party shall be liable for the payment of DST before the effectivity of Presidential Decree No. (PD) 1994 on 1 January 1986; (3) since the then law left the tax to be paid indifferently by either party and the party liable was exempt, the document was exempt from DST; and (4) the assessed DST was the same assessment made by the BIR for DST swap transaction covering taxable years 1982-1986.In a letter dated 4 August 1998,7then Commissioner of Internal Revenue (CIR) Beethoven L. Rualo denied the "request for reconsideration." The CIR held that BPIs arguments were legally untenable. The CIR cited BIR Unnumbered Ruling dated 30 May 1977 and BIR Ruling No. 144-84 dated 3 September 1984, where the liability to pay DST was shifted to the other party, who was notexempt from the tax. As for being taxed twice, the CIR found that such allegation was unsubstantiated by BPI.On 4 January 1999, BPI filed a petition for review before the CTA. On 23 February 1999, the CIR filed his answer with a demand for BPI to pay the assessed DST.The CTA RulingIn a Decision dated 12 February 2001,8the CTA ordered the cancellation of the assessed DST on BPI. The CTA ruled that neither BPI nor Central Bank, which was tax-exempt, could be liable for the payment of the assessed DST. The CTA reasoned out that before PD 1994 took effect in 1986, there was no law that shifted the liability to the other party, in case the party liable to pay the DST was tax exempt.The dispositive portion of the CTA decision reads: WHEREFORE, in view of the foregoing, the Court finds the instant Petition for Review MERITORIOUS. Respondent is hereby ORDERED to CANCEL the 1985 deficiency documentary stamp tax assessment issued to Bank of the Philippine Islands (as successor-ininterest of Citytrust [B]anking Corporation) in the amount ofP1,259,884.50 covered by Assessment No. FAS-5-85-89-000988.SO ORDERED.9Hence, the CIR appealed to the CA.The CA RulingIn a Decision dated 29 May 2007,10the CA reversed the CTA decision, and adopted the arguments of the CIR and CTA Associate Justice Ramon O. De Veyra, in his dissent.The CA held that BIR Unnumbered Ruling dated 30 May 1977 was more in accord with the general principles of law and the intent for the enactment of the provisions on DST. According to the CA, BPI further failed to justify its claim for exemption from tax.Thus, the dispositive portion ofthe CA decision states:WHEREFORE, based on the foregoing, the instant Petition is GRANTED. The Decision of the Court of Tax Appeals in C. T. A. Case No. 5711, dated February 12, 2001, which [cancelled] the 1985 deficiency documentary stamp tax issued to the Bank of the Philippine Islands (as successor-in-interest of Citytrust Banking Corporation) in the amount ofP1,259,884.50 covered by Assessment No. FAS-5-85-89-000988 is REVERSED and SET ASIDE. Assessment No. FAS-5-85-89-000988 is hereby ordered reinstated. Bank of the Philippine Islands is ordered to pay the amount ofP1,259,884.50 plus 20% annual interest from the date prescribed for its payment until fully paid pursuant to Section 249 (cc) (3) of the Tax Code.SO ORDERED.11On 12 February 2008, the CA denied the motion for reconsideration filed by BPI. Hence, BPI filed a petition for review before the Court.In a Resolution dated 5 August 2013,12the Court, through the Third Division, found that the assailed tax assessment may be invalidated because the statute of limitations on the collection of the alleged deficiency DST had already expired, conformably with Section 1, Rule 9 of the Rules of Court and the Bank of the Philippine Islands v. Commissioner of Internal Revenue13decision. However, to afford due process, the Court required both BPI and CIR to submit their respective comments on the issue of prescription.Only the CIR filed his comment on 9 December 2013. In his Comment,14the CIR argues that the issue of prescription can not be raised for the first time on appeal. The CIR further alleges that even assuming that the issue of prescription can be raised, the protest letter interrupted the prescriptive period to collect the assessed DST, unlike in the Bank of the Philippine Islands case.15The IssueThe issue boils down to whether or not BIR has a right to collect the assessed DST from BPI.The Ruling of the CourtWe deny the right of the BIR tocollect the assessed DST on the ground of prescription.Section 1, Rule 9 of the Rules ofCourt expressly provides that:Section 1. Defenses and objections not pleaded. - Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. However, when it appears from the pleadings or the evidence on record that the court has nojurisdiction over the subject matter, that there is another action pending between the same parties for the same cause, or that the action is barred by prior judgment or by the statute of limitations, the court shall dismiss the claim. (Emphasis and underscoring supplied)If the pleadings or the evidence on record show that the claim is barred by prescription, the court is mandated to dismiss the claim even if prescription is not raised as a defense. In Heirs of Valientes v. Ramas,16we ruled that the CA may motu proprio dismiss the case on the ground of prescription despite failure to raise this ground on appeal. The court is imbued with sufficient discretion to review matters, not otherwise assigned as errors on appeal, if it finds that their consideration is necessary in arriving at a complete and just resolution of the case.17More so, when the provisions on prescription were enacted to benefit and protect taxpayers from investigation after a reasonable period of time.18Thus, we proceed to determine whether the period to collect the assessed DST for the year 1985 has prescribed.1wphi1To determine prescription, what is essential only is that the facts demonstrating the lapse of the prescriptive period were sufficiently and satisfactorily apparent on the record either in the allegations of the plaintiffs complaint, or otherwise established by the evidence.19Under the then applicable Section 319(c) [now, 222(c)]20of the National Internal Revenue Code (NIRC) of 1977, as amended, any internal revenue tax which has been assessed within the period of limitation may be collected by distraint or levy, and/or court proceeding within three years21following the assessment of the tax. The assessment of the tax is deemed made and the three-year period for collection of the assessed tax begins torun on the date the assessment notice had been released, mailed or sent by the BIR to the taxpayer.22In the present case, although there was no allegation as to when the assessment notice had been released, mailed or sent to BPI, still, the latest date that the BIR could have released, mailed or sent the assessment notice was on the date BPI received the same on 16 June 1989. Counting the threeyear prescriptive period from 16 June1989, the BIR had until 15 June 1992 to collect the assessed DST. But despite the lapse of 15 June 1992, the evidence established that there was no warrant of distraint or levy served on BPIs properties, or any judicial proceedings initiated by the BIR.The earliest attempt of the BIR to collect the tax was when it filed its answer in the CTA on 23 February 1999, which was several years beyond the three-year prescriptive period. However, the BIRs answer in the CTA was not the collection casecontemplated by the law. Before 2004 or the year Republic Act No. 9282 took effect, the judicial action to collect internal revenue taxes fell under the jurisdiction of the regular trial courts, and not the CTA. Evidently, prescription has set in to bar the collection of the assessed DST.The BIR nevertheless insists thatthe running of the prescriptive period to collect the tax was suspended by BPIs filing of a request for the reinvestigation and/or reconsideration on 23 June 1989. In the similar case of Bank of the Philippine Islands,23we already ruled on the matter as follows:Of particular importance to the present case is one of the circumstances enumerated in Section [320 (now, 223)] of the Tax Code of 1977, as amended, wherein the runningof the statute of limitations on assessment and collection of taxes is considered suspended "when the taxpayer requests for a reinvestigation which is granted by the Commissioner."This Court gives credence to the argument of petitioner BPI that there is a distinction between a request for reconsideration and a request for reinvestigation. Revenue Regulations (RR) No. 12-85, issued on 27 November 1985 by the Secretary of Finance, upon the recommendation of the BIR Commissioner, governs the procedure for protesting an assessment and distinguishes between the two types of protest, as followsx x x x(a) Request for reconsideration. refers to a plea for a re-evaluation of an assessment on the basis of existing recordswithout need of additional evidence. It may involve both a question of fact or of law or both.(b) Request for reinvestigation. refers to a plea for re-evaluation of an assessment on the basis of newly-discovered or additional evidencethat a taxpayer intends to present in the reinvestigation. It may also involve a question of fact or law or both.x x x Undoubtedly, a reinvestigation,which entails the reception and evaluation of additional evidence, will take more time than a reconsideration of a tax assessment, which will be limited to the evidence already at hand; this justifies why the former can suspend the running of the statute of limitations on collectionof the assessed tax, while the latter can not.x x x A close review of the contents thereof would reveal, however, that it protested Assessment No. FAS-5-85-89-002054 based on a question of law, in particular, whether or not petitioner BPI was liable for DST on its sales of foreign currency to the Central Bank in taxable year 1985. The same protest letter did not raise any question of fact; neither did it offer to present any new evidence. In its own letter to petitioner BPI, dated 10 September 1992, the BIR itself referred to the protest of petitioner BPI as a request for reconsideration. These considerations would lead this Court to deduce that the protest letter of petitioner BPI was in the nature of a request for reconsideration, rather than a request for reinvestigation and, consequently, Section 224 of the Tax Code of 1977, as amended, on the suspension of the running of the statute of limitations should not apply.Even if, for the sake of argument, this Court glosses over the distinction between a request for reconsideration and a request for reinvestigation, and considers the protest of petitioner BPI as a request for reinvestigation, the filing thereof could not have suspended at once the running of the statute oflimitations. Article 224 of the Tax Code of 1977, as amended, very plainly requires that the request for reinvestigation had been granted by the BIR Commissioner to suspend the running of the prescriptive periods for assessment and collection. (Emphasis supplied)In the present case, the protest letter of BPI essentially raises the same question of law, that is whether BPI was liable for DST on its sales of foreign bills of exchange to the Central Bank in the taxable year 1985. Although it raised the issue of being taxed twice, the BIR admitted that BPI did not present any new or additional evidence to substantiate its allegations.24In its letter dated 4 August 1998,25the BIR itself referred to the protest of BPI as a request for reconsideration, found the arguments in it legally untenable, and denied the request. Hence, we find that the protest letter of BPI was a request for reconsideration, which did not suspend the running of the prescriptive period to collect.Even considering that BPIs protest was a request for reinvestigation, there was nothing in the records which showed that the BIR granted such request. On the other hand, the BIR only responded to BPI on 4 August 1998 or after nine years from the protest letter of BPI. In the Bank of the Philippine Islands case,26we clarified and qualified our ruling in Commissioner of Internal Revenue v. Wyeth Suaco Laboratories, Inc.,27such that the request for reinvestigation in that case was granted by the BIR. Thus, unlike in the present case, there was a proper ground for suspension of the prescriptive period in Wyeth Suaco.28Considering that the dismissal of the present case due to prescription is imperative, there is no more need to determine the validity of the assessment.WHEREFORE, we GRANT the petition. The Decision of the Court of Appeals in CA-G.R. SP No. 63640, dated 29 May 2007, which reinstated Assessment No. FAS-5-85-89-000988 requiring petitioner BPI to pay the amount ofP1,259,884.50 as deficiency documentary stamp tax for the taxable year 1985, inclusive of the compromise penalty, is REVERSED and SET ASIDE. Assessment No. F AS-5-85-89-000988 is hereby ordered CANCELLED.SO ORDERED.G.R. No. L-22734 September 15, 1967COMMISSIONER 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

1945P135.83

1946436.95

19471,206.91P1,779.69

Add: 5% surcharge88.98

1% monthly interest from November 30, 1953 to April 15, 1957720.77

Compromise for late filing80.00

Compromise for late payment40.00

Total amount dueP2,707.44===========

2.Additional residence tax for 1945P14.50===========

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

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."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.1In 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 tax1945P135.83

1946436.95

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

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.1awphl.ntManuel 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 onGovernment of the Philippine Islands v. Pamintuan2where 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.3His liability, however, cannot exceed the amount of his share.4As 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 taxes4afor 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,5to 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 inGovernment 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.6The 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 aslessened by the tax.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.7And 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.G.R. No. L-22734 September 15, 1967COMMISSIONER 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

1945P135.83

1946436.95

19471,206.91P1,779.69

Add: 5% surcharge88.98

1% monthly interest from November 30, 1953 to April 15, 1957720.77

Compromise for late filing80.00

Compromise for late payment40.00

Total amount dueP2,707.44===========

2.Additional residence tax for 1945P14.50===========

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

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."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.1In 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 tax1945P135.83

1946436.95

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

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.1awphl.ntManuel 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 onGovernment of the Philippine Islands v. Pamintuan2where 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.3His liability, however, cannot exceed the amount of his share.4As 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 taxes4afor 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,5to 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 inGovernment 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.6The 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 aslessened by the tax.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.7And 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.(3)G.R. No. L-31364March 30, 1979

MISAEL P. VERA, as Commissioner of Internal Revenue, and JAIME ARANETA, as Regional Director, Revenue Region No. 14, Bureau of Internal Revenue, petitioners, vs.HON. JOSE F. FERNANDEZ, Judge of the Court of First Instance of Negros Occidental, Branch V, and FRANCIS A. TONGOY, Administrator of the Estate of the late LUIS D. TONGOY respondents.

DE CASTRO, J.:

Appeal from two orders of the Court of First Instance of Negros Occidental, Branch V in Special Proceedings No. 7794, entitled: "Intestate Estate of Luis D. Tongoy," the first dated July 29, 1969 dismissing the Motion for Allowance of Claim and for an Order of Payment of Taxes by the Government of the Republic of the Philippines against the Estate of the late Luis D. Tongoy, for deficiency income taxes for the years 1963 and 1964 of the decedent in the total amount of P3,254.80, inclusive 5% surcharge, 1% monthly interest and compromise penalties, and the second, dated October 7, 1969, denying the Motion for reconsideration of the Order of dismissal.

The Motion for allowance of claim and for payment of taxes dated May 28, 1969 was filed on June 3, 1969 in the abovementioned special proceedings, (par. 3, Annex A, Petition, pp. 1920, Rollo). The claim represents the indebtedness to the Government of the late Luis D. Tongoy for deficiency income taxes in the total sum of P3,254.80 as above stated, covered by Assessment Notices Nos. 11-50-29-1-11061-21-63 and 11-50-291-1 10875-64, to which motion was attached Proof of Claim (Annex B, Petition, pp. 21-22, Rollo). The Administrator opposed the motion solely on the ground that the claim was barred under Section 5, Rule 86 of the Rules of Court (par. 4, Opposition to Motion for Allowance of Claim, pp. 23-24, Rollo). Finding the opposition well-founded, the respondent Judge, Jose F. Fernandez, dismissed the motion for allowance of claim filed by herein petitioner, Regional Director of the Bureau of Internal Revenue, in an order dated July 29, 1969 (Annex D, Petition, p. 26, Rollo). On September 18, 1969, a motion for reconsideration was filed, of the order of July 29, 1969, but was denied in an Order dated October 7, 1969.

Hence, this appeal on certiorari, petitioner assigning the following errors:

1.The lower court erred in holding that the claim for taxes by the government against the estate of Luis D. Tongoy was filed beyond the period provided in Section 2, Rule 86 of the Rules of Court.

2.The lower court erred in holding that the claim for taxes of the government was already barred under Section 5, Rule 86 of the Rules of Court.

which raise the sole issue of whether or not the statute of non-claims Section 5, Rule 86 of the New Rule of Court, bars claim of the government for unpaid taxes, still within the period of limitation prescribed in Section 331 and 332 of the National Internal Revenue Code.

Section 5, Rule 86, as invoked by the respondent Administrator in hid Oppositions to the Motion for Allowance of Claim, etc. of the petitioners reads as follows:

All claims for money against the decedent, arising from contracts, express or implied, whether the same be due, not due, or contingent, all claims for funeral expenses and expenses for the last sickness of the decedent, and judgment for money against the decedent, must be filed within the time limited in they notice; otherwise they are barred forever, except that they may be set forth as counter claims in any action that the executor or administrator may bring against the claimants. Where the executor or administrator commence an action, or prosecutes an action already commenced by the deceased in his lifetime, the debtor may set forth may answer the claims he has against the decedents, instead of presenting them independently to the court has herein provided, and mutual claims may be set off against each other in such action; and in final judgment is rendered in favored of the decedent, the amount to determined shall be considered the true balance against the estate, as though the claim has been presented directly before the court in the administration proceedings. Claims not yet due, or contingent may be approved at their present value.

A perusal of the aforequoted provisions shows that it makes no mention of claims for monetary obligation of the decedent created by law, such as taxes which is entirely of different character from the claims expressly enumerated therein, such as: "all claims for money against the decedent arising from contract, express or implied, whether the same be due, not due or contingent, all claim for funeral expenses and expenses for the last sickness of the decedent and judgment for money against the decedent." Under the familiar rule of statutory construction of expressio unius est exclusio alterius, the mention of one thing implies the exclusion of another thing not mentioned. Thus, if a statute enumerates the things upon which it is to operate, everything else must necessarily, and by implication be excluded from its operation and effect (Crawford, Statutory Construction, pp. 334-335).

In the case of Commissioner of Internal Revenue vs. Ilagan Electric & Ice Plant, et al., G.R. No. L-23081, December 30, 1969, it was held that the assessment, collection and recovery of taxes, as well as the matter of prescription thereof are governed by the provisions of the National Internal revenue Code, particularly Sections 331 and 332 thereof, and not by other provisions of law. (See also Lim Tio, Dy Heng and Dee Jue vs. Court of Tax Appeals & Collector of Internal Revenue, G.R. No. L-10681, March 29, 1958). Even without being specifically mentioned, the provisions of Section 2 of Rule 86 of the Rules of Court may reasonably be presumed to have been also in the mind of the Court as not affecting the aforecited Section of the National Internal Revenue Code.

In the case of Pineda vs. CFI of Tayabas, 52 Phil. 803, it was even more pointedly held that "taxes assessed against the estate of a deceased person ... 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." The abolition of the Committee on Claims does not alter the basic ruling laid down giving exception to the claim for taxes from being filed as the other claims mentioned in the Rule should be filed before the Court. Claims for taxes may be collected even after the distribution of the decedent's estate among his heirs who shall be liable therefor in proportion of their share in the inheritance. (Government of the Philippines vs. Pamintuan, 55 Phil. 13).

The reason for the more liberal treatment of claims for taxes against a decedent's estate in the form of exception from the application of the statute of non-claims, is not hard to find. Taxes are the lifeblood of the Government and their prompt and certain availability are imperious need. (Commissioner of Internal Revenue vs. Pineda, G. R. No. L-22734, September 15, 1967, 21 SCRA 105). Upon taxation depends the Government ability to serve the people for whose benefit taxes are collected. To safeguard such interest, neglect or omission of government officials entrusted with the collection of taxes should not be allowed to bring harm or detriment to the people, in the same manner as private persons may be made to suffer individually on account of his own negligence, the presumption being that they take good care of their personal affairs. This should not hold true to government officials with respect to matters not of their own personal concern. This is the philosophy behind the government's exception, as a general rule, from the operation of the principle of estoppel. (Republic vs. Caballero, L-27437, September 30, 1977, 79 SCRA 177; Manila Lodge No. 761, Benevolent and Protective Order of the Elks Inc. vs. Court of Appeals, L-41001, September 30, 1976, 73 SCRA 162; Sy vs. Central Bank of the Philippines, L-41480, April 30,1976, 70 SCRA 571; Balmaceda vs. Corominas & Co., Inc., 66 SCRA 553; Auyong Hian vs. Court of Tax Appeals, 59 SCRA 110; Republic vs. Philippine Rabbit Bus Lines, Inc., 66 SCRA 553; Republic vs. Philippine Long Distance Telephone Company, L-18841, January 27, 1969, 26 SCRA 620; Zamora vs. Court of Tax Appeals, L-23272, November 26, 1970, 36 SCRA 77; E. Rodriguez, Inc. vs. Collector of Internal Revenue, L- 23041, July 31, 1969, 28 SCRA 119.) As already shown, taxes may be collected even after the distribution of the estate of the decedent among his heirs (Government of the Philippines vs. Pamintuan, supra; Pineda vs. CFI of Tayabas, supra Clara Diluangco Palanca vs. Commissioner of Internal Revenue, G. R. No. L-16661, January 31, 1962).

Furthermore, as held in Commissioner of Internal Revenue vs. Pineda, supra, citing the last paragraph of Section 315 of the Tax Code payment of income tax shall be a lien in favor of the Government of the Philippines from the time the assessment was made by the Commissioner of Internal Revenue until paid with interests, penalties, etc. By virtue of such lien, this court held that the property of the estate already in the hands of an heir or transferee may be subject to the payment of the tax due the estate. A fortiori before the inheritance has passed to the heirs, the unpaid taxes due the decedent may be collected, even without its having been presented under Section 2 of Rule 86 of the Rules of Court. It may truly be said that until the property of the estate of the decedent has vested in the heirs, the decedent, represented by his estate, continues as if he were still alive, subject to the payment of such taxes as would be collectible from the estate even after his death. Thus in the case above cited, the income taxes sought to be collected were due from the estate, for the three years 1946, 1947 and 1948 following his death in May, 1945.

Even assuming arguendo that claims for taxes have to be filed within the time prescribed in Section 2, Rule 86 of the Rules of Court, the claim in question may be filed even after the expiration of the time originally fixed therein, as may be gleaned from the italicized portion of the Rule herein cited which reads:

Section 2. Time within which claims shall be filed. - In the notice provided in the preceding section, the court shall state the time for the filing of claims against the estate, which shall not be more than twelve (12) nor less than six (6) months after the date of the first publication of the notice. However, at any time before an order of distribution is entered, on application of a creditor who has failed to file his claim within the time previously limited the court may, for cause shown and on such terms as are equitable, allow such claim to be flied within a time not exceeding one (1) month. (Emphasis supplied)

In the instant case, petitioners filed an application (Motion for Allowance of Claim and for an Order of Payment of Taxes) which, though filed after the expiration of the time previously limited but before an order of the distribution is entered, should have been granted by the respondent court, in the absence of any valid ground, as none was shown, justifying denial of the motion, specially considering that it was for allowance Of claim for taxes due from the estate, which in effect represents a claim of the people at large, the only reason given for the denial that the claim was filed out of the previously limited period, sustaining thereby private respondents' contention, erroneously as has been demonstrated.

WHEREFORE, the order appealed from is reverse. Since the Tax Commissioner's assessment in the total amount of P3,254.80 with 5 % surcharge and 1 % monthly interest as provided in the Tax Code is a final one and the respondent estate's sole defense of prescription has been herein overruled, the Motion for Allowance of Claim is herein granted and respondent estate is ordered to pay and discharge the same, subject only to the limitation of the interest collectible thereon as provided by the Tax Code. No pronouncement as to costs.

SO ORDERED.(4) G.R. No. 86785 November 21, 1991COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.COURT OF APPEALS and ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION,respondents.Redentor G. Guyala for private respondent.M.L. Gadioma Law Office collaborating counsel for private respondent.REGALADO,J.:pWith commendable zeal, petitioner, through the Solicitor General, assails the decision in CA-G.R. No. 15429 of the Court of Appeals,1promulgated on January 20, 1989, affirming the decision of the Court of Tax Appeals in C.T.A. Case No. 2778 which granted a tax credit of P170,476.64 representingad valoremtaxes paid by private respondent for the period from the first quarter of 1974 to the third quarter of 1975.The findings of fact of the Court of Tax Appeals, which were adopted by the Court of Appeals, are not disputed by petitioner and are hereunder reproduced:1. Petitioner is a mining corporation duly organized and existing under and virtue of the laws of the Philippines, having its offices at A. Soriano Bldg., Ayala Avenue, Makati, Rizal. It is engaged primarily in the mining of copper ore from its mines property and concessions in a barrio called Don Andres Soriano, Toledo, Province of Cebu, and reputedly the biggest copper mine in Asia (t.s.n., pp. 6, 18-19, hearing 10/1/82.)2. Petitioner used the open pit method digging away the copper ore deposits. This consists of removing all surface and top materials of limestone, soil and rocks to reach into the copper ore deposits found below. (t.s.n., pp. 19-21, 10/1/82; pp. 16-17, 2/17/83.)3. Petitioner is the owner of the land or surface rights of the Biga Lime Quarry located on Toledo City containing limestone. (Exhs. G-1, H, H-1 to H-17, K; t.s.n., pp. 18, 22, 24, 31-32, 10/1/82) And as such owner, petitioner is not required, during the years covered in this case (1973-1975), to secure a government permit to dig out the limestone. (Sec. 67, P.D. 463; Sec. 63, Consolidated Mines Administrative Order; t.s.n., pp. 21-24, 10/1/82.)4. Beneath the surface of the Biga Lime Quarry are deposits of copper ore, and to mine these copper deposits, petitioner had to remove and dig out the surface materials of limestone soil and rocks. Apparently, most of the limestone was left in the mine site as waste, although a small portion thereof was utilized by petitioner as a flotation agent in the conversion of the copper rocks into concentrates. On the basis of the evidence, the limestone was first processed by petitioner into lime; and the lime became a cleansing reagent, by chemical reaction with water, in the conversion of the copper ore into copper concentrate. The effect of the lime mixed with water was to cause the copper mineral powder to float and caused the unwanted waste like lime and other materials to sink. This waste at the bottom of the conveyor was thrown away as tailings while the floating copper powder was accumulated and dried, known as copper concentrate. This was the mineral ore that was exported to Japan for processing into copper cathodes and rods. Evidently, the lime does not become part of the concentrate. (Exhs. I; J; t.s.n., p. 16, 5/4/81; pp. 16-17, 20-27, 10/1/82.)5. As shown from the records, the limestone processed into lime and used as flotation agent was never removed from the mines concession of petitioner. Even the tailings, topsoil waste and rocks, were left in the mines site as waste. (t.s.n., pp. 21-27, 10/1/ 82; p. 6. 5/14/81.)6. The processing by petitioner of the limestone was done completely inside the concession. (t.s.n., pp. 8, 10/29/83; pp. 28, 31, 10/1/82; pp. 21-22, 10/1/83.) And nobody purchased the limestone or the lime manufactured from it. (t.s.n., p. 29, 10/1/83/.) Seemingly, neither the limestone not the processed "lime" possessed market value. (t.s.n., pp. 5-7, 9/29/83; pp. 7-8, 13-14, 5/14/81; Exhs. D, D-11.)7. The evidence presented shows that for cost accounting and internal management control, petitioner assigned "cost estimates" to each and every identifiable activity or process involved in the mining of copper from blasting and digging and hauling to loading for export. Invariably, cost was assigned to the process of digging out the copper rocks, crushing and pulverizing them, and converting the mineral into exportable copper concentrate to exporting the concentrate. It was from this assignment of cost estimate to the process of producing lime from the limestone, that petitioner established that the "production cost" of lime, during the period involved in this case, was P72,096.25. (Exhs. A-d, D-1, F-1 to F-3; t.s.n., pp. 7-14, 5/14/81; pp. 3-4, 8-9, 13-17, 2/17/83; pp. 5-8, 9/29/83.)8. It was this production cost of "lime" that petitioner used in computing thead valoremtax of P181,925.25 representing tax on thelime, . . .2On December 22, 1975, petitioner filed with the Commissioner of Internal Revenue its claim for tax credit of the aforesaid sum of P181,925.25 which it paid asad valoremtax. On February 18, 1976, since no action was seasonably taken by the Commissioner of Internal Revenue on the claim, petitioner filed a petition for review with the Court of Tax Appeals.On February 16, 1988, the Court of Tax Appeals rendered judgment in favor of private respondent ordering therein respondent Commissioner of Internal Revenue "to grant a tax credit to petitioner Atlas Consolidated Mining & Development Corporation in the amount of P170,476.64 representing erroneously paidad valoremtax for the period from the 1st quarter of 1974 to the 3rd quarter of 1975."3Not satisfied therewith, petitioner filed with this Court a petition for review oncertiorari, which petition was referred to the Court of Appeals and re-docketed therein as CA-G.R. SP No. 15429. On January 20, 1989, respondent Court of Appeals affirmed the decision of the Court of Tax Appeals and dismissed the petition for lack of merit.4Before us, petitioner raises the sole issue of whether limestone dug out and processed into lime used in the production of copper concentrates is subject toad valoremtax imposed by Section 243 of the then applicable National Internal Revenue Code (Section 255 of the Internal Revenue Code of 1977, as amended). It is petitioner's submission that the aforementionedad valoremtax is a severance tax and is due and payable upon removal of the mineral from its bed or mine.The petition cannot prosper.Thead valoremtax under Section 243 of the old Tax Code is a tax not on the minerals but upon the taxpayer's privilege of severing or extracting minerals or mineral products from the earth, the Government's right to exact said imposed springing from the Regalian theory of State ownership of its natural resources.5The pertinent provisions of the old Tax Code read as follows:Sec. 243. Ad valorem taxes on output of mineral lands not covered by leases. There is hereby imposed on the actual market value of the annual gross output of the minerals or mineral product extracted or produced from all mineral lands not covered by lease, anad valoremtax in the amount of twoper centumof the value of the output, except gold which shall pay one and one-halfper centum.Before the minerals or mineral products are removed from the mines, the Commissioner of Internal Revenue or his representatives shall first be notified of such removal on a form prescribed for the purpose. (As amended by Sec. 21, Republic Act No. 909, and Sec. 48, Republic Act No. 6110).Sec. 245. Time and manner of payment of royalties or ad valorem taxes. The royalties orad valoremtaxes, as the case may be, shall be due and payable upon the removal of the mineral products from the locality where mined. . . . .Under the aforementioned provisions, although all minerals and mineral products extracted from the mineral lands are subject toad valoremtax, however, the said tax becomes due and payable only upon removal of the same from the locality where mined. In the case at bar, the limestone were admittedly never removed from the mine site nor did they become component parts of the copper concentrates. Moreover, it should be noted that said tax is imposed only on the actual market value of mineral products extracted or produced.6This is confirmed by the second paragraph of said Section 243 which requires prior notification to the Commissioner of Internal Revenue or his representative before the minerals or mineral products are removed from the mines. Such requirements is obviously intended to enable him to assess and collect the properad valoremtaxes, which necessarily presupposes that such minerals or mineral product have an actual market value.As found by both lower courts, in the case of private respondent the evidence shows that the limestone removed from its mineral lands, together with other surface materials, had no actual market value. The Court of Tax Appeals ramified that the utilization of waste limestone by herein private respondent, which is engaged in mining copper ore, by converting such waste into lime as a cleansing reagent in the conversion of copper into copper concentrate, was merely incidental to its mining copper ore operation for which it is adequately taxed.7It is not engaged i the district business of extracting limestone in order to serve other persons or commercial entities therewith.Thus, respondent Court of Appeals oppositely declares:It is clear from the above provision that thead valoremtax charged therein is assessed and collected on "actual market value" of the annual gross output of the minerals extracted or the mineral products produced from the mineral lands of the taxpayer. But "to extract" as pointed out by respondent Atlas, means "to separate an ore or mineral from a deposit" (p. 80,Rollo), so that the word "extract" used in the above Sec. 243, when applied to the case of Atlas, means that its taxable operation is its business or activity of extracting copper minerals or ore from the deposit in its mining lands. The presence of limestone together with other surface materials as soil and rocks on its mineral lands is, however, only an accident; in the words of respondent Atlas, "in fact, as obstruction blocking the separation of the copper sought" by it from said lands (id). Hence, the removal of these obstructions, like the removal of other surface materials like soil and rocks, from the mineral lands where the copper ore is buried, cannot be the "extraction" contemplated by Sec. 243.The process by which respondent Atlas extracts copper mineral or ore from its mineral lands in the course of which it digs away and removes all the surface top materials thereon including limestone, is very well described in the decision of the respondent CTA as follows:1. Petitioner (Atlas Consolidated) had to dig away and remove all the surface top materials consisting of limestone, top soil and rocks to reach into the copper ore deposits found below. As a matter of fact, as stated above, petitioner as owner of the surface right was not even required to secure a government permit to dig out the limestone.2. Most of the limestone was left in the mine site as waste, although a small portion thereof was utilized by petitioner as a flotation agent in the conversion of the copper rocks into concentrates. The limestone was first processed by petitioner into lime, and by chemical reaction with water, the lime became a cleansing reagent in the conversion of the copper ore into copper concentrate. It appears that the effect of the lime, mixed with water, was to cause the copper mineral powder to float and caused the unwanted waste like lime and other materials to sink which were thrown away as tailings. The floating copper powder was accumulated and dried, known as copper concentrate which was the mineral exported to Japan for processing into copper cathodes and rods. The lime did not become part of the concentrate.3. The limestone processed into lime and used as flotation agent was never removed from the mine concession of petitioner. And the record reveals that neither the limestone not the processed lime possessed market value.8On the promise, therefore, that the extraction or removal by private respondent of limestone from its mineral lands is a mere incident in its copper ore mining operations for which it is already taxed, both courts held that to impose another set of tax on said limestone which has no commercial value would be tantamount to double taxation. Such an imposition, avers respondent court, has been repeatedly proscribed in our decisional pronouncements to the effect that where a taxpayer is engaged in a distinct business and, as a feature thereof, in an activity merely incidental which serves no other person or business, the incidental activity should not be separately or additionally taxed.9Petitioner takes vigorous exception thereto, stigmatizing the reliance on said cases as erroneous and misplaced since what is involved in the case at bar is a mining tax while the cited cases deal with privilege taxes.We agree, for purposes of the issue involve in the present case, with the ratiocination of respondent court in holding that, under the factual situation obtaining herein, there is no substantial difference between privilege taxes and mining taxes, specifically thead valoremtax imposed in Section 243 of the old Tax Code, insofar as the prohibition against double taxation is concerned. It calls our attention to petitioner's own admission that saidad valoremtax is really a tax on the privilege of extracting or producing minerals or mineral products from the earth, a principle taken from theRepublic Cement Corporationcase,supra. Respondent court plausibly concludes therefrom that thead valoremtax in question is really in the nature of a privilege tax, hence, the aforesaid rulings in the cited cases, involving privilege taxes and the forbiddance against the imposition of another tax on an activity incidental to the principal business, should apply to the instant case.Generally, statutes levying taxes or duties are to be construed strongly against the Government and in favor of the subject or citizens, because burdens are not to be imposed or presumed to be imposed beyond what statutes expressly and clearly declare.10No person or property is subject to taxation unless they fall within the terms or plain import of a taxing statute.11Moreover, it has been the long standing policy and practice of this Court to respect the conclusions of quasi-judicial agencies, such as the Court of Tax Appeals which, by the nature of its functions, is dedicated exclusively to the study and consideration of tax problems and has necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of its authority.12Therefore, finding no such abuse or improvident exercise of authority or discretion, the decision of respondent court, affirming that of the Court of Tax Appeals, must consequently by upheld.ON THE FOREGOING CONSIDERATIONS, the petition at bar is DENIED and the judgment of respondent Court of Appeals is hereby AFFIRMED.SO ORDERED.Melencio-Herrera and Paras, JJ., concur.Padilla, J., took no part.(5)G.R. No. L-28896 February 17, 1988COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.ALGUE, INC., and THE COURT OF TAX APPEALS,respondents.CRUZ,J.:Taxes are the lifeblood of the government and so should be collected without unnecessary hindrance On the other hand, such collection should be made in accordance with law as any arbitrariness will negate the very reason for government itself. It is therefore necessary to reconcile the apparently conflicting interests of the authorities and the taxpayers so that the real purpose of taxation, which is the promotion of the common good, may be achieved.The main issue in this case is whether or not the Collector of Internal Revenue correctly disallowed the P75,000.00 deduction claimed by private respondent Algue as legitimate business expenses in its income tax returns. The corollary issue is whether or not the appeal of the private respondent from the decision of the Collector of Internal Revenue was made on time and in accordance with law.We deal first with the procedural question.The record shows that on January 14, 1965, the private respondent, a domestic corporation engaged in engineering, construction and other allied activities, received a letter from the petitioner assessing it in the total amount of P83,183.85 as delinquency income taxes for the years 1958 and 1959.1On January 18, 1965, Algue flied a letter of protest or request for reconsideration, which letter was stamp received on the same day in the office of the petitioner.2On March 12, 1965, a warrant of distraint and levy was presented to the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who refused to receive it on the ground of the pending protest.3A search of the protest in the dockets of the case proved fruitless. Atty. Guevara produced his file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service of the warrant.4On April 7, 1965, Atty. Guevara was finally informed that the BIR was not taking any action on the protest and it was only then that he accepted the warrant of distraint and levy earlier sought to be served.5Sixteen days later, on April 23, 1965, Algue filed a petition for review of the decision of the Commissioner of Internal Revenue with the Court of Tax Appeals.6The above chronology shows that the petition was filed seasonably. According to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of the decision or ruling challenged.7It is true that as a rule the warrant of distraint and levy is "proof of the finality of the assessment"8and renders hopeless a request for reconsideration,"9being "tantamount to an outright denial thereof and makes the said request deemed rejected."10But there is a special circumstance in the case at bar that prevents application of this accepted doctrine.The proven fact is that four days after the private respondent received the petitioner's notice of assessment, it filed its letter of protest. This was apparently not taken into account before the warrant of distraint and levy was issued; indeed, such protest could not be located in the office of the petitioner. It was only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all, considered by the tax authorities. During the intervening period, the warrant was premature and could therefore not be served.As the Court of Tax Appeals correctly noted,"11the protest filed by private respondent was notpro formaand was based on strong legal considerations. It thus had the effect of suspending on January 18, 1965, when it was filed, the reglementary period which started on the date the assessment was received, viz., January 14, 1965. The period started running again only on April 7, 1965, when the private respondent was definitely informed of the implied rejection of the said protest and the warrant was finally served on it. Hence, when the appeal was filed on April 23, 1965, only 20 days of the reglementary period had been consumed.Now for the substantive question.The petitioner contends that the claimed deduction of P75,000.00 was properly disallowed because it was not an ordinary reasonable or necessary business expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue, it held that the said amount had been legitimately paid by the private respondent for actual services rendered. The payment was in the form of promotional fees. These were collected by the Payees for their work in the creation of the Vegetable Oil Investment Corporation of the Philippines and its subsequent purchase of the properties of the Philippine Sugar Estate Development Company.Parenthetically, it may be observed that the petitioner had Originally claimed these promotional fees to be personal holding company income12but later conformed to the decision of the respondent court rejecting this assertion.13In fact, as the said court found, the amount was earned through the joint efforts of the persons among whom it was distributed It has been established that the Philippine Sugar Estate Development Company had earlier appointed Algue as its agent, authorizing it to sell its land, factories and oil manufacturing process. Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the Vegetable Oil Investment Corporation, inducing other persons to invest in it.14Ultimately, after its incorporation largely through the promotion of the said persons, this new corporation purchased the PSEDC properties.15For this sale, Algue received as agent a commission of P126,000.00, and it was from this commission that the P75,000.00 promotional fees were paid to the aforenamed individuals.16There is no dispute that the payees duly reported their respective shares of the fees in their income tax returns and paid the corresponding taxes thereon.17The Court of Tax Appeals also found, after examining the evidence, that no distribution of dividends was involved.18The petitioner claims that these payments are fictitious because most of the payees are members of the same family in control of Algue. It is argued that no indication was made as to how such payments were made, whether by check or in cash, and there is not enough substantiation of such payments. In short, the petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by involving an imaginary deduction.We find that these suspicions were adequately met by the private respondent when its President, Alberto Guevara, and the accountant, Cecilia V. de Jesus, testified that the payments were not made in one lump sum but periodically and in different amounts as each payee's need arose.19It should be remembered that this was a family corporation where strict business procedures were not applied and immediate issuance of receipts was not required. Even so, at the end of the year, when the books were to be closed, each payee made an accounting of all of the fees received by him or her, to make up the total of P75,000.00.20Admittedly, everything seemed to be informal. This arrangement was understandable, however, in view of the close relationship among the persons in the family corporation.We agree with the respondent court that the amount of the promotional fees was not excessive. The total commission paid by the Philippine Sugar Estate Development Co. to the private respondent was P125,000.00.21After deducting the said fees, Algue still had a balance of P50,000.00 as clear profit from the transaction. The amount of P75,000.00 was 60% of the total commission. This was a reasonable proportion, considering that it was the payees who did practically everything, from the formation of the Vegetable Oil Investment Corporation to the actual purchase by it of the Sugar Estate properties. This finding of the respondent court is in accord with the following provision of the Tax Code:SEC. 30.Deductions from gross income.--In computing net income there shall be allowed as deductions (a) Expenses:(1) In general.--All the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including a reasonable allowance for salaries or other compensation for personal services actually rendered; ...22and Revenue Regulations No. 2, Section 70 (1), reading as follows:SEC. 70.Compensation for personal services.--Among the ordinary and necessary expenses paid or incurred in carrying on any trade or business may be included a reasonable allowance for salaries or other compensation for personal services actually rendered. The test of deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and deductibility in the case of compensation payments is whether they are reasonable and are, in fact, payments purely for service. This test and its practical application may be further stated and illustrated as follows:Any amount paid in the form of compensation, but not in fact as the purchase price of services, is not deductible. (a) An ostensible salary paid by a corporation may be a distribution of a dividend on stock. This is likely to occur in the case of a corporation having few stockholders, Practically all of whom draw salaries. If in such a case the salaries are in excess of those ordinarily paid for similar services, and the excessive payment correspond or bear a close relationship to the stockholdings of the officers of employees, it would seem likely that the salaries are not paid wholly for services rendered, but the excessive payments are a distribution of earnings upon the stock. . . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)It is worth noting at this point that most of the payees were not in the regular employ of Algue nor were they its controlling stockholders.23The Solicitor General is correct when he says that the burden is on the taxpayer to prove the validity of the claimed deduction. In the present case, however, we find that the onus has been discharged satisfactorily. The private respondent has proved that the payment of the fees was necessary and reasonable in the light of the efforts exerted by the payees in inducing investors and prominent businessmen to venture in an experimental enterprise and involve themselves in a new business requiring millions of pesos. This was no mean feat and should be, as it was, sufficiently recompensed.It is said that taxes are what we pay for civilization society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one's hard earned income to the taxing authorities, every person who is able to must contribute his share in the running of the government. The government for its part, is expected to respond in the form of tangible and intangible benefits intended to improve the lives of the people and enhance their moral and material values. This symbiotic relationship is the rationale of taxation and should dispel the erroneous notion that it is an arbitrary method of exaction by those in the seat of power.But even as we concede the inevitability and indispensability of taxation, it is a requirement in all democratic regimes that it be exercised reasonably and in accordance with the prescribed procedure. If it is not, then the taxpayer has a right to complain and the courts will then come to his succor. For all the awesome power of the tax collector, he may still be stopped in his tracks if the taxpayer can demonstrate, as it has here, that the law has not been observed.We hold that the appeal of the private respondent from the decision of the petitioner was filed on time with the respondent court in accordance with Rep. Act No. 1125. And we also find that the claimed deduction by the private respondent was permitted under the Internal Revenue Code and should therefore not have been disallowed by the petitioner.ACCORDINGLY, the appealed decision of the Court of Tax Appeals is AFFIRMEDin toto,without costs.SO ORDERED.Teehankee, C.J., Narvasa, Gancayco and Grio-Aquino, JJ., concur.(6)G.R. No. 124043 October 14, 1998COMMISSIONER OF INTERNAL REVENUE,petitioner,vs.COURT OF APPEALS, COURT OF TAX APPEALS and YOUNG MEN'S CHRISTIAN ASSOCIATION OF THE PHILIPPINES, INC.,respondents.PANGANIBAN,J.:Is the income derived from rentals of real property owned by the Young Men's Christian Association of the Philippines, Inc. (YMCA) established as "a welfare, educational and charitable non-profit corporation" subject to income tax under the National Internal Revenue Code (NIRC) and the Constitution?The CaseThis is the main question raised before us in this petition for review oncertiorarichallenging two Resolutions issued by the Court of Appeals1on September 28, 19952and February 29, 19963in CA-GR SP No. 32007. Both Resolutions affirmed the Decision of the Court of Tax Appeals (CTA) allowing the YMCA to claim tax exemption on the latter's income from the lease of its real property.The FactsThe facts are undisputed.4Private Respondent YMCA is a non-stock, non-profit institution, which conducts various programs and activities that are beneficial to the public, especially the young people, pursuant to its religious, educational and charitable objectives.In 1980, private respondent earned, among others, an income of P676,829.80 from leasing out a portion of its premises to small shop owners, like restaurants and canteen operators, and P44,259.00 from parking fees collected from non-members. On July 2, 1984, the commissioner of internal revenue (CIR) issued an assessment to private respondent, in the total amount of P415,615.01 including surcharge and interest, for deficiency income tax, deficiency expanded withholding taxes on rentals and professional fees and deficiency withholding tax on wages. Private respondent formally protested the assessment and, as a supplement to its basic protest, filed a letter dated October 8, 1985. In reply, the CIR denied the claims of YMCA.Contesting the denial of its protest, the YMCA filed a petition for review at the Court of Tax Appeals (CTA) on March 14, 1989. In due course, the CTA issued this ruling in favor of the YMCA:. . . [T]he leasing of [private respondent's] facilities to small shop owners, to restaurant and canteen operators and the operation of the parking lot are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the [private respondents]. It appears from the testimonies of the witnesses for the [private respondent] particularly Mr. James C. Delote, former accountant of YMCA, that these facilities were leased to members and that they have to service the needs of its members and their guests. The rentals were minimal as for example, the barbershop was only charged P300 per month. He also testified that there was actually no lot devoted for parking space but the parking was done at the sides of the building. The parking was primarily for members with stickers on the windshields of their cars and they charged P.50 for non-members. The rentals and parking fees were just enough to cover the costs of operation and maintenance only. The earning[s] from these rentals and parking charges including those from lodging and other charges for the use of the recreational facilities constitute [the] bulk of its income which [is] channeled to support its many activities and attainment of its objectives. As pointed out earlier, the membership dues are very insufficient to support its program. We find it reasonably necessary therefore for [private respondent] to make [the] most out [of] its existing facilities to earn some income. It would have been different if under the circumstances, [private respondent] will purchase a lot and convert it to a parking lot to cater to the needs of the general public for a fee, or construct a building and lease it out to the highest bidder or at the market rate for commercial purposes, or should it invest its funds in the buy and sell of properties, real or personal. Under these circumstances, we could conclude that the activities are already profit oriented, not incidental and reasonably necessary to the pursuit of the objectives of the association and therefore, will fall under the last paragraph of Section 27 of the Tax Code and any income derived therefrom shall be taxable.Considering our findings that [private respondent] was not engaged in the business of operating or contracting [a] parking lot, we find no legal basis also for the imposition of [a] deficiency fixed tax and [a] contractor's tax in the amount[s] of P353.15 and P3,129.73, respectively.xxx xxx xxxWHEREFORE, in view of all the foregoing, the following assessments are hereby dismissed for lack of merit:1980 Deficiency Fixed Tax P353,15;1980 Deficiency Contractor's Tax P3,129.23;1980 Deficiency Income Tax P372,578.20.While the following assessments are hereby sustained:1980 Deficiency Expanded Withholding Tax P1,798.93;1980 Deficiency Withholding Tax on Wages P33,058.82plus 10% surcharge and 20% interest per annum from July 2, 1984 until fully paid but not to exceed three (3) years pursuant to Section 51(e)(2) & (3) of the National Internal Revenue Code effective as of 1984.5Dissatisfied with the CTA ruling, the CIR elevated the case to the Court of Appeals (CA). In its Decision of February 16, 1994, the CA6initially decided in favor of the CIR and disposed of the appeal in the following manner:Following the ruling in the afore-cited cases ofProvince of Abra vs. HernandoandAbra Valley College Inc. vs. Aquino, the ruling of the respondent Court of Tax Appeals that "the leasing of petitioner's (herein respondent's) facilities to small shop owners, to restaurant and canteen operators and the operation of the parking lot are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the petitioners, and the income derived therefrom are tax exempt, must be reversed.WHEREFORE, the appealed decision is hereby REVERSED in so far as it dismissed the assessment for:1980 Deficiency Income Tax P 353.151980 Deficiency Contractor's Tax P 3,129.23, &1980 Deficiency Income Tax P 372,578.20but the same is AFFIRMED in all other respect.7Aggrieved, the YMCA asked for reconsideration based on the following grounds:IThe findings of facts of the Public Respondent Court of Tax Appeals being supported by substantial evidence [are] final and conclusive.IIThe conclusions of law of [p]ublic [r]espondent exempting [p]rivate [r]espondent from the income on rentals of small shops and parking fees [are] in accord with the applicable law and jurisprudence.8Finding merit in the Motion for Reconsideration filed by the YMCA, the CA reversed itself and promulgated on September 28, 1995 its first assailed Resolution which, in part, reads:The Court cannot depart from the CTA's findings of fact, as they are supported by evidence beyond what is considered as substantial.xxx xxx xxxThe second ground raised is that the respondent CTA did not err in saying that the rental from small shops and parking fees do not result in the loss of the exemption. Not even the petitioner would hazard the suggestion that YMCA is designed for profit. Consequently, the little income from small shops and parking fees help[s] to keep its head above the water, so to speak, and allow it to continue with its laudable work.The Court, therefore, finds the second ground of the motion to be meritorious and in accord with law and jurisprudence.WHEREFORE, the motion for reconsideration is GRANTED; the respondent CTA's decision is AFFIRMEDin toto.9The internal revenue commissioner's own Motion for Reconsideration was denied by Respondent Court in its second assailed Resolution of February 29, 1996. Hence, this petition for review under Rule 45 of the Rules of Court.10The IssuesBefore us, petitioner imputes to the Court of Appeals the following errors:IIn holding that it had departed from the findings of fact of Respondent Court of Tax Appeals when it rendered its Decision dated February 16, 1994; andIIIn affirming the conclusion of Respondent Court of Tax Appeals that the income of private respondent from rentals of small shops and parking fees [is] exempt from taxation.11This Court's RulingThe petition is meritorious.First Issue:Factual Findings of the CTAPrivate respondent contends that the February 16, 1994 CA Decision reversed the factual findings of the CTA. On the other hand, petitioner argues that the CA merely reversed the "rulingof the CTA that the leasing of private respondent's facilities to small shop owners, to restaurant and canteen operators and the operation of parking lots are reasonably incidental to and reasonably necessary for the accomplishment of the objectives of the private respondent and that the income derived therefrom are tax exempt."12Petitioner insists that what the appellate court reversed was the legal conclusion,not the factual finding, of the CTA.13The commissioner has a point.Indeed, it is a basic rule in taxation that the factual findings of the CTA, when supported by substantial evidence, will be disturbed on appeal unless it is shown that the said court committed gross error in the appreciation of facts.14In the present case, this Court finds that the February 16, 1994 Decision of the CA did not deviate from this rule. The latter merely applied the law to the facts as found by the CTA and ruled on the issue raised by the CIR: "Whether or not the collection or earnings of rental income from the lease of certain premises and income earned from parking fees shall fall under the last paragraph of Section 27 of the National Internal Revenue Code of 1977, as amended."15Clearly, the CA did not alter any fact or evidence. It merely resolved the aforementioned issue, as indeed it was expected to. That it did so in a manner different from that of the CTA did not necessarily imply a reversal of factual findings.The distinction between a question of law and a question of fact is clear-cut. It has been held that "[t]here is a question of law in a given case when the doubt or difference arises as to what the law is on a certain state of facts; there is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts."16In the present case, the CA did not doubt, much less change, the facts narrated by the CTA. It merely applied the law to the facts. That its interpretation or conclusion is different from that of the CTA is not irregular or abnormal.Second Issue:Is the Rental Income of the YMCA Taxable?We now come to the crucial issue: Is the rental income of the YMCA from its real estate subject to tax? At the outset, we set forth the relevant provision of the NIRC:Sec. 27. Exemptions from tax on corporations. The following organizations shall not be taxed under this Title in respect to income received by them as such xxx xxx xxx(g) Civic league or organization not organized for profit but operated exclusively for the promotion of social welfare;(h) Club organized and operated exclusively for pleasure, recreation, and other non-profitable purposes, no part of the net income of which inures to the benefit of any private stockholder or member;xxx xxx xxxNotwithstanding the provisions in the preceding paragraphs, the income of whatever kind and character of the foregoing organizations from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income, shall be subject to the tax imposed under this Code. (as amended by Pres. Decree No. 1457)Petitioner argues that while the income received by the organizations enumerated in Section 27 (now Section 26) of the NIRC is, as a rule, exempted from the payment of tax "in respect to income received by them as such," the exemption does not apply to income derived ". . . from any of their properties, real or personal, or from any of their activities conducted for profit, regardless of the disposition made of such income . . . ."Petitioner adds that "rental income derived by a tax-exempt organization from the lease of its properties, real or personal, [is] not, therefore, exempt from income taxation, even if such income [is] exclusively used for the accomplishment of its objectives."17We agree with the commissioner.Because taxes are the lifeblood of the nation, the Court has always applied the doctrine of strict in interpretation in construing tax exemptions.18Furthermore, a claim of statutory exemption from taxation should be manifest. and unmistakable from the language of the law on which it is based. Thus, the claimed exemption "must expressly be granted in a statute stated in a language too clear to be mistaken."19In the instant case, the exemption claimed by the YMCA is expressly disallowed by the very wording of the last paragraph of then Section 27 of the NIRC which mandates that the income of exempt organizations (such as the YMCA) from any of their properties, real or personal, be subject to the tax imposed by the same Code. Because the last paragraph of said section unequivocally subjects to tax the rent income of the YMCA from its real property,20the Court is duty-bound to abide strictly by its literal meaning and to refrain from resorting to any convoluted attempt at construction.It is axiomatic that where the language of the law is clear and unambiguous, its express terms must be applied.21Parenthetically, a consideration of the question of construction must not even begin, particularly when such question is on whether to apply a strict construction or a liberal one on statutes that grant tax exemptions to "religious, charitable and educational propert[ies] or institutions."22The last paragraph of Section 27, the YMCA argues, should be "subject to the qualification that the income from the properties must arise from activities 'conducted for profit' before it may be considered taxable."23This argument is erroneous. As previously stated, a reading of said paragraph ineludibly shows that the income from any property of exempt organizations, as well as that arising from any activity it conducts for profit, is taxable. The phrase "any of their activities conducted for profit" does not qualify the word "properties." This makes from the property of the organization taxable, regardless of how that income is used whether for profit or for lofty non-profit purposes.Verba legis non est recedendum. Hence, Respondent Court of Appeals committed reversible error when it allowed, on reconsideration, the tax exemption claimed by YMCA on income it derived from renting out its real property, on the solitary but unconvincing ground that the said income is not collected for profit but is merely incidental to its operation. The law does not make a distinction. The rental income is taxable regardless of whence such income is derived and how it is used or disposed of. Where the law does not distinguish, neither should we.Constitutional ProvisionsOn TaxationInvoking not only the NIRC but also the fundamental law, private respondent submits that Article VI, Section 28 of par. 3 of the 1987 Constitution,24exempts "charitable institutions" from the payment not only of property taxes but also of income tax from any source.25In support of its novel theory, it compares the use of the words "charitable institutions," "actually" and "directly" in the 1973 and the 1987 Constitutions, on the one hand; and in Article VI, Section 22, par. 3 of the 1935 Constitution, on the other hand.26Private respondent enunciates three points.First, the present provision is divisible into two categories: (1) "[c]haritable institutions, churches and parsonages or convents appurtenant thereto, mosques and non-profit cemeteries," the incomes of which are, from whatever source, all tax-exempt;27and (2) "[a]ll lands, buildings and improvements actually and directly used for religious, charitable or educational purposes," which are exempt only from property taxes.28Second, Lladoc v. Commissioner of Internal Revenue,29which limited the exemption only to the payment of property taxes, referred to the provision of the 1935 Constitution and not to its counterparts in the 1973 and the 1987 Constitutions.30Third, the phrase "actually, directly and exclusively used for religious, charitable or educational purposes" refers not only to "all lands, buildings and improvements," but also to the above-quoted first category which includes charitable institutions like the private respondent.31The Court is not persuaded. The debates, interpellations and expressions of opinion of the framers of the Constitution reveal their intent which, in turn, may have guided the people in ratifying the Charter.32Such intent must be effectuated.Accordingly, Justice Hilario G. Davide, Jr., a former constitutional commissioner, who is now a member of this Court, stressed during the Concom debates that ". . . what is exempted is not the institution itself . . .; those exempted from real estate taxes are lands, buildings and improvements actually, directly and exclusively used for religious, charitable or educationalpurposes."33Father Joaquin G. Bernas, an eminent authority on the Constitution and also a member of the Concom, adhered to the same view that the exemption created by said provision pertained only to property taxes.34In his treatise on taxation, Mr. Justice Jose C. Vitug concurs, stating that "[t]he tax exemption coverspropertytaxes only."35Indeed, the income tax exemption claimed by private respondent finds no basis in Article VI, Section 26, par. 3 of the Constitution.Private respondent also invokes Article XIV, Section 4, par. 3 of the Character,36claiming that the YMCA "is a non-stock, non-profit educational institution whose revenues and assets are used actually, directly and exclusively for educational purposes so it is exempt from taxes on its properties and income."37We reiterate that private respondent is exempt from the payment of property tax, but not income tax on the rentals from its property. The bare allegation alone that it is a non-stock, non-profit educational institution is insufficient to justify its exemption from the payment of income tax.As previously discussed, laws allowing tax exemption are construedstrictissimi juris. Hence, for the YMCA to be granted the exemption it claims under the aforecited provision, it must prove with substantial evidence that (1) it falls under the classificationnon-stock, non-profit educational institution; and (2) the income it seeks to be exempted from taxation is usedactually, directly, and exclusively for educational purposes. However, the Court notes that not a scintilla of evidence was submitted by private respondent to prove that it met the said requisites.Is the YMCA aneducationalinstitution within the purview of Article XIV, Section 4, par. 3 of the Constitution? We rule that it is not. The term "educational institution" o