Pirovano V CIR

SUPREME COURT REPORTS ANNOTATED VOLUME 014 24/04/2019, 1)55 PM
832 SUPREME COURT REPORTS ANNOTATED

Pirovano vs. Commissioner of Internal Revenue
No. L-19865. July 31, 1965.
MARIA CARLA PIROVANO, etc., et al., petitioners-

appellants vs. THE COMMISSIONER OF INTERNAL
REVENUE, respondent-appellee.
Taxation; Gift tax; Donation out of gratitude for past services

taxable.·A donation made by a corporation to the heirs of a
deceased officer out of gratitude for his past services is subject to
the doneesÊ gift tax.
Same; Same; Same; No deduction for value of past services.·A
donation made out of gratitude for past services is not subject to
deduction for the value of said services which do not constitute a
recoverable debt.
Same; Same; Same; Gratitude not consideration under tax code.
·Gratitude has no economic value and is not „consider-
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VOL. 14, JULY 31, 1965 833
ation‰ in the sense that the word is used under Section 311 of the
Tax Code.
Same; Same; Collection of interest and surcharge for delay in
payment of tax mandatory.·Section 119, paragraph (b)(1) and (c) of
the Tax Code does not confer on the Commissioner of Internal
Revenue or on the courts any power and discretion not to impose
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the 1% interest monthly and the 5% surcharge for delay in payment

of the gift tax already assessed.
APPEAL from a decision of the Court of Tax Appeals.
The facts are stated in the opinion of the Court.

Angel S. Gamboa for petitioners-appellants.
Solicitor General for respondent-appellee.
REYES, J.B.L., J.:
This case is a sequel to the case of Pirovano vs. De la Rama

Steamship Co., 96 Phil. 335.
Briefly, the facts of the aforestated case may be stated as
follows:
Enrico Pirovano was the father of the herein
petitionersappellants. Sometime in the early part of 1941,
De la Rama Steamship Co. insured the life of said Enrico
Pirovano, who was then its President and General
Manager until the time of his death, with various
Philippine and American insurance companies for a total
sum of one million pesos, designating itself as the
beneficiary of the policies obtained by it. Due to the
Japanese occupation of the Philippines during the second
World War, the Company was unable to pay the premiums
on the policies issued by its Philippine insurers and these
policies lapsed, while the policies issued by its American
insurers were kept effective and subsisting, the New York
office of the Company having continued paying its
premiums from year to year.
During the Japanese occupation, or more particularly in
the latter part of 1944, said Enrico Pirovano died.
After the liberation of the Philippines from the Japanese
forces, the Board of Directors of De la Rama Steamship Co.
adopted a resolution dated July 10, 1946 granting and
setting aside, out of the proceeds expected to be collected
834

on the insurance policies taken on the life of said Enrico

Pirovano, the sum of P400,000.00 for equal division among
the four (4) minor children of the deceased, said sum of
money to be convertible into 4,000 shares of stock of the
Company, at par, or 1,000 shares for each child. Shortly
thereafter, the Company received the total sum of
P643,-000.00 as proceeds of the said life insurance policies
obtained from American insurers.
Upon receipt of the last stated sum of money, the Board
of Directors of the Company modified, on January 6, 1947,
the above-mentioned resolution by renouncing all its rights
title, and interest to the said amount of P643,000.00 in
favor of the minor children of the deceased, subject to the
express condition that said amount should be retained by
the Company in the nature of a loan to it, drawing interest
at the rate of five per centum (5%) per annum, and payable
to the Pirovano children after the Company shall have first
settled in full the balance of its present remaining bonded
indebtedness in the sum of approximately P5,000,000.00.
This latter resolution was carried out in a Memorandum
Agreement on January 10, 1947 and June 17, 1947,
respectively, executed by the Company and Mrs. Estefania
R. Pirovano, the latter acting in her capacity as guardian of
her children (petitioners-appellants herein) and pursuant
to an express authority granted her by the court.
On June 24, 1947, the Board of Directors of the
Company further modified the last mentioned resolution
providing therein that the Company shall pay the proceeds
of said life insurance policies to the heirs of the said Enrico
Pirovano after the Company shall have settled in full the
balance of its present remaining bonded indebtedness, but
the annual interests accruing on the principal shall be paid
to the heirs of the said Enrico Pirovano, or their duly
appointed representative, whenever the Company is in a
position to meet said obligation.
On February 26, 1948, Mrs. Estefania R. Pirovano, in
behalf of her children, executed a public document formally
accepting the donation; and, on the same date, the Com-
835
VOL. 14, JULY 31, 1965 835
pany, through its Board of Directors, took official notice of

this formal acceptance.
On September 13, 1949, the stockholders of the
Company formally ratified the various resolutions
hereinabove mentioned with certain clarifying
modifications that the payment of the donation shall not be
effected until such time as the Company shall have first
duly liquidated its present bonded indebtedness in the
amount of P3,260,855.77 with the National Development
Company, or fully redeemed the preferred shares of stock in
the amount which shall be issued to the National
Development Company in lieu thereof; and that any and all
taxes, legal fees, and expenses in any way connected with
the above transaction shall be chargeable and deducted
from the proceeds of the life insurance policies mentioned
in the resolutions of the Board of Directors.
On March 8, 1951, however, the majority stockholders of
the Company voted to revoke the resolution approving the
donation in favor of the Pirovano children.
As a consequence of this revocation and refusal of the
Company to pay the balance of the donation amounting to
P564,980.90 despite demands therefor, the herein
petitioners-appellants represented by their natural
guardian, Mrs. Estefania R. Pirovano, brought an action for
the recovery of said amount, plus interest and damages
against De la Rama Steamship Co., in the Court of First
Instance of Rizal, which case ultimately culminated to an
appeal to this Court. On December 29, 1954, this court
rendered its decision in the appealed case (96 Phil. 335)
holding that the donation was valid and remunerative in
nature, the dispositive part of which reads:
„Wherefore, the decision appealed from should be modified as

follows: (a) that the donation in favor of the children of the late
Enrico Pirovano of the proceeds of the insurance policies taken on
his life is valid and binding on the defendant corporation; (b) that
said donation, which amounts to a total of P583,-813.59, including
interest, as it appears in the books of the corporation as of August
31, 1951, plus interest thereon at the rate of 5 per cent per annum
from the filing of the complaint, should be paid to the plaintiffs
after the defendant corporation shall have fully redeemed the

preferred shares issued
836

to the National Development Company under the terms and

conditions stated in the resolutions of the Board of Directors of
January 6, 1947 and June 24, 1947, as amended by the resolution of
the stockholders adopted on September 13, 1949; and (c) defendant
shall pay to plaintiffs an additional amount equivalent to 10 per
cent of said amount of P583,813.59 as damages by way of attorneyÊs
fees, and to pay the costs of action.‰ (Pirovano, et al. vs. De la Rama
Steamship Co., 96 Phil. 367-368)
The above decision became final and executory. In

compliance therewith, De la Rama Steamship Co. made, on
April 6, 1955, a partial payment on the amount of the
judgment and paid the balance thereof on May 12, 1955,
On March 6, 1955, respondent Commissioner of Internal
Revenue assessed the amount of P60,869.67 as doneesÊ gift
tax, inclusive of surcharges, interests and other penalties,
against each of the petitioners-appellants, or for the total
sum of P243,478.68; and, on April 23, 1955, a donorÊs gift
tax in the total amount of P34,371.76 was also assessed
against De la Rama Steamship Co., which the latter paid.
Petitioners-appellants herein contested respondent
CommissionerÊs assessment and imposition of the doneesÊ
gift taxes and donorÊs gift tax and also made a claim for
refund of the donorÊs gift tax so collected. Respondent
Commissioner overruled petitionersÊ claims; hence, the
latter presented two (2) petitions for review against
respondentÊs rulings before the Court of Tax Appeals, said
petitions having been docketed as CTA Cases Nos. 347 and
375. CTA Case No. 347 relates to the petition disputing the
legality of the assessment of doneesÊ gift taxes and donorÊs
gift tax while CTA Case No. 375 refers to the claim for
refund of the donorÊs gift tax already paid.
After the filing of respondentÊs usual answers to the
petitions, the two cases, being interrelated to each other,
were tried jointly and terminated.

On January 31, 1962, the Court of Tax Appeals rendered
its decision in the two cases, the dispositive part of which
reads:
„In resume, we are of the opinion, that (1) the donorÊs gift tax in the
sum of P34,371.76 was erroneously assessed and collected, hence,
petitioners are entitled to the refund thereof; (2) the doneesÊ gift
taxes were correctly assessed; (3) the im-
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VOL. 14, JULY 31, 1965 837

position of the surcharge of 25% is not proper; (4) the surcharge of

5% is legally due; and (5) the interest of 1% per month on the
deficiency doneesÊ gift taxes is due from petitioners from March 8,
1955 until the taxes are paid.
„IN LINE WITH THE FOREGOING OPINION, petitioners are
hereby ordered to pay the doneesÊ gift taxes as assessed by
respondent, plus 5% surcharge and interest at the rate of 1% per
month from March 8, 1955 to the date of payment of said doneesÊ
gift taxes. Respondent is ordered to apply the sum of P34,371.76
which is refundable to petitioners, against the amount due from
petitioners. With costs against petitioners in Case No. 347.‰
Petitioners-appellants herein filed a motion to reconsider

the above decision, which the lower court denied. Hence,
this appeal before us.
In the instant appeal, petitioners-appellants herein
question only that portion of the decision of the lower court
ordering the payment of doneesÊ gift taxes as assessed by
respondent as well as the imposition of surcharge and
interest on the amount of doneesÊ gift taxes.
In their brief and memorandum, they dispute the factual
finding of the lower court that De la Rama Steamship
CompanyÊs renunciation of its rights, title, and interest
over the proceeds of said life insurance policies in favor of
the Pirovano children „was motivated solely and
exclusively by its sense of gratitude, an act of pure
liberality, and not to pay additional compensation for
services inadequately paid for.‰ Petitioners now contend
that the lower courtÊs finding was erroneous in seemingly

considering the disputed grant as a simple donation, since
our previous decision (96 Phil. 335) had already declared
that the transfer to the Pirovano children was a
remuneratory donation. Petitioners further contend that
the same was made not for an insufficient or inadequate
consideration but rather it was made for a full and
adequate compensation for the valuable services rendered
by the late Enrico Pirovano to the De la Rama Steamship
Co.; hence, the donation does not constitute a taxable gift
under the provisions of Section 108 of the National Internal
Revenue Code.
The argument for petitioners-appellants fails to take
into account the fact that neither in Spanish nor in Anglo-
Amer-
838

ican law was it considered that past services, rendered

without relying on a coetaneous promise, express or
implied, that such services would be paid for in the future,
constituted cause or consideration that would make a
conveyance of property anything else but a gift or donation.
This conclusion flows from the text of Article 619 of the
Code of 1889 (identical with Article 726 of the present Civil
Code of the Philippines):
„When a person gives to another a thing x x x on account of the

latterÊs merits or of the services rendered by him to the donor,
provided they do not constitute a demandable debt, xxx, there is
also a donation. x x x.‰
There is nothing on record to show that when the late

Enrico Pirovano rendered services as President and
General Manager of the De la Rama Steamship Co. he was
not fully compensated for such services, or that, because
they were „largely responsible for the rapid and very
successful development of the activities of the company‰
(Res, of July 10, 1946). Pirovano expected or was promised
further compensation over and in addition to his regular

emoluments as President and General Manager. The fact
that his services contributed in a large measure to the
success of the company did not give rise to a recoverable
debt, and the conveyances made by the company to his
heirs remain a gift or donation. This is emphasized by the
directorsÊ Resolution of January 6, 1947, that „out of
gratitude‰ the company decided to renounce in favor of
PirovanoÊs heirs the proceeds of the life insurance policies
in question. The true consideration for the donation was,
therefore, the companyÊs gratitude for his services, and not
the services themselves.
That the tax court regarded the conveyance as a simple
donation, instead of a remuneratory one as it was declared
to be in our previous decision, is but an innocuous error;
whether remuneratory or simple, the conveyance remained
a gift, taxable under Chapter 2, Title III of the Internal
Revenue Code.
But then appellants contend, the entire property or right
donated should not be considered as a gift for taxation
purposes; only that portion of the value of the property or
839
VOL. 14, JULY 31, 1965 839

right transferred, if any, which is in excess of the value of

the services rendered should be considered as a taxable
gift. They cite in support Section 111 of the Tax Code which
provides that·
„Where property is transferred for less than an adequate and full

consideration in money or moneyÊs worth, then the amount by
which the value of the property exceeded the value of the
consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, x x x.‰
The flaw in this argument lies in the fact that, as copied

from American law, the term consideration used in this
section refers to the technical „consideration‰ defined by
the American Law Institute (Restatement of Contracts) as
„anything that is bargained for by the promisor and given

by the promisee in exchange for the promise‰ (Also, Corbin
on Contracts, Vol. I, p. 359). But, as we have seen,
PirovanoÊs successful activities as officer of the De la Rama
Steamship Co. cannot be deemed such consideration for the
gift to his heirs, since the services were rendered long
before the Company ceded the value of the life policies to
said heirs; cession and services were not the result of one
bargain or of a mutual exchange of promises.
And the Anglo-American law treats a subsequent
promise to pay for past services (like one to pay for
improvements already made without prior request from the
promisor) to be a nudum pactum (Roscorla vs. Thomas, 3
Q.B. 234; Peters vs. Poro, 25 ALR 615; Carson vs. Clark, 25
Am. Dec. 79; Boston vs. Dodge, 12 Am. Dec. 206), i.e., one
that is unenforceable in view of the common law rule that
consideration must consist in a legal benefit to the
promisee or some legal detriment to the promisor.
What is more, the actual consideration for the cession of
the policies, as previously shown, was the CompanyÊs
gratitude to Pirovano; so that under section 111 of the Code
there is no consideration the value of which can be
deducted from that of the property transferred as a gift.
Like „love and affection,‰ gratitude has no economic value
and is not „consideration‰ in the sense that the word is
used in this section of the Tax Code.
840

As stated by Chief Justice Griffith of the Supreme Court of

Mississippi in his well-known book, „Outlines of the Law‰
(p. 204)·
„Love and affection are not considerations of value·thev are not

estimable in terms of value. Nor are sentiments of gratitude for
gratuitous past favors or kindnesses; nor are obligations which are
merely moral. It has been well said that if a moral obligation were
alone sufficient it would remove the necessity for any consideration
at all, since the fact of making a promise imposes, the moral
obligation to perform it.‰
It is of course perfectly possible that a donation or gift

should at the same time impose a burden or condition on
the donee involving some economic liability for him. A, for
example, may donate a parcel of land to B on condition that
the latter assume a mortgage existing on the donated land.
In this case the donee may rightfully insist that the gift tax
be computed only on the value of the land less the value of
the mortgage. This, in fact, is contemplated by Article 619
of the Civil Code of 1889 (Art. 726 of the Tax Code) when it
provides that there is also a donation „when the gift
imposes upon the donee a burden which is less than the
value of the thing given.‰ Section 111 of the Tax Code has
in view situations of this kind, since it also prescribes that
„the amount by which the value of the property exceeded
the value of the consideration‰ shall be deemed a gift for
the purpose of the tax.
Petitioners finally contend that, even assuming that the
donation in question is subject to doneesÊ gift taxes, the
imposition of the surcharge of 5% and interest of 1% per
month from March 8, 1955 was not justified because the
proceeds of the life insurance policies were actually
received on April 6, 1955 and May 12, 1955 only and in
accordance with Section 115(c) of the Tax Code; the filing of
the returns of such tax became due on March 1, 1958 and
the tax became payable on May 15, 1956, as provided for in
Section 116 (a) of the same Code. In other words,
petitioners maintain that the assessment and demand for
doneesÊ gift taxes was prematurely made and of no legal
effect; hence, they should not be held liable for such
surcharge and interest.
841
VOL. 14, JULY 31, 1965 841

It is well to note, and it is not disputed, that

petitionersdonees have failed to file any gift tax return and
that they also failed to pay the amount of the assessment
made against them by respondent in 1955. This situation is
covered by Section 119 (b) (1) and (c) and Section 120 of the
Tax Code:
„(b) Deficiency.
„(1) Payment not extended.·Where a deficiency, or any

interest assessed in connection therewith, or any
addition to the taxes provided for in section one
hundred twenty is not paid in full within thirty
days from the date of the notice and demand from
the Commissioner, there shall be collected as a part
of the taxes, interest upon the unpaid amount at
the rate of one per centum a month from the date of
such notice and demand until it is paid. (section
119)
„(c) Surcharge.·If any amount of the taxes included in

the notice and demand from the Commissioner of
Internal Revenue is not paid in full within thirty
days after such notice and demand, there shall be
collected in addition to the interest prescribed
above as a part of the taxes a surcharge of five per
centum of the unpaid amount.‰ (sec. 119)
The failure to file a return was found by the lower court to

be due to reasonable cause and not to willful neglect. On
this score, the elimination by the lower court of the 25%
surcharge as ad valorem penalty which respondent
Commissioner had imposed pursuant to Section 120 of the
Tax Code was proper, since said Section 120 vests in the
Commissioner of Internal Revenue or in the tax court
power and authority to impose or not to impose such
penpity depending upon whether or not reasonable cause
has been shown in the non-filing of such return.
On the other hand, unlike said Section 120, Section 119,
paragraphs (b) (1) and (c) of the Tax Code, does not confer
on the Commissioner of Internal Revenue or on the courts
any power and discretion not to impose such interest and
surcharge. It is likewise provided for by law that an appeal
to the Court of Tax Appeals from a decision of the
Commissioner of Internal Revenue shall not suspend the
payment or collection of the tax liability of the taxpayer
unless a motion to that effect shall have been presented to
the court and granted by it on the ground
842

that such collection will jeopardize the interest of the

taxpayer (Sec. 11, Republic Act No. 1125; Rule 12, Rules of
the Court of Tax Appeals). It should further be noted that·
„It has been the uniform holding of this Court that no suit for
enjoining the collection of a tax, disputed or undisputed, can be
brought, the remedy being to pay the tax first, formerly under
protest and now without need of protest, file the claim with the
Collector, and if he denies it, bring an action for recovery against
him.‰ (David v. Ramos, et al., 90 Phil. 351)
„Section 306 of the National Internal Revenue Code xxx lays
down the procedure to be followed in those cases wherein a
taxpayer entertains some doubt about the correctness of a tax
sought to be collected. Said section provides that the tax should first
be paid and the taxpayer should sue for its recovery afterwards. The
purpose of the law obviously is to prevent delay in the collection of
taxes upon which the Government depends for its existence. To
allow a taxpayer to first secure a ruling as regards the validity of
the tax before paying it would be to defeat this purpose.‰ (National
Dental Supply Co. vs. Meer, 90 Phil. 265)
Petitioners did not file in the lower court any motion for the
suspension of payment or collection of the amount of
assessment made against them.
On the basis of the above-stated provisions of law and
applicable authorities, it is evident that the imposition of
1% interest monthly and 5% surcharge is justified and
legal. As succinctly stated by the court below, said
imposition is „mandatory and may not be waived by the
Commissioner of Internal Revenue or by the courts‰
(Resolution on petitionersÊ motion for reconsideration,
Annex XIV, petition). Hence, said imposition of interest and
surcharge by the lower court should be upheld.
WHEREFORE, the decision of the Court of Tax Appeals
is affirmed. Costs against petitioners Pirovano.
Bengzon, C.J., Bautista Angelo, Paredes, Dizon,

Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ.,
concur.
Concepcion, J., took no part.
Barrera, J., on leave, did not take part.
Decision affirmed.
···o0o···
843
VOL. 14, JULY 31, 1965 843

ANNOTATION
COURT OF TAX APPEALS
I. Composition; designation.
The Court of Tax Appeals is composed of a Presiding Judge

and two Associate Judges, each of whom shall be appointed
by the President of the Philippines, with the consent of the
Commission on Appointments. The Presiding Judge shall
be so designated in the commission issued to him by the
President, and the Associate Judges shall have precedence
according to the date of their commissions. (See Sec. 1, Rep.
Act 1125.)
II. Salary; tenure of office.
The Presiding Judge shall receive a compensation of

twenty thousand pesos per annum and shall have the same
qualifications, rank, category and privileges as the
Presiding Judge of the Court of Industrial Relations. The
Associate Judges shall each receive a compensation of
nineteen thousand pesos per annum and shall have the
same qualifications, rank, category and privileges as a
member of the Court of Industrial Relations. The Presiding
Judge and the Associate Judges shall be appointed to hold
office during good behavior until they reach the age of

seventy, or become incapacitated to discharge the duties of
their office, unless sooner removed for the same causes and
in the same manner provided by law for members of the
judiciary of appellate rank, (infra.)
III. How quorum constituted.
Any two judges of the Court of Tax Appeals shall constitute

a quorum, and the concurrence of two judges shall be
necessary to promulgate any decision thereof. (See Sec. 2,
Rep. Act 1125.)
IV. Jurisdiction of the Court of Tax Appeals.
As provided by law, the Court of Tax Appeals shall exercise

exclusive appellate jurisdiction to review by appeal:
844

A. Decisions of the Commissioner of Internal Revenue

in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other
matters arising under the National Internal
Revenue Code or other law or part of law
administered by the Bureau of Internal Revenue.
Where the decision sought to be reviewed is that of the

Commissioner of Internal Revenue regarding respondentÊs
liability for forest charges and surcharges, the mere fact
that the question of limited grant of tax exemption by the
Secretary of Finance should also be determined in the
action does not take the matter outside the jurisdiction of
the Court of Tax Appeals, for the latter issue is merely
incidental to the principal controversy; namely, the validity
of the assessment by the Commissioner of Internal
Revenue. (Collector of Internal Revenue vs. Lacson, 107
Phil. 945)
Likewise, where the determination of the question of

whether the deceased had really or fictitiously transferred
properties to her children, and whether or not the transfer
had been made in contemplation of death, is merely
incidental to the issue on the validity of the disputed
assessments, it follows that the Court of Tax Appeals·not
the Court of First Instance, not even as a regular court·is
competent to decide said question. (Republic vs. Uy), 1
SCRA 1262).
In another case, the taxpayer appealed from the
assessment of the Commissioner of Internal Revenue
without previously contesting the same. Thus, the appeal is
premature and the Court of Tax Appeals has no jurisdiction
to entertain the appeal, the reason being that, the
jurisdiction of the Tax Court is to review by appeal
decisions of the Commissioner of Internal Revenue on
disputed assessments. As such, it can take cognizance only
of such matters as are clearly within its jurisdiction.
(Commissioner of Internal Revenue vs. Villa and Court of
Tax Appeals, 22 SCRA 4.)
In another case, however, the correctness or
incorrectness of a tax assessment is for the Tax Court to de-
845
VOL. 14, JULY 31, 1965 845

termine and not for the regular courts of justice. Nor can a
case be placed beyond the jurisdiction of the Court simply
because certain consequential or moral damages are
demanded, for they are but incidental to the main case.
This can be passed upon by that Court if and when the
evidence so warrants. (Blaquera vs. Rodriguez, 103 Phil.
335).
B. Decisions of the Commissioner of Customs in cases

involving liability for customs duties, fees or other
money charges; seizure, detention or release of
property affected; fines, forfeitures or other
penalties imposed in relation thereto; or other
matters arising under the Customs Law or other
law or part of law administered by the Bureau of

Customs.
The basic issue in the case of Sanchez vs. Commissioner of

Customs (102 Phil. 37) is essentially one of fraud, namely,
whether or not appellant had wrongful or fraudulent intent
in declaring the three cases in question in the bill of lading
and shipping manifest, and in his affidavit and pro-forma
invoice, as „commercial samples.‰ The question of intent to
defraud being a question of fact, and the lower court having
made the finding that appellant had tried to import the
goods in question fraudulently under the guise of
„commercial samples‰ to avoid payment of duties, the
Supreme Court is bound by such finding, it being the
settled rule that in petitions to review decisions of the
Court of Tax Appeals, only questions of law may be raised
and may be passed upon by the Supreme Court. (Gutierrez
vs. Court of Tax Appeals and Collector of Internal Revenue
vs. Gutierrez, 101 Phil. 713).
C. Decisions of provincial or city Board of Assessment

Appeals in cases involving the assessment and
taxation of real property or other matters arising
under the Assessment Law, including rules and
regulations relative thereto. (Sec. 7, Rep. Act 1125.)
When a taxpayer questions an assessment and asks the

Commissioner to reconsider or cancel the same because he
believes he is not liable therefor, the assessment becomes
846

a disputed assessment. (See Morales vs. Collector, 17 SCRA

1018; Filipinas Investment & Finance Corporation vs.
Commissioner, 20 SCRA 50)
In one case, the Secretary of Finance is given by the
Charter of the City of Pasay the power to review the
decisions of the City Board of Tax Appeals, a provision not
found in other City Charters. It was held that this power of
the Secretary of Finance refers to administrative review of

the decisions of the City Board of Tax Appeals while the
power of the Court of Tax Appeals refers to judicial review
by appeal. If the result of the administrative review is not
acceptable to the taxpayer, he still retains the right to seek
judicial review by appeal to the Court of Tax Appeals.
(Enriquez vs. Secretary of Finance, 27 SCRA 1261.)
V. Who may appeal; nature of.
Any person, association, or corporation adversely affected

by a decision or ruling of the Commissioner of Internal
Revenue, the Commissioner of Customs or any provincial
or City Board of Assessment Appeals may file an appeal in
the Court of Tax Appeals within thirty days after the
receipt of such decision or ruling. (See Sec. 11, Rep. Act
1125.)
This period of appeal is jurisdictional and non-
extendible. In the case of Filipinas Investment & Finance
Corporation, the Supreme Court said: „The period to appeal
from a decision of the Commissioner of Internal Revenue to
the Tax Court is jurisdictional and non-extendible. A
taxpayer may not delay indefinitely a tax assessment by
reiterating his original defenses over and over again with
substantial variation.‰ (Filipinas Investment & Finance
Corporation vs. Commissioner, 20 SCRA 50.)
Appeal to the Court of Tax Appeals is a matter of right
on the part of any party who claims to have been
prejudiced. The right to appeal is granted by law and the
right does not depend upon the correctness of the order
appealed from. (See Chan Kian vs. Court of Tax Appeals,
105 Phil. 904.)
847
VOL. 14, JULY 31, 1965 847

VI. Effect of appeals.
Where the petition for review of the decision, order or

ruling of the Commissioner of Internal Revenue was filed
beyond the thirty-day period provided for in section 11 of

Rep. Act 1125, the petition cannot be entertained for the
decision, order or ruling of the Commissioner of Internal
Revenue had already become final, executory and
demandable. (See Republic vs. Del Rosario, 105 Phil, 277;
Uy Ham vs. Republic, L-13809, Oct. 20, 1959; North
Camarines Lumber Co., Inc. vs. Collector of Internal
Revenue, L-12353, Sept. 30, 1960.)
As regards disputed assessment, where a taxpayer
questions an assessment and asks the Commissioner to
reconsider or cancel the same because the taxpayer
believes he is not liable therefor, the assessment becomes a
„disputed assessment‰ that the Commissioner must decide,
and the taxpayer can appeal to the Court of Tax Appeals
only upon receipt of the decision of the Commissioner on
the disputed assessment in accordance with par. 1, section
7 of Republic Act 1125.
Hence, in one case, the Supreme Court held that the
period for appeal to the Court of Tax Appeals must be
computed from the time the petitioners received the
decisions of the respondent Collector of Internal Revenue
on the disputed assessment and not from the time they
received said assessment. (St. StephenÊs Association vs.
Collector of Internal Revenue, 104 Phil. 314.)
In another case, the assessment in question became a
„disputed assessment which the Collector must decide‰
when the taxpayer questions its validity and asked for its
reconsideration and withdrawal and that the taxpayer
could appeal to the Court of Tax Appeals „only upon receipt
of the decision of the Collector on the disputed assessment.‰
This means that the thirty-day period allowed the taxpayer
to take the appeal commenced to run only from the day he
received said decision. (Baguio Country Club, Corp. vs.
Collector, 105 Phil. 1269 [unrep.])
No appeal taken to the Court of Tax Appeals from the
848

decision of the Commissioner of Internal Revenue or the
Commissioner of Customs shall suspend the payment, levy,

distraint, and/or sale of any property of the taxpayer for the
satisfaction of his tax liability as provided in Section 11,
Rep. Act 1125. Provided that, in the opinion of the Court
the collection by the Bureau of Internal Revenue or the
Commissioner of Customs may jeopardize the interest of
the Government and/or the taxpayer, the Court at any
stage of the proceeding, may suspend the said collection
and require the taxpayer either to deposit the amount
claimed or to file a surety bond for not more than double
the amount with the court. (See Sec. 11, Rep. Act 1125)
An appeal to the Court of Tax Appeals from a decision of
the Commissioner of Internal Revenue shall not suspend
the payment or collection of the tax liability of the taxpayer
unless a motion to that effect shall have been presented to
the court and granted by it on the ground that such
collection will jeopardize the interest of the taxpayer.
(Pirovano vs. Commissioner of Internal Revenue, L-19865,
July 31, 1965.)
VII. How and when appeal may be made.
Any party adversely affected by any ruling, order or

decision of the Court of Tax Appeals may appeal therefrom
to the Supreme Court by filing with the said Court (CTA) a
notice of appeal and with the Supreme Court a petition for
review within thirty days from the date he receives notice
of the said ruling, order or decision. If within the aforesaid
period he fails to perfect his appeal, the said order, ruling
or decision shall become final and conclusive against him.
If no decision is rendered by the Court of Tax Appeals
within thirty days from the date a case is submitted for
decision, the party adversely affected by said ruling, order
or decision may file with the said Court a notice of his
intention to appeal to the Supreme Court, and if, within
thirty days from the filing of said notice of intention to
appeal, no decision has as yet been rendered by the Court,
the aggrieved party may file directly with the Supreme
Court an appeal from said ruling, order or decision,
notwithstanding the provisions stated in section 18.
849
VOL. 14, JULY 31, 1965 849

Republic Act 1125. If any ruling, order or decision of the

Court of Tax Appeals be adverse to the Government, the
Commissioner of Internal Revenue, the Commissioner of
Customs or the provincial or city Board of Assessment
Appeals concerned may likewise file an appeal therefrom to
the Supreme Court in the manner and within the same
period as above described for private parties. Tax cases
appealed to the Supreme Court shall have preference over
all other civil proceedings except habeas corpus, workmenÊs
compensation and election cases. (See Sec. 18, Rep. Act
1125.)
The ruling, order or decision of the Court of Tax Appeals
may be reviewed by the Supreme Court upon a writ of
certiorari subject to the provisions of the New Rules of
Court. In such a case, there is no need to file a notice of
appeal but it must appear that a motion for reconsideration
was filed and the same was denied. (See Sec. 19, Rep. Act
1125; see also Collector of Internal Revenue vs. Reyes, 100
Phil. 822.)
There are two ways of appealing to the Supreme Court:
first, by filing in the Court of Tax Appeals a notice of
appeal, and with the Supreme Court, a petition for review
within thirty days from the date he receives notice of said
ruling, order or decision adverse to him (Sec. 18, Rep. Act
1125); and second, by causing such ruling, order or decision
likewise reviewed by the Supreme Court upon writ of
certiorari in proper cases. (Sec. 19, id.) (Collector of
Internal Revenue vs. Aznar, L-10370, Jan. 31, 1958.)
VIII. Findings of fact by Court of Tax Appeals reviewable

by the Supreme Court.
The Supreme Court in passing upon petitions to review by

certiorari decisions or rulings of the Court of Tax Appeals
may review, revise, reverse, amend or modify not only the
legal issues involved therein but also the findings of fact
upon which said decision or ruling is based. (Collector of
Internal Revenue vs. Aznar, L-10370, Jan. 31, 1958; see
also Collector of Internal Revenue vs. Henderson, L-12954,
Feb. 28, 1961; Henderson vs. Collector of Internal Revenue,

L-13049, Feb. 28, 1961.)
850

Crisologo vs. Dural
But in the absence of grave abuse of discretion on the part;

of the Tax Court, its findings of facts may not be disturbed
by the Supreme Court (Collector vs. Pio Barretto & Sons, L-
11805, Aug. 31, 1960.)
IX. Other rulings.
The Court of Tax Appeals is a part of the judicial system of

the Philippines. (Ursal vs. Court of Tax Appeals, L-10123,
April 26, 1957). It may acquire jurisdiction over a petition
for injunction to stay proceedings to collect taxes as long as
the circumstances so warrant (Castro vs. Blaquera, 53 O.G.
2135); it has jurisdiction to declare the order of distraint
and levy by the Commissioner of Internal Revenue a
nullity (Collector vs. Zulueta, 53 O.G. 6532) ; but has no
jurisdiction over refunds of real property taxes or customs
duties. (City of Cabanatuan vs. Gatmaitan, L-19129, Feb.
28, 1963.)
The Court of Tax Appeals cannot issue writs of
prohibition and injunction independently of and apart from
an appealed case (Collector vs. Yuseco, L-12518, Oct. 28,
1961) ; cannot compel the taxpayer to pay a compromise
penalty (Collector vs. Bautista, L-12250 and L-12259, May
27, 1959); and cannot, motu proprio, acquire jurisdiction to
review tax cases (Collector vs. Court of Tax Appeals, L-
8811, Oct 31, 1957), but may raise the question of its
jurisdiction (see Ker & Co. vs. Court of Tax Appeals, L-
12396, Jan. 31, 1962.)·ATTY. PLARIDEL C. JOSE
···o0o···
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SUPREME COURT REPORTS ANNOTATED VOLUME 014 24/04/2019, 1)55 PM

832 SUPREME COURT REPORTS ANNOTATED

No. L-19865. July 31, 1965.

MARIA CARLA PIROVANO, etc., et al., petitioners-

Taxation; Gift tax; Donation out of gratitude for past services

VOL. 14, JULY 31, 1965 833

Pirovano vs. Commissioner of Internal Revenue

the 1% interest monthly and the 5% surcharge for delay in payment

APPEAL from a decision of the Court of Tax Appeals.

The facts are stated in the opinion of the Court.

REYES, J.B.L., J.:

This case is a sequel to the case of Pirovano vs. De la Rama

834 SUPREME COURT REPORTS ANNOTATED

on the insurance policies taken on the life of said Enrico

VOL. 14, JULY 31, 1965 835

Pirovano vs. Commissioner of Internal Revenue

pany, through its Board of Directors, took official notice of

„Wherefore, the decision appealed from should be modified as

after the defendant corporation shall have fully redeemed the

836 SUPREME COURT REPORTS ANNOTATED

to the National Development Company under the terms and

The above decision became final and executory. In

were tried jointly and terminated.

VOL. 14, JULY 31, 1965 837

position of the surcharge of 25% is not proper; (4) the surcharge of

Petitioners-appellants herein filed a motion to reconsider

that the lower courtÊs finding was erroneous in seemingly

838 SUPREME COURT REPORTS ANNOTATED

ican law was it considered that past services, rendered

„When a person gives to another a thing x x x on account of the

There is nothing on record to show that when the late

further compensation over and in addition to his regular

VOL. 14, JULY 31, 1965 839

right transferred, if any, which is in excess of the value of

„Where property is transferred for less than an adequate and full

The flaw in this argument lies in the fact that, as copied

„anything that is bargained for by the promisor and given

840 SUPREME COURT REPORTS ANNOTATED

As stated by Chief Justice Griffith of the Supreme Court of

„Love and affection are not considerations of value·thev are not

obligation to perform it.‰

It is of course perfectly possible that a donation or gift

VOL. 14, JULY 31, 1965 841

It is well to note, and it is not disputed, that

„(1) Payment not extended.·Where a deficiency, or any

„(c) Surcharge.·If any amount of the taxes included in

The failure to file a return was found by the lower court to

the court and granted by it on the ground

842 SUPREME COURT REPORTS ANNOTATED

that such collection will jeopardize the interest of the

Bengzon, C.J., Bautista Angelo, Paredes, Dizon,

VOL. 14, JULY 31, 1965 843

The Court of Tax Appeals is composed of a Presiding Judge

II. Salary; tenure of office.

The Presiding Judge shall receive a compensation of

office during good behavior until they reach the age of

III. How quorum constituted.

Any two judges of the Court of Tax Appeals shall constitute

IV. Jurisdiction of the Court of Tax Appeals.

As provided by law, the Court of Tax Appeals shall exercise

844 SUPREME COURT REPORTS ANNOTATED

A. Decisions of the Commissioner of Internal Revenue

Where the decision sought to be reviewed is that of the