CTA Case No. 934 (Decision)

REPUBLIC �'OF THE PHI L' IPPINES COURT OF TAX APPEALS ~~RIANO CU UNJI~ NG , ALFONSO CU UNJIENG, Bt: 'ITO CU UNJir.:NG , � SOR ESPERANZA CU UNJ!t:NG , JOSEFA C. RIVERA , CARIDAD C. PAPA, LEONOR C. ANDREWS, VICTORIA FE CU UNJIENG , MAC:DALENA C . BARRETO, and ELISA C. BAYOT , Petitioners , - versus - C. T. A. CASE NO. 934 ME LECIO R. DOMINGO, in his capacity as Commissioner of Internal Revenue, Respondent . X .. - .. .. - .. .. - - .x DECI S I 0 N This is an appeal from the decision of respondent � Commissioner of Internal Reve nue denying petitioners ' request for the waiver of the ~% surcharge imposed on the deficiency estate and inheritance taxes in the amounts of ~0 ,909.30 and P53 ,578.54, respectively. Petitioners are the heirs of the late Dominga Ayala Vda . de Cu Unjieng , who died on December 2, 1957. On the basis of the estate and inheritance tax returns filed on behalf of the estate of their deceased prede- cessor, petitioners, on May 19, 1958, paid estate and inheritance taxes in the respective amo unts of P63,141.27 and P25,984 . 89 , and, in addition, on Oct ober 13 of the same year, paid th e additional sums of P25.18 and Pl3 .2l for estate and inheritance taxes, respectively . After investigation of petitioners ' liability for I

C.T.A. CASE NO. 934 Quezon City - 2. - estate and inheritance taxes, respondent, on March 24, 1959, determined a deficiency against petitioners in th~ amounts of P84 ,145.67 and f54 ,918. 00 , or a total of ~ 139,063.67, for estate and inheritance taxes, respec- tively, including interest, payable on or before April 23, 1959 (Exhi. 1, 1-A, 1-B; B, B-1, B-2, pp. 143-145, BIR rec. ). On March 31, 1959, petitioners requested that they be allowed to pay the deficiency estate and inheritance taxes by installment for a period of five (5) years (Exh. C, p. 147, BIR rec.), which request was denied. However, respondent agreed to allow petitioners to pay the deficiency estate and inheritance taxes in 24 equal monthly installments beginning April 15, 1959 up to March 15, 1961 (Exh. 2, pp. 159-161, BIR rec. ). In computing the deficiency estate and inheritance taxes, 5% surcharge for late paymer.t and ~% monthly interest were added. The deficiency taxes, surcharge and interest were computed by respondent as follows : Estate tax ���������� ~ 144,075.75 5% surcharge for late payment on ~80 ,909.30 � � � � � � � 4,045.47 ~% mo . int. on ~80 , 909 .30 from 9/3/58 to 3/15/61 � � � � � 12,945.49 Compromise for late payment � 50 , 00 Total ������������ P 161,116,71 Less amount paid � � � � � � � 63,166.45 Balance sti l l due ������������ P 97,950.26 Inheritance tax ������� P 79,567.64 5% surc harge on P53 ,578.54 for late payment � � � � � � � 2,678.93 ~% mo. int. on P53 , 578 ,54 from 12/3/58 to 3/15/61 � � � � 7,768.93 Compromise for late payment. � 50,00 J7

C.T.A. CASE NO. 934 Quezon City - 3- Total ����� � ������ P . 90,074.45 Less amount paid � � � � � 25.998.10 Balance still due � � � � � � � � � � � ~ 64,076.35 TOTAL ESTATE & INHERITANCE TAXES DUE. \ P 162,026.61 (Exhs. E & 2, pp. 159, 161, BIR rec. J On Apri l 28, 1959, pet i tioners protested the impo- sition of the 5% surcharge _amounting to P6 ,724.40 on the ground that it is not in order and requested that it be deleted from the computation lExh. G, pp. 165-A to 165-C, BIR rec.), which protest was denied by respond- ent on September 30, 1959 (Exh. H, pp. 177-178, BIR rec.) for the reason that the law imposing 5% surcha rge - for late payment is mandatory. On November 28, 1959 {Exh. I, pp. 183-184, BIR rec.), petitioners again requested reconsideration which was denied on July 21, 1960 {Exh. J, pp. 197-198, BIR rec. ). Meantime, peti-tioners made various payments in the total amount of Pl29 ,180 . 00 (Exhs. A, A-1 to A-11, pp. 66-67, BIR rec. ). The request for waiver of the 5% surcharge having been denied as aforesaid, which denial was received by petitioners on August 18, 1960 , they interposed this appeal on August 22, 1960, or within the 30-day period to appeal provided in Section 11 of Republic Act No . 1125. The issues presented for our determination are as follows: (1) Whether or not petitioners are liable for the 5% surcharge on the amounts of P80,909 .30 and P53,578 .54; and (2) Whether or not petitioners are liable for 1% monthly interest on the unpaid balance of P32,846.61.

C.T.A . CASE NO. 934 Quezon City ' -4- Anent the first issue, it is contended by petitioners that having been granted extension of time to pay the �. deficiency estate and inheritance tax liability under Section 95 (b) of the Tax Code, they are not subject to 5% surcharge on the respective amounts of ?80, 909. 30 and P53 , 578 . 54. On the other hand , respondent contends otherwise, insisting that the 5% surcharge should be imposed because petitioners had failed to pay the de - ficiency taxes on or before the extended period of pay- ment , or on March 15, 1961 . We agree with petitioners that they are not liable for 5% surcharge . Mere failure to pay the tax on March 15, 1961 .does not justify the imposition of the 5% surcharge . Under Section 101 (c) of the Revenue Code, in order that the 5% surcharge may be imposed , there must be a notice and demand for payment of the deficiency estate and inheritance taxes . The surcharge of 5% accrues only if such taxes are not ~aid within 30 days after such notice and demand . There being no proof that such notice and demand was issued, we find no justification for the imposition and collection of the 596 surc harge on the amoun~ of P80 , 909 . 30 and Y53,578 . 54. Neither may the said surcharge be imposed upon petitioners ' failur e to pay th~ deficiency tax e s within 30 days after the assessment made on l�'iarch 24 , 1959 , because respondent granted petitioners an extens i on of time to pay sa id taxes until March 15, 1961, which is allowed under Section 116(b) of th e Revenue Code . I

C.T.A. CASE NO . 934 Quezon City - 5- With respect to the second issue, petitioners contend that the charging of ~% monthly interest on the original deficiency estate and inheritance taxes, despite subsequent monthly payments thereon, is illegal. Peti tioners assert that the interest should be computed on the basis of the balances remaining unpaid after the monthly installment payments, and not on the whole bal- ance of the deficiency taxes. Respondent, however, claims that monthly interest at �the rate of ~ per month is imposable on thP whole unpaid deficiency es- tate and inheritance taxes in the amounts of '80,909.- 30 and P53 ,578.54 from September 3, 1958 to March 15, 1961, and from December 3, 1958 to March 15, 1961, re- spectively, and 1% on the remaining unpaid amount of P32 ,846.61 from April 24, 1959 to the date of payment . The imposition of 6.% interest per annum (or~% monthly interest) on the original unpaid deficiency estate and inheritance taxes from the dates the eaid taxes were respectively due on September 3, 1958 and December 3, 1958 to the date of the extended payment on March 15, �1961 is not correct. The 6% interest per annum or ~% monthly interest should,. under Sections 100 and 99 (b) of the Revenue Code , be imposed on the remaining unpaid balance of the deficiency estate and inheritance taxes after ea ch monthly installment pay- ment. In other words, the ~ monthly interest should be computed on the unpaid balances of the deficiency estate and inheritance taxes remaining after the monthly

C.T.A. CASE NO. 934 Quezon City - 6- installment payments which were made from April 15, 1959 through October 18, 1960 (Fxhs. A, A-1 t o A-11). After applying the installments paid, there remains an unpaid balance of ~15,619. 0 1, of which ~ ,396.40 is allocable to the deficiency estate tax and P6, 222.61 to the deficiency inheritance tax, as of March 15, 1961 when the last installment was due {Sec. 10l(b)(2) of the Tax Code), computed as follows: Estate Tax , � � � , , � � �� Pl44 ,075.75 Less amount paid � � � � � 63,166.45 Balance still due � � � � �� ~% mo. int. on inheritance t�ax� p 80,909.30 from 9/3/58 to 4/13/59, �� p 21961.28 p 83,870.58 Inheritance Tax �� , �� I I p 79,576,64 Less amount paid � , � � � 25,998.10 Balance still due � � � � �� ,. 53,578.54 ~% mo. int. on inheritance t�ax� from 12/3/58 to 4/13/59 �� p 1.157,30 54,735,84 ~138,606,42 1, Payment o~ 4/13/59, 0 � � � � � � � � � 5.795.00 �132,811.42 ~%mo . int. from 4/14/59 to 5/15/59 � � 707,88 P133 ,519.30 � 2, Payment on 5/15/59 � � � � � � � �� :p 17,385,00 �116 ,134.30 !~% mo. int. from 5/16/59 to 8/10/59 � � 11660,72 Pll7,795, 02 3, Payment on 8/10/59 � �� � � I ���� p 20, 000, 00 ' p 97,795. 02 ' ~%mo . int. from 8/11/59 to 9/2/59 . � � 371,62 '98,166.64 41 Payment on 9/2/59 � � � � � � � � � � � p 10,000,00 ? 88,166.64 ~% mo. int. from 9/3/59 to 9/25/59 . � � 335, 03 , - 8 8 , 50 1 , 6 7 5, Payment on 9/25/59. I � � ������� ~ 5,000, 00 p 83,501.67 Y2-;5�& mo � int. from 9/26/59 to 10/13/59, � 250 , 5 0 f$ ~ 83,752.17 6. Payment on 10/13/59 � � � � � � � � � � p 5,000, 00 p 78,752.17 ~% mo. int. from 10/14/59 to 11/17/59 , 445,74 ? 79,197,91

C. T. A. CASE NO. 934 Quezon City - 7- Balance carried forward � � � � � 0 � p 79' 197.91 7. Payment on 11/17/59 � � � � � � � � � P 10~ 000 . 00 ~ '69,197.91 ~ mo. int. from 11/18/59 to 12/1/59. 159.15 p 69,357.06 8. Payment on 12/1/59� � � � � � � � � � p 10 . 000, 00 p 59,357. 06 ~% mo. i~t. from 12/2159 to 12/22/59. 20 7 , 7 5 p 59,564.81 9. Payment on 12/22/59 � � � � � � � � � p 10,000. 00 ~% mo. int. from 12/23/59 to 2/16/60. p 49,564.81 455.99 p 50,020.80 10. Payment on 2/16/60. � � � � � � � � � p 10 . 000 . 00 p 40,020.80 ~% mo. int. from 2/17/60 to 10/5/60 i p 1.528.80 p 41,549.60 11. Payment on 10/5/60. � � � � � � � � � ~% mo. int. from 10/6/60 to 10/18/60, p 31,619.01 . ... 12. Payment on 10/18/60 � � � � � � � � � 16,000,00 Balance still due ��� � � � � � � p 15,619.01 WHEREFORE, petitioners are h~reby ordered to pay the respondent Commissioner of Internal Revenue, the amounts of P9,396.40 and P6,222.61 as deficiency estate and inheritance taxes, plus interest at 1% per month from September 3, 1958 and December 3, 1958, respectively, to the date of payment. Interest at ~ a month, having been imposed on these deficiency amounts of P9,396.40 and ~6,222.61 from the dates they were originally due to October 18, 1960 as per above computation, additional interest at the rate of ~% per month on the said I

(;. T. A. CASE NO. 934 Quezon City -8- amounts from September 3, 1958 and December 3, 1958, respectively, to October 18, 1960 shall be computed, plus 1% interest per month thereon from October 19, 1960 to the date of payment. If the said amounts of P9,396.40 and P6,222.61, plus interests, are not paid within 30 days from and after this decision becomes final and executory, petitioner shall also pay 5% sur- charge thereon in accordance with Sec. lOl(c) of the Tax Code. Without special pronouncement as to costs. SO ORDERED. Quezon City, April 30, 1966. ROMAN M. UMALI Acting Presiding Judge I CONCUR: I