CTA Case No. 3374 (Decision)

~�PUBLIC OF THE PHILIPP INES ,:: 1URT OF TAX APPEALS � QUEZON CITY I LDEFONSO 0. ELEGADO, as C. T . A. CASE NO . 3374 Ancillary Administrator of the Testate Estate of the l ate Warren Taylor Graham , Petitioner , - versus - COMMI SSIONER OF INTERNAL REVENUE , Respondent . X- - - - - - - - - - - - X DE C I S I 0 N This refe�rs to re�sponde:nt ' s. "Motion To Dismiss" dated Apr il 12 , 1982 and petitioner 9 ~ "Motion For Leave To Fi l e Supplemental Petition " filed on May 11 , 1982 . Respondent ' s motion to dismiss is anchored on the contention that the subject of petit i oner's. peti - � tion for review in this case, which is the lett~r - ass:essmen t dated July 3 1 1980 re,quiring petitioner to pay an estate tax i n the amoun t of P72,948.87, i ncl usive of penalties, has been cancelled by res- pendent in his letter of March 31 , 1982 ( i.e ., during the pendency of this case) '� and thus the said motion has "become moot and academic" . 97

DEC I SION - CTA CASE NO . 3374 - 2- The facts as may be gathered from t he petiti on f or r ev i ew , the annexes thereof , as wel l a s the res- pective written oppositi ons of the parties, reveal t he fol l owing.: On March 1 4 , 1976 , Warren Taylo r Graham , an American citizen and former resident of the Philippines , died in Oregon , u . s.A ., l eaving certain properties in the Ph i lippines consisting of shares of stocks in some local cor porations . On August 17 , 1978 , the administrator of Graham's estate i n the Philippines , petitioner I ldefonso Elegado, inst i tuted Spe:cial Pro.ceedings No . 8869 in the Court of First I nstance of Rizal (Branch IV , Pasig , Metro Manila), for the probate of the will of the decedent . On June 4 , 1 980 , petitioner , in his capacity as such administrator , filed with the Bureau of Inter nal Revenue an estate ta~ return together with an inven - tory of the d e ceased'~ properties and a statement of aCC'OUn t . On the basis of said return , r espondent Comm is- . sioner of Internal Revenue , in a letter dated July 3, 1980 , assessed petitione r the sum of ~72 , 948 . 87 as deficiency estate tax and penalties . In a l etter dated August 12 ,. 1980, and filed with the office of the Commissioner of I~ternal Revenue on 98

DECISION - CTA CAS E NO. 3374 - 3- August 1 3 , 1980 , petitioner protested the said assessment and prayed f o r the abatement of the deficiency e state tax o f ~72,948 . 87 a ssessed against him. On August 24, 1981 , respondent Commiss i oner filed a "Mo t ion f or Allowance of Claim and For an Order of Payment" (Annex "D " Pe tition , p. 21, CTA rec.) _t ogether wi th a "Pr oo f of Cl a i m" (Annex "D-1" Pet iti o n, pp. 23- 26, CTA r e c. ) in Special Pr oceedi ngs No. 886 9 b e f ore the Court of ' First Instance of Rizal , copies of wh ich motion a nd the proof of claim were received by peti tioner's counsel on August 28 , 1981, seeking to c ollec t aga i nst the estate of the deceased an estate t ax in t he a moun t of ~96,509 . 35 or a to ta l of ~105 ,4 09 . 95 , i nclus i ve of surcharge and i nterests f or late payment , t hus : COMES NOW the claimant Actin g Commis- sioner o f I nternal Revenue, through the undersigned c ounsel, and to this Honorable Cou rt respectfu lly prays tha t the claim of the Governmen t of the Republic of the Philippines against the Estate of the deceased Warren Tay l o r Graham in the a moun t o f ~96 , 50 9. 3 5 as e state tax as shown in the a ttached Proof of Claim form- ing part hereof and marked as Annex "A", be allowed and that an Order be i ssued r equi ring the Ancillary Administrator c/o Agrava, Vel arde, Lucero and Puno Law Office, Merchan ts Bldg. , Makati, Metro Manila , to pay to the Commissioner o f Internal Re- venue the amount of ~105,409 . 95 as esta~e tax inclu sive of 5% surcharge f or late paymen t and inte re s t from Apri l 1 5, 1 978 to October 15, 1 9 78�pl us in teres t at 1 4% to O ctobe~ 15, 1978 pl us inter es t at 1 4% 99

DEC IS ION - CTA CASE NO. 3374 - 4: - per ann um from October 16 , 1978 to J uly 31 , 1980 and at 20% per annum from Augus t 1, 1980 up to April 1 5, 1981, pursuant to Section 113(b) (1 ) and (c) of the 1977 Tax Code as amended by P.D. No . 1 705 . The "Proof of Claim" aforesaid (Annex D-1, petition for revie w) .alleges, among others , that: XXX XXX XXX 2 . That upon investigation, it was ascertained tha t the Estate of the l ate Warren Taylor Graham is i ndebted to the Republic of t he Philipp ines in the amoun t of � ~96 ,509.35 as estate tax inclusive of i nte re sts and de~inquency penalties due on the transmission thereof , details of which are shown as f ollows : Estate t ax - - - - - - - - - - ~6 7,17 4 . 33 25% ad valorem penalty - .- - - 16, 793.58 14% p.a. interest on P67,174.33 from 12/14/ 76 to 4/14/78 12' 541. 44 TOTAL AMOUNT DUE - - - - - ~96,509.35 3. That in a le tte r dated February 9 , 1978 together with an assessment notice of even date, claimant assessed and demanded from the Estate of Warren Taylor Graham the payment of the above tax l iability . A xerox c opy of said demand letter to- gether with an assessment notice i s here- by attached and marked as Annexes "A" and "A-~" and made as integral parts hereof ; 4 . That sa id tax liability was protested in a l etter dated March 7 , 1978 thru counsels , Bump, Young and Walker of 1930 Council St ., Forest Grove, Oregon, 97116, u . s.A . A xerox copy of said protest letter is hereby attached and marked as Annex "B " and made as an i ntegral part hereof ; s. That afte r due consideration of the grounds of said protest , the same 100

DECISION - CTA CASE NO. 3374 - 5- was finall y denied by the claimant i n a letter dated July 7 , 1978 which rei te- rated the demand f or the payment of the above tax liability plus 5% su rchar ge and delinquency i nterest . A xerox copy of said denial letter i s hereto attached and marked as Annex "C" and made as an integral part hereof; 6. That in a letter dated January 29 , 1980, the Estate of Warren Taylo r Graham t hru the aforesaid foreign law firm in- formed claimant that they have paid said tax liability thru the Agrava , Velarde , Lucero and Puno, Philippine l aw f irm of 313 Buendia Avenue Ext., Makati, Metro Manila , that in itiated the instant ancil- lary proceedings; however , to date, herein claimant has no t as yet received any pay- ment for the satisfaction of the aforesaid tax liability . A xerox copy of said letter is hereto attached as Annex "D" and made as an integral part hereof ; 7. That notwithstanding repeated demands the indebtedness mentioned in para- graph 2 hereof has not been satisfied in whole and in part and as against the claim- ant or the Republic of the Philippin~s , the debtor has neither set-off nor counterclaim of any kind whatsoever ; that the said in- debtedness constitutes a superior lien in favor of the Government of the Republic of the Philippines in accordance with Section 301 of the 1977 Tax Code , as amended ; 8. That the aforesaid c laim is not barred by the statute of limitations ; 9. That the t axdaim involved in this case has no t been contested before the Court of Tax Appeals pursuant to the provisions of Section 11 of REpublic Act No. 1125 and, therefore, the same has already become final, executory and demandable (Republic vs. Juana B . Vda . de del Rosario, et al ., G.R . No . L-10460, March 11, � 1957 , 57 O.G. L317 p . 5543~ Republic vs . Antonio Albert, G.R. No. L-~2 996 , Decision dated Decembe�r 28, 1961, 3 SCRA 717 ; Republic vs. the �Manila Port Service, G.R . No. L-18208 , November 27 , 1964, 12 SCRA 101 )

DECISION - CTA CASE NO . 3374 - 6- 384; Republic vs . Lim Tian Tong Sons and Co ., Inc ., G . R ~ No . L-21731 , March 21, 1966 , 16 SCRA 58 4:) ;_ 10 . That this Honorable Court in the exercise of i ts administrative: contro l over the administrator of the e:state�, may direct the payment of the aforesaid tax upon show- � ing that the tax has bee�n assesse�d agains t the estate (Pineda vs. Court of First I ns- t ance of Tayabas, 52 Phil . 803-805; Melecio Domingo, etc . vs . Hon . Judge S . C. Moscoso , e t c. , et al. , G. R. No . L-1 4674, January 30 , 1960) ;_ XXX XX: X XXX On September 15 , 1 981 , treating respondent ' s "Motion for Allowance of Claim and for an Order to Pay Taxes" as. a decision denying his protest of August 12 , 1980 , petitioner f iled i ts petition fo r rev i ew in this Court . On Apri l 21 , 1982 , after se�rvice of summons to re - spondent and several extensions granted to him for the filing of his answe:r , respondent filed a motion to d~s miss on the ground tha t "the assessment i ssued against the Estate of the late Warren Taylor Graham dated July 3, 1980 in the amount of P72,948 . 87 as e state tax, and sub- je�ct of t hi s appea l, has been cance:lled in a l etter dated March 31 , 1982" and thus " the herein petition has become moot and acade:mic ." Sa�id let te�r o f Marc:h 31 , 198 2 which was attached to r espondent ' s motion t o dismiss as Annex "A" 102

DECISION - CTA CA~E NO . 3374 - 7- reads as follows: March 31 , 1982 Estate of WARREN T . GRAHAM cjo Mr. ILDEFONSO Oe ELEGADO Ancillary Administration Phi lex Building Cor . Brixton & Fairlane Sts. Pasig, Metro Manila sir : This is with regar d to the estate of the late WARREN TAYLOR GRAHAM , who died a resi dent of Oregon, u. s .A. on March 1 4 , 1976. It appears t hat two (2) letters of demand were i ssued by this Bureau . One is for the amount of P96,5>09.35 based on the first return filed, and the other in the amount of P72,948 . 87 , based on t he second re~ t ur n filed . It appears that the first assessment of P96,509.35 2as issued on February 9, 1978 on the basis of the est ate tax retu r n filed on September 16, 1976. The said assessment was , however, prot ested in a l etter dated March 7, 1978 but was denied on July 7, 1978 . Since no appea l was made within t he regulato~y period , the same has become final. In view the�re�of 1 it is requested th at you settle the afore~ said assessment of P96 , 509 . 35 wi thin fifteen (15) days upon receipt hereof to the Receivable Accounts Division , this Bureau, BIR National Office Building , Diliman , Quezon City. The assessment for P72 , 949 . 57 dated July 3, 1980 , referred to above is hereby cancelled . Very truly yours, RUBEN B . ANCHETA Acti ng Commissioner On May 11 , 1982, petitioner f~led a "Motion f or Leave to File Supplemental Petition" in order, allegedly, 103

DECISION - CTA CASE NO . 3374 - 8- to set forth "certain occurences and events which took place afte r the Main Petition was filed on Sep tember 15 , 1981 ." The supplemental petition attached to said motion and sought to be admitted alleges , among others, that after his main petition was f iled in this Court , peti- tioner received on April 13, 1982 the letter of res- pondent Commissioner of March 31 , 1982 and that said letter can be treated as an order or decision denying the protest of August 1 3, 1980 (Annex "C" Petition ) .and same is appealable to this Court within a period of t hir t y days or up to May 13, 1982 . After hearing of resp ondent ' ~ "Motion to Dismiss" and petitioner ' s "Motion for Leave to File Supplemental Petition", respondent f i led his opposition to peti- tioner's motion on July 9, 1982, and petiti oner simi- larly filed , on July 27, 1982 , his opposition to motion to dismiss an d his reply to respondent ' ~ opposition, contending that the subject of his appeal is not only the assessme�nt of July 3 , 1 98 0 f or !172,948 . 8 7 but also the motion for allowance of c l aim seeking to collect against the e state an estate tax of !196 , 509 . 35 or the total of ~105,409.95 , i nclusive of surcharges and in- terests , and thus his petition for review cannot be dismisse�d . We find merit in respondent 's motion to dismiss . 104

DECISION - CTA CASE NO . 3374 - 9- The facts indubitably show that the motion for allowance of c l aim and proof of claim (Annexes D and D-1, peti- ti o n for re:view ) '� filed by respondent with the Court of First Instance i n Special Proceedings No . 8869 on August 24, 1981, solely refers to a previous assess- ment dated February 9 , 1978 , requiring the estate of the deceased to pay a deficiency estate tax of ~96,509.35, inclus iVe of interest and surcharge, and which assess- ment has already become final and executory (par . 9 , Proof of Claim, Annex D-1, petition )~ Said motion for allowance of claim does not at all make any reference, either expressly or impliedly , to the letter-assessment of July 3 , 1980 wh i ch equired the estate , through peti- t ioner , to pay a deficiency estate tax of ~72,948 . 87 based on t he return filed by him with the Bureau of Internal Revenue on June 4 , 1980 . Consequently , such action (motion ) of respondent , explicitly involving a different subject matter (assessment)~ cannot, by any l ogical conclusion or inference, be considered as a den i al of petitioner ' s protest of August 12, 1980 against the assessment of July 3, 1 980 , and eventually as an appealable decision therefrom. Needless to say, since there is no decision yet on the wr i tten protest or reques~ for reconsideration of petit i oner dated August 12, 1 980 , his petition for 105

DECISION - CTA CASE NO. 3374 - 10 - review to this Court questioning the legality of the assessme'nt of July 3p 1 980 for deficiency estate tax and penalty in the sum of ~72 , 948.87 , would still be premature' and cannot there�fore be taken cognizance by the Court for lack of jurisdiction . The law requires that for this Court to acquire jurisdiction over the appeal of the taxpayer , there must be a decision of the Commiss~one r o f Internal Revenue on a disputed assess- ment o r a decision on the protest against the assessment. (See Sec . 7(1) ~Rep . Act No. 1125; Comm . of Int. Rev . vs . Villa, G.R. No . L-23988, Jan. 2 , 19 68 ; 22 SCRA 307 .) In any even t , it . is clear that the subject matt er of petitioner 's appeal in this case, the assessment of J uly 3, 1980, which requires him, as the auxillary administr ator of the estate of the deceased Warren Taylor Graham , to pay an estate tax of ~72 ,94 8 . 87 inclu- sive of penalty, has been cancelled by the Commissioner of Internal Revenue i n his letter dated March 31 , 198~. Therefor e, as correctly obse� rve~d by respondent , with t he canc�ellation of the assessment of July 3, 1980, petitioner ' s petition for review has become moot and academic . Indeed, petitioner ' s pretension in its opposition and reply that its petition fo r .review cannot be dis- missed because the subject of appe~l is not only the 106

- ._.... . DECISION - CTA CASE NO. 3374 - 11 - assessment o f July 3, 1980 for ~72,948 .87 estate tax but also the motion for allowanc:e of claim seeking to collect the amount of ~96 ,5 09.35 , is untenable . The petit ion for revi ew , as careful ly examined, does not specify nor indicate that the subject matters therein are the assessment of July 3, 1980 in the amount of ~72,948.87 and the assessment of February 9 , 1978 in sum of ~96,~09 . 35. What i s apparent, as we intimated heretofore, is that the appeal refers only to the assessment of July 3, 1980 . Furthermore, it is evident from the "Proof Of Claim'', supra , that the assessment of February 9, 1978, subject matter of the motion for allowance ot claim , has already become final , executory and unappealable, because after the l etter-protest thereon dated March 7 , 1978 , filed by the American counsel of the estate of the deceased, was denied by respondent Commissioner of Internal Revenue in his letter dated July 7, 1978, and despite repeated demand~ fo r payment of t he assessed estate tax and increments of ~96,509 . 35, no payment has ever been made no r an appeal from said letter of denial has been instituted in this Court. ACCORDINGLY , the petition for review o f petitioner is hereby dismissed for lack of j uri sdiction and cause of action, and petitioner's motion for leave to file 101

DECISION - CTA CASE NO. 3374 - 12 - supplemental plead ing is denied for lack of mer it and val i d basis . SO ORDERED. Quezon City, Metro Manila, Apri l 25, 1984 . WE CONCUR: 108