CTA Case No. 2326 (Decision)

'\EPUBLIC OJ' THE PHILIPPINE' COURT �oF TAX APPE.ALI QUEZON CITY TAX SERVICE OF THE PHIL .~, INC. Assignee and representative of the ESTATE OF THE LATE GEN. COURTl~ WHITNEY, Petitioner, - versus - C. T.A. CASE NO. 2326 THE COMMISSIONER OF Dfl'ERNAL Rl!."'VENUE' Respondent . X-- ------- - ---X D E CISION On Novemb r 4, 19691 the Estate of the late Gen. Courtne.y Whitney (here~nafter to be known as the Estate) filed with responden�t a claim for refund of the sum of �71293 . 471 representing excess estate tax. On July 7, 1971, respondent advised counsel ~or the Estateethat the claim for refund had been approved, but final action had � to be withheld because of an alleged outstanding liability of said Estate for deficiency income tax in the amount of ~1241946 . 00. In the meantime, the claim of the Estate in the sum of �11293 . 47 was assigned to herein petitioner, and upon failure of respondent to grant the refund, peti- tioner has filed the instant petition for review to compel respondent to make the refund. In answer to the petition for review, respondent ad- mi.ts the right of the Estate to t he refund of the amount in question, but alleges: 1 4. That this Honorable has no jurisdic- tion to entertain the instant petition for review there being nothing more left to be reviewed b,y this Honorable Court for the res- pondent ha.S , as admitted by the petitioner, al- ready resolved and approved the petitioner ' s claim for refund i n the amount of �71293.47;

DECISION - C.T .A. CASE NO . -2- "5. That the filing by the petitioner of the instant petition for revievt is un- warranted for it is not adversely affected by the respondent ' s decision as required by Section 11 of Republic Act No. 1125 � �� 1l6. That the decision of the respond- ent in favor of the petitioner cannot as yet be. L~plemented due to ' an outstanding tax liability of the late Gen. Courtney Wb.itney in the tota;L amount of ~124,946.00 as deficiency income tax for the. year 1955; n7 . That the aforesaid deficiency in- come tax for 1955 was ascertained after the late Gen. Courtney Whitney and his wife, Evelyn J . Whitney, filed their income tax return for 1955 wh.e:ri the amounts of ~10, 000- 00 and Pl66, 933 . 58 considered ~J the tax- peyer worthless shares of the Lyric Mlsic House, Inc~ and bad debts respectively, were disallowed as deductions; ug. That the said deficiency income tax for 1955 is different and is in addition to the income tax allegedly paid by the spou- ses surnamed Whitneys mentioned in paragraph 6 subparagraph b, of the Petition for l~view; "9. That accordingly, respondent issued on November 17, 1956, a deficiency income tax assessment netice No � .&1~14-56/55 in the sum of 1=124, 946. 00 and a corresponding demand letter dated November 10, 1956 which deficiency tax liability could not be collected in spite of diligent efforts exerteq by the respondent because of the positive acts of the taxpayers and their representatives in the Philippines by leaving the Philippines without first settling their tax liabilities �or by gross misrepresenta- tion that said taxpayers left no property in the Fhilippines to answer to the said tax liability; "10. That granting, without admitting, that the right to collect the aforesaid tax liability due from the estate of the late Gen. Courtney Whitney has prescribed, said incident is not due to the negligence or fault of the respondent but due to the !o~lowing reasons: (a) The taxpayer's representa- tives in the Philippines absconded all his properties or holdings in the Philippines thru misrepresentation; ~�

DECISION- C.T. A. CASE No. 2736 ' -3- (b) The respondent was never noti- fied of the settlement proceedings involving the estate of late Gen. Courtney Whitney, thus depriving the respondent the opportunity to file a proof of claim in said pro- ceedings, if any; nu. That a:ny disposition or distribution of the estate of the late Gen. Courtney Whit- ney located 1irithin the Philippine; is void 1ab initio 1 being in patent violation of Sec- tions 103 and 104 of the Tax Code an'd Sec- tion 1, Rule 90 of the Rules of Court; n12 . That justice and equity demand that the government be allowed to recoup or set- off the aforesaid tax liability against whatever refund or tax credit the estate of the late Gen. Courtney Whitney has against the government; �� �" (Pp. 1-3, Answer of Respondent.) The issue in regard to the jurisdiction of this Court raised by respondent is without merit. The refusal of respondent to make an actual refund, although adlnitting the right of the Estate to the refund, constitutes a suf- ficient ground for this appeal. The fact that respondent has not denied. the right of the Estate to the refund does not affect the jurisdiction of this Court since respondent has refused to make the refund on the ground of a supposed pending _tax liability of the Estate. In these circumannces, this Court is called upon to decide whether or not to com- pel respondent to refund the sum of P7, 293 . 47 to herein petitioner notwithstanding the alleged outstanding tax lia- bility of the istate. Section 309 of the National Internal Revenue Code authorizes the Commissioner of Internal Revenue to refund national internal revenue taxes erroneously or illegally collected or to allow a tax credit therefor in favor of

DECISION - C.T.A. CASE NO. 2326 -4- the taxpayer. In this case, the Commissioner has alleged- ly authorized the application of the sum of �7,293.47 as partial p~e~t of the alleged pending income tax liability of the Estate, by way of tax credit, in accordance with Section 309 of the Revenue Code . However , petitioner ques- � tions the authority of respondent to apply the sum of P7;293.47 .to the alleged deficiency income tax due from the Estate on the ground that the right of the Government to assess or collect the said deficiency income tax has already prescribed. Since .no appeal has been filed vlith this Court involv- ing the alleged /deficiency income tax assessment against the Bstate for the sum of ~124,946. 00, the said assessment \ cannot be collaterally attacked in this proceeding which involves merely the right of petitioner to the refund of "�11293 .47. The proper remedy is for the Estate to contest the assessment in an appropriate proceeding pursuant to Sec- tions 7 and 11 of Republic Acy/ Nb. 1125, in which case it could secure the refund of the sum of P'7, 293 .47 if the said assessment is ultimately declared illegal or erroneous . IN VIE\~ OF THE FOREGOING COJIB IDERATI O:ti5 , and it apear- ing that the sum of �71293 . 47 has been applied qy respondent in partial p~ent of the alleged deficiency income tax due from the Estate, ~~ way of tax credit, the claim for re- fund pra~ed for is hereby denied. As already adverted to / . above, the remedy of petitioner or of the Estate for the recovery� of said amount is to contest the legality of the alleged deficiency income tax assessment against the Es-

DECISION - C.T.A. CASE NO . 2326 - 5- tate in an appropriate proceeding. SO ORDERED . Quezon City, September 30, 19?2. ROMAN l'+f. UMA.LI Presiding Judge WE CO:r�DR: ;L. -~~� RAMJN L. AVA!�ENA Associate Judge �