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demanded payment for deficiency tax and surcharge. Petitioners The payment by the sub-tenant should have been reported as rental
argue that these amounts were either deposited with the court by the income in said year as it in still income regardless of the source.
tenants or have yet to be received.
Republic v. Dela Rama (Actual versus Constructive Receipt)
P: Zaldivar, J.
Issue:
Ordinary appeal.
Held: vs.
amount, therefore it was incumbent upon the corporation to establish FACTS:The estate of the late Esteban de la Rama was the subject of
Special Proceedings No. 401 of the Court of First Instance of Iloilo.
The executor-administrator, EliseoHervas, filed income tax returns of of appeal within thirty days from receipt thereof to the Court of Tax
the estate corresponding to the taxable year 1950. The Bureau of Appeals.
Internal Revenue later claimed that it had found out that there had
been received by the estate in 1950 from the De la Rama Steamship ISSUE: WON there was proper notice of the tax assessment
Company, Inc. cash dividends amounting to P86,800.00, which RATIO: If the notice was not sent to the taxpayer for the purpose of
amount was not declared in the income tax return of the estate for the giving effect to the assessment, said notice cannot produce any
year 1950. The Bureau of Internal Revenue then made an
effect.
assessment as deficiency income tax against the estate.
HELD: The SC sustained the finding of the lower court that neither
The Collector of Internal Revenue wrote a letter to Mrs. Leonor nor Lourdes was the administratrix of the estate of Esteban de
Lourdes de la Rama-Osmeña informing her of the deficiency income
la Rama. The Court noted that at the time the tax assessment was
tax and asking for payment. Counsel for Lourdes wrote to the sent, Special Proceedings No. 401 were still open with respect to the
Collector acknowledging receipt of the assessment but contended that controverted matter regarding the cash dividends upon which the
Lourdes had no authority to represent the estate, and that the deficiency assessment was levied. It is clear that at the time these
assessment should be sent to Leonor de la Rama who was pointed to special proceedings were taking place, EliseoHervas was the duly
by said counsel as the administratrix. The Deputy Collector of Internal
appointed administrator of the estate.
Revenue then sent a letter to Leonor de la Rama as administratrix of
the estate, asking payment. The tax, as assessed, not having been Plaintiff-appellant also contends that the lower court could not
paid, the Deputy Commissioner of Internal Revenue, on September 7, take cognizance of the defense that the assessment was erroneous,
1959, wrote another letter to Lourdes demanding the payment of the this being a matter that is within the exclusive jurisdiction of the Court
deficiency income tax within the period of thirty days from receipt of Tax Appeals. This contention has no merit. According to Republic
thereof. The counsel of Lourdes insisted that the letter should be sent Act 1125, the Court of Tax Appeals has exclusive jurisdiction to
to Leonor de la Rama. The Deputy Commissioner of Internal Revenue review by appeal decisions of the Collector of Internal Revenue in
wrote to Leonor de la Rama another letter, demanding the payment cases involving disputed assessments, and the disputed assessment
within thirty days from receipt thereof. must be appealed by the person adversely affected by the decision
within thirty days after the receipt of the decision. In the instant case,
The deficiency income tax not having been paid, the Republic the person adversely affected should have been the administrator of
of the Philippines filed a complaint against the heirs of Esteban de la
the estate, and the notice of the assessment should have been sent to
Rama. The Trial court, however, dismissed the complaint on the
him. The administrator had not received the notice of assessment,
ground that [relevant to the subject heading]it wasEliseoHervas, and and he could not appeal the assessment to the Court of Tax Appeals
neither Leonor nor Lourdes, who was the proper administrator at the within 30 days from notice. Hence the assessment did not fall within
time, and to whom the assessment should have been sent. the exclusive jurisdiction of the Court of Tax Appeals.
The appellant contended that the assessment had become DISPOSITION: Petition is DISMISSED, decision appealed from is
final, because the decision of the Collector of Internal Revenue was AFFIRMED
sent in a letter dated February 11, 1960 and addressed to the heirs of
the late Esteban de la Rama, through Leonor de la Rama as Henderson v. Collector, 1 SCRA 649
administratrix of the estate, and was not disputed or contested by way
Facts: Arthur Henderson is the President of the American Intl.
Underwriters for the Phils. w/c represents a group of American cos. CTA -> ruled in favor of Castaneda and ordered the refund.
engaged in the business of general insurance (exc. in life insurance). CA -> affirmed decision of CTA. Hence, this petition for review on
certiorari.
he receives a basic annual salary of P30,000 and allowance for house
rentals and utilities. Although he and his wife are childless and are ISSUE:
only two in the family, they lived in a large apartment provided for by Whether or not terminal leave pay (on occasion of his compulsory
his employer. As company president, he and his wife had to entertain retirement) is subject to income tax.
and put up houseguests for the company. The BIR now seeks to
collect taxes on the allowances for rental and utilities expenses. HELD:
If it s sour ce is t he orig inal capit al subscr ipt ions upon This cir cum - stance negates the legitimacy of ANSCOR's alleged
establishment of t he cor porat ion or from initial capital purposes.ANSCOR argued that to treat as "taxable dividend" the
investment in an existing enterprise, its redemption to the concurrent proceeds of the redeemed stock divi-dends would be to impose
value of ac-quisition may not invite the application of Sec. 83(b) under on such stock an undisclosed lien and would be extremely unfair
to inter-vening purchase. Such argument, however, bears no relevance in this case as Case No. 3540, seeking saidrefund.During pendency of said case,
no intervening buyer isinvolved. respondent denied PHILAMLIFE’s claim for refund ofPhp643,125.00
as withholding tax at source for 1980. Respondent also cancelled the
After considering the manner and the circumstances by which the
issuance and redemptionof stock dividends were made, there is no taxcredit memo in the amount of Php643,125.00 previously
other conclusion but that the proceeds thereof are essen-tially issued to PHILAMLIFE onNovember 18, 1980 and requested the
considered equivalent to a distribution of taxable dividends. As latter to pay the amount of Php643,125.00 asde²ciency withholding
"taxable dividend" under Sec-tion 83(b), it is part of the "entire tax at source for 1979 plus increments.Without protesting the
income" subject to tax. assessment, petitioners ²led a petition with CTA on June 14,1985,
PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, INC., ET docketed as CTA Case No. 3943, seeking the annulment of said
AL., v. HON.COURT OF TAX APPEALS, AND THE COMMISSIONER assessment.After trial on the merits, respondent tax court rendered
OF INTERNAL REVENUECA-G.R. SP No. 3128325 April the decision dated March10, 1993 denying both petitions for review
1995Doctrine:The test of taxability is the ‘source’, and the source of and subsequent motions for reconsiderations.Both parties ²led
an income is thatactivity which produced the income.Facts:Petitioner motion for reconsideration on the March 10, 1993
Philippine American Life Insurance Co., Inc. (PHILAMLIFE), a decisionwherein the respondent tax court issued a resolution dated
domesticcorporation entered into a Management Services Agreement May 19, 1993 which modi²edthe dispositive portion of the said
with American InternationalReinsurance Co., Inc. (AIRCO), a non- decision ordering the PHILAMLIFE to pay respondentthe amount of
resident foreign corporation with principal place ofbusiness in Php643,125.00 with interest at the rate of twenty per centum (20%)
Pembroke, Bermuda whereby, e±ective January 1, 1972, for a fee of perannum from March 9, 1981 until paid
notexceeding $250,000.00 per annum, AIRCO shall perform
for PHILAMLIFE variousmanagement services.On September 30,
1978, AIRCO merged with petitioner American InternationalGroup,
Inc. (AIGI) with the latter as the surviving corporation and successor-
in-interest inAIRCO’s Management Services Agreement with
PHILAMLIFE.On November 18, 1980, respondent Commission of
Internal Revenue (CIR) issuedin favour of PHILAMLIFE Tax Credit
Memo in the amount of Php643,125.00 representingerroneous
payment of withholding tax at source on remittances to AIGIfor
servicesrendered abroad in 1979.On the basis of the said issuance of
tax credit, PHILAMLIFE, through a letter datedMarch 21, 1981, ²led
with CIR a claim for refund of the second erroneous tax payment
ofPhp643,125.00 which was made on December 16, 1980. Another
letter dated July 6,1982 was sent wherein PHILAMLIFE alleged that
the claim for refund of the amount paidin 1980 is exactly the same
subject matter as in the previous claim for refund in 1979.Without
waiting for CIR to resolve the claim, petitioners ²led with the Court of
TaxAppeals (CTA) on July 29, 1982 the petition docketed as CTA