Dizon Vs CTA

6/27/2016 SUPREME COURT REPORTS ANNOTATED VOLUME 553
Note.Eachcoownermaydemandatanytimethepartitionof
the common property unless a coowner has repudiated the co
ownershipundercertainconditions.(DeGuiavs.CourtofAppeals,
413SCRA114[2003])
o0o
G.R.No.140944. April30,2008. *
RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial

AdministratoroftheEstateofthedeceasedJOSEP.FERNANDEZ,
petitioner,vs.COURT OFTAXAPPEALS and COMMISSIONER
OFINTERNALREVENUE,respondents.
RemedialLawEvidenceNoevidentiaryvaluecanbegiventhepiecesof
evidencesubmittedbytheBureauofInternalRevenue(BIR),astheruleson
documentaryevidencerequirethatthesedocumentsmustbeformallyoffered
before the Court of Tax Appeals (CTA).Under Section 8 of RA 1125, the
CTAiscategoricallydescribedasacourtofrecord.Ascasesfiledbeforeitare
litigateddenovo,partylitigantsshallproveeveryminuteaspectoftheircases.
Indubitably, no evidentiary value can be given the pieces of evidence
submittedbytheBIR,astherulesondocumentaryevidencerequirethatthese
documentsmustbeformallyofferedbeforetheCTA.PertinentisSection34,
Rule132oftheRevisedRulesonEvidencewhichreads:SEC. 34. Offerof
evidence.Thecourtshallconsidernoevidencewhichhasnotbeenformally
offered.Thepurposeforwhichtheevidenceisofferedmustbespecified.
Same Same Courts cannot consider evidence which has not been
formally offered Doctrine laid down in Vda. de Oate still subsists in this
jurisdictionVda.deOateismerelyanexceptiontothegeneralruleBeing
anexception,itmaybeappliedonlywhenthereisstrictcompliancewiththe
requisitesmentionedtherein.TheCTAandtheCArelysolelyonthecaseof
Vda.deOate,250SCRA283(1995),whichreiteratedthisCourtsprevious
rulingsinPeople
_______________
http://www.central.com.ph/sfsreader/session/0000015590844e6eaa4cc01d003600fb002c009e/t/?o=False 1/25
*THIRDDIVISION.
112
112 SUPREMECOURTREPORTSANNOTATED
Dizonvs.CourtofTaxAppeals
v. Napata, 179 SCRA 403 (1989), and People v. Mate, 103 SCRA 484
(1981), on the admission and consideration of exhibits which were not
formally offered during the trial.Although in a long line of cases many of
whichweredecidedafterVda.deOate,weheldthatcourtscannotconsider
evidencewhichhasnotbeenformallyoffered,nevertheless,petitionercannot
validlyassumethatthedoctrinelaiddowninVda.deOatehasalreadybeen
abandoned. Recently, in Ramos v. Dizon, 498 SCRA 17 (2006), this Court,
applying the said doctrine, ruled that the trial court judge therein committed
no error when he admitted and considered the respondents exhibits in the
resolution of the case, notwithstanding the fact that the same were not
formally offered. Likewise, in Far East Bank & Trust Company v.
Commissioner of Internal Revenue, 502 SCRA 87 (2006), the Court made
reference to said doctrine in resolving the issues therein. Indubitably, the
doctrinelaiddowninVda.DeOatestillsubsistsinthisjurisdiction.InVda.
deOate,weheldthat:xxxHowever,inPeoplev.Napata[179SCRA403]
citingPeoplev.Mate[103SCRA484], we relaxed the foregoing rule and
allowedevidencenotformallyofferedtobeadmittedandconsideredby
thetrialcourtprovidedthefollowingrequirementsarepresent,viz.:first,
thesamemusthavebeendulyidentifiedbytestimonydulyrecordedand,
second,thesamemusthavebeenincorporatedintherecordsofthecase.
From the foregoing declaration, however, it is clear that Vda. de Oate is
merelyanexceptiontothegeneralrule.Beinganexception,itmaybeapplied
only when there is strict compliance with the requisites mentioned therein
otherwise, the general rule in Section 34 of Rule 132 of the Rules of Court
shouldprevail.
Same Same The presentation of the Bureau of Internal Revenues (BIRs)
evidence is not a mere procedural technicality which may be disregarded
consideringthatitistheonlymeansbywhichtheCourtofTaxAppeals(CTA)
mayascertainandverifythetruthofBIRsclaimsagainsttheEstate.While
the CTA is not governed strictly by technical rules of evidence, as rules of
procedurearenotendsinthemselvesandareprimarilyintendedastoolsinthe
administrationofjustice,thepresentationoftheBIRsevidenceisnotamere
procedural technicality which may be disregarded considering that it is the
only means by which the CTA may ascertain and verify the truth of BIRs
claimsagainsttheEstate.TheBIRsfailuretoformallyofferthesepiecesof
evidence,despiteCTAsdirectives,is
113
VOL.553,APRIL30,2008 113
fataltoitscause.Suchfailureisaggravatedbythefactthatnotevenasingle
reasonwasadvancedbytheBIRtojustifysuchfatalomission.This,wetake
againsttheBIR.
CivilLawObligationsCondonationorRemissionofDebtWordsand
PhrasesDefinitionofcondonationorremissionofdebt.Itisadmittedthat
theclaimsoftheEstatesaforementionedcreditorshavebeencondoned.Asa
mode of extinguishing an obligation, condonation or remission of debt is
defined as: an act of liberality, by virtue of which, without receiving any
equivalent,thecreditorrenouncestheenforcementoftheobligation,whichis
extinguishedinitsentiretyorinthatpartoraspectofthesametowhichthe
remission refers. It is an essential characteristic of remission that it be
gratuitous,thatthereisnoequivalentreceivedforthebenefitgivenoncesuch
equivalent exists, the nature of the act changes. It may become dation in
payment when the creditor receives a thing different from that stipulated or
novation,whentheobjectorprincipalconditionsoftheobligationshouldbe
changedorcompromise,whenthematterrenouncedisinlitigationordispute
andinexchangeofsomeconcessionwhichthecreditorreceives.
Taxation Statutory Construction Court agrees with the dateofdeath
valuationruleTaxburdensarenottobeimposednorpresumedtobeimposed
beyond what the statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government.We express our
agreementwiththedateofdeathvaluationrule,madepursuanttotheruling
oftheU.S.SupremeCourtinIthacaTrustCo.v.UnitedStates,279U.S.151,
49S.Ct.291,73L.Ed.647(1929).First.Thereisnolaw,nordowediscern
any legislative intent in our tax laws, which disregards the dateofdeath
valuation principle and particularly provides that postdeath developments
must be considered in determining the net value of the estate. It bears
emphasisthattaxburdensarenottobeimposed,norpresumedtobeimposed,
beyond what the statute expressly and clearly imports, tax statutes being
construedstrictissimijuris against the government.Any doubt on whether a
person, article or activity is taxable is generally resolved against taxation.
Second. Such construction finds relevance and consistency in our Rules on
Special Proceedings wherein the term claims required to be presented
againstadecedentsestateisgenerallyconstruedtomeandebtsordemandsof
apecuniarynaturewhichcouldhavebeenenforcedagainstthedeceasedinhis
lifetime,orliabilitycontractedby
114
the deceased before his death. Therefore, the claims existing at the time of
deatharesignificantto,andshouldbemadethebasisof,thedeterminationof
allowabledeductions.
PETITIONforreviewoncertiorariofthedecisionandresolutionof
theCourtofAppeals.
ThefactsarestatedintheopinionoftheCourt.
R.A.S.DizonLawOfficesforpetitioner.
TheSolicitorGeneralforrespondents.
NACHURA, J.:
Before this Court is a Petition for Review on Certiorari1 under
Rule45oftheRulesofCivilProcedureseekingthereversalofthe
Court of Appeals (CA) Decision 2 dated April 30, 1999 which
affirmed the Decision3 of the Court of Tax Appeals (CTA) dated
June17,1997.4
_______________
1DatedJanuary20,2000,Rollo,pp.820.
2ParticularlydocketedasCAG.R.SPNo.46947pennedbyAssociateJustice
Marina L. Buzon, with Presiding Justice Jesus M. Elbinias (now retired) and
AssociateJusticeEugenioS.Labitoria(nowretired),concurringid.,atpp.2231.
3 Particularly docketed as CTA Case No. 5116 penned by Associate Judge
Ramon O. De Veyra and concurred in by Presiding Judge Ernesto D.Acosta and
AssociateJudgeAmancioQ.Sagaid.,atpp.3361.
4ThiscasewasdecidedbeforetheCTAwaselevatedbylawtothesamelevelas
the CA by virtue of Republic Act (RA) No. 9282 otherwise known as An Act
ExpandingtheJurisdictionoftheCourtofTaxAppeals(CTA),ElevatingitsRankto
the Level of a Collegiate Court with Special Jurisdiction and Enlarging its
Membership,AmendingforthePurposeCertainSectionsofRepublicActNo.1125,
asamended,otherwiseknownasTheLawCreatingtheCourtofTaxAppeals,and
for other purposes, which was approved on March 30, 2004. Hence, upon its
effectivity,decisionsoftheCTAarenowappealabledirectlytotheSupremeCourt.
115
VOL.553,APRIL30,2008 115
TheFacts
OnNovember7,1987,JoseP.Fernandez(Jose)died.Thereafter,
apetitionfortheprobateofhiswill5wasfiledwithBranch51ofthe
RegionalTrialCourt(RTC)ofManila(probatecourt).6Theprobate
courtthenappointedretiredSupremeCourtJusticeArsenioP.Dizon
(Justice Dizon) and petitioner, Atty. Rafael Arsenio P. Dizon
(petitioner) as Special and Assistant Special Administrator,
respectively,oftheEstateofJose(Estate).Inaletter7datedOctober
13, 1988, Justice Dizon informed respondent Commissioner of the
BureauofInternalRevenue(BIR)ofthespecialproceedingsforthe
Estate.
Petitionerallegedthatseveralrequestsforextensionoftheperiod
tofiletherequiredestatetaxreturnweregrantedbytheBIRsince
theassetsoftheestate,aswellastheclaimsagainstit,hadyettobe
collated, determined and identified. Thus, in a letter8 dated March
14, 1990, Justice Dizon authorizedAtty. Jesus M. Gonzales (Atty.
Gonzales)tosignandfileonbehalfoftheEstatetherequiredestate
taxreturnandtorepresentthesameinsecuringaCertificateofTax
Clearance. Eventually, on April 17, 1990, Atty. Gonzales wrote a
letter9 addressed to the BIR Regional Director for San Pablo City
andfiledtheestatetaxreturn10withthesameBIRRegionalOffice,
showingthereinaNILestatetaxliability,computedasfollows:
_______________
5BIRRecords,pp.188.
6Thesaidpetitionisentitled:IntheMatterofthePetitiontoApprovetheWill
of Jose P. Fernandez, Carlos P. Fernandez, Petitioner, particularly docketed as
SpecialProceedingsNo.8742980BIRRecord,pp.107108.
7Id.,atp.126.
8Id.,atp.184.
9Id.,atp.183.
10Id.,atp.182.
116
COMPUTATIONOFTAX
ConjugalRealProperty(Sch.1) P10,855,020.00
ConjugalPersonalProperty(Sch.2) 3,460,591.34
TaxableTransfer(Sch.3)
GrossConjugalEstate 14,315,611.34
Less:Deductions(Sch.4) 187,822,576.06
NetConjugalEstate NIL
Less:ShareofSurvivingSpouse ____NIL.____
NetShareinConjugalEstate NIL
xxx
NetTaxableEstate ____NIL.____
EstateTaxDue ____NIL.___11
OnApril 27, 1990, BIR Regional Director for San Pablo City,
Osmundo G. Umali issued Certification Nos. 205212 and 205313
stating that the taxes due on the transfer of real and personal
properties14ofJosehadbeenfullypaidandsaidpropertiesmaybe
transferred to his heirs. Sometime in August 1990, Justice Dizon
passed away. Thus, on October 22, 1990, the probate court
appointedpetitionerastheadministratoroftheEstate.15
Petitioner requested the probate courts authority to sell several
properties forming part of the Estate, for the purpose of paying its
creditors,namely:EquitableBankingCorporation(P19,756,428.31),
BanquedeLIndochineet.deSuez(US$4,828,905.90asofJanuary
31, 1988), Manila Banking Corporation (P84,199,160.46 as of
February 28, 1989) and State Investment House, Inc.
(P6,280,006.21). Petitioner manifested that Manila Bank, a major
creditoroftheEstatewasnotincluded,asitdidnotfileaclaimwith
theprobate
_______________
11Id.
12Rollo,p.68.
13Id.,atp.69.
14ListsofPersonalandRealPropertiesofJoseid.,atpp.7073.
15CTARecord,p.102.
117
VOL.553,APRIL30,2008 117
courtsinceithadsecurityoverseveralrealestatepropertiesforming
partoftheEstate.16
However, on November 26, 1991, the Assistant Commissioner
for Collection of the BIR, Themistocles Montalban, issued Estate
TaxAssessmentNoticeNo.FASE8791003269, 17demandingthe
payment of P66,973,985.40 as deficiency estate tax, itemized as
follows:
DeficiencyEstateTax1987
Estatetax P31,868,414.48
25%surchargelatefiling 7,967,103.62
latepayment 7,967,103.62
Interest 19,121,048.68
Compromisenonfiling 25,000.00
nonpayment 25,000.00
nonoticeofdeath 15.00
noCPACertificate 300.00
Totalamountdue&collectible P66,973,985.4018
In his letter19 dated December 12, 1991,Atty. Gonzales moved

forthereconsiderationofthesaidestatetaxassessment.However,in
herletter20datedApril12,1994,theBIRCommissionerdeniedthe
request and reiterated that the estate is liable for the payment of
P66,973,985.40asdeficiencyestatetax.OnMay3,1994,petitioner
received the letter of denial. On June 2, 1994, petitioner filed a
petition for review21 before respondent CTA. Trial on the merits
ensued.
As found by the CTA, the respective parties presented the
followingpiecesofevidence,towit:
_______________
16Rollo,p.10.
17BIRRecords,p.169.
18Id.
19Id.,atp.171.
20BythenBIRCommissionerLiwaywayVinzonsChatoid.,atpp.277278.
21CTARecords,pp.17.
118
Inthehearingsconducted,petitionerdidnotpresenttestimonialevidence
butmerelydocumentaryevidenceconsistingofthefollowing:
NatureofDocument(sic)
Exhibits
1. LetterdatedOctober13,1988fromAr
senioP.DizonaddressedtotheCom
missionerofInternalRevenueinform
ingthelatterofthespecialproceedings
forthesettlementoftheestate(p.126,
BIRRecords)A
2. Petitionfortheprobateofthewilland
issuanceofletterofadministrationfiled
withtheRegionalTrialCourt(RTC)of
Manila,docketedasSp.Proc.No.87
Manila,docketedasSp.Proc.No.87

42980(pp.107108,BIRRecords)B&B1
3. PleadingentitledCompliancefiled
withtheprobateCourtsubmittingthe
finalinventoryofallthepropertiesof
thedeceased(p.106,BIRRecords)C
4. AttachmenttoExh.Cwhichisthede
tailedandcompletelistingoftheprop
ertiesofthedeceased(pp.89105,BIR
Rec.)C1toC17
5. ClaimsagainsttheestatefiledbyEqui
tableBankingCorp.withtheprobate
CourtintheamountofP19,756,428.31
asofMarch31,1988,togetherwiththe
Annexestotheclaim(pp.6488,BIR
Records)DtoD24
6. ClaimfiledbyBanquedeLIndochine
etdeSuezwiththeprobateCourtinthe
amountofUS$4,828,905.90asofJanu
ary31,1988(pp.262265,BIRRecords)EtoE3
7.ClaimoftheManilaBankingCorpora
tion(MBC)whichasofNovember7,
1987amountstoP65,158,023.54,but
119
VOL.553,APRIL30,2008 119
recomputedasofFebruary28,1989ata
totalamountofP84,199,160.46to
getherwiththedemandletterfrom
MBCslawyer(pp.194197,BIRRe
cords)FtoF3
8. DemandletterofManilaBankingCor
porationpreparedbyAsedillo,Ramos
andAssociatesLawOfficesaddressedto
FernandezHermanos,Inc.,represented
byJoseP.Fernandez,asmortgagors,in
thetotalamountofP240,479,693.17as
ofFebruary28,1989(pp.186187,BIR
Records)G&G1
9. ClaimofStateInvestmentHouse,Inc.
filedwiththeRTC,BranchVIIofMa
nila,docketedasCivilCaseNo.86
38599entitledStateInvestment
House,Inc.,Plaintiff,versusMaritime
CompanyOverseas,Inc.and/orJoseP.
Fernandez,Defendants,(pp.200215,
BIRRecords)HtoH16
10. LetterdatedMarch14,1990ofArsenio
P.DizonaddressedtoAtty.JesusM.

Gonzales,(p.184,BIRRecords)I
11. LetterdatedApril17,1990fromJ.M.
GonzalesaddressedtotheRegionalDi
rectorofBIRinSanPabloCity(p.183,
BIRRecords)J
12. EstateTaxReturnfiledbytheestateof
thelateJoseP.Fernandezthroughits
authorizedrepresentative,Atty.Jesus
M.Gonzales,forArsenioP.Dizon,with
attachments(pp.177182,BIRRecords)KtoK5
13. CertifiedtruecopyoftheLetterofAd
ministrationissuedbyRTCManila,
Branch51,inSp.Proc.No.8742980
appointingAtty.RafaelS.DizonasJu
120
dicialAdministratoroftheestateof
JoseP.Fernandez(p.102,CTARecords)andL
14. CertificationofPaymentofestatetaxes
Nos.2052and2053,bothdatedApril
27,1990,issuedbytheOfficeoftheRe
gionalDirector,RevenueRegionNo.4
C,SanPabloCity,withattachments
(pp.103104,CTARecords.).MtoM5
Respondents[BIR]counselpresentedonJune26,1995onewitnessin
the person ofAlberto Enriquez, who was one of the revenue examiners
whoconductedtheinvestigationontheestatetaxcaseofthelateJoseP.
Fernandez. In the course of the direct examination of the witness, he
identifiedthefollowing:
Documents/ BIRRecord
Signatures
1. EstateTaxReturnpreparedby p.138
theBIR
2. SignaturesofMa.Anabella do
AbulocandAlbertoEnriquez,
Jr.appearingatthelower
PortionofExh.1
3. MemorandumfortheCommissioner, pp.143144
datedJuly19,1991,preparedby
revenueexaminers,Ma.AnabellaA.
Abuloc,AlbertoS.Enriquezand
RaymundS.GallardoReviewedby
MaximinoV.Tagle
4. SignatureofAlbertoS. do
Enriquezappearingatthe
lowerportiononp.2ofExh.2
do
5. SignatureofMa.AnabellaA.
Abulocappearingatthe
lowerportiononp.2ofExh.2
121
VOL.553,APRIL30,2008 121
6. SignatureofRaymundS. do
Gallardoappearingatthe
Lowerportiononp.2ofExh.2
7. SignatureofMaximinoV. do
Taglealsoappearingon
p.2ofExh.2
8. Summaryofrevenue p.139
EnforcementOfficersAudit
Report,datedJuly19,1991
9. SignatureofAlberto do
Enriquezatthelower
portionofExh.3
10. SignatureofMa.AnabellaA. do
Abulocatthelower
portionofExh.3
11. SignatureofRaymondS. do
Gallardoatthelower
portionofExh.3
12. SignatureofMaximino do
V.Tagleatthelower
portionofExh.3
13. Demandletter(FASE879100), p.169
signedbytheAsst.Commissioner
forCollectionfortheCommissioner
ofInternalRevenue,demanding
paymentoftheamountof
P66,973,985.40and
14. AssessmentNoticeFASE879100 pp.16917022
_______________
22Rollo,pp.3740(Emphasissupplied).
122
TheCTAsRuling
On June 17, 1997, the CTA denied the said petition for review.
CitingthisCourtsrulinginVda.deOatev.CourtofAppeals,23the
CTA opined that the aforementioned pieces of evidence introduced
bytheBIRwereadmissibleinevidence.TheCTAratiocinated:
Although the abovementioned documents were not formally offered as

evidence for respondent, considering that respondent has been declared to
havewaivedthepresentationthereofduringthehearingonMarch20,1996,
still they could be considered as evidence for respondent since they were
properly identified during the presentation of respondents witness, whose
testimonywasdulyrecordedaspartoftherecordsofthiscase.Besides,the
documentsmarkedasrespondentsexhibitsformedpartoftheBIRrecordsof
thecase.24
Nevertheless, the CTA did not fully adopt the assessment made by
theBIRanditcameupwithitsowncomputationofthedeficiency
estatetax,towit:
ConjugalRealProperty P5,062,016.00
ConjugalPersonalProp. 33,021,999.93
GrossConjugalEstate 38,084,015.93
Less:Deductions 26,250,000.00
NetConjugalEstate P11,834,015.93
Less:ShareofSurvivingSpouse 5,917,007.96
NetShareinConjugalEstate P5,917,007.96
Add:Capital/Paraphernal
PropertiesP44,652,813.66
Less:Capital/Paraphernal
Deductions 44,652,813.66
NetTaxableEstate P50,569,821.62
_______________
23G.R.No.116149,November23,1995,250SCRA283,287,citing Peoplev.
Napata,179SCRA403(1989)andPeoplev.Mate,103SCRA484(1981).
24CTARecords,p.148.
123
VOL.553,APRIL30,2008 123
EstateTaxDue P29,935,342.97
Add:25%SurchargeforLateFiling 7,483,835.74
Add:PenaltiesforNonoticeofdeath 15.00
NoCPAcertificate 300.00
Totaldeficiencyestatetax P37,419,493.71
exclusive of 20% interest from due date of its payment until full payment
thereof
[Sec.283(b),TaxCodeof1987].25
Thus,theCTAdisposedofthecaseinthiswise:
WHEREFORE, viewed from all the foregoing, the Court finds the
petitionunmeritoriousanddeniesthesame.Petitionerand/ortheheirsofJose
P. Fernandez are hereby ordered to pay to respondent the amount of
P37,419,493.71plus20%interestfromtheduedateofitspaymentuntilfull
paymentthereofasestatetaxliabilityoftheestateofJoseP.Fernandezwho
diedonNovember7,1987.
SOORDERED.26
Aggrieved, petitioner, on March 2, 1998, went to the CA via a

petitionforreview.27
TheCAsRuling
OnApril30,1999,theCAaffirmedtheCTAsruling.Adopting
in full the CTAs findings, the CA ruled that the petitioners act of
filing an estate tax return with the BIR and the issuance of BIR
Certification Nos. 2052 and 2053 did not deprive the BIR
Commissioner of her authority to reexamine or reassess the said
returnfiledonbehalfoftheEstate.28
_______________
25Id.,atpp.166167.
26Id.,atp.167.
27CARollo,pp.317.
28CitingSection16ofthe1993NationalInternalRevenueCode.
124
OnMay31,1999,petitionerfiledaMotionforReconsideration29
whichtheCAdeniedinitsResolution30datedNovember3,1999.
Hence,theinstantPetitionraisingthefollowingissues:
1. Whether or not the admission of evidence which were not formally

offered by the respondent BIR by the Court of Tax Appeals which was
subsequentlyupheldbytheCourtofAppealsiscontrarytotheRulesofCourt
andrulingsofthisHonorableCourt
2. Whether or not the Court of TaxAppeals and the Court ofAppeals
erred in recognizing/considering the estate tax return prepared and filed by
respondentBIRknowingthattheprobatecourtappointedadministratorofthe
estate of Jose P. Fernandez had previously filed one as in fact, BIR
Certification Clearance Nos. 2052 and 2053 had been issued in the estates
favor
3. Whether or not the Court ofTaxAppeals and the Court ofAppeals
erredindisallowingthevalidandenforceableclaimsofcreditorsagainstthe
estate,aslawfuldeductionsdespiteclearandconvincingevidencethereofand
4. Whether or not the Court of TaxAppeals and the Court ofAppeals
erred in validating erroneous double imputation of values on the very same
estatepropertiesintheestatetaxreturnitpreparedandfiledwhicheffectively
bloatedtheestatesassets.31
The petitioner claims that in as much as the valid claims of

creditorsagainsttheEstateareinexcessofthegrossestate,noestate
tax was due that the lack of a formal offer of evidence is fatal to
BIRs cause that the doctrine laid down in Vda. de Oate has
already been abandoned in a long line of cases in which the Court
held that evidence not formally offered is without any weight or
value that Section 34 of Rule 132 of the Rules on Evidence
requiringaformalofferofevidenceismandatoryincharacterthat,
while BIRs witness Alberto Enriquez (Alberto) in his testimony
beforetheCTA
_______________
29Rollo,pp.2231.
30Id.,atp.32.
31Id.,atpp.114115.
125
VOL.553,APRIL30,2008 125
identifiedthepiecesofevidenceaforementionedsuchthatthesame
weremarked,BIRsfailuretoformallyoffersaidpiecesofevidence
and depriving petitioner the opportunity to crossexamineAlberto,
render the same inadmissible in evidence that assuming arguendo
that the ruling in Vda. de Oate is still applicable, BIR failed to
complywiththedoctrinesrequisitesbecausethedocumentsherein
remained simply part of the BIR records and were not duly
incorporatedinthecourtrecordsthattheBIRfailedtoconsiderthat
although the actual payments made to the Estate creditors were
lower than their respective claims, such were compromise
agreementsreachedlongaftertheEstatesliabilityhadbeensettled
by the filing of its estate tax return and the issuance of BIR
CertificationNos.2052and2053andthatthereckoningdateofthe
claims against the Estate and the settlement of the estate tax due
should be at the time the estate tax return was filed by the judicial
administratorandtheissuanceofsaidBIRCertificationsandnotat
thetimetheaforementionedCompromiseAgreementswereentered
intowiththeEstatescreditors.32
Ontheotherhand,respondentcountersthatthedocuments,being
partoftherecordsofthecaseanddulyidentifiedinadulyrecorded
testimony are considered evidence even if the same were not
formallyofferedthatthefilingoftheestatetaxreturnbytheEstate
and the issuance of BIR Certification Nos. 2052 and 2053 did not
deprivetheBIRofitsauthoritytoexaminethereturnandassessthe
estate tax and that the factual findings of the CTA as affirmed by
theCAmaynolongerbereviewedbythisCourtviaapetitionfor
review.33
_______________
32Id.
33RespondentBIRsMemorandumdatedOctober16,2000id.,atpp.140144.
126
TheIssues
There are two ultimate issues which require resolution in this
case:
First. Whether or not the CTA and the CA gravely erred in

allowing the admission of the pieces of evidence which were not
formallyofferedbytheBIRand
Second. Whether or notthe CA erred in affirming the CTAin
the latters determination of the deficiency estate tax imposed
againsttheEstate.
TheCourtsRuling
ThePetitionisimpressedwithmerit.
UnderSection8ofRA1125,theCTAiscategoricallydescribed
as a court of record.As cases filed before it are litigated de novo,
partylitigants shall prove every minute aspect of their cases.
Indubitably,noevidentiaryvaluecanbegiventhepiecesofevidence
submittedbytheBIR,astherulesondocumentaryevidencerequire
that these documents must be formally offered before the CTA.34
PertinentisSection34,Rule132oftheRevisedRulesonEvidence
whichreads:
SEC. 34. Offer of evidence.The court shall consider no evidence

whichhasnotbeenformallyoffered.Thepurposeforwhichtheevidenceis
offeredmustbespecified.
TheCTAandtheCArelysolelyonthecaseof Vda. de Oate,

whichreiteratedthisCourtspreviousrulingsinPeoplev.Napata35
andPeoplev.Mate36ontheadmissionandconsiderationofexhibits
whichwerenotformallyofferedduringthetrial.Althoughinalong
lineofcasesmanyofwhichweredecidedafterVda.de Oate, we
heldthatcourts
_______________
34 Commissioner of Internal Revenue v. Manila Mining Corporation, G.R. No.

153204,August31,2005,468SCRA571,588589.
35Supranote23.
36Supranote23.
127
VOL.553,APRIL30,2008 127
cannot consider evidence which has not been formally offered,37

nevertheless,petitionercannotvalidlyassumethatthedoctrinelaid
down in Vda. de Oate has already been abandoned. Recently, in
Ramosv.Dizon,38 this Court, applying the said doctrine, ruled that
the trial court judge therein committed no error when he admitted

and considered the respondents exhibits in the resolution of the
case, notwithstanding the fact that the same were not formally
offered. Likewise, in Far East Bank & Trust Company v.
Commissioner of Internal Revenue,39 the Court made reference to
saiddoctrineinresolvingtheissuestherein.Indubitably,thedoctrine
laiddowninVda.deOatestillsubsistsinthisjurisdiction.InVda.
deOate,weheldthat:
From the foregoing provision, it is clear that for evidence to be

considered,thesamemustbeformallyoffered.Corollarily,themerefactthata
particulardocumentisidentifiedandmarkedasanexhibitdoesnotmeanthat
ithasalreadybeenofferedaspartoftheevidenceofaparty.InInterpacific
Transit, Inc. v. Aviles [186 SCRA 385], we had the occasion to make a
distinction between identification of documentary evidence and its formal
offerasanexhibit.Wesaidthatthefirstisdoneinthecourseofthetrialandis
accompaniedbythemarkingoftheevidenceasanexhibitwhilethesecondis
doneonlywhenthepartyrestsitscaseandnotbefore.Aparty,therefore,may
opttoformallyofferhisevidenceifhebelievesthatit
_______________
37 Far East Bank & Trust Company v. Commissioner of Internal Revenue, G.R. No.
149589, September 15, 2006, 502 SCRA 87 AlaMartin v. Sultan, G.R. No. 117512,
October2,2001,366SCRA316,citing Ongv.CourtofAppeals,301SCRA391(1999),
whichfurthercitedCandidov.CourtofAppeals,253SCRA78,8283(1996) Republicv.
Sandiganbayan, 255 SCRA 438, 456 (1996) People v. Peralta, 237 SCRA 218, 226
(1994)Vda.deAlvarezvs.CourtofAppeals,231SCRA309,317318(1994)and People
v. Cario, et al., 165 SCRA 664, 671 (1988) See also De los Reyes v. Intermediate
AppellateCourt, G.R. No. 74768,August 11, 1989, 176 SCRA 394, 401402 (1989) and
Peoplev.Mate,supranote23,atp.493.
38G.R.No.137247,August7,2006,498SCRA17,3031.
39Supranote29,atp.91.
128
willadvancehiscauseornottodosoatall.Intheeventhechoosestodothe
latter,thetrialcourtisnotauthorizedbytheRulestoconsiderthesame.
However,inPeoplev.Napata[179SCRA403]citingPeoplev.Mate[103
SCRA 484], we relaxed the foregoing rule and allowed evidence not
formally offered to be admitted and considered by the trial court
providedthefollowingrequirementsarepresent,viz.:first,thesamemust
have been duly identified by testimony duly recorded and, second, the
samemusthavebeenincorporatedintherecordsofthecase.40
Fromtheforegoingdeclaration,however,itisclearthatVda.de
Oate is merely an exception to the general rule. Being an
exception, it may be applied only when there is strict compliance
withtherequisitesmentionedthereinotherwise,thegeneralrulein
Section34ofRule132oftheRulesofCourtshouldprevail.
In this case, we find that these requirements have not been
satisfied. The assailed pieces of evidence were presented and
marked during the trial particularly whenAlberto took the witness
stand. Alberto identified these pieces of evidence in his direct
testimony.41 He was also subjected to crossexamination and re
cross examination by petitioner.42 But Albertos account and the
exchanges between Alberto and petitioner did not sufficiently
describethecontentsofthesaidpiecesofevidencepresentedbythe
BIR. In fact, petitioner sought that the lead examiner, one Ma.
AnabellaA.Abuloc, be summoned to testify, inasmuch asAlberto
was incompetent to answer questions relative to the working
papers.43 The lead examiner never testified. Moreover, while
Albertos testimony identifying the BIRs evidence was duly
recorded, the BIR documents themselves were not incorporated in
therecordsofthecase.
_______________
40Underscoringsupplied.
41TSN,June26,1995.
42TSN,July12,1995.
43Id.,atpp.4249.
129
VOL.553,APRIL30,2008 129
A common fact threads through Vda. de Oate and Ramos that

doesnotexistatallintheinstantcase.Intheaforementionedcases,
theexhibitsweremarkedatthepretrialproceedingstowarrantthe
pronouncementthatthesameweredulyincorporatedintherecords
ofthecase.Thus,weheldinRamos:
In this case, we find and so rule that these requirements have been
satisfied.Theexhibitsinquestionwerepresentedandmarkedduringthe
pretrial of the case thus, they have been incorporated into the records.
Further,Elpidiohimselfexplainedthecontentsoftheseexhibitswhenhewas
interrogatedbyrespondentscounsel...
xxxx
But what further defeats petitioners cause on this issue is that respondents
exhibitsweremarkedandadmittedduringthepretrialstageasshownbythe
PreTrialOrderquotedearlier.44
While the CTA is not governed strictly by technical rules of

evidence,45asrulesofprocedurearenotendsinthemselvesandare
primarily intended as tools in the administration of justice, the
presentation of the BIRs evidence is not a mere procedural
technicalitywhichmaybedisregardedconsideringthatitistheonly
meansbywhichtheCTAmayascertainandverifythetruthofBIRs
claimsagainsttheEstate.46TheBIRsfailuretoformallyofferthese
pieces of evidence, despite CTAs directives, is fatal to its cause.47
Suchfailureisaggravatedbythefactthatnotevenasinglereason
wasadvanced
_______________
44Supranote29,atpp.31and34,citingMarmontResortHotelEnterprisesv.
Guiang,168SCRA373,379380(1988).
45CalambaSteelCenter,Inc.(formerlyJSSteelCorporation)v.Commissioner
ofInternalRevenue,G.R.No.151857,April28,2005,457SCRA482,494.
46CommissionerofInternalRevenuev.ManilaMiningCorporation,supranote
28,atpp.593594.
47FarEastBank&TrustCompanyv.CommissionerofInternalRevenue,supra
note29,atp.90.
130
bytheBIRtojustifysuchfatalomission.This,wetakeagainstthe
BIR.
Per the records of this case, the BIR was directed to present its
evidence48 in the hearing of February 21, 1996, but BIRs counsel
failedtoappear.49 The CTA denied petitioners motion to consider
BIRs presentation of evidence as waived, with a warning to BIR
that such presentation would be considered waived if BIRs
evidence would not be presented at the next hearing.Again, in the
hearingofMarch20,1996,BIRscounselfailedtoappear.50 Thus,
in its Resolution51 dated March 21, 1996, the CTA considered the
BIR to have waived presentation of its evidence. In the same
Resolution, the parties were directed to file their respective
memorandum. Petitioner complied but BIR failed to do so.52Inall
memorandum. Petitioner complied but BIR failed to do so.52Inall

oftheseproceedings,BIRwasdulynotified.Hence,inthiscase,we
are constrained to apply our ruling in Heirs of Pedro Pasag v.
Parocha:53
A formal offer is necessary because judges are mandated to rest their

findings of facts and their judgment only and strictly upon the evidence
offered by the parties at the trial. Its function is to enable the trial judge to
know the purpose or purposes for which the proponent is presenting the
evidence. On the other hand, this allows opposing parties to examine the
evidenceandobjecttoitsadmissibility.Moreover,itfacilitatesreviewasthe
appellate court will not be required to review documents not previously
scrutinizedbythetrialcourt.
_______________
48CTAResolutiondatedJanuary19,1996CTARecords,pp.113114.
49CTARecords,p.117.
50Id.,atp.119.
51Id.,atp.120.
52CTAOrderdatedJune17,1996,CTARecords,p.138.
53G.R.No.155483,April27,2007,522SCRA410,416,citingConstantinov.Courtof
Appeals, G.R. No. 116018, November 13, 1996, 264 SCRA 59 (Other citations omitted
Emphasissupplied).
131
VOL.553,APRIL30,2008 131
Strict adherence to the said rule is not a trivial matter. The Court in
Constantinov.CourtofAppealsruledthattheformalofferofonesevidence
isdeemedwaivedafterfailingtosubmititwithinaconsiderableperiodof
time.Itexplainedthatthecourtcannotadmitanofferofevidencemade
after a lapse of three (3) months because to do so would condone an
inexcusable laxity if not noncompliance with a court order which, in
effect, would encourage needless delays and derail the speedy
administrationofjustice.
Applying the aforementioned principle in this case, we find that the trial
courthadreasonablegroundtoconsiderthatpetitionershadwaivedtheirright
to make a formal offer of documentary or object evidence. Despite several
extensionsoftimetomaketheirformaloffer,petitionersfailedtocomplywith
their commitment and allowed almost five months to lapse before finally
submittingit.Petitionersfailuretocomplywiththeruleonadmissibility
of evidence is anathema to the efficient, effective, and expeditious
dispensationofjustice.
Havingdisposedoftheforegoingproceduralissue,weproceedto
discussthemeritsofthecase.
Ordinarily, the CTAs findings, as affirmed by the CA, are
entitled to the highest respect and will not be disturbed on appeal
unlessitisshownthatthelowercourtscommittedgrosserrorinthe
appreciationoffacts.54Inthiscase,however,wefindthedecisionof
theCAaffirmingthatoftheCTAtaintedwithpalpableerror.
It is admitted that the claims of the Estates aforementioned
creditorshavebeencondoned.Asamodeofextinguish
_______________
54FilinvestDevelopmentCorporationv.CommissionerofInternalRevenueand
CourtofTaxAppeals,G.R.No.146941,August9,2007,529SCRA605,609610,
citingCarraraMarblePhilippines,Inc.v.CommissionerofCustoms,372Phil.322,
333334 313 SCRA 453, 462 (1999) and Commissioner of Internal Revenue v.
CourtofAppeals,358Phil.562,584298SCRA83,91(1998).
132
inganobligation,55condonationorremissionofdebt56isdefined
as:
anactofliberality,byvirtueofwhich,withoutreceivinganyequivalent,the
creditorrenouncestheenforcementoftheobligation,whichisextinguishedin
itsentiretyorinthatpartoraspectofthesametowhichtheremissionrefers.
Itisanessentialcharacteristicofremissionthatitbegratuitous,thatthereis
noequivalentreceivedforthebenefitgivenoncesuchequivalentexists,the
natureoftheactchanges.Itmaybecomedationinpaymentwhenthecreditor
receivesathingdifferentfromthatstipulatedornovation,whentheobjector
principal conditions of the obligation should be changed or compromise,
whenthematterrenouncedisinlitigationordisputeandinexchangeofsome
concessionwhichthecreditorreceives.57
Verily,thesecondissueinthiscaseinvolvestheconstructionof
Section7958oftheNationalInternalRevenue
_______________
55Article1231oftheCivilCodeofthePhilippinesprovides:
Art. 1231. Obligationsareextinguished:
(1) Bypaymentorperformance
(2) Bythelossofthethingdue
(3) Bythecondonationorremissionofthedebt
(4) Bytheconfusionormergeroftherightsofcreditoranddebtor
(5) Bycompensation
(6) Bynovation.(Emphasisours.)
56Article1270oftheCivilCodeofthePhilippinesprovides:
Art. 1270. Condonation or remission is essentially gratuitous, and
requires the acceptance by the obligor. It may be made expressly or
impliedly.
One and the other kind shall be subject to the rules which govern
inofficiousdonations.Expresscondonationshall,furthermore,complywith
theformsofdonation.
57 Tolentino, Commentaries and Jurisprudence on the Civil Code of the
Philippines,Vol.IV,1991ed.,p.353,citing8Manresa365.
58SEC. 79. Computationofnetestateandestatetax.Forthepurposeofthe
taximposedinthisChapter,thevalueofthenetestateshallbedetermined:
133
VOL.553,APRIL30,2008 133
Code59(TaxCode)whichprovidesfortheallowabledeductions
_______________
(a) InthecaseofacitizenorresidentofthePhilippines,bydeductingfromthe
valueofthegrossestate
(1) Expenses,losses,indebtedness,andtaxes.Suchamounts
(A) For funeral expenses in an amount equal to five per centum of the gross
estatebutinnocasetoexceedP50,000.00
(B) Forjudicialexpensesofthetestamentaryorintestateproceedings
(C) For claims against the estate Provided,That at the time the indebtedness
wasincurredthedebtinstrumentwasdulynotarizedand,iftheloanwascontracted
within three years before the death of the decedent, the administrator or executor
shall submit a statement showing the disposition of the proceeds of the loan. (As
amendedbyPDNo.1994)
(D) For claims of the deceased against insolvent persons where the value of
decedentsinterestthereinisincludedinthevalueofthegrossestateand
(E) For unpaid mortgages upon, or any indebtedness in respect to property,
where the value of decedents interest therein, undiminished by such mortgage or
indebtedness, is included in the value of the gross estate, but not including any
incometaxesuponincomereceivedafterthedeathofthedecedent,orpropertytaxes
notaccruedbeforehisdeath,oranyestatetax.Thedeductionhereinallowedinthe
caseofclaimsagainsttheestate,unpaidmortgages,oranyindebtedness,shallwhen
founded upon a promise or agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full reconsideration in money or
moneysworth.Thereshallalsobedeductedlossesincurredduringthesettlementof
theestatearisingfromfires,storms,shipwreck,orothercasualties,orfromrobbery,
theft,orembezzlement,whensuchlossesarenotcompensatedforbyinsuranceor
otherwise, and if at the time of the filing of the return such losses have not been
claimed as a deduction for income tax purposes in an income tax return, and
providedthatsuchlosseswereincurrednotlaterthanlastdayforthepaymentofthe
estatetaxasprescribedinsubsection(a)ofSection84.
134
from the gross estate of the decedent. The specific question is

whether the actual claims of the aforementioned creditors may be
fullyallowedasdeductionsfromthegrossestateofJosedespitethe
fact that the said claims were reduced or condoned through
compromiseagreementsenteredintobytheEstatewithitscreditors.
Claims against the estate, as allowable deductions from the
gross estate under Section 79 of the Tax Code, are basically a
reproductionofthedeductionsallowedunderSection89(a)(1)(C)
and(E)ofCommonwealthActNo.466(CA466),otherwiseknown
astheNationalInternalRevenueCodeof1939,andwhichwasthe
firstcodificationofPhilippinetaxlaws.Philippinetaxlawswere,in
turn, based on the federal tax laws of the United States. Thus,
pursuanttoestablishedrulesofstatutoryconstruction,thedecisions
of American courts construing the federal tax code are entitled to
greatweightintheinterpretationofourowntaxlaws.60
It is noteworthy that even in the United States, there is some
disputeastowhetherthedeductibleamountforaclaimagainstthe
estateisfixedasofthedecedentsdeathwhichisthegeneralrule,or
thesameshouldbeadjustedtoreflectpostdeathdevelopments,such
aswhereasettlementbetweenthepartiesresultsinthereductionof
the amount actually paid.61 On one hand, the U.S. court ruled that
the appropriate deduction is the value that the claim had at the
date of the decedents death.62Also, as held in Propstra v. U.S.,63
wherea
_______________
59 This refers to the 1977 National Internal Revenue Code, as amended which
waseffectiveatthetimeofJosesdeathonNovember7,1987.
60 Commissioner of Internal Revenue v. Court of Appeals, G.R. No. 123206,
March22,2000,328SCRA666,676677(citationsomitted).
6147BCorpusJurisSecundum,InternalRevenue533.
62Smithv.C.I.R.,82T.C.M.(CCH)909(2001),affd54Fed.Appx.413.
63680F.2d1248.
135
VOL.553,APRIL30,2008 135
lien claimed against the estate was certain and enforceable on the
dateofthedecedentsdeath,thefactthattheclaimantsubsequently
settledforlesseramountdidnotprecludetheestatefromdeducting
the entire amount of the claim for estate tax purposes. These
pronouncementsessentiallyconfirmthegeneralprinciplethatpost
death developments are not material in determining the amount of
thededuction.
Ontheotherhand,theInternalRevenueService(Service)opines
thatpostdeathsettlementshouldbetakenintoconsiderationandthe
claim should be allowed as a deduction only to the extent of the
amount actually paid.64 Recognizing the dispute, the Service
releasedProposedRegulationsin2007mandatingthatthededuction
wouldbelimitedtotheactualamountpaid.65
InannouncingitsagreementwithPropstra,66theU.S.5thCircuit
CourtofAppealsheld:
We are persuaded that the Ninth Circuits decision...in Propstra correctly

applytheIthacaTrustdateofdeathvaluationprincipletoenforceableclaims
against the estate. As we interpret Ithaca Trust, when the Supreme Court
announced the dateofdeath valuation principle, it was making a judgment
aboutthenatureofthefederalestatetaxspecifically,thatitisataximposed
ontheactoftransferringpropertybywillorintestacyand,becausetheacton
whichthetaxisleviedoccursatadiscretetime,i.e.,theinstanceofdeath,the
net value of the property transferred should be ascertained, as nearly as
possible,asofthattime.Thisanalysissupportsbroadapplicationofthedate
ofdeathvaluationrule.67
_______________
6447BCorpusJurisSecundum,InternalRevenue524.
65Prop.Treas.Reg..20.20531(b)(1),publishedasREG14331603.
66Supranote63.
67SmithsEst.v.CIR,198F3d515,525(5thCir.1999).SeealsoONealsEst.v.
US,228F.Supp.2d1290(NDAla.2002).
136
Weexpressouragreementwiththedateofdeathvaluationrule,
made pursuant to the ruling of the U.S. Supreme Court in Ithaca
TrustCo.v.UnitedStates.68First.Thereisnolaw,nordowediscern
anylegislativeintentinourtaxlaws,whichdisregardsthedateof
death valuation principle and particularly provides that postdeath
developmentsmustbeconsideredindeterminingthenetvalueofthe
estate.Itbearsemphasisthattaxburdensarenottobeimposed,nor
presumed to be imposed, beyond what the statute expressly and
clearlyimports,taxstatutesbeingconstruedstrictissimijurisagainst
thegovernment.69Anydoubtonwhetheraperson,articleoractivity
is taxable is generally resolved against taxation.70 Second. Such
constructionfindsrelevanceandconsistencyinourRulesonSpecial
Proceedings wherein the term claims required to be presented
against a decedents estate is generally construed to mean debts or
demands of a pecuniary nature which could have been enforced
against the deceased in his lifetime, or liability contracted by the
deceased before his death.71 Therefore, the claims existing at the
timeofdeatharesignificantto,andshouldbemadethebasisof,the
determinationofallowabledeductions.
_______________
68279U.S.151,49S.Ct.291,73L.Ed.647(1929).
69CommissionerofInternalRevenuev.TheCourtofAppeals,CentralVegetable
ManufacturingCo.,Inc.,andtheCourtofTaxAppeals,G.R.No.107135,February
23,1999,303SCRA508,516517,citingProvinceofBulacanv.CourtofAppeals,
299 SCRA 442 (1998) Republic v. Intermediate Appellate Court, 196 SCRA 335
(1991)Commissioner of Internal Revenue v. Firemens Fund Ins. Co., 148 SCRA
315(1987)andCommissionerofInternalRevenuev.CourtofAppeals,204SCRA
182(1991).
70ManilaInternationalAirportAuthorityv.CourtofAppeals,G.R.No.155650,
July20,2006,495SCRA591,619.
71Quirinov.Grospe,G.R.No.58797,January31,1989,169SCRA702,704
705,citingGabinv.Melliza,84Phil.794,796(1949).
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Dizon Vs CTA

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Dizon Vs CTA

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6/27/2016 SUPREME COURT REPORTS ANNOTATED VOLUME 553

RAFAEL ARSENIO S. DIZON, in his capacity as the Judicial

In his letter19 dated December 12, 1991,Atty. Gonzales moved

Although the abovementioned documents were not formally offered as

Aggrieved, petitioner, on March 2, 1998, went to the CA via a

1. Whether or not the admission of evidence which were not formally

The petitioner claims that in as much as the valid claims of

First. Whether or not the CTA and the CA gravely erred in

SEC. 34. Offer of evidence.The court shall consider no evidence

TheCTAandtheCArelysolelyonthecaseof Vda. de Oate,

34 Commissioner of Internal Revenue v. Manila Mining Corporation, G.R. No.

cannot consider evidence which has not been formally offered,37

the trial court judge therein committed no error when he admitted

From the foregoing provision, it is clear that for evidence to be

A common fact threads through Vda. de Oate and Ramos that

While the CTA is not governed strictly by technical rules of

memorandum. Petitioner complied but BIR failed to do so.52Inall

A formal offer is necessary because judges are mandated to rest their

from the gross estate of the decedent. The specific question is

We are persuaded that the Ninth Circuits decision...in Propstra correctly

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