DIZON V. CTA (TAX, REMEDIAL)

FIRST ISSUE: Whether or not the CTA and the CA gravely erred in allowing the admission of the pieces of evidence which were not formally offered by the BIR.

The petition is impressed with merit.

Under Section 8, RA 1125, the CTa is categorically described as a court of record. As cases filed before it are litigated de novo, party-litigants shall prove every minute aspect of their cases. Indubitably, no evidentiary value can be given the pieces of evidence submitted by the BIR, as the rules on documentary evidence require that these documents be formally offered before the CTA.

While the CTA is not governed strictly by technical rules of evidence, as rules of procedure are not ends in themselves ans are primarily intended as tools in the administration of justice, the presentation of the BIR's evidence is not a mere procedural technicality which may be disregarded considering that it is the only means by which the STA may ascertain and verify the truth of BIR"s claims against the Estate. BUR's failure to formally offer these pieces of evidence, despite CTA's directives, is fatal to its cause. such failure is aggravated by the fact that not even a single reason was advanced by the BIR to justify such fatal omission. This we take against BIR.

SECOND ISSUE: Whether or not the CA erred in affirming the CTA in the latter's determination of the deficiency estate tax imposed against the Estate.

Verily, this involves the construction of Section 79 of the NIRC, which provides for the allowable deductions from the gross estate of the decedent. The specific question is whether the actual claims of the creditors may be fully allowed as deductions from the gross estate of the decedent despite the fact that the said claims were reduced or condoned through compromise agreements entered into by the Estate with its creditors.

CLAIMS AGAINST THE ESTATE as allowable deductions from the gross estate are basically a reproduction of the deductions allowed under the NIRC, and which was the first codification of Philippine tax laws, which in turn, were based on the federal tax laws of the US. Thus, pursuant to established rules of statutory construction, the decisions of US courts construing the federal tax code are entitled to great weight in the interpretation of our own tax laws.

We express our agreement with the DATE-OF-DEATH VALUATION RULE, made pursuant to the ruling of the US SC in Ithaca Trust co. v. US.

First, there is no law, nor do we discern any legislative intent in our tax laws, which disregards the date-of-death valuation principle and particularly provides that post-death developments must be considered in determining the net value of the estate. It bears emphasis that tax burdens are not to be imposed, nor presumed to be imposed, beyond what the statute expressly and clearly imports, tax statutes being construed strictly 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 against a decendent's 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.

Therefore, the claims existing at the time of death are significant to, and should be made the basis of, the determination of allowable deductions.