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CIR V Palanca (1966)

1. The CIR assessed estate and inheritance taxes against Carlos Palanca Jr. for shares of stock donated to him by his father before death, claiming it was a transfer in contemplation of death. Palanca filed an amended return claiming a deduction for interest paid on the late taxes. 2. The issues were whether interest paid on late estate taxes was deductible, and whether Palanca's claim for a refund had prescribed. 3. The Court ruled the interest was deductible as a debt under previous cases, and Palanca's refund claim had not prescribed as it was filed within two years of his last tax installment payment.

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68 views1 page

CIR V Palanca (1966)

1. The CIR assessed estate and inheritance taxes against Carlos Palanca Jr. for shares of stock donated to him by his father before death, claiming it was a transfer in contemplation of death. Palanca filed an amended return claiming a deduction for interest paid on the late taxes. 2. The issues were whether interest paid on late estate taxes was deductible, and whether Palanca's claim for a refund had prescribed. 3. The Court ruled the interest was deductible as a debt under previous cases, and Palanca's refund claim had not prescribed as it was filed within two years of his last tax installment payment.

Uploaded by

Bianca Sandoval
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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CIR v Palanca (1966)

CIR v Palanca, Jr.


GR No L-16626, October 29, 1966

FACTS:
The late Don Carlos Palanca, Sr. donated in favor of his son, Carlos Palanca, Jr. shares of stock in La
Tondeña Inc.
amounting to 12,500 shares. Later, the BIR considered the donation as transfer in contemplation of death;
consequently, the BIR assessed against the respondent, Palanca Jr., the sum of P191,591.62 as estate
and inheritance taxes on the transfer of said 12,500 shares of stock, including therein interest for
delinquency of P60,581.80. The respondent then filed an amended income tax return, claiming an
additional deduction in the amount P60,581.80; hence, his new income tax due is only P428. He attached a
letter requesting the refund of P20,624.01. However, the said request for refund was denied by the BIR.
Court of tax appeals ordered the refund. Hence, this petition.

ISSUES:
1. Whether the interest on the delinquent estate and inheritance tax is deductible from the gross
income
2. Whether the respondent’s claim for refund has prescribed

RULING:

1. Yes, the interest is deductible. The rule is settled that although taxes already due have not, strictly
speaking, the same
concept as debts, they are, however, obligations that may be considered as such. In CIR v Prieto,
the Court explicitly announced that while the distinction between “taxes” and “debts” was
recognized in this jurisdiction, the variance in their legal conception does not extend to the interests
paid on them.

2. No, respondent’s claim has not yet prescribed. Considering that it is the interest paid on this latter-
assessed estate and inheritance tax that respondent is claiming for refund, then the 30-day period
for prescription under RA 1125 should be computed from the receipt of the final denial by the BIR
of the said claim.
Inasmuch as the said account was paid by him by installment, then the computation of the two-year
prescriptive period, under Section 306 of the National Internal Revenue Code, should be from the
date of the last installment.
Respondent Palanca paid the last installment on his 1955 income tax account on August 14, 1956.
His claim for refund was filed on August 13, 1958. It was, therefore, still timely instituted.

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