1. CIR vs Pineda GR No L-22734 September 15, 1957

Facts: On May 23, 1945, Anastasio Pineda died, survived by his wife and 15 children, the eldest of whom is Atty. Manuel Pineda. Estate proceedings were had in the CFI of Manila resulting to the estate being divided among and awarded to the heirs. Manuel’s share amounted to about P 2,500.00.

After the estate proceedings were closed, the Bureau of Internal Revenue (BIR) investigated the income tax liability of the estate for the years 1945, 1946, 1947 and 1948 and it found that the corresponding income tax returns were not filed. Thereupon, the representative of the CIR issued the following assessments:

I. Deficiency Income Tax (1945, 1946, 1947) – P 2,707.44

II. Additional Residence Tax for 1945 – P 14.50

III. Real estate dealer’s tax for 4th qtr of 1946 and whole year 1947 – P207.50

The assessment was contested by Manuel Pineda. Thereafter, he appealed to the CTA alleging that he was appealing only that proportionate part or portion pertaining to him as one of the heirs. Subsequently, the CTA rendered judgment reversing the decision of the CIR on the ground of prescription of his right to assess and collect the aforementioned tax. On appeal to the SC, the SC affirmed the ruling of the CTA with respect to the assessment for the year 1947 (income tax) but held that for the years 1945 and 1946, the action for assessment and collection has not yet prescribed. Accordingly, the SC remanded the case to the CTA for further appropriate proceedings.

The CTA rendered judgment holding Manuel Pineda liable for his share in the deficiency income tax for 1945 and 1946 and the real estate dealer’s tax all amounting to P760.28. The decision was then appealed by the CIR to the SC.

Issue: WON Manuel Pineda can be held liable for the payment of all the taxes found by the CTA instead of only for his corresponding share in the same

Held: YES. The government can require Manuel Pineda to pay the full amount of the taxes assessed. The reason is that the government has a lien on the P2, 500.00 received by him from the estate as his share in the inheritance, for unpaid income taxes for which said estate is liable, pursuant to Section 315 of the Tax Code.

By virtue of such lien, the government has the right to subject the property in Pineda’s possession (the money amounting to P2, 500.00) to satisfy the income tax assessment. After such payment, Manuel Pineda will have a right of contribution from his co-heirs.

The government can collect the tax in question in two ways. First, by going after all the heirs and collecting from each one of them the amount of the tax proportionate to the inheritance received. The second remedy, pursuant to the lien created by Section 315 of the Tax Code upon all property and property rights belonging to the taxpayer for unpaid income tax, is by subjecting said property of the estate which is in the hands of the heir or transferee to the payment of the tax due, the estate. This second remedy is the option the government took in this case to collect the tax. The BIR should be given the necessary discretion to avail itself of the most expeditious way to collect the tax, because taxes are the lifeblood of the government and their prompt and certain availability is an imperious need.