G.R. No. L-19865 July 31, 1965
MARIA CARLA PIROVANO, etc., et al., petitioners-appellants, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent-appellee.
FACTS:
Sometime in the early part of 1941, De la Rama Steamship Co. insured the life of said Enrico Pirovano, who was then its President and General Manager until the time of his death, with various Philippine and American insurance companies for a total sum of one million pesos, designating itself as the beneficiary of the policies, obtained by it. Due to the Japanese occupation of the Philippines during the second World War, the Company was unable to pay the premiums on the policies issued by its Philippine insurers and these policies lapsed, while the policies issued by its American insurers were kept effective and subsisting, the New York office of the Company having continued paying its premiums from year to year.
During the Japanese occupation , or more particularly in the latter part of 1944, said Enrico Pirovano died.
Board of Directors of the Company renounced all its rights title, and interest amount of P643,000.00 of insurance proceeds in favor of the minor children of the deceased, subject to the express condition that said amount should be retained by the Company in the nature of a loan to it, drawing interest at the rate of five per centum (5%) per annum, and payable to the Pirovano children after the Company shall have first settled in full the balance of its present remaining bonded indebtedness in the sum of approximately P5,000,000.00.
On February 26, 1948, Mrs. Estefania R. Pirovano, in behalf of her children, executed a public document formally accepting the donation; and, on the same date, the Company through its Board of Directors, took official notice of this formal acceptance. On March 8, 1951, however, the majority stockholders of the Company voted to revoke the resolution approving the donation in favor of the Pirovano children.
As a consequence of this revocation and refusal of the Company to pay the balance of the donation amounting to P564,980.90 despite demands therefor, the herein petitioners-appellants represented by their natural guardian, Mrs. Estefania R. Pirovano, brought an action for the recovery of said amount, which they won.
On March 6, 1955, respondent Commissioner of Internal Revenue assessed the amount of P60,869.67 as donees' gift tax, inclusive of surcharges, interests and other penalties, against each of the petitioners-appellants, or for the total sum of P243,478.68; and, on April 23, 1955, a donor's gift tax in the total amount of P34,371.76 was also assessed against De la Rama Steamship Co., which the latter paid.
ISSUE:
Whether the decision of the lower court ordering the payment of donees' gift taxes as assessed by respondent as well as the imposition of surcharge and interest on the amount of donees' gift taxes was proper
RULING:
Yes.
There is nothing on record to show that when the late Enrico Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. he was not fully compensated for such services, or that, because they were "largely responsible for the rapid and very successful development of the activities of the company"
The fact that his services contributed in a large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his heirs remain a gift or donation.
This is emphasized by the directors' Resolution of January 6, 1947, that "out of gratitude" the company decided to renounce in favor of Pirovano's heirs the proceeds of the life insurance policies in question. The true consideration for the donation was, therefore, the company's gratitude for his services, and not the services themselves.
Whether remuneratory or simple, the conveyance remained a gift, taxable under Chapter 2, Title III of the Internal Revenue Code.
MARIA CARLA PIROVANO, etc., et al., petitioners-appellants, vs. THE COMMISSIONER OF INTERNAL REVENUE, respondent-appellee.
FACTS:
Sometime in the early part of 1941, De la Rama Steamship Co. insured the life of said Enrico Pirovano, who was then its President and General Manager until the time of his death, with various Philippine and American insurance companies for a total sum of one million pesos, designating itself as the beneficiary of the policies, obtained by it. Due to the Japanese occupation of the Philippines during the second World War, the Company was unable to pay the premiums on the policies issued by its Philippine insurers and these policies lapsed, while the policies issued by its American insurers were kept effective and subsisting, the New York office of the Company having continued paying its premiums from year to year.
During the Japanese occupation , or more particularly in the latter part of 1944, said Enrico Pirovano died.
Board of Directors of the Company renounced all its rights title, and interest amount of P643,000.00 of insurance proceeds in favor of the minor children of the deceased, subject to the express condition that said amount should be retained by the Company in the nature of a loan to it, drawing interest at the rate of five per centum (5%) per annum, and payable to the Pirovano children after the Company shall have first settled in full the balance of its present remaining bonded indebtedness in the sum of approximately P5,000,000.00.
On February 26, 1948, Mrs. Estefania R. Pirovano, in behalf of her children, executed a public document formally accepting the donation; and, on the same date, the Company through its Board of Directors, took official notice of this formal acceptance. On March 8, 1951, however, the majority stockholders of the Company voted to revoke the resolution approving the donation in favor of the Pirovano children.
As a consequence of this revocation and refusal of the Company to pay the balance of the donation amounting to P564,980.90 despite demands therefor, the herein petitioners-appellants represented by their natural guardian, Mrs. Estefania R. Pirovano, brought an action for the recovery of said amount, which they won.
On March 6, 1955, respondent Commissioner of Internal Revenue assessed the amount of P60,869.67 as donees' gift tax, inclusive of surcharges, interests and other penalties, against each of the petitioners-appellants, or for the total sum of P243,478.68; and, on April 23, 1955, a donor's gift tax in the total amount of P34,371.76 was also assessed against De la Rama Steamship Co., which the latter paid.
ISSUE:
Whether the decision of the lower court ordering the payment of donees' gift taxes as assessed by respondent as well as the imposition of surcharge and interest on the amount of donees' gift taxes was proper
RULING:
Yes.
There is nothing on record to show that when the late Enrico Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. he was not fully compensated for such services, or that, because they were "largely responsible for the rapid and very successful development of the activities of the company"
The fact that his services contributed in a large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his heirs remain a gift or donation.
This is emphasized by the directors' Resolution of January 6, 1947, that "out of gratitude" the company decided to renounce in favor of Pirovano's heirs the proceeds of the life insurance policies in question. The true consideration for the donation was, therefore, the company's gratitude for his services, and not the services themselves.
Whether remuneratory or simple, the conveyance remained a gift, taxable under Chapter 2, Title III of the Internal Revenue Code.
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