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.