Facts:
Petitioners and respondents, including the Republic as intervernor, had a dispute concerning war profit estate and inheritance taxes which started when Jose L. Uy was appointed as administrator of the estate of Maria Lim De Uy in a probate proceeding. The Courts of First Instance took cognizance of the case and later remanded it to the Court of Tax Appeals upon motion by the intervenor (the Republic).
Issue:
Whether or not the Court of First Instance has jurisdiction over the case
Ruling:
Partly yes.The main "action", to which the intervention is said to be ancillary is the proceeding (not "action") for the settlement of the estate of the deceased Maria Lim Vda. deUy. Despite the order appealed from, this special proceeding will continue as such under the jurisdiction of the probate court. The nature of such special proceeding will not be altered. However, the issue on the nature of the sales or transfers made by Maria Lim Vda.deUy in favor of her children, and on the obligation to pay the taxes claimed by the government, will be taken out of this proceeding and submitted to the Court of Tax Appeals, for determination pursuant to Republic Act No. 1125. It is not true that said claims do not involve a disputed assessment. The complaint in intervention, and its amendments, as well as the proof of debts attached thereto, partake of the nature of assessments. Appellants herein have denied the obligation to pay the amounts therein claimed to be due as taxes. Hence, the controversy refers to disputed assessments of internal revenue taxes and a special tax the enforcement and collection of which are entrusted by law to the Commissioner of Internal Revenue. Pursuant to sections 7 and 22 of Republic Act No. 1125, the Court of Tax Appeals shall have exclusive appellate jurisdiction to review on appeal the decision of said officer thereon.
It is urged by appellants, in support of their second assignment of error, (a) that "estate and inheritance taxes are based on the fact of transmission" of property of the deceased "and receipt" thereof by his heir or legatee, which, appellants claim, cannot possibly take place when the property in question is subject to a claim of ownership adverse to the deceased; and (b) that "the question whether or not there was a transfer of property, when denied by alleged recipient, is a question of ownership". Precisely, for these reasons, the probate court has no jurisdiction to settle the issue between the parties herein in this special proceeding for the settlement of the estate of the deceased. Upon the other hand, since the determination of the question whether the deceased had really or fictitiously transferred properties to her children, and whether or not the transfer had been made in contemplation of death, as provided in section 88(B) of the Tax Code, are merely incidental to the issue on the validity or legality of the disputed assessments, which is within the jurisdiction of the Court of Tax Appeals, it follows that the latter — not the court of first instance, not even as a regular court — is, likewise, competent to hear and decide said questions concerning the nature of the transfers aforementioned.
Petitioners and respondents, including the Republic as intervernor, had a dispute concerning war profit estate and inheritance taxes which started when Jose L. Uy was appointed as administrator of the estate of Maria Lim De Uy in a probate proceeding. The Courts of First Instance took cognizance of the case and later remanded it to the Court of Tax Appeals upon motion by the intervenor (the Republic).
Issue:
Whether or not the Court of First Instance has jurisdiction over the case
Ruling:
Partly yes.The main "action", to which the intervention is said to be ancillary is the proceeding (not "action") for the settlement of the estate of the deceased Maria Lim Vda. deUy. Despite the order appealed from, this special proceeding will continue as such under the jurisdiction of the probate court. The nature of such special proceeding will not be altered. However, the issue on the nature of the sales or transfers made by Maria Lim Vda.deUy in favor of her children, and on the obligation to pay the taxes claimed by the government, will be taken out of this proceeding and submitted to the Court of Tax Appeals, for determination pursuant to Republic Act No. 1125. It is not true that said claims do not involve a disputed assessment. The complaint in intervention, and its amendments, as well as the proof of debts attached thereto, partake of the nature of assessments. Appellants herein have denied the obligation to pay the amounts therein claimed to be due as taxes. Hence, the controversy refers to disputed assessments of internal revenue taxes and a special tax the enforcement and collection of which are entrusted by law to the Commissioner of Internal Revenue. Pursuant to sections 7 and 22 of Republic Act No. 1125, the Court of Tax Appeals shall have exclusive appellate jurisdiction to review on appeal the decision of said officer thereon.
It is urged by appellants, in support of their second assignment of error, (a) that "estate and inheritance taxes are based on the fact of transmission" of property of the deceased "and receipt" thereof by his heir or legatee, which, appellants claim, cannot possibly take place when the property in question is subject to a claim of ownership adverse to the deceased; and (b) that "the question whether or not there was a transfer of property, when denied by alleged recipient, is a question of ownership". Precisely, for these reasons, the probate court has no jurisdiction to settle the issue between the parties herein in this special proceeding for the settlement of the estate of the deceased. Upon the other hand, since the determination of the question whether the deceased had really or fictitiously transferred properties to her children, and whether or not the transfer had been made in contemplation of death, as provided in section 88(B) of the Tax Code, are merely incidental to the issue on the validity or legality of the disputed assessments, which is within the jurisdiction of the Court of Tax Appeals, it follows that the latter — not the court of first instance, not even as a regular court — is, likewise, competent to hear and decide said questions concerning the nature of the transfers aforementioned.
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