BIR Ruling

March 10, 1997 Atty. Onesimo Banares No. 3 Hernandez St., San Lorenzo Village Makati City S i r : This refers to your letter dated May 12, 1993 protesting for and in behalf of the ESTATE OF DAVID S LIBONGCO, Assessment Notice No. FAS-3-92-93-002134 dated May 21, 1993, demanding payment of the sum of P833,191.64 as deficiency estate tax for the taxable year 1992, inclusive of surcharge and interest. Records show that the decedent, David S. Libongco died intestate on June 18, 1992, leaving a gross conjugal estate of P3,311,280.00; that on December 17, 1992, the administratrix Norma G. Libongco filed with the then Banks, Financing and Insurance Division an Estate Tax Return (BIR Form No. 1801) and paid the corresponding estate tax of P63,451.20; that investigation conducted by Revenue Officer Adora M. Alberto disclosed that the estate was not entitled to the deduction claimed of P1,000,000.00 representing the fair market value of the family home and that of the claimed funeral expenses of P100,000.00 only P50,000.00 should be allowed since the decedent died before the effectivity of Republic Act. No. 7499 on July 29, 1992; that an assessment notice was issued on April 21, 1993, demanding payment of a deficiency estate tax of P833,191.67; that a protest was lodged against the assessment, anchored on the claim that the lower tax rate, the increased funeral expense of P100,000.00 and family home of P1,000,000.00 provided for under R.A. No. 7499 should be applied to the herein estate since the late David S. Libongco died on June 18, 1992, or one (1) month after the approval of the said Act on May 18, 1992; and that based on the conflicting contentions of our investigating examiner and the taxpayer, the issue to be resolved in this case is, "whether the estate tax due on the estate of the late David S. Libongco shall be computed based on the old provisions of the NIRC or on the provisions of R.A. No. 7499, which amended Section 79 (a) of the Tax Code and which was approved by the President on May 18, 1992. In reply, please be informed that laws shall take effect after fifteen (15) days following the completion of their publication in the Official Gazette, unless it is otherwise provided (See Art. 2, Civil Code of the Philippines). The Supreme Court in interpreting the clause "unless it is otherwise provided" declared that it refers to the date of effectivity and not to the requirement of publication itself, which cannot in any event be omitted. This clause does not mean that the legislature may make the law effective immediately upon approval, or on any other date, without its previous publication. The prior publication of laws before they become effective cannot be dispensed with. The reason is that such omission would offend due process insofar as it would deny the public knowledge of the laws that are supposed to govern it (See Taada, et al. vs. Tuvera, 146 SCRA 446). The BIR, in line with the aforequoted pronouncement of the Supreme Court, clarified the issue on the effectivity date of R.A. No. 7499 by declaring that, while Republic Act No. 7499, "An Act Restructuring the Estate and Donor's Taxes, Amending for the Purpose Sections 77, 79(a), 83(b), and 98(a) and (b) on Transfer Taxes of the National Internal Revenue Code, as Amended," was approved on May 18, 1992, it was published in Volume 88, No. 24 of the Official Gazette in its issue of July 13, 1992. Such being the case, it took effect after fifteen (15) days following said publication or, on July 29, 1992 to be exact. Since R.A. No. 7499 took effect on July 29, 1992, we cannot make its provisions retroact to as far as June 18, 1992, the date of death of deceased David S. Libongco. In view thereof, your protest against Assessment Notice No. FAS-3-92-93-002134 dated May 21, 1993 is hereby DENIED. Consequently, you are hereby requested to advise the administratrix, MRS. NORMA G. LIBONGCO, of the estate of David S. Libongco to pay the deficiency estate tax of P833,191.67, plus interest that may have accrued thereon to Revenue District Office No. 38 North Quezon City, within fifteen (15) days from your receipt hereof, in order that this case may be closed and terminated. This constitutes the final decision of this Office on the matter. cdt Very truly yours, (SGD.) LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue