CIR vs. Campos Rueda

THE COLLECTOR OF INTERNAL REVENUE, petitioner,
vs.
ANTONIO CAMPOS RUEDA, respondent.
G.R. No. L-13250
Oct. 29, 1971

FACTS:

This is an appeal interposed by petitioner Antonio Campos Rueda, administrator of the estate of the deceased Doña Maria de la Estrella Soriano Vda. de Cerdeira, from the decision of the respondent Collector of Internal Revenue, assessing against and demanding from the former the sumP161,874.95 as deficiency state and inheritance taxes, including interests and penalties, on the transfer of intangible personal properties situated in the Philippines and belonging to said Maria de la Estrella Soriano Vda. de Cerdeira. Maria de la Estrella Soriano Vda. de Cerdeira (Maria Cerdeira for short) is a Spanish national, because of her marriage to a Spanish citizen and was a resident of Tangier, Morocco from 1931 up to her death on January 2, 1955. At the time of her demise she left, among others, intangible personal properties in the Philippines.” Then came this portion: “On September 29, 1955, petitioner filed a provisional estate and inheritance tax return on all the properties of the late Maria Cerdeira. On the same date, respondent, pending investigation, issued an assessment for estate and inheritance taxes which tax liabilities were paid by petitioner.

On November 17, 1955, an amended return was filed …where intangible personal properties with were claimed as exempted from taxes. On November 23, 1955, respondent, pending investigation, issued another assessment for estate and inheritance taxes. In a letter, dated January 11, 1956, respondent denied the request for exemption on the ground that the law of Tangier is not reciprocal to Section 122 of the National Internal Revenue Code. Hence, respondent demanded the payment OF deficiency estate and inheritance taxes including ad valorem penalties, surcharges, interests and compromise penalties . . . . In a letter dated February 8, 1956, and received by respondent on the following day, petitioner requested for the reconsideration of the decision denying the claim for tax exemption of the intangible personal properties and the imposition of the 25% and 5% ad valorem penalties. However, respondent denied this request, in his letter dated May 5, 1956 . . . and received by petitioner on May 21, 1956. Respondent premised the denial because there was no reciprocity [with Tangier, which was moreover] a mere principality, not a foreign country. Consequently, respondent demanded the payment of deficiency estate and inheritance taxes including surcharges, interests and compromise penalties

ISSUE:

Is Tangier a foreign country?

HELD:

Yes. It does not admit of doubt that if a foreign country is to be identified with a state, it is required in line with Pound’s formulation that it be a politically organized sovereign community independent of outside control bound by ties of nationhood, legally supreme within its territory, acting through a government functioning under a regime of law. 9 It is thus a sovereign person with the people composing it viewed as an organized corporate society under a government with the legal competence to exact obedience its commands. It has been referred to as a body politic organized by common consent for mutual defense and mutual safety and to promote the general welfare. Correctly has it been described by Esmein as “the juridical personification of the nation.” This is to view it in the light its historical development. The stress is on its being a nation, its people occupying a definite territory, politically organized, exercising by means of its government its sovereign will over the individuals within it and maintaining its separate international personality. Laski could speak of it then as a territorial society divided into government and subjects, claiming within its allotted area a supremacy over all other institutions. McIver similarly would point to the power entrusted to its government to maintain within its territory the conditions of a legal order and to enter into international relations. With the latter requisites satisfied, international law does not exact independence as a condition of statehood. So Hyde did opine.

Even on the assumption then that Tangier is bereft of international personality petitioner has not successfully made out a case. It bears repeating that four days after the filing of this petition on January 6, 1958 in Collector of Internal Revenue v. De Lara, it was specifically held by us: “Considering the State of California as a foreign country in relation to section 122 of our Tax Code we believe and hold, as did the Tax Court, that the Ancillary Administrator is entitled to exemption from the inheritance tax on the intangible personal property found in the Philippines.” There can be no doubt that California as a state in the American Union was lacking in the alleged requisite of international personality. Nonetheless, it was held to be a foreign country within the meaning of Section 122 of the National Internal Revenue Code.

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