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[Nos. L-9456 & L-9481. January 6, 1958]

THE COLLECTOR OF INTERNAL REVENUE, petitioner

vs. DOMINGO DE LARA, as ancilliary administrator of the
estate of HUGO H. MILLER (Deceased), and the COURT
OF TAX APPEALS, respondents.

1. TAXATION; ESTATE AND INHERITANCE TAXES; FOR

TAX PURPOSES, RESIDENCE SYNONYMOUS WITH
DOMICILE.—For estate and inheritance tax purposes,
the term "residence" is synonymous with the term
"domicile". The two terms may be used interchangeably
without distinction.

2. ID.; ID.; NON-RESIDENTS; PROPERTIES SUBJECT TO

TAX; EXEMPTION FROM INHERITANCE TAX UNDER
SECTION 122 OF THE TAX CODE.—The decedent, being
a non-resident of the Philippines, the only properties of his
estate subject to estate and inheritance taxes are those
shares of stock issued by Philippine corporations.
Considering, however, the State of California, of which he
was a resident, as a foreign country in relation to section
122 of the National Internal Revenue Code, the decedent
is entitled to exemption from the inheritance tax on the
intangible personal property found in the Philippines.
This exemption granted to non-residents under the
provision of multiple taxation, which otherwise would
subject a decedent's intangible personal property to the
inheritance tax,

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814 PHILIPPINE REPORTS ANNOTATED

Collector of Internal Revenue vs. De Lara, et al

both in his place of residence and domicile and the place

where those properties are found.

3. ID.; REPUBLIC ACT No. 1253; WHEN ESTATE OF

DECEDENT ENTITLED TO BENEFITS OF THE ACT.—
Inasmuch as the decedent not only suffered deprivations
of the war, but was killed by the Japanese military forces,
his estate is entitled to the benefits of Republic Act No.

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1253, which was passed for the benefit of veterans,

guerrillas, or victims of Japanese atrocities. Consequently,
the interests and other increments imposed on the
decedent's estate should not be paid.

PETITION for review by certiorari of a decision of the

Court of Tax Appeals.

The f acts are stated in the opinion of the Court.

Allison J. Gibbs, Zafra, De Leon & Veneracion for
Domingo E. de Lara.
Assistant Solicitor General Ramon L. Avanceña and
Cezar L. Kierulf for the Collector of Internal Revenue.

MONTEMAYOR, J.:

These are two separate appeals, one by the Collector of

Internal Revenue, later on referred to as the Collector, and
the other by Domingo de Lara as Ancilliary Administrator
of the estate of Hugo H. Miller, from the decision of the
Court of Tax Appeals of June 25, 1955, with the following
dispositive part:

"WHEREFORE, respondent's assessment for estate and

inheritance taxes upon the estate of the decedent Hugo H. Miller
is hereby modified in accordance with the computation attached
as Annex "A" of this decision. Petitioner is hereby ordered to pay
respondent the amount of P2,047.22 representing estate taxes
due, together with the interests and other increments. In case of
failure to pay the amount of P2,047.22 within thirty (30) days
from the time this decision has become final, the 5 per cent
surcharge and the corresponding interest due thereon shall be
paid as part of the tax."

The facts in the case gathered from the record and as found
by the Court of Tax Appeals may be briefly stated as
follows: Hugo H. Miller, an American citizen, was born in
Santa Cruz, California, U.S.A., in 1883. In
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Collector of Internal Revenue vs. De Lara, et al.

1905, he came to the Philippines. From 1906 to 1917, he

was connected with the public school system, first as a
teacher and later as a division superintendent of schools,
later retiring under the Osmeña Retirement Act. After his
retirement, Miller accepted an executive position in the
local branch of Ginn & Co., book publishers with principal
offices in New York and Boston, U.S.A., up to the outbreak
of the Pacific War. From 1922 up to December 7, 1941, he

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was stationed in the Philippines as Oriental representative

of Ginn & Co., covering not only the Philippines, but also
China and Japan. His principal work was selling books
specially written for Philippine schools. In or about the
year 1922, Miller lived at the Manila Hotel. His wife
remained at their home in BenLomond, Santa Cruz,
California, but she used to come to the Philippines for brief
visits with Miller, staying three or four months. Miller also
used to visit his wife in California. He never lived in any
residential house in the Philippines. After the death of his
wife in 1931, he transferred from the Manila Hotel to the
Army and Navy Club, where he was staying at the
outbreak of the Pacific War. On January 17, 1941, Miller
executed his last will and testament in Santa Cruz,
California, in which he declared that he was "of Santa
Cruz, California". On December 7, 1941, because of the
Pacific War, the office of Ginn & Co. was closed, and Miller
joined the Board of Censors of the United States Navy.
During the war, he was taken prisoner by the Japanese
forces in Leyte, and in January, 1944, he was transferred
to Catbalogan, Samar, where he was reported to have been
executed by said forces on March 11, 1944, and since then,
nothing has been heard from him. At the time of his death
in 1944, Miller owned the following properties:

"Real property situated in Ben-Lomond, Santa P5,000.00

Cruz, California valued at
..........................................................
Real property situated in Burlingame, San 16,200.00
Mateo, California valued at
...............................................................

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816 PHILIPPINE REPORTS ANNOTATED

Collector of Internal Revenue vs. De Lara, et al

Tangible Personal Property, worth 2,140.00

................................
Cash in the banks in the United States 21,178.20
...........................
Accounts Receivable from various persons in 36,062.74
the United States including notes
..............................
Stocks in U. S. Corporations and U. S. Savings 123,637.16
Bonds, valued at
.....................................................................
Shares of stock in Philippine Corporations, 51,906.45"
valued at ....

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Testate proceedings were instituted before the Superior

Court of California in Santa Cruz County, in the course of
which Miller's will of January 17, 1941 was admitted to
probate on May 10, 1946. Said court subsequently issued
an order and decree of settlement of final account and final
distribution, wherein it found that Miller was a "resident of
the County of Santa Cruz, State of California" at the time
of his death in 1944. Thereafter,, ancilliary proceedings
were filed by the executors of the will before the Court of
First Instance of Manila, which court by order of November
21, 1946, admitted to probate the will of Miller as probated
in the California court, and also found that Miller was a
resident of Santa Cruz, California, at the time of his death.
On July 29, 1949, the Bank of America, National Trust and
Savings Association of San Francisco, California, co-
executor named in Miller's will, filed an estate and
inheritance tax return with the Collector, covering only the
shares of stock issued by Philippine corporations, reporting
a liability of P269.43 for estate taxes and P230.27 for
inheritance taxes. After due investigation, the Collector
assessed estate and inheritance taxes, which was received
by the said executor on April 3, 1950. The estate of Miller
protested the assessment, but the Collector maintained his
stand and made the assessment of the liability for estate
and inheritance taxes, including penalties and other
increments at P77,300.92, as of January 16, 1954. This
assessment was appealed by De Lara as Ancilliary
Administrator before the Board of Tax Appeals, which
appeal was later heard and decided by the Court of Tax
Appeals.

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Collector of Int. Rev. vs. De Lara, et al.

In determining the "gross estate" of a decedent, under

Section 122 in relation to section 88 of our Tax Code, it is
first necessary to decide whether the decedent was a
resident or a non-resident of the Philippines at the time of
his death. The Collector maintains that under the tax laws,
residence and domicile have different meanings; that tax
laws on estate and inheritance taxes only mention resident
and non-resident, and no reference whatsoever is made to
domicile except in Section 93 (d) of the Tax Code; that
Miller during his long stay in the Philippines had acquired
a "residence" in this country, and was a resident thereof at
the time of his death, and consequently, his intangible
personal properties situated here as well as in the United
States were subject to said taxes. The Ancilliary
Administrator, however, equally maintains that for estate
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and inheritance tax purposes, the term "residence" is

synonymous with the term domicile.
We agree with the Court of Tax Appeals that at the time
that the National Internal Revenue Code was promulgated
in 1939, the prevailing construction given by the courts to
the term "residence" was synonymous with domicile, and
that the two were used interchangeably. Cases were cited
in support of this view, particularly that of Velilla vs.
Posadas, 62 Phil. 624, wherein this Tribunal used the
terms "residence" and "domicile" interchangeably and
without distinction, the case involving the application of
the term residence employed in the inheritance tax law at
the time (sections 1536-1548 of the Revised Administrative
Code), and that consequently, it will be presumed that in
using the term residence or resident in the Tax Code of
1939, the Legislature was giving it the meaning as
construed and interpreted by the Court. Moreover, there is
reason to believe that the Legislature adopted the
American (Federal and State) estate and inheritance tax
system (see e.g. Report to the Tax Commission of the
Philippines, Vol. II, pages 122-124, cited in I Dalupan,
National Internal Revenue Code Annotated, p. 469-470).

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818 PHILIPPINE REPORTS ANNOTATED

Collector of Int. Rev. vs. De Lara, et al.

In the United States, for estate tax purposes, a resident is

considered one who at the time of his death had his
domicile in the United States, and in American
jurisprudence, for purposes of estate and inheritance
taxation, "residence" is interpreted as .synonymous with
domicile, and that—

"The incidence of estate and succession taxes has historically been

determined by domicile and situs and not by the fact of actual
residence". (Bowring vs. Bowers, (1928) 24 F 2d 918, at 921, 6
AFTR 7498, cert. den (1928) 272 U.S. 608).

We also agree with the Court of Tax Appeals that at the

time of his death, Miller had his residence or domicile in
Santa Cruz, California. During his long stay in this
country, Miller never acquired a house for residential
purposes for he stayed at the Manila Hotel and later on at
the Army and Navy Club. Except for occasional visits, his
wife never stayed in the Philippines. The bulk of his
savings and properties were in the United States. To his
home in California, he had been sending souvenirs, such as
carvings, curios and other similar collections from the
Philippines and the Far East. In November, 1940, Miller
took out a property insurance policy and indicated therein
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his address as Santa Cruz, California, this aside from the

fact that Miller, as already stated, executed his will in
Santa Cruz, California, wherein he stated that he was "of
Santa Cruz, California". From the foregoing, it is clear that
as a non-resident of the Philippines, the only properties of
his estate subject to estate and inheritance taxes are those
shares of stock issued by Philippine corporations, valued at
P51,906.45. It is true, as stated by the Tax Court, that
while it may be the general rule that personal property,
like shares of stock in the Philippines, is taxable at the
domicile of the owner (Miller) under the doctrine of mobilia
secuuntur persona, nevertheless, when he during his life
time,

* * * "extended his activities with respect to his intangibles, so as

to avail himself of the protection and benefits of the laws of the
Philippines, in such a way as to bring his person or

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Collector of Int. Rev. vs. De Lara, et al.

property within the reach of the Philippines, the reason for a

single place of taxation no longer obtains—protection, benefit, and
power over the subject matter are no longer confined to
California, but also to the Philippines (Wells Fargo Bank & Union
Trust Co. vs.. Collector (1940), 70 Phil. 325). In the instant case,
the actual situs of the shares of stock is in the Philippines, the
corporation being domiciled herein: and besides, the right to vote
the certificates at stockholders' meetings, the right to collect
dividends, and the right to dispose of the shares including the
transmission and acquisition thereof by succession, all enjoy the
protection of the Philippines, so that the right to collect the estate
and inheritance taxes cannot be questioned (Wells Fargo Bank &
Union Trust Co. vs. Collector, supra). It is recognized that the
state may, consistently with due process, impose a tax upon
transfer by death of shares of stock in a domestic corporation
owned by a decedent whose domicile was outside of the state
(Burnett vs. Brooks, 288 U.S. 378; State Commission vs. Aldrich,
(1942) 316 U.S. 174, 86 L. Ed. 1358, 62 ALR 1008)." (Brief for the
Petitioner, p. 79-80).

The Ancilliary Administrator for purposes of exemption

invokes the proviso in Section 122 of the Tax Code, which
provides as follows:

* * * "And Provided, however, That no tax shall be collected under

this Title in respect of intangible personal property (a) if the
decedent at the time of his death was a resident of a foreign
country which at the time of his death did not impose a transfer
tax or death tax of any character in respect of intangible personal

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property of citizens of the Philippines not residing in that country,

or (b) if the laws of the foreign country of which the decedent was
resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of
intangible personal property owned by citizens of the Philippines
not residing in that foreign country."

The Ancilliary Administrator bases his claim of exemption

on (a) the exemption of non-residents from the California
inheritance taxes with respect to intangibles, and (b) the
exemption by way of reduction of P4,000 from the estates of
non-residents, under the United States Federal Estate Tax
Law. Section 6 of the California Inheritance Tax Act of
1935, now reenacted as Section 13851, California Revenue
and Taxation Code, reads as follows:

"SEC. 6. The following exemption from the tax are hereby

allowed:
*     *     *     *     *     *     *

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820 PHILIPPINE REPORTS ANNOTATED

Collector of Int. Rev. vs. De Lara, et al.

"(7) The tax imposed by this act in respect of intangible personal

property shall not be payable if decedent is a resident of a State or
Territory of the United States or a foreign state or country which
at the time of his death imposed a legacy, succession of death tax
in respect of intangible personal property within the State or
Territory or foreign state or country of residents of the States or
Territory or foreign state country, but did not impose a legacy or
succession or a death tax or a death tax of any character in
respect of intangible personal property within the State or
Territory or foreign state or country of residence of the decedent
at the time of his death contained a reciprocal provision under
which non-residents were exempted from legacy or succession
taxes or death taxes of every character in respect of intangible
personal property providing the State or Territory or foreign state
or country of residence of such non-residents allowed a similar
exemption to residents of the State, Territory or foreign state or
country of residence of such decedent."

Considering the State of California as a foreign country in

relation to -section 122 of Our Tax Code we beleive and
hold, as did the Tax Court, that the Ancilliary
Administrator is entitled to exemption from the inheritance
tax on the intangible personal property found in the
Philippines. Incidentally, this exemption granted to
nonresidents under the provision of Section 122 of our Tax
Code, was to reduce the burden of multiple taxation, which
otherwise would subject a decedent's intangible personal

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property to the inheritance tax, both in his place of

residence and domicile and the place where those
properties are found. As regards the exemption or
reduction of P4,000 based on the reduction under the
Federal State Tax Law in the amount of $2,000, we agree
with the Tax Court that the amount of $2,000 allowed
under the Federal Estate Tax Law is in the nature of
deduction and not of an exemption. Besides, as the Tax
Court observes—

* * * "this exemption is allowed on all gross estates of

nonresidents of the United States, who are not citizens thereof,
irrespective of whether there is a corresponding or similar
exemption from transfer or death taxes of non-residents of the
Philippines, who are citizens of the United States; and thirdly,
because this exemption is allowed on all gross estates of non-
residents irrespec-

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Collector of Int. Rev. vs. De Lara, et al.

tive of whether it involves tangible or intangible, real or personal

property; so that for these reasons petitioner cannot claim a
reciprocity." * * *

Furthermore, in the Philippines, there is already a

reduction on the gross estate for purposes of the
inheritance or estate tax in the amount of P3,000 under
section 85 of the Tax Code, before it was amended, which in
part provides as follows:

"SEC. 85. Rates of estate tax.—There shall be levied, assessed,

collected, and paid upon the transfer of the net estate of every
decedent, whether a resident or non-resident of the Philippines, a
tax equal to the sum of the following percentages of the value of
the net estate determined as provided in sections 88 and 89:
"One per centum of the amount by which the net estate exceeds
three thousand pesos and does not exceed ten thousand pesos;" * *
*

It will be noticed from the dispositive part of the appealed

decision of the Tax Court that the Ancilliary Administrator
was ordered to pay the amount of P2,047.22, representing
estate taxes due, together with interest and other
increments. Said Ancilliary Administrator invokes the
provisions of Republic Act No. 1253, which was passed for
the benefit of veterans, guerrillas or victims of Japanese
atrocities who died during the Japanese occupation. The
provisions of this Act could not be invoked during the
hearing before the Tax Court for the reason that said
Republic Act was approved only on June 10, 1955. We are
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satisfied that inasmuch as Miller not only suffered

deprivation of the war, but was killed by the Japanese
military forces, his estate is entitled to the benefits of this
Act. Consequently, the interests and other increments
provided in the appealed judgment should not be paid by
his estate.
With the above modification, the appealed decision of
the Court of Tax Appeals is hereby affirmed. We deem it
unnecessary to pass upon the other points raised in the
appeal. No costs.
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Collector of Int. Rev. vs. Batangas Trans. Co., et al.

Parás, C. J., Bengzon, Padilla, Reyes, A. Bautista

Angelo, Labrador, Concepción, Reyes, J. B. L., Endencia,
and Felix, JJ., concur.

Decision affirmed with modification.

_______________

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