Pirovano Vs Cir.docx

Pirovano v. CIR (14 SCRA 232) Sec. 32[B] of the NIRC provides that Gifts, bequests and devises are excluded from gross income liable to tax. Instead, such donations are subject to estate or gift taxes. However, if the amount is received on account of services rendered, whether constituting a demandable debt or not (such as remuneratory donations under Civil Law), the donation is considered taxable income. Facts: De la Rama Steamship Co. insured the life of Enrico Pirovano who was then its President and General Manager. The company initially designated itself as the beneficiary of the policies but, after Pirovano’s death, it renounced all its rights, title and interest therein, in favor of Pirovano’s heirs. The CIR subjected the donation to gift tax. Pirovano’s heirs contended that the grant was not subject to such donee’s tax because it was not a simple donation, as it was made for a full and adequate compensation for the valuable services by the late Priovano (i.e. that it was remuneratory). Issue: WON the donation is remuneratory and therefore not subject to donee’s tax, but rather taxable as part of gross income. Held: No. the donation is not remuneratory. There is nothing on record to show that when the late Enrico Pirovano rendered services as President and General Manager of the De la Rama Steamship Co. and was “largely responsible for the rapid and very successful development of the activities of the company", he was not fully compensated for such services. The fact that his services contributed in a large measure to the success of the company did not give rise to a recoverable debt, and the conveyances made by the company to his heirs remain a gift or a donation. The company’s gratitude was the true consideration for the donation, and not the services themselves.