GONZAGA-REYES, J.: Supr-ema

Assailed in this petition for review on certiorari is the December 21, 1995 Decision^.1 [Entitled "Commissioner of Internal Revenue v. Josefina P. Pajonar, as Administratrix of the Estate of Pedro P. Pajonar, and Court of Tax Appeals." Rollo, 35-46.] of the Court of Appeals^.2 [Eighth Division composed of J. Jaime M. Lantin, ponente; and JJ Eduardo G. Montenegro and Jose C. De la Rama, concurring.] in CA-G.R. Sp. No. 34399 affirming the June 7, 1994 Resolution of the Court of Tax Appeals in CTA Case No. 4381 granting private respondent Josefina P. Pajonar, as administratrix of the estate of Pedro P. Pajonar, a tax refund in the amount of P76,502.42, representing erroneously paid estate taxes for the year 1988.

Pedro Pajonar, a member of the Philippine Scout, Bataan Contingent, during the second World War, was a part of the infamous Death March by reason of which he suffered shock and became insane. His sister Josefina Pajonar became the guardian over his person, while his property was placed under the guardianship of the Philippine National Bank (PNB) by the Regional Trial Court of Dumaguete City, Branch 31, in Special Proceedings No. 1254. He died on January 10, 1988. He was survived by his two brothers Isidro P. Pajonar and Gregorio Pajonar, his sister Josefina Pajonar, nephews Concordio Jandog and Mario Jandog and niece Conchita Jandog.

On May 11, 1988, the PNB filed an accounting of the decedent's property under guardianship valued at P3,037,672.09 in Special Proceedings No. 1254. However, the PNB did not file an estate tax return, instead it advised Pedro Pajonar's heirs to execute an extrajudicial settlement and to pay the taxes on his estate. On April 5, 1988, pursuant to the assessment by the Bureau of Internal Revenue (BIR), the estate of Pedro Pajonar paid taxes in the amount of P2,557.

On May 19, 1988, Josefina Pajonar filed a petition with the Regional Trial Court of Dumaguete City for the issuance in her favor of letters of administration of the estate of her brother. The case was docketed as Special Proceedings No. 2399. On July 18, 1988, the trial court appointed Josefina Pajonar as the regular administratrix of Pedro Pajonar's estate.

On December 19, 1988, pursuant to a second assessment by the BIR for deficiency estate tax, the estate of Pedro Pajonar paid estate tax in the amount of P1,527,790.98. Josefina Pajonar, in her capacity as administratrix and heir of Pedro Pajonar's estate, filed a protest on January 11, 1989 with the BIR praying that the estate tax payment in the amount of P1,527,790.98, or at least some portion of it, be returned to the heirs.^.3 [CA Records, 45-53.] Jur-is

However, on August 15, 1989, without waiting for her protest to be resolved by the BIR, Josefina Pajonar filed a petition for review with the Court of Tax Appeals (CTA), praying for the refund of P1,527,790.98, or in the alternative, P840,202.06, as erroneously paid estate tax.^.4 [Ibid., 37-44.] The case was docketed as CTA Case No. 4381.

On May 6, 1993, the CTA ordered the Commissioner of Internal Revenue to refund Josefina Pajonar the amount of P252,585.59, representing erroneously paid estate tax for the year 1988.^.5 [The CTA made the following computations¾

Among the deductions from the gross estate allowed by the CTA were the amounts of P60,753 representing the notarial fee for the Extrajudicial Settlement and the amount of P50,000 as the attorney's fees in Special Proceedings No. 1254 for guardianship.^.6 [Ibid., 78-79, 81-83.]Juri-ssc

On June 15, 1993, the Commissioner of Internal Revenue filed a motion for reconsideration^.7 [CA Records, 118-130.] of the CTA's May 6, 1993 decision asserting, among others, that the notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship proceedings are not deductible expenses.

On June 7, 1994, the CTA issued the assailed Resolution^.8 [Rollo, 47-56.] ordering the Commissioner of Internal Revenue to refund Josefina Pajonar, as administratrix of the estate of Pedro Pajonar, the amount of P76,502.42 representing erroneously paid estate tax for the year 1988. Also, the CTA upheld the validity of the deduction of the notarial fee for the Extrajudicial Settlement and the attorney's fees in the guardianship proceedings.

On July 5, 1994, the Commissioner of Internal Revenue filed with the Court of Appeals a petition for review of the CTA's May 6, 1993 Decision and its June 7, 1994 Resolution, questioning the validity of the abovementioned deductions. On December 21, 1995, the Court of Appeals denied the Commissioner's petition.^.9 [Ibid., 35-46.]

Hence, the present appeal by the Commissioner of Internal Revenue.

The sole issue in this case involves the construction of section 79^.10 [SEC. 79 Computation of net estate and estate tax. – For the purpose of the tax imposed in this Chapter, the value of the net estate shall be determined:

(a).....In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate-

(1)..... Expenses, losses, indebtedness, and taxes. – Such amounts-

(A).....For funeral expenses in an amount equal to five per centum of the gross estate but in no case to exceed P50,000.00;

(B).....For judicial expenses of the testamentary or intestate proceedings;

xxx.....xxx.....xxx] of the National Internal Revenue Code^.11 [This refers to the 1977 National Internal Revenue Code, as amended. On the date of decedent’s death (January 10, 1988), the latest amendment to the Tax Code was introduced by Executive Order No. 273, which became effective on January 1, 1988.] (Tax Code) which provides for the allowable deductions from the gross estate of the decedent. More particularly, the question is whether the notarial fee paid for the extrajudicial settlement in the amount of P60,753 and the attorney's fees in the guardianship proceedings in the amount of P50,000 may be allowed as deductions from the gross estate of decedent in order to arrive at the value of the net estate.

We answer this question in the affirmative, thereby upholding the decisions of the appellate courts. J-jlex

In its May 6, 1993 Decision, the Court of Tax Appeals ruled thus:

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Upon a motion for reconsideration filed by the Commissioner of Internal Revenue, the Court of Tax Appeals modified its previous ruling by reducing the refundable amount to P76,502.43 since it found that a deficiency interest should be imposed and the compromise penalty excluded.^.13 [

Ibid., 54.] However, the tax court upheld its previous ruling regarding the legality of the deductions -

In upholding the June 7, 1994 Resolution of the Court of Tax Appeals, the Court of Appeals held that: Newmiso

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The deductions from the gross estate permitted under section 79 of the Tax Code basically reproduced the deductions allowed under Commonwealth Act No. 466 (CA 466), otherwise known as the National Internal Revenue Code of 1939,^.16 [Approved on June 15, 1939.] and which was the first codification of Philippine tax laws. Section 89 (a) (1) (B) of CA 466 also provided for the deduction of the "judicial expenses of the testamentary or intestate proceedings" for purposes of determining the value of the net estate. Philippine tax laws were, in turn, based on the federal tax laws of the United States.^.17 [Wise & Co. v. Meer, 78 Phil 655 (1947)] In accord with established rules of statutory construction, the decisions of American courts construing the federal tax code are entitled to great weight in the interpretation of our own tax laws.^.18 [Carolina Industries, Inc. v. CMS Stock Brokerage, Inc., 97 SCRA 734 (1980)] Scc-alr

Judicial expenses are expenses of administration.^.19 [Lorenzo v. Posada, 64 Phil 353 (1937)] Administration expenses, as an allowable deduction from the gross estate of the decedent for purposes of arriving at the value of the net estate, have been construed by the federal and state courts of the United States to include all expenses "essential to the collection of the assets, payment of debts or the distribution of the property to the persons entitled to it."^.20 [34A Am Jur 2d, Federal Taxation (1995), sec. 144, 288, citing Union Commerce Bank, trans, (1963) 39 TC 973, affd & revd on other issues (1964, CA6) 339 F2d 163, 65-1 USTC p 12279, 15 AFTR 2d 1281.] In other words, the expenses must be essential to the proper settlement of the estate. Expenditures incurred for the individual benefit of the heirs, devisees or legatees are not deductible.^.21 [Ibid., sec. 144,272, citing Bretzfelder, Charles, exr v. Com., (1936, CA2) 86 F2d 713, 36-2 USTC sec. 9548, 18 AFTR 653.] This distinction has been carried over to our jurisdiction. Thus, in Lorenzo v. Posadas^.22 [Lorenzo v. Posada, supra.] the Court construed the phrase "judicial expenses of the testamentary or intestate proceedings" as not including the compensation paid to a trustee of the decedent's estate when it appeared that such trustee was appointed for the purpose of managing the decedent's real estate for the benefit of the testamentary heir. In another case, the Court disallowed the premiums paid on the bond filed by the administrator as an expense of administration since the giving of a bond is in the nature of a qualification for the office, and not necessary in the settlement of the estate.^.23 [Sison vs. Teodoro, 100 Phil. 1055 (1957)] Neither may attorney's fees incident to litigation incurred by the heirs in asserting their respective rights be claimed as a deduction from the gross estate.^.24 [Johannes v. Imperial, 43 Phil 597 (1922)]

Coming to the case at bar, the notarial fee paid for the extrajudicial settlement is clearly a deductible expense since such settlement effected a distribution of Pedro Pajonar's estate to his lawful heirs. Similarly, the attorney's fees paid to PNB for acting as the guardian of Pedro Pajonar's property during his lifetime should also be considered as a deductible administration expense. PNB provided a detailed accounting of decedent's property and gave advice as to the proper settlement of the latter's estate, acts which contributed towards the collection of decedent's assets and the subsequent settlement of the estate.

We find that the Court of Appeals did not commit reversible error in affirming the questioned resolution of the Court of Tax Appeals.

WHEREFORE, the December 21, 1995 Decision of the Court of Appeals is AFFIRMED. The notarial fee for the extrajudicial settlement and the attorney's fees in the guardianship proceedings are allowable deductions from the gross estate of Pedro Pajonar.

Melo, (Chairman), Vitug, Panganiban, and Purisima, JJ., concur. Calrs-pped