The  facts in this  case  are   not  disputed.   Valentin Descals, an American citizen, died on September' 17, 1948, in the City of Manila where he was a resident.  He left as .heirs his brothers  Antonio and Ricardo and  a sister Angeles, all surnanied  Descals.   About two years before his death  he and his  brother  Ricardo  jointly bought a piece of real estate  property situated in the city of Barcelona, Spain.   In the  course of  the administration of said property in Spain, the two brothers had  differences, particularly about the repair and remodeling of the same, and to settle said differences, they agreed that Valentin become the owner pit the entire property  by buying  his brother Ricardo's  interest in it.  After an accounting, said interest of Ricardo was  valued at  P46.000  and Valentin acknowledged the said sum  as a debt by means  of a  promissory note dated November  1, 1946.

After the death of Valentin, proceedings were initiated in the City of Manila for the administration of his estate. The administrator did not include  in his  inventory that property in Spain.  According  to  his accounts the gross value of the estate was, P64,000 but after the  payment of the expenses, this was rendered to around P44,000.  Ricardo filed before the probate court a claim for P46.000 with interest based  on the promissory; note executed  by his brother in. 1946.  Said claim was approved.  The administrator paid about P80.000 on account of this  claim with interest leaving a balance of about P26,000.  The "balance in favor of Ricardo was later reduced to about P4.000 after the  administrator had delivered to him certain shares  of stock  and cash belonging to  the  estate.  On the  basis of this accounting and  report of the administrator,  there, apparently,  was no. property  left in the  estate subject  to estate and inheritance tax.

The  Collector  of 'Internal  Revenue, however,  assessed the  estate for purposes of taxation without deducting the claim  filed by Ricardo despite its approval  by the probate court and fixed and demanded the payment of P701.53 by way of  estate  tax  and P2,144.10  as inheritance tax, a total of P2,845.63.   The  administrator paid this amount under protest and  later brought the present action  in the Court of First  Instance of Manila to get its  refund.  After hearing,  the lower  court dismissed  the  complaint with costs.  The administrator appealed to the Court.of Appeals, which court later indorsed  the appeal to us as involving only questions of  law.

For purposes of reference  we  are  reproducing sections 88 and 89 of the National internal Revenue Code, to wit:

"Sec. 88. Gross estate. The  value  of  the  gross of  the decedent  shall be determined by  including  the value the time of his death of all property, real or personal, tangible, intangible, wherever situated except real property situated outside Philippines.  (Italics ours.)

"Sec. ,89. Net  estate. For  the  purpose of the  taxes 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  which shall,  in no  case, exceed five percentum of the gross estate;

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

(C)  For  claims against the estate;

(D)  For claims of  the deceased against  insolvent persons where the value of decendent's  interest therein is  included value of the gross estate; and

(E)  For unpaid mortgages upon or .any  indebtedness respect to, property  where the value  of  decedent's interest the undiminished by such mortgage or indebtedness, is included in the value of the gross  estate."  (Italics  ours.)

It will be seen  that  under  section  88, real property situated outside  the Philippines  is  not included in  the value of the gross estate of a deceased resident.  Not being included as  part of the  estate, it cannot be  subject to taxation such as estate tax and inheritance tax.  Because of this, section  89 (e)  provides  that for  the  purpose of the taxes imposed  under, that  chapter  of  the  Tax Code, in the  determination  of the value of the net estate, in order  that  indebtedness in respect  to  property  pay be allowed to be deducted from the value of the gross estate, the value  of decedent's  interest  in  said  property,  undiminished by said indebtedness must be included in the value of the gross estate.  Where however, in the determination of the  gross estate the law (section 88) does not permit the inclusion of property outside of  the Philippines, then it is but just and reasonable that the indebtedness  incurred by  the decedent by reason  of  said  property  or in  the acquisition  thereof  should also  not be  discounted  from the gross  estate for  purpose  of taxation.  This  is  also the rule and practice in the United States where in  the determination  of the gross and net  estate of a decedent, properties outside  the jurisdiction,  and indebtedness  incurred  in respect to or by reason of said property, are  not considered, being regarded as impossible items.

'Inasmuch as real property situated outside of  the United  States does not form  a part of the gross  estate,  no  deduction may be taken  of any mortgage  thereon or  any  indebtedness in  respect thereof." (Reg.  Sec. 81,38.  (Vol. 2,  Rabkin and Johnson, Federal lncome,  Gift and Estate Taxation, 1954 ed., Sec. 63.03(10), p. 6319) "'. .  .now the deduction is allowed only in  case tile mortgaged property was included in the gross estate;... (Rodick vs. Helvering, 87 Fed.  (2d) 328, 331  [1937].)

". .  . among the deductions allowed were 'unpaid mortgages', an impossible item unless the whole value of the mortgaged property is to  be  included in  the gross  estate  under  section 402(a), 40  Stat. 1097,  as an  interest  subject to the payment  of charges against his estate.'   (City Bank  Farmers' Trust Co. vs. Bowers, 68 Fed. (2d)  909, 913  [1934].)"

We deem it unnecessary to discuss the other points raised in this appeal.

Finding no reversible  error  in  the decision  appealed from,  the same is hereby affirmed, with costs in  both Instances.

Parás, C. J., Bengzon, Padilla, Reyes, A., Bautista Angelo, Labrador, Concepcion, Reyes, J. B. L. and Endencia, JJ., concur.