PIROVANO v.

CIR
G.R. No. L-19865 July 31, 1965
EN BANC REYES, J.B.L., J.:

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 Pirovanos death, it renounced
all its rights, title and interest therein, in favor of Pirovanos heirs.

The CIR subjected the donation to gift tax. Pirovanos heirs contended
that the grant was not subject to such donees 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 donees

tax, but rather taxable as part of gross income.

DECISION:

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 companys gratitude was the true
consideration for the donation, and not the services themselves.

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.
 LLADOC v. CIR
G.R. No. L-19201 June 16, 1965
EN BANC PAREDES, J.:

FACTS:

Sometime in 1957, M.B. Estate Inc., of Bacolod City, donated 10,000.00

pesos in cash to Fr. Crispin Ruiz, the parish priest of Victorias, Negros Occidental,
and predecessor of Fr. Lladoc, for the construction of a new Catholic church
in the locality. The donated amount was spent for such purpose.

On March 3, 1958, the donor M.B. Estate filed the donor's gift tax return.
Under date of April 29, 1960. Commissioner of Internal Revenue issued an
assessment for the donee's gift tax against the Catholic Parish of Victorias of
which petitioner was the parish priest.

ISSUE:

Whether or not the imposition of gift tax is valid despite the fact that the
Constitution provides an exemptions and that Fr. Lladoc was not the Parish
priest at the time of donation.

DECISION:

Yes, the imposition of the gift tax was valid. Section 22(3) Article VI of the
Constitution contemplates exemption only from payment of taxes assessed on
such properties as Property taxes contra distinguished from Excise taxes. The
imposition of the gift tax on the property used for religious purpose is not a
violation of the Constitution. A gift tax is not a property by way of gift inter vivos,
the imposition of which on property used exclusively for religious purposes,
does not constitute an impairment of the Constitution. As well observed by the
learned respondent Court, the phrase "exempt from taxation," as employed in
the Constitution (supra) should not be interpreted to mean exemption from all
kinds of taxes. And there being no clear, positive or express grant of such
privilege by law, in favor of petitioner, the exemption herein must be denied.

A gift tax is not a property tax, but an excise tax imposed on the transfer
of property by way of gift inter vivos.
 SPOUSES. GESTOPA v. CA
G.R. No. 111904 October 5, 2000
SECOND DIVISION QUISUMBING, J.:

FACTS:

Spouses Danlag own six parcels of land. To four parcels of land, they
executed a donation mortis causa in favor of respondent Mercedes Danlag-
Pilapil, reserving donor's rights to amend, cancel, or revoke the donation and
to sell or encumber such properties. Years later, they executed another
donation, this time inter vivos, to six parcels of land in favor of respondents,
reserving their rights to the fruits of the land during their lifetime and for
prohibiting the donee to sell or dispose the properties donated. Subsequently,
the spouses sold 2 parcels to herein petitioners, spouses Gestopa, and
eventually revoking the donation. Respondent filed a petition to quiet title,
stating that she had already become the owner of the parcels of land. Trial
Court ruled in favor of petitioners, but CA reversed.

ISSUE:

Whether the (second) donation was inter vivos or mortis causa

DECISION:

It was donation inter vivos. The spouses were aware of the difference
between the two donations, and that they needed to execute another deed
of donation inter vivos, since it has a different application to a donation mortis
causa. Also, the court stated four reasons to the matter: (1) that the spouses
donated the parcels of land out of love and affection, a clear indication of a
donation inter vivos; (2) the reservation of a lifetime usufruct; (3) reservation of
sufficient properties for maintenance that shows the intention to part with their
six lot; and (4) respondent's acceptance, contained in the deed of donation.
Once a deed of donation has been accepted, it cannot be revoked, except
for officiousness or ingratitude, which the spouses failed to invoke.

Acceptance is a mark that the donation is inter vivos. Donations mortis

causa, being in the form of a will, are not required to be accepted by the
donee during the donors lifetime.
 TANG HO v. THE BOARD OF TAX APPEALS
G.R. No. L-5949 November 19, 1955
EN BANC REYES, J.B.L., J.:

FACTS:

The BIR found that petitioners had an investment in shares issued to them
from their family corporation. The CIR regarded these transfers as undeclared
gifts made in the respective years, and assessed against petitioners. After
paying the basic tax, petitioners asked for the reassessment stating that each
of them received by way of gift inter vivos, that those who got married were
given additional money as propter nuptias and those who did not received it
by inter vivos. Petitioners also contend that the cash donated came from
conjugal funds, claiming for exemption.

The CIR refused to revise his original assessment. Upon petition to the
CTA, the CTA still upheld the CIR's assessment.

ISSUE:

Whether petitioners are liable for tax. Whether petitioners can claim tax
exemptions twice from the conjugal funds.

DECISION:

YES. As petitioners failed to pay taxes for the past ten years they are now
scarcely in a position to complain if their contentions are not accepted as
truthful without satisfactory corroboration. Any other view would leave the
collection of taxes at the mercy of explanations concocted ex post facto by
evading taxpayers, drafted to suit any facts disclosed upon investigation, and
safe from contradiction because the passing years have erased all
trace of the truth.

NO. The Court took a look at the Spanish Civil Code of 1889, which was
the governing law in this case. The provisions state that the donations of
property "by the husband" from the "donations by both spouses by common
consent" differs. The lawful donations by the husband to the common children
are valid and are chargeable to the community property, irrespective of
whether the wife agrees or objects thereof. To be a donation by both spouses,
taxable to both, the wife must expressly join the husband in making the gift; her
participation therein cannot be implied.

A donation by the husband alone does not become in law a donation

by both spouses merely because it involves property of the conjugal
partnership. A donation of property belonging to the conjugal partnership,
made during its existence, by the husband alone in favor of the common
children, is taxable to him exclusively as sole donor.
 ABELLO ET. AL. v. CIR
G.R. No. 120721 Feb. 23, 2005
FIRST DIVISION AZCUNA, J.:

FACTS:

During the 1987 national elections, petitioners, who are partners in the
ACCRA law firm, contributed P882,661.31 each to the campaign funds of
Senator Edgardo Angara, then running for the Senate. The BIR then assessed
each of the petitioners P263,032.66 for their contributions. Petitioners
questioned the assessment claiming that political or electoral contributions are
not considered gifts under NIRC therefore, not liable for donors tax. The claim
for exemption was denied by the Commissioner.

The BIR denied their motion. They then filed a petition with the CTA,
which was granted.

On appeal, the CA again held in favor of the BIR.

ISSUE:

Whether the contributions are liable for donor's tax.

DECISION:

Yes. The NIRC does not define transfer of property by gift. However, the
Civil Code, by reference, considers such as donations. The present case falls
squarely within the definition of a donation. There was intent to do an act of
liberality or animus donandi was present since each of the petitioners gave
their contributions without any consideration.

Taken together with the Civil Code definition of donation, Section 91 of

the NIRC is clear and unambiguous, thereby leaving no room for construction.
Petitioners contribution of money without any material consideration evinces
animus donandi. The fact that their purpose for donating was to aid in the
election of the donee does not negate the presence of donative intent.
Petitioners raise the fact that since 1939 when the first Tax Code was enacted,
up to 1988 the BIR never attempted to subject political contributions to donors
tax.

This Court holds that the BIR is not precluded from making a new
interpretation of the law, especially when the old interpretation was flawed. It
is a well-entrenched rule that "erroneous application and enforcement of the
law by public officers do not block subsequent correct application of the
statute" (PLDT v. Collector of Internal Revenue, 90 Phil. 676), "and that the
Government is never estopped by mistake or error on the part of its agents.
 THE CHRISTIAN & MISSIONARY ALLIANCE CHURCHES OF THE PHIL. v.
COLLECTOR OF INTERNAL REVENUE
CTA Case No. 668

FACTS

Petitioner is a religious corporation duly organized and existing under

and by virtue of the laws of the Philippines. On March 4, 1954 and Feb. 17, 1956,
the petitioner received by way of donation from the Christian and Missionary
Alliance a total of 12 parcels of lands and the improvements thereon. The
properties were already devoted to religious purposes prior to donation and
continued to be used for the same purposes which they had been employed.

On Feb. 21, 1956, petitioner applied with the BIR for tax clearance
certificates (the donation is exempt from taxation) for the purpose of
registering the deeds of donation effecting the transfer of certificate of title in
favor of the petitioner. Instead of issuing tax clearance, collector on internal
revenue (respondent) assessed against and demanded from the petitioner
total sum of P23, 312.70 as donees gift taxes.

Petitioner protested against the assessment and requested for

reconsideration and cancellation of the same. Respondent denied
reconsideration and insisted on the payment of assessed gift taxes.

ISSUE

Whether or Not donations of real properties devoted exclusively to

religious purposes by a religious corporation in favor of another religious
corporation are subject to gift taxes.

DECISION

Petitioner is not liable for payment of donees gift taxes. One of the
essential elements of a taxable gift is that there must be a clear and
unmistakable intent on the part of the donor to make the gift. The donative
intent is wanting, as the petitioner did not receive a thing or right under the
deeds of donation, rather, assumed an obligation to administer the properties
transferred to it for religious purposes only.

The Christian & Missionary Alliance Churches of the Phil. Inc. is simply a
religious society connected with, subordinate to and a district organization of
The Christian & Missionary Alliance Mission of the Phil. and is charged with the
administration of the temporalities and management of the estates and
properties of the latter. Hence, such transfer must be excluded from payment
of gift taxes.
 PHILAM LIFE & GEN. INSURANCE CO. v. SEC. OF FINANCE & CIR
G.R. No. 210987 November 24, 2014
THIRD DIVISION VELASCO, JR., J.:

FACTS:

PhilAm Life sold its shares in PhilAm Care Health Systems to STI Investments
Inc., the highest bidder. After the sale was completed, Philam life applied for
a tax clearance and was informed by BIR that there is a need to secure a BIR
Ruling due to a potential donors tax liability on the sold shares.

The petitioner contend that The transaction cannot attract donors tax
liability since there was no donative intent and, ergo, no taxable donation,
citing BIR Ruling [DA-(DT-065) 715-09] dated November 27, 2009; that the shares
were sold at their actual fair market value and at arms length; that as long as
the transaction conducted is at arms lengthsuch that a bonafide business
arrangement of the dealings is done in the ordinary course of businessa sale
for less than an adequate consideration is not subject to donors tax; and that
donors tax does not apply to sale of shares sold in an open bidding process.
The CIR denied the request contending Through BIR Ruling No. 015-12. As
determined by the Commissioner, the selling price of the shares thus sold was
lower than their book value based on the financial statements of Philam Care
as of the end of 2008. The Commissioner held donors tax became imposable
on the price difference pursuant to Sec. 100 of the National Internal Revenue
Code (NIRC):

SEC. 100. Transfer for Less Than Adequate and full Consideration. - Where
property, other than real property referred to in Section 24(D), is transferred for
less than an adequate and full consideration in money or moneys worth, then
the amount by which the fair market value of the property exceeded the value
of the consideration shall, for the purpose of the tax imposed by this Chapter,
be deemed a gift, and shall be included in computing the amount of gifts
made during the calendar year.

ISSUE
W/N the sales of shares sold for less than an adequate consideration be
subject to donors tax?

DECISION:

The price difference is subject to donors tax. Petitioners substantive

arguments are unavailing. The absence of donative intent, if that be the case,
does not exempt the sales of stock transaction from donors tax since Sec. 100
of the NIRC categorically states that the amount by which the fair market value
of the property exceeded the value of the consideration shall be deemed a
gift. Thus, even if there is no actual donation, the difference in price is
considered a donation by fiction of law.
 Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the NIRC
but merely sets the parameters for determining the fair market value of a sale
of stocks. Such issuance was made pursuant to the Commissioners power to
interpret tax laws and to promulgate rules and regulations for their
implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having been

issued after the sale, was being applied retroactively in contravention to Sec.
246 of the NIRC.26 Instead, it merely called for the strict application of Sec. 100,
which was already in force the moment the NIRC was enacted.

As to the question where does one seek immediate recourse from the
adverse ruling of the Secretary of Finance in its exercise of its power of review
under Sec. 4?

Petitioner essentially questions the CIRs ruling that Petitioners sale of

shares is a taxable donation under Sec. 100 of the NIRC. The validity of Sec. 100
of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely questioned incidentally
since it was used by the CIR as bases for its unfavorable opinion. Clearly, the
Petition involves an issue on the taxability of the transaction rather than a direct
attack on the constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC
25-11. Thus, the instant Petition properly pertains to the CTA under Sec. 7 of RA
9282.

As a result of the seemingly conflicting pronouncements, petitioner

submits that taxpayers are now at a quandary on what mode of appeal should
be taken, to which court or agency it should be filed, and which case law
should be followed.

Petitioners above submission is specious (erroneous). CTA, through its

power of certiorari, to rule on the validity of a particular administrative rule or
regulation so long as it is within its appellate jurisdiction. Hence, it can now rule
not only on the propriety of an assessment or tax treatment of a certain
transaction, but also on the validity of the revenue regulation or revenue
memorandum circular on which the said assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact
that the CA petition not only contested the applicability of Sec. 100 of the NIRC
over the sales transaction but likewise questioned the validity of Sec. 7(c.2.2)
of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the
controversy, contrary to petitioners arguments.
 LOURDES COLLEGE v. CIR
CTA Case No. 8038 Feb. 2, 2016
EN BANC RINGPIS-LIBAN, J.:

FACTS

Petitioner is a non-stock, non-profit educational corporation organized

and existing under the laws of the Philippines, offering basic education and
higher education courses under the authority of the Department of Education
and Commissioner of Higher Education, respectively.
Regional Director, Mustapha M. Gandarosa, authorized Revenue Officer
Tindug C. Casan to examine petitioner's books of accounts and other
accounting records for all internal revenue taxes from March 1, 2006 to April
30, 2007. As a result of said investigation, Regional Director Gandarosa, sent a
Formal Letter of Demand to petitioner demanding payment of deficiency
expanded withholding tax (EW1) and deficiency fringe benefit tax in the total
amount of P4,222,51 0.1 0, inclusive of surcharges, interest and compromise
penalty. Petitioner protested the said assessments.

ISSUE
WON the amount paid by petitioner to the Congregation is subject to
Donors tax

DECISION

Petitioner argues that the amount paid by the School to the

Congregation for the services rendered by the ten (1 0) sisters were actually
paid by the School to the Congregation, since the sisters are not allowed to
receive income under their vow of poverty. Hence, the amount paid to the
Congregation was not a donation but an income of the corporation.

Petitioner cannot invoke exemption from payment of donor's tax since

petitioner failed to prove that the amount of P2,326,01 0.52 paid by petitioner
to the Congregation is considered as income of the latter.

Sec. 101. Exemption of Certain Gifts.- The following gifts or donations shall
be exempt from the tax provided for in this Chapter:

"3) Gift in favor of an educational and/ or charitable, religious, cultural

or social welfare corporation, institution, accredited nongovernmental
organization, trust or philanthropic organization or research institution or
organization: Provided, however, That not more than thirty percent (30%)
of said gifts shall be used by such donee for administration purposes. x x
x" (Emphasis supplied.)
 TOENEC PHILIPPINES INC. v. CIR
CTA Case No. 8653 Jan. 27, 2016
FIRST DIVISION DEL ROSARIO, P.J.:
FACTS
Petitioner is engaged in construction activities related to power
generation, transformer, transmission, distribution, process equipment
installation, and other consulting services, such as surveying, design, and
supervision of said construction activities. Toenec Corporation (Toenec
Japan), a corporation organized and existing under the laws of Japan, owns
seven thousand two hundred (7,200) shares of stock of petitioner. On May 24,
2010, petitioner and Toenec Japan executed a Capital Infusion Agreement,
wherein Toenec Japan contributed P30,000,000.00 as additional paid-in
capital (APIC) to petitioner purportedly to sustain the viability of its operations
and to protect its original capital investment therein.

Philippine Contractor's Accreditation Board (PCAB) sought the advice

of Revenue District Officer Gerry O. Dumayas whether the APIC of
P30,000,000.00 reflected in the audited financial statement of petitioner is
subject to payment of donor's tax. BIR informed petitioner that the infusion of
additional capital is subject to donor's tax. Petitioner contend that the
additional capital infusion made by Toenec Japan does not fall within the
purview of the concept of donation; hence, not subject to donor's tax.

ISSUE
Whether or not petitioner is liable to pay the amount of P16,467,534.25
and P50,000.00 (inclusive of surcharges and interest), as deficiency donor's tax
and compromise penalty relative to its Capital Infusion Agreement with
Toenec Japan executed on May 24, 2010.

DECISION
The person or entity liable to pay donor's tax is the donor, or the person
or entity transferring the property to another. Moreover, if the donor is a non-
resident, the return must be led with the Philippine Embassy or with the Office
of the Commissioner, particularly with the Revenue District Office (RDO) No. 39.
The gift tax or donor's tax is a tax on the privilege of transmitting one's property
or property rights to another or others without adequate and full valuable
consideration.

Petitioner is the entity that received the P30,000,000.00 cash and, thus,
considered as the donee. Consequently, as the donee, petitioner is not liable
to pay donor's tax, pursuant to Section 98 of the NIRC of 1997, as amended.
The liability to pay donor's tax is not transferable. The burden to pay the donor's
tax is imposed upon the donor and not upon the donee. While the imposition
of tax is a matter of law, mere exigency and convenience may not be used as
an excuse to collect donor's tax from a donee simply because the latter is
located in the Philippines. Basic is the rule that laws imposing tax are strictly
construed against the taxing authority and in favor of the taxpayer.
 URBANO VELASCO v. BIR
CTA Case No. 8497 May 17, 2016
FIRST DIVISION DEL ROSARIO, P.J.:

FACTS

Petitioner sold to Gervel Inc. (Gervel) and Metropolitan Management

Corporation (MMC) a total of 532,180 shares of stocks for a total consideration
of P86, 428, 514. 07. Atty. Mahinardo G. Mailing, Revenue District Officer
assessed against the petitioner an alleged total donor's tax due of
P9,473,081.25, and demanding collection of said tax as a requisite for the
processing and issuance of the Certificate Authorizing Registration (CAR).

BIR treated as deemed gift subject to donor's tax under Section 100 of
the NIRC of 1997, as amended, the difference between the book value (P122,
739,627.27) and selling price (P86,428,514.07) of the said 532,180 shares.
Petitioner filed a protest letter8 on the aforesaid findings of the ROO stating
that the sale of stocks were made without donative intent and it was an arm-
length transaction, thus, it is not subject to donor's tax.

ISSUE
WON the difference between the book value and the selling price of the
532, 180 shares sold is considered as a gift subject to donors tax.

DECISION

Donor's tax is imposed upon the transfer by any person of the property
by gift as provided under Section 98 of the NIRC of 1997, as amended.
Donation has the following elements: (a) the reduction of the patrimony of the
donor; (b) the increase in the patrimony of the donee; and, (c) the intent to
do an act of liberality or animus donandi.

Included in the concept of a gift or donation is the amount in excess of

the fair market value of the property over the value of the consideration for
property transferred for less than adequate and full consideration. Further, in
case the fair market value of the shares of stock sold, bartered, or exchanged
is greater than the amount of money and/or fair market value of the property
received, the excess of the fair market value of the shares of stock sold,
bartered or exchanged over the amount of money and the fair market value
of the property, if any, received as consideration shall be deemed a gift
subject to the donor's tax under Sec. 100 of the Tax Code.

The absence of donative intent does not exempt the sales of stock
transaction from donor's tax; and that even if there is no actual donation, the
difference in price is considered a donation by fiction of law.