G.R. No. 210987 November 24, 2014 following: that the transaction cannot attract donors tax (c.

act donors tax (c.1) In the case of cash sale, the selling price shall be the
liability since there was no donative intent and,ergo, no consideration per deed of sale.
THE PHILIPPINE AMERICAN LIFE AND GENERAL taxable donation, citing BIR Ruling [DA-(DT-065) 715-09]
5
INSURANCE COMPANY, Petitioner, vs. THE SECRETARY OF dated November 27, 2009; that the shares were sold at their xxxx
FINANCE and THE COMMISSIONER OF INTERNAL actual fair market value and at arms length; that as long as
REVENUE, Respondents. the transaction conducted is at arms lengthsuch that a
(c.1.4) In case the fair market value of the shares of stock
bona fide business arrangement of the dealings is done inthe
sold, bartered, or exchanged is greater than the amount of
ordinary course of businessa sale for less than an adequate
DECISION money and/or fair market value of the property received, the
consideration is not subject to donors tax; and that donors
excess of the fair market value of the shares of stock sold,
tax does not apply to saleof shares sold in an open bidding
VELASCO, JR., J.: bartered or exchanged overthe amount of money and the fair
process.
market value of the property, if any, received as consideration
shall be deemed a gift subject to the donorstax under Section
Nature of the Case On January 4, 2012, however, respondent Commissioner on 100 of the Tax Code, as amended.
Internal Revenue (Commissioner) denied Philamlifes request
Before the Court is a Petition for Review on Certiorari under through BIR Ruling No. 015-12. As determined by the
xxxx
Rule 45 of the Rules of Court assailing and seeking the Commissioner, the selling price of the shares thus sold was
reversal of the Resolutions of the Court of Appeals (CA) in CA- lower than their book value based on the financial statements
G.R. SP No. 127984, dated May 23, 20131 and January 21, of PhilamCare as of the end of 2008. 6 As such, the (c.2) Definition of fair market valueof Shares of Stock. For
2014, which dismissed outright the petitioner's appeal from Commisioner held, donors tax became imposable on the purposes of this Section, fair market value of the share of
the Secretary of Finance's review of BIR Ruling No. 015-12 2 for price difference pursuant to Sec. 100 of the National Internal stock sold shall be:
lack of jurisdiction. Revenue Code (NIRC), viz:
xxxx
The Facts SEC. 100. Transfer for Less Than Adequate and full
Consideration.- Where property, other than real property (c.2.2) In the case of shares of stock not listed and traded in
referred to in Section 24(D), is transferred for less than an the local stock exchanges, the book value of the shares of
Petitioner The Philippine American Life and General Insurance
adequate and full consideration in money or moneys worth, stock as shown in the financial statements duly certified by an
Company (Philamlife) used to own 498,590 Class A shares in
then the amount by which the fair market value of the independent certified public accountant nearest to the date of
Philam Care Health Systems, Inc. (PhilamCare), representing
property exceeded the value of the consideration shall, for the sale shall be the fair market value.
49.89% of the latter's outstanding capital stock. In 2009,
purpose of the tax imposed by this Chapter, be deemed a gift,
petitioner, in a bid to divest itself of its interests in the health
and shall be included in computing the amount of gifts made
maintenance organization industry, offered to sell its In view of the foregoing, the Commissioner ruled that the
during the calendar year.
shareholdings in PhilamCare through competitive bidding. difference between the book value and the selling price in the
Thus, on September 24, 2009, petitioner's Class A shares sales transaction is taxable donation subject to a 30% donors
were sold for USD 2,190,000, or PhP 104,259,330 based on The afore-quoted provision, the Commissioner added, is tax under Section 99(B) of the NIRC. 7Respondent
the prevailing exchange rate at the time of the sale, to STI implemented by Revenue Regulation 6-2008 (RR 6-2008), Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-
Investments, Inc., who emerged as the highest bidder.3 which provides: 09], on which petitioner anchored its claim, has already been
revoked by Revenue Memorandum Circular (RMC) No. 25-
8
After the sale was completed and the necessary documentary SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK 2011.
stamp and capital gains taxes were paid, Philamlife filed an NOT TRADED THROUGH A LOCAL STOCK EXCHANGE
application for a certificate authorizing registration/tax PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7) Aggrieved, petitioner requested respondent Secretary of
clearance with the Bureau of Internal Revenue (BIR) Large (c), 28(B)(5)(c) OF THE TAX CODE, AS AMENDED. Finance (Secretary) to review BIR Ruling No. 015-12, but to no
Taxpayers Service Division to facilitate the transfer of the avail. For on November 26, 2012, respondent Secretary
shares. Months later, petitioner was informed that it needed x x x x affirmed the Commissioners assailed ruling in its entirety.9
to secure a BIR ruling in connection with its application due to
potential donors tax liability. In compliance, petitioner, on Ruling of the Court of Appeals
(c) Determination of Amount and Recognition of Gain or Loss
January 4, 2012, requested a ruling4 to confirm that the sale
was not subject to donors tax, pointing out, in its request, the

taxation LAW cases: GIFT tax Page 1 of 9

Not contented with the adverse results, petitioner elevated On May 23, 2013, the CA issued the assailed Resolution subject to review by the Secretary of Finance under Sec. 4 of
the case to the CA via a petition for review under Rule 43, dismissing the CA Petition, thusly: the NIRC, to wit:
assigning the following errors:10
WHEREFORE, the Petition for Review dated January 9, 2013 is SECTION 4. Power of the Commissioner to Interpret Tax Laws
A. DISMISSED for lack of jurisdiction. and to Decide Tax Cases. The power to interpret the
provisions of this Code and other tax laws shall be under the
The Honorable Secretary of Finance gravely erred in not SO ORDERED. exclusive and original jurisdiction of the Commissioner,
finding that the application of Section 7(c.2.2) of RR 06-08 in subject to review by the Secretary of Finance.
the Assailed Ruling and RMC 25-11 is void insofar as it In disposing of the CA petition, the appellate court
altersthe meaning and scope of Section 100 of the Tax Code. ratiocinated that it is the Court of Tax Appeals (CTA), pursuant The power to decide disputed assessments, refunds of
to Sec. 7(a)(1) of Republic Act No. 1125 (RA 1125), 11 as internal revenue taxes, fees or other charges, penalties
B. amended, which has jurisdiction over the issues raised. The imposed in relation thereto, or other matters arising under
outright dismissal, so the CA held, is predicated on the this Code orother laws or portions thereof administered by the
Bureau of Internal Revenue is vested in the Commissioner,
The Honorable Secretary of Finance gravely erred in finding postulate that BIR Ruling No. 015-12 was issued in the
exercise of the Commissioners power to interpret the NIRC subject to the exclusive appellate jurisdiction of the Court of
that Section 100 of the Tax Code is applicable tothe sale of
and other tax laws. Consequently, requesting for its review Tax Appeals. Petitioner postulates that there is a need to
the Sale of Shares.
can be categorized as "other matters arising under the NIRC differentiate the rulings promulgated by the respondent
or other laws administered by the BIR," which is under the Commissioner relating to those rendered under the first
1. paragraph of Sec. 4 of the NIRC, which are appealable to the
jurisdiction of the CTA, not the CA.
Secretary of Finance, from those rendered under the second
The Sale of Shares were sold at their fair market paragraph of Sec. 4 of the NIRC, which are subject to review
Philamlife eventually sought reconsideration but the CA, in its
value and for fair and full consideration in money or on appeal with the CTA.
equally assailed January 21, 2014 Resolution, maintained its
moneys worth.
earlier position. Hence, the instant recourse.
This distinction, petitioner argues, is readily made apparent by
2. Department Order No. 7-02,12 as circularized by RMC No. 40-A-
Issues
02.

The sale of the Sale Shares is a bona fide business

Stripped to the essentials, the petition raises the following
transaction without any donative intent and is Philamlife further averred that Sec.7 of RA 1125, as amended,
issues in both procedure and substance:
therefore beyond the ambit of Section 100 of the Tax does not find application in the case at bar since it only
Code. governs appeals from the Commissioners rulings under the
1. Whether or not the CA erred in dismissing the CA second paragraph and does not encompass rulings from the
Petition for lack of jurisdiction; and Secretary of Finance in the exercise of his power of review
3.
under the first, as what was elevated to the CA. It added that
2. Whether or not the price difference in petitioners under RA 1125, as amended, the only decisions of the
It is superfluous for the BIR to require an express
adverted sale of shares in PhilamCare attracts Secretary appealable to the CTA are those rendered in
provision for the exemption of the sale of the Sale customs cases elevated to him automatically under Section
donors tax.
Shares from donors tax since Section 100 of the Tax 2315 of the Tariff and Customs Code.13
Code does not explicitly subject the transaction to
donors tax. Procedural Arguments
There is, thus, a gap in the law when the NIRC, as couched,
and RA 1125, as amended, failed to supply where the rulings
C. a. Petitioners contentions
of the Secretary in its exercise of its power of review under
Sec. 4 of the NIRC are appealable to. This gap, petitioner
The Honorable Secretary of Finance gravely erred in failing to Insisting on the propriety of the interposed CA petition, submits, was remedied by British American Tobacco v.
find that in the absence of any of the grounds mentioned in Philamlife, while conceding that respondent Commissioner Camacho14 wherein the Court ruled that where what is
Section 246 of the Tax Code, rules and regulations, rulings or issued BIR Ruling No. 015-12 in accordance with her authority assailed is the validity or constitutionality of a law, or a rule or
circulars such as RMC 25-11 cannot be given retroactive to interpret tax laws, argued nonetheless that such ruling is regulation issued by the administrative agency, the regular
application to the prejudice of Philamlife. courts have jurisdiction to pass upon the same.

taxation LAW cases: GIFT tax Page 2 of 9

In sum, appeals questioning the decisions of the Secretary of The petition is unmeritorious. matters" arising under the NIRC or other laws administered by
Finance in the exercise of its power of review under Sec. 4 of the BIR. As stated:
the NIRC are not within the CTAs limited special jurisdiction Reviews by the Secretary of Finance pursuant to Sec. 4 of the
and, according to petitioner, are appealable to the CA via a NIRC are appealable to the CTA Sec. 7. Jurisdiction.- The CTA shall exercise:
Rule 43 petition for review.

To recapitulate, three different, if not conflicting, positions as a. Exclusive appellate jurisdiction to review by appeal, as
b. Respondents contentions indicated below have been advanced by the parties and by herein provided:
the CA as the proper remedy open for assailing respondents
Before the CA, respondents countered petitioners procedural rulings: 1. Decisions of the Commissioner of Internal Revenue in cases
arguments by claiming that even assuming arguendo that the involving disputed assessments, refunds of internal revenue
CTA does not have jurisdiction over the case, Philamlife, 1. Petitioners: The ruling of the Commissioner is taxes, fees or other charges, penalties in relation thereto, or
nevertheless,committed a fatal error when it failed to appeal subject to review by the Secretary under Sec. 4 of other matters arising under the National Internal Revenue or
the Secretary of Finances ruling to the Office of the President the NIRC, and that of the Secretary to the CA via Rule other laws administered by the Bureau of Internal Revenue.
(OP). As made apparent by the rules, the Department of 43; (emphasis supplied)
Finance is not among the agencies and quasi-judicial bodies
enumerated under Sec. 1, Rule 43 of the Rules of Court whose
2. Respondents: The ruling of the Commissioner is Even though the provision suggests that it only covers rulings
decisions and rulings are appealable through a petition for
15 subject to review by the Secretary under Sec. 4 of of the Commissioner, We hold that it is, nonetheless, sufficient
review. This is in stark contrast to the OPs specific mention
the NIRC, and that of the Secretary to the Office of enough to include appeals from the Secretarys review under
under the same provision, so respondents pointed out.
the President before appealing to the CA via a Rule Sec. 4 of the NIRC.
43 petition; and
To further reinforce their argument, respondents cite the
It is axiomatic that laws should be given a reasonable
Presidents power of review emanating from his power of
3. CA: The ruling of the Commissioner is subject to interpretation which does not defeat the very purpose for
control as enshrined under Sec. 17 of Article VII of the
review by the CTA. which they were passed.17 Courts should not follow the letter
Constitution, which reads:
of a statute when to do so would depart from the true intent
We now resolve. of the legislature or would otherwise yield conclusions
Section 17.The President shall have control of all the inconsistent with the purpose of the act. 18 This Court has, in
executive departments, bureaus, and offices. He shall ensure many cases involving the construction of statutes, cautioned
that the laws be faithfully executed. Preliminarily, it bears stressing that there is no dispute that
against narrowly interpreting a statute as to defeat the
what is involved herein is the respondent Commissioners
purpose of the legislator, and rejected the literal
exercise of power under the first paragraph of Sec. 4 of the
The nature and extent of the Presidents constitutionally interpretation of statutes if todo so would lead to unjust or
NIRCthe power to interpret tax laws. This, in fact, was
granted power of control have beendefined in a plethora of absurd results.19
16 recognized by the appellate court itself, but erroneously held
cases, most recently in Elma v. Jacobi, wherein it was held
that her action in the exercise of such power is appealable
that:
directly to the CTA. As correctly pointed out by petitioner, Sec. Indeed, to leave undetermined the mode of appeal from the
4 of the NIRC readily provides that the Commissioners power Secretary of Finance would be an injustice to taxpayers
x x x This power of control, which even Congress cannot limit, to interpret the provisions of this Code and other tax laws is prejudiced by his adverse rulings. To remedy this situation,
let alone withdraw, means the power of the Chief Executive to subject to review by the Secretary of Finance. The issue that Weimply from the purpose of RA 1125 and its amendatory
review, alter, modify, nullify, or set aside what a subordinate, now arises is thiswhere does one seek immediate recourse laws that the CTA is the proper forum with which to institute
e.g., members of the Cabinet and heads of line agencies, had from the adverse ruling of the Secretary of Finance in its the appeal. This is not, and should not, in any way, be taken
done in the performance of their duties and to substitute the exercise of its power of review under Sec. 4? as a derogation of the power of the Office of President but
judgment of the former for that of the latter. merely as recognition that matters calling for technical
knowledge should be handled by the agency or quasi-judicial
Admittedly, there is no provision in law that expressly
In their Comment on the instant petition, however, provides where exactly the ruling of the Secretary of Finance body with specialization over the controversy. As the
respondents asseverate that the CA did not err in its holding under the adverted NIRC provision is appealable to. However, specialized quasi-judicial agency mandated to adjudicate tax,
respecting the CTAs jurisdiction over the controversy. customs, and assessment cases, there can be no other court
We find that Sec. 7(a)(1) of RA 1125, as amended, addresses
of appellate jurisdiction that can decide the issues raised
the seeming gap in the law asit vests the CTA, albeit
inthe CA petition, which involves the tax treatment of the
The Courts Ruling impliedly, with jurisdiction over the CA petition as "other

taxation LAW cases: GIFT tax Page 3 of 9

shares of stocks sold. Petitioner, though, nextinvites attention The appellate power of the CTA includes certiorari them. The issuance of RMO No. 15-91 was an offshoot of the
to the ruling in Ursal v. Court of Tax Appeals 20 to argue against CIRs finding that the pawnshop business is akin to that of
granting the CTA jurisdiction by implication, viz: Petitioner is quick to point out, however, that the grounds "lending investors" as defined in Section 157(u) of the Tax
raised in its CA petition included the nullity of Section 7(c.2.2) Code. Subsequently, the CIR issued RMC No. 43-91 subjecting
Republic Act No. 1125 creating the Court of Tax Appeals did of RR 06-08 and RMC 25-11. In an attempt to divest the CTA pawn tickets to documentary stamp tax. Respondent therein,
not grant it blanket authority to decide any and all tax jurisdiction over the controversy, petitioner then cites British Josefina Leal, owner and operator of Josefinas Pawnshop,
disputes. Defining such special courts jurisdiction, the Act American Tobacco, wherein this Court has expounded on the asked for a reconsideration of both RMO No. 15-91 and RMC
necessarily limited its authority to those matters enumerated limited jurisdiction of the CTA in the following wise: No. 43-91, but the same was denied by petitioner CIR. Leal
therein. Inline with this idea we recently approved said courts then filed a petition for prohibition with the RTC of San Mateo,
order rejecting an appeal to it by Lopez & Sons from the While the above statute confers on the CTA jurisdiction to Rizal, seeking to prohibit petitioner CIR from implementing the
decision of the Collector ofCustoms, because in our opinion its resolve tax disputes in general, this does not include cases revenue orders. The CIR, through the OSG, filed a motion to
jurisdiction extended only to a review of the decisions of the where the constitutionality of a law or rule is challenged. dismiss on the ground of lack of jurisdiction. The RTC denied
Commissioner of Customs, as provided bythe statute and Where what is assailed is the validity or constitutionality of a the motion. Petitioner filed a petition for certiorari and
not to decisions of the Collector of Customs. (Lopez & Sons vs. law, or a rule or regulation issued by the administrative prohibition with the CA which dismissed the petition "for lack
The Court of Tax Appeals, 100 Phil., 850, 53 Off. Gaz., [10] agency in the performance of its quasi legislative function, the of basis." In reversing the CA, dissolving the Writ of
3065). Preliminary Injunction issued by the trial court and ordering
regular courts have jurisdiction to pass upon the same. The
the dismissal of the case before the trial court, the Supreme
determination of whether a specific rule or set of rules issued
Court held that "[t]he questioned RMO No. 15-91 and RMC No.
xxxx by an administrative agency contravenes the law or the
43-91 are actually rulings or opinions of the Commissioner
constitution is within the jurisdiction of the regular courts.
implementing the Tax Code on the taxability of pawnshops."
x x x Republic Act No. 1125 is a complete law by itself and Indeed, the Constitution vests the power of judicial review or
They were issued pursuant to the CIRs power under Section
expressly enumerates the matters which the Court of Tax the power to declare a law, treaty, international or executive
245 of the Tax Code "to make rulings or opinions in connection
Appeals may consider; such enumeration excludes all others agreement, presidential decree, order, instruction, ordinance,
with the implementation of the provisions of internal revenue
by implication. Expressio unius est exclusio alterius. or regulation inthe courts, including the regional trial courts.
laws, including ruling on the classification of articles of sales
This is within the scope of judicial power, which includes the
and similar purposes."The Court held that under R.A. No. 1125
authority of the courts to determine inan appropriate action
Petitioners contention is untenable. Lest the ruling in Ursalbe (An Act Creating the Court of Tax Appeals), as amended, such
the validity of the acts of the political departments. Judicial
taken out of context, but worse as a precedent, it must be rulings of the CIR are appealable to the CTA.
power includes the duty of the courts of justice to settle actual
noted that the primary reason for the dismissal of the said
controversies involving rights which are legally demandable
case was that the petitioner therein lacked the personality to In the case at bar, the assailed revenue regulations and
and enforceable, and to determine whether or not there has
file the suit with the CTA because he was not adversely revenue memorandum circulars are actually rulings or
been a grave abuse of discretion amounting to lack or excess
affected by a decision or ruling of the Collector of Internal opinions of the CIR on the tax treatment of motor vehicles
of jurisdiction on the part of any branch or instrumentality of
Revenue, as was required under Sec. 11 of RA 1125.21 As held: sold at public auction within the SSEZ to implement Section
the Government.23
12 of R.A. No. 7227 which provides that "exportation or
We share the view that the assessor had no personality to removal of goods from the territory of the [SSEZ] to the other
Vis-a-vis British American Tobacco, it bears to stress what
resort to the Court of Tax Appeals. The rulings of the Board of parts of the Philippine territory shall be subject to customs
appears to be a contrasting ruling in Asia International
Assessment Appeals did not "adversely affect" him. At most it duties and taxes under the Customs and Tariff Codeand other
Auctioneers, Inc. v. Parayno, Jr., to wit:
was the City of Cebu that had been adversely affected in the relevant tax laws of the Philippines." They were issued
sense that it could not thereafter collect higher realty taxes pursuant to the power of the CIR under Section 4 of the
from the abovementioned property owners. His opinion, it is Similarly, in CIR v. Leal, pursuant to Section 116 of National Internal Revenue Code x x x.24 (emphasis added)
true had been overruled; but the overruling inflicted no Presidential Decree No. 1158 (The National Internal Revenue
material damage upon him or his office. And the Court of Tax Code, as amended) which states that "[d]ealers in securities
The respective teachings in British American Tobacco and Asia
Appeals was not created to decide mere conflicts of opinion shall pay a tax equivalent to six (6%) per centum of their
International Auctioneers, at first blush, appear to bear no
between administrative officers or agencies. Imagine an gross income. Lending investors shall pay a tax equivalent to
conflictthat when the validity or constitutionality of an
income tax examiner resorting to the Court of Tax Appeals five (5%) per cent, of their gross income," the CIR issued
administrative rule or regulation is assailed, the regular courts
whenever the Collector of Internal Revenue modifies, or lower Revenue Memorandum Order (RMO) No. 15-91 imposing 5%
have jurisdiction; and if what is assailed are rulings or
his assessment on the return of a tax payer! 22 lending investors tax on pawnshops based on their gross
opinions of the Commissioner on tax treatments, jurisdiction
income and requiring all investigating units of the BIR to
over the controversy is lodged with the CTA. The problem with
investigate and assess the lending investors tax due from
the above postulates, however, is that they failed to take into

taxation LAW cases: GIFT tax Page 4 of 9

consideration one crucial pointa taxpayer can raise both The prevailing doctrine is that the authority to issue writs of mandate, is vested with jurisdiction to issue writs of certiorari
issues simultaneously. certiorari involves the exercise of original jurisdiction which in these cases.
must be expressly conferred by the Constitution or by law and
Petitioner avers that there is now a trend wherein both the cannot be implied from the mere existence of appellate Indeed, in order for any appellate court to effectively exercise
CTA and the CA disclaim jurisdiction over tax cases: on the jurisdiction. Thus, x x x this Court has ruled against the its appellate jurisdiction, it must have the authority to issue,
one hand, mere prayer for the declaration of a tax measures jurisdiction of courts or tribunals over petitions for certiorari among others, a writ of certiorari. In transferring exclusive
unconstitutionality or invalidity before the CTA can result in a on the ground that there is no law which expressly gives these jurisdiction over appealed tax cases to the CTA, it can
petitions outright dismissal, and on the other hand, the CA tribunals such power. Itmust be observed, however, that x x x reasonably be assumed that the law intended to transfer also
will likewise dismiss the same petition should it find that the these rulings pertain not to regular courts but to tribunals such power as is deemed necessary, if not indispensable, in
primary issue is not the tax measures validity but the exercising quasijudicial powers. With respect tothe aid of such appellate jurisdiction. There is no perceivable
assessment or taxability of the transaction or subject Sandiganbayan, Republic Act No. 8249 now provides that the reason why the transfer should only be considered as partial,
involved. To illustrate this point, petitioner cites the assailed special criminal court has exclusive original jurisdiction over not total. (emphasis added)
Resolution, thusly: Admittedly, in British American Tobacco vs. petitions for the issuance of the writs of mandamus,
Camacho, the Supreme Court has ruled that the prohibition, certiorari, habeas corpus, injunctions, and other Evidently, City of Manilacan be considered as a departure
determination of whether a specific rule or set of rules issued ancillary writs and processes in aid of its appellate jurisdiction. from Ursal in that in spite of there being no express grant in
by an administrative agency contravenes the law or the law, the CTA is deemed granted with powers of certiorari by
constitution is within the jurisdiction of the regular courts, not In the same manner, Section 5 (1), Article VIII of the 1987 implication. Moreover, City of Manila diametrically opposes
the CTA. Constitution grants power to the Supreme Court, in the British American Tobacco to the effect that it is now within the
exercise of its original jurisdiction, to issue writs of certiorari, power of the CTA, through its power of certiorari, to rule on
xxxx prohibition and mandamus. With respect to the Court of the validity of a particular administrative ruleor regulation so
Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) long as it is within its appellate jurisdiction. Hence, it can now
gives the appellate court, also in the exercise of its original rule not only on the propriety of an assessment or tax
Petitioner essentially questions the CIRs ruling that
jurisdiction, the power to issue, among others, a writ of treatment of a certain transaction, but also on the validity of
Petitioners sale of shares is a taxable donation under Sec.
certiorari, whether or not in aid of its appellate jurisdiction. As the revenue regulation or revenue memorandum circular on
100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7
to Regional Trial Courts, the power to issue a writ of certiorari, which the said assessment is based.
(C.2.2) and RMC 25-11 is merely questioned incidentally since
in the exercise of their original jurisdiction, is provided under
it was used by the CIR as bases for its unfavourable opinion.
Section 21 of BP 129.
Clearly, the Petition involves an issue on the taxability of the Guided by the doctrinal teaching in resolving the case at bar,
transaction rather than a direct attack on the constitutionality the fact that the CA petition not only contested the
of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, The foregoing notwithstanding, while there is no express grant applicability of Sec. 100 of the NIRC over the sales transaction
the instant Petition properly pertains to the CTA under Sec. 7 of such power, with respect to the CTA, Section 1, Article VIII but likewise questioned the validity of Sec. 7 (c.2.2) of RR 06-
of RA 9282. of the 1987 Constitution provides, nonetheless, that judicial 08 and RMC 25-11 does not divest the CTA of its jurisdiction
power shall be vested in one Supreme Court and in such lower over the controversy, contrary to petitioner's arguments.
courts as may be established by law and that judicial power
As a result of the seemingly conflicting pronouncements,
includes the duty of the courts of justice to settle actual
petitioner submits that taxpayers are now at a quandary on The price difference is subject to donor's tax
controversies involving rights which are legally demandable
what mode of appeal should be taken, to which court or
and enforceable, and to determine whether or not there has
agency it should be filed, and which case law should be Petitioner's substantive arguments are unavailing. The
been a grave abuse of discretion amounting to lack or excess
followed. absence of donative intent, if that be the case, does not
of jurisdiction on the part of any branch or instrumentality of
the Government. exempt the sales of stock transaction from donor's tax since
Petitioners above submission is specious. Sec. 100 of the NIRC categorically states that the amount by
which the fair market value of the property exceeded the
On the strength of the above constitutional provisions, it can
In the recent case of City of Manila v. Grecia-Cuerdo, the be fairly interpreted that the power of the CTA includes that of value
25 of the consideration shall be deemed a
Court en banc has ruled that the CTA now has the power of determining whether or not there has been grave abuse of gift.1wphi1 Thus, even if there is no actual donation, the
certiorari in cases within its appellate jurisdiction. To discretion amounting to lack or excess of jurisdiction on the difference in price is considered a donation by fiction of law.
elucidate: part of the RTC in issuing an interlocutory order in cases
falling within the exclusive appellate jurisdiction of the tax Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of
court. It, thus, follows that the CTA, by constitutional the NIRC but merely sets the parameters for determining the

taxation LAW cases: GIFT tax Page 5 of 9

"fair market value" of a sale of stocks. Such issuance was
made pursuant to the Commissioner's power to interpret tax
laws and to promulgate rules and regulations for their
implementation.
Lastly, petitioner is mistaken in stating that RMC 25-11, D E C I S I O N
having been issued after the sale, was being applied
retroactively in contravention to Sec. 246 of the AZCUNA, J.:
NIRC.26 Instead, it merely called for the strict application of
Sec. 100, which was already in force the moment the NIRC
was enacted.
WHEREFORE, the petition is hereby DISMISSED. The Internal Revenue v. Manuel G. Abello, Jose C. Concepcion,
Resolutions of the Court of Appeals in CA-G.R. SP No. 127984 Teodoro D. Regala, Avelino V. Cruz and Court of Tax Appeals,"
dated May 23, 2013 and January 21, 2014 are hereby which reversed and set aside the decision of the Court of Tax
AFFIRMED.
SO ORDERED.
G.R. No. 120721 February 23, 2005
MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. Sec. 91. Imposition of Tax. (a) There shall be levied, assessed,
REGALA, AVELINO V. CRUZ, petitioners, vs. collected, and paid upon the transfer by any person, resident,
COMMISSIONER OF INTERNAL REVENUE and COURT OF or non-resident, of the property by gift, a tax, computed as
APPEALS, respondents. provided in Section 92. (b) The tax shall apply whether the
transfer is in trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible
or intangible.
Pursuant to the above-quoted provisions of law, the transfer of
property by gift, whether the transfer is in trust or otherwise,
This is a petition for review on certiorari under Rule 45 of the
whether the gift is direct or indirect, and whether the property
Rules of Civil Procedure, assailing the decision of the Court of
is real or personal, tangible or intangible, is subject to donors
Appeals in CA G.R. SP No. 27134, entitled "Comissioner of
or gift tax.
A gift is generally defined as a voluntary transfer of property
Appeals (CTA), ordering the Commissioner of Internal Revenue by one to another without any consideration or compensation
(Commissioner) to withdraw his letters dated April 21, 1988 therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250).
and August 4, 1988 assessing donors taxes and to desist
from collecting donors taxes from petitioners. In the instant case, the contributions are voluntary transfers
of property in the form of money from private respondents to
During the 1987 national elections, petitioners, who are Sen. Angara, without considerations therefor. Hence, they
partners in the Angara, Abello, Concepcion, Regala and Cruz squarely fall under the definition of donation or gift.
(ACCRA) law firm, contributed P882,661.31 each to the
campaign funds of Senator Edgardo Angara, then running for As correctly pointed out by the Solicitor General:
the Senate. In letters dated April 21, 1988, the Bureau of
Internal Revenue (BIR) assessed each of the The fact that the contributions were given to be used as
petitioners P263,032.66 for their contributions. On August 2, campaign funds of Sen. Angara does not affect the character
1988, petitioners questioned the assessment through a letter of the fund transfers as donation or gift. There was thereby no
to the BIR. They claimed that political or electoral retention of control over the disposition of the contributions.
contributions are not considered gifts under the National There was simply an indication of the purpose for which they
Internal Revenue Code (NIRC), and that, therefore, they are were to be used. For as long as the contributions were used
not liable for donors tax. The claim for exemption was denied for the purpose for which they were intended, Sen. Angara
by the Commissioner.11vvphi1.nt had complete and absolute power to dispose of the
contributions. He was fully entitled to the economic benefits
On September 12, 1988, petitioners filed a petition for review of the contributions.
with the CTA, which was decided on October 7, 1991 in favor
of the petitioners. As aforestated, the CTA ordered the Section 91 of the Tax Code is very clear. A donors or gift tax is
Commissioner to desist from collecting donors taxes from the imposed on the transfer of property by gift.1awphi1.nt
petitioners.2
The Bureau of Internal Revenue issued Ruling No. 344 on July
On appeal, the Court of Appeals reversed and set aside the 20, 1988, which reads:
CTA decision on April 20, 1994.3 The appellate Court ordered
the petitioners to pay donors tax amounting to P263,032.66
Political Contributions. For internal revenue purposes,
each, reasoning as follows:
political contributions in the Philippines are considered
taxable gift rather than taxable income. This is so, because a
The National Internal Revenue Code, as amended, provides: political contribution is indubitably not intended by the giver
taxation LAW cases: GIFT tax Page 6 of 9
or contributor as a return of value or made because of any
intent to repay another what is his due, but bestowed only
because of motives of philanthropy or charity. His purpose is
to give and to bolster the morals, the winning chance of the
candidate and/or his party, and not to employ or buy. On the
other hand, the recipient-donee does not regard himself as
exchanging his services or his product for the money
contributed. But more importantly he receives financial
advantages gratuitously.
When the U.S. gift tax law was adopted in the Philippines
(before May 7, 1974), the taxability of political contributions
was, admittedly, an unsettled issue; hence, it cannot be
presumed that the Philippine Congress then had intended to
consider or treat political contributions as non-taxable gifts
when it adopted the said gift tax law. Moreover, well-settled is
the rule that the Philippines need not necessarily adopt the
present rule or construction in the United States on the
matter. Generally, statutes of different states relating to the
same class of persons or things or having the same purposes
are not considered to be in pari materia because it cannot be
justifiably presumed that the legislature had them in mind
when enacting the provision being construed. (5206,
Sutherland, Statutory Construction, p. 546.) Accordingly, in
the absence of an express exempting provision of law,
political contributions in the Philippines are subject to the
donors gift tax. (cited in National Internal Revenue Code
Annotated by Hector S. de Leon, 1991 ed., p. 290).
In the light of the above BIR Ruling, it is clear that the political
contributions of the private respondents to Sen. Edgardo
Angara are taxable gifts. The vagueness of the law as to what
comprise the gift subject to tax was made concrete by the
above-quoted BIR ruling. Hence, there is no doubt that
political contributions are taxable gifts.4
Petitioners filed a motion for reconsideration, which the Court
of Appeals denied in its resolution of June 16, 1995.5
Petitioners thereupon filed the instant petition on July 26,
1995. Raised are the following issues:
1. DID THE HONORABLE COURT OF APPEALS ERR
WHEN IT FAILED TO CONSIDER IN ITS DECISION THE
PURPOSE BEHIND THE ENACTMENT OF OUR GIFT TAX
LAW?
2. DID THE HONORABLE COURT OF APPEALS ERR IN (A) There shall be levied, assessed, collected and
NOT CONSIDERING THE INTENTION OF THE GIVERS paid upon the transfer by any person, resident or
IN DETERMINING WHETHER OR NOT THE nonresident, of the property by gift, a tax, computed
PETITIONERS POLITICAL CONTRIBUTIONS WERE as provided in Section 92
GIFTS SUBJECT TO DONORS TAX?
(B) The tax shall apply whether the transfer is in trust
3. DID THE HONORABLE COURT OF APPEALS ERR or otherwise, whether the gift is direct or indirect,
WHEN IT FAILED TO CONSIDER THE DEFINITION OF and whether the property is real or personal, tangible
AN "ELECTORAL CONTRIBUTION" UNDER THE or intangible.
OMNIBUS ELECTION CODE IN DETERMINING
WHETHER OR NOT POLITICAL CONTRIBUTIONS ARE The NIRC does not define transfer of property by gift.
TAXABLE? However, Article 18 of the Civil Code, states:
4. DID THE HONORABLE COURT OF APPEALS ERR IN In matters which are governed by the Code of Commerce and
NOT CONSIDERING THE ADMINISTRATIVE PRACTICE special laws, their deficiency shall be supplied by the
OF CLOSE TO HALF A CENTURY OF NOT SUBJECTING provisions of this Code.
POLITICAL CONTRIBUTIONS TO DONORS TAX?
Thus, reference may be made to the definition of a donation
5. DID THE HONORABLE COURT OF APPEALS ERR IN in the Civil Code. Article 725 of said Code defines donation as:
NOT CONSIDERING THE AMERICAN JURISPRUDENCE
RELIED UPON BY THE COURT OF TAX APPEALS AND
. . . an act of liberality whereby a person disposes gratuitously
BY THE PETITIONERS TO THE EFFECT THAT POLITICAL
of a thing or right in favor of another, who accepts it.
CONTRIBUTIONS ARE NOT TAXABLE GIFTS?
Donation has the following elements: (a) the reduction of the
6. DID THE HONORABLE COURT OF APPEALS ERR IN
patrimony of the donor; (b) the increase in the patrimony of
NOT APPLYING AMERICAN JURISPRUDENCE ON THE
the donee; and, (c) the intent to do an act of liberality
GROUND THAT THIS WAS NOT KNOWN AT THE TIME
or animus donandi.7
THE PHILIPPINES GIFT TAX LAW WAS ADOPTED IN
1939?
The present case falls squarely within the definition of a
donation. Petitioners, the late Manuel G. Abello 8 , Jose C.
7. DID THE HONORABLE COURT OF APPEALS ERR IN
Concepcion, Teodoro D. Regala and Avelino V. Cruz, each
RESOLVING THE CASE MAINLY ON THE BASIS OF A
gave P882,661.31 to the campaign funds of Senator Edgardo
RULING ISSUED BY THE RESPONDENT ONLY AFTER
Angara, without any material consideration. All three
THE ASSESSMENTS HAD ALREADY BEEN MADE?
elements of a donation are present. The patrimony of the four
petitioners were reduced by P882,661.31 each. Senator
8. DID THE HONORABLE COURT OF APPEALS ERR Edgardo Angaras patrimony correspondingly increased
WHEN IT DID NOT CONSTRUE THE GIFT TAX LAW by P3,530,645.249 . There was intent to do an act of liberality
LIBERALLY IN FAVOR OF THE TAXPAYER AND STRICLTY or animus donandi was present since each of the petitioners
AGAINST THE GOVERNMENT IN ACCORDANCE WITH gave their contributions without any consideration.
APPLICABLE PRINCIPLES OF STATUTORY
CONSTRUCTION?6
Taken together with the Civil Code definition of donation,
Section 91 of the NIRC is clear and unambiguous, thereby
First, Fifth and Sixth Issues leaving no room for construction. In Rizal Commercial Banking
Corporation v. Intermediate Appellate Court 10 the Court
Section 91 of the National Internal Revenue Code (NIRC) enunciated:
reads:
taxation LAW cases: GIFT tax Page 7 of 9
It bears stressing that the first and fundamental duty of the
Court is to apply the law. When the law is clear and free from
any doubt or ambiguity, there is no room for construction or
interpretation. As has been our consistent ruling, where the
law speaks in clear and categorical language, there is no
occasion for interpretation; there is only room for application
(Cebu Portland Cement Co. v. Municipality of Naga, 24 SCRA
708 [1968])
Third Issue
Petitioners maintain that the definition of an "electoral
contribution" under the Omnibus Election Code is essential to
appreciate how a political contribution differs from a taxable
gift.11 Section 94(a) of the said Code defines electoral
contribution as follows:
that are contrary to the interests of his benefactors, for the
benefit of the greater good.
In fine, the purpose for which the sums of money were given,
which was to fund the campaign of Senator Angara in his bid
for a senatorial seat, cannot be considered as a material
consideration so as to negate a donation.

The term "contribution" includes a gift, donation, subscription, Fourth Issue

Where the law is clear and unambiguous, it must be taken to loan, advance or deposit of money or anything of value, or a
mean exactly what it says and the court has no choice but to contract, promise or agreement to contribute, whether or not Petitioners raise the fact that since 1939 when the first Tax
see to it that its mandate is obeyed (Chartered Bank legally enforceable, made for the purpose of influencing the Code was enacted, up to 1988 the BIR never attempted to
Employees Association v. Ople, 138 SCRA 273 [1985]; Luzon results of the elections but shall not include services rendered subject political contributions to donors tax. They argue that:
Surety Co., Inc. v. De Garcia, 30 SCRA 111 [1969]; Quijano v. without compensation by individuals volunteering a portion or
Development Bank of the Philippines, 35 SCRA 270 [1970]). all of their time in behalf of a candidate or political party. It
. . . It is a familiar principle of law that prolonged practice by
shall also include the use of facilities voluntarily donated by
the government agency charged with the execution of a
Only when the law is ambiguous or of doubtful meaning may other persons, the money value of which can be assessed
statute, acquiesced in and relied upon by all concerned over
the court interpret or construe its true based on the rates prevailing in the area.
an appreciable period of time, is an authoritative
intent.l^vvphi1.net Ambiguity is a condition of admitting two
interpretation thereof, entitled to great weight and the highest
or more meanings, of being understood in more than one way, Since the purpose of an electoral contribution is to influence
respect. . . .12
or of referring to two or more things at the same time. A the results of the election, petitioners again claim that
statute is ambiguous if it is admissible of two or more possible donative intent is not present. Petitioners attempt to place the
meanings, in which case, the Court is called upon to exercise barrier of mutual exclusivity between donative intent and the This Court holds that the BIR is not precluded from making a
one of its judicial functions, which is to interpret the law purpose of political contributions. This Court reiterates that new interpretation of the law, especially when the old
according to its true intent. interpretation was flawed. It is a well-entrenched rule that
donative intent is not negated by the presence of other
intentions, motives or purposes which do not contradict
Second Issue donative intent. . . . 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.
Since animus donandi or the intention to do an act of liberality Petitioners would distinguish a gift from a political donation by
676), and that the Government is never estopped by mistake
is an essential element of a donation, petitioners argue that it saying that the consideration for a gift is the liberality of the
or error on the part of its agents (Pineda v. Court of First
is important to look into the intention of the giver to donor, while the consideration for a political contribution is
Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated
determine if a political contribution is a gift. Petitioners the desire of the giver to influence the result of an election by
Mining Co. v. Pineda, 98 Phil. 711, 724).13
argument is not tenable. First of all, donative intent is a supporting candidates who, in the perception of the giver,
creature of the mind. It cannot be perceived except by the would influence the shaping of government policies that
material and tangible acts which manifest its presence. This would promote the general welfare and economic well-being Seventh Issue
being the case, donative intent is presumed present when one of the electorate, including the giver himself.
gives a part of ones patrimony to another without Petitioners question the fact that the Court of Appeals
consideration. Second, donative intent is not negated when Petitioners attempt is strained. The fact that petitioners will decision is based on a BIR ruling, namely BIR Ruling No. 88-
the person donating has other intentions, motives or purposes somehow in the future benefit from the election of the 344, which was issued after the petitioners were assessed for
which do not contradict donative intent. This Court is not candidate to whom they contribute, in no way amounts to a donors tax. This Court does not need to delve into this issue.
convinced that since the purpose of the contribution was to valuable material consideration so as to remove political It is immaterial whether or not the Court of Appeals based its
help elect a candidate, there was no donative intent. contributions from the purview of a donation. Senator Angara decision on the BIR ruling because it is not pivotal in deciding
Petitioners contribution of money without any material was under no obligation to benefit the petitioners. The proper this case. As discussed above, Section 91 (now Section 98) of
consideration evinces animus donandi. The fact that their performance of his duties as a legislator is his obligation as an the NIRC as supplemented by the definition of a donation
purpose for donating was to aid in the election of the donee elected public servant of the Filipino people and not a found in Article 725 of the Civil Code, is clear and
does not negate the presence of donative intent. consideration for the political contributions he received. In unambiguous, and needs no further elucidation.
fact, as a public servant, he may even be called to enact laws

taxation LAW cases: GIFT tax Page 8 of 9

Eighth Issue
Petitioners next contend that tax laws are construed liberally
in favor of the taxpayer and strictly against the government.
This rule of construction, however, does not benefit
petitioners because, as stated, there is here no room for
construction since the law is clear and unambiguous.
Finally, this Court takes note of the fact that subsequent to WHEREFORE, the petition is DENIED and the assailed
the donations involved in this case, Congress approved Decision and Resolution of the Court of Appeals are
Republic Act No. 7166 on November 25, 1991, providing in AFFIRMED.
Section 13 thereof that political/electoral contributions, duly
reported to the Commission on Elections, are not subject to No costs.
the payment of any gift tax. This all the more shows that the
political contributions herein made are subject to the payment
SO ORDERED.
of gift taxes, since the same were made prior to the
exempting legislation, and Republic Act No. 7166 provides no
retroactive effect on this point.
taxation LAW cases: GIFT tax Page 9 of 9