Manuel ABELLO, Jose CONCEPCION, Teodoro REGALA,
and Avelino CRUZ v. COMMISSIONER OF INTERNAL
REVENUE and Court of Appeals
(G.R. No. 120721, Feb. 23, 2005)
AZCUNA J.
FACTS
1. During the 1987 national elections, Petitioners, who are partners in
ACCRA Law Firm, contributed P 882,661.31 each to the campaign
funds of Sen. Edgardo Angara, who is then running for Senate.
2. The BIR, on April 21, 1988, assessed that the donors tax of each
of the Petitioners amounts to P263,032.66, which the Petitioners
questioned. They claimed that political or electoral contributions are
not considered gifts under the National Internal Revenue Code
(NIRC, Sec. 91); thus, they are not liable for donors tax.
3. The CA ordered them to pay the donors tax. It contends that the
contributions are voluntary transfers of property in the form of
money without consideration, which fall under the definition of
donation or gift.
4. The BIR issued Ruling No. 344 on July 20, 1988 stating that
political contributions in the Philippines are considered taxable gift.
ISSUE
1. Whether or not the purpose behind the gift tax law needs
construction because of its ambiguity.
2. Whether or not the definition of an electoral contribution is
needed to appreciate how a political contribution differs from a
taxable gift.
3. Whether or not it is essential to consider the long familiar practice
of not subjecting political contributions to donors tax.
4. Whether or not the doctrine of liberally interpretating the Gift Tax
Law in favor of the taxpayers and strictly against the government
was applicable in this case.
HELD
1. No. Because of a deficiency in the special law, the Court referred
to the Civil Code in supplying the definition of a donation (under
Art. 725).
Donation has 3 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.
In the present case, the valued possession of each Petitioners were
reduced (by P882,661.31), Sen. Angaras patrimony increased (by
P3,530,645.24) and animus donandi was present when contributions
were given without consideration.
Taken together with the Civil Code defintion of donation, Sec. 91 of
the NIRC is clear and unambiguous, thus, theres no room for
construction.
2. No. Petitioners here attend to the third element of a donation.
Although the purpose of an electoral contribution is to influence the
results of the election by supporting a candidate that will give benefit
to the donor in the future through shaping government policies that
would promote general welfare, the donative intent is still present.
The benefits that Petitioners will get in the future do not amount to a
valuable material consideration so as to remove political
contributions from the view of a donation. In fact, Sen. Angara, as a
public servant, is not obligated to benefit petitioners. Moreover,
donative intent is not negated by the presence of other intentions,
motives or purposes which do not contradict donative intent.
3. No. The BIR is not prevented from making a new interpretation of
the law especially when the old interpretation was flawed. It cannot
block a subsequent correct application of the statute. Erroneous
application and enforcement of the law by public officers do not
block subsequent correct application of the statute and that the
Government is never estopped by mistake or error on the part of its
agents.

4. No. It does not benefit the Petitioners because there is no room for
construction since the law is clear and unambiguous. Court takes
note of the fact that subsequent to the donations involved in this case,
Congress approved Republic Act No. 7166 on November 25, 1991,
providing in Section 13 thereof that political/electoral contributions,
duly reported to the Commission on Elections, are not subject to the
payment of any gift tax. This all the more shows that the political
contributions herein made are subject to the payment 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.