Case Digest (G.R. No. 210987) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In The Philippine American Life and General Insurance Company (Philamlife) vs. Secretary of Finance and Commissioner of Internal Revenue, decided on November 24, 2014 under G.R. No. 210987, Philamlife, which held 498,590 Class A shares (49.89%) of Philam Care Health Systems, Inc., sold those shares on September 24, 2009 for USD 2,190,000 (PhP 104,259,330) via competitive bidding. After paying documentary stamp and capital gains taxes, Philamlife sought a tax clearance from the Bureau of Internal Revenue’s Large Taxpayers Service Division to register the transfer. The BIR required a ruling on potential donor’s tax exposure. On January 4, 2012 Philamlife requested a ruling confirming the transaction as arm’s-length and not a donation, relying on BIR Ruling DA-(DT)-065-715-09 (Nov. 27, 2009). The Commissioner denied the request in BIR Ruling No. 015-12, applying Section 100 of the 1997 National Internal Revenue Code (NIRC) as implemented by Revenue Regulation 6-2008, finding the se Case Digest (G.R. No. 210987) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Parties and Background
- Petitioner: The Philippine American Life and General Insurance Company (Philamlife) held 498,590 Class A shares (49.89%) of Philam Care Health Systems, Inc. (PhilamCare).
- In 2009, Philamlife divested its interests in PhilamCare via competitive bidding; on September 24, 2009, it sold its shares to STI Investments, Inc. for USD 2,190,000 (PhP 104,259,330).
- Post-Sale Compliance
- Philamlife paid documentary stamp and capital gains taxes, then applied for a tax clearance/certificate authorizing registration with the BIR Large Taxpayers Service Division.
- The BIR required a ruling on potential donor’s tax liability before issuing the clearance.
- Request for BIR Ruling and Denial
- On January 4, 2012, Philamlife requested a ruling confirming no donor’s tax due, arguing:
- No donative intent existed; transaction was at fair market value (FMV) and at arm’s length.
- Prior BIR ruling (DA-(DT-065) 715-09) exempted similar open‐bidding share sales from donor’s tax.
- On the same day, the Commissioner of Internal Revenue issued BIR Ruling No. 015-12 denying relief, holding that:
- The selling price was below the shares’ book value as of end-2008.
- Under Section 100, National Internal Revenue Code (NIRC), and Revenue Regulation (RR) 6-2008 § 7(c.2.2), the price difference is deemed a gift subject to donor’s tax at 30% under Section 99(B).
- The prior ruling was revoked by Revenue Memorandum Circular (RMC) No. 25-2011.
- Administrative and Judicial Appeals
- Philamlife sought review by the Secretary of Finance, who, on November 26, 2012, affirmed BIR Ruling No. 015-12.
- Philamlife filed a Rule 43 petition for review with the Court of Appeals (CA), raising arguments on the applicability and validity of Section 100 NIRC, RR 6-2008 § 7(c.2.2), and RMC 25-2011, and on the Secretary’s lack of authority for retroactive application.
- On May 23, 2013 and January 21, 2014, the CA dismissed the petition for lack of jurisdiction, holding that the Court of Tax Appeals (CTA) has exclusive jurisdiction over “other matters arising under the NIRC.”
Issues:
- Procedural Jurisdiction
- Did the CA err in dismissing Philamlife’s petition for lack of jurisdiction?
- Is the proper remedy an appeal with the CTA under Section 7(a)(1), RA 1125, as amended, from the Secretary of Finance’s review of BIR rulings under Section 4, NIRC?
- Substantive Tax Liability
- Does the price difference between the shares’ FMV (book value) and the sale price constitute a “deemed gift” under Section 100, NIRC, thus attracting donor’s tax?
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)