Case Summary (G.R. No. 210987)
Facts
Philamlife sold 498,590 Class A shares of PhilamCare on September 24, 2009 for USD 2,190,000. After paying documentary stamp and capital gains taxes, it sought a tax clearance certificate. The BIR required a ruling on potential donors’ tax liability under NIRC Sec. 100. Batang Philamlife argued the sale was at fair market value, at arm’s length, and lacked donative intent.
BIR Ruling and Secretary’s Review
On January 4, 2012, the Commissioner issued BIR Ruling No. 015-12:
- Fair market value of non-listed shares equated to book value per RR 6-2008 Sec. 7(c.2.2).
- Selling price was lower than book value; the differential was deemed a gift subject to 30% donors’ tax under Sec. 100.
- Prior favorable ruling revoked by RMC 25-2011.
Philamlife appealed to the Secretary of Finance, who on November 26, 2012, affirmed the Commissioner’s ruling in full.
Proceedings Before the Court of Appeals
Philamlife filed a Rule 43 petition in the CA, arguing:
A. RR 6-2008 Sec. 7(c.2.2) and RMC 25-2011 improperly expanded NIRC Sec. 100.
B. The sale was bona fide, at fair market value, and lacked donative intent, thus exempt from donors’ tax.
C. RMC 25-2011 was retroactively applied without statutory basis (NIRC Sec. 246).
The CA dismissed the petition for lack of jurisdiction, holding that appeals from BIR rulings interpreting the NIRC lie with the CTA under RA 1125 Sec. 7(a)(1).
Issues
- Whether the CA erred in dismissing for lack of jurisdiction.
- Whether the price differential in the share sale is subject to donors’ tax under NIRC Sec. 100.
Jurisdictional Ruling
The Supreme Court held:
- NIRC Sec. 4 grants the Commissioner exclusive original jurisdiction to interpret tax laws, subject to review by the Secretary of Finance.
- Although no statute explicitly provides the next appellate forum for the Secretary’s rulings, RA 1125 Sec. 7(a)(1) vests the CTA with exclusive appellate jurisdiction over “other matters arising under the National Internal Revenue” including appeals from the Secretary’s review under Sec. 4.
- An implied, purposive interpretation ensures taxpayers access to a specialized tribunal.
- The CTA’s appellate jurisdiction encompasses certiorari powers by constitutional mandate (City of Manila v. Grecia-Cuerdo), permitting review of the validity of revenue regulations and rulings incident to its appellate function.
Merits of Donors’ Tax Claim
- NIRC Sec. 100 prescribes that any property transferred for less than full consideration gives rise, by legal fiction, to a deemed gift equal to the fair market value excess. Actu ...continue reading
Case Syllabus (G.R. No. 210987)
Nature of the Case
- Petition for Review on Certiorari under Rule 45 of the Rules of Court
- Seeks reversal of Court of Appeals Resolutions in CA-G.R. SP No. 127984 (May 23, 2013 and January 21, 2014)
- CA had dismissed petitioner’s appeal from the Secretary of Finance’s review of BIR Ruling No. 015-12 for lack of jurisdiction
Facts
- Philamlife owned 498,590 Class A shares (49.89%) in Philam Care Health Systems, Inc.
- In September 2009, shares sold via competitive bidding to STI Investments, Inc. for USD 2,190,000 (PhP 104,259,330)
- Documentary stamp and capital gains taxes paid; application filed for tax clearance to transfer shares
- BIR required a ruling on potential donor’s tax liability
- January 4, 2012: Philamlife requested ruling confirming no donor’s tax due—no donative intent; sale at fair market value; bona fide, arm’s-length transaction; sale by open bidding
- Same day, Commissioner issued BIR Ruling No. 015-12: held selling price below book value; difference deemed gift under Section 100 NIRC; 30% donor’s tax imposed under Section 99(B) NIRC; cited RR 6-2008 implementing rules and Revenue Memorandum Circular No. 25-2011 revoking prior favorable rulings
- Philamlife asked Secretary of Finance for review; November 26, 2012: Secretary affirmed BIR Ruling No. 015-12 in full
Ruling of the Court of Appeals
- Petition for review under Rule 43 filed by Philamlife with CA
- CA held it lacked jurisdiction; disputes over interpretation of NIRC fall under Court of Tax Appeals (CTA) per Sec. 7(a)(1) of RA 1125 as amended
- May 23, 2013 and January 21, 2014 Resolutions dismissed CA petition outright
Issues
- Procedural: D