EN BANC

[G.R. No. L-19201. June 16, 1965.]

REV. FR. CASIMIRO

LLADOC, petitioner, vs. THE
COMMISSIONER OF INTERNAL REVENUE
and THE COURT OF TAX
APPEALS, respondents.

Hilado & Hilado for petitioner.

Solicitor General for respondents.

SYLLABUS

1. TAXATION; CONSTITUTIONAL EXEMPTION FOR

RELIGIOUS PURPOSES REFERS ONLY TO PROPERTY
TAXES. Section 22 (3), Art. VI of the Constitution of
the Philippines, exempts from taxation cemeteries,
churches and personages or convents, appurtenants
thereto, and all lands, buildings, and improvements
used exclusively for religious purposes. The exemption
is only from the payment of taxes assessed on such
properties enumerated, as property taxes, as contra-
distinguished from excise taxes.
2. ID.; ID.; GIFT TAX ON PROPERTY USED FOR
RELIGIOUS PURPOSES NOT VIOLATION OF
CONSTITUTION. A gift tax is not an assessment on
the properties themselves. It did not rest upon general
ownership. Rather it is an excise upon the use made
of the properties and upon the privilege of receiving
them. It is not, therefore a property tax, but an excise
tax imposed on the transfer of property by way of
gift inter vivos, the imposition of which a property
used exclusively for religious purposes, does not
constitute an impairment of the Constitution.
3. ID.; ID.; HEAD OF DIOCESE: REAL PARTY IN
INTEREST IN GIFT ON CHURCH PROPERTY. The head
of the diocese and not the parish priest is the real
party in interest in the imposition of a donee's tax on
property donated to the church for religious purposes.

DECISION

PAREDES, J p:
Sometime in 1957, the M.B. Estate, Inc., of
Bacolod City, donated P10,000.00 in cash to Rev. Fr.
Crispin Ruiz then parish priest of Victorias, Negros
Occidental, and predecessor of herein petitioner, for
the construction of a new Catholic Church in the
locality. The total amount was actually spent for the
purpose intended.
On March 3, 1958, the donor M.B. Estate, Inc., filed
the donor's gift tax return. Under date of April 29,
1960, the respondent Commissioner of Internal
Revenue issued as assessment for donee's gift tax
against the Catholic Parish of Victorias, Negros
Occidental, of which petitioner was the priest. The tax
amounted to P1,370.00 including surcharges, interest
of 1% monthly from May 15, 1958 to June 15, 1960,
and the compromise for the late filing of the return.
Petitioner lodged a protest to the assessment and
requested the withdrawal thereof. The protest and the
motion for reconsideration presented to the
Commissioner of Internal Revenue were denied. The
petitioner appealed to the Court of Tax Appeals on
November 2, 1960. In the petition for Review, the Rev.
Fr. Casimiro Lladoc, claimed among others, that at the
time of the donation, he was not the parish priest in
Victorias; that there is no legal entity or juridical
person known as the "Catholic Parish Priest of
Victorias," and therefore, he should not be liable for
the donee's gift tax. It was also asserted that the
assessment of the gift tax, even against the Roman
Catholic Church, would not be valid, for such would be
a clear violation of the provisions of the Constitution.
After hearing, the CTA rendered judgment, the
pertinent portions of which are quoted below:
". . . Parish priests of the Roman Catholic
Church under canon laws are similarly
situated as its Archbishops and Bishops with
respect to the properties of the church within
their parish. They are the guardians,
superintendents or administrators of these
properties, with the right of succession and
may sue and be sued.
xxx xxx xxx
"The petitioner impugns the fairness of the
assessment with the argument that he
should not be held liable for gift taxes on
donation which he did not receive personally
since he was not yet the parish priest of
Victorias in the year 1957 when said
donation was given. It is intimated that if
someone has to pay at all, it should be
petitioner's predecessor, the Rev. Fr. Crispin
Ruiz, who received the donation in behalf of
the Catholic parish of Victorias or the Roman
Catholic Church. Following petitioner's line of
thinking, we would be equally unfair to hold
that the assessment now in question should
have been addressed to, and collected from
the Rev. Fr. Crispin Ruiz to be paid from
income derived from his present parish
wherever it may be. It does not seem right to
indirectly burden the present parishioners of
Rev. Fr. Ruiz for donee's gift tax on a
donation to which they were not benefited.
xxx xxx xxx
"We saw no legal basis then as we see none
now, to include within the Constitutional
exemption, taxes which partake of the
nature of an excise upon the use made of
the properties or upon the exercise of the
privilege of receiving the properties. (Phipps
vs. Commissioner of Internal Revenue, 91 F
[2d] 627; 1938, 302 U.S. 742.)
"It is a cardinal rule in taxation that
exemptions from payment thereof are highly
disfavored by law, and the party claiming
exemption must justify his claim by a clear,
positive, or express grant of such privilege
by law. (Collector vs.Manila Jockey Club, G.R.
No. L-8755, March 23, 1956; 98 Phil., 670; 53
Off. Gaz., 3762.)
"The phrase `exempt from taxation' as
employed in Section 22(3), Article VI of the
Constitution of the Philippines, should not be
interpreted to mean exemption from all
kinds of taxes. Statutes exempting charitable
and religious property from taxation should
be construed fairly though strictly and in
such manner as to give effect to the main
intent of the lawmakers." (Roman Catholic
Church vs. Hastrings, 5 Phil., 701.)
xxx xxx xxx
"WHEREFORE, in view of the foregoing
considerations, the decision of the
respondent Commissioner of Internal
Revenue appealed from, is hereby affirmed
except with regard to the imposition of the
compromise penalty in the amount of P20.00
(Collector of Internal Revenue vs. U.S.T., G.
R. No. L-11274, Nov. 28, 1958; . . ., and the
petitioner, the Rev. Fr. Casimiro Lladoc is
hereby ordered to pay to the respondent the
amount of P900.00 as donee's gift tax, plus
the surcharge of five per centum (5%) as ad
valorem penalty under Section 119 (c) of the
Tax Code, and one per centum(1%) monthly
interest from May 15, 1958 to the date of
 actual payment. The surcharge of 25%
provided in Section 120 for failure to file a
return may not be imposed as the failure to
file a return was not due to willful neglect.
(. . .) No costs."
The above judgment is now before Us on appeal,
petitioner assigning two (2) errors allegedly
committed by the Tax Court, all of which converge on
the singular issue of whether or not petitioner should
be liable for the assessed donee's gift tax on the
P10,000.00 donated for the construction of the
Victorias Parish Church.
Section 22(3), Art. VI of the Constitution of the
Philippines, exempts from taxation
cemeteries, churches and personages or convents,
appurtenant thereto, and all lands, buildings, and
improvements used exclusively for religious purposes.
The exemption is only from the payment of taxes
assessed on such properties enumerated, as property
taxes, as contra-distinguished from excise taxes. In
the present case, what the Collector assessed was a
donee's gift tax; the assessment was not on the
properties themselves. It did not rest upon general
ownership; it was an excise upon the use made of the
properties, upon the exercise of the privilege of
receiving the properties (Phipps vs. Com. of Int. Rev.,
91 F [2d] 627.) Manifestly, gift tax is not within the
exempting provisions of the section just mentioned. A
gift tax is not a property tax, but an excise tax
imposed on the transfer of property by way of
gift inter vivos, the imposition of which on property
used exclusively for religious purposes, do 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 the petitioner, the exemption herein
must be denied.
The next issue which readily present itself, in view of
petitioner's thesis, and Our finding that a tax liability
exists, is, who should be called upon to pay the gift
tax? Petitioner postulates that he should not be liable,
because at the time of the donation he was not the
priest of Victorias. We note the merit of the above
claim, and in order to put things in their proper light,
this Court, in its Resolution of March 15, 1965, ordered
the parties to show cause why the Head of the
Diocese to which the parish of Victorias pertains,
should not be substituted in lieu of petitioner Rev. Fr.
Casimiro Lladoc, it appearing that the Head of such
Diocese is the real party in interest. The Solicitor
General, in representation of the Commissioner of
Internal Revenue, interposed no objection to such a
substitution. Counsel for the petitioner did not also
offer objection thereto.
On April 30, 1965, in a resolution, We ordered the
Head of the Diocese to present whatever legal issues
and/or defenses he might wish to raise, to which
resolution counsel for petitioner, who also appeared
as counsel for the Head of the Diocese, the Roman
Catholic Bishop of Bacolod, manifested that it was
submitting itself to the jurisdiction and orders of this
Court and that it was presenting, by reference, the
brief of petitioner Rev. Fr. Casimiro Lladoc, as its own
and for all purposes.
In view hereof and considering that, as heretofore
stated, the assessment at bar had been properly
made and the imposition of the tax is not a violation
of the constitutional provision exempting churches,
personages or convents, etc. (Art. VI, sec. 22[3],
Constitution), the Head of the Diocese, to which the
parish of Victorias pertains is liable for the payment
thereof.
The decision appealed from should be, as it is hereby
affirmed, insofar as tax liability is concerned; it is
modified, in the sense that petitioner herein is not
personally liable for the said gift tax, and that the
Head of the Diocese, herein substitute petitioner,
should pay, as he is presently ordered to pay, the said
gift tax, without special pronouncement as to costs.

FIRST DIVISION

[G.R. No. 120721. February 23, 2005.]

MANUEL G. ABELLO, JOSE C.

CONCEPCION, TEODORO D. REGALA,
AVELINO V. CRUZ, petitioners, vs.
COMMISSIONER OF INTERNAL REVENUE
and COURT OF APPEALS, respondents.
 DECISION

AZCUNA, J p:
This is a petition for review on certiorari under Rule 45
of the Rules of Civil Procedure, assailing the decision
of the Court of Appeals in CA-G.R. SP No. 27134,
entitled "Commissioner of Internal Revenue v. Manuel
G. Abello, Jose C. Concepcion, Teodoro D. Regala,
Avelino V. Cruz and Court of Tax Appeals," which
reversed and set aside the decision of the Court of Tax
Appeals (CTA), ordering the Commissioner of Internal
Revenue (Commissioner) to withdraw his letters dated
April 21, 1988 and August 4, 1988 assessing donor's
taxes and to desist from collecting donor's taxes from
petitioners.
During the 1987 national elections, petitioners, who
are partners in the Angara, Abello, Concepcion, Regala
and Cruz (ACCRA) law firm, contributed P882,661.31
each to the campaign funds of Senator Edgardo
Angara, then running for the Senate. In letters dated
April 21, 1988, the Bureau of Internal Revenue (BIR)
assessed each of the petitioners P263,032.66 for their
contributions. On August 2, 1988, petitioners
questioned the assessment through a letter to the BIR.
They claimed that political or electoral contributions
are not considered gifts under the National Internal
Revenue Code (NIRC),and that, therefore, they are not
liable for donor's tax. The claim for exemption was
denied by the Commissioner. 1
On September 12, 1988, petitioners filed a petition for
review with the CTA, which was decided on October 7,
1991 in favor of the petitioners. As aforestated, the
CTA ordered the Commissioner to desist from
collecting donor's taxes from the petitioners. 2
On appeal, the Court of Appeals reversed and set
aside the CTA decision on April 20, 1994. 3 The
appellate Court ordered the petitioners to pay donor's
tax amounting to P263,032.66 each, reasoning as
follows:
The National Internal Revenue Code, as
amended, provides:
Sec. 91. Imposition of Tax. (a)
There shall be levied, assessed,
collected, and paid upon the
transfer by any person, resident, or
non-resident, of the property by
gift, a tax, computed as 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. TEcADS
Pursuant to the above-quoted provisions of
law, the transfer of property by gift, 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, is subject to donor's or gift tax.
A gift is generally defined as a voluntary
transfer of property by one to another
without any consideration or compensation
therefor (28 C.J. 620; Santos vs. Robledo, 28
Phil. 250).
In the instant case, the contributions are
voluntary transfers of property in the form of
money from private respondents to Sen.
Angara, without considerations therefor.
Hence, they squarely fall under the definition
of donation or gift.
As correctly pointed out by the Solicitor
General:
The fact that the contributions
were given to be used as campaign
funds of Sen. Angara does not
affect the character of the fund
transfers as donation or gift. There
was thereby no retention of control
over the disposition of the
contributions. There was simply an
indication of the purpose for which
they were to be used. For as long
as the contributions were used for
the purpose for which they were
intended, Sen. Angara had
complete and absolute power to
dispose of the contributions. He
was fully entitled to the economic
benefits of the contributions.
Section 91 of the Tax Code is very clear. A
donor's or gift tax is imposed on the transfer
of property by gift.
The Bureau of Internal Revenue issued
Ruling No. 344 on July 20, 1988, which reads:
Political Contributions. For
internal revenue purposes, political
contributions in the Philippines are
considered taxable gift rather than
taxable income. This is so, because
a political contribution is
indubitably not intended by the
giver 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
donor's gift tax. (cited in National
Internal Revenue Code Annotated
by Hector S. de Leon, 1991 ed., p.
290). jur2005cd
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? HTAEIS
2. DID THE HONORABLE COURT OF APPEALS
ERR IN NOT CONSIDERING THE
INTENTION OF THE GIVERS IN
DETERMINING WHETHER OR NOT THE
PETITIONERS' POLITICAL
CONTRIBUTIONS WERE GIFTS SUBJECT
TO DONORS TAX?
3. DID THE HONORABLE COURT OF APPEALS
ERR WHEN IT FAILED TO CONSIDER THE
DEFINITION OF AN "ELECTORAL
CONTRIBUTION" UNDER THE OMNIBUS
ELECTION CODE IN DETERMINING
WHETHER OR NOT POLITICAL
CONTRIBUTIONS ARE TAXABLE?
4. DID THE HONORABLE COURT OF APPEALS
ERR IN NOT CONSIDERING THE
ADMINISTRATIVE PRACTICE OF CLOSE TO
HALF A CENTURY OF NOT SUBJECTING
POLITICAL CONTRIBUTIONS TO DONORS
TAX?
5. DID THE HONORABLE COURT OF APPEALS
ERR IN NOT CONSIDERING THE
AMERICAN JURISPRUDENCE RELIED
UPON BY THE COURT OF TAX APPEALS
AND BY THE PETITIONERS TO THE
EFFECT THAT POLITICAL
CONTRIBUTIONS ARE NOT TAXABLE
GIFTS?
6. DID THE HONORABLE COURT OF APPEALS
ERR IN NOT APPLYING AMERICAN
JURISPRUDENCE ON THE GROUND THAT
THIS WAS NOT KNOWN AT THE TIME THE
PHILIPPINES GIFT TAX LAW WAS
ADOPTED IN 1939?
7. DID THE HONORABLE COURT OF APPEALS
ERR IN RESOLVING THE CASE MAINLY ON
THE BASIS OF A RULING ISSUED BY THE
RESPONDENT ONLY AFTER THE
ASSESSMENTS HAD ALREADY BEEN
MADE? AaHcIT
8. DID THE HONORABLE COURT OF APPEALS
ERR WHEN IT DID NOT CONSTRUE THE
GIFT TAX LAW LIBERALLY IN FAVOR OF
THE TAXPAYER AND STRICTLY AGAINST
THE GOVERNMENT IN ACCORDANCE
 WITH APPLICABLE PRINCIPLES OF
STATUTORY CONSTRUCTION? 6
First, Fifth and Sixth Issues
Section 91 of the National Internal Revenue
Code (NIRC)reads:
(A) There shall be levied, assessed, collected
and paid upon the transfer by any
person, resident or nonresident, of the
property by gift, a tax, computed as
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.
The NIRC does not define transfer of property by gift.
However, Article 18 of the Civil Code, states:
In matters which are governed by the Code
of Commerce and special laws, their
deficiency shall be supplied by the provisions
of this Code.
Thus, reference may be made to the definition of a
donation in the Civil Code. Article 725 of said Code
defines donation as:
. . . an act of liberality whereby a person
disposes gratuitously of a thing or right in
favor of another, who accepts it.
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. 7
The present case falls squarely within the definition of
a donation. Petitioners, the late Manuel G. Abello 8 ,
Jose C. Concepcion, Teodoro D. Regala and Avelino V.
Cruz, each gave P882,661.31 to the campaign funds
of Senator Edgardo Angara, without any material
consideration. All three elements of a donation are
present. The patrimony of the four petitioners were
reduced by P882,661.31 each. Senator Edgardo
Angara's patrimony correspondingly increased by
P3,530,645.24. 9 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. In Rizal Commercial Banking Corporation
v. Intermediate Appellate Court 10 the Court
enunciated:

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])
Where the law is clear and unambiguous, it
must be taken to mean exactly what it says
and the court has no choice but to see to it
that its mandate is obeyed (Chartered Bank
Employees Association v. Ople, 138 SCRA
273 [1985]; Luzon Surety Co., Inc. v. De
Garcia, 30 SCRA 111 [1969]; Quijano
v. Development Bank of the Philippines, 35
SCRA 270 [1970]).cAHITS
Only when the law is ambiguous or of
doubtful meaning may the court interpret or
construe its true intent. Ambiguity is a
condition of admitting two or more
meanings, of being understood in more than
one way, or of referring to two or more
things at the same time. A statute is
ambiguous if it is admissible of two or more
possible meanings, in which case, the Court
is called upon to exercise one of its judicial
functions, which is to interpret the law
according to its true intent.
Second Issue
Since animus donandior the intention to do an act of
liberality is an essential element of a donation,
petitioners argue that it is important to look into the
intention of the giver to determine if a political
contribution is a gift. Petitioners' argument is not
tenable. First of all, donative intent is a creature of the
mind. It cannot be perceived except by the material
and tangible acts which manifest its presence. This
being the case, donative intent is presumed present
when one gives a part of ones patrimony to another
without consideration. Second, donative intent is not
negated when the person donating has other
intentions, motives or purposes which do not
contradict donative intent. This Court is not convinced
that since the purpose of the contribution was to help
elect a candidate, there was no donative intent.
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.
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:
The term "contribution" includes a gift,
donation, subscription, loan, advance or
deposit of money or anything of value, or a
contract, promise or agreement to
contribute, whether or not legally
enforceable, made for the purpose of
influencing the results of the elections but
shall not include services rendered without
compensation by individuals volunteering a
portion or all of their time in behalf of a
candidate or political party. It shall also
 include the use of facilities voluntarily
donated by other persons, the money value
of which can be assessed based on the rates
prevailing in the area.
Since the purpose of an electoral contribution is to
influence the results of the election, petitioners again
claim that donative intent is not present. Petitioners
attempt to place the barrier of mutual exclusivity
between donative intent and the purpose of political
contributions. This Court reiterates that donative
intent is not negated by the presence of other
intentions, motives or purposes which do not
contradict donative intent.
Petitioners would distinguish a gift from a political
donation by saying that the consideration for a gift is
the liberality of the donor, while the consideration for
a political contribution is the desire of the giver to
influence the result of an election by supporting
candidates who, in the perception of the giver, would
influence the shaping of government policies that
would promote the general welfare and economic
well-being of the electorate, including the giver
himself.
Petitioners' attempt is strained. The fact that
petitioners will somehow in the future benefit from the
election of the candidate to whom they contribute, in
no way amounts to a valuable material consideration
so as to remove political contributions from the
purview of a donation. Senator Angara was under no
obligation to benefit the petitioners. The proper
performance of his duties as a legislator is his
obligation as an elected public servant of the Filipino
people and not a consideration for the political
contributions he received. In fact, as a public servant,
he may even be called to enact laws 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. prcd
Fourth Issue
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 donor's
tax. They argue that:
. . . It is a familiar principle of law that
prolonged practice by the government
agency charged with the execution of a
statute, acquiesced in and relied upon by all
concerned over an appreciable period of
time, is an authoritative interpretation
thereof, entitled to great weight and the
highest respect. . . . 12
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 (Pineda v. Court of First Instance
of Tayabas, 52 Phil. 803, 807; Benguet
Consolidated Mining Co. v. Pineda, 98 Phil.
711, 724). 13
Seventh Issue
Petitioners question the fact that the Court of Appeals
decision is based on a BIR ruling, namely BIR Ruling
No. 88-344, which was issued after the petitioners
were assessed for donor's tax. This Court does not
need to delve into this issue. It is immaterial whether
or not the Court of Appeals based its decision on the
BIR ruling because it is not pivotal in deciding this
case. As discussed above, Section 91 (now Section 98)
of the NIRC as supplemented by the definition of a
donation found in Article 725 of the Civil Code, is clear
and unambiguous, and needs no further elucidation.
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 the donations involved in this case,
Congress approvedRepublic 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.
WHEREFORE, the petition is DENIED and the assailed
Decision and Resolution of the Court of Appeals are
AFFIRMED. ECcTaH
No costs.
SO ORDERED.
||| (Abello, et al. v. Commissioner of Internal Revenue
and Court of Appeals, G.R. No. 120721, [February 23,
2005], 492 PHIL 303-313)

THIRD DIVISION

[G.R. No. 210987. November 24, 2014.]

THE PHILIPPINE AMERICAN LIFE AND

GENERAL INSURANCE
COMPANY, petitioner, vs. THE SECRETARY
OF FINANCE and THE COMMISSIONER
OF INTERNAL REVENUE, respondents.

DECISION
VELASCO, JR., J p:
Nature of the Case
Before the Court is a Petition for Review
on Certiorari under Rule 45 of the Rules of Court
assailing and seeking the reversal of the Resolutions
of the Court of Appeals (CA) in CA-G.R. SP No. 127984,
dated May 23, 2013 1 and January 21, 2014, which
dismissed outright the petitioner's appeal from the
Secretary of Finance's review of BIR Ruling No. 015-
12 2 for lack of jurisdiction.
The Facts
Petitioner The Philippine American Life and General
Insurance Company (Philamlife) used to own 498,590
Class A shares in Philam Care Health Systems, Inc.
(PhilamCare), representing 49.89% of the latter's
outstanding capital stock. In 2009, petitioner, in a bid
to divest itself of its interests in the health
maintenance organization industry, offered to sell its
shareholdings in PhilamCare through competitive
bidding. Thus, on September 24, 2009, petitioner's
Class A shares were sold for USD2,190,000, or
PhP104,259,330 based on the prevailing exchange
rate at the time of the sale, to STI Investments, Inc.,
who emerged as the highest bidder. 3
After the sale was completed and the necessary
documentary stamp and capital gains taxes were
paid, Philamlife filed an application for a certificate
authorizing registration/tax clearance with the Bureau
of Internal Revenue (BIR) Large Taxpayers Service
Division to facilitate the transfer of the shares. Months
later, petitioner was informed that it needed to secure
a BIR ruling in connection with its application due to
potential donor's tax liability. In compliance,
petitioner, on January 4, 2012, requested a ruling 4 to
confirm that the sale was not subject to donor's tax,
pointing out, in its request, the following: that the
transaction cannot attract donor's 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; 5 that the shares were sold at
their actual fair market value and at arm's length; that
as long as the transaction conducted is at arm's
length such that a bona fidebusiness arrangement
of the dealings is done in the ordinary course of
business a sale for less than an adequate
consideration is not subject to donor's tax; and that
donor's tax does not apply to sale of shares sold in an
open bidding process.
On January 4, 2012, however, respondent
Commissioner on Internal Revenue (Commissioner)
denied Philamlife's request 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
PhilamCare as of the end of 2008. 6 As such, the
Commissioner held, donor's tax became imposable on
the price difference pursuant to Sec. 100 of
the National Internal Revenue
Code(NIRC),viz.: HCaEAT
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 money's 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.
The afore-quoted provision, the Commissioner added,
is implemented by Revenue Regulation 6-2008 (RR 6-
2008), which provides:
SEC. 7. SALE, BARTER OR EXCHANGE OF
SHARES OF STOCK NOT TRADED THROUGH
A LOCAL STOCK EXCHANGE PURSUANT TO
SECS. 24(C), 25(A)(3), 25(B), 27(D)(2),
28(A)(7)(c), 28(B)(5)(c) OF THE TAX
CODE,AS AMENDED.
xxx xxx xxx
(c) Determination of Amount and
Recognition of Gain or Loss
(c.1) In the case of cash sale, the selling
price shall be the consideration per deed of
sale.
xxx xxx xxx
(c.1.4) 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 Section 100 of the Tax
Code,as amended.
xxx xxx xxx
(c.2) Definition of 'fair market value' of
Shares of Stock. For purposes of this
Section, 'fair market value' of the share of
stock sold shall be:
xxx xxx xxx
(c.2.2) In the case of shares of stock not
listed and traded in the local stock
exchanges, the book value of the shares of
stock as shown in the financial statements
duly certified by an independent certified
public accountant nearest to the date of
sale shall be the fair market value.
In view of the foregoing, the Commissioner ruled that
the difference between the book value and the selling
price in the sales transaction is taxable donation
subject to a 30% donor's tax under Section 99 (B) of
the NIRC. 7 Respondent Commissioner likewise held
that BIR Ruling [DA-(DT-065) 715-09], on which
petitioner anchored its claim, has already been
revoked by Revenue Memorandum Circular (RMC) No.
25-2011. 8
Aggrieved, petitioner requested respondent Secretary
of Finance (Secretary) to review BIR Ruling No. 015-
12, but to no avail. For on November 26, 2012,
respondent Secretary affirmed the Commissioner's
assailed ruling in its entirety. 9
Ruling of the Court of Appeals
Not contented with the adverse results, petitioner
elevated the case to the CA via a petition for review
under Rule 43, assigning the following errors: 10
A.
The Honorable Secretary of Finance gravely
erred in not finding that the application of
Section 7(c.2.2) of RR 06-08 in the Assailed
Ruling and RMC 25-11 is void insofar as it
alters the meaning and scope of Section
100 of the Tax Code.
B.
The Honorable Secretary of Finance gravely
erred in finding that Section 100 of the Tax
Code is applicable to the sale of the Sale of
Shares.
1.
The Sale of Shares were sold at their fair
market value and
for fair and full consideration in money or
money's worth.
2.
 The sale of the Sale Shares is a bona
fide business
transaction without any donative intent and
is therefore
beyond the ambit of Section 100 of the Tax
Code.
3.
It is superfluous for the BIR to require an
express provision
for the exemption of the sale of the Sale
Shares from
donor's tax since Section 100 of the Tax
Code does not
explicitly subject the transaction to donor's
tax.
C.
The Honorable Secretary of Finance gravely
erred in failing to find that in the absence of
any of the grounds mentioned in Section
246 of the Tax Code,rules and regulations,
rulings or circulars such as RMC 25-11
cannot be given retroactive application to
the prejudice of Philamlife.
On May 23, 2013, the CA issued the assailed
Resolution dismissing the CA Petition, thusly: HaAISC
WHEREFORE, the Petition for Review dated
January 9, 2013 is DISMISSED for lack of
jurisdiction.
SO ORDERED.
In disposing of the CA petition, the appellate court
ratiocinated that it is the Court of Tax Appeals (CTA),
pursuant to Sec. 7 (a) (1) of Republic Act No. 1125 (RA
1125), 11 as amended, which has jurisdiction over the
issues raised. The outright dismissal, so the CA held,
is predicated on the postulate that BIR Ruling No. 015-
12 was issued in the exercise of the Commissioner's
power to interpret the NIRC and other tax laws.
Consequently, requesting for its review can be
categorized as "other matters arising under
the NIRC or other laws administered by the BIR,"
which is under the jurisdiction of the CTA, not the CA.
Philamlife eventually sought reconsideration but the
CA, in its equally assailed January 21, 2014
Resolution, maintained its earlier position. Hence, the
instant recourse.
Issues
Stripped to the essentials, the petition raises the
following issues in both procedure and substance:
1. Whether or not the CA erred in dismissing
the CA Petition for lack of jurisdiction;
and
2. Whether or not the price difference in
petitioner's adverted sale of shares in
PhilamCare attracts donor's tax.
Procedural Arguments
a. Petitioner's contentions
Insisting on the propriety of the interposed CA
petition, Philamlife, while conceding that respondent
Commissioner issuedBIR Ruling No. 015-12 in
accordance with her authority to interpret tax laws,
argued nonetheless that such ruling is subject to
review by the Secretary of Finance under Sec. 4 of
the NIRC,to wit:
SECTION 4. Power of the Commissioner to
Interpret Tax Laws and to Decide Tax Cases.
The power to interpret the provisions of
this Code and other tax laws shall be under
the exclusive and original jurisdiction of the
Commissioner, subject to review by the
Secretary of Finance.
The power to decide disputed assessments,
refunds of internal revenue taxes, fees or
other charges, penalties imposed in relation
thereto, or other matters arising under this
Code or other laws or portions thereof
administered by the Bureau of Internal
Revenue is vested in the Commissioner,
subject to the exclusive appellate
jurisdiction of the Court of Tax Appeals.
Petitioner postulates that there is a need to
differentiate the rulings promulgated by the
respondent Commissioner relating to those rendered
under the first paragraph of Sec. 4 of the NIRC,which
are appealable to the Secretary of Finance, from those
rendered under the second paragraph of Sec. 4 of
the NIRC,which are subject to review on appeal with
the CTA. This distinction, petitioner argues, is readily
made apparent by Department Order No. 7-02, 12 as
circularized by RMC No. 40-A-02.
Philamlife further averred that Sec. 7 of RA 1125, as
amended, does not find application in the case at bar
since it only governs appeals from the Commissioner's
rulings under the second paragraph and does not
encompass rulings from the Secretary of Finance in
the exercise of his power of review under the first, as
what was elevated to the CA. It added that under RA
1125, as amended, the only decisions of the Secretary
appealable to the CTA are those rendered in customs
cases elevated to him automatically under Section
2315 of the Tariff and Customs Code. 13
There is, thus, a gap in the law when the NIRC,as
couched, and RA 1125, as amended, failed to supply
where the rulings of the Secretary in its exercise of its
power of review under Sec. 4 of the NIRC are
appealable to. This gap, petitioner submits, was
remedied by British American Tobacco v.
Camacho 14 wherein the Court ruled that where what
is assailed is the validity or constitutionality of a law,
or a rule or regulation issued by the administrative
agency, the regular courts have jurisdiction to pass
upon the same. aSTAHD
In sum, appeals questioning the decisions of the
Secretary of Finance in the exercise of its power of
review under Sec. 4 of the NIRC are not within the
CTA's limited special jurisdiction and, according to
petitioner, are appealable to the CA via a Rule 43
petition for review.
b. Respondents' contentions
Before the CA, respondents countered petitioner's
procedural arguments by claiming that even
assuming arguendo that the CTA does not have
jurisdiction over the case, Philamlife, nevertheless,
committed a fatal error when it failed to appeal the
Secretary of Finance's ruling to the Office of the
President (OP). As made apparent by the rules, the
Department of Finance is not among the agencies and
quasi-judicial bodies enumerated under Sec. 1, Rule
43 of the Rules of Court whose decisions and rulings
are appealable through a petition for review. 15 This is
in stark contrast to the OP's specific mention under
the same provision, so respondents pointed out.
To further reinforce their argument, respondents cite
the President's power of review emanating from his
power of control as enshrined under Sec. 17 of Article
VII of the Constitution, which reads:
Section 17. The President shall have control
of all the executive departments, bureaus,
and offices. He shall ensure that the laws be
faithfully executed.
The nature and extent of the President's
constitutionally granted power of control have been
defined in a plethora of cases, most recently in Elma
v. Jacobi, 16 wherein it was held that:
. . . This power of control, which even
Congress cannot limit, let alone withdraw,
means the power of the Chief Executive to
review, alter, modify, nullify, or set aside
what a subordinate, e.g., members of the
Cabinet and heads of line agencies, had
done in the performance of their duties and
 to substitute the judgment of the former for
that of the latter.
In their Comment on the instant petition, however,
respondents asseverate that the CA did not err in its
holding respecting the CTA's jurisdiction over the
controversy.
The Court's Ruling
The petition is unmeritorious.
Reviews by the Secretary of
Finance pursuant to Sec. 4 of
the NIRC are appealable to the
CTA
To recapitulate, three different, if not conflicting,
positions as indicated below have been advanced by
the parties and by the CA as the proper remedy open
for assailing respondents' rulings:
1. Petitioners: The ruling of the
Commissioner is subject to review by the
Secretary under Sec. 4 of theNIRC,and
that of the Secretary to the CA via Rule
43;
2. Respondents: The ruling of the
Commissioner is subject to review by the
Secretary under Sec. 4 of theNIRC,and
that of the Secretary to the Office of the
President before appealing to the CA via
a Rule 43 petition; and
3. CA: The ruling of the Commissioner is
subject to review by the CTA.
We now resolve. ICAcHE
Preliminarily, it bears stressing that there is no dispute
that what is involved herein is the respondent
Commissioner's exercise of power under the first
paragraph of Sec. 4 of the NIRC the power to
interpret tax laws. This, in fact, was recognized by the
appellate court itself, but erroneously held that her
action in the exercise of such power is appealable
directly to the CTA. As correctly pointed out by
petitioner, Sec. 4 of the NIRC readily provides that the
Commissioner's power to interpret the provisions of
this Code and other tax laws is subject to review by
the Secretary of Finance. The issue that now arises
is this 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?
Admittedly, there is no provision in law that expressly
provides where exactly the ruling of the Secretary of
Finance under the adverted NIRC provision is
appealable to. However, We find that Sec. 7 (a) (1)
of RA 1125, as amended, addresses the seeming gap
in the law as it vests the CTA, albeit impliedly, with
jurisdiction over the CA petition as "other matters"
arising under the NIRC or other laws administered by
the BIR. As stated:
Sec. 7. Jurisdiction. The CTA shall
exercise:
a. Exclusive appellate jurisdiction
to review by appeal, as herein
provided:
 1. Decisions of the
Commissioner of Internal
Revenue in cases involving
disputed assessments, refunds
of internal revenue taxes, fees
or other charges, penalties in
relation thereto, or other
matters arising under the
National Internal Revenue or
other laws administered by the
Bureau of Internal Revenue.
(emphasis supplied)
Even though the provision suggests that it only covers
rulings of the Commissioner, We hold that it is,
nonetheless, sufficient enough to include appeals from
the Secretary's review under Sec. 4 of the NIRC.
It is axiomatic that laws should be given a reasonable
interpretation which does not defeat the very purpose
for which they were passed. 17 Courts should not
follow the letter of a statute when to do so would
depart from the true intent of the legislature or would
otherwise yield conclusions inconsistent with the
purpose of the act. 18 This Court has, in many cases
involving the construction of statutes, cautioned
against narrowly interpreting a statute as to defeat
the purpose of the legislator, and rejected the literal
interpretation of statutes if to do so would lead to
unjust or absurd results. 19
Indeed, to leave undetermined the mode of appeal
from the Secretary of Finance would be an injustice to
taxpayers prejudiced by his adverse rulings. To
remedy this situation, We imply from the purpose
of RA 1125 and its amendatory laws that the CTA is
the proper forum with which to institute the appeal.
This is not, and should not, in any way, be taken as a
derogation of the power of the Office of President but
merely as recognition that matters calling for
technical knowledge should be handled by the agency
or quasi-judicial body with specialization over the
controversy. As the specialized quasi-judicial agency
mandated to adjudicate tax, customs, and assessment
cases, there can be no other court of appellate
jurisdiction that can decide the issues raised in the CA
petition, which involves the tax treatment of the
shares of stocks sold.
Petitioner, though, next invites attention to the ruling
in Ursal v. Court of Tax Appeals 20 to argue against
granting the CTA jurisdiction by implication, viz.:
Republic Act No. 1125 creating the Court of
Tax Appeals did not grant it blanket authority
to decide any and all tax disputes. Defining
such special court's jurisdiction, the Act
necessarily limited its authority to those
matters enumerated therein. In line with this
idea we recently approved said court's order
rejecting an appeal to it by Lopez & Sons
from the decision of the Collector of
Customs, because in our opinion its
jurisdiction extended only to a review of the
decisions of the Commissioner of Customs,
as provided by the statute and not to
decisions of the Collector of Customs. (Lopez
 & Sons vs. The Court of Tax Appeals, 100
Phil., 850, 53 Off. Gaz., [10] 3065).
xxx xxx xxx
. . . Republic Act No. 1125 is a complete law
by itself and expressly enumerates the
matters which the Court of Tax Appeals may
consider; such enumeration excludes all
others by implication. Expressio unius est
exclusio alterius.
Petitioner's contention is untenable. Lest the ruling
in Ursal be taken out of context, but worse as a
precedent, it must be noted that the primary reason
for the dismissal of the said case was that the
petitioner therein lacked the personality to file the suit
with the CTA because he was not adversely affected
by a decision or ruling of the Collector of Internal
Revenue, as was required under Sec. 11 of RA
1125. 21 As held: TIDaCE
We share the view that the assessor had no
personality to resort to the Court of Tax
Appeals. The rulings of the Board of
Assessment Appeals did not "adversely
affect" him. At most it was the City of Cebu
that had been adversely affected in the
sense that it could not thereafter collect
higher realty taxes from the
abovementioned property owners. His
opinion, it is true had been overruled; but
the overruling inflicted no material damage
upon him or his office. And the Court of Tax
Appeals was not created to decide mere
 conflicts of opinion between administrative
officers or agencies. Imagine an income tax
examiner resorting to the Court of Tax
Appeals whenever the Collector of Internal
Revenue modifies, or lower his assessment
on the return of a tax payer" 22
The appellate power of the
CTA includes certiorari
Petitioner is quick to point out, however, that the
grounds raised in its CA petition included the nullity of
Section 7 (c.2.2) of RR 06-08 and RMC 25-11. In an
attempt to divest the CTA jurisdiction over the
controversy, petitioner then cites British American
Tobacco, wherein this Court has expounded on the
limited jurisdiction of the CTA in the following wise:
While the above statute confers on the
CTA jurisdiction to resolve tax disputes
in general, this does not include cases
where the constitutionality of a law or
rule is challenged. Where what is
assailed is the validity or
constitutionality of a law, or a rule or
regulation issued by the administrative
agency in the performance of its quasi-
legislative function, the regular courts
have jurisdiction to pass upon the
same. The determination of whether a
specific rule or set of rules issued by an
administrative agency contravenes the law
or the constitution is within the jurisdiction of
the regular courts. Indeed, the
 Constitution vests the power of judicial
review or the power to declare a law, treaty,
international or executive agreement,
presidential decree, order, instruction,
ordinance, or regulation in the courts,
including the regional trial courts. This is
within the scope of judicial power, which
includes the authority of the courts to
determine in an appropriate action the
validity of the acts of the political
departments. Judicial power includes the
duty of the courts of justice to settle actual
controversies involving rights which are
legally demandable and enforceable, and to
determine whether or not there has been a
grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any
branch or instrumentality of the
Government. 23
Vis-a-vis British American Tobacco, it bears to stress
what appears to be a contrasting ruling in Asia
International Auctioneers, Inc. v. Parayno, Jr., to wit:
Similarly, in CIR v. Leal, pursuant to Section
116 of Presidential Decree No. 1158
(The National Internal Revenue Code, as
amended) which states that "[d]ealers in
securities shall pay a tax equivalent to six
(6%) per centum of their gross income.
Lending investors shall pay a tax equivalent
to five (5%) per cent, of their gross income,"
the CIR issuedRevenue Memorandum Order
(RMO) No. 15-91 imposing 5% lending
investor's tax on pawnshops based on their
gross income and requiring all investigating
units of the BIR to investigate and assess the
lending investor's tax due from them. The
issuance of RMO No. 15-91 was an offshoot
of the CIR's finding that the pawnshop
business is akin to that of "lending investors"
as defined in Section 157(u) of the Tax
Code.Subsequently, the CIR issued RMC No.
43-91subjecting pawn tickets to
documentary stamp tax. Respondent
therein, Josefina Leal, owner and operator of
Josefina's Pawnshop, asked for a
reconsideration of both RMO No. 15-
91 and RMC No. 43-91, but the same was
denied by petitioner CIR. Leal then filed a
petition for prohibition with the RTC of San
Mateo, Rizal, seeking to prohibit petitioner
CIR from implementing the revenue orders.
The CIR, through the OSG, filed a motion to
dismiss on the ground of lack of jurisdiction.
The RTC denied the motion. Petitioner filed a
petition for certiorari and prohibition with the
CA which dismissed the petition "for lack of
basis." In reversing the CA, dissolving the
Writ of Preliminary Injunction issued by the
trial court and ordering the dismissal of the
case before the trial court, the Supreme
Court held that "[t]he questionedRMO No.
15-91 and RMC No. 43-91 are actually
rulings or opinions of the Commissioner
implementing the Tax Code on the
taxability of pawnshops." They were
issued pursuant to the CIR's power
under Section 245 of theTax Code "to
make rulings or opinions in connection
with the implementation of the
provisions of internal revenue laws,
including ruling on the classification of
articles of sales and similar
purposes." The Court held that under R.A.
No. 1125 (An Act Creating the Court of Tax
Appeals), as amended, such rulings of the
CIR are appealable to the CTA.
In the case at bar, the assailed revenue
regulations and revenue memorandum
circulars are actually rulings or
opinions of the CIR on the tax
treatment of motor vehicles sold at
public auction within the SSEZ to
implement Section 12 of R.A. No.
7227 which provides that "exportation or
removal of goods from the territory of the
[SSEZ] to the other parts of the Philippine
territory shall be subject to customs duties
and taxes under the Customs and Tariff Code
and other relevant tax laws of the
Philippines." They were issued pursuant
to the power of the CIR under Section 4
of the National Internal Revenue
Code . . . . 24 (emphasis added)
The respective teachings in British American
Tobacco and Asia International Auctioneers, at first
blush, appear to bear no conflict that when the
validity or constitutionality of an administrative rule or
regulation is assailed, the regular courts have
jurisdiction; and if what is assailed are rulings or
opinions of the Commissioner on tax treatments,
jurisdiction over the controversy is lodged with the
CTA. The problem with the above postulates, however,
is that they failed to take into consideration one
crucial point a taxpayer can raise both issues
simultaneously. HDCAaS
Petitioner avers that there is now a trend wherein both
the CTA and the CA disclaim jurisdiction over tax
cases: on the one hand, mere prayer for the
declaration of a tax measure's unconstitutionality or
invalidity before the CTA can result in a petition's
outright dismissal, and on the other hand, the CA will
likewise dismiss the same petition should it find that
the primary issue is not the tax measure's validity but
the assessment or taxability of the transaction or
subject involved. To illustrate this point, petitioner
cites the assailed Resolution, thusly:
Admittedly, in British American Tobacco vs.
Camacho, the Supreme Court has ruled that
the determination of whether a specific rule
or set of rules issued by an administrative
agency contravenes the law or the
constitution is within the jurisdiction of the
regular courts, not the CTA.
xxx xxx xxx
 Petitioner essentially questions the CIR's
ruling that Petitioner's 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 unfavourable 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.
Petitioner's above submission is specious.
In the recent case of City of Manila v. Grecia-
Cuerdo, 25 the Court en banc has ruled that the CTA
now has the power ofcertiorari in cases within its
appellate jurisdiction. To elucidate:
The prevailing doctrine is that the authority
to issue writs of certiorari involves the
exercise of original jurisdiction which must
be expressly conferred by the Constitution or
by law and cannot be implied from the mere
existence of appellate jurisdiction. Thus, . . .
this Court has ruled against the jurisdiction
of courts or tribunals over petitions
forcertiorari on the ground that there is no
law which expressly gives these tribunals
such power. It must be observed, however,
that . . . these rulings pertain not to regular
courts but to tribunals exercising quasi-
judicial powers. With respect to the
Sandiganbayan, Republic Act No. 8249 now
provides that the special criminal court has
exclusive original jurisdiction over petitions
for the issuance of the writs of mandamus,
prohibition, certiorari, habeas corpus,
injunctions, and other ancillary writs and
processes in aid of its appellate jurisdiction.
In the same manner, Section 5 (1), Article
VIII of the 1987 Constitution grants power to
the Supreme Court, in the exercise of its
original jurisdiction, to issue writs
of certiorari, prohibition and mandamus.
With respect to the Court of Appeals, Section
9 (1) of Batas Pambansa Blg. 129 (BP 129)
gives the appellate court, also in the
exercise of its original jurisdiction, the power
to issue, among others, a writ of certiorari,
whether or not in aid of its appellate
jurisdiction. As to Regional Trial Courts, the
power to issue a writ of certiorari, in the
exercise of their original jurisdiction, is
provided under Section 21 of BP 129.
The foregoing notwithstanding, while there is
no express grant of such power, with respect
to the CTA, Section 1, Article VIII of the 1987
Constitution provides, nonetheless, that
judicial power shall be vested in one
Supreme Court and in such lower courts as
may be established by law and that judicial
power includes the duty of the courts of
justice to settle actual controversies
involving rights which are legally
demandable and enforceable, and to
determine whether or not there has been a
grave abuse of discretion amounting to lack
or excess of jurisdiction on the part of any
branch or instrumentality of the
Government. EIDTAa
On the strength of the above constitutional
provisions, it can be fairly interpreted
that the power of the CTA includes that
of determining whether or not there
has been a grave abuse of discretion
amounting to lack or excess of
jurisdiction on the part of the RTC in
issuing an interlocutory order in cases
falling within the exclusive appellate
jurisdiction of the tax court. It, thus,
follows that the CTA, by constitutional
mandate, is vested with jurisdiction to
issue writs of certiorari in these cases.
Indeed, in order for any appellate court to
effectively exercise its appellate jurisdiction,
it must have the authority to issue, among
others, a writ of certiorari. In transferring
exclusive jurisdiction over appealed tax
 cases to the CTA, it can reasonably be
assumed that the law intended to transfer
also such power as is deemed necessary, if
not indispensable, in aid of such appellate
jurisdiction. There is no perceivable reason
why the transfer should only be considered
as partial, not total. (emphasis added)
Evidently, City of Manila can be considered as a
departure from Ursal in that in spite of there being no
express grant in law, the CTA is deemed granted with
powers of certiorari by implication. Moreover, City of
Manila diametrically opposes British American
Tobacco to the effect that it is now within the power of
the 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 petitioner's arguments.
The price difference is subject
to donor's tax
Petitioner's substantive arguments are unavailing. The
absence of donative intent, if that be the case, does
not exempt the sales of stock transaction from donor's
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
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, 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.
WHEREFORE, the petition is hereby DISMISSED. The
Resolutions of the Court of Appeals in CA-G.R. SP No.
127984 dated May 23, 2013 and January 21, 2014 are
hereby AFFIRMED.
SO ORDERED. cDHAES
||| (The Philippine American Life and General
Insurance Co. v. The Secretary of Finance, G.R. No.
210987, [November 24, 2014])
 THIRD DIVISION

[G.R. No. 104171. February 24, 1999.]

COMMISSIONER OF INTERNAL
REVENUE, petitioner, vs. B.F. GOODRICH
PHILS., INC. (now SIME DARBY
INTERNATIONAL TIRE CO., INC.) and THE
COURT OF APPEALS, respondents.

The Solicitor General for petitioner.

Wilfredo U. Villanueva for private respondent.

SYNOPSIS

On April 23, 1975, petitioner issued against private

respondent an assessment for deficiency income tax
for its 1974 income in the amount of P6,005.35, which
private respondent duly paid. Subsequently, on
October 10, 1980, petitioner again issued an
assessment for deficiency donor's tax in the amount
of P1,020,850.00 against private respondent in
relation to the sale of its Basilan Landholdings to
Siltown Realty Phils. Inc. in 1974 at a price less than
its market value. The BIR deemed the consideration
for the sale insufficient, and the difference between
the Fair Market Value and the actual purchase price a
taxable donation. On April 9, 1981, private respondent
received another assessment from petitioner dated
March 16, 1981 which increased to P1,092,949.00 the
amount demanded for the alleged deficiency donor's
tax, surcharge, interest and compromise penalty.
Private respondent assailed the correctness and the
legality of these last two assessments to the Court of
Tax Appeals. The CTA modified the decision of the
Commissioner of Internal Revenue as to the amount.
The CTA ruled that the ordinary period of limitation
upon assessment and collection does not apply when
there is falsity with intent to evade tax as in this case,
thus, petitioner's right to assess private respondent
has not yet prescribed. Private respondent appealed
to the Court of Appeals, which reversed the CTA's
decision. Hence, this petition.
In affirming the decision of the Court of Appeals, the
Supreme Court found the questioned assessments to
have been issued by the BIR beyond the five-year
statute of limitations. There was no basis to disregard
the five-year period of prescription expressly provided
under Section 331 of the National Internal Revenue
Code. Likewise, Section 15 of the NIRCdoes not
provide an exception to the statute of limitations on
the issuance of an assessment, by allowing the initial
assessment to be made on the basis of the best
evidence available. Having made its initial assessment
in the manner prescribed, petitioner could not have
been authorized to issue, beyond the five-year
prescriptive period, the second and the third
assessments under consideration. Nor is petitioner's
claim of falsity sufficient to take the questioned
assessments out of the ambit of the statute of
limitations. The fact that private respondent sold its
real property for a price less than its declared fair
market value did not by itself justify a finding of false
return. Since private respondent declared the said
sale in its 1974 Income Tax Return, the BIR should
have issued the questioned assessment within the
five-year prescriptive period. Moreover, since the BIR
failed to prove that respondent's 1974 return had
been filed fraudulently with intent to evade the
payment of the correct amount of tax, or that it had
failed to file a return at all, the period for assessments
had obviously prescribed. aECSHI

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; QUESTION OF LAW

DIFFERENTIATED FROM QUESTION OF FACT. True,
the factual findings of the CTA are generally not
disturbed on appeal when supported by substantial
evidence and in the absence of gross error or grave
abuse of discretion. However, the CTA's application of
the law to the facts of this controversy is an
altogether different matter, for it involves a legal
question. There is a question of law when the issue is
the application of the law to a given set of facts. On
the other hand, a question of fact involves the truth or
falsehood of alleged facts. In the present case, the
Court of Appeals ruled not on the truth or falsity of the
facts found by the CTA, but on the latter's application
of the law on prescription.
2. TAXATION; ASSESSMENT AND COLLECTION OF
TAXES; STATUTE OF LIMITATIONS; EXCEPTIONS
THERETO MUST BE STRICTLY CONSTRUED; TAX
ASSESSMENTS IN CASE AT BAR ALREADY BEYOND THE
FIVE-YEAR PERIOD OF PRESCRIPTION. Applying
Section 331 of the National Internal Revenue Code to
the facts at hand, it is clear that the October 16, 1980
and the March 1981 assessments were issued by the
BIR beyond the five-year statute of limitations. The
Court has thoroughly studied the records of this case
and found no basis to disregard the five-year period of
prescription. For the purpose of safeguarding
taxpayers from any unreasonable examination,
investigation or assessment, our tax law provides a
statute of limitations in the collection of taxes. Thus,
the law on prescription, being a remedial measure,
should be liberally construed in order to afford such
protection. As a corollary, the exceptions to the law on
prescription should perforce be strictly construed.
3. ID.; ID.; ID.; COMMISSIONER OF INTERNAL
REVENUE, NOT AUTHORIZED TO ISSUE SECOND AND
THIRD TAX ASSESSMENT BEYOND THE FIVE-YEAR
PRESCRIPTIVE PERIOD EVEN IF THE INITIAL
ASSESSMENT WAS MADE IN THE PRESCRIBED
MANNER. Section 15 of the NIRC,provides that
"[w]hen a report required by law as a basis for the
assessment of any national internal revenue tax shall
not be forthcoming within the time fixed by law or
regulation, or when there is reason to believe that any
such report is false, incomplete, or erroneous, the
Commissioner of Internal Revenue shall assess the
proper tax on the best evidence obtainable." Clearly,
Section 15 does not provide an exception to the
statute of limitations on the issuance of an
assessment, by allowing the initial assessment to be
made on the basis of the best evidence available.
Having made its initial assessment in the manner
prescribed, the commissioner could not have been
authorized to issue, beyond the five-year prescriptive
period, the second and the third assessments under
consideration before us. Nor is petitioner's claim of
falsity sufficient to take the questioned assessments
out of the ambit of the statute of limitations. AHDacC
4. ID.; ID.; SALE OF REAL PROPERTY AT A PRICE
LESSER THAN ITS DECLARED FAIR MARKET VALUE
DOES NOT BY ITSELF JUSTIFY THE FINDING OF FALSE
RETURN. Petitioner insists that private respondent
committed "falsity" when it sold the property for a
price lesser than its declared fair market value. This
fact alone did not constitute a false return which
contains wrong information due to mistake,
carelessness or ignorance. It is possible that real
property may be sold for less than adequate
consideration for a bona fide business purpose; in
such event, the sale remains an "arm's length"
transaction. In the present case, the private
respondent was compelled to sell the property even at
a price less than its market value, because it would
have lost all ownership rights over it upon the
expiration of the parity amendment. In other words,
private respondent was attempting to minimize its
losses. At the same time, it was able to lease the
property for 25 years, renewable for another 25. This
can be regarded as another consideration on the
price. Furthermore, the fact that private respondent
sold its real property for a price less than its declared
fair market value did not by itself justify a finding of
false return. Indeed, private respondent declared the
sale in its 1974 return submitted to the BIR. Within
the five-year prescriptive period, the BIR could have
issued the questioned assessment, because the
declared fair market value of said property was of
public record. This it did not do, however, during all
those five years.
5. ID.; ID.; FILING OF FRAUDULENT RETURN WITH
INTENT TO EVADE TAX, NOT PROVEN IN CASE AT BAR.
The BIR failed to show that private respondent's
1974 return was filed fraudulently with intent to evade
the payment of the correct amount of tax. Moreover,
even though a donor's tax, which is defined as "a tax
on the privilege of transmitting one's property or
property rights to another or others without adequate
and full valuable consideration," is different from
capital gains tax, a tax on the gain from the sale of
the taxpayer's property forming part of capital assets,
the tax return filed by private respondent to report its
income for the year 1974 was sufficient compliance
with the legal requirement to file a return. In other
words, the fact that the sale transaction may have
partly resulted in a donation does not change the fact
that private respondent already reported its income
for 1974 by filing an income tax return.
6. ID.; ID.; STATUTE OF LIMITATIONS; NEGLIGENCE OR
OVERSIGHT ON THE PART OF THE BUREAU OF
INTERNAL REVENUE CANNOT PREJUDICE TAXPAYERS.
Since the BIR failed to demonstrate clearly that
private respondent had filed a fraudulent return with
the intent to evade tax, or that it had failed to file a
return at all, the period for assessments has obviously
prescribed. Such instances of negligence or oversight
on the part of the BIR cannot prejudice taxpayers,
considering that the prescriptive period was precisely
intended to give them peace of mind. Based on the
foregoing, a discussion of the validity and legality of
the assailed assessments has become moot and
unnecessary. aSCHcA

DECISION

PANGANIBAN, J p:
Notwithstanding the expiration of the five-year
prescriptive period, may the Bureau of Internal
Revenue (BIR) still assess a taxpayer even after the
latter has already paid the tax due, on the ground that
the previous assessment was insufficient or based on
a "false" return?
The Case
This is the main question raised before us in this
Petition for Review on Certiorari assailing the
Decision 1 dated February 14, 1992, promulgated by
the Court of Appeals 2 in CA-GR SP No. 25100. The
assailed Decision reversed the Court of Tax Appeals
(CTA) 3 which upheld the BIR commissioner's
assessments made beyond the five-year statute of
limitations. cdpr

The Facts
The facts are undisputed. 4 Private Respondent BF
Goodrich Phils., Inc. (now Sime Darby International
Tire Co, Inc.), was an American-owned and controlled
corporation previous to July 3, 1974. As a condition for
approving the manufacture by private respondent of
tires and other rubber products, the Central Bank of
the Philippines required that it should develop a
rubber plantation. In compliance with this
requirement, private respondent purchased from the
Philippine government in 1961, under the Public Land
Act and the Parity Amendment to the 1935
Constitution, certain parcels of land located in
Tumajubong, Basilan, and there developed a rubber
plantation.
More than a decade later, on August 2, 1973, the
justice secretary rendered an opinion stating that,
upon the expiration of the Parity Amendment on July
3, 1974, the ownership rights of Americans over public
agricultural lands, including the right to dispose or sell
their real estate, would be lost. On the basis of this
Opinion, private respondent sold to Siltown Realty
Philippines, Inc. on January 21, 1974, its Basilan
landholding for P500,000 payable in installments. In
accord with the terms of the sale, Siltown Realty
Philippines, Inc. leased the said parcels of land to
private respondent for a period of 25 years, with an
extension of another 25 years at the latter's option.
Based on the BIR's Letter of Authority No. 10115
dated April 14, 1975, the books and accounts of
private respondent were examined for the purpose of
determining its tax liability for taxable year 1974. The
examination resulted in the April 23, 1975 assessment
of private respondent for deficiency income tax in the
amount of P6,005.35, which it duly paid.
Subsequently, the BIR also issued Letters of Authority
Nos. 074420 RR and 074421 RR and Memorandum
Authority Reference No. 749157 for the purpose of
examining Siltown's business, income and tax
liabilities. On the basis of this examination, the BIR
commissioner issued against private respondent on
October 10, 1980, an assessment for deficiency in
donor's tax in the amount of P1,020,850, in relation to
the previously mentioned sale of its Basilan
landholdings to Siltown. Apparently, the BIR deemed
the consideration for the sale insufficient, and the
difference between the fair market value and the
actual purchase price a taxable donation.
In a letter dated November 24, 1980, private
respondent contested this assessment. On April 9,
1981, it received another assessment dated March 16,
1981, which increased to P1,092,949 the amount
demanded for the alleged deficiency donor's tax,
surcharge, interest and compromise penalty.
Private respondent appealed the correctness and the
legality of these last two assessments to the CTA.
After trial in due course, the CTA rendered its Decision
dated March 29, 1991, the dispositive portion of which
reads as follows:
"WHEREFORE, the decision of the
Commissioner of Internal Revenue assessing
petitioner deficiency gift tax is MODIFIED
and petitioner is ordered to pay the amount
 of P1,311,179.01 plus 10% surcharge and
20% annual interest from March 16, 1981
until fully paid provided that the maximum
amount that may be collected as interest on
delinquency shall in no case exceed an
amount corresponding to a period of three
years pursuant to Section 130(b)(1) and (c)
of the 1977 Tax Code,as amended by P.D.
No. 1705, which took effect on August 1,
1980.
"SO ORDERED." 5
Undaunted, private respondent elevated the matter to
the Court of Appeals, which reversed the CTA, as
follows:
"What is involved here is not a first
assessment; nor is it one within the 5-year
period stated in Section 331 above. Since
what is involved in this case is a multiple
assessment beyond the five-year period, the
assessment must be based on the grounds
provided in Section 337, and not on Section
15 of the 1974 Tax Code.Section 337 utilizes
the very specific terms 'fraud,
irregularity, and mistake'. 'Falsity does not
appear to be included in this enumeration.
Falsity suffices for an assessment, which is
a first assessment made within the five-year
period. When it is a subsequent assessment
made beyond the five-year period, then, it
may be validly justified only by 'fraud,
 irregularity and mistake' on the part of the
taxpayer." 6
Hence, this Petition for Review under Rule 45 of the
Rules of Court. 7
The Issues
Before us, petitioner raises the following issues:
"I
Whether or not petitioner's right to assess
herein deficiency donor's tax has indeed
prescribed as ruled by public respondent
Court of Appeals
II
Whether or not the herein deficiency donor's
tax assessment for 1974 is valid and in
accordance with law"
Prescription is the crucial issue in the resolution of this
case.
The Court's Ruling
The petition has no merit.
Main Issue: Prescription
The petitioner contends that the Court of Appeals
erred in reversing the CTA on the issue of prescription,
because its ruling was based on factual findings that
should have been left undisturbed on appeal, in the
absence of any showing that it had been tainted with
gross error or grave abuse of discretion. 8 The Court is
not persuaded.
True, the factual findings of the CTA are generally not
disturbed on appeal when supported by substantial
evidence and in the absence of gross error or grave
abuse of discretion. However, the CTA's application of
the law to the facts of this controversy is an
altogether different matter, for it involves a legal
question. There is a question of law when the issue is
the application of the law to a given set of facts. On
the other hand, a question of fact involves the truth or
falsehood of alleged facts. 9 In the present case, the
Court of Appeals ruled not on the truth or falsity of the
facts found by the CTA, but on the latter's application
of the law on prescription.
Section 331 of the National Internal Revenue
Code provides:
"SECTION 331. Period of limitation upon
assessment and collection. Except as
provided in the succeeding section, internal-
revenue taxes shall be assessed within five
years after the return was filed, and no
proceeding in court without assessment for
the collection of such taxes shall be begun
after expiration of such period. For the
purposes of this section, a return filed before
the last day prescribed by law for the filing
thereof shall be considered as filed on such
last day: Provided, That this limitation shall
not apply to cases already investigated prior
to the approval of this Code."
Applying this provision of law to the facts at hand, it is
clear that the October 16, 1980 and the March 1981
assessments were issued by the BIR beyond the five-
year statute of limitations. The Court has thoroughly
studied the records of this case and found no basis to
disregard the five-year period of prescription. As
succinctly pronounced by the Court of Appeals:
"The subsequent assessment made by the
respondent Commissioner on October 10,
1980, modified by that of March 16, 1981,
violates the law. Involved in this petition is
the income of the petitioner for the year
1974, the returns for which were required to
be filed on or before April 15 of the
succeeding year. The returns for the year
1974 were duly filed by the petitioner, and
assessment of taxes due for such year
including that on the transfer of properties
on June 21, 1974 was made on April 13,
1975 and acknowledged by Letter of
Confirmation No. 101155 terminating the
examination on this subject. The subsequent
assessment of October 10, 1980 modified,
by that of March 16, 1981, was made
beyond the period expressly set in Section
331 of the National Internal Revenue Code . .
. ." 10
Petitioner relies on the CTA ruling, the salient portion
of which reads:
"Falsity is what we have here, and for that
matter, we hasten to add that the second
assessment (March 16, 1981) of the
Commissioner was well-advised having been
 made in contemplation of his power under
Section 15 of the 1974 Code (now Section
16, of NIRC) to assess the proper tax on
the best evidence obtainable "when there is
reason to believe that a report of a taxpayer
is false, incomplete or erroneous." More,
when there is falsity with intent to evade tax
as in this case, the ordinary period of
limitation upon assessment and collection
does not apply so that contrary to the
averment of petitioner, the right to assess
respondent has not prescribed.
"What is the considered falsity? The transfer
through sale of the parcels of land in
Tumajubong, Lamitan, Basilan in favor of
Siltown Realty for the sum of P500,000.00
only whereas said lands had been sworn to
under Presidential Decree No. 76 (Dec. 6,
1972) as having a value of P2,683,467
(P2,475,467 + P207,700) (see Declaration of
Real Property form, p. 28, and p. 15, no. 5,
BIR Record)." 11
For the purpose of safeguarding taxpayers from any
unreasonable examination, investigation or
assessment, our tax law provides a statute of
limitations in the collection of taxes. Thus, the law on
prescription, being a remedial measure, should be
liberally construed in order to afford such
protection. 12 As a corollary, the exceptions to the
law on prescription should perforce be strictly
construed.
Section 15 of the NIRC,on the other hand, provides
that "[w]hen a report required by law as a basis for
the assessment of any national internal revenue tax
shall not be forthcoming within the time fixed by law
or regulation, or when there is reason to believe that
any such report is false, incomplete, or erroneous, the
Commissioner of Internal Revenue shall assess the
proper tax on the best evidence obtainable." Clearly,
Section 15 does not provide an exception to the
statute of limitations on the issuance of an
assessment, by allowing the initial assessment to be
made on the basis of the best evidence available.
Having made its initial assessment in the manner
prescribed, the commissioner could not have been
authorized to issue, beyond the five-year prescriptive
period, the second and the third assessments under
consideration before us.

Nor is petitioner's claim of falsity sufficient to take the

questioned assessments out of the ambit of the
statute of limitations. The relevant part of then
Section 332 of the NIRC,which enumerates the
exceptions to the period of prescription, provides:
"SECTION 332. Exceptions as to period of
limitation of assessment and collection of
taxes. (a) In the case of a false or
fraudulent return with intent to evade a tax
or of a failure to file a return, the tax may be
assessed, or a proceeding in court for the
collection of such tax may be begun without
assessment, at any time within ten years
 after the discovery of the falsity, fraud, or
omission: . . . ."
Petitioner insists that private respondent committed
"falsity" when it sold the property for a price lesser
than its declared fair market value. This fact alone did
not constitute a false return which contains wrong
information due to mistake, carelessness or
ignorance. 13 It is possible that real property may be
sold for less than adequate consideration for a bona
fide business purpose; in such event, the sale remains
an "arm's length" transaction. In the present case, the
private respondent was compelled to sell the property
even at a price less than its market value, because it
would have lost all ownership rights over it upon the
expiration of the parity amendment. In other words,
private respondent was attempting to minimize its
losses. At the same time, it was able to lease the
property for 25 years, renewable for another 25. This
can be regarded as another consideration on the
price.
Furthermore, the fact that private respondent sold its
real property for a price less than its declared fair
market value did not by itself justify a finding of false
return. Indeed, private respondent declared the sale in
its 1974 return submitted to the BIR. 14 Within the
five-year prescriptive period, the BIR could have
issued the questioned assessment, because the
declared fair market value of said property was of
public record. This it did not do, however, during all
those five years. Moreover, the BIR failed to prove
that respondent's 1974 return had been filed
fraudulently. Equally significant was its failure to prove
respondent's intent to evade the payment of the
correct amount of tax.
Ineludibly, the BIR failed to show that private
respondent's 1974 return was filed fraudulently with
intent to evade the payment of the correct amount of
tax. 15 Moreover, even though a donor's tax, which is
defined as "a tax on the privilege of transmitting one's
property or property rights to another or others
without adequate and full valuable
consideration," 16 is different from capital gains tax, a
tax on the gain from the sale of the taxpayer's
property forming part of capital assets, 17the tax
return filed by private respondent to report its income
for the year 1974 was sufficient compliance with the
legal requirement to file a return. In other words, the
fact that the sale transaction may have partly resulted
in a donation does not change the fact that private
respondent already reported its income for 1974 by
filing an income tax return. LLphil
Since the BIR failed to demonstrate clearly that
private respondent had filed a fraudulent return with
the intent to evade tax, or that it had failed to file a
return at all, the period for assessments has obviously
prescribed. Such instances of negligence or oversight
on the part of the BIR cannot prejudice taxpayers,
considering that the prescriptive period was precisely
intended to give them peace of mind.
Based on the foregoing, a discussion of the validity
and legality of the assailed assessments has become
moot and unnecessary.
WHEREFORE, the Petition for Review is DENIED and
the assailed Decision of the Court of Appeals is
AFFIRMED. No costs.
SO ORDERED.
||| (Commissioner of Internal Revenue v. B.F. Goodrich
Phils., Inc., G.R. No. 104171, [February 24, 1999], 363
PHIL 169-181)