STATUTORY CONSTRUCTION

CASTILLO, E.G.

GR NO. 120721, 23 FEB 2005

PETITIONER: MANUEL G. ABELLO JOSE C. CONCEPCION

TEODORO D. REGALA AVELINO V. CRUZ
RESPONDENT: COMMISSIONER OF INTERNAL REVENUE
COURT OF APPEALS
AZCUNA, J.:
I. FACTS
 During the 1987 Elections, Petitioners contributed P882,661.31 each to the campaign funds of Senator
Edgardo Angara, then running for the Senate.
 BIR assessed each of the petitioners P263,032.66 for their contributions
 AUG 2 1988 – Petitioners wrote a letter questioning the assessment of the BIR, claiming that political or
electoral contributions are not considered gifts under the NIRC, therefore, are not subjected to donor’s tax.
The claim was denied by the Commissioner
 SEPT 12 1988 -Petitioner filed a petition for review with the CTA
 OCT 7 1991 – CTA decided and favored the petitioners. CTA ordered the Commissioner to desist from
collecting donor’s taxes from the petitioners
 APR 20 1994 – CA reversed and set aside the CTA and order the petitioners to pay donor’s tax due for the
following reasons:
o Pursuant to Sec 91(a) and 92(b) of the NIRC, 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.
o A gift is generally defined as a voluntary of transfer of property by one to another without any
consideration or compensation therefor.
o In the instant case, the contributions are voluntary transfers of money from the private respondents
to Sen. Angara, without any consideration. Hence, falling squarely under the definition of gifts.
 As pointed by the Solicitor-General, the fact that the contributions were given to be used as campaign funds
does not affect the character of the funds transferred as gifts.
 The BIR issued Ruling No. 344 on July 20 1988, stating that political contributions are considered taxable gifts
than taxable income. This is because a political contribution is not intended by the giver as a return of value or
with intent to repay another but on motives philanthropy. The purpose is not to employ or buy. Also, the
recipient does not regard himself as exchanging his services or his products for the consideration.
 When the US gift tax law was adopted by the Philippines, the taxability of political contributions was an
unsettled issue. It cannot be presumed that the Philippine Congress then had the same intended to treat
political contributions as non-taxable gifts.
 Generally, statutes in different states relating to the same class of persons/things or having the same purpose
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.
526.)
 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.)
 In the above mentioned BIR Ruling, it is clear that political contributions of the private respondents are
taxable. The vagueness of the law as to what comprise the gift subject to tax was made concrete.
 JUN 16 1995 – motion for reconsideration of Abello et al was dismissed by the CA
II. ISSUE
 JUL 26 1995 – petition or review on certiorari was raised on the following issues:
1. CA failed to consider the purpose behind the enactment of gift tax law
2. Err in not considering the intention of the givers in determining whether the petitioners’ political
contributions were gifts subject to donor’s tax
3. Err when it failed to consider the definition of an “electoral contribution” under the omnibus election
code in determining whether political contributions are taxable
4. Err in not considering administrative practice of close to half a century of not subjecting political
contributions to donor’s tax
5. Err in not considering American jurisprudence relied upon by the CTA and by the petitioners to the
effect that political contributions are not taxable gifts
6. Err in not applying American jurisprudence on the ground that this was not known at the time the
Philippine Gift Tax Law was adopted in 1939
7. Err in resolving the case mainly on the basis of a ruling issued by the respondent only after the
assessment has been made
8. Err when it did not construe the gift tax law liberally in favor of the taxpayer and strictly against the
 STATUTORY CONSTRUCTION
CASTILLO, E.G.

government in accordance with applicable rules of statutory construction

III. RULING – Wherefore, the petition is DENIED and assailed Decision and Resolution of the Court of Appeal
AFFIRMED.
 For issues 1,5, and 6
o The case falls squarely on the definition of an donation under Art 275 of the Civil Code defining a
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 in patrimony of the
donor; (b) the increase in patrimony of the done; and, (c) the intent to do an act of liberality or animus
donandi.”
o Taken together with Sec 91 of the NIRC, it is clear an unambiguous, thereby no room for construction.
When 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 it that its mandate is obeyed. (Chartered Bank Employees Association v.
Ople)
o Ambiguity is a condition of admitting two or more meanings 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
o Since animus donandi is an essential element of donation, petitioners argue to look into the intention
of the giver to determine if a political contribution is a gift. Donative intent is a creature of the mind
and cannot be perceived except through tangible acts manifesting its presence. Donative intent is
presumed present when one gives part of his own patrimony in favor of another. Also, donative
intent is not negated when the person donating has other intentions or motives which do not
contradict donative intent. Contribution of money without material consideration evinces donative
intent.
 Third issue
o Electoral Contributions as defined in under Section 94(a) in the Omnibus Election Code is as follows,
“contribution” shall mean …anything of value, or a contract, promise or agreement to contribute,
whether or not legally enforceable, made for the purpose of influencing the result of the elections but
shall not include services rendered without compensation by individuals… It shall also include the use
of facilities voluntarily donated by other persons, the money value of which can be assessed based on
the prevailing rates prevailing in the area.
o Petitioners attempt to place the barrier of mutual exclusivity between donative intent and the
purpose of political contributions. The court reiterates that donative intent is not negated by
presence of motives, that petitioners will somehow benefit from the election of the candidate they
support is not an example of material consideration, and thus, not contradicting donative intent.
 Fourth Issue
o The Court holds that BIR is not precluded from making new interpretations of the law, especially
when the old interpretation is flawed. Erroneous application and enforcement of the law by public
officers do not block subsequent correct application of the statute.
 Seventh Issue
o It is immaterial to dwell on the basis of the CA decision, which is based on BIR Ruling NO. 88-344, that
was subsequent to the assessment of donor’s tax since it was already discussed that Sec 91
(now Sec 98) of the NIRC is clear and unambiguous.
 Eight Issue
o Since the law here is clear and unambiguous, petitioners does not benefit that tax laws are construed
liberally in favor of the taxpayers and strictly against the government.
 Finally, Congress approved RA 7166 on Nov 25 1991, which provides that duly reported political contributions
to the COMELEC are not subject to the payment of gift tax. RA 7166 however, was enacted subsequent to the
case at hand and it provides no retroactive effect.