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 approved Republic Act No. 7166
on November 25, 1991, providing in Section 13 thereof that
political/electoral contributions, duly reported to the Commission on
Elections, are not subject to the payment of any gift tax. This all the more
shows that the political contributions herein made are subject to the payment
of gift taxes, since the same were made prior to the exempting legislation,
and Republic Act No. 7166 provides no retroactive effect on this point.
WHEREFORE, the petition is DENIED and the assailed Decision
and Resolution of the Court of Appeals are AFFIRMED. ECcTaH
No costs.
SO ORDERED.
Davide, Jr., C.J., Quisumbing and Carpio, JJ., concur.
|||  (Abello, et al. v. Commissioner of Internal Revenue and Court of Appeals,
G.R. No. 120721, [February 23, 2005], 492 PHIL 303-313)

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.
Bengzon, C . J ., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Dizon, Regala, Makalintal, Bengzon, J.P. and Zaldivar, JJ., concur.
Barrera, J  ., took no part.
|||  (Lladoc v. Commissioner of Internal Revenue, G.R. No. L-19201, [June
16, 1965], 121 PHIL 1074-1079)

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 sinterests 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 fide business
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 Regulations 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 issued BIR
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 the NIRC,
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 the NIRC,
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 issued Revenue 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. 43-91 subjecting 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 questioned RMO 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 the Tax 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 of certiorari 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 for certiorari 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
Peralta, Villarama, Jr., Mendoza *  and Leonen, **  JJ., concur.
|||  (The Philippine American Life and General Insurance Co. v. The
Secretary of Finance, G.R. No. 210987, [November 24, 2014], 747 PHIL
811-832)

THIRD DIVISION

[G.R. No. 144696. August 16, 2006.]

COMMISSIONER OF INTERNAL
REVENUE, petitioner, vs. PHILIPPINE GLOBAL
COMMUNICATIONS, INC., respondent.
 DECISION

CARPIO MORALES,  J  p:

Is respondent telecommunications company, Philippine Global

Communications, Inc., liable to pay the 3% franchise tax under Section 117
(b) of Presidential Decree No. 1158 or the 1977 National Internal Revenue
Code (Tax Code) during the suspension of the enforcement or
implementation of Republic Act No. 7716 1 or the Expanded Value Added
Tax Law (E-VAT Law) which was passed in 1994 amending such provision
of the Tax Code?
Respondent operates under a legislative franchise granted by
Republic Act No. 4617 to construct, maintain and operate communications
systems by radio, wire, satellite and other means known to science for the
reception and transmission of messages between any points in the
Philippines to points exterior thereto. As such, it was subject to 3% franchise
tax under Section 117 (b) of the Tax Code, as amended by Executive
Order No. 72, which provided:
SECTION 117. Tax on franchises. — Any provision
of general or special laws to the contrary notwithstanding,
there shall be levied, assessed and collected in respect to all
franchise, upon the gross receipts from the business covered
by the law granting the franchise, a tax in accordance with
the schedule prescribed hereunder:
(a) On electric utilities, city gas and  
  water supplies Two (2%) percent
     
(b) On telephone and/or telegraph  
  systems, and radio/or broadcasting  
  stations Three (3%) percent
     
(c) On other franchises Five (5%) percent
The grantee shall file with, and pay the tax due
thereon to, the Commissioner of Internal Revenue or his
duly authorized representative in accordance with the
 provisions of Section 125 of this Code, and the return shall
be subject to audit by the Bureau of Internal Revenue, any
provision of any existing law to the contrary
notwithstanding. (Underscoring supplied)
The said provision of the Tax Code was amended by Section 12 of the E-
VAT Law which was passed in 1994, reading:
SEC. 12. Section 117 of the National Internal
Revenue Code, as amended, is hereby further amended to
read as follows:
SEC. 117. Tax on Franchises. — Any
provision of general or special law to the contrary
notwithstanding there shall be levied, assessed and
collected in respect to all franchises on electric, gas
and water utilities a tax of two percent (2%) on the
gross receipts derived from the business covered by
the law granting the franchise. HaTAEc
The grantee shall file the return with, and
pay the tax due thereon to, the Commissioner of
Internal Revenue or his duly authorized
representative in accordance with the provisions of
Section 125 of this Code and the return shall be
subject to audit by the Bureau of Internal Revenue,
any provision of any existing law to the contrary
notwithstanding.
As the immediately quoted Section 12 of the E-VAT Law shows, the
payment of 3% franchise tax by a telecommunications company required
under Section 117 (b) of the Tax Code was omitted.
Section 21 of the E-VAT law provides that the amendatory law "shall
take effect fifteen (15) days after, its complete publication in the Official
Gazette or in at least (2) national newspapers of general circulation
whichever comes earlier." The E-VAT Law was published in
the Malaya and the Journal on May 12, 1994. It was published in
the Official Gazette on August 1, 1994. It therefore became effective
on May 28, 1994, or 15 days after its first publication in the said newspapers.
On June 30, 1994, this Court, in the consolidated cases of "Tolentino
et al. v. Secretary of Finance, et al." (G.R. Nos. 115455, 115525, 115543,
115544, 115754 and 115781) assailing the constitutionality of the E-VAT
Law, issued a Temporary Restraining Order (TRO) enjoining the
"enforce[ment] and/or implement[ation]" of said law. The TRO was later to
be lifted, however, on October 30, 1995.
On account of the suspension of the implementation of the E-VAT
Law, respondent filed on May 20, 1996 with the Appellate Division, Tax
Refund/Credit of the Bureau of Internal Revenue (BIR) a claim for
refund 2 of the 3% franchise tax it allegedly erroneously paid during the 2nd
quarter of 1994 until the 4th quarter of 1995 in the total amount of
P70,795,150.51, itemized as follows:
Period Covered Date Paid Total
     
2nd Qtr. 1994 20 July 1994 P9,380,243.00
3rd Qtr. 1994 20 October 1994 10,892,806.80
4th Qtr. 1994 20 January 1995 14,645,196.78
1st Qtr. 1995 20 April 1995 9,512,684.78
2nd Qtr. 1995 20 July 1995 9,870,148.49
3rd Qtr. 1995 22 October 1995 8,586,305.90
4th Qtr. 1995 22 January 1996 7,907,764.76
    –––––––––––
    P70,795,150.51
Respondent claimed that with the passage and effectivity of the E-
VAT Law on May 24 [sic], 1994, it was no longer obliged to pay the 3%
franchise tax under Section 117 (b) of the Tax Code. 3
Respondent added that the TRO issued in Tolentino et al. enjoining
the enforcement and/or implementation of the E-VAT Law did not have the
effect of extending its obligation under Section 117 (b) of the Tax Code to
pay the 3% franchise tax since the exemption from or removal of liability for
said 3% franchise tax under the E-VAT Law was not an issue in those cases;
and with the effectivity of the E-VAT Law on May 24 [sic], 1994, it was
benefited by the tax exemption which was self-operative and
required no implementation to take effect. 4
The BIR having failed to act on its claim, respondent filed a petition
for review 5 before the Court of Tax Appeals (CTA) against herein petitioner
Commissioner of Internal Revenue.
 By Decision of October 2, 1997, 6 the CTA granted respondent's
claim for refund, holding that the dropping of the provision of Section 117
(b) and (c) of the Tax Code in the E-VAT Law constitutes an express
amendment by deletion, 7 and the clear legislative intent was to exempt
respondent from payment of the 3% franchise tax. 8
Moreover, the CTA held that the TRO issued by this Court
in Tolentino et al. did not have the effect of suspending the exclusion of
herein respondent from liability for the 3% franchise tax 9 since the TRO
"has the effect of merely suspending the implementation but not the
effectivity of [RA 7716] which is primarily a legislative function," 10 it
adding that once the TRO is lifted, "the law should be implemented as it is
written and shall take effect on the date the law requires it to take
effect." 11 The CTA explained:
It is of the considered opinion of this Court that the
exclusion of petitioner by way of an express amendment by
deletion started immediately upon the effectivity of
Republic Act No. 7716 on May 28, 1994 and with the
continuing validity and operation of said Act
notwithstanding the issuance of the TRO, such exclusion
remain uninterrupted. As this Court sees it, the exclusion or
deletion requires no enforcement and/or implementation to
be applicable, which would thereby cover it within the
ambit of the TRO. The words "enforcement" and
"implementation" as applied to the ACT would necessitate
the promulgation of rules and regulations which, in turn,
demand some positive acts to be done by concerned
taxpayers who will become liable to the tax, i.e., declaration
and payment of taxes and compliance with reporting
procedures. Exclusion or exemption, however, falls in a
different class as the taxpayer so deleted or exempted is not
duty bound to do any positive or negative act. . . . In this
sense, the exemption or deletion benefiting petitioner can
thus be stated beyond cavil to be one that is self-
operative. CTIEac
In the light of the foregoing reasons, this Court joins
the petitioner in its submission that "only those provisions
in R.A. 7716 which need to be implemented by the BIR
were restrained but those provisions which are self-
operative such as the grant of tax exemption or removal
of a tax liability, which does not need implementation by
 the BIR to be effective, were already enjoyed by those
entitled thereto upon the effectivity of the
law." 12 (Emphasis and underscoring supplied)
Thus the CTA ordered petitioner to "REFUND the amount of
P70,795,150.51" to respondent.
Its motion for reconsideration of the CTA Decision having been
denied, petitioner filed a petition for review before the Court of Appeals.
By Decision of August 21, 2000, 13 the appellate court affirmed that
of the CTA. Hence, the present petition for review.
The petition is impressed with merit.
The amendment of a law, being part of the original which is already
in force and effect, must necessarily become effective as part of the amended
law at the time the amendment takes effect. 14
Under the earlier quoted Section 12 of the E-VAT Law, only the
franchise tax on "electric, gas and water utilities" was retained. The 3%
franchise tax on "telephone and/or telegraph systems and radio broadcasting
stations" to which category respondent belongs was omitted.
Under Section 3 of the E-VAT Law, however, respondent's sale of
services is subject to VAT, 15 thus:
SEC. 3. Section 102 of the National Internal
Revenue Code, as amended, is hereby further amended to
read as follows:
SEC. 102. Value-added tax on sale of
services and use or lease of properties. — (a) Rate
and base of tax. — There shall be levied, assessed
and collected, as value-added tax equivalent to 10%
of gross receipts derived from the sale or exchange
of services, including the use or lease of properties.
The phrase "sale or exchange of services"
means the performance of all kinds of services in the
Philippines, for others for a fee, remuneration or
consideration, including those performed or
rendered by construction and service
contractors; . . . services of franchise grantees of
telephone and telegraph, radio and television,
broadcasting and all other franchise grantees except
 those under Section 117 of this Code; . . .
(Underscoring supplied)
 
In fine, under the E-VAT Law, respondent ceased to be liable to pay
the 3% franchise tax. It instead is made liable to pay 10% VAT on sale of
services.
The effectivity of the E-VAT Law was, however, suspended, by this
Court on June 30, 1994 when it issued a TRO pending the resolution of
the Tolentino et al. cases challenging the constitutionality of the law. The
Order granting the TRO reads:
The Court, by a vote of 11 to 4, further Resolved to
ISSUE a TEMPORARY RESTRAINING ORDER,
effective immediately and continuing until further orders
from this Court, ordering all the respondents to CEASE and
DESIST from enforcing and/or, implementing R.A. No.
7716, otherwise known as the "Expanded Value Added Tax
Law."
NOW, THEREFORE, effective immediately and
continuing until further orders from this Court, You,
respondents Executive Secretary TEOFISTO GUINGONA,
JR., Secretary of Finance ROBERTO F. DE OCAMPO,
Commissioner of Internal Revenue LIWAYWAY V.
CHATO, and Commissioner of Customs GUILLERMO L.
PARAYNO, Jr., or your agents, representatives and/or any
person or persons acting in your place or stead, are hereby
ORDERED to CEASE and DESIST from enforcing and/or
implementing R.A. No. 7716, otherwise known as the
"Expanded Value Added Tax Law." (Emphasis and
underscoring supplied) EAcHCI
Notably, there is nothing in the above-quoted order that can be read
to mean that the TRO applies only to the specific provisions of the E-VAT
law which were being challenged in Tolentino et al. The wording of the
order leaves no doubt that what was restrained by the TRO was the
implementation of the E-VAT law in its entirety.
Respondent's view, which was adopted by both the CTA and the
appellate court, that the TRO restrained merely the implementation of those
provisions of the E-VAT Law which need to be implemented by the BIR and
not those provisions which are self-operative, does not lie.
 That the provisions of the Tax Code including Section 117(b), prior
to their amendment by the E-VAT Law, were to apply in the interim, that is,
while the TRO in Tolentino et al. was effective, is clearly reflected in
Revenue Memorandum Circular No. 27-94 issued by petitioner on June 30,
1994. The said circular directed all internal revenue officers to comply with
the following directives, to wit:
1. Stop implementation of the registration
requirement for businesses newly covered by the Expanded
VAT Law as prescribed under RMO 4194 and other related
revenue issuances.
2. Stop collection of the P1,000.00 annual
registration fees prescribed by the expanded VAT Law.
3. All VAT and non-VAT persons shall be governed
by the provisions of the National Internal Revenue
Code prior to its amendment by Republic Act No.
7716 (e.g., operators of restaurants, refreshment parlors and
other eating places including caterers shall continue paying
the caterer's tax prescribed under Section 114 of the NIRC
prior to its amendment by RA 7716; sale of copra which is
exempted from VAT under Section 103 of the NIRC, as
amended by RA 7716, shall be subject to 10% VAT
pursuant to Section 103 of the old NIRC; sale of real
property which became taxable under RA 7716 shall
continue to be VAT exempt pursuant to the provisions of
Sections 99 and 100 of the old NIRC; etcetera).
4. All sales invoices heretofore registered with the
BIR as non-VAT sales invoices which have been
superimposed with rubber stamp marking for issuance as
VAT sales invoices pursuant to Revenue Regulations No.
10-94 shall be reverted to and considered remaining as non-
VAT sales invoices.
5. All other amendments of the NIRC made by RA
7716 shall be considered ineffective until the Supreme
Court has declared otherwise. In the meanwhile, pending
decision of the Court, claims for refund of the P1,000.00
annual registration fee made under RA 7716 shall not be
given due course. (Emphasis and underscoring supplied)
With the issuance of the TRO, the enforcement and/or
implementation of the entire E-VAT law was stopped. 16
 On October 30, 1995, this Court, in Tolentino et al., lifted the TRO
after it denied with finality the motions for reconsideration of its decision
upholding the constitutionality of the E-VAT Law. 17
Under the circumstances, from the suspension of the effectivity of the
E-VAT Law on June 30, 1994 up to October 30, 1995 when the TRO
in Tolentino et al. was lifted, the tax liability of respondent was, following
the earlier quoted Revenue Memorandum Circular, governed by Section 117
(b) of the Tax Code in which case it was liable to pay the 3% franchise tax.
With the lifting of the TRO on October 30, 1995, respondent would have
ceased to be liable to pay the 3% franchise tax.
The abolition of the 3% franchise tax on telecommunications
companies, and its replacement by the 10% VAT, was effective and
implemented only on January 1, 1996, however, following the passage of
Revenue Regulation No. 7-95 (CONSOLIDATED VALUE-ADDED TAX
REGULATIONS). 18 Thus, respondent's claim for refund of the franchise
tax it paid during the 2nd quarter of 1994 until the 4th quarter of 1995 must
fail. cda
To grant a refund of the franchise tax it paid prior to the effectivity
and implementation of the VAT would create a vacuum and thereby deprive
the government from collecting either the VAT or the franchise tax.
WHEREFORE, the petition is GRANTED. The decision of the
appellate court of August 21, 2000 is hereby REVERSED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.
Quisumbing, Carpio, Tinga and Velasco, Jr., JJ., concur.
|||  (Commissioner of Internal Revenue v. Philippine Global Communications,
Inc., G.R. No. 144696, [August 16, 2006], 530 PHIL 490-500)