BIR Ruling [DA-003-99]

January 7, 1999 BIR RULING [DA-003-99] National Power Corporation Southern Luzon Regional Center San Vicente, Bian, Laguna Attention: Mr . Antonio T . Corpuz Vice-President Southern Luzon Regional Center Gentlemen : This refers to your letter dated July 30, 1998 requesting for a ruling that National Power Corporation, Southern Luzon Regional Center (NPC-SLRC) be granted exemption from the application of the zonal valuation as basis in computing the capital gains tax imposed under Section 21(e) [now Section 24(D)(1) and Section 27(D)(5) of the Tax Code of 1997] with respect to the sale of private properties in favor of the government pursuant to Revenue Memorandum Circular No. 29-93. It is represented that NPC-SLRC, is a government-owned and controlled corporation established under R.A. No. 6395, as amended; that it is presently incurring power generation losses in millions of pesos due to unsettled right of way claims and problems in areas specifically affected by NPC facilities and power generation projects and activities; that the price that NPC pays to directly affected owners is based on Provincial Appraisal Committee (PAC) or City Appraisal Committee (CAC) as the case may be, which are very much lower than the commercial price. In reply, please be informed that under Revenue Memorandum Circular (RMC) No. 29-93, the tax base of capital gains tax on sale of property in favor of the government for road right-of-way purposes shall be the consideration appearing on the Deed of Sale, even though the said consideration is lower than the zonal valuation for the property sold considering that the likelihood of under valuation of the purchase price in this case is remote as the government is the buyer of said realty. Accordingly, your request that NPC-SLRC be granted exemption from the use of the zonal valuation as tax base in computing the capital gains tax due on unsettled right-of-way claims and on the sale of private property in your favor is hereby granted as an exception to the policy of this office in relation to Section 6(E) and Section 21(e) of the Tax Code, as amended [now Section 24(D)(1) in the case of individual and Section 27(D)(5) in the case of corporation, of the Tax Code of 1997]. (BIR Ruling No. 022-91 dated February 14, 1991) Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)