Phil. Asia Lending Investor, Inc.

February 1, 2008 BIR RULING [DA-068-08] DA465-04 Phil. Asia Lending Investor, Inc. Unit 4, Crisanto Heights OPRRA, Cebu City Attention: Mr. Elpidio R. Sarcauga Rehabilitation Receiver-Liquidator Gentlemen : This refers to your letter dated May 28, 2007 stating that Philippine Asia Lending Investor, Inc. (PALI) is as domestic corporation engaged in the lending business; that PALI was placed under a Management Committee Receiver by the Securities and Exchange Commission (SEC) on March 31, 1998 after the death of its founder and principal stockholder when it failed to meet its obligation to more than 2,000 investors amounting to P825 Million; that the SEC created Management Committee-Receiver was later converted into a Rehabilitation Receivership pursuant to the Resolution of the Supreme Court En Banc dated August 22, 2000 in Administrative Matter No. 00-8-10-SC in conjunction with another resolution dated November 21, 2000 in Administrative Matter No. 00-11-03-SC transferring to Branch 11 the cases filed against PALI which were pending with SEC; that the Court then issued an Order in CEB-26998-SRC dated October 19, 2001 staying the enforcement of all claims whether for money or otherwise and likewise appointed a rehabilitation receiver; that on July 26, 2002, the Court ordered the dissolution of PALI and the liquidation of its remaining assets; that among the properties identified to be owned by PALI are the parcels of land ascertained to have been acquired out of PALI funds but the titles of which are made under the name of its sister corporations Kaugmaran Land Development and Construction Corporation (KLDCC) and Kaugmaran Homes Community Organizer, Inc. (KHCOI) the designated buyers; that the rehabilitation receiver then filed a petition with the court for the recovery of the properties; that on February 28, 2003, the Court ordered the respondent corporations to reconvey the properties to PALI; that unfortunately however, the respondent corporations were abandoned by the remaining stockholders who claimed to be nominees only of the late principal stockholder hence, no corporate officer or any stockholder was left to implement the Court Order; that to be able to dispose of and include the subject properties in the liquidation of PALI assets, the covering fifty (50) Transfer Certificates of Title should first be transferred to PALI because the sister corporations under whom the titles were issued are not covered by the receivership order; that you requested the Register of Deeds concerned to transfer the titles on the basis only of the court order; and that the Officer of the Register of Deeds is amenable to your request but required among others a BIR ruling exempting from taxation the judicial transfer of the said properties. Based on the foregoing representations, you now request for an opinion that the judicial transfer of TCT Nos. 139766, 139767, 139773, 139774, 139775, 139765, 12904, 12905, 12906, 12907, 12908, 12909, 12910, 12911, 12912, 12913, 12914, 12915, 12916, 12917, 12918, 12919, 12920, 12921, 12922, 12923, 12924, 12925, 12926, 12927, 12928, 11989, 10605, 10606, T-27684, TP-14304, TP-14305, TP-14306, TP-14307, TP-14308, TP-14309, TP-14310, TP-14312, TP-14313, TP-14314, TP-14315, TP-14316, TP-14317, TP-14318 located in Cebu City, Consolacion, Cebu, Sibonga, Cebu and Baybay, Leyte from KLDCC and KHCOI to PALI is exempt from capital gains tax and the corresponding documentary stamp tax, considering that some of the stockholders, directors and officers of PALI and the KLDCC and KHCOI appear to be interlocking and the relationship between and among them was that of parent and subsidiary corporations. AcTDaH In reply thereto, please be informed that since the reconveyance of the above-mentioned properties is in pursuance to the Court Order dated February 28, 2003 and is without consideration, the transfer of the said properties in favor of PALI is not subject to the capital gains tax imposed in Section 27 (D) (5) of the Tax Code of 1997 nor to the creditable withholding tax prescribed in Revenue Regulations No. 2-98, as amended, implementing Section 57 (B) of the said Code. Furthermore, the Deed of Reconveyance is likewise not subject to the documentary stamp tax (DST) imposed in Section 196 of the Tax Code of 1997 but only to the DST imposed under Section 188, supra. This ruling is being issued on the basis of the foregoing facts as represented. However, if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. IDTHcA Very truly yours, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service