BIR Ruling [DA-075-02]

April 25, 2002 BIR RULING [DA-075-02] 24 (D) (1); #339-88 Atty. Enrique M. Almario 123 Real St., Pamplona Uno, Las Pias City S i r : This refers to your letter dated July 19, 2001 which was indorsed by Revenue Region No. 8, Makati City, relative to your request for exemption from capital gains tax by virtue of a Supreme Court decision which prompted the execution of a Judicial Conveyance. Based on the documents submitted, the facts are as follows: 1. In Civil Case No. LP-8790-P entitled Mercedes Dela Cruz and Florencia Dela Cruz, plaintiffs, vs. Spouses Narciso Rongavilla and Dolores Rongavilla, defendants , the Regional Trial Court of Pasay City, RTC Branch 111, rendered a judgment in favor of the plaintiffs on May 15, 1985, the dispositive portion of the which reads as follows: "WHEREFORE, judgment is hereby rendered declaring void and inexistent the Deed of Absolute Sale dated June 3, 1976 allegedly executed by plaintiffs in favor of defendant spouses, which document is now particularly identified as Doc. No. 164, Page No. 34, Book No. 1, Series of 1976 in the Notarial Register of Arcadio Espiritu, a Notary Public for and in the Province of Cavite. Further, defendant spouses are hereby ordered a. To reconvey to the plaintiffs, free from all liens and encumbrances the property covered by Transfer Certificate of Title No. S-28903 of the Registry of Deeds for the Province of Rizal; b. To pay the plaintiffs the sum of P5,000.00 as Attorney's fees; and c. To pay the costs of the suit." 2. On appeal, the above decision of the Regional Trial Court was affirmed in toto by the Court of Appeals in its Decision of March 11, 1988. 3. On review by Certiorari , the Decision of the Court of Appeals (C.A. G.R. CV No. 06543) was affirmed by the Supreme Court (G.R. No. 83974) in its Decision promulgated on August 17, 1998. aCSHDI 4. The Decision of the Supreme Court became final and executory on September 18, 1998 upon Entry of Judgment on G.R. No. 83974 issued to that effect. 5. The plaintiffs then filed a Motion for Execution before the RTC Branch 111 of Pasay City (Court of origin) on August 31, 2000. 6. RTC Branch 111 of Pasay City issued an Order dated September 8, 2000 directing the Deputy Sheriff of the court to enforce the Writ of Execution so issued and make the return relative thereto. 7. On March 27, 2001, the Court issued an Order appointing the Clerk of Court as Trustee and directed to execute the necessary Deed of Conveyance in favor of the plaintiffs. 8. On May 21, 2001, a Deed of Judicial Conveyance was executed by and between Ricardo R. Adolfo, Acting Clerk of Court, RTC Branch 111, Pasay City as Trustee and Mercedes Dela Cruz and Florencia Dela Cruz, whereby the Trustee shall convey to the latter the property covered by TCT No. (S-28903) 13371-A, located in Manuyo, Las Pias City with an area of One Hundred Thirty One (131 sq. m.) pursuant to the final and executory judgment rendered by the Supreme Court in G.R. No. 83974 promulgated on August 17, 1998. In reply, please be informed that the aforementioned conveyance of real property pursuant to the Deed of Judicial Conveyance executed by and between the Acting Clerk of Court, as Trustee, and Mercedes Dela Cruz and Florencia Dela Cruz is not subject to the capital gains tax imposed under Section 24(D)(1) of the 1997 Tax Code since there is no sale, exchange or disposition of capital asset made by the Clerk of Court as Trustee in favor of Mercedes Dela Cruz and Florencia Dela Cruz but a mere compliance with the decision of the Supreme Court declaring as null and void the Deed of Absolute Sale allegedly executed by Mercedes Dela Cruz and Florencia Dela Cruz in favor of Spouses Danilo Rongavilla and Dolores Rongavilla and ordering the necessary reconveyance of the subject property, the execution of which had been ordered by the RTC of Pasay City. Moreover, it is not likewise subject to the documentary stamp tax imposed under Section 196 of the 1997 Tax Code. However, the Deed of Judicial Conveyance shall be subject to the P15.00 documentary stamp tax imposed under Section 188 of the same Code. 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. EcDATH Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group