BIR Ruling [DA-202-04]

April 12, 2004 BIR RULING [DA-202-04] 27 (D) (5), 196 DA-192-03 Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA) Attention: Mr. Leoncio A. Amadoro Director Gentlemen : This refers to your letter dated January 31, 2003 requesting for exemption from the payment of capital gains tax and all other kinds of taxes due on a Deed of Sale executed by National Housing Authority (NHA) in favor of PAGASA. It is represented that on January 13, 2003, a Deed of Sale was executed between NHA, as the Vendor and PAGASA, as the Vendee, involving two parcels of land located at East Triangle Subdivision, Diliman, Quezon City covered by TCT Nos. 305408 and 316688 with a condition that all fees, expenses, taxes and assessments shall be shouldered by PAGASA without prejudice to the latter's exemption under existing laws or regulations; and that PAGASA is not an income generating agency, but a government agency purely involved in public service created under Presidential Decree (P.D.) No. 78, as amended by P.D. No. 1149. In reply, please be informed that capital gains tax is imposed on every gain presumed to have been realized on the sale, exchange, or disposition of lands and/or buildings which are not actually used in the business of a corporation and are treated as capital assets, based on the gross selling price or fair market value as determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher, of such lands and/or buildings. [ Section; 27(D)(5), Tax Code of 1997 ] However, considering that the sale of the aforesaid parcels of land by NHA in favor of PAGASA was in accordance with the Memorandum by the President of the Philippines dated July 29, 1975, whereby all government agencies, including PAGASA, have allocated building sites in the National Government Center in Quezon City, which are titled in the name of NHA as successor-in-interest of the People's Homesite and Housing Corporation, are required to negotiate and make the necessary arrangement for the purchase of their allocated sites for the use of heir respective offices and as mandated by P.D. No. 78, as amended by P.D. No. 1149, this Office hereby rules that the aforementioned sale is exempt from capital gains tax imposed under Section 27(D)(5) of the Tax Code of 1997. Likewise, the NHA as the vendor, is also granted exemption from the payment of any and all fees and taxes of any kind under P.D. No. 2013 which restored the exemption of the same including among others, income tax and realty taxes. EACIcH Accordingly, the NHA and PAGASA, both being government agencies and were exercising purely governmental functions when they executed the aforementioned Deed of Sale, this Office is of the opinion that such sale is exempt from the payment of capital gains tax or creditable withholding tax, as the case may be, and documentary stamp tax. ( Section 2, P.D. No. 2013 ) 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. Very truly yours, Commissioner of Internal Revenue By: (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group