BIR Ruling [DA-243-04]

May 7, 2004 BIR RULING [DA-243-04] RA 7917; 000-00 Bases Conversion and Development Authority 41-42/F, Rufino Pacific Tower Ayala Avenue corner Herrera St., Makati Attention: Atty. Rene G. Baez Representative Gentlemen : This refers to your letter dated November 23, 1998 requesting confirmation of your opinion that sales of condominium units by the Bases Conversion and Development Authority (BCDA) at subsidized cost/price to awardees/beneficiaries is exempt from capital gains and documentary stamp taxes pursuant to Section 1 (d) of Republic Act No. 7917 amending Section 8 of Republic Act No. 7227 otherwise known as the "Bases Conversion and Development Act of 1992." It is represented that BCDA was created by virtue of Republic Act No. 7227 the primary purpose of which is to accelerate the sound and balance conversion of the Clark and Subic military reservations and their extensions (John Hay Station, Wallace Air Station, etc.) into alternative productive uses, to raise funds by the sale of portions of Metro Manila military camps, and to apply said funds for the development and conversion to productive civilian use of the lands covered by the 1947 Military Bases Agreement between the Philippines and the United States; that to realize the herein mentioned objectives, BCDA has to relocate numerous "informal occupants/settlers" inside the military reservations; that consistent with the social agenda of the government to provide decent housing to the underprivileged and to prevent any social unrest that may ensue as a consequence of the relocation, BCDA built socialized condominiums at Pamayanang Diego Silang and Centennial Village where to relocate and house the "informal occupants/settlers"; that BCDA has identified most of the "informal occupants/settlers" as awardees/beneficiaries of the condominium units which will be sold to them at subsidized cost ranging from P125,000.00 to 550,000.00. In view thereof, you are requesting confirmation of your opinion that the sale of the condominium units to "informal occupants/settlers" is exempt from capital gains and documentary stamp taxes pursuant to Section 1 (d) of R.A. 7917 amending R.A. 7227, otherwise known as the "Bases Conversion and Development Act of 1992," which provides in part as follows: "The provision of law to the contrary. notwithstanding, the proceeds of the sale thereof shall not be diminished and, therefor, exempt from all forms of taxes and fees." In reply, we regret to inform you that your request for exemption from the payment of capital gains tax and the documentary stamp tax on the sale by BCDA of socialized condominium units to the "informal occupants/settlers" is hereby denied for lack of legal basis. Section 1 (d) of R.A. 7917 exempts only the sales of areas of the military bases as authorized under such Act, including certain areas in Fort Bonifacio and Villamor Air Base. Nowhere in the said Republic Act is a provision exempting the sale of socialized condominium units to the "informal occupants/settlers" of the military bases. In the absence of a clear and unambiguous exempting provision, this Office cannot exempt the said transaction from payment of the capital gains tax and the documentary stamp tax imposed under Sections 27(D)(5) and 196 of the Tax Code 1997, respectively. It is well-settled rule that he who claims exemption should prove by convincing proofs that he is exempted. ( Visayan Cebu Terminal Co., Inc. vs. Commissioner , L-19530 & L-19444, February 27, 1965) Exemptions from taxation are highly disfavored in law; and he who claims an exemption must be able to justify his claim by the clearest grant of organic or statute law. An exemption from the common burden cannot be permitted to exist upon vague implications. ( Asiatic Petroleum Co. vs. Llanas , 49 Phil. 466 cited in Collector vs. Manila Comm. of Customs , L-28731, 28902, March 29, 1979) Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal and Inspection Group