BIR Ruling [DA-274-00]

July 3, 2000 BIR RULING [DA-274-00] Mr. Ric Hernandez 37 Jerusalem Street Victoriaville Homes Sumulong Highway, Sta. Cruz Antipolo City S i r : This refers to your letter dated April 12, 2000 in relation to your previous letters dated February 2 and 3, March 6 and 31 and April 5, and 10, 2000, relative to your request for payment of informer's reward on the following: 1. Deficiency capital gains and documentary stamp taxes for the year 1990 in the amounts of P2,288,389.83 and P24,997.75, respectively, or a total of P2,313,387.58 assessed against Mr. Benigno P. Toda, Jr. on June 2, 1994; and 2. Deficiency estate tax paid on July 31, 1997 by the Estate of the late Benigno P. Toda, Jr. in the amount of P3,288,160.22. Records show that you are the informer who filed Confidential Information No. 2458 on September 15, 1990 and supplemental Affidavit which was denominated as Confidential Information No. 113-92 dated December 29, 1992, denouncing the alleged anomalous sale of a building by Cibeles Insurance Corporation (CIC) to Rafael Altonaga and then by Rafael Altonaga to Royal Match, Inc. all in one day; that consequently, CIC and/or the Estate of Benigno P. Toda, Jr. was assessed deficiency income tax for 1989 in the aggregate amount of P79,099,999.22; that the deceased Benigno P. Toda, Jr. was also found out to have incurred a tax liability for capital gains tax and documentary stamp tax arising from the sale in 1990 of his shares of stock in CIC in the respective amounts of P2,288,389.83 and P24,997.75 or a total of P2,313,387.58; that the deficiency income tax assessment in the aforesaid amount of P79,099,999.27 was appealed by the Estate of Benigno P. Toda, Jr. before the Court of Tax Appeals which rendered a decision on January 3, 2000 finding the Estate not liable to pay the deficiency income tax in question; that upon denial of our Motion for Reconsideration against the decision of the Court of Tax Appeals, a Petition for Review was filed with the Court of Appeals docketed as CA G.R. SP No. 57799 and now pending with the said Court, and that with respect to the deficiency capital gains tax and documentary stamp tax assessed against Benigno P. Toda, Jr. involving the total amount of P2,313,387.58, the collection of the same is the subject-matter of SP. Proc. No. 3792 before the Regional Trial Court of Makati, Branch 133 with an Ex-Parte Motion to Resolve Claim having been filed on March 31, 2000 by our Litigation and Prosecution Division. In reply, please be informed that the payment of informer's reward is conditioned upon the payment and collection of unpaid or deficiency taxes. An informer is entitled by way of reward only to a percentage of the taxes actually assessed and collected. (Meralco Securities Corporation vs. Savellano, et al., L. 36181, October 23, 1982) Since the collection of deficiency capital gains tax and documentary stamp tax in the total amount of P231,387.58 due from the Estate of the late Benigno P. Toda, Jr. cannot as yet be effected as the same is still under court litigation, your claim for payment of the corresponding informer's reward is, therefore, premature and cannot be granted for lack of legal basis. You are also entitled to a reward with respect to the assessment and eventual collection of the deficiency estate tax found due from the Estate of the late Benigno P. Toda, Jr. in the amount of P3,288,160.22. To be entitled to reward under Section 282(A) of the Tax Code of 1997, the information given had led to or had been instrumental in the discovery of the frauds upon or violation of the internal revenue laws or any of the provisions thereof and that such discovery resulted in the recovery and collection of revenues, surcharges and fees and/or the conviction of the guilty party and the imposition of any fine or penalty. The confidential information given by you pertains only to the transaction involving the two (2) interrelated sales of the Cibeles property in 1989 and the sale of the shares of stock by Mr. Toda in 1990 and therefore, could not have included the estate tax liability of the latter who died on January 16, 1994, long after you have filed the confidential information in question. In short, the payment by the Estate of the late Benigno P. Toda, Jr. of the aforesaid amount of P3,288,160.22 as deficiency estate tax was not the direct, logical and necessary consequence of the information given by you , to paraphrase the Supreme Court in the case of Penid vs. Hon. Cesar Virata and Hon. Efren Plana, G.R. No. L-44004 promulgated March 25, 1983. Finally, your reliance on the statement in the 2nd paragraph of a letter dated October 22, 1997 signed by former Commissioner Chato as basis of your claim for reward is not well-founded. The Chief, Appellate Division who prepared the said letter, has clarified the said statement as follows: "To begin with, the Appellate Division has not acknowledged whether or not there is an existing estate tax case filed against the estate of Benigno P. Toda, Jr. of which Mr. Hernandez is the alleged confidential informer for no such case ever reached this division. If ever we stated in said letter that Mr. Hernandez is the confidential informer in the estate tax of the estate of Benigno P. Toda, Jr., it is just that we adopted Mr. Hernandez's allegation or claim, the truth of which this Division could not vouch. Such being the case, this statement could not be invoked as basis to any claim for reward as a confidential informer. " In view of the foregoing, we regret to deny your claim for payment of the corresponding reward under Section 282(A) of the Tax Code of 1997. Very truly yours, (SGD.) DAKILA B. FONACIER Commissioner of Internal Revenue