BIR Ruling [DA-311-03]

September 23, 2003 BIR RULING [DA-311-03] RR 4-99; 177-99 Philippine Veterans Bank PVB Building 101 Herrera corner Dela Rosa Streets Legaspi Village Makati City Attention: Atty. Rey I. Madroo Head-Litigation Gentlemen : This refers to your letter dated June 13, 2000 requesting for a ruling on the legal justification for the imposition of the appropriate penalties for late payment of the capital gains tax and the corresponding documentary stamp tax relative to the foreclosure sale held on April 16, 1999. It is represented and alleged that on April 16, 1999, the Philippine Veterans Bank (PVB) extra-judicially foreclosed the mortgage of over thirty (30) parcels of land located in Occidental Mindoro in accordance with the provisions of Act No. 3135, as amended; that on the same date, the Sheriff's Certificate of Sale was issued in favor of PVB, as the highest bidder; that on May 7, 1999, PVB registered the said Certificate of Sale with the Register of Deeds of San Jose, Occidental Mindoro bearing Entry No. 34099 and annotated at the back of the titles embracing the properties foreclosed by PVB; that on June 2, 2000, the Legal Department of PVB moved to consolidate the bank's ownership over these foreclosed properties; that to facilitate the registration of consolidation documents with the Register of Deeds, PVB needed to secure a clearance from the Bureau of Internal Revenue (BIR), San Jose Revenue District Office; that for this purpose, PVB paid the capital gains tax and documentary stamp tax; that notwithstanding the aforesaid payments, the BIR, San Jose Revenue District Office refused to issue the clearance on the ground that appropriate penalties have been incurred in view of the delay in the payment of the said taxes; that it is the opinion of the latter that the one year redemption period should be reckoned from April 16, 1999, the date of the issuance of the Certificate of Sale and which period has expired on April 16, 2000 and from this date, the payment of the capital gains tax and documentary stamp tax should have been paid on May 16, 2000; and that since PVB tendered payment only on June 2, 2000, a delay has been incurred and the imposition of the appropriate penalties is in place. TaCDAH In reply thereto, please be informed that although the Certificate of Sale was issued on April 16, 1999, it was registered with the Registry of Deeds of San Jose, Occidental Mindoro only on May 7, 1999, hence, the latter date should be the reckoning point for purposes of computing the one (1) year period of redemption as enunciated in the case of Salazar vs. Meneses, 8 SCRA 495 . In like manner, this Office in BIR Ruling No. 177-99 has already occasioned to rule on the matter when it said, thus "xxx xxx xxx "In extra-judicial foreclosure of mortgage under Act No. 3135, as amended, the mortgagor has the right to redeem the property within one year from the date of sale. The date of sale has been construed to mean the date of registration of the certificate of sale in the Registry of Deeds. ( Santos vs. Register of Deeds of Manila, L-26752, March 19, 1971; Reyes vs. Tolentino, et al., L-29142, November 29, 1971 ) "xxx xxx xxx "Thus, the counting of the one year period of redemption in the case of an extra-judicial foreclosure of mortgage under Section 6 of Act No. 3135, as amended, as well as judicial and extra-judicial foreclosure of mortgage by banks, finance and insurance companies shall be the date of registration of the certificate of sale in the Registry of Deeds. "xxx xxx xxx" Considering that the reckoning date for purposes of counting the one (1) year period of redemption is from the date of the registration of the Certificate of Sale with the Register of Deeds, which is May 7, 1999 in this particular case, PVB had until June 7, 2000 or thirty (30) days from the expiration of the said one-year redemption period, i.e. , May 7, 2000, within which to pay the capital gains tax. Inasmuch as PVB has paid the capital gains tax and the corresponding documentary stamp tax on June 2, 2000, it has indeed timely filed and paid the aforesaid taxes respectively within the thirty (30) day and the ten (10) day period required under Revenue Regulations No. 4-99. Accordingly, this Office finds no legal justification for imposing the appropriate penalties for the late payment of the capital gains tax and documentary stamp tax. IN THE LIGHT OF ALL THE FOREGOING, and finding that the imposition of the appropriate penalties to be without legal justification, this Office hereby authorizes the Revenue District Office in San Jose, Occidental Mindoro to issue the corresponding Certificate Authorizing Registration (CAR) so that titles to the above-mentioned foreclosed properties can now be consolidated in favor of PVB. CSaITD Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group