BIR Ruling [DA-378-00]

October 30, 2000 BIR RULING [DA-378-00] 66 RA 6657; 104-90, DA-429-98 Cecileville Realty & Service Corporation 1211 Quezon Avenue, Brgy. Sta. Cruz Quezon City Attention: Mr . Jose A . Resurreccion President Gentlemen : This refers to your letter dated February 16, 2000 stating that a portion of your agricultural land, specifically six hundred (600) square meters, will be transferred to your sole tenant, Ms. Ana Pascual in accordance with the Compromise Agreement entered into by and between Ms. Ana Pascual and you, duly approved by the Provincial Agrarian Reform Adjudication Board, Branch I, Malolos, Bulacan in its Order dated June 2, 1999 which states that: "xxx xxx xxx "a) That upon the signing of this compromise agreement the defendant, who is the sole tenant of the plaintiff over the subject land with an area of not less than two (2) hectares, covered by TCT No. T-86494 and located at Catmon, Sta. Maria, Bulacan, is surrendering her tenancy over the said parcel of land and turning over the possession of the same to the plaintiff, who is authorized to do what he desires regarding the same; "b) That the defendant acknowledges receipt from the plaintiff of the sum of FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00) by way of disturbance compensation as part of her surrender of the tenancy and subject land to the plaintiff; CacEID "c) That as another consideration, the plaintiff is also foregoing and waiving its claim for all back rentals; "d) That as third consideration, the plaintiff shall give and deliver the defendant Six Hundred (600) square meter-lot fronting the street in between the subject and the property of the Reyeses, with a frontage of Twenty (20) meters and length of Thirty (30) meters. The plaintiff shall deliver the separate title to the said six hundred (600) square meters to defendant, within one (1) year from today, free of charge; "xxx xxx xxx" In connection therewith, you now request for exemption from the payment of capital gains tax, relative to the said transfer. In reply, please be informed that pursuant to Section 66 of Republic Act No. 6657 (Comprehensive Agrarian Reform Law), quoted as follows: "Sec. 66. Exemptions from Taxes and Fees of Land Transfers . Transactions under this Act involving a transfer of ownership, whether from natural or juridical persons, shall be exempted from taxes arising from capital gains. These transactions shall also be exempted from the payment of registration fees, and all other taxes and fees for the conveyance or transfer thereof; , That all arrearages in real property taxes, without penalty or interest, shall be deductible from the compensation to which the owner may be entitled." In view of the foregoing, this Office is of the opinion as it hereby holds that the transfer by Cecileville Realty and Service Corporation of a portion of its agricultural land falling under the coverage of the agrarian reform program in favor of Ana Pascual is exempt from capital gains tax and also from other taxes. Said phrase "other taxes" includes documentary stamp tax imposed under Section 196 of the Tax Code of 1997, because documentary stamp tax is substantially a tax on the transaction rather than on the document. (Op. No. 177, S. of 1939, Secretary of Justice) (DA-429-98 dated September 21, 1998) Nevertheless, the notarial acknowledgment to said deed of transfer is subject to the documentary stamp tax of P15.00 pursuant to Section 188 of the same Tax Code. This ruling is 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.) LILIAN B. HEFTI Deputy Commissioner Legal and Inspection Group