BIR Ruling [DA-460-98]

October 19, 1998 BIR RULING [DA-460-98] Atty. Armando A. Rayos Barangay Tangway Lipa City S i r : This refers to your letter dated February 10, 1998 requesting, in effect, for a ruling on the correct tax base to be used in the computation of capital gains tax/creditable withholding tax and the corresponding documentary stamp tax relative to the sale of two (2) parcels of agricultural land by Spouses Emiliano and Rosalia Aranda (Spouses Aranda) in favor of Spouses Ladislao and Rosita Macasaet (Spouses Macasaet). It is represented that on May 11, 1995, two (2) Deeds of Absolute Sale were executed by and between Spouses Aranda and Spouses Macasaet whereby the former transferred to the latter their two (2) parcels of agricultural land located at Barangay San Carlos, Rosario, Batangas covered by OCT No. 02614 issued by the Registry of Deeds for the Province of Batangas containing an area of 20,000 square meters and 41,191 square meters, respectively; that on the same date, Mr. Emiliano Aranda paid partially the documentary stamp tax due on the said transactions in the amounts of P1,500.00 and P750.00 as evidenced by Official Receipt Nos. 2210891 and 2210892, respectively, based on the zonal value of P15.00 per square meter as previously assessed by Mr. Sergio O. Oate; that due to an error in the technical description of the properties, i.e., it was the intention of the parties that the respective area of the subject properties covered by the Deeds of Absolute Sale dated May 11, 1995 was only for 20,000 square meters for each lot, the parties in order to rectify the error in the technical description of the properties and to enforce their true intention, executed on August 19, 1996 another two (2) Deeds of Absolute Sale covering the same properties but this time covering an area of 20,000 square meters for each lot; that the parties agreed that the execution of another sets of Deed of Absolute Sale has the effect of revoking the Deed of Absolute Sale executed on May 11, 1995; that on December 10, 1997, when Mr. Emiliano Aranda presented the latest Deeds of Absolute Sale to Revenue District Office No. 59, Sabang, Lipa City, Ms. Virginia Caraig assessed the capital gains tax and documentary stamp tax based on the latest zonal value of P70.00 per square meters; and that Mr. Emiliano Aranda paid under protest the documentary stamp tax in the amounts of P3,000.00 and P39,000.00 on December 10, 1997 and December 11, 1997, respectively, as evidenced by Official Receipt Nos. 00060600 and 00060790. In reply, please be informed that since the Deeds of Absolute Sale executed on August 19, 1996 involved the same parties and covered the same subject matter and its execution was effected for the purpose or rectifying the error committed in the technical description of the subject properties per Deeds of Absolute Sale executed on May 11, 1995, to which the documentary stamp taxes were partially paid, the documentary stamp tax in the second Deeds of Absolute Sale shall be based on the zonal values of the properties at the time the first set of Deeds of Absolute Sale were executed, i.e., P15.00 per square meter and not on the zonal values at the time the second set of Deeds of Absolute Sale were executed since such second set of Deeds of Absolute Sale were executed merely to rectify the errors made in the technical descriptions of the first Deeds of Absolute Sale. (BIR Ruling No. 088-93 dated March 10, 1993) Such being the case, the contention of Ms. Virginia Caraig to the effect that the capital gains tax and documentary stamp tax on the said transactions should be based on the latest zonal value of P70.00 per square meters because the Deeds of Absolute Sale were ante-dated, is absolutely without any legal basis. However, it shall be understood that Mr. Emiliano Aranda is subject to the corresponding penalties, surcharges and interest that may have accrued thereon up to the time of payment of the capital gains tax and the corresponding documentary stamp tax. 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.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal & Enforcement Group)