BIR Ruling [DA-660-99]

November 29, 1999 BIR RULING [DA-660-99] Industrial-Commercial Holdings, Inc. 65 Industria St., Bagumbayan, Quezon City Attention: Ms . Jeanette M . Teo Accountant Gentlemen : This refers to your letter dated October 19, 1999 requesting for a ruling that the planned sale of Assets of Industrial-Commercial Holdings, Inc . (ICHI) is subject to the six percent (6%) capital gains tax. It is represented that ICHI with office address at 65 Industria St., Bagumbayan, Quezon City, is a corporation duly incorporated under the laws of the Philippines, and registered as a holding company to primarily invest, acquire, hold by purchase or otherwise, dispose of whatever nature or purpose, machineries, equipment and other personal properties such as securities, shares of stock and other forms of investments that are in furtherance of the business of the corporation; that ICHI's assets primarily consists of parcels of land where it originally intend to put up manufacturing facilities for industrial and plastic chemicals, in accordance with its secondary purpose, to wit: "To engage in, operate, conduct and maintain the business of manufacturing, importing, exporting, buying, selling or otherwise dealing in, at wholesale and retail, such goods as industrial chemicals, plastics, building materials, equipment, materials, supplies used or employed in or related to the manufacture of such finished goods." That ICHI has not been operational since its incorporation up to present due to the lack of capital to finance any additional investment and pay-off its liabilities; that due to the recent financial crisis, it is no longer feasible for ICHI to develop its real estate properties, herein described, as factory sites as it originally planned; and that on September 28, 1999, the Board of Directors, during its special meeting, proposed to sell part of ICHI's capital assets which are located in Bo. Diezmo, Cabuyao, Laguna, to generate funds with which to partially settle its liabilities; that the subject real properties are particularly described as follows: LibLex TCT No. Area Description (sq. m.) Lot C, of the consel. subd. Plan, Pcs-043404-007827, being a portion of Lots 1 & 2, Blk. 11, T-347298 10,786 Road Lot 11, Psd-04-044274, LRC Rec. No.) Lot E-1 of the subd. Plan., Psd-04-082256, being a portion T-347299 103 of Lot 4, Pcs-043404-008476, LRC Rec. No.) Lot 4-B, of the subd. Plan, Psd-04-082256, being a portion T-357118 10,306 of Lot 4, Pcs-043404-008476 LRC Rec. No.) Lot 3, Blk 2, of the subd. Plan, Psd-043404-066110 being T-357173 9,037 a portion of Lot 5, (LRC) Ps-263692, LRC Rec. No.) In reply, please be informed that under Section 27(D)(5) of the Tax Code of 1997, a final tax of six percent (6%) is imposed on the gains presumed to have been realized in the sale, exchange or disposition of lands and/or buildings which are not actively used in the business of a corporation and which are treated as capital assets based on the gross selling price or fair market value as determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher. Such being the case, this Office is of the opinion as it hereby holds that the aforementioned real properties located Bo. Diezmo, Cabuyao, Laguna, consisting of land with an aggregate area of 30,232 square meters may qualify as capital assets, and the sale and disposition thereof may be subject to the final tax of six percent (6%) based on the gross selling price or fair market value as determined in accordance with Section 6(E) of the Tax Code of 1997, whichever is higher, pursuant to Section 27(D)(5) of the Tax Code of 1997. (BIR Ruling No. 021-99 dated February 25, 1999) 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 and the Revenue District Office concerned shall impose on the gain derived from the sale thereof the appropriate corporate income tax under Section 27(A) of the tax Code of 1997. Very truly yours, Commissioner of Internal Revenue By: (SGD.) SIXTO S. ESQUIVIAS IV Deputy Commissioner (Legal and Enforcement Group)