Mr. Michael Angelo C. Alano

October 23, 2008 BIR RULING [DA-(I-031) 339-08] Mr. Michael Angelo C. Alano 85 K-7 Kamias Road Quezon City S i r : This refers to your letter dated February 11, 2008, which was referred to this Office by Revenue Region No. 9, San Pablo City, by way of its 2nd Indorsement dated April 1, 2008, requesting for the waiver of surcharge, penalties and interest relative to your failure to pay the capital gains tax and the corresponding documentary stamp tax due on the expropriation proceedings. It is represented that Jose C. Alano, Jr., Alfredo C. Alano, Manuel C. Alano and Nora C. Alano (Landowners), represented herein by their Attorney-in-Fact, Michael Angelo C. Alano, are the absolute and registered owners of several real properties which they have acquired by virtue of inheritance from their parents, more particularly described as follows: TCT No. Area (sq. m.) T-233608 8,314 T-236808 90,048 241318 18,458 T-215131 55,601 that on the other hand, Engineer Ricardo M. Lusterio, in his capacity as district engineer of Quezon 2nd Engineering District of the Department of Public Works and Highways (DPWH) is constructing the Quirino Highway, Calauag/Del Gallego Section, Quezon and Camarines Sur Provinces and in the course of the said construction, portion of the above-described properties had been appropriated by the latter to form part of the Quirino Highway, Calauag/del Gallego Section, with the areas taken from each land holding as shown below: THAECc TCT No. Lot No. Area Taken T-236808 1493-J-Psd-04-095300 6,734 sq. m. T-241318 344-C-4D-Psd-04-092516 6,695 sq. m. T-235140 345-C-5, Psd-04-092864 5,045 sq. m. T-235137 586-B-2, Psd-04-092864 8,776 sq. m. T-215131 589 D-5, Psd-04-092863 4,458 sq. m. T-236528 338-B, Psd-04-094462 3,461 sq. m. T-235142 584-B-2, Psd-04-097998 14,079 sq. m. Total 49,248 sq. m. ========== that the above-named landowners agreed to sell, cede, transfer and convey by way of Absolute Sale to the DPWH the 49,248 square meters of land representing the aggregate area of the portions respectively taken from the landholdings of the former; that in consideration of the total sum of P14,774,400.00 computed at P300.00 per square meter, the landowners ceded, transferred and conveyed and delivered to the DPWH the above-mentioned properties; that in a Certification dated June 5, 1997 duly issued by the Geodetic Engineer Romeo T. Trijo, it was certified that the above-mentioned lots with an aggregate area of 49,250 square meters are existing and actual road traversed by the Quirino Highway situated in the Barangay of Rizal, Municipality of Tagkawayan, Province of Quezon; that as of this date, the capital gains tax has not yet been paid since the BIR is imposing the corresponding penalties for late payment of the aforesaid taxes; and that you posit that the landowners have no knowledge that the Deed of Sale had already been notarized which reckoned the period within which to pay the aforesaid taxes. In reply thereto, please be informed that under Sections 248 (A) (1) and (3) and 249, both of the Tax Code of 1997, the imposition of the surcharge and interest on delinquency is mandatory. Strong reasons of policy support a strict observance of the rule regarding the payment of tax. The laws imposing penalties for delinquencies are clearly intended to hasten tax payments or punish evasions or neglect of duty in respect thereof. If delays in tax payments are to be condoned for light reasons, the law imposing penalties for delinquencies would be rendered nugatory and the maintenance of the government and its multifarious activities would be as precarious as taxpayers are willing or unwilling to pay their obligations to the State on time. (Jamora vs. Meer, 74 Phils. 22) This is justified because the intention of the law is precisely to discourage delay in the payment of taxes due to the State and, in this sense, the surcharge and interest charged are not penal but compensatory in nature. They are compensation to the State for the delay in payment of the tax and for the concomitant use by the taxpayer of the funds that rightfully should be in the government's hands. (Castro vs. Collector of Internal Revenue, 6 SCRA 886) DIETcH Moreover, under Section 204 (B) of the Tax Code of 1997, the Commissioner may abate or cancel tax liability only in two (2) cases, viz.: (a) the tax or any portion thereof appears to be unjustly or excessively assessed; or (b) the administration and collection costs involved do not justify the collection of the amount due. It has also been held that a voluntary relinquishment of a part of a tax lawfully assessed upon and due from a solvent person or corporation is not permitted by law. (16 Op. Atty. Gen. [U.S.] 249) Thus, in the matter of abatement of penalties, the Commissioner of Internal Revenue should not act from motives merely out of compassion or charity, but should consider the pecuniary interest of the government, justice and equity and public policy. IN VIEW OF THE FOREGOING, this Office regrets to deny your request for the condonation of the surcharges, interest and penalties inasmuch as the above-named landowners case does not fall under the grounds within which the Commissioner can grant abatement. 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, (SGD.) JAMES H. ROLDAN Assistant Commissioner Legal Service