Authority of SEC to Approve the Total Amount of Stocks Proposed to be Subscribed in Exchange for Property

September 13, 2004 BIR RULING NO. 018-04 000-00 Feria Feria Lao Tantoco Law Offices 8th Floor, DPC Place, 2322 Chino Roces Avenue Makati City Attention: Ma. Cecilia C. Katigbak Gentlemen : This refers to your letter dated April 23, 2003 requesting for a ruling on whether the representation made by Spouses Peter D. Garrucho and Cecilia B. Garrucho (Sps. Garrucho for brevity) in the number of shares subscribed in exchange for the property transferred to PANDAN DEVELOPMENT GROUP, INC. (Pandan for brevity) constitutes a misrepresentation that would consequently nullify the said ruling. The facts, as represented, are as follows: A Deed of Exchange was executed by and between Sps. Garrucho and Pandan on or before August 19, 1999 and which was filed with the Law Division on August 19, 1999. The BIR issued BIR Ruling No. S-40-092-2000 on the tax-free exchange transaction on May 4, 2000. Subsequently, the Deed of Exchange was notarized on October 12, 2000. The Documentary Stamp Tax (DST for brevity) on the Deed of Exchange was paid on October 24, 2000. ETHCDS The Securities and Exchange Commission (SEC for brevity) approved the Certificate of Registration of Pandan on April 23, 2001. Subsequently, a TVN No. 2000-00063004 dated June 14, 2001 and TVN No. 2000-00062837 dated March 5, 2001 were issued to Pandan relative to the processing of Tax Clearance. Upon your request of the CAR, the Revenue District Office No. 40, on October 7, 2002 forwarded your case to the Assessment Division thru a memorandum stating the difference in the valuation of the improvement as per BIR Ruling and that of the SEC-approved documents. On December 27, 2002, Ms. Anita G. Torres, Chief of the Assessment Division, returned the case back to the Revenue District Office considering the discrepancy of the facts per BIR Ruling and SEC; thus, she declared that the ruling is null and void and consequently, ordering your client to secure another ruling based on the new facts stated in the SEC-approved Articles of Incorporation. aAEIHC In reply, please be informed that this Office opines that the Securities and Exchange Commission has the exclusive jurisdiction and sole authority in the determination and subsequent approval of the total amount of stocks proposed to be subscribed by the transferor/s in exchange for property/ies. Since Sps. Garrucho has no control over the approval of the said subscription, the same cannot be considered as misrepresentation on their part that would outright invalidate the said Ruling. Thus, the said Ruling is hereby modified to reflect the total subscription for the shares of stock to be subscribed, as approved by the SEC, from the amount of Nine Million Five Hundred Twenty Three Thousand Eight Hundred Eighty Pesos (P9,523,880.00) as represented, to the amount of Seven Million Three Hundred Twenty Seven Thousand and Sixty Pesos (P7,327,060.00). 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, and/or any of the requirements imposed in this letter are not complied with, then this ruling shall be considered null and void. Very truly yours, (SGD.) GUILLERMO L. PARAYNO, JR. Commissioner of Internal Revenue