Transfer of Certain Properties Not Subject to Capital Gains Tax Since the Transaction Occurred in 1974 and 1975 or Prior to the Effectivity of Batas Pambansa Blg. 37 Which Amended Section 34(h) [now Section 21(e)] of the Tax Code

February 14, 1995 BIR RULING NO. 029-95 24 (a) 000-00 029-95 National Sugar Development Corporation San Fernando, Pampanga Attention: Mr . Crisostomo L . Caro Special Counsel Gentlemen : This refers to your letter dated April 11, 1994, addressed to the Regional Director of Revenue Region III, San Fernando, Pampanga, requesting for the issuance of a certificate of exemption from the capital gains tax arising from the transfer of OCT No. RO-1407 O-18822, TCT Nos. RT-339 T-1454, 2222554-R and 222555-R in favor of National Sugar Development Corporation (NSDC). You have represented that the aforesaid titles are still in the name of the defunct of Pampanga Sugar Mills (PSM) although the parcels of land and improvement covered by the said titles were the subject of acquisition first by the Development Bank of the Philippines (DBP) and then by the Philippine National Bank (PNB); that thereafter, PNB transferred all its rights and interests over the said properties in favor of National Sugar Development Corporation (NSDC) by the virtue of a Deed of Assignment; that when NSDC turned over the said properties to the Department of Agrarian Reform (DAR) considering that the same are under CARP, DAR required that the titles be first registered in the name of NSDC and the various liens cancelled; that NSDC file a Petition with the Regional Trial Court of Pampanga which issued an Order directing the Register of Deeds of said province to effect the transfer and registration of said titles from PSM to NSDC; and that NSDC is being required by the BIR Regional Office at Pampanga to secure a clearance on the payment of the capital gains tax. In reply, please be informed that the transfer of the abovesaid properties is not subject to the capital gains tax since the transaction occurred in 1974 and 1975 or prior to the effectivity of Batas Pambansa Blg. 37 which amended Section 34(h) [now Section 21(e)] of the Tax Code. However, PNB which executed the Deed of Assignment in favor of NSDC whereby it transferred all its rights and interests in favor of NSDC is subject to the ordinary corporate income tax under Section 34(a) of the Tax Code. As such, PNB must show proof that it has included or reported in its corporate income tax return whatever gain it may have realized from the aforesaid transfer of properties in favor of NSDC and that the tax/es due thereon has/have been paid in order that a Tax Clearance may be issued by this Office. cdta Very truly yours, LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue