Whether the Deed of Transfer According to Revenue Circular No. 34-91 as Interpreted by the Honorable Commissioner is Considered Ante-Dated

February 20, 1992 BIR RULING NO. 060-92 24 000-00 060-92 Atty. Jose M. Dy 1137 Unida St., Baclaran Paraaque, Metro Manila S i r : This refers to your letter dated December 23, 1991 stating that a decision was rendered in the case entitled Summa Insurance Corporation versus Maria Cristina Fertilizer Corporation on September 27, 1989, mandating the transfer of the property covered by Transfer Certificate of Title No. 52547 (now TCT No. 77625) of the Registry of Deeds for the Province of North Cotabato, to the plaintiff Summa Insurance Corporation; that the property subject matter of this decision was acquired by Polaris Marketing Corporation (sister company of Maria Cristina Fertilizer Corporation) by virtue of an execution sale in Civil Case No. 12148, wherein the Deed of Sale was executed by the Sheriff in the total sum of P32,800.00 in favor of the transferee; that in accordance with the court decision, it was mandated therein that the property be transferred in the name of the plaintiff Summa Insurance Corporation (now Finman General Assurance Corporation) by virtue of the Deed of Transfer Notarized last July 20, 1989, under Doc. No. 129, Page No. 27; Book No. 1; Series of 1989 of the Notarial Register of Atty. Severino D. Corpus of the City of Manila; and that you are filing this letter of inquiry because you were appointed by Maria Cristina Fertilizer Corporation and Polaris Marketing Corporation to facilitate the registration in Kidapawan, North Cotabato, of the property in question, under a Special Power of Attorney and because the Revenue District Officer could not decide what to do after you have filed the return. Based on the foregoing representations, you now in effect request a ruling on the following queries: "(A) Whether or not the Deed of Transfer according to Revenue Circular No. 34-91 as interpreted by the Honorable Commissioner is considered ante-dated. "(B) On the event that the same is ante-dated as interpreted to be such under Revenue Circular No. 34-91, how much amount of withholding tax are we required to pay under the foregoing circumstances? "(C) Are we still required to pay the withholding tax under the foregoing circumstances under the foregoing particular case?" In reply, please be informed that under No. 2 of Revenue Memorandum Circular No. 43-91 clarifying among others, Revenue Memorandum Circular No. 34-91 dealing on ante-dating of Deed of Sale involving real properties, in order to remove doubts as to what rules to apply and when to impose the penalties for late filing of tax return and payment of tax, the following rules are hereby prescribed. a. When there is only a delay in the presentation of sales document, the rules on the kind of tax, rate of tax, zonal or fair market value, obtaining at the date of notarization shall be applied but the penalties for late filing of return and payment of tax shall be imposed. There is a delay in the presentation of sales document when the taxpayer submits said document to the BIR after 30 days from date of notarization. The delay could be in terms of days, months or even years. For this purpose, taxpayers have the burden of proving by the submission of other documents such as cancelled checks, official receipts, contract to sell, or certification of the archive official, to show that there is no ante-dating of public instrument. b. When the document is presented to the BIR after three months from date of notarization and the taxpayer cannot present additional receipts or documents to show that the same is not ante-dated, then the rules applicable at the time of presentation of the document shall be applied but no penalty shall be imposed. It is expected that by applying the current rules, a higher tax will be collected from the taxpayer than when the old rules plus penalties had been followed. From the foregoing rules, and based on the documents submitted, the Deed of Transfer filed with this Office on November 22, 1991, that was entered into by and between your clients, Polaris Marketing Corporation, and Finman General Assurance Corporation on July 12, 1989, wherein your said client transferred in favor of Finman General Assurance Corporation its properties (lots 1 and 2) situated at Barrio Inug-ug, Municipality of Piket-Pagalungan, Cotabato covered by Transfer Certificate of Title No. 52547, in partial satisfaction of the money judgment rendered in favor of Finman General Assurance Corporation and against its sister company Ma. Cristina Fertilizer Corporation in Civil Case No. 40985, Regional Trial Court, Branch 137, Makati, Metro Manila, is not ante-dated as envisioned under Revenue Memorandum Circular No. 34-91, and therefore rule No. 2(a) of the aforecited rules is applicable in the instant case. Accordingly, your client, Polaris Marketing Corporation, is not liable to the 5% creditable withholding tax imposed under Revenue Regulations No. 1-90 implementing Section 50(b) of the Tax Code, as amended, but to the deficiency income tax on the net gains it derived on the said transfer of its properties on July 12, 1989 computed by determining the difference between the acquisition cost of P32,800.00 of the said properties and other incidental expense that were incurred in the acquisition thereof as of April 12, 1984 and the fair market value of the properties using the fair market value of the properties as shown in the latest tax declarations of the said properties as determined by the City or provincial assessor immediately prior to July 12, 1989 on which the 10% inflationary factor under Revenue Audit Memorandum Order No. 1-88 is to be added in order to arrive at the fair market value of the properties. The amount arrived at shall be the tax base upon which the 35% income tax is to be imposed after which the 25% surcharge and 20% interest for late filing and late payment, of the same are to be imposed as civil penalties thereon. Moreover, the Deed of Transfer is subject to the documentary stamp tax imposed under Section 196 of the Tax Code based on the fair market value of the said properties as above determined. Furthermore, under Section 248(d) of the Tax Code, in case of failure to affix the proper documentary stamps to a document or instrument, there shall, for every violation, be imposed, in addition to the amount of documentary stamp tax required to be paid, an amount equivalent to twenty-five percent of such unpaid amount which shall be in lieu of the interest prescribed in Section 249 of the same Code. Very truly yours, JOSE U. ONG Commissioner of Internal Revenue