BIR Ruling No. 084-15

April 8, 2015 BIR RULING NO. 084-15 PD 1529; BIR Ruling No. 401-13 Atty. Tomas C. Enrile Sol's Subdivision, Brgy. Bitano, Legazpi City Sir : This refers to your letter dated August 15, 2013, requesting for a Certificate of Tax Exemption from the payment of capital gains tax relative to your application for correction of the description/measurement of the lots/real properties and issuance of new Transfer Certificates of Title which is the subject of a Deed of Exchange executed by and between BESLYN AZURAN-ENRILE (BESLYN for brevity) and MAYLEN AZURAN-ANDES (MAYLEN for brevity). It is represented that BESLYN, married to Tomas C. Enrile, and MAYLEN, married to Jose L. Andes, are the separate owners of two (2) adjacent lots described as Lot 3-A and Lot 3-B, covered by Transfer Certificate of Title (TCT) Nos. 50556 and 50557, respectively; that the lots, which run parallel to each other, contain a measurement of 6x33.20 square meters or a total area of One Hundred Ninety Nine (199) square meters each; that the present lot description/measurement of 6x33.20 square meters was not their mutual desire and/or intention when they bought them from their parents in 1999; that their true intention was supposed to be described and measured at 12x16.60, still containing a total area of One Hundred Ninety Nine (199) square meters, the front portion of which was for BESLYN and the rear/back portion is to be occupied by MAYLEN; that the improvement constructed by BESLYN in 1999 already covers the present description/measurement (12x16.60 square meters) they seek to exchange; that the lot area which is the subject of the Deed of Exchange are the same lots that are covered in their respective TCT's, which are Lot 3-A and Lot 3-B; and that the exchange of lots did not involve any sale and therefore no gains were realized; In connection with the foregoing, you are now requesting for a Certificate of Tax Exemption with regard to the tax consequences of the correction and/or registration of the above-mentioned exchange of properties. In reply, please be informed that Section 108 of Presidential Decree (PD) 1529 1 provides: cEDIAa Sec. 108. Amendment and alteration of certificates. No erasure, alteration, or amendment shall be made upon the registration book after the entry of a certificate of title or of a memorandum thereon and the attestation of the same be Register of Deeds, except by order of the proper Court of First Instance. A registered owner of other person having an interest in registered property, or, in proper cases, the Register of Deeds with the approval of the Commissioner of Land Registration, may apply by petition to the court upon the ground that the registered interests of any description, whether vested, contingent, expectant or inchoate appearing on the certificate, have terminated and ceased; or that new interest not appearing upon the certificate have arisen or been created; or that an omission or error was made in entering a certificate or any memorandum thereon, or, on any duplicate certificate; or that the same or any person on the certificate has been changed; or that the registered owner has married, or, if registered as married, that the marriage has been terminated and no right or interests of heirs or creditors will thereby be affected; or that a corporation which owned registered land and has been dissolved has not convened the same within three years after its dissolution; or upon any other reasonable ground; and the court may hear and determine the petition after notice to all parties in interest, and may order the entry or cancellation of a new certificate, the entry or cancellation of a memorandum upon a certificate, or grant any other relief upon such terms and conditions, requiring security or bond if necessary, as it may consider proper; Provided, however, That this section shall not be construed to give the court authority to reopen the judgment or decree of registration, and that nothing shall be done or ordered by the court which shall impair the title or other interest of a purchaser holding a certificate for value and in good faith, or his heirs and assigns, without his or their written consent. Where the owner's duplicate certificate is not presented, a similar petition may be filed as provided in the preceding section. All petitions or motions filed under this Section as well as under any other provision of this Decree after original registration shall be filed and entitled in the original case in which the decree or registration was entered. . . . This is in relation to the jurisdiction of the Regional Trial Court (formerly Court of First Instance) as laid down in Section 2 2 of the same law. Pursuant to the above provision, the Regional Trial Court has the authority to act, not only on applications for original registration of title to land, but also on all petitions, amendments and/or alterations filed after the original registration of title. (BIR Ruling No. 401-13 dated November 7, 2013) Any change or amendment thereto should be done by seeking judicial relief since the properties involved are titled in the name of the respective individuals. (BIR Ruling No. 401-13 dated November 7, 2013) Hence, the Deed of Exchange executed by BESLYN and MAYLEN cannot be given the effect of amending or altering what has been recorded in their respective titles on the ground that the descriptions of the afore-described lots are not what they intended them to be. In order to correct any such error, mistake or inadvertence in the titles of their properties, the parties have to go first to the regular court for judicial relief and present, in the process, the Deed of Exchange executed without consideration and prove the existence of such error, mistake or inadvertence allegedly committed in the titling of their properties. Only upon order of the proper court shall any change, entry or cancellation of a new title be made and whereupon the parties may apply from the BIR a legal opinion on the exemption of such consequence from the imposition of capital gains tax. TSDHCc Accordingly, this Office finds no factual and legal basis to grant your request. Very truly yours, (SGD.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue Footnotes 1. AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY AND FOR OTHER PURPOSES. 2. Sec. 2. Nature of registration proceedings; jurisdiction of courts. Judicial proceedings for the registration of lands throughout the Philippines shall be in rem, and shall be based on the generally accepted principles underlying the Torrens System. Courts of First Instance shall have exclusive jurisdiction over all applications for original registration of title to lands, including improvements and interests therein, and over all petitions filed after original registration of title, with power to hear and determine all questions arising upon such applications or petitions.