BIR Ruling No. 180-99

November 24, 1999 BIR RULING NO. 180-99 Quezon City Development and Financing Corporation Suite 900 LPL Towers 112 Legaspi Street Legaspi Village Makati City Attention: Mr . J . Antonio Leviste President Gentlemen : This refers to your letter dated October 18, 1999 stating that Quezon City Development & Financing Corporation (QCDFC) was the owner and developer of White Plains Subdivision in Quezon City prior to the sale of the lots to the residents of the subdivision; that QCDFC represented to the lot buyers that there would be a thoroughfare known as Katipunan Avenue and that the width of the land allotted to said road was 38 meters; that of the 38 meters, QCDFC developed only 20 meters; that the undeveloped strip of land, 18 meters in width, of the proposed Katipunan Avenue has been and still is the subject of court litigation; that as early as April 14, 1970, QCDFC filed a petition with the then Court of First Instance of Rizal for the conversion into residential lots of this undeveloped strip of land; that sometime between 1970's and 1980's, QCDFC sold lots along Katipunan Avenue in White Plains, Quezon City, thereafter, the government filed a complaint inhibiting QCDFC from executing the corresponding Deeds of Conveyance, claiming that the properties are for use as road (Katipunan Parkway/Circumferential Road-5); that of the forty-four (44) lots which QCDFC sold, at least ten (10) had been conveyed; that the rest were prevented from being registered on account of the filing of the case; that after more than twenty (20) years of litigation, the Supreme Court in the case of White Plains Homeowners Association, Inc. et al. vs. The Court of Appeals and the Quezon City Development & Financing Corporation docketed as G.R. No 128131 promulgated on October 8, 1998 resolved the case in favor QCDFC; and that the vendees are now demanding for the execution of the Deeds of Conveyance In connection therewith, you now request for a ruling that for purposes of taxation the reckoning date of the sale of the above-mentioned lots by QCDFC to its buyers should be the date of the execution of the Deeds of Absolute Sale. In reply, please be informed that Article 1475 of the Civil Code of the Philippines provides "Art. 1475. The contract of sale is perfected at the moment there is a meeting of minds upon the thing which is the object of the contract and upon the price. "From the moment, the parties may reciprocally demand performance, subject to the provisions of the law governing the form of contract." The above-cited article provides that a contract of purchase and sale is perfected from the moment the parties have agreed upon a determinate thing i.e., the object of the contract and a price certain therefor, even if neither is delivered. Thus, the delivery of the thing sold is not necessary for the perfection of the contract. In the case at bar, there is indeed a perfected sale as the seller of the QCDFC has agreed to sell and had actually sold the above-mentioned lots to the respective buyers while the latter had agreed to pay the contract price therefor, although delivery had not been effected until no less the Supreme Court has resolved the case in favor of QCDFC, but from the time on, the vendees/buyers are given the right to compel the vendor/seller QCDFC to deliver the lots sold where it not for the inhibition filed by the government that the properties sold are for use as road (Katipunan Parkway / Circumferential Road-5). Based on the foregoing, it is the opinion of this Office as it hereby holds that since the Deeds of Absolute Sale executed by QCDFC and its buyers involving the above-mentioned lots are in itself perfected contracts, the reckoning date of sale for purposes of taxation is the date of the execution of the aforementioned Deed of Absolute Sale. Accordingly, the said deeds are governed by the laws, rules and regulations prevailing at the time of execution. 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.) BEETHOVEN L. RUALO Commissioner of Internal Revenue