BIR Ruling No. 383-11

October 20, 2011 BIR RULING NO. 383-11 000-00 Heirs of Julian & Lutgarda Samson No. 1829 Dagupan St., Tondo, Manila Attention: Roscoe S. Villanueva Authorized Representative Sir : This refers to your letter dated September 24, 2010 requesting for clarification on the taxes to be paid to the BIR covering the registration of lots exchanged by the City Government of Manila in favour of the Heirs of Julian & Lutgarda Samson. It is represented that on 01 December 1932, a Deed of Transfer was executed between the Roman Catholic Archbishop of Manila as represented by his Excellency Reverend WM Finneman, Mr. Julian Samson, as guardian of minors Milagros, Aurora, Paz and Simplicio Samson, and Mr. Florentino Ampil, et al., and the City Government of Manila, represented by Mayor Tomas Earnshaw; that two (2) of the parcels of land (Lot 5 and 17, Block 3006) included in the said transfer, registered in the name of deceased Lutgarda Maalac de Samson, mother of minors Milagros, Aurora, Paz and Simplicio Samson, were transferred in favour of the aforementioned minors and exchanged for road improvement purposes, with those parcels of land located at the corner of Gregorio Perfecto, Balaya and Tayuman Streets, Tondo, Manila, registered under the name of the City of Manila described as Lots 12, 24 and 25, Block 3006 covered by Transfer Certificate of Title No. 7086; that the Deed of Transfer, written in Spanish language, was acknowledged before the Notary Public under Document No. 188, Page No. 86, Book No. III, Series of 1932 and the reproduced copy of which was duly certified by the Chief, Archives Collection and Access Division of the National Archives of the Philippines; that under Resolution No. 44 dated 24 September 2010, City Mayor Alfredo S. Lim approved the resolution of the Patrimonial Property Committee of the Office of the City Administrator of Manila approving the titling of Lots 12, 24 and 25, Block 3006 corner Tayuman, Gregorio Perfecto and Balaya Streets, Tondo, Manila, in the name of the Heirs of Julian & Lutgarda Samson. Based on the foregoing, you now request for clarification on whether or not to pay capital gains tax and documentary stamp tax considering that the Tax Code is silent on the transactions on exchange of government lots with private lots taken for road improvement purposes. CcSEIH In support of your request, you have submitted the following documents: 1) Copy of Cadastral Survey of the City of Manila showing Lot 12 (458.10 sqm), Lot 24 (19.90 sqm) and Lot 25 (86.10 sqm) covered by Transfer Certificate of Title No. 7086; 2) Copy of Transfer Certificate of Title No. 7086 registered under the name of the City of Manila; 3) Copy of Tax Declarations of Lots 12, 24 and 25; 4) Copy of Tax Declarations of Lot 5 (109.50 sqm) and Lot 17 (753.80 sqm), Block 3006, now portion of Arqueros St., Tondo, Manila; 5) Copy of Deed of Transfer, both in its original Spanish form and in English translation; 6) Copy of Realty Tax payments for the year 2010; and 7) Copy of Authority given by the Heirs of Julian & Lutgarda Samson to representative, Roscoe S. Villanueva. In reply, please be informed that the date of notarization appearing on the Deed of Transfer is considered the prima facie date of consummation of the agreement of exchange between the Heirs of Julian & Lutgarda Samson and the City Government of Manila. Thus, as of 01 December 1932, the date when the Deed of Transfer was executed and notarized, the Tax Code was not yet in existence. Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code of 1939, took effect only on June 15, 1939. Tax or customs laws may not be extended by implication beyond the clear import of their language, nor their operation enlarged so as to embrace matters not specifically provided (Collector of Internal Revenue vs. La Tondea, Inc., 115 Phil. 841) . If a person sought to be taxed comes within the letter of the law, he must be taxed, however great the hardship may appear to be to the judicial mind. On the other hand, if the government seeking to collect tax or customs duties cannot bring the subject within the letter of the law, the subject is free, however, apparently within the spirit of the law the case might otherwise appear to be (Groehlick & Kuttner v. Collector of Customs, 18 Phil. 461). AHacIS Moreover, the general rule that laws operate prospectively and not retroactively, unless the intention to the contrary appears, as embodied in Article 4 of the Civil Code, applies to tax law. In Lopez v. Crow (40 Phil. 997), the Supreme Court held that a law is a rule established to guide actions with no binding effect until it is enacted; hence, it has no application to past but only to future times. This is why it is said that the law looks to the future only, and has no retroactive effect unless the legislature may have formally given that effect to the law. In view of the foregoing, the government properties acquired by the Heirs of Julian & Lutgarda Samson in exchange for their private properties as embodied in the Deed of Transfer dated 01 December 1932 may now be issued a Certificate Authorizing Registration (CAR) or Tax Clearance Certificate (TCC) without paying the 6% capital gains tax or the document stamp tax imposed under Sections 24 (D) and 173 of the Tax Code of 1997, as amended, respectively. aHcACT 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.) KIM S. JACINTO-HENARES Commissioner of Internal Revenue