Annotation of the Deed of Absolute Forfeiture of Land in Favor of the Government

October 14, 1959 BIR RULING NO. 524-59 1st Indorsement Respectfully returned to the Regional Director, B.I.R. Regional District No. 4, Quezon City, the within papers relative to the internal revenue tax case of Jose Ponce de Leon, involving the amount of P1,560.32 representing amusement and fixed taxes, surcharge and compromise penalty. cdt Request is made for a ruling as to whether or not the deed of absolute forfeiture of land covered by T.C.T. Nos. 2599 and 2600 in favor of the government can be annotated on the new title issued to the Rehabilitation Finance Corporation. It appears that on October 8, 1951, a mortgage was constituted on the land covered by T.C.T. Nos. 2599 and 2600 in favor of the Rehabilitation Finance Corporation. On March 5, 1954, a demand was made by this Office for the payment of P1,560.32 representing amusement and fixed taxes for the period covering February, March, April, and May, 1953. In view of the taxpayer's failure to pay the said tax obligation, on June 1, 1955, a notice of tax lien on the properties of the taxpayer was issued by the Bureau. However, on June 15, 1954, among others, the properties in question were purchased by the Rehabilitation Finance Corporation at foreclosure sale. The taxpayer failed to redeem the properties and on April 19, 1955, the final deed of sale was executed in favor of the Rehabilitation Finance Corporation. Generally, taxes are liens on the property and are attached to it in preference to all other encumbrances. But as against prior mortgages, duly constituted and registered, liens for taxes are reduced to ordinary liens and subordinated to prior mortgage lien. More so in this case, where the taxes involved are not imposed on the property used in the business or occupation upon which the tax is due. Accordingly, he is advised that the property in question cannot be forfeited to Jose Ponce de Leon. Consequently, there is no legal basis to annotate the deed of absolute forfeiture of the land in question in the new title thereof issued to the Rehabilitation Finance Corporation. cdtech (SGD.) MELECIO R. DOMINGO Commissioner of Internal Revenue