BIR Ruling [UN-010-95]

January 4, 1995 BIR RULING [UN-010-95] MEMORANDUM FOR : The Commissioner This refers to the internal revenue tax case of Bellevue Properties, Inc., Second Floor, W & W Bldg., 106 Aguirre St., Legaspi Village, Makati, Metro Manila, involving the respective amounts of P2,322,667.78 and P7,932.50 representing deficiency income tax and deficiency documentary stamp tax for the year 1988, under Assessment Notice and Letter of Demand numbered FAN 1-88-92-000-959 and FAN-5-88-92-000-960 and both dated March 5, 1992. cd Records of this case disclosed that on November 21, 1988, the taxpayer sold a residential condominium unit containing an area of 122.55 square meters located at 75-77 Quezon Ave., Sta. Mesa Heights, Quezon City for P450,000.00 to Rosita Tao of Vinzon Dacudao St., Davao City; that in accordance with RAMO 1-88, the zonal value of the land and improvement as determined by the Examiner is P670,965.00; that the taxpayer paid a documentary stamp tax of P6,710.00 on the Deed of Sale under Confirmation Receipts Nos. 16047725 and 160477032 both dated November 28, 1988 in accordance with the zonal value of the property under RAMO 1-88; that on November 29, 1988, a Certificate Authorizing Registration of the property in the name of vendee was issued by the Assistant RDO, RDO No. 30 North Quezon City; that upon investigation, the then Assistant Commissioner of the National Assessment Office opined that in determining the zonal value of the aforesaid property, the "Guidelines in the Implementation of the Zonal Valuation of Real Properties for RDO 30, South Quezon City dated September 1990" should be followed; that the Chief of the then National Audit Review Division was of the opinion, however, that the zonal value applicable in this case is that provided under RAMO 1-88 since the sale and/or transaction took place in 1988. Thus, in a Memorandum dated September 25, 1991 to the Assistant Commissioner, National Assessment Office, the Chief of the National Audit Review Division stated that "Anent your Memorandum dated August 22, 1991, please be informed that the zonal value of condominium/townhouse in Quezon City has not yet been established at the time of sale, therefore, the zonal value of P7,500/sqm cannot be applied but instead the 50% additional valuation for the improvement under RAMO No. 1-88 dated February 4, 1988 and the zonal value of P1,200/sqm for the land, as approved under Department Order No. 136-87 dated December 7, 1987 with effectivity date on May 3, 1988" The original computation of the tax base of the aforesaid sale of the residential condominium unit made by Examiner Alfred S. Valera which is P670,965.00 based on the zonal value of the land and improvements is in accordance with RAMO 1-88 which was then in force at the time of the sale of the property on November 21, 1988. However, the instant deficiency income tax and deficiency documentary stamp tax assessments dated March 5, 1992 involving the respective amounts of P2,322,667.78 and P7,932.50 issued against the taxpayer for the year 1988 were based on the "Guidelines in the Implementation of Zonal Valuation of Real Properties for RDO 30, South Quezon City dated September 1990". On January 21, 1993 within 30 days from the receipt of the Warrant of Distraint and Levy, (the taxpayer has allegedly not received the assessment notice and/or letter of demand), its counsel protested the assessment on the ground that the same has no legal and factual bases since the tax base for computing the internal revenue taxes on the aforesaid sale was computed in accordance with a guideline on zonal valuation in 1990 and not in accordance with RAMO 1-88 which was then in force at the time of the sale. Moreover, on July 29, 1993, the taxpayer likewise protested the assessment on the ground that the right of the government to assess the taxpayer has already prescribed since the assessment notice and/or letter of demand dated March 5, 1992 were sent to its old address at 9/F CBC Bldg., Paseo de Roxas, Makati, Metro Manila inspite of its notification of its change of address as of July 3, 1989 to 2/F, W & W Bldg., 106 Aguirre St., Legaspi Village, Makati MM aside from the fact that the assessment has no legal and factual bases because the zonal valuation used by the BIR in computing the tax base of the aforesaid sale of condominium unit is the zonal valuation for 1990 when the sale and/or transaction took place in 1988. Consequently, since the determination of the tax base for purposes of computing the internal revenue taxes due on the sale of the condominium unit in this case was made in accordance with the "Guidelines in the Implementation of the Zonal Valuation of Real Properties for RDO 30, South Quezon City dated September 1990" and not in accordance with RAMO 1-88 which was then in force at the time the sale and/or transaction took place, the aforesaid deficiency assessments has no legal and factual bases . Moreover, although the Notice of Change of address of the taxpayer dated July 3, 1989 from "Bellevue Properties, Inc., 9th Floor, CBC Bldg., Paseo de Roxas, Makati, Metro Manila" to "Bellevue Properties, Inc., Second Floor, W & W Bldg., 106 Aguirre St., Legaspi Village, Makati, Metro Manila", was stamped received by Revenue Office No. 482, RDO 32-East Makati on July 4, 1989 yet the Assessment Notice and/or Letter of Demand dated March 5, 1992 were still mailed on March 10, 1992 to the old address which is "9th Floor, China Bank Bldg., Makati, Metro Manila". The assessment notice and/or Letter of Demand were therefore incorrectly addressed. Such being the case, and considering that the assessment notice and/or letter of demand which were incorrectly addressed were not received by the taxpayer and more than three (3) years has already lapsed from the filing of the return, the right of the government to assess the taxpayer for deficiency income tax and deficiency documentary stamp tax in the respective amounts of P2,322,667.78 and P7,932.50 for the year 1988 has already been barred by the statute of limitations pursuant to Section 203 of the Tax Code as amended. In view thereof, it is respectfully recommended that the assessment notice and/or letter of demand issued against Bellevue Properties, Inc. involving the amounts of P2,322,667.78 and P7,932.50 representing deficiency income tax and deficiency documentary stamp tax for the year 1988 be withdrawn and cancelled and this case considered closed. cdtech Respectfully submitted: MILAGROS V. REGALADO Chief, Law Division (Officer-In-Charge) I CONCUR: ALICIA P. CLEMENO Acting Assistant Commissioner (Legal Service) APPROVED: LIWAYWAY VINZONS-CHATO Commissioner of Internal Revenue