BIR Ruling [UN-067-94]

February 18, 1994 BIR RULING [UN-067-94] Ramcar Incorporated Scout Santiago cor., Marathon St., Diliman, Quezon City Attention: Mr . Romulo C . Briones VP-Personnel Gentlemen : This refers to your letter dated December 15, 1992 requesting for exemption from the payment of capital gains tax and documentary stamp tax on the Deeds of Reconveyance of your company's properties. It appears that Ramcar Inc. provides a housing plan/project for its employees in Bo. Saog, Marilao, Bulacan, named as "Ramcar Subdivision"; that in pursuit of this plan/project, Ramcar Inc. applied for and obtained the necessary licenses and permits in putting-up the said housing project as the developer/owner, in accordance with Batas Pambansa Blg. 220; that the first batch of its employees received their corresponding titles transferred in their names by virtue of the Deeds of Absolute Sale executed by Ramcar Inc. in favor of the said employees as a pre-requisite by the Social Security System (SSS), for the approval of their respective housing loan; that among those titles first awarded to the employees are Transfer Certificates of Title Nos. T-111418, T-112353, T-112352 & T-112886 in the names of Manuel R. Reyes, Jr., Luisito B. Santos, Gerardo P. Leonardo and Jesus M. Paule respectively; that due to some financial constraints, the aforenamed employees backed out and eventually withdrew their respective loan applications from the SSS; that the said withdrawals were made prior to the "scheduled" release of the loans (viz., loan take out) from the SSS; that Ramcar Inc. was able to obtain cancellations or release of mortgages from the SSS, and had recently re-awarded the said properties to its other employees; that before Ramcar Inc. could effect transfers of that said properties to the new awardees, the said properties must have to be reconveyed first by the aforenamed employees/awardees in favor of Ramcar Inc. without any consideration involved; that eventually, Deeds of Reconveyance were executed by the aforenamed employees/awardees, returning the said properties to Ramcar Inc. In reply, please be informed that the Deeds of Sale executed by you in favor of Mr. Manuel R. Reyes, Jr., Mr. Luisito B. Santos, Mr. Gerardo P. Leonardo & Mr. Jesus M. Paule as required by the SSS for the approval of their housing loans did not produce any legal effect because, with the withdrawals of the aforenamed employees prior to the release of their loans and the subsequent cancellations of the loan by the SSS, you failed to receive the proceeds which were to be the causes/considerations for the sales. For lack of cause or consideration, it cannot be said that your properties have been disposed, transferred or conveyed in favor of the aforenamed employees pursuant to Article 1352 of the Civil Code, stating: "ARTICLE 1352. Contracts without cause , or with unlawful cause, produce no effect whatsoever. xxx xxx xxx Consequently, since the Deed of Sale, between you on one hand and Mr. Manuel R. Reyes, Jr., Mr. Luisito B. Santos, Mr. Gerardo P. Leonardo & Mr. Jesus M. Paule on the other failed to effect the transfers of ownership of the lots for lack of cause or consideration, the Deeds of Reconveyance executed by the aforenamed employees on October 22, 1992 so as to effect the return of the subject properties to you are not subject to the capital gains and documentary stamp taxes prescribed in Sections 21(e) and 196 of the Tax Code, as amended, respectively. This ruling is being issued on the basis of the foregoing statement of facts. However, if upon investigation the facts turn out different, then this ruling shall not apply (BIR Ruling No. 186-93 dated May 5, 1993). cdtech Very truly yours, JAIME M. MAZA Assistant Commissioner (Legal Service)