DOJ Opinion No. 024, s. 1997

DOJ OPINION NO. 024 , s. 1997 April 10, 1997 Executive Director Manuel P. Tiacqui National Livelihood Support Fund 4/F Hanston Building Emerald Avenue, Ortigas Center Pasig City Sir : This has reference to your request for opinion as to the: ". . . NLSF possible exemption from payment of Capital Gains (Final Taxes) on 'real assets acquired from delinquent KKK borrowers through foreclosures, dacion or other legal means of extinguishing contractual obligations." You state that the program implementation of the Kilusang Kabuhayan at Kaunlaran (KKK) loans administered during the Marcos regime to give effect to the social justice clause of the Constitution resulted in a failure; that such loans, as released through the program conduits, namely: the DBP, PNB and LBP, became due and demandable; that in order to recover, NLSF foreclosed the real properties hypothecated as securities for the loans; and that the foreclosed properties which became acquired assets of the NLSF through conduits are being assessed Capital Gains Tax or Final Tax upon consolidation and transfer of ownership preparatory to Public Sale in accordance with government rules and regulations. The instant request has arisen because you feel that the aforecited tax burden would in a way deplete the meager resources derived by NLSF from KKK loan collections to the detriment of its clientele considering that NLSF is a government entity mandated by law to provide livelihood credits to small farmers, their dependents and other eligible residents of Agrarian Reform Communities. In this connection, please be informed that the issue involves the imposition of capital gains tax which is governed by the pertinent income taxation provisions of the National Internal Revenue Code (Title II). However, Section 245 of the said Code provides: "Sec. 245. Authority of the Secretary of Finance to promulgate rules and regulations . The Secretary of Finance, upon recommendation of the Commission of Internal Revenue, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code." Based thereon, we advise you to address the matter to the Secretary of Finance, through the Commissioner of Internal Revenue, who, on the basis of the aforequoted provision has the implied authority to determine whether the above-described NLSF transactions may be exempt from capital gains taxation. Pursuant to established practice and precedents, this Department has consistently desisted from expressing his views on matters which, by provision of law, fall within the authority of another office, particularly where he possesses no revisory authority over said office unless such opinion is requested by said office or agency (Sec. Of Justice Ops. No. 91, s. 1982; Nos. 123 and 9, s. 1980; No. 99, s. 1978; No. 137, s. 1977, etc.). This rule arises not only from practical considerations, but also out of due respect and deference for the competence and expertise of the office having primary jurisdiction to resolve the matter and for its familiarity with the policy repercussions of the question as well as from a logical recognition of the lawful exercise of an authority conferred by law (Ibid., No. 1, s. 1983). Please be guided accordingly. Very truly yours, (SGD.) TEOFISTO T. GUINGONA, JR. Secretary