An Ordinance Imposing an Additional "Ad Valorem Tax on Idle Lands" in the City of Pasay at the Rate of Five Percent (5%) of the Assessed Value

June 16, 2010 BIR RULING [DA-(C-023) 100-10] Section 24 (D) (1), 57 (B), RR 2-98; BIR Ruling 178-94 dated December 14, 1994; DA-195-2000 dated March 30, 2000; DA-301-03 dated September 15, 2003; DA-306-07 dated May 17, 2007 Atty. Saudi A. Magbanua Unit 328 FEMII Bldg., Soriano Avenue Intramuros, Manila Gentlemen : This refers to your letter dated February 15, 2010 requesting on behalf of your client, SYS Resources, Inc. (formerly known as Dragon Ace Commercial and Development Corporation ), for a confirmatory ruling that no taxes are imposable on the transfer of ownership as mandated by a court order of reinstatement promulgated on October 10, 2007. The facts of the case are as follows: Sometime in 2004, plaintiff Jessie Amigo Marcelo filed a complaint for reconveyance of property, declaration of nullity of TCT No. 198367 (in the name of Dragon Ace Commercial and Development Corporation, a corporation duly organized under the laws of the Philippines, registered with the Securities and Exchange Commission under SEC Registration No. 183345 and with Tax Identification Number 000-116-125-000), issuance of a new title in the name of Jessie Amigo Marcelo, accounting, reimbursement of rentals, moral and exemplary damages, attorney's fees, legal interest and costs of suit. The case was entitled "Jessie Amigo Marcelo vs. Dragon Ace Commercial and Development Corporation, et al." with Civil Case No. 04-494. Defendant Dragon Ace Commercial and Development Corporation (now known as SYS Resources, Inc.) was declared in default. After ex parte presentation of evidence, judgment was rendered and TCT No. 198367 (in the name of Dragon Ace Commercial and Development Corporation) was cancelled and TCT No. 221865 was issued by the Register of Deeds of Makati in the name of Jessie Amigo Marcelo, married to George T. Marcelo. SYS Resources, Inc. (formerly known as Dragon Ace Commercial and Development Corporation) came to know of Civil Case No. 04-494 entitled "Jessie Amigo Marcelo vs. Dragon Ace Commercial and Development Corporation, et al." only after TCT No. 198367 was cancelled. Upon knowledge of the cancellation of title, SYS Resources, Inc. filed a Petition for Annulment of Judgment under Rule 47 of the Rules of Court entitled "SYS Resources, Inc. vs. Jessie Amigo Marcelo, et al." with C.A. G.R. SP No. 94705. On January 26, 2007, the Court of Appeals promulgated a Decision in favor of SYS Resources, Inc. and directed the cancellation of TCT No. 221865 (in the name of Jessie Amigo Marcelo) and reinstatement of TCT No. 198367 in the name of Dragon Ace Commercial and Development Corporation (now known as SYS Resources, Inc.), the dispositive portion states as follows: DAHCaI "WHEREFORE, the petition is hereby GRANTED and the assailed Decision of the Regional Trial Court is declared NULL and VOID for lack of jurisdiction over the person of the petitioner (SYS Resources, Inc. emphasis supplied) . The Register of Deeds of Makati is ordered to cancel TCT No. 221865 in the name of private respondent and reinstate TCT No. 198367 in favor of petitioner." Jessie Amigo Marcelo filed a Motion for Reconsideration in C.A. G.R. SP No. 94705, but the Court of Appeals denied the same in Resolution dated July 13, 2007. Jessie Amigo Marcelo subsequently filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court but the same was denied by the Supreme Court in Resolution dated October 10, 2007. Afterwards, Jessie Amigo Marcelo filed a Motion for Reconsideration but the same was denied by the Supreme Court in a Resolution dated January 16, 2008. On March 11, 2008, the Supreme Court issued an Entry of Judgment stating that: "This is to certify that on October 10, 2007 a resolution rendered in the above-entitled case was filed in this Office, which reads as follow: ' G.R. No. 178886 (Jessie Amigo-Marcelo vs. Sys. Resources, Inc.) . . . . . . . . On the basis thereof, the Court resolves to DENY the instant petition for review on certiorari of the Decision and Resolution dated 26 January 2007 and 13 July 2007, respectively, of the Court of Appeals in C.A. G.R. SP No. 94705 for submitting a verification of the petition and a certification of non-forum shopping that fail to comply with the 2004 Rules on Notarial Practice re: competent evidence of affiant's identity. . . . .' and that the same has, on March 11, 2008 become final and executory and is hereby recorded in the Book of Entries of Judgments." In support of your request, you submitted to this Office the following documents, viz. : 1) Certified true copy of the Decision dated January 26, 2007 of the Court of Appeals directing the reinstatement of the title in favor of Dragon Ace Commercial and Development Corporation (now known as SYS Resources, Inc.); 2) Certified true copy of the Resolution dated July 13, 2007 of the Court of Appeals denying the Motion for Reconsideration filed by the respondent Jessie Amigo Marcelo; 3) Certified true copy of the Resolution dated October 10, 2007 of the Supreme Court denying the Petition for Review on Certiorari filed by the petitioner Jessie Amigo Marcelo; 4) Certified true copy of the Resolution dated January 16, 2008 of the Supreme Court denying the Motion for Reconsideration filed by the petitioner Jessie Amigo Marcelo; 5) Certified true copy of the Entry of Judgment dated March 11, 2008 issued by the Supreme Court; 6) Certified true copy of the Amended Articles of Incorporation issued on April 14, 2010 by the Securities and Exchange Commission indicating the change in corporate name from Dragon Ace Commercial and Development Corporation to SYS Resources, Inc.; 7) Original copy of the Notice of Denial dated February 5, 2010 issued by the Registry of Deeds of the City of Makati; 8) Certified true copy of the cancelled TCT No. 198367 in the name of Dragon Ace Commercial and Development Corporation which was ordered by the Court of Appeals and the Supreme Court to be reinstated in favor of Dragon Ace Commercial and Development Corporation; TDCAHE 9) Latest photocopy of TCT No. 221865 in the name of Jessie Amigo Marcelo which the Court of Appeals and the Supreme Court ordered to be cancelled; and 10) Photocopy of the Certificate of Registration (BIR Form 2303) of SYS Resources, Inc. In reply, please be informed that since the transfer of the subject property is in consonance with the decision of the Court of Appeals and is without consideration, the transfer of the said property in favor of your client, SYS Resources, Inc. is not subject to the capital gains tax imposed under Section 24 (D) (1) of the Tax Code of 1997 nor to the creditable withholding tax prescribed by Revenue Regulations No. 2-98, implementing Section 57 (B) of the Tax Code of 1997 (DA-301-03 dated September 15, 2003 citing BIR Ruling DA-195-2000 dated March 30, 2000). Moreover, the order directing the reinstatement of the title in favor of Dragon Ace Commercial and Development Corporation (now known as SYS Resources, Inc.) as the rightful owner is not likewise subject to the documentary stamp tax imposed under Section 196 of the Tax Code, as amended (BIR Ruling No. 178-94 dated December 14, 1994). 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.) MARISSA O. CABREROS OIC-Assistant Commissioner Legal Service