Rafael Arsenio S. Dizon, v.

CTA and CIR

G.R. No. 140944; April 30, 2008

Facts:
Jose P. Fernandez died in November 7, 1987. Thereafter, a
petition for the probate of his will was filed. The probate court
appointed Atty. Rafael Arsenio P. Dizon as administrator of the
Estate of Jose Fernandez.

An estate tax return was filed later on which showed ZERO estate
tax liability. BIR thereafter issued a deficiency estate tax
assessment, demanding payment of Php 66.97 million as
deficiency estate tax. This was subsequently reduced by CTA to
Php 37.42 million. The CA affirmed the CTAs ruling, hence, the
instant petition.

The petitioner claims that in as much as the valid claims of

creditors against the Estate are in excess of the gross estate, no
estate tax was due. On the other hand, respondents argue that
since the claims of the Estates creditors have been condoned,
such claims may no longer be deducted from the gross estate of
the decedent.

Issue:
Whether the actual claims of creditors may be fully allowed
as deductions from the gross estate of Jose despite the fact that
the said claims were reduced or condoned through compromise
agreements entered into by the Estate with its creditors

Held:
YES. Following the US Supreme Courts ruling in Ithaca Trust
Co. v. United States, the Court held that post-death developments
are not material in determining the amount of deduction. This is
because estate tax is a tax imposed on the act of transferring
property by will or intestacy and, because the act on which the tax
is levied occurs at a discrete time, i.e., the instance of death, the
net value of the property transferred should be ascertained, as
nearly as possible, as of the that time. This is the date-of-death
valuation rule.

The Court, in adopting the date-of-death valuation principle,

explained that: First. There is no law, nor do we discern any
legislative intent in our tax laws, which disregards the date-of-death
valuation principle and particularly provides that post-death
developments must be considered in determining the net value of
the estate. It bears emphasis that tax burdens are not to be
imposed, nor presumed to be imposed, beyond what the statute
expressly and clearly imports, tax statutes being construed
strictissimi juris against the government. Second. Such
construction finds relevance and consistency in our Rules on
Special Proceedings wherein the term "claims" required to be
presented against a decedent's estate is generally construed to
mean debts or demands of a pecuniary nature which could have
been enforced against the deceased in his lifetime, or liability
contracted by the deceased before his death. Therefore, the claims
existing at the time of death are significant to, and should be made
the basis of, the determination of allowable deductions.

Cano vs Director of Lands

Facts:

The CFI of Sorsogon decreed the registration of the Juban

(Sorsogon) Cadastre under the following terms and conditions
subjecting it to right of reservation reservation in favor of Eustaquia
Guerrero pursuant to Article 891 of the Civil code. The decision
having become final, the decree and the Certificate of Title (were
issued in the name of Maria Cano, subject to reserva troncal in
favor of Eustaquia Guerrero. In October 1955, counsel for the
reserve (reservatorio) Guerrero filed a motion with the Cadastral
Court, alleging the death of the original registered owner and
reservista, Maria Cano, on September 8, 1955, and praying that
the original Certificate of Title be ordered cancelled and a new one
issued in favor of Guerrero; and that the Sheriff be ordered to place
her in possession of the property. The motion was opposed by
Jose and Teotimo Fernandez, sons of the reservista Maria Cano,
who contended that the application and operation of the reserva
troncal should be ventilated in an ordinary contentious proceeding,
and that the Registration Court did not have jurisdiction to grant the
motion.

The lower court granted the petition for the issuance of a new
certificate, for the reason that the death of the reservista vested the
ownership of the property in the petitioner as the sole reservatorio
troncal.

The oppositors, heirs of the reservista Maria Cano appealed,

insisting that the ownership of the reservatorio can not be decreed
in a mere proceeding but requires a judicial administration
proceedings, wherein the rights of Guerrero, as the reservatorio
entitled to the reservable property, are to be declared. In this
connection, appellants argue that the reversion in favor of the
reservatorio requires the declaration of the existence of the
following facts:

(1) The property was received by a descendant by gratuitous title

from an ascendant or from a brother or sister;

(2) Said descendant dies without issue;

(3) The property is inherited by another ascendant by operation of

law; and
(4) The existence of relatives within the third degree belonging the
line from which said property came.

Issue:
Whether or not the contention of the oppositors was correct

Held:
No. The requisites enumerated by appellants have already
been declared to exist by the decree of registration wherein the
rights of the appellee as reservatario troncal were expressly
recognized. It is evident that Lot No. 1799 was acquired by the
Appellant Maria Cano by inheritance from her deceased daughter,
Lourdes Guerrero who, in turn, inherited the same from her father
Evaristo Guerrero and, hence, falls squarely under the provisions
of Article 891 of the Civil Code; and that each and everyone of the
private oppositors are within the third degree of consaguinity of the
decedent Evaristo Guerrero, and who belonging to the same line
from which the property came.

It appears however, that with the exception of Eustaquia Guerrero,

who is the only living daughter of the decedent Evaristo Guerrero,
by his former marriage, all the other oppositors are grandchildren
of the said Evaristo Guerrero by his former marriages. Eustaquia
Guerrero, being the nearest of kin, excludes all the other private
oppositors, whose decree of relationship to the decedent is
remoter.

This decree having become final, all persons (appellees included)

are bared thereby from contesting the existence of the constituent
elements of the reserva. The only requisites for the passing of the
title from the reservista to the appellee are: (1) the death of the
reservista; and (2) the fact that the reservatario has survived the
reservista. Both facts are present in this case.

The contention that an intestacy proceeding is still necessary rests

upon the assumption that the reservatario will succeed in, or
inherit, the reservable property from the reservista. This is not true.
The reservatario is not the reservista's successor mortis causa nor
is the reservable property part of the reservista's estate; the
reservatario receives the property as a conditional heir of the
descendant ( prepositus), said property merely reverting to the line
of origin from which it had temporarily and accidentally strayed
during the reservista's lifetime.

It is a consequence of these principles that upon the death of the

reservista, the reservatario nearest to the prepositus (the appellee
in this case) becomes, automatically and by operation of law, the
owner of the reservable property. As already stated, that
property is no part of the estate of the reservista, and does
not even answer for the debts of the latter. Hence, its
acquisition by the reservatario may be entered in the property
records without necessity of estate proceedings, since the basic
requisites therefor appear of record. It is equally well settled that
the reservable property can not be transmitted by a reservista to
her or his own successors mortis causa,(like appellants herein) so
long as a reservatario within the third degree from the prepositus
and belonging to the line whence the property came, is in
existence when the reservista dies.

The rights of the reservataria Eustaquia Guerrero have been

expressly recognized, and it is nowhere claimed that there are
other reservatarios of equal or nearer degree. It is thus apparent
that the heirs of the reservista are merely endeavoring to prolong
their enjoyment of the reservable property to the detriment of the
party lawfully entitled thereto.
Gonzales vs Legarda

GONZALES VS. CFI MANILA

FACTS:
Benito Legarda y De la Paz died on June 17, 1933. He was
survived by his widow, Filomena Races Vda. de Legarda, and their
seven children: four daughters named Beatriz, Rosario, Teresa and
Filomena and three sons named Benito, Alejandro and Jose. In
1943 one of the daughters, Filomena, died intestate and without
any issue. Her sole heiress was her mother, Filomena Races Vda.
de Legarda. Mrs. Legarda executed on May 12, 1947 an affidavit
adjudicating extrajudicially to herself the properties which she
inherited from her deceased daughter, Filomena Legarda. The said
properties consist mostly of real properties. Mrs. Legarda on
March 6, 1953 executed two handwritten Identical documents
wherein she disposed of the properties, which she inherited from
her daughter, in favor of the children of her sons, Benito, Alejandro
and Jose (sixteen grandchildren in all). Mrs. Legarda died on
September 22, 1967. In the testate proceeding, Beatriz Legarda
Gonzales, a daughter of the testatrix, filed on May 20, 1968 a
motion to exclude from the inventory of her mother's estate the
properties which she inherited from her deceased daughter,
Filomena, on the ground that said properties are reservable
properties which should be inherited by Filomena Legarda's three
sisters and three brothers and not by the children of Benito,
Alejandro and Jose, all surnamed Legarda. LOWER COURT- Her
will was admitted to probate as a holographic will in the order dated
July 16, 1968 of the Court of First Instance of Manila in Special
Proceeding No. 70878, Testate Estate of Filomena Races Vda. de
Legarda. The decree of probate was affirmed by the Court of
Appeals in Legarda vs. Gonzales, CA-G.R. No. 43480-R, July
30,1976.
ISSUE:

1.) won the disputed properties are reservable properties under

article 891 of the Civil Code, formerly article 811, and whether
Filomena Races Vda. de Legarda could dispose of them in her will
in favor of her grandchildren to the exclusion of her six children.
2.) Persons Involved

HELD:

1.) No. We hold that Mrs. Legarda could not convey in her
holographic will to her sixteen grandchildren the reservable
properties which she had inherited from her daughter Filomena
because the reservable properties did not form part of her estate
(Cabardo vs. Villanueva, 44 Phil. 186, 191). The reservor cannot
make a disposition mortis causa of the reservable properties as
long as the reservees survived the reservor. As repeatedly held in
the Cano and Padura cases, the reservees inherit the reservable
properties from the prepositus, not from the reservor. Article 891
clearly indicates that the reservable properties should be inherited
by all the nearest relatives within the third degree from the
prepositus who in this case are the six children of Mrs. Legarda.
She could not select the reservees to whom the reservable
property should be given and deprive the other reservees of their
share therein. To allow the reservor in this case to make a
testamentary disposition of the reservable properties in favor of the
reservees in the third degree and, consequently, to ignore the
reservees in the second degree would be a glaring violation of
article 891. That testamentary disposition cannot be allowed. We
have stated earlier that this case is governed by the doctrine of
Florentino vs. Florentino, 40 Phil. 480, a similar case, where it was
ruled: Reservable property left, through a will or otherwise, by the
death of ascendant (reservista) together with his own property in
favor of another of his descendants as forced heir, forms no part of
the latter's lawful inheritance nor of the legitime, for the reason
that, as said property continued to be reservable, the heir receiving
the same as an inheritance from his ascendant has the strict
obligation of its delivery to the relatives, within the third degree, of
the predecessor in interest (prepositus), without prejudicing the
right of the heir to an aliquot part of the property, if he has at the
same time the right of a reservatario (reserves).

2.) The persons involved in reserve troncal are (1) the ascendant
or brother or sister from whom the property was received by the
descendant by lucrative or gratuitous title, (2) the descendant or
prepositus (prepositus) who received the property, (3) the reservor
(reservista) the other ascendant who obtained the property from
the (prepositus) by operation of law and (4) the reserves
(reservatario) who is within the third degree from the prepositus
and who belongs to the (line o tronco) from which the property
came and for whom the property should be reserved by the
reservor.

Herrera vs. Quezon City Board of Assessment Appeals

Facts:
The Director of Bureau of Hospitals authorized the petitioners
to establish and operate the St. Catherines Hospital. Petitioners
sent a letter to the QC Assessor requesting exemption from
payment of real estate tax on the lot, building and other
improvement comprising the hospital on the ground that it was
established for charitable and humanitarian purposes, not for
commercial gain. Exemption was granted for the years 1953 to
1955.Subsequently, the QC Assessor notified the petitioners that
the said properties were reclassified from exempt to taxable, and
assessed them for real property taxes. Petitioner appealed the
assessment to the respondent, which affirmed the decision of the
Assessor.

Issue:
Whether or not the lot, building and other improvements
occupied by the St.Catherine Hospital are exempt from the real
property tax.

Ruling:
In this case, the building involved in this case is principally
used as a hospital. It is used mainly as a surgical and orthopedic
hospital. The hospital admits both charity and pay patients.
Petitioners also operate within the premises of the hospital a
school of midwifery wherein the students therein are charged a
matriculation. The students practice both in St. Catherines and St.
Marys Hospital, the latter also owned by petitioners. A separate
set of accounting books is maintained by the school for midwifery
distinct from that kept by the hospital. It must be noted that of the
32 beds in the hospital, 20 are for charity patients. However, the
income realized from pay patients is spent for improvement of the
charity wards. The admission of pay patients does not detract from
the charitable character of a hospital, if all its funds exclusively to
the maintenance of the institution as a public charity. Where
rendering charity is its primary object, and the funds derived from
payments made by patients able to pay are devoted to the
benevolent purposes of the institution, the mere fact that a profit
has been made will not deprive the hospital of its benevolent
character. Moreover, the exemption in favor of property used
exclusively for charitable or educational purposes is not limited to
property actually indispensable therefore but extends to facilities
which are incidental to and reasonably necessary for the
accomplishment of the said purposes, such as, in the case of
hospitals, "a school for training nurses, a nurses' home, property
use to provide housing facilities for interns, resident doctors,
superintendents, and other members of the hospital staff, and
recreational facilities for student nurses, interns and residents".
The St. Catherine's Hospital is, therefore, a charitable institution,
and the fact that it admits pay-patients does not bar it from claiming
that it is devoted exclusively to benevolent purposes, it being
admitted that the income derived from pay-patients is devoted to
the improvement of the charity wards. The existence of
"St.Catherine's School of Midwifery" does not, and cannot, affect
the exemption to which St. Catherine's Hospital is entitled under
our fundamental law.

CIR vs Bishop of the Missionary District

G.R. No. L-19445 August 31, 1965

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs.
BISHOP OF THE MISSIONARY DISTRICT OF THE PHILIPPINE
ISLANDS OF THE PROTESTANT EPISCOPAL CHURCH IN THE
U.S.A. and THE COURT OF TAX APPEALS, respondents.

The following requisites must concur in order that a taxpayer may

claim exemption under the law (1) the imported articles must have
been donated; (2) the donee must be a duly incorporated or
established international civic organization, religious or charitable
society, or institution for civic religious or charitable purposes; and
(3) the articles so imported must have been donated for the use of
the organization, society or institution or for free distribution and
not for barter, sale or hire.

Facts:
Respondent Bishop is a corporation sole duly registered with
the Securities and Exchange Commission. He is in charge of the
administration of the temporalities and the management of the
estates and properties in the Philippines of the Domestic and
Foreign Missionary Society of the Protestant Episcopal Church in
the United States (Missionary Society). On the other hand, the
Missionary District of the Philippine Islands of the Protestant
Episcopal Church of the U.S.A. (Missionary District) is a duly
incorporated and established religious society. It owns and
operates the St. Luke's Hospital in Quezon City, the Brent Hospital
in Zamboanga City and the St. Stephen's High School in Manila.
On different dates in 1957, 1958 and 1959, the Missionary
District in the Philippines received from the Missionary Society in
the United States various shipments of materials, supplies,
equipment and other articles intended for use in the construction
and operation of the new St. Luke's Hospital in Quezon City and
the Brent Hospital and St. Stephen's High School. The Missionary
District also received from a certain William Minnis of Canada a
stove for the use of the Brent Hospital. On these shipments, the
Commissioner of Internal Revenue levied and collected the total
amount of P118,847 as compensating tax.
The Bishop of the Missionary District filed claims for refund
of the amount he had paid on the ground that under Republic Act
No. 1916, the materials and articles received by him were exempt
from the payment of compensating tax. As the 2 year period for
recovery of tax was about to expire, the Bishop of the Missionary
District filed a petition for review in the Court of Tax Appeals,
without awaiting action on his claim for refund. Subsequently, he
also filed two supplemental petitions for review covering other
shipments received by him and on which he had paid
compensating taxes.
The Commissioner denied respondent's claim for refund on
the ground that St. Luke's Hospital was not a charitable institution
and, therefore, was not exempt under the law. After trial, the Tax
Court rendered a decision holding the shipments exempt from
taxation ordering the petitioner to refund to the respondent the
amount of P118,847. It denied a motion for reconsideration of its
decision, prompting petitioner to interpose this appeal.
Issue:

w/n petitioner (as a charitable institution) is entitled to refund?

Held: YES. Decision affirmed.

This Court has already held that the following

requisites must concur in order that a taxpayer may claim
exemption under the law (1) the imported articles must have been
donated; (2) the donee must be a duly incorporated or established
international civic organization, religious or charitable society, or
institution for civic religious or charitable purposes; and (3) the
articles so imported must have been donated for the use of the
organization, society or institution or for free distribution and not for
barter, sale or hire.
In this appeal, the petitioner contends that the importations in
question cannot be considered "donations" because the
Missionary Society, which made the shipments, and the Missionary
District in the Philippines are not different persons but rather are
one and the same, the latter being a mere branch of the former. By
stipulation of the parties, the respondent Bishop is admitted to be a
corporation sole duly registered with the Securities and Exchange
Commission and that the Missionary District is a "duly incorporated
and established religious society." They are, therefore, entities
separate and distinct from the Missionary Society whose address
New York 10, U.S.A. The fact that the Missionary District, of which
respondent is the Bishop, is a branch of the Missionary Society is
of no moment. For that matter, so is the Roman Catholic Church in
the Philippines a branch of the Universal Roman Catholic
Apostolic Church, but it is a branch only in religious matters, in
matters of faith and dogma. In other respects, it is independent.
 Petitioner's other point is that St. Luke's Hospital is not a
charitable institution considering that it admits paying patients.
Indeed, it was on this ground that petitioner denied respondent's
claim for refund. It is argued that pursuant to the last proviso of
Republic Act No. 1916, the Secretary of Finance issued
Department Order No. 18 on October 20, 1958, stating that
Hospitals that admit pay patients and charity patients ... are not
charitable institutions for purposes of Republic Act No 1916.
Again, it should be enough to point out that the admission of
pay patients does not detract from the charitable character of a
hospital, if, as in the case of St. Luke's Hospital, its funds are
devoted exclusively to the Maintenance of the institution. The
Secretary of Finance cannot limit or otherwise qualify the
enjoyment of this exemption granted under Republic Act No. 1916
in implementing the law.

Abello, Concepcion, Regala and Cruz vs CIR

Abello v. CIRG.R. No. 120721 February 23, 2005

Topics: gift not defined in the Tax Code Civil Code definition on
donation applies; election contributions are subject to gift tax
they are not exempt even if such transfers are with intentions,
motives or purpose

Facts:
During the 1987 national elections, petitioners, who are
partners in the Angara, Abello, Concepcion, Regala and Cruz
(ACCRA) law firm, contributed P882,661.31 each to the campaign
funds of Senator Edgardo Angara, then running for the Senate.
BIR assessed each of the petitioners P263,032.66 for their
contributions. Petitioners questioned the assessment to the BIR,
claiming that political or electoral contributions are not considered
gifts under the NIRC so they are not liable for donors tax. The
claim for exemption was denied by the Commissioner. The CTA
ruled in favor of the petitioners, but such ruling was overturned by
the CA, thus this petition for review.

Issue:
Whether or not electoral contributions are subject to donors
tax.

Held:
Yes, they are. The NIRC does not define transfer of property
by gift. However, Article 18 of the Civil Code, states: In matters
which are governed by the Code of Commerce and special laws,
their deficiency shall be supplied by the provisions of this Code.
Thus, reference may be made to the definition of a donation in the
Civil Code. Article 725 of said Code defines donation as: . . . an
act of liberality whereby a person disposes gratuitously of a thing
or right in favor of another, who accepts it.Donation has the
following elements: (a) the reduction of the patrimony of the donor;
(b) the increase in the patrimony of the donee; and, (c) the intent to
do an act of liberality or animus donandi.The present case falls
squarely within the definition of a donation. Petitioners each gave
P882,661.31 to the campaign funds of Senator Edgardo Angara,
without any material consideration. All three elements of a
donation are present. The patrimony of the four petitioners were
reduced by P882,661.31 each. Senator Angaras patrimony
correspondingly increased by P3,530,645.24. There was intent to
do an act of liberality or animus donandi was present since each of
the petitioners gave their contributions without any consideration.
Taken together with the Civil Code definition of donation, Section
91 of the NIRC is clear and unambiguous, thereby leaving no room
for construction.Since animus donandi or the intention to do an act
of liberality is an essential element of a donation, petitioners argue
thatit is important to look into the intention of the giver to determine
if a political contribution is a gift. Petitioners argument is not
tenable. First of all, donative intent is a creature of the mind. It
cannot be perceived except by the material and tangible acts which
manifest its presence. This being the case, donative intent is
presumed present when one gives a partof ones patrimony to
another without consideration. Second, donative intent is not
negated when the person donating has other intentions, motives or
purposes which do not contradict donative intent. This Court is not
convinced that since the purpose of the contribution was to help
elect a candidate, there was no donative intent. Petitioners
contribution of money without any material consideration evinces
animus donandi. Petitioners claim that since the purpose of
electoral contributions is to influence the results of the elections,
donative intent is not present. They claim that the purpose of
electoral contributions is brought on by the desire of the giver to
influence the result of an election by supporting candidates who
would influence the shaping of government policies that would
promote the general welfare and economic well-being of the
electorate, including the giver himself. Petitioners attempt to place
the barrier of mutual exclusivity between donative intent and the
purpose of political contributions. This Court reiterates that
donative intent is not negated by the presence of other intentions,
motives or purposes which do not contradict donative intent.
Petitioners attempt is strained. The fact that petitioners will
somehow in the future benefit from the election of the candidate to
whom they contribute, in no way amounts to a valuable material
consideration so as to remove political contributions from the
purview of a donation. Senator Angara was under no obligation to
benefit the petitioners. The proper performance of his duties as a
legislator is his obligation as an elected public servant of the
Filipino people and not a consideration for the political
contributions he received. In fact, as a public servant, he may even
be called to enact laws that are contrary to the interests of his
benefactors, for the benefit of the greater good.
Pirovano vs CIR

FACTS:

De la Rama Steamship Co. insured the life of Enrico

Pirovano, who was then its President and General Manager until
the time of his death. The Company then received the total sum of
P643,000.00 as proceeds of the said life insurance policies. The
Company renounced all its rights on the money in favor of the
decendent's children.

After a case that marred Estefania Pirovano, the guardian and the
Company (see Pirovano vs. De la Rama Steamship Co., 96 Phil.
335.), the Company paid in favor of the children.

The CIR then assessed donees' gift tax against Pirovano and
donor's tax against the Company. Pirovano contested with the CIR
which she lost and thus appealed with the CTA.

The CTA held that donees' gift tax were correctly assessed.

ISSUE:
Whether Pirovano should pay the donees' gift tax.

RULING:

YES. Pirovano contends that the Court itself declared that

the donation was renumenatory and not simple and it was made
for a full and adequate compensation for the valuable services by
decedent to the Company; hence, the donation does not constitute
a taxable gift under the provisions of Section 108 of the National
Internal Revenue Code (old law).
The Court states that it is a donation; that the consideration for the
donation was, therefore, the company's gratitude for his services,
and not the services themselves and whether the donation was
simple or renumenatory, it was still a gift taxable under the law.

Lladoc vs Commissioner of Internal Revenue

Case: REV. FR. CASIMIRO LLADOC v. CIR and CTA (14 SCRA
202)Date: June 16, 1965Ponente: J. Paredes

Facts:
In 1957, the M.B. Estate, Inc. in Bacolod City donated
P10,000 in case to Rev. Fr. Crispin Ruiz, the then parish priest of
Victorias, Negros Occidental and the predecessor of Rev. Fr.
Casimiro Lladoc, for the construction of a new Catholic Church.
The total amount was actually spent for the purpose intended. On
March 1958, M.B. Estate filed a donors gift tax return.
Subsequently, on April 1960, the CIR issued an assessment for
donees gift tax in the amount of P1,370 including surcharges,
interest of 1% monthly from May 1958 toJ une 1960 and the
compromise for the late filing of the return against the Catholic
Parish of Victorias, Negros Occidental of which Lladoc was a
priest. Lladoc protested and moved to reconsider but it was denied.
He then appealed to the CTA, in his petition for review, he claimed
that at the time of the donation, he was not the parish priest, thus,
he is not liable. Moreover, he asserted that the assessment of the
gift tax, even against the Roman Catholic Church, would not be
valid, for such would be a clear violation of the Constitution. The
CTA ruled in favor of the CIR. Hence, the present petition.

Issue:
WON donees gift tax should be paid

Held:
Yes. Ratio:Section 22 (3), Art. VI of the Constitution of the
Philippines, exempts from taxation cemeteries, churches and
parsonages or convents, appurtenant thereto, and all lands,
buildings, and improvements used exclusively for religious
purposes. The exemption is only from the payment of taxes
assessed on such properties enumerated, as property taxes, as
contra distinguished from excise taxes. In the present case, what
the Collector assessed was a donee's gift tax; the assessment was
not on the properties themselves. It did not rest upon general
ownership; it was an excise upon the use made of the properties,
upon the exercise of the privilege of receiving the properties.
Manifestly, gift tax is not within the exempting provisions of the
section just mentioned. A gift tax is not a property tax, but an
excise tax imposed on the transfer of property by way of gift inter
vivos , the imposition of which on property used exclusively for
religious purposes, does not constitute an impairment of the
Constitution. As well observed by the learned respondent Court,
the phrase "exempt from taxation," as employed in the Constitution
should not be interpreted to mean exemption from all kinds of
taxes. And there being no clear, positive or express grant of such
privilege by law, in favor of Lladoc, the exemption herein must be
denied. However, the Court noted the merit of Lladocs claim, and
held as liable the Head of Diocese for being the real party in
interest instead of Lladoc who was held to be not personally liable;
the former manifested that it was submitting himself to the
jurisdiction and orders of the Court and he presented Lladocs
brief, by reference, as his own and for all purposes.

Philam Life vs Secretary of Finance

Philam Life sold its shares in Philam Care Health Systems to STI
Investments Inc., the highest bidder. After the sale was completed,
Philam life applied for a tax clearance and was informed by BIR
that there is a need to secure a BIR Ruling due to a potential
donors tax liability on the sold shares.

ISSUE on DONORS TAX:

W/N the sales of shares sold for less than an adequate
consideration be subject to donors tax?

PETITIONERS CONTENTION:
The transaction cannot attract donors tax liability since there was
no donative intent and, ergo, no taxable donation, citing BIR Ruling
[DA-(DT-065) 715-09] dated November 27, 2009; that the shares
were sold at their actual fair market value and at arms length; that
as long as the transaction conducted is at arms lengthsuch that
a bonafide business arrangement of the dealings is done in the
ordinary course of businessa sale for less than an adequate
consideration is not subject to donors tax; and that donors tax
does not apply to sale of shares sold in an open bidding process.

CIR DENYING THE REQUEST:

Through BIR Ruling No. 015-12. As determined by the
Commissioner, the selling price of the shares thus sold was lower
than their book value based on the financial statements of Philam
Care as of the end of 2008. The Commissioner held donors tax
became imposable on the price difference pursuant to Sec. 100 of
the National Internal Revenue Code (NIRC):

SEC. 100. Transfer for Less Than Adequate and full Consideration.
- Where property, other than real property referred to in Section
24(D), is transferred for less than an adequate and full
consideration in money or moneys worth, then the amount by
which the fair market value of the property exceeded the value of
the consideration shall, for the purpose of the tax imposed by this
Chapter, be deemed a gift, and shall be included in computing the
amount of gifts made during the calendar year.
RULING:
The price difference is subject to donors tax.

Petitioners substantive arguments are unavailing. The absence of

donative intent, if that be the case, does not exempt the sales of
stock transaction from donors tax since Sec. 100 of the NIRC
categorically states that the amount by which the fair market value
of the property exceeded the value of the consideration shall be
deemed a gift. Thus, even if there is no actual donation, the
difference in price is considered a donation by fiction of law.

Moreover, Sec. 7(c.2.2) of RR 06-08 does not alter Sec. 100 of the
NIRC but merely sets the parameters for determining the fair
market value of a sale of stocks. Such issuance was made
pursuant to the Commissioners power to interpret tax laws and to
promulgate rules and regulations for their implementation.

Lastly, petitioner is mistaken in stating that RMC 25-11, having

been issued after the sale, was being applied retroactively in
contravention to Sec. 246 of the NIRC.26 Instead, it merely called
for the strict application of Sec. 100, which was already in force the
moment the NIRC was enacted.