The Philippine American Life and General Insurance Company vs.

The Secretary of Finance and the CIR

G.R. No. 210987, 24 November 2014

FACTS:
Petitioner Philamlife offered to sell its shareholdings in PhilamCare through
competitive bidding. Thus, on September 24, 2009, petitioner's Class A
shares were sold to STI Investments, Inc., who emerged as the highest
bidder.
After the sale was completed, Philamlife filed an application for a certificate
authorizing registration/tax clearance with the Bureau of Internal Revenue
(BIR) to facilitate the transfer of the shares. Later, petitioner was informed
that it needed to secure a BIR ruling in connection with its application due to
potential donor’s tax liability. In compliance, petitioner, requested a ruling
contending in its request that the transaction cannot attract donor’s tax
liability since there was no donative intent and, ergo, no taxable donation.
Respondent Commissioner on Internal Revenue denied Philamlife’s request
since the selling price of the shares thus sold was lower than their book
value, donor’s tax became imposable on the price difference pursuant to
Sec. 100 of the National Internal Revenue Code (NIRC).

ISSUE:
W/N the sales of shares sold for less than an adequate consideration be
subject to donor’s tax?

HELD:
Yes. The absence of donative intent does not exempt the sales of stock
transaction from donor’s 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.