[G.R. No. 111904.

October 5, 2000]

SPS. AGRIPINO GESTOPA and ISABEL SILARIO GESTOPA, petitioners, vs. COURT OF APPEALS and
MERCEDES DANLAG y PILAPIL, respondents.

DECISION

QUISUMBING, J.:

This petition for review,[1] under Rule 45 of the Rules of Court, assails the decision[2]of the Court of
Appeals dated August 31, 1993, in CA-G.R. CV No. 38266, which reversed the judgment[3] of the Regional
Trial Court of Cebu City, Branch 5.

The facts, as culled from the records, are as follows:

Spouses Diego and Catalina Danlag were the owners of six parcels of unregistered lands. They
executed three deeds of donation mortis causa, two of which are dated March 4, 1965 and another dated
October 13, 1966, in favor of private respondent Mercedes Danlag-Pilapil.[4] The first deed pertained to
parcels 1 & 2 with Tax Declaration Nos. 11345 and 11347, respectively. The second deed pertained to
parcel 3, with TD No. 018613. The last deed pertained to parcel 4 with TD No. 016821. All deeds contained
the reservation of the rights of the donors (1) to amend, cancel or revoke the donation during their
lifetime, and (2) to sell, mortgage, or encumber the properties donated during the donors' lifetime, if
deemed necessary.

On January 16, 1973, Diego Danlag, with the consent of his wife, Catalina Danlag, executed a deed of
donation inter vivos[5] covering the aforementioned parcels of land plus two other parcels with TD Nos.
11351 and 11343, respectively, again in favor of private respondent Mercedes. This contained two
conditions, that (1) the Danlag spouses shall continue to enjoy the fruits of the land during their lifetime,
and that (2) the donee can not sell or dispose of the land during the lifetime of the said spouses, without
their prior consent and approval. Mercedes caused the transfer of the parcels' tax declaration to her name
and paid the taxes on them.

On June 28, 1979 and August 21, 1979, Diego and Catalina Danlag sold parcels 3 and 4 to herein
petitioners, Mr. and Mrs. Agripino Gestopa. On September 29, 1979, the Danlags executed a deed of
revocation[6]recovering the six parcels of land subject of the aforecited deed of donation inter vivos.

On March 1, 1983, Mercedes Pilapil (herein private respondent) filed with the RTC a petition against
the Gestopas and the Danlags, for quieting of title[7] over the above parcels of land.She alleged that she
was an illegitimate daughter of Diego Danlag; that she lived and rendered incalculable beneficial services
to Diego and his mother, Maura Danlag, when the latter was still alive. In recognition of the services she
rendered, Diego executed a Deed of Donation on March 20, 1973, conveying to her the six (6) parcels of
land. She accepted the donation in the same instrument, openly and publicly exercised rights of
ownership over the donated properties, and caused the transfer of the tax declarations to her
name. Through machination, intimidation and undue influence, Diego persuaded the husband of
Mercedes, Eulalio Pilapil, to buy two of the six parcels covered by the deed of donation. Said
donation inter vivos was coupled with conditions and, according to Mercedes, since its perfection, she
had complied with all of them; that she had not been guilty of any act of ingratitude; and that respondent
Diego had no legal basis in revoking the subject donation and then in selling the two parcels of land to the
Gestopas.
 In their opposition, the Gestopas and the Danlags averred that the deed of donation dated January
16, 1973 was null and void because it was obtained by Mercedes through machinations and undue
influence. Even assuming it was validly executed, the intention was for the donation to take effect upon
the death of the donor. Further, the donation was void for it left the donor, Diego Danlag, without any
property at all.

On December 27, 1991, the trial court rendered its decision, thus:

"WHEREFORE, the foregoing considered, the Court hereby renders judgment in favor of the defendants
and against the plaintiff:

1. Declaring the Donations Mortis Causa and Inter Vivos as revoked, and, therefore, has (sic) no
legal effect and force of law.

2. Declaring Diego Danlag the absolute and exclusive owner of the six (6) parcels of land
mentioned in the Deed of revocation (Exh. P-plaintiff, Exh. 6-defendant Diego Danlag).

3. Declaring the Deeds of Sale executed by Diego Danlag in favor of spouses Agripino Gestopa
and Isabel Gestopa dated June 28, 1979 (Exh. S-plaintiff; Exh. 18-defendant); Deed of Sale
dated December 18, 1979 (Exh. T plaintiff; Exh. 9-defendant); Deed of Sale dated September
14, 1979 (Exh. 8); Deed of Sale dated June 30, 1975 (Exh. U); Deed of Sale dated March 13,
1978 (Exh. X) as valid and enforceable duly executed in accordance with the formalities
required by law.

4. Ordering all tax declaration issued in the name of Mercedes Danlag Y Pilapil covering the
parcel of land donated cancelled and further restoring all the tax declarations previously
cancelled, except parcels nos. 1 and 5 described, in the Deed of Donation Inter Vivos (Exh.
"1") and Deed of Sale (Exh. "2") executed by defendant in favor of plaintiff and her husband.

[5.] With respect to the contract of sale of abovestated parcels of land, vendor Diego Danlag and
spouse or their estate have the alternative remedies of demanding the balance of the agreed
price with legal interest, or rescission of the contract of sale.

SO ORDERED."[8]

In rendering the above decision, the trial court found that the reservation clause in all the deeds of
donation indicated that Diego Danlag did not make any donation; that the purchase by Mercedes of the
two parcels of land covered by the Deed of Donation Inter Vivos bolstered this conclusion; that Mercedes
failed to rebut the allegations of ingratitude she committed against Diego Danlag; and that Mercedes
committed fraud and machination in preparing all the deeds of donation without explaining to Diego
Danlag their contents.

Mercedes appealed to the Court of Appeals and argued that the trial court erred in (1) declaring the
donation dated January 16, 1973 as mortis causa and that the same was already revoked on the ground
of ingratitude; (2) finding that Mercedes purchased from Diego Danlag the two parcels of land already
covered by the above donation and that she was only able to pay three thousand pesos, out of the total
amount of twenty thousand pesos; (3) failing to declare that Mercedes was an acknowledged natural child
of Diego Danlag.
 On August 31, 1993, the appellate court reversed the trial court. It ruled:

"PREMISES CONSIDERED, the decision appealed from is REVERSED and a new judgment is hereby rendered
as follows:

1. Declaring the deed of donation inter vivos dated January 16, 1973 as not having been revoked and
consequently the same remains in full force and effect;

2. Declaring the Revocation of Donation dated June 4, 1979 to be null and void and therefore of no force
and effect;

3. Declaring Mercedes Danlag Pilapil as the absolute and exclusive owner of the six (6) parcels of land
specified in the above-cited deed of donation inter vivos;

4. Declaring the Deed of Sale executed by Diego Danlag in favor of spouses Agripino and Isabel Gestopa
dated June 28, 1979 (Exhibits S and 18), Deed of Sale dated December 18, 1979 (Exhibits T and 19), Deed
of Sale dated September 14, 1979 (Exhibit 8), Deed of Sale dated June 30, 1975 (Exhibit U), Deed of Sale
dated March 13, 1978 (Exhibit X) as well as the Deed of Sale in favor of Eulalio Danlag dated December
27, 1978 (Exhibit 2) not to have been validly executed;

5. Declaring the above-mentioned deeds of sale to be null and void and therefore of no force and effect;

6. Ordering spouses Agripino Gestopa and Isabel Silerio Gestopa to reconvey within thirty (30) days from
the finality of the instant judgment to Mercedes Danlag Pilapil the parcels of land above-specified,
regarding which titles have been subsequently fraudulently secured, namely those covered by O.C.T. T-
17836 and O.C.T. No. 17523.

7. Failing to do so, ordering the Branch Clerk of Court of the Regional Trial Court (Branch V) at Cebu City
to effect such reconveyance of the parcels of land covered by O.C.T. T-17836 and 17523.

SO ORDERED."[9]

The Court of Appeals held that the reservation by the donor of lifetime usufruct indicated that he
transferred to Mercedes the ownership over the donated properties; that the right to sell belonged to the
donee, and the donor's right referred to that of merely giving consent; that the donor changed his
intention by donating inter vivos properties already donated mortis causa; that the transfer to Mercedes'
name of the tax declarations pertaining to the donated properties implied that the donation was inter
vivos; and that Mercedes did not purchase two of the six parcels of land donated to her.

Hence, this instant petition for review filed by the Gestopa spouses, asserting that:

"THE HONORABLE COURT OF APPEALS, TWELFTH DIVISION, HAS GRAVELY ERRED IN REVERSING THE
DECISION OF THE COURT A QUO."[10]

Before us, petitioners allege that the appellate court overlooked the fact that the donor did not only
reserve the right to enjoy the fruits of the properties, but also prohibited the donee from selling or
disposing the land without the consent and approval of the Danlag spouses. This implied that the donor
still had control and ownership over the donated properties. Hence, the donation was post mortem.
 Crucial in resolving whether the donation was inter vivos or mortis causa is the determination of
whether the donor intended to transfer the ownership over the properties upon the execution of the
deed.[11]

In ascertaining the intention of the donor, all of the deed's provisions must be read together.[12] The
deed of donation dated January 16, 1973, in favor of Mercedes contained the following:

"That for and in consideration of the love and affection which the Donor inspires in the Donee and as an
act of liberality and generosity, the Donor hereby gives, donates, transfer and conveys by way of donation
unto the herein Donee, her heirs, assigns and successors, the above-described parcels of land;

That it is the condition of this donation that the Donor shall continue to enjoy all the fruits of the land
during his lifetime and that of his spouse and that the donee cannot sell or otherwise, dispose of the lands
without the prior consent and approval by the Donor and her spouse during their lifetime.

xxx

That for the same purpose as hereinbefore stated, the Donor further states that he has reserved for
himself sufficient properties in full ownership or in usufruct enough for his maintenance of a decent
livelihood in consonance with his standing in society.

That the Donee hereby accepts the donation and expresses her thanks and gratitude for the kindness and
generosity of the Donor."[13]

Note first that the granting clause shows that Diego donated the properties out of love and affection for
the donee. This is a mark of a donation inter vivos.[14] Second, the reservation of lifetime usufruct indicates
that the donor intended to transfer the naked ownership over the properties. As correctly posed by the
Court of Appeals, what was the need for such reservation if the donor and his spouse remained the owners
of the properties? Third, the donor reserved sufficient properties for his maintenance in accordance with
his standing in society, indicating that the donor intended to part with the six parcels of land.[15] Lastly,
the donee accepted the donation. In the case of Alejandro vs. Geraldez, 78 SCRA 245 (1977), we said that
an acceptance clause is a mark that the donation is inter vivos. Acceptance is a requirement for
donations inter vivos. Donations mortis causa, being in the form of a will, are not required to be accepted
by the donees during the donors' lifetime.

Consequently, the Court of Appeals did not err in concluding that the right to dispose of the
properties belonged to the donee. The donor's right to give consent was merely intended to protect his
usufructuary interests. In Alejandro, we ruled that a limitation on the right to sell during the donors'
lifetime implied that ownership had passed to the donees and donation was already effective during the
donors' lifetime.

The attending circumstances in the execution of the subject donation also demonstrated the real
intent of the donor to transfer the ownership over the subject properties upon its execution.[16] Prior to
the execution of donation inter vivos, the Danlag spouses already executed three donations mortis
causa. As correctly observed by the Court of Appeals, the Danlag spouses were aware of the difference
between the two donations. If they did not intend to donate inter vivos, they would not again donate the
four lots already donated mortis causa.Petitioners' counter argument that this proposition was erroneous
because six years after, the spouses changed their intention with the deed of revocation, is not only
disingenious but also fallacious. Petitioners cannot use the deed of revocation to show the spouses' intent
because its validity is one of the issues in this case.

Petitioners aver that Mercedes' tax declarations in her name can not be a basis in determining the
donor's intent. They claim that it is easy to get tax declarations from the government offices such that tax
declarations are not considered proofs of ownership. However, unless proven otherwise, there is a
presumption of regularity in the performance of official duties.[17] We find that petitioners did not
overcome this presumption of regularity in the issuance of the tax declarations. We also note that the
Court of Appeals did not refer to the tax declarations as proofs of ownership but only as evidence of the
intent by the donor to transfer ownership.

Petitioners assert that since private respondent purchased two of the six parcels of land from the
donor, she herself did not believe the donation was inter vivos. As aptly noted by the Court of Appeals,
however, it was private respondent's husband who purchased the two parcels of land.

As a rule, a finding of fact by the appellate court, especially when it is supported by evidence on
record, is binding on us.[18] On the alleged purchase by her husband of two parcels, it is reasonable to infer
that the purchase was without private respondent's consent. Purchase by her husband would make the
properties conjugal to her own disadvantage. That the purchase is against her self-interest, weighs
strongly in her favor and gives credence to her claim that her husband was manipulated and unduly
influenced to make the purchase, in the first place.

Was the revocation valid? A valid donation, once accepted, becomes irrevocable, except on account
of officiousness, failure by the donee to comply with the charges imposed in the donation, or
ingratitude.[19] The donor-spouses did not invoke any of these reasons in the deed of revocation. The deed
merely stated:

"WHEREAS, while the said donation was a donation Inter Vivos, our intention thereof is that of Mortis
Causa so as we could be sure that in case of our death, the above-described properties will be inherited
and/or succeeded by Mercedes Danlag de Pilapil; and that said intention is clearly shown in paragraph 3
of said donation to the effect that the Donee cannot dispose and/or sell the properties donated during
our life-time, and that we are the one enjoying all the fruits thereof."[20]

Petitioners cited Mercedes' vehemence in prohibiting the donor to gather coconut trees and her
filing of instant petition for quieting of title. There is nothing on record, however, showing that private
respondent prohibited the donors from gathering coconuts. Even assuming that Mercedes prevented the
donor from gathering coconuts, this could hardly be considered an act covered by Article 765 of the Civil
Code.[21] Nor does this Article cover respondent's filing of the petition for quieting of title, where she
merely asserted what she believed was her right under the law.

Finally, the records do not show that the donor-spouses instituted any action to revoke the donation
in accordance with Article 769 of the Civil Code.[22] Consequently, the supposed revocation on September
29, 1979, had no legal effect.

WHEREFORE, the instant petition for review is DENIED. The assailed decision of the Court of Appeals
dated August 31, 1993, is AFFIRMED.

Costs against petitioners.

 SO ORDERED.

G.R. No. 210987 November 24, 2014

THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, Petitioner,

vs.
THE SECRETARY OF FINANCE and THE COMMISSIONER OF INTERNAL REVENUE, Respondents.

DECISION

VELASCO, JR., J.:

Nature of the Case

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing and
seeking the reversal of the Resolutions of the Court of Appeals (CA) in CA-G.R. SP No. 127984, dated May
23, 20131 and January 21, 2014, which dismissed outright the petitioner's appeal from the Secretary of
Finance's review of BIR Ruling No. 015-122 for lack of jurisdiction.

The Facts

Petitioner The Philippine American Life and General Insurance Company (Philamlife) used to own 498,590
Class A shares in Philam Care Health Systems, Inc. (PhilamCare), representing 49.89% of the latter's
outstanding capital stock. In 2009, petitioner, in a bid to divest itself of its interests in the health
maintenance organization industry, offered to sell its shareholdings in PhilamCare through competitive
bidding. Thus, on September 24, 2009, petitioner's Class A shares were sold for USD 2,190,000, or PhP
104,259,330 based on the prevailing exchange rate at the time of the sale, to STI Investments, Inc., who
emerged as the highest bidder.3

After the sale was completed and the necessary documentary stamp and capital gains taxes were paid,
Philamlife filed an application for a certificate authorizing registration/tax clearance with the Bureau of
Internal Revenue (BIR) Large Taxpayers Service Division to facilitate the transfer of the shares. Months
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, on January 4, 2012, requested a ruling4 to
confirm that the sale was not subject to donor’s tax, pointing out, in its request, the following: that the
transaction cannot attract donor’s 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;5 that the shares were sold at
their actual fair market value and at arm’s length; that as long as the transaction conducted is at arm’s
length––such that a bona fide business arrangement of the dealings is done inthe ordinary course of
business––a sale for less than an adequate consideration is not subject to donor’s tax; and that donor’s
tax does not apply to saleof shares sold in an open bidding process.

On January 4, 2012, however, respondent Commissioner on Internal Revenue (Commissioner) denied

Philamlife’s 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 PhilamCare
as of the end of 2008.6 As such, the Commisioner held, donor’s tax became imposable on the price
difference pursuant to Sec. 100 of the National Internal Revenue Code (NIRC), viz:
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 money’s 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.

The afore-quoted provision, the Commissioner added, is implemented by Revenue Regulation 6-2008 (RR
6-2008), which provides:

SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT TRADED THROUGH A LOCAL STOCK
EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE,
AS AMENDED. —

xxxx

(c) Determination of Amount and Recognition of Gain or Loss –

(c.1) In the case of cash sale, the selling price shall be the consideration per deed of sale.

xxxx

(c.1.4) In case the fair market value of the shares of stock sold, bartered, or exchanged is greater than the
amount of money and/or fair market value of the property received, the excess of the fair market value
of the shares of stock sold, bartered or exchanged overthe amount of money and the fair market value of
the property, if any, received as consideration shall be deemed a gift subject to the donor’stax under
Section 100 of the Tax Code, as amended.

xxxx

(c.2) Definition of ‘fair market value’of Shares of Stock. – For purposes of this Section, ‘fair market value’
of the share of stock sold shall be:

xxxx

(c.2.2) In the case of shares of stock not listed and traded in the local stock exchanges, the book value of
the shares of stock as shown in the financial statements duly certified by an independent certified public
accountant nearest to the date of sale shall be the fair market value.

In view of the foregoing, the Commissioner ruled that the difference between the book value and the
selling price in the sales transaction is taxable donation subject to a 30% donor’s tax under Section 99(B)
of the NIRC.7Respondent Commissioner likewise held that BIR Ruling [DA-(DT-065) 715-09], on which
petitioner anchored its claim, has already been revoked by Revenue Memorandum Circular (RMC) No. 25-
2011.8

Aggrieved, petitioner requested respondent Secretary of Finance (Secretary) to review BIR Ruling No. 015-
12, but to no avail. For on November 26, 2012, respondent Secretary affirmed the Commissioner’s assailed
ruling in its entirety.9

Ruling of the Court of Appeals

Not contented with the adverse results, petitioner elevated the case to the CA via a petition for review
under Rule 43, assigning the following errors:10

A.

The Honorable Secretary of Finance gravely erred in not finding that the application of Section 7(c.2.2) of
RR 06-08 in the Assailed Ruling and RMC 25-11 is void insofar as it altersthe meaning and scope of Section
100 of the Tax Code.

B.

The Honorable Secretary of Finance gravely erred in finding that Section 100 of the Tax Code is applicable
tothe sale of the Sale of Shares.

1.

The Sale of Shares were sold at their fair market value and for fair and full consideration in money
or money’s worth.

2.

The sale of the Sale Shares is a bona fide business transaction without any donative intent and is
therefore beyond the ambit of Section 100 of the Tax Code.

3.

It is superfluous for the BIR to require an express provision for the exemption of the sale of the
Sale Shares from donor’s tax since Section 100 of the Tax Code does not explicitly subject the
transaction to donor’s tax.

C.

The Honorable Secretary of Finance gravely erred in failing to find that in the absence of any of the
grounds mentioned in Section 246 of the Tax Code, rules and regulations, rulings or circulars – such as
RMC 25-11 – cannot be given retroactive application to the prejudice of Philamlife.

On May 23, 2013, the CA issued the assailed Resolution dismissing the CA Petition, thusly:

WHEREFORE, the Petition for Review dated January 9, 2013 is DISMISSED for lack of jurisdiction.

SO ORDERED.

In disposing of the CA petition, the appellate court ratiocinated that it is the Court of Tax Appeals (CTA),
pursuant to Sec. 7(a)(1) of Republic Act No. 1125 (RA 1125),11 as amended, which has jurisdiction over the
issues raised. The outright dismissal, so the CA held, is predicated on the postulate that BIR Ruling No.
015-12 was issued in the exercise of the Commissioner’s power to interpret the NIRC and other tax laws.
Consequently, requesting for its review can be categorized as "other matters arising under the NIRC or
other laws administered by the BIR," which is under the jurisdiction of the CTA, not the CA.
Philamlife eventually sought reconsideration but the CA, in its equally assailed January 21, 2014
Resolution, maintained its earlier position. Hence, the instant recourse.

Issues

Stripped to the essentials, the petition raises the following issues in both procedure and substance:

1. Whether or not the CA erred in dismissing the CA Petition for lack of jurisdiction; and

2. Whether or not the price difference in petitioner’s adverted sale of shares in PhilamCare
attracts donor’s tax.

Procedural Arguments

a. Petitioner’s contentions

Insisting on the propriety of the interposed CA petition, Philamlife, while conceding that respondent
Commissioner issued BIR Ruling No. 015-12 in accordance with her authority to interpret tax laws, argued
nonetheless that such ruling is subject to review by the Secretary of Finance under Sec. 4 of the NIRC, to
wit:

SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. – The power to
interpret the provisions of this Code and other tax laws shall be under the exclusive and original
jurisdiction of the Commissioner, subject to review by the Secretary of Finance.

The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges,
penalties imposed in relation thereto, or other matters arising under this Code orother laws or portions
thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the
exclusive appellate jurisdiction of the Court of Tax Appeals. Petitioner postulates that there is a need to
differentiate the rulings promulgated by the respondent Commissioner relating to those rendered under
the first paragraph of Sec. 4 of the NIRC, which are appealable to the Secretary of Finance, from those
rendered under the second paragraph of Sec. 4 of the NIRC, which are subject to review on appeal with
the CTA.

This distinction, petitioner argues, is readily made apparent by Department Order No. 7-02,12 as
circularized by RMC No. 40-A-02.

Philamlife further averred that Sec.7 of RA 1125, as amended, does not find application in the case at bar
since it only governs appeals from the Commissioner’s rulings under the second paragraph and does not
encompass rulings from the Secretary of Finance in the exercise of his power of review under the first, as
what was elevated to the CA. It added that under RA 1125, as amended, the only decisions of the Secretary
appealable to the CTA are those rendered in customs cases elevated to him automatically under Section
2315 of the Tariff and Customs Code.13

There is, thus, a gap in the law when the NIRC, as couched, and RA 1125, as amended, failed to supply
where the rulings of the Secretary in its exercise of its power of review under Sec. 4 of the NIRC are
appealable to. This gap, petitioner submits, was remedied by British American Tobacco v.
Camacho14 wherein the Court ruled that where what is assailed is the validity or constitutionality of a law,
or a rule or regulation issued by the administrative agency, the regular courts have jurisdiction to pass
upon the same.

In sum, appeals questioning the decisions of the Secretary of Finance in the exercise of its power of review
under Sec. 4 of the NIRC are not within the CTA’s limited special jurisdiction and, according to petitioner,
are appealable to the CA via a Rule 43 petition for review.

b. Respondents’ contentions

Before the CA, respondents countered petitioner’s procedural arguments by claiming that even assuming
arguendo that the CTA does not have jurisdiction over the case, Philamlife, nevertheless,committed a fatal
error when it failed to appeal the Secretary of Finance’s ruling to the Office of the President (OP). As made
apparent by the rules, the Department of Finance is not among the agencies and quasi-judicial bodies
enumerated under Sec. 1, Rule 43 of the Rules of Court whose decisions and rulings are appealable
through a petition for review.15 This is in stark contrast to the OP’s specific mention under the same
provision, so respondents pointed out.

To further reinforce their argument, respondents cite the President’s power of review emanating from
his power of control as enshrined under Sec. 17 of Article VII of the Constitution, which reads:

Section 17.The President shall have control of all the executive departments, bureaus, and offices. He shall
ensure that the laws be faithfully executed.

The nature and extent of the President’s constitutionally granted power of control have beendefined in a
plethora of cases, most recently in Elma v. Jacobi,16 wherein it was held that:

x x x This power of control, which even Congress cannot limit, let alone withdraw, means the power of
the Chief Executive to review, alter, modify, nullify, or set aside what a subordinate, e.g., members of the
Cabinet and heads of line agencies, had done in the performance of their duties and to substitute the
judgment of the former for that of the latter.

In their Comment on the instant petition, however, respondents asseverate that the CA did not err in its
holding respecting the CTA’s jurisdiction over the controversy.

The Court’s Ruling

The petition is unmeritorious.

Reviews by the Secretary of Finance pursuant to Sec. 4 of the NIRC are appealable to the CTA

To recapitulate, three different, if not conflicting, positions as indicated below have been advanced by the
parties and by the CA as the proper remedy open for assailing respondents’ rulings:

1. Petitioners: The ruling of the Commissioner is subject to review by the Secretary under Sec. 4
of the NIRC, and that of the Secretary to the CA via Rule 43;

2. Respondents: The ruling of the Commissioner is subject to review by the Secretary under Sec.
4 of the NIRC, and that of the Secretary to the Office of the President before appealing to the CA
via a Rule 43 petition; and
 3. CA: The ruling of the Commissioner is subject to review by the CTA.

We now resolve.

Preliminarily, it bears stressing that there is no dispute that what is involved herein is the respondent
Commissioner’s exercise of power under the first paragraph of Sec. 4 of the NIRC––the power to interpret
tax laws. This, in fact, was recognized by the appellate court itself, but erroneously held that her action in
the exercise of such power is appealable directly to the CTA. As correctly pointed out by petitioner, Sec. 4
of the NIRC readily provides that the Commissioner’s power to interpret the provisions of this Code and
other tax laws is subject to review by the Secretary of Finance. The issue that now arises is this––where
does one seek immediate recourse from the adverse ruling of the Secretary of Finance in its exercise of
its power of review under Sec. 4?

Admittedly, there is no provision in law that expressly provides where exactly the ruling of the Secretary
of Finance under the adverted NIRC provision is appealable to. However, We find that Sec. 7(a)(1) of RA
1125, as amended, addresses the seeming gap in the law asit vests the CTA, albeit impliedly, with
jurisdiction over the CA petition as "other matters" arising under the NIRC or other laws administered by
the BIR. As stated:

Sec. 7. Jurisdiction.- The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of
internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under
the National Internal Revenue or other laws administered by the Bureau of Internal Revenue. (emphasis
supplied)

Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is,
nonetheless, sufficient enough to include appeals from the Secretary’s review under Sec. 4 of the NIRC.

It is axiomatic that laws should be given a reasonable interpretation which does not defeat the very
purpose for which they were passed.17 Courts should not follow the letter of a statute when to do so
would depart from the true intent of the legislature or would otherwise yield conclusions inconsistent
with the purpose of the act.18 This Court has, in many cases involving the construction of statutes,
cautioned against narrowly interpreting a statute as to defeat the purpose of the legislator, and rejected
the literal interpretation of statutes if todo so would lead to unjust or absurd results.19

Indeed, to leave undetermined the mode of appeal from the Secretary of Finance would be an injustice
to taxpayers prejudiced by his adverse rulings. To remedy this situation, Weimply from the purpose of RA
1125 and its amendatory laws that the CTA is the proper forum with which to institute the appeal. This is
not, and should not, in any way, be taken as a derogation of the power of the Office of President but
merely as recognition that matters calling for technical knowledge should be handled by the agency or
quasi-judicial body with specialization over the controversy. As the specialized quasi-judicial agency
mandated to adjudicate tax, customs, and assessment cases, there can be no other court of appellate
jurisdiction that can decide the issues raised inthe CA petition, which involves the tax treatment of the
shares of stocks sold. Petitioner, though, nextinvites attention to the ruling in Ursal v. Court of Tax
Appeals20 to argue against granting the CTA jurisdiction by implication, viz:
Republic Act No. 1125 creating the Court of Tax Appeals did not grant it blanket authority to decide any
and all tax disputes. Defining such special court’s jurisdiction, the Act necessarily limited its authority to
those matters enumerated therein. Inline with this idea we recently approved said court’s order rejecting
an appeal to it by Lopez & Sons from the decision of the Collector ofCustoms, because in our opinion its
jurisdiction extended only to a review of the decisions of the Commissioner of Customs, as provided bythe
statute — and not to decisions of the Collector of Customs. (Lopez & Sons vs. The Court of Tax Appeals,
100 Phil., 850, 53 Off. Gaz., [10] 3065).

xxxx

x x x Republic Act No. 1125 is a complete law by itself and expressly enumerates the matters which the
Court of Tax Appeals may consider; such enumeration excludes all others by implication. Expressio unius
est exclusio alterius.

Petitioner’s contention is untenable. Lest the ruling in Ursalbe taken out of context, but worse as a
precedent, it must be noted that the primary reason for the dismissal of the said case was that the
petitioner therein lacked the personality to file the suit with the CTA because he was not adversely
affected by a decision or ruling of the Collector of Internal Revenue, as was required under Sec. 11 of RA
1125.21 As held:

We share the view that the assessor had no personality to resort to the Court of Tax Appeals. The rulings
of the Board of Assessment Appeals did not "adversely affect" him. At most it was the City of Cebu that
had been adversely affected in the sense that it could not thereafter collect higher realty taxes from the
abovementioned property owners. His opinion, it is true had been overruled; but the overruling inflicted
no material damage upon him or his office. And the Court of Tax Appeals was not created to decide mere
conflicts of opinion between administrative officers or agencies. Imagine an income tax examiner
resorting to the Court of Tax Appeals whenever the Collector of Internal Revenue modifies, or lower his
assessment on the return of a tax payer!22

The appellate power of the CTA includes certiorari

Petitioner is quick to point out, however, that the grounds raised in its CA petition included the nullity of
Section 7(c.2.2) of RR 06-08 and RMC 25-11. In an attempt to divest the CTA jurisdiction over the
controversy, petitioner then cites British American Tobacco, wherein this Court has expounded on the
limited jurisdiction of the CTA in the following wise:

While the above statute confers on the CTA jurisdiction to resolve tax disputes in general, this does not
include cases where the constitutionality of a law or rule is challenged. Where what is assailed is the
validity or constitutionality of a law, or a rule or regulation issued by the administrative agency in the
performance of its quasi legislative function, the regular courts have jurisdiction to pass upon the same.
The determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the power to declare a law, treaty, international or
executive agreement, presidential decree, order, instruction, ordinance, or regulation inthe courts,
including the regional trial courts. This is within the scope of judicial power, which includes the authority
of the courts to determine inan appropriate action the validity of the acts of the political departments.
Judicial power includes the duty of the courts of justice to settle actual controversies involving rights which
are legally demandable and enforceable, and to determine whether or not there has been a grave abuse
of discretion amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of
the Government.23

Vis-a-vis British American Tobacco, it bears to stress what appears to be a contrasting ruling in Asia
International Auctioneers, Inc. v. Parayno, Jr., to wit:

Similarly, in CIR v. Leal, pursuant to Section 116 of Presidential Decree No. 1158 (The National Internal
Revenue Code, as amended) which states that "[d]ealers in securities shall pay a tax equivalent to six (6%)
per centum of their gross income. Lending investors shall pay a tax equivalent to five (5%) per cent, of
their gross income," the CIR issued Revenue Memorandum Order (RMO) No. 15-91 imposing 5% lending
investor’s tax on pawnshops based on their gross income and requiring all investigating units of the BIR
to investigate and assess the lending investor’s tax due from them. The issuance of RMO No. 15-91 was
an offshoot of the CIR’s finding that the pawnshop business is akin to that of "lending investors" as defined
in Section 157(u) of the Tax Code. Subsequently, the CIR issued RMC No. 43-91 subjecting pawn tickets to
documentary stamp tax. Respondent therein, Josefina Leal, owner and operator of Josefina’s Pawnshop,
asked for a reconsideration of both RMO No. 15-91 and RMC No. 43-91, but the same was denied by
petitioner CIR. Leal then filed a petition for prohibition with the RTC of San Mateo, Rizal, seeking to
prohibit petitioner CIR from implementing the revenue orders. The CIR, through the OSG, filed a motion
to dismiss on the ground of lack of jurisdiction. The RTC denied the motion. Petitioner filed a petition for
certiorari and prohibition with the CA which dismissed the petition "for lack of basis." In reversing the CA,
dissolving the Writ of Preliminary Injunction issued by the trial court and ordering the dismissal of the
case before the trial court, the Supreme Court held that "[t]he questioned RMO No. 15-91 and RMC No.
43-91 are actually rulings or opinions of the Commissioner implementing the Tax Code on the taxability
of pawnshops." They were issued pursuant to the CIR’s power under Section 245 of the Tax Code "to make
rulings or opinions in connection with the implementation of the provisions of internal revenue laws,
including ruling on the classification of articles of sales and similar purposes."The Court held that under
R.A. No. 1125 (An Act Creating the Court of Tax Appeals), as amended, such rulings of the CIR are
appealable to the CTA.

In the case at bar, the assailed revenue regulations and revenue memorandum circulars are actually
rulings or opinions of the CIR on the tax treatment of motor vehicles sold at public auction within the SSEZ
to implement Section 12 of R.A. No. 7227 which provides that "exportation or removal of goods from the
territory of the [SSEZ] to the other parts of the Philippine territory shall be subject to customs duties and
taxes under the Customs and Tariff Codeand other relevant tax laws of the Philippines." They were issued
pursuant to the power of the CIR under Section 4 of the National Internal Revenue Code x x x.24 (emphasis
added)

The respective teachings in British American Tobacco and Asia International Auctioneers, at first blush,
appear to bear no conflict––that when the validity or constitutionality of an administrative rule or
regulation is assailed, the regular courts have jurisdiction; and if what is assailed are rulings or opinions of
the Commissioner on tax treatments, jurisdiction over the controversy is lodged with the CTA. The
problem with the above postulates, however, is that they failed to take into consideration one crucial
point––a taxpayer can raise both issues simultaneously.

Petitioner avers that there is now a trend wherein both the CTA and the CA disclaim jurisdiction over tax
cases: on the one hand, mere prayer for the declaration of a tax measure’s unconstitutionality or invalidity
before the CTA can result in a petition’s outright dismissal, and on the other hand, the CA will likewise
dismiss the same petition should it find that the primary issue is not the tax measure’s validity but the
assessment or taxability of the transaction or subject involved. To illustrate this point, petitioner cites the
assailed Resolution, thusly: Admittedly, in British American Tobacco vs. Camacho, the Supreme Court has
ruled that the determination of whether a specific rule or set of rules issued by an administrative agency
contravenes the law or the constitution is within the jurisdiction of the regular courts, not the CTA.

xxxx

Petitioner essentially questions the CIR’s ruling that Petitioner’s sale of shares is a taxable donation under
Sec. 100 of the NIRC. The validity of Sec. 100 of the NIRC, Sec. 7 (C.2.2) and RMC 25-11 is merely
questioned incidentally since it was used by the CIR as bases for its unfavourable opinion. Clearly, the
Petition involves an issue on the taxability of the transaction rather than a direct attack on the
constitutionality of Sec. 100, Sec.7 (c.2.2.) of RR 06-08 and RMC 25-11. Thus, the instant Petition properly
pertains to the CTA under Sec. 7 of RA 9282.

As a result of the seemingly conflicting pronouncements, petitioner submits that taxpayers are now at a
quandary on what mode of appeal should be taken, to which court or agency it should be filed, and which
case law should be followed.

Petitioner’s above submission is specious.

In the recent case of City of Manila v. Grecia-Cuerdo,25 the Court en banc has ruled that the CTA now has
the power of certiorari in cases within its appellate jurisdiction. To elucidate:

The prevailing doctrine is that the authority to issue writs of certiorari involves the exercise of original
jurisdiction which must be expressly conferred by the Constitution or by law and cannot be implied from
the mere existence of appellate jurisdiction. Thus, x x x this Court has ruled against the jurisdiction of
courts or tribunals over petitions for certiorari on the ground that there is no law which expressly gives
these tribunals such power. Itmust be observed, however, that x x x these rulings pertain not to regular
courts but to tribunals exercising quasijudicial powers. With respect tothe Sandiganbayan, Republic Act
No. 8249 now provides that the special criminal court has exclusive original jurisdiction over petitions for
the issuance of the writs of mandamus, prohibition, certiorari, habeas corpus, injunctions, and other
ancillary writs and processes in aid of its appellate jurisdiction.

In the same manner, Section 5 (1), Article VIII of the 1987 Constitution grants power to the Supreme Court,
in the exercise of its original jurisdiction, to issue writs of certiorari, prohibition and mandamus. With
respect to the Court of Appeals, Section 9 (1) of Batas Pambansa Blg. 129 (BP 129) gives the appellate
court, also in the exercise of its original jurisdiction, the power to issue, among others, a writ of certiorari,
whether or not in aid of its appellate jurisdiction. As to Regional Trial Courts, the power to issue a writ of
certiorari, in the exercise of their original jurisdiction, is provided under Section 21 of BP 129.

The foregoing notwithstanding, while there is no express grant of such power, with respect to the CTA,
Section 1, Article VIII of the 1987 Constitution provides, nonetheless, that judicial power shall be vested
in one Supreme Court and in such lower courts as may be established by law and that judicial power
includes the duty of the courts of justice to settle actual controversies involving rights which are legally
demandable and enforceable, and to determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or instrumentality of the Government.

On the strength of the above constitutional provisions, it can be fairly interpreted that the power of the
CTA includes that of determining whether or not there has been grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of the RTC in issuing an interlocutory order in cases falling within
the exclusive appellate jurisdiction of the tax court. It, thus, follows that the CTA, by constitutional
mandate, is vested with jurisdiction to issue writs of certiorari in these cases.

Indeed, in order for any appellate court to effectively exercise its appellate jurisdiction, it must have the
authority to issue, among others, a writ of certiorari. In transferring exclusive jurisdiction over appealed
tax cases to the CTA, it can reasonably be assumed that the law intended to transfer also such power as
is deemed necessary, if not indispensable, in aid of such appellate jurisdiction. There is no perceivable
reason why the transfer should only be considered as partial, not total. (emphasis added)

Evidently, City of Manilacan be considered as a departure from Ursal in that in spite of there being no
express grant in law, the CTA is deemed granted with powers of certiorari by implication. Moreover, City
of Manila diametrically opposes British American Tobacco to the effect that it is now within the power of
the CTA, through its power of certiorari, to rule on the validity of a particular administrative ruleor
regulation so long as it is within its appellate jurisdiction. Hence, it can now rule not only on the propriety
of an assessment or tax treatment of a certain transaction, but also on the validity of the revenue
regulation or revenue memorandum circular on which the said assessment is based.

Guided by the doctrinal teaching in resolving the case at bar, the fact that the CA petition not only
contested the applicability of Sec. 100 of the NIRC over the sales transaction but likewise questioned the
validity of Sec. 7 (c.2.2) of RR 06-08 and RMC 25-11 does not divest the CTA of its jurisdiction over the
controversy, contrary to petitioner's arguments.

The price difference is subject to donor's tax

Petitioner's substantive arguments are unavailing. The absence of donative intent, if that be the case,
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.1âwphi1 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
Commissioner's 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.

WHEREFORE, the petition is hereby DISMISSED. The Resolutions of the Court of Appeals in CA-G.R. SP No.
127984 dated May 23, 2013 and January 21, 2014 are hereby AFFIRMED.

SO ORDERED.

[G.R. No. 120721. February 23, 2005]

MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA, AVELINO V. CRUZ, petitioners, vs.
COMMISSIONER OF INTERNAL REVENUE and COURT OF APPEALS, respondents.

DECISION

AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure, assailing the
decision of the Court of Appeals in CA G.R. SP No. 27134, entitled Comissioner of Internal Revenue v.
Manuel G. Abello, Jose C. Concepcion, Teodoro D. Regala, Avelino V. Cruz and Court of Tax Appeals, which
reversed and set aside the decision of the Court of Tax Appeals (CTA), ordering the Commissioner of
Internal Revenue (Commissioner) to withdraw his letters dated April 21, 1988 and August 4, 1988
assessing donors taxes and to desist from collecting donors taxes from petitioners.

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. In letters dated April 21, 1988, the Bureau of Internal
Revenue (BIR) assessed each of the petitioners P263,032.66 for their contributions. On August 2, 1988,
petitioners questioned the assessment through a letter to the BIR. They claimed that political or electoral
contributions are not considered gifts under the National Internal Revenue Code (NIRC), and that,
therefore, they are not liable for donors tax. The claim for exemption was denied by the Commissioner.[1]

On September 12, 1988, petitioners filed a petition for review with the CTA, which was decided on
October 7, 1991 in favor of the petitioners. As aforestated, the CTA ordered the Commissioner to desist
from collecting donors taxes from the petitioners.[2]

On appeal, the Court of Appeals reversed and set aside the CTA decision on April 20, 1994. [3] The
appellate Court ordered the petitioners to pay donors tax amounting to P263,032.66 each, reasoning as
follows:

The National Internal Revenue Code, as amended, provides:

Sec. 91. Imposition of Tax. (a) There shall be levied, assessed, collected, and paid upon the transfer by any
person, resident, or non-resident, of the property by gift, a tax, computed as provided in Section 92. (b)
The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and
whether the property is real or personal, tangible or intangible.

Pursuant to the above-quoted provisions of law, the transfer of property by gift, whether the transfer is
in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal,
tangible or intangible, is subject to donors or gift tax.

A gift is generally defined as a voluntary transfer of property by one to another without any consideration
or compensation therefor (28 C.J. 620; Santos vs. Robledo, 28 Phil. 250).

In the instant case, the contributions are voluntary transfers of property in the form of money from private
respondents to Sen. Angara, without considerations therefor. Hence, they squarely fall under the
definition of donation or gift.

As correctly pointed out by the Solicitor General:

The fact that the contributions were given to be used as campaign funds of Sen. Angara does not affect
the character of the fund transfers as donation or gift. There was thereby no retention of control over the
disposition of the contributions. There was simply an indication of the purpose for which they were to be
used. For as long as the contributions were used for the purpose for which they were intended, Sen.
Angara had complete and absolute power to dispose of the contributions. He was fully entitled to the
economic benefits of the contributions.

Section 91 of the Tax Code is very clear. A donors or gift tax is imposed on the transfer of property by gift.

The Bureau of Internal Revenue issued Ruling No. 344 on July 20, 1988, which reads:

Political Contributions. For internal revenue purposes, political contributions in the Philippines are
considered taxable gift rather than taxable income. This is so, because a political contribution is
indubitably not intended by the giver or contributor as a return of value or made because of any intent to
repay another what is his due, but bestowed only because of motives of philanthropy or charity. His
purpose is to give and to bolster the morals, the winning chance of the candidate and/or his party, and
not to employ or buy. On the other hand, the recipient-donee does not regard himself as exchanging his
services or his product for the money contributed. But more importantly he receives financial advantages
gratuitously.

When the U.S. gift tax law was adopted in the Philippines (before May 7, 1974), the taxability of political
contributions was, admittedly, an unsettled issue; hence, it cannot be presumed that the Philippine
Congress then had intended to consider or treat political contributions as non-taxable gifts when it
adopted the said gift tax law. Moreover, well-settled is the rule that the Philippines need not necessarily
adopt the present rule or construction in the United States on the matter. Generally, statutes of different
states relating to the same class of persons or things or having the same purposes are not considered to
be in pari materia because it cannot be justifiably presumed that the legislature had them in mind when
enacting the provision being construed. (5206, Sutherland, Statutory Construction, p. 546.) Accordingly,
in the absence of an express exempting provision of law, political contributions in the Philippines are
subject to the donors gift tax. (cited in National Internal Revenue Code Annotated by Hector S. de Leon,
1991 ed., p. 290).

In the light of the above BIR Ruling, it is clear that the political contributions of the private respondents to
Sen. Edgardo Angara are taxable gifts. The vagueness of the law as to what comprise the gift subject to
tax was made concrete by the above-quoted BIR ruling. Hence, there is no doubt that political
contributions are taxable gifts.[4]

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its resolution of
June 16, 1995.[5]

Petitioners thereupon filed the instant petition on July 26, 1995. Raised are the following issues:

1. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER IN ITS DECISION
THE PURPOSE BEHIND THE ENACTMENT OF OUR GIFT TAX LAW?

2. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE INTENTION OF THE
GIVERS IN DETERMINING WHETHER OR NOT THE PETITIONERS POLITICAL CONTRIBUTIONS
WERE GIFTS SUBJECT TO DONORS TAX?
 3. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT FAILED TO CONSIDER THE DEFINITION
OF AN ELECTORAL CONTRIBUTION UNDER THE OMNIBUS ELECTION CODE IN
DETERMINING WHETHER OR NOT POLITICAL CONTRIBUTIONS ARE TAXABLE?

4. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE ADMINISTRATIVE
PRACTICE OF CLOSE TO HALF A CENTURY OF NOT SUBJECTING POLITICAL CONTRIBUTIONS
TO DONORS TAX?

5. DID THE HONORABLE COURT OF APPEALS ERR IN NOT CONSIDERING THE AMERICAN
JURISPRUDENCE RELIED UPON BY THE COURT OF TAX APPEALS AND BY THE PETITIONERS
TO THE EFFECT THAT POLITICAL CONTRIBUTIONS ARE NOT TAXABLE GIFTS?

6. DID THE HONORABLE COURT OF APPEALS ERR IN NOT APPLYING AMERICAN JURISPRUDENCE
ON THE GROUND THAT THIS WAS NOT KNOWN AT THE TIME THE PHILIPPINES GIFT TAX
LAW WAS ADOPTED IN 1939?

7. DID THE HONORABLE COURT OF APPEALS ERR IN RESOLVING THE CASE MAINLY ON THE BASIS
OF A RULING ISSUED BY THE RESPONDENT ONLY AFTER THE ASSESSMENTS HAD ALREADY
BEEN MADE?

8. DID THE HONORABLE COURT OF APPEALS ERR WHEN IT DID NOT CONSTRUE THE GIFT TAX
LAW LIBERALLY IN FAVOR OF THE TAXPAYER AND STRICLTY AGAINST THE GOVERNMENT
IN ACCORDANCE WITH APPLICABLE PRINCIPLES OF STATUTORY CONSTRUCTION?[6]

First, Fifth and Sixth Issues

Section 91 of the National Internal Revenue Code (NIRC) reads:

(A) There shall be levied, assessed, collected and paid upon the transfer by any person, resident
or nonresident, of the property by gift, a tax, computed as provided in Section 92

(B) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or
indirect, and whether the property is real or personal, tangible or intangible.

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.[7]
 The present case falls squarely within the definition of a donation. Petitioners, the late Manuel G.
Abello[8], Jose C. Concepcion, Teodoro D. Regala and Avelino V. Cruz, 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
Edgardo Angaras patrimony correspondingly increased by P3,530,645.24[9]. 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. In Rizal Commercial Banking Corporation v.
Intermediate Appellate Court[10] the Court enunciated:

It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is
clear and free from any doubt or ambiguity, there is no room for construction or interpretation. As has
been our consistent ruling, where the law speaks in clear and categorical language, there is no occasion
for interpretation; there is only room for application (Cebu Portland Cement Co. v. Municipality of
Naga, 24 SCRA 708 [1968])

Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the court has
no choice but to see to it that its mandate is obeyed (Chartered Bank Employees Association v. Ople, 138
SCRA 273 [1985]; Luzon Surety Co., Inc. v. De Garcia, 30 SCRA 111 [1969]; Quijano v. Development Bank of
the Philippines, 35 SCRA 270 [1970]).

Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent.
Ambiguity is a condition of admitting two or more meanings, of being understood in more than one way,
or of referring to two or more things at the same time. A statute is ambiguous if it is admissible of two or
more possible meanings, in which case, the Court is called upon to exercise one of its judicial functions,
which is to interpret the law according to its true intent.

Second Issue

Since animus donandi or the intention to do an act of liberality is an essential element of a donation,
petitioners argue that it 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 part of 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. The fact
that their purpose for donating was to aid in the election of the donee does not negate the presence of
donative intent.

Third Issue

Petitioners maintain that the definition of an electoral contribution under the Omnibus Election Code
is essential to appreciate how a political contribution differs from a taxable gift.[11]Section 94(a) of the said
Code defines electoral contribution as follows:
The term "contribution" includes a gift, donation, subscription, loan, advance or deposit of money or
anything of value, or a contract, promise or agreement to contribute, whether or not legally enforceable,
made for the purpose of influencing the results of the elections but shall not include services rendered
without compensation by individuals volunteering a portion or all of their time in behalf of a candidate or
political party. It shall also include the use of facilities voluntarily donated by other persons, the money
value of which can be assessed based on the rates prevailing in the area.

Since the purpose of an electoral contribution is to influence the results of the election, petitioners
again claim that donative intent is not present. 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 would distinguish a gift from a political donation by saying that the consideration for a
gift is the liberality of the donor, while the consideration for a political contribution is the desire of the
giver to influence the result of an election by supporting candidates who, in the perception of the giver,
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 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.

In fine, the purpose for which the sums of money were given, which was to fund the campaign of
Senator Angara in his bid for a senatorial seat, cannot be considered as a material consideration so as to
negate a donation.

Fourth Issue

Petitioners raise the fact that since 1939 when the first Tax Code was enacted, up to 1988 the BIR
never attempted to subject political contributions to donors tax. They argue that:

. . . It is a familiar principle of law that prolonged practice by the government agency charged with the
execution of a statute, acquiesced in and relied upon by all concerned over an appreciable period of time,
is an authoritative interpretation thereof, entitled to great weight and the highest respect. . . .[12]

This Court holds that the BIR is not precluded from making a new interpretation of the law, especially
when the old interpretation was flawed. It is a well-entrenched rule that

. . . erroneous application and enforcement of the law by public officers do not block subsequent correct
application of the statute (PLDT v. Collector of Internal Revenue, 90 Phil. 676), and that the Government
is never estopped by mistake or error on the part of its agents (Pineda v. Court of First Instance of Tayabas,
52 Phil. 803, 807; Benguet Consolidated Mining Co. v. Pineda, 98 Phil. 711, 724).[13]

Seventh Issue
 Petitioners question the fact that the Court of Appeals decision is based on a BIR ruling, namely BIR
Ruling No. 88-344, which was issued after the petitioners were assessed for donors tax. This Court does
not need to delve into this issue. It is immaterial whether or not the Court of Appeals based its decision
on the BIR ruling because it is not pivotal in deciding this case. As discussed above, Section 91 (now Section
98) of the NIRC as supplemented by the definition of a donation found in Article 725 of the Civil Code, is
clear and unambiguous, and needs no further elucidation.

Eighth Issue

Petitioners next contend that tax laws are construed liberally in favor of the taxpayer and strictly
against the government. This rule of construction, however, does not benefit petitioners because, as
stated, there is here no room for construction since the law is clear and unambiguous.

Finally, this Court takes note of the fact that subsequent to the donations involved in this case,
Congress approved Republic Act No. 7166 on November 25, 1991, providing in Section 13 thereof that
political/electoral contributions, duly reported to the Commission on Elections, are not subject to the
payment of any gift tax. This all the more shows that the political contributions herein made are subject
to the payment of gift taxes, since the same were made prior to the exempting legislation, and Republic
Act No. 7166 provides no retroactive effect on this point.

WHEREFORE, the petition is DENIED and the assailed Decision and Resolution of the Court of Appeals
are AFFIRMED.

No costs.

SO ORDERED.