CASE DIGEST

G.R. NUMBER 120721

PETITIONER Manuel G. Abello
Jose C. Conception
Teodoro D. Regala
Avelino V. Cruz
*Relationship: Partners in a law firm
RESPONDENT Commissioner of Internal Revenue
Court of Appeals

FACTS:  In the 1987 national elections, the petitioners contributed 882,661.31php

each to the campaign funds of Senator Edgardo Angara who was running
for the Senate
 The BIR assessed each of the petitioners to pay 263,032.66php as donor’s
tax
 The petitioners questioned this, through a letter to the BIR, claiming that
political or electoral contributions are not considered as gifts under the
National Internal Revenue Code of the Philippines, and therefore, they are
not supposed to pay for donor’s tax
 This claim was denied by the Commissioner of Internal Revenue
(Respondent)
 So they filed a petition for review with the Court of Tax Appeals (CTA)
which ruled in their favor, ordering the Commissioner to cease from
collecting donor’s taxes from the petitioners
 On appeal, the Court of Appeals reversed and set aside the decision of the
CTA and ordered the petitioners to pay the donor’s tax because:
o Section 91 states that the transfer of property by gift is subject to
donor’s of gift tax
o Here, a gift is generally defined as a voluntary transfer of property
by one to another without any consideration or compensation
therefore
o The contributions of the petitioners are voluntary transfer of
property therefore, they are under the definition of a gift or
donation
o The BIR issued ruling No. 344 which states:
 For internal revenue purposes, political contributions are
considered taxable gift rather than taxable income
 Because the motives of these contributions are
philanthropic or for charity
 (This ruling was made after the assessment)
 Logic: Petitioners gave a donation, a donation is subject to donor’s tax,
therefore, the petitioners are subject to donor’s tax
 The petitioners filed a Motion for reconsideration which the CA denied
 This case is an Instant Petition
ISSUE/S:  Whether or not the CA erred in ruling that the petitioners are ordered to
pay the donor’s tax
RULING:  NO. The petitioners should pay the donor’s tax
 ARGUMENTS MADE
PETITIONERS
 The CA erred in their
interpretation of the law because
of the definitions of donations
 The CA did not consider why the
Gift Tax Law was enacted, they
also did not consider the
American jurisprudence, and
they did not apply the American
jurisprudence
 The intention of the donor must
be taken into account
 The definition of “Electoral
Contribution” according to the
Omnibus Election Code is that a
contribution are those with the
purpose of influencing the
results of the election
 So the petitioners claim that
there is no donative intent
CONTENTION
 Article 18 of the Civil Code states that when
the NIRC is not complete, it can be used to
fill in the gaps
o The Civil Code provides a definition
for donations – an act of liberality
whereby a person disposes
graciously of a thing or right in favor
of another, who accepts it
o Donations have the following
elements:
 Decrease in the property of
the donor
 Increase in the property of the
done
 The intent of the donor to do
an act of liberality or animus
donandi (the act of giving)
o All of these elements are satisfied by
the petitioners, therefore they
donated
 With these, there is NO NEED for
construction – it is clear and unambiguous
and must therefore be taken to mean
exactly what it says
 The petitioners donated – donations are
subject to donor’s tax – petitioners are
subject to the donor’s tax
 Donative intent cannot be perceived except
by the material and tangible acts which
manifest its presence
o It is assumed when one gives a
donation
o The fact that their purpose for
donating was to aid in the election of
the done does not negate the
presence of donative intent
 Just because it is an electoral contribution
does not mean that it’s not a donation
o Yes, the petitioners will somehow
benefit in the future from the
election of the candidate that they
contributed to
o But the candidate has no obligation
to benefit the petitioners – the
performance of his duties is for the
Filipino people (meaning, he’s not
performing his duties because of the
donations but for the people)
 The decision is based on a BIR
ruling which was issued after the
assessment
 Ever since the Tax Code has been
enforced in 1939, the BIR never
subjected political contribution
to donor’s tax
 Rules of construction state that
tax laws are to be construed in
favor of the tax payer and not
the government
 No need to answer this because it’s
immaterial
 The BIR is not prevented from making a new
interpretation of the law, especially when
the one interpretation is flawed
 The statute involved was clear and
unambiguous, therefore, it had room for
construction