COMMISSIONER OF INTERNAL REVENUE VS. AQUAFRESH SEAFOODS, INC.

- Fair Market Value

FACTS:

Aquafresh Seafoods sold two parcels of located at Barrio Banica in Roxas City and paid the
corresponding CGT and DST due on the sale. However, the BIR assessed Aquafresh Seafoods based on its
conclusion that the lots were classified as commercial and not residential as claimed by the taxpayer.
Aquafresh Seafood’s defense was that there was already a pre-defined zonal value for the said lots and
thus the BIR could not reclassify the same to be commercial lots.

ISSUE:

Is the requirement (under Section 6 of the Tax Code) of consultation with competent appraisers both
from the public and private sectors in determining fair market value applicable in this case?

HELD:

YES. The BIR’s position that the requirement of consultation with appraisers is mandatory only when
formulating or making changes in the schedule of zonal values is wrong. The Court held that the BIR’s act
of classifying the subject properties involved a re-classification and revision of the prescribed zonal
values. It was likewise added that the application of the rule of assigning zonal values based on the
‘predominant use of property’ only applies when the property is located in an area or zone where the
properties are not yet classified and their zonal values are not yet determined. If a determination has
already been made, the BIR has no discretion as regards its classification and/or valuation.