THE PHILIPPINE AMERICAN LIFE AND GENERAL INSURANCE COMPANY, PETITIONER,

VS.
THE SECRETARY OF FINANCE AND THE COMMISSIONER OF INTERNAL REVENUE, RESPONDENTS.

Facts:

 Philippine American Life and General Insurance Company (Philamlife) owned 498,590
Class A shares in Philam Care Health Systems, Inc.
 In 2009, Philamlife sold its Class A shares for USD2,190,000 to STI Investments, Inc.
through competitive bidding.
 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.
 The BIR informed Philamlife that it needed to secure a BIR ruling in connection with its
application due to potential donor's tax liability.
 The Commissioner on Internal Revenue denied Philamlife's request and held that donor's
tax became imposable on the price difference between the book value and the selling
price of the shares.
 Philamlife requested the Secretary of Finance to review the Commissioner's ruling, but
the Secretary affirmed the ruling.
Issue:
Whether or not the price difference in the sale of shares attracts donor's tax.
Ruling:
The price difference in the sale of shares is subject to donor's tax.
Ratio:
The Court held that even if there is no actual donation, the difference in price is considered a
donation by fiction of law. This is based on the principle that any disposition of property for less
than an adequate and full consideration in money or money's worth is deemed a donation.
The Court also held that the BIR ruling and the revocation of a previous ruling were valid and
applicable. The BIR has the authority to interpret tax laws and issue rulings, and its rulings are
binding unless revoked or modified by a competent court.
In conclusion, the Court upheld the dismissal of the case for lack of jurisdiction and ruled that
the price difference in the sale of shares is subject to donor's tax.