Metro Pacific Corporation vs.

CIR
CTA Case No. 8318, June 11 2014
DOCTRINE:
In case where property 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 (FMV) of the property exceeded the
value of the consideration shall be deemed a gift, and shall be
included in computing the amount of gifts made during the
calendar year.
FACTS:
Petitioner MPC sold to Colmbus Holdings, Inc. (CHI) 2,597,197
common shares in Bonifacio Land Corporation (BLC).
Further, petitioner, through Atty. Tagao, requested respondent
for "confirmation that the sale of Bonifacio Land Corporation
(BLC) shares of stocks owned by MPC to Columbus Holdings, Inc.
(CHI) is not subject to donor's tax as provided in Section 100 of
the Internal Revenue Code] as it is an ordinary business
transaction negotiated in good faith by unrelated parties for
legitimate business purposes.
Petitioner, as seller, filed CGT Return with the BIR LTS-Regular
and the DST. The said CGT return showed that there was no tax due
or paid for the transaction.
The CIR confirmed that the sales transaction over the BLC shares
between petitioner as seller and CHI as buyer is not subject to
donor's tax because it is an ordinary commercial transaction
negotiated in good faith between unrelated parties and motivated
by legitimate business reasons.
Later, petitioner received a Notice for Informal Conference
(Notice) from respondent BIR LTS-Regular, informing petitioner
that the subject transaction is actually subject to donor's tax.
In response, petitioner wrote respondent requesting for the reevaluation of the factual information presented by petitioner and
for the cancellation of the tax assessment shown in the Notice,
which was received by respondent through the BIR LTS-Regular.
Petitioner received BIR LTSRegular a Final Assessment Notice
(FAN), details of discrepancy and Audit Result/ Assessment
Notice, reiterating its demand for payment of deficiency donor's
tax.
Petitioner filed its formal protest, however, the same was denied
by the respondent.
Thus, the petitioner filed the instant Petition for review.
ISSUE:

Whether or not MPC is liable for the deficiency donor's tax

assessment.
HELD:
YES. Petitioners claim for donors tax exemption has no legal
basis.
Section 100 of the 1997 NIRC, as amended, is clear that in case
where property 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 (FMV) of the property exceeded the value of
the consideration shall be deemed a gift, and shall be included
in computing the amount of gifts made during the calendar year.
It is thus, important to determine the "fair market value" (FMV)
of the property sold or transferred, and whether it exceeded the
value of the consideration.
Petitioner alleges, on the assumption that the subject shares
were sold for less than their "fair market value", that the
subject transaction was an ordinary business transaction
negotiated in good faith by unrelated parties for legitimate
purposes operate to exclude the subject transaction from the
coverage of Section 100 of the NIRC, the same being a transfer
which is bona fide, at arm's length.
After a careful reading of the bases cited by petitioner, the
court find that the alleged exemption/exception from the donor's
tax under the said provision of law was not clearly established
therein.