Sepcrlic of the Philippivab Gqurt of Tan Appeals. Manila ‘ Ote the Christian and Missionary Alliance Churches of the Philippines vs. « C.I.A. Case No, 668 Collector of Internal Revenue

SEPCRLIC OF THE PHILIPPivab

GQURT OF TAN APPEALS

. MANILA ‘ ote

THE CHRISTIAN AND MISSIONARY

ALLIANCE CHURCHES OF THE

PHILIPPINES , Petitioner, - versus « C.I.A.

CASE NO, 668 COLLECTOR OF INTERNAL REVENUE, Respondent.

Koester ee ee ee ee eee x ‘The petitioner is a religious corporation duly prganized and existing under and by virtue of the laws of tie Philippines, with principal office in | Zamboanga City, Philippines.

On March 4, 195% and on February 17, 1956, the petitioner received by way of donation from the Christ- jan and Missionary Alliance “and the Philipoine Mission of said corporation," a total of twelve (12) parcels of land and the improvements thereon. (Par. 1, Stip- ulation of Facts, nereinafter referred to as Stifacts, pp. 84-85, CTA rec.) The donor, Christian and Mission- ary Alliance, like the petitioner herein, is also a religious corporation. (Par. 2, Stifacts) The prop erties, subject matter of the aforementioned donations, were already devoted to religious purposes prior to the herein donations,. and continued to be used by the petitioner-donee for the same pirposes to which they had been employed by the donor prior to tlie dona tiene. (Pars. 3 & 4, Stifacts)

I

'

:)ECISION

C. T.A. Case T_Io . 668 - 2 - On Februar y 21, 1956 , t he petitioner applied wi t :1 the Bureau of Internal Revenue for tax clearance certificates for t he above donations , as donations exemp t from taxation , f or t he p'.lrpose of registering t he deeds of donation wit h t he 3.egis ter of De eds of Zamboanga City and effecting t he transfer of t he cer- tificates of title of t he properties donated in favor of t he petitioner .

(Par . 5, becond ·l.mended .t?eti tion for Review, hereinafter referred to as Petition; pp . 123- 129; Par . 1 , nsvJer t o Ame nded .1:-'etitlon for ~i eview , hereinafter referred to as Answer , pp . 142- lll-5) Instead of issui ng t l~ tax clea rance cer tificate s applied for, t 11e res1Jonde ;1t , on Se ::Jte;-nber 24, 1957 , as!::l essed agains t and d ema nc~. e d from t he petitioner t he amounts of ii-16,153 . 80 and ~7 , 158 . 90 as .onee ' s gift taxes for t he years 1954 a nd 1956, respectively, or t :le total sum of *23 ,312. 70 . . (Pars . 5 & 6, Stifacts ) On October 21 , 1957 , t l;e petitioner protested against t he said a ssessments for donee ' s gift t axes and req:.1es ted for t he reconsideration a nd cancella tiot1 of t he same .

Hmvever, on Harch 16, 1959 , t ~J. e respondent denieri t t1e reques t for reconsideration and insisted on t :.e payment by the petitioner of t he disputed donee ' s gift tax assessments .

(p . 163 , BIR rec .)

Hence, the present appeal .

I

tECibiON C. T.A. CAC>E EO. 668 - 3 - The only i ssue in t hi s case , as correctly pointed out by t ne petitioner am~ agreed to by t he respondent , is t he determination of t he legal question whether or not donations of real properties devoted exclusively to religious purposes , by a re~igious corporation in f avor of anotner r eli gious corporation, f or the pur- pose of devoting said properties exclusively to the same religious purposes tba t it 11.a.d been heretofore c"ievoted to , are sub ject to t -:1e payment of gift taxes . (Par . 10, Petition; Par . 1, nswer) In snort , is t he petitioner herein liable f or t he donee ' s gift tax assessed agains t it by t he res.-,ondent? (Par . 7, Stifacts) He believe and so hold t bat petitioner Christian and Hissionary Alliance Churches of t he Philippines is not liable for t he payment of t he donee ' s gi f t t axes on the tv1elve (12) parcels of l and and the im_)rovements t hereon which it received from t he Christian and Nission- ary lliance .

One of the essential elements of a taxa- ble gift is that t here must be a clear and unmistakable intent on t he part of t he donor to make t i1e gift . In other \vords , t he donative intent mus t be present in t he transfer of property in order t hat t ,1e gif t t axes can be assessed and collected . (P...:H Federal Gift Tax, (1956), par. 125, 010) In t he case at bar , t he donative int ent is wanting .

'rhe cause or consideration i s neither fond- ness , liberality, admiration, generosity , gratitude f

I ~

DEC: IS ION

I'W . 668 nor pity . (p . 787, Vol . I, Cagu.ioa ' s Comments and

Cases on Civil Law)

He have caref ully examined and scrutinized t he deeds of donation exec llted by Christian and Hission- ary Alliance in favor of t he petitioner , and. ~tve noted t~ e f ollowing condition w ~ic h is present i n all said C:tona tions:

11Tha t t i1e c on~~ i tion of tt~is Donation is t .-... EL t t ~1e ].) 0IJ~E s ~~all use an:J apply t he above- described properties , s ubject matter of t i1is Donation, to the uses and purposes for Hhic ::1- t ~1 e same were annlied and intended by the DOJ::OR, and for no purpose other than relir;ious or to fulfill t he ob jects for \v ~l ic h t i1e .. mJEE \vas created , a n~~ on the fa ilur e of said DONEE to comply wi t ~1 V1ese conc3i tions , t he said pro ~) erties s hall r e- vert to t :1e DONOR as if this Donation has not been executed in t he f irst place. " C ee Stifa cts , Annexes to A- 5, pp . 86- 102 ,

CT

rec . )

To our mind , considering t '1e above- quoted con- dition and all t he other provisions of t he deeds of dona tion , t he Christian and Lissionary Alliance did not transfer by gift Hi b1in t he purview of t :1e Gift Tax Law t he properties mentioned in t he contracts . TaX',vise , it c.d d not ;_)erform an act of liberality Hhere- by it disposed gr atui tously of t ~1e twelve ( 12) parcels of la nd s and t he improvement s tl1e reon in f avor of t he Christian a nd Hissionary Alliance Cimrches of the Philip9ines .

The petitioner did not receive a t hing ' .)

DECit:JION

C. T.A. C SE NO 668 - 5 - or right unJer t he deeds of donation. ( rt . 725,

Civil Code)

On t he contrary, it assumed an obliga- tion to admidister t he properties transferred to i t for religious purposes only - t he same religious pur- poses for which t he donor was created atJd still exists toc.ay .

The pe titioner received not hing of rna terial value which could possibly be reached by gift taxa tion. Subject to t he restrictive and resolutory condi- tion stated above , t r1e properties mentioned in t he llonations have no 11fair marke t value 11 as t hat term is used in ·action 113 of t he National Internal ' avenue Code .

The transfers of sa i~ properties from Christian and I1issior.13.ry Alliance to t ha t of t he pe titioner \•Jere in name only , and merely to enable the l a t t er to better perform its obligation to adninis ter t je properties in question for religious purposes only , and accomplish i ts mi s sion in t he Phi l i ppi nes to 11go ye i nt o all t he vmrld and preach t he gospel to every creature. 11 (Exh.

E, p. 58 , CT rec.)

tf.arec:1ver;: t he records show t ha t petiti oner Chris tian and gissionary lliance Churches of t he ?hilip ines , Inc . is simply 11a religious society, connected with , ~ubor d inate to and a dis trict organizati on of t he ' The Christian and Nissionary Alliance 1'1~ission of the Philip- pines ' , 11 and is 11charged with the administration of t he D rGISION C. T •• CASE NO. 668 - 6 - t temporali ties and management of t lle estates and prop- erties of the Christian anci ·dssionary lliance Lission of the Philippines , within t he territorial jurisdiction of t he Islan6.s of hindanao and uulu , which territories are portions of t ' .e 1-'hilippines . 11 (....:;xh . F , pp . 62- 69 , CTA rec . ; Underscoring supplied . ) nd t he records further s how t r:a t 11 t :1.e Christian and Hissionary Alliance Lission of t :1e rhilippinestt is just t :1e Phil i p~' ine arm of t he donor - 11 t he Christian and lassionary lliance 11 - t he local organization or Piilip ~ ine branch or mission of the latter .

( 'ee Exh. h , p . 175, CT rec . ; See also T~N, pp . 29- 30; 59- 85) Hence , in all t :1e instruments of donation unc~ er review, t l1e donor is allvays described as 1'The .Christian and l1issionary lliance , x x x and t he Philippine Lission of said corporation. '' (Par . l , .:.tifacts) F'rom t l-).e eyes of the Gift Tax 1aw, t i1e trans - fers of t he twelve (12) parcels of land and t .1e improve- ments t 11ereon to t i·1e .Petitioner he1·ein were , in effect , tra nsfers from t he right :nnd to t he left hand .

There

s houlc , t '1erefore, be excluded from t he category o;e donations all t hose acts \v:1.ic:1 t hough erant benefits without compensation do not require any corresponding patrimonial loss;

t 1ere must exist t :.,.e animus donandi t l1a t is, t he intention to give benefit or e :1ric lm1en t to t he donee (p . 792, Vol . I , •:;aguioa ' s Cor·1rnents and Cases on Civil Law) .

1le are of tne opinion and so hold t hat such .kin .... s of transfers of properties are not sub- ject to gift taxes .

·"

DECibiON

C. T •• C ~ E NO 668 - 7 - / ,,J,...,.I· H:P1i'Ft O~ E • ~ ......,:\...., .i.

' in vie1:1 of t he fore goincr consider- ations , t he decis ion of the respondent Collector (now Commissioner) of Internal J.evenue is hereby reversed , and t 11e don:'l tions of t he twelve (12) parcels of land and t he improvements t hereon made by the Christian and Missionary Alliance and its Philippine l1ission to petitioner Christian and Ni ssionary lliance Churches of t he l1ilippines , are hereby declared .not subject to gift t axes .

SO 0 :l.DERED .

Manila , August 21, 1964.

E CONCUR:

~~~

Presiding Judge

RO:tv N M. UMALI f1.S3ociate Jldge