G&W Architects, et al. vs. Commissioner of Internal Revenue Consolidated with CTA Case No. 8426 & 8489

DECISION

MINDARO-GRULLA, }_.:

The instant case is a consolidation of three (3) Petitions for Review filed by G & W Architects, Engineers and Project Consulta nts Co. as petit ioner, against the Commissioner of Internal Revenue (CIR), as respondent, wit h t he Court in Division, pursuant to Section 7 (a) (1) of Republic Act (RA) No. 1125, An Act Creating t he Court of Tax Appeals, as amended 1 , as well as Rule 4, Section 3 (a) (1), in relation to Rule 8, Section 4(a), of the Revised Rules of the Court of

Tax Appeals (RRCTA)

7 .~ 1 Sec. 7. Jurisdiction. - The CTA shall exercise:

(a) Fxclusive appellate jurisdiction to review by appeal, as herein provided :

X X X

X X X

(1 ) Decisions of the Com m issioner of I nternal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of I nternal Revenue;

X X X

X X X

? Rule 4. Sec. 3. Cases within lhe jurisdiction of the Courl in Division. - The Court in Division. shall exercise:

G & W Architects, Engineers and Project Consultants Co. vs. CIR

Petitioner prays for the cancellation of the deficiency tax assessment issued against it for deficiency expanded withholding tax (EWT) and documentary stamp tax (DST), broken down as follows:

8358 8426 8489

TOTAL

2004 I P213,376,605.65 July 10, 2004 , 102,091,930.43 June 2004 I 114,909,209.18

I

P64,081,511.54 1 P 30,760,748.62 1 34,505,019.48 .

277,458,117.1 132,852,679.051 149,414,228.665 I P559,725,024.90 Petitioner G & w Architects, Engineers and Project Consultants Co. is duly registered with the Bureau of Internal Revenue (BIR) Revenue District Office No. 30 of Revenue Region No. 6-Manila. 6 On the other hand, respondent is the Commissioner of

Lhe

Bureau of Internal Revenue, who is vested with<

(a) Exclusive original over or appellate jurisdiction to review by appea l the following:

XXX

XXX

(1) Decisions of the Commissioner of [nternal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other rnatlers arising under the National Internal Revenue Code or other laws administered by the 13ureau of Internal Revenue;

XXX

XXX

Rule 8 . Sec. IJ. Where to appeal; mode of appeal. -

(a) /\n /\ppeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected; the decision or ruling of t he Commissioner of Customs, the Secretary of finance, the Secretary of Trade & Industry, the Secretary of Agricu lture, and the Regiona l I rial Court in the exercise of thei r original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Rule 42 of the Rules of Court. ·1 he Court in Division shall act on the appeal. 1 Petition for Review, CT/\ Case No. 8358, Docket, Vol. I, p. 31. " Pelilion for Review, CTA Case No. 8426, Docket, Vol. I, p. 30 . . , Petition for Review, Cl/\ Case No. 8'189, Docket, Vol. I, p. 30. r, Par. 1 , /\drnitted Facts, Pre I rial Order, Cl/\ Case No. 8489, Docket, Vol. I, p. 609.

CTA Case Nos. 8358, 8426 a n d 8489 G & W 1\rchitects, Engineers and Project Consultants Co. vs. CIR authority to administer and enforce Nat ional I nternal Revenue Laws. 7 On different dates, petitioner obtained several confirmatory BIR Rulings for the followi ng projects: BI R Ruling -r --c- ondominium Project

DA-338-20078

Grand Hamptons Tower I

DA-337-200iJ _§rand Hamptons Tower_l_I __

DA-056- 2003

1-

Penhurst Parkplace

DA-455- 2007

Kensington Condominium Project

According to said BIR Rulings, petitioner's Build-To- Own concept of pooling of unit owners' funds to be used for t he construction of condominium units on behalf of the fund owners is tax-exempt because it does not constitute a ta xable sale, exchange, or disposition of real property by pelilioner, hence, not subject to creditable withholding tax (CWT) or capital gains tax (CGT), value-added tax (VAT) and DST, except the PlS.OO DST on the contractual agreement. Thereafter, petitioner proceeded with the implementation of the projects.

The parcels of land upon which the projects were bu ilt were origina lly owned

by Fort Bonifacio

Development

Corporation (FBDC) and these were subsequently sold to the projects' respective condominium corporations via Deed of Absolute Sale, summarized as follows: 1 Date of Executio n of i Deed of A bsolute I

Sale

I

Cancelled TCTs in

the name of FBDC (seller) TCTs issued in the names of the September fi, 200710+-· No. 3127611 ,-- , • . : ' ~

I

I name of

Grand I

_____________ Hamptons

Tower I<

1 Pa r. 7, Admitted Facts, Pre-Trial Order, CTA Case No. 8489, Docket, Vol. I , p. 609. B Lxllibit "J" in C l/\ Case No. 8489, Docket , Vol. 11, pp. 720-723. <J Lxhibit ".J" in C l /\ Case No. 81126, Docket, Vol . I , pp. 618-621.

G & W Architects, engineers and Project Consultants Co. vs. CIR

Condominium

Cor oration June l6, -2008B - No. 31275 1 No. 2434-P ~ in the name of

Grand

Hamptons

Tower

II

Condominium

CorJ2oration No. 3584717 No.

30-P18

in the - -- ------i December 17, 200316 1 name of Pen hurst

Parkplace

I

Condominium

Corporation

July 21, 2006 19 No. 3584970 No.

J 402-P7 I

in the name of Kensington

Parkplace

Condominium

Cor oration - -- Respondenl's representatives issued Letter of Authority Nos. 0002763622 , 0002763923 , and 0002763724 , all on September 29, 2009, to examine petitioner's books of accounts for Transfer Taxes (EWT and DST) involving Penhurst Parkplace and Kensington Place, Grand Hamptons Tower I, and The Grand Hamptons.

Thereafter, a letter 25 was sent by BIR Revenue District Offi cer (ROO) Gerry 0. Dumayas to petitioner, requiring the submission of documents.

This was followed by a Second Request for Presentation of Records26 dated November 9, 2009.[.

1° Fxhibit "F", CTA Case No. 84 26, Docket, Vol. I, pp. 577-589. 1 1 Fxhibit "G", CTA Case No. 8476, Docket, Vo. I, pp. 590-593. 17 Lxhibit " II", CT/\ Case No. 8426, Docket, Vol. 11, p. 865. 11 Exhibit "F", CTA Case No. 8489, Docket , Vol. II, pp. 687-701. 1'1 Lxhibit "G", C I 1\ Case No. 8489, Docket, Vol. II, pp. 702 705. 1'' Lxhibit " II", C I 1\ Case No. 8489, Docket, Vol. II, pp. 706 707. IG Fxhibit "D", CTA Case No. 8358, Petitioner's Exhibits in expanding envelope. 11 Lxhibit " 13", C I A Case No. 8358, Petitioner's [xhibits in expanding envelope. IB Lxhibit " I-", Cl 1\ Case No. 8358, Petitioner's Exhibits in expanding envelope. 1° Fxhibit "E", CTA Case No. 8358, Petitioner's Exhibits in expanding envelope. Jo exhibit "C", Cl A Case No. 8358, Petitioner's Lxhibits in expa nding envelope. ) I Exhibit "G", CTA Case No. 83~8, Petitioner's Exhibits in expanding envelope. n Fxhibit " I ", CTA Case No. 8358, Petitioner's Exhibits in expanding envelope. 11 Lxhibit " L", in C I 1\ Case No. 81126, Docket, Vol. I, p. 624. 7 ' Fxhibil " I ", in CTA Case No. 8489, Docket, Vol. II, p. 726. )~ Cxhibit "2", 131R Records, p. 911 . . ,h Lxhibit "3", £3lR Records, p. 95.

G & W Architects, Engineers and Proj ect Consultants Co. vs. CIR

A Notice of Inform al Conference dated January 20, 2010 was issued by ROO Oumayas, inviting petitioner to an informal conference regard ing the results of the investigation on petitioner's EWT and OST liabilities on the transfer of units in Kensington and Pen hurst Place. 27 In a

Memorandum for Commissioner of Internal

Revenue Joel L. Tan-Torres dated March 28, 2010, Assistant ROO Christina C. Barroga and ROO Oumayas requested the nullification of BIR Ruling Nos. OA-056-2003, OA-624-2004, DA-4 55-2007, DA-338-2007, DA-410-2007, DA-409-2007, and DA-337-2007. 28 On June 28, 2010, Revenue Memorandum Circular (RMC) No. 55-2010 29 was issued by the BIR, declaring, among others, BIR Ruling Nos. DA-337-2007, DA-056- 2003, and DA-455-2007 as null and void. As a result, respondent issued Preliminary Assessment Notices dated June 8, 201030 and July 1, 201031 , finding petitioner liable to pay EWT and DST for the transfer of the 111 condominium units in Penhurst Parkplace and 229 units in Kensington Place.

Subsequently, respondent issued the assailed Formal Assessment Notices (FAN) on January 25, 2011 32, June 10, 20 1133 and July 26, 201134 , finding petitioner liable to pay EWT and DST on the transfer of condominium units in Penhurst Parkplace, Kensington Place, Grand Hampton I,

and Grand Hampton ILL

/t Fxhibit " 4", BIR Records, pp. 103-105. :>a exhibit "28", C l /\ Case No. 8358, Docket, Vol. II, pp. 1252 1257. ]'} Exhibit "K", CTA Case No. 84/6, Docket , Vol. I, pp. 622-623. 1° Fxhibit "25", BIR Records, pp. 144-146. "ll exhibit "6", 131R Records, pp. 15'1 -156. 17 Exhibit")", CTA Case No. 83:,8, Petitioner's Fxhibits in expanding envelope. ll l::xhibit " M", in Cl 1\ Case No. 8426, Docket, Vol. I, p. 625.

G & W /\rchitects, Lngineers and Project Consultants Co. vs. CLR

Petitioner filed its protest35 on the January 25, 2011 FAN on February 24, 2011 and submitted its supporting documents on March 30, 2011 36.

As to the FAN issued on June 10, 2011, petitioner filed its protest on July 6, 2011 37 and submitted its supporting documents on July 27, 2011 38 ; while on August 25, 2011 39, petitioner protested the FAN issued on July 26, 2011 and submitted supporting documents on October 18, 2011 4 0 . Due to respondent's inaction on the protest, petitioner fil ed the instant Petitions for Review on October 21, 201 1 for CTA Case No. 8358, on February 15, 2012 for CTA Case No. 8426, and on May 11, 2012 for CTA Case No. 8489. In CTA Case No. 8358, respondent interposed the following Special and Affirmative defenses in the Answer4 1 filed on December 7, 2011:

"7. She reiterates and rep leads the preceding paragraphs of this answer as part of her Special and Affirmative Defenses;

8. Section 228 of the 1997 Tax Code partly reads as follows:

'SEC. 228. Protesting of Assessment -

XXX

XXX

XXX

Such

assessment may be protested administratively ·by fi ling a request for reconsideration or reinvestigation within thirty

(30) days from receipt of the assessment in such C. ·~ Lxhibit "0", Cl 1\ Case No. 8358, Petitioner's Exhibits in expanding envelope. lh Fxhibil " P", CTA Case No. 8358, Petitioner's Exhibits in expanding envelope. 1 ' Fxhibit " N" , in CTA Case No. 84/6, Docket, Vol. I , pp. 630-7/3. m Lxhibit "0 ", in C l/\ Case No. 8-126, Docket, Vol. I, pp. 724 -756. l<l Fxhibil " N", in CTA Case No. 8489, Docket, Vol. II, pp. 737-753. ~ 0 l xhibit "0", in C I 1\ Case No. 8-189, Docket, Vol. 11, pp. 877 -904. '

G & W 1\rchitects, L:n9ineers and Project Collsult:ants Co. VS. ClR form and manner as may be prescribed by the implementing rules and regulations. Within sixty

(60) days from filing of the protest, all relevant supporting documents shall have been submitted;

otherwise, the assessment shall become fi nal.

If the protest is denied in whole or in part, or is not acted upon within one hundred eighty ( 180) days from submission of documents, the taxpayer adversely affected by the decision or inaction may ar;meal to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from t he lapse of the one hundred eighty ( 180) - day period;

otherwise the g~cis ion_ ~ha ll become fina l, executory and gemaQdahl_~.' [Emphasis supplied] Implement ing th e aforesaid provision, Section 3, 3.1.5 of the Revenue Regulations No. 12-99 dated September 6, 1999, provides that the taxpayer shall submit the required docum~nts in support Qf his protest within sixty (60) days from date of filing of his letter of protest, otherwise, the assessment shall become final, executory, and demandable. The phrase 'subm itted the required documents' includes submission or presentation of the pertinent documents for scrutiny and evaluation by the Revenue Officer cond ucting the audit and the said Revenue

Officer

shall state this fact in his report of investigation.

In the instant case, pursuant to the report of re- investigation of the concerned BIR Examiner, the latter found that despite considerable length of time given to herein petitioner, it failed to submit the required documents in support of its protest against the BIR Formal Assessment Not ice (FAN) dated 25 January 2011, within sixty (60) days from the alleged filing of its administrative protest on February 24, 2011.

Hence, the assessed deficiency expanded withholding tax and documentary stamp tax, respectively for taxable year 2004 has already become final, executory and demandable.

As such, this(

G & W /\rchitects, Engineers and Project Consultants Co. vs. ClR

Honorable Court has no jurisdiction to act on the instant petition.

9. Well-settled is the ru le that if the court has no jurisdiction over the nature of an action, its only jurisdiction is to dismiss the case. The court could not decide the case on the merits (De Guzman, et al., vs. Escalona, et al., G.R. No. L-51773, May 16, 1980).

The Court of Tax Appeals, being a court of special jurisdiction, can take cognizance only on matters that are clearly within its jurisdiction (Allied

Banking

Corporation

vs.

Commissioner

of Internal Revenue, G.R. No. 175097, February 5, 2010 citing

Rizal

Commercial

Banking

Corporation, vs.

Commissioner of Internal

Revenue, G.R. No. 168498, 522 SCRA 144, 150). 10.

Further, the Su preme Court in the case of Ker & Company, Ltd., vs. CTA, et al., L-12396, January 31, 1962 and Commissioner of Internal Revenue vs. Joseph, et al., L-14034, August 30, 1962, consistently ruled that:

'If a statutory remedv provides as condition precedent that the action to enforce must be commenced within a

Qrescribed

timf1, such reauirement is jurisdictional and failure to comply therewith may be raised in a motion to dismiss.' [Emphasis supplied]

11. Moreover, in the case of Yao vs. Court of Appeals, et al., G.R. No. 132428, October 24, 2000, the Supreme Court held and we quote: 'The right to appeal is not a constitutional, natural or inherent right.

It is a statutory privilege of statutory origin and, therefore available only if granted or provided by statute. Since the rig ht to appeal is not a natural right nor part of due process, it may be exercised only in the manner and in L CTA Case Nos. 8 358 , 8 426 a nd 8 489 C & W Architects, engineers and Project Consultants Co. vs. CJR accordance with the provisions of law. Corollary, its requirements must be strictly complied with.

That an appeal must be perfected in the manner and within the period fix ed by law is not only mandatory but jurisdictional.

Non-compliance with such legal requirements is fata l, fo r it renders t he decision sought to be appealed fina l and executory, with the end result that no court can exercise appellate jurisdiction to review th e decision. ' [Emphasis supplied] Thus, it must be emphasized that jurisdiction over the subject matter or nature of an action is fundamental for the court - to act on a given cont roversy (Commissioner of Internal Revenue, vs. Villa, et a l., G.R. No. L-23988, January 2, 1968) , and is conferred only by law and not by the consent or waiver upon the court which, oth erwise, would have no jurisdiction over the subject matter or nature of an action . Lack of jurisdiction of the court over an action or the subject matter of an action ca nnot be cured by the silence, acquiescence, or even by express consent of the parties (Laresma vs. Abel/a na, G.R. N o. 1 4 097 3, November 11, 2004) . 12.

On th e oth er hand, assuming without admitting that t his Honorable Court has jurisdiction to act on the instant petition, Petitioner was assessed for defi ciency expanded wit hholding tax and documentary stamp tax, respectively for taxable year 2004, for the reaso n that during th e administrative investigati on of its tax case by the BIR, petitioner fa iled to substantiate or submit supporting evidence against the BtR findings, more specifically shown under the

Details of

Discrepancies attached to the

Formal

Assessment Notice (FAN) dated January 25, 2011, the Preli minary Assessment Notice (PAN) dated June 8, 2010, which are briefly discussed hereunder, v iz :

XXX

XXX

XXX t::

CTA Case Nos. 8358, 8426 and 8 489 G & W Architects, lngineers and Project Co11sultants Co. v s. CIR

13.

Verification

disclosed that the 111 condominium units of

Penhurst

Parkplace

Condominium Corporation and the 229 condominium units of Kensington Place Condominium Corporation both located at Global City Fort Bonifacio, Taguig City have already been issued with

Condominium

Certificate of l itle's

(CCTs)

in violation of last paragraph of Section 56(A) of the Tax Code, as amended which states that:

'NO registration of any documents transferring real property shall be effected by the Register of Deeds unless the

Commissioner

or his duly authorized representative has certified that such transfer has been reported, and the tax therein imposed, if any has been paid.'

14. In Memorandum dated April 28, 2009 the Commissioner of Internal Revenue has effectively nullified the BIR ruling exempting the transfer of condominium units to the unit owner under the so- called co-development/built-to-own/built-your-own and similar schemes, and directed to conduct investigation of involved taxpayers.

15. Respondent fully complied with the due process requirement mandated under Section 228 of the 1997 Tax Code, as implemented by Revenue Regulations No. 12-99, when the disputed Preliminary Assessment Notice (PAN) dated June 8, 2010 and Formal Assessment Notice (FAN) dated January 25, 2011 were issued to herein petitioner. Records clearly show that petitioner was duly afforded an opportunity to controvert the initial findings of the respondent involving its deficiency taxes for taxable year 2004 through th e issuance of a

Notice for Informal

Conference and Preliminary Assessment Notice (PAN)

dated June 8, 2010.

Likewise, petitioner was duly appraised by the respondent of the factual and legal basis on how and why he (respondent) arrived at such a deficiency expanded withholding tax and documentary stamp tax, respectively for taxable year 2004, through the receipt of the

Details

of C.

G & W Architects, Lngineers and Project Consultants Co . vs. CJR

Discrepancies attached to the Formal Assessment'

Notice

(FAN)

dated January 25, 2011 and the Preliminary Assessment Notice (PAN ) dated June 8, 2010, as well as other BIR Correspondence/Notices du ly received by petitioner which are found in the BIR records of this case.

16.

Petitioner was assessed by the respondent CIR for deficiency expanded withholding tax and documentary stamp tax for taxable year 2004, within the ten ( 10) year prescriptive period pursuant to Section 222 (a) of the 1997 Tax Code, in view of the fact that petitioner failed - to file the required

Withholding Tax Remittance Return (BIR Form 1606) and Documentary Stamp Tax Declaration/Return (BIR

Form

2000-0T)

on the transfer of the 111 condominium units of

Penhurst

Parkplace

Condominium Corporation and 229 condominium units of Kensington Place Corporation both located at Global City Fort Bonifacio, Taguig City;

17. The assessments issued against petitioner for deficiency expanded withholding tax and documentary stamp tax for taxable year 2004 were made in accordance with law and regulations. 18.

All

presumptions are in favor of the correctness of tax assessments (i.e.

expanded withholding tax and documentary stamp tax for taxable year 2004) issued by the respondent." Respondent likewise filed by registered mail her Answer to the Pelition for Review in CTA Case No. 8426 on May 14, 201242, and interposed denials to the allegations in the said petition.

Respondent fil ed her Answer43 to the Petition for Review in CTA Case No. 8489 by registered mail on July 16, 2012, and raised the following Special and Affirmative Defenses: C.

tJ C l /\ Case No. 8'126, Docket, Vol. I , pp. 155 160.

G & W 1\rchitects, l::ngineers and Project Consultants Co. vs. ClR

"3. She reiterates and repleads the preceding paragraphs of this answer as part of her Special and Affirmative Defenses;

4 . The assessments in question were made and issued in accordance with law, rules and regulations; 5.

The petitioner is time-barred in filin-g the instant petition for review filed on May 11, 2012, hence, the Honorable CTA has no jurisdiction to take cog nizance of th e case. Under Section 228 of t he 1997

Tax

Code, as implemented by Revenue Regulations No 12-99, a taxpayer has thirty

(30) days from receipt of an assessment to file a protest, and another sixty (60) days from such filing to submit all relevant/pertinent documents.

Thereafter, the BIR has one hundred eighty (180) days within which to rule on the protest. The taxpayer has 30 days to appeal to the Court of Tax Appeals (CTA), reckoned from the receipt of decision or the lapse of t he 180 day period.

However, if no releva nt/pertinent documents were submitted by the taxpayer within 60 days from the filing of t he protest, the 180 days inaction of the BIR which is appealable to the CTA should be recko ned from the filing of the protest (Oceanic Wireless Network, Inc., vs.

Commissioner of Internal Revenue, CTA EB No. 76, June 22, 2006; also cited in Fii-Hispano

Holdings

Corporation

vs.

Commissioner

of Internal Revenue, CTA EB No. 343, June 12, 2008) .

6. In case of transfer of real properties, t he situs of taxation is where th e property is located. Thus, the corresponding creditable withholding tax and documentary due on the transfer are to be paid with t he Revenue District office which has jurisdiction over the location of the properties .

7. Under Section 22 (N) of t he NIRC of 1997, as amended , the term 'taxpayer' means any person subject to tax imposed by this Title. Thus, thet:

G & W Arch itects, l::ngineers and Project Consultants Co. vs. ClR

Revenue District Office No. 44 of the Revenue Region No. 8 has jurisdiction to assess taxpayers over the transfer taxes (i.e., creditable withholding tax and documentary stamp tax) due on the properties located within its jurisdiction.

8 . The ' Build-To-Own or Build-Your-Own' concept employed by petitioner is considered pre- selling/selling that should have been subjected to expanded withholding tax (EWT) and documentary stamp tax (DST).

9. Upon examination of RDO No. 44, the facts are not as represented by the petitioner in its request for ru ling. Hence, the transactions should be treated as pre-selling/selling and therefore subject to EWT and DST.

The BIR Ruling DA-338-2007 dated June 20, 2007 issued to petitioner was issued with a very specific collatilla, to wit:

'This ru ling is being issued on the basis of the foregoing facts as represented . However, if upon investigation, it will be disclosed that the facts are different, t hen this ru ling shall be considered null and void.'

10. The nullification of the BIR Ruling DA-338- 2007 dated June 20, 2007 is anchored on the findings that the scheme of build-to-own, build-your-own, and similar concepts mainly consist of the developer making il appear that it merely manages the construction of t he condominium project, and that the funds as contributed by the individual investors are management fee only.

Moreover, in t he above scheme, the assignment and delivery of the developed units to joint owners (individ ual investors), is claimed not to be a taxable event being merely a transfer of property held in trust by the Trustee for the individual Trusters.

The foregoing effectively resulted in the non-payment of income taxes and value-added tax by the developer on the gross project amount. C

G & W /\rchitects, Engineers and Project Co11sultants Co . vs. Cl R

11. The House and Land Use Regulatory Board (HLURB) rej ects the above-scheme being contrary to the policy behind Presidential Decree (P.O.) No. 957, oth erwise known as 'The

Subdivision

and Condominium Buyer's ProtectiYe Decree' (as amended by P.O. 1216).

12. The Assistant Commissioner of the BIR Legal Service had exceeded his delegated authority to render the questioned/ cancelled BIR Ruling DA-338- 2007 dated June 20, 2007 which is a case of first impression which he has no authority to do under Sec. 7 (b) of the NIRC of 1997. Hence, the said BIR Ruling (DA-338-2007) is void and of no effect. 13.

The deficiency assessments against petitioner arose from the transactions covered by One-Time Transactions (ONETT) .

Under Revenue

Memorandum Order (RMO) No. 15-2003, no Letters of Authority (LA) is required before verification can be made of such returns on one-time transactions (ONEn -) .

Thus, any defect in the issuance of the Letter of Au t hority No. 00027637 dated September 29, 2009 has no effect on the validity of the subject deficiency tax assessments and the issuance of the said LA would just be a surplusage because of the aforestated existing RMO 15-2003.

14.

All

presumptions are in favor of the correctness of the tax assessment (Interprovincial Autobus vs. Collector of Internal Revenue, 98 Phil. 290). "

Thereafter, the three (3) cases were set for Pre-Trial Conference on January 19, 201244, June 22, 201245 , and August 10, 201246 .

Accordingly, in CTA Case No. 8358, the Pre-Trial Brief for Petitioner Ad Cautelam4 7 and Respondent's Pre-Trialc 11 C l f\ Case No. 8358 , Docket, Vol. I , p. J59. 1'' CTA Case No. 8476, Docket, Vol. I , p. 167.

G & W /\rcllitect s, Lngineers a nd Project Consultants Co. vs. CIR

Page 1 5 of 58

Briefl 8 were filed on January 16, 2012 and February 14, 2012, respectively.

On the other hand, Petitioner's Pre-Trial Briefl9 and the Pre-Trial Brief (for Respondent) 50 in CTA Case No. 8426 were filed on June 15, 2012 and June 18, 2012, respectively. Also, in CTA Case No. 8489, Petitioner's Pre-Trial Brief51 and Respondent's Pre-Trial Brief52 were filed on August 6, 2012 and August 23, 2012, respectively. On March 27, 2012, petitioner filed a Manifestation stating that a Joint Stipulation will no longer be filed in CTA Case No. 8358 due to some disagreements over the draft Joinl Stipulation. 53 Meanwhile, the parties filed their Joint Stipulation of Facts and Issues in CTA Case Nos. 8426 and 8489 on July 6, 201 2~ 4 and September 28, 201255 , respectively. Upon the termination of the pre-trial of the cases, trial proceeded, giving both parties the opportunity to present Lheir respective documentary and testimonial evidence. After the presentation, marking, identification, and formal offer of evidence, the Court admitted Exhibits "A" to "Q- 1" as part of petitioner's evidence in CTA Case No. 83 5856, Exhibits "A" to "P- 1" in CTA Case No. 842657 , and Exhibits "A" to " P- 1" in CTA Case No. 848958.( 'R CTA Case No. 8358, Docket, Vol. I , pp. /15-718. '19 C l /\ Case No. 811 26, Docket, Vol. 1, pp. 163- 1711. ·,o Cl/\ Case No. 81126, Docket, Vol. I, pp. 18 1-1811 . . ,, CTA Case No. 8489, Docket, Vol. I , pp. 266-/77. ~' Cl/\ Case No. 8"1 89, Docket, Vol. I, pp. 280-283. 'd CTA Case No. 8358, Docket, Vol. l, pp. 733-235. r, , CTA Case No. 8426, Docket, Vol. I , pp. 186- 197. ~~ C r/\ Case No. 8489, Docket, Vol. l, pp. 297 306. r,r, CTA Case No. 8358, Docket, Vol. II, pp. 616-617. ~ 7 CI/\ Case No. 8426, Docket, Vol. II. pp. 780- 781 and 891 893. '•H C 11\ Case No. 8489, Docket, Vol. ll, pp. 922 923.

CTA Case N os. 8358 , 8426 a nd 8489 C & W Architects, Engineers and Project Consultants Co. vs. CTR

The documentary evidence forma lly offered by the petitioner and admitted by the Court are as follows :

Exhibit

A

B

c

D

E

F

G

H

CTA Case N o. 8 358

Description

Certificate of Registration (BIR Form No. 2303) showing G&W's registration at Revenue Region No. 6 under Revenue District Office No. 30 Tra nsfer Certificate of Title (TCT) No. 35847 registered under the name of Fort Bonifacio

Development Corporation ( FBDC)

TCT No. 35849 registered under the name of

FBDC

Deed of Absolute Sale between FBDC and

Penhurst Parkplace Condominium Corporation

notarized on 17 December 2003 Deed of Absolute Sale between FBDC and

Kensington Place Condominium

Corporation

notarized on 21 July 2006 TCT No. 30-P registered under the name of

Penhurst Parkplace Condominium Corporation

TCT No. 1402-P registered under the name of

Kensington Place Condominium Corporation

Condominium Certificate of Title (CCT) Nos. 23 1 registered under the name of Adele A. Jaucian; CCT No. 479 registered under the name of Sps. Edwa rd K. Sy and Emily C. Sy; CCT No . 240 reg istered under the name of Cathy G. Kong; CCT No . 23 5 registed under the name of Pek Eng Lim; CCT No. 223 registered under the name of Glenda T.

Endaya; CCT No. J 1302 registered under the name of Alvin Clifton T. Go; CCT No. 8115 registered under the name of

Angela

S.

Aguilar; CCT No. 12128 registered under the name of Elizabeth Q. Alvina; and CCT No. 10535 registered under t he name of Gina G.

Tan

LOA 27636 dated 29 September 2 009 ~ CTA Case Nos. 8358, 8 4 26 and 8 4 89 G & W 1\rchitects, Engineers and Proj ect Consultants Co. vs. CIR

J

K

Forma l Assessment Notice (FAN) dated 25 J a n u a ry 2 0 11

Contract

to

-Manage

and

Execute

the

Construction

of

Penhurst

Parkplace

Condominium

L

Contract

to

Manage

and

Execute

the

Construction of Kensington Place Condominium

M

Trust Agreement dated 03 July 2002

N

Depository and Disbursing Ag reement dated 23

March 2004

0 Letter Protest dated 24 February 2011 filed with the Bureau of Interna l Revenue (BTR)

P

Supporting documents submitted to t he BI R and Letter dated 29 March 201 1

Q

Judicial Affidavit of Arch. Gilbert C. Yu dated 13

June 2012

Q- 1

Signature of Arch. Gilbert C. Yu

Exhibit

A

B

CTA Case No. 8426

Description

G&W's Articles of Partnership duly filed with

the Securities and Exchange Commission

G&W's Amended Articles of Partnership duly filed with the

Securities

and

Exchange

Commission

C

BI R Certificate of Registration (BIR Form No. 2303), showing G&W's registration at Revenue Region No. 6 under Revenue District Office No. 30

D

Contract

to

Manage

and

Execute

the

Construction of Hamptons Place Condominium

D- 1

Contract

to

Manage

and

Execute

the Construction of Hamptons Place Condom inium L..

G & W 1\rchitec:ts, Engineers and Project Consultants Co. vs. CI R

D-2

Contract

to

Manage

and

Execute

the

Construction of Hamptons Place Condominium

D-3

Contract

to

Manage

and

Execute

the

Construction of Hamptons Place Condominium

E

Depository and Disbursing Agreem ent dated 17

June 2005

E- 1

Depository and Disbursing Agreem ent dated 30

June 200 5

E- 2

Depository and Disbursing Agreement dated J 9

October 2005

E-3

Depository and Disbursing Agreement dated 13

June 200 7

F

Deed of Absolute Sale between Fort Bonifacio

Development

Corporation

and The

Grand

Hamptons Tower 1 Condominium Corporation

G

Transfer Certificate of Title (TCT) No. 3 1276 under the name of Fort Bonifacio Development

Corporation ( FBDC)

H

TCT No. 2270-P under the name of The Grand

Hamptons Tower I Condominium Corporation

I

Condominium Certificate of Title No. 303 75 under the name of Nelly Uy Yu

I - 1

Condominium Certificate of Title No. 29777 under the name of Michael Joseph B. Celis

I -2

Condominium Certificate of Title No. 29764 under the nam es of Sps. Ernesto S. Esmani and Rebecca E. Esrnani

I -3

Condominium Certificate of Title No. 30371 under the name of Shirley Y. Sy

J

BIR Ruling No. DA-::337-2007 dated 2G June 2007

K

Reven ue Memorandum Circular No. 55- 2010 dated 28 June 201 0

L

Letter of Authority No. 200800027639 dated

29 September 2009 ("LOA 27639")(

CTA Case Nos. 8358, 8426 and 8 489 G & W Architects, Engineers and Project Consultants Co. vs. CIR.

M

Formal Assessment Notice ("FAN") dated 10 (with sub markings June 2011 " M-1" to "M-4)

N

Letter Protest dated 06 July 2011, filed by petitioner G&W on 06 July 20 11 0 Supporting Documents submitted to the BIR and Letter dated 22 July 2011, filed by petitioner G&W on 27 July 201 1

P

Judicial Affidavit of Arch. Gilbert C. Yu dat ed 17

October 201 2

with sub marking Signature of-.Arch. Gilbert C. Yu

Exhibit " P-1"

Exhibit

A

B

c

D

0- l

D- 2

CTA Case No. 8489

Description

G&W's Articles of Partnership duly fi led with and certified by the Securities and Exchange

Commission ("SEC") on 3 J January 1978

G&W's Amended Articles of Partnership duly filed with and certified by the SEC on 15

January 1998

BIR Certificate of Registration (BIR Form No. 2303) No.

1 RC0000586533

issued on 01 January 1996, showing G&W's registration at Revenue Region No. 6 under Revenue District Office No. 30

Contract

to

Manage

and

Execute

the

Construction of Hamptons Place Condominium

executed by and between Jayan Russel S. Dy and Janette Sy Dy and petitioner G&W dated

23 August 2006

Contract

to

Manage

and

Execute

the

Construction of Hamptons Place Condominium

executed by and between Enrique B. Gcpilano, Ill and Gretelwolda C. Gepilano and petitioner G&W dated 29 June 2006

Contract

to

Manage

and

Execute

the

Construction of Hamptons Place Condominium

executed by and between Mitchell 0. Soria and4C

G & W Architects, Engineers and Project Consultants Co. vs. CIR

E

Anna Marie P. Amoroso and petitioner G&W dated 11 May 200 7 Depository and Disbursing Agreement dated 01 September 2006 executed by and between Jayan Russel S. Dy and Janette Sy Dy and

Banco de Oro Universal Bank - Trust Banking

Group

E- 1

Depository and Disbursing Agreem ent dated 12 July 2006 executed by and between Enrique B. Gcpilano, III and Gretelwolda C. Gepilano and

Banco de Oro Universal Bank - Trust Banking

Group

E- 2

Depository and Disbursing Agreement dated 01 June 2007 executed by and between Mitchell

0. Soria and Anna Marie P. Amoroso and Banco

de Oro Universal Bank - Trust Banking Group

F

Deed of Absolute Sale executed between Fort

Bonifacio Development Corporation and The

Grand

Hamptons

Tower

II

Condominium

Corporation dated 16 June 2008

G

Transfer Certificate of Title (TCT) No. 3J 275 under the name of Fort Bonifacio Development

Corporation ( FBDC)

H

TCT No. 2434-P under the name of The Grand Hamptons Tower lJ Condominium Corporation

I

I -1

I -2

J

K

Condominium Certificate of Title No. 36079 under the names of Jayan Russel Sy Dy and

Janette Sy Dy

Condominium Certificate of Title No. 36099 under the names of- Sps. Enrique B. Gepilano and Gretelwolda G. Gepilano Condominium Certificate of Title No. 36104 under the names of Sps. Mitchell Oliva Soria and An na Marie Amoroso Soria BIR Ruling No. DA-337-2007 dated 20 June 2007 Revenue Mem orandum Circular No. 55-2010 dated 28 June 2010C

G & W Architects, Lngineers and Project Co11sultants Co. vs. C!R

L

Letter of Authority No. 2008 00027637 dated

29 September 2009 (" LOA 27637")

M

Form al Assessment Notice ("FAN ") dated 26 (with sub-markings July 20 11 " M 1" to " M 4)

N

Letter Protest dated 24 August 2011, filed by petitioner G&W on 25 August 2011 0 Supporting Documents submitted to the B1R and Letter dated 14 October 201 1, fi led by petitioner G&W on 18 October 201 1

P

Judicial Affidavit of Arch . Gilbert C. Yu dagted

12 November 20 1 2

with sub marking Signature of Arch. Gilbert C. Yu

Exhibit" P-1"

During the presentation of respondent's evidence, respondent filed her Manifestation with Urgent Motion fo Consolidate CTA Case Nos. 8358, 8426 and 8489 on September 12, 201 359 , w hich was later granted during the hearing held on September 20, 201 360 . The Court admitted as part of respondent's evidence Exhibits "1" to "30-A", with the exception of Ex hibits " 17 -A", " 19" "19-A" "24" and "24-A" for CTA Case No 8358 · , , , .

, Exhibits "1" to "30-a" except Exhibits " 4" " 4-a" " 4-b" " 4- , , ' , c" "8" "8-a" " 8-b" " 9" "9-a" " 10" " 13" " 13-a" " 13- b" '

I

I

f

I

I

I

f f

I

f and " 15-a" for CTA Case No. 842.6; and Exhibits " R- 1" to "R- 25-1" for CTA Case No. 8489.61 Respondent's consolidated documentary evidence are as follows:

CTA Case No. 8358

Exhibit

Description'-

'''1 CTA Case No. 83~8, Docket, Vol. II, pp. 761-765; CTA Case No. 8426, Docket, Vol. II, pp. 917 921; Cl/\ Case No. 81189, Docket, Vol. II, pp. 941-945. c,o CTA Case No. 8358, Docket, Vol. II, pp. 767-768; CTA Case No. 8426, Docket, Vol. II, pp. 923 924; Cl/\ Case No. 8489, Docket, Vol. II, pp. 946-947. 6 1 C l/\ Case No. 8358, Docket, Vol. 11, pp. 1395- 1397 and 1443- 1448.

CTA Case Nos. 8358, 842 6 and 8489 G & W Architects, Engineers and Proj ect Consultants Co. vs. CIR

BlR Records bearing the report of investigation on the deficiency Ex panded Withholding Tax

(EWT) and Documentary Stamp Tax (DST)

liabilities of petitioner for taxable year 2014. 2 BIR First Notice dated October 6, 2009 to present records addressed to petitioner.

2-A

Name and specimen signature of GERRY 0 . DUMAYAS, Revenue District Officer of BI R ROO 44, Tag uig/ Pateros.

2-B

Date of receipt of petitioner of the sa id BIR First Notice dated October 6, 2009. 3 BIR Second Request to Present Records dated November 9, 2009 addressed to petitioner.

3-A

Name and specimen signature of GERRY 0 . DUMAYAS, Revenue District Officer of BI R ROO 44, Taguig/Pateros.

3-B

Date of receipt of petitioner of the said BIR Second Request to Present Records dated Novem ber 9, 2009.

4 BIR Letter dated January 20, 2010 addressed to petitioner, inviting for an informal conference.

4-A

Name and specimen signature of GERRY 0 . DUMAYAS, Revenue District Officer of BI~ ROO 44, Taguig/Pateros.

4-B

Summary of Computation of the Tax Liability of

petitioner for taxable yea r 2004 which was attached to the said BIR Letter dated January 20, 201 0.

4-C

Date of receipt of petitioner of the said BI R Letter dated January 20, 2010 with attached Summary of Com putation of its Tax Liabilities for taxable year 2004.

5 Memorandum Report dated March 23, 2010 of Revenue Officer RHODORA S. DE VILLA.

5-A

Name and specimen signature of Revenue Officer RHODORA S. DE VILLA.~

G & W /\rchitects, Engineers and Project Consultants Co. vs. CIR

6

BJR

Preliminary

Assessment

Notice

(PAN)

dated July 1, 2010, assessing petitioner a deficiency Ex panded Withholding Tax (EWT) and Documentary Stamp Tax (DST) for taxable year 2004 for its

Kensington

Place

Condominium Project, located in Taguig City, Metro Manila .

6-A

Name and specimen signature of JAIME B. SANTIAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City.

6-B

Details of Discrepancies attached to the said

Bl R

Preliminary

Assessment

Notice

(PAN)

dated July 1, 20 10.

6-C

Name and specimen signature of JAIME B. SANTlAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City.

6-D

Date of receipt of petitioner of the said BlR Preliminary Assessment Notice (PAN) dated

July

1, 2010 with attached Deta ils of Discrepancies.

7 Memorandum Report dated August 10, 2010 of Revenue Officer RHODORA S. DE VILLA.

7-A

Name and specimen signature of Revenue Officer RHODORA S. DE VILLA.

8 BIR Letter dated August 18, 20 10, in reply to petitioner's protest against the BIR Preliminary Assessment Notices (PAN) dated July 1, 2010.

8-A

Name and specimen signature of GERRY 0. DUMAYAS, Revenue District Officer of BIR RDO 44, Taguig/Pateros.

9 BIR Letter dated October 1, 2010, in reply to petitioner 's Letter dated September 14, 2010.

9-A

Name and specimen signature of GERRY 0 . DUMAYAS, Reven ue District Officer of BIR RDO 44, Tag uig/ Pateros.

9-B

Date of receipt of petitioner of the said BlR Letter dated October 1, 20 10.C

G & W Architects, Engineers and Project Consultants Co. vs. CIR

10 Memorandum Report dated December 2, 2010 of Revenue Officer RHODORA S. DE VILLA.

10-A

Name and specimen signature of Revenue Officer RHODORA S. DE VILLA.

11

BIR Formal Assessment Notice (FAN) and

Letter of Dem and dated 25 January 2011 addressed to petitioner.

11-A

Name and specimen signature of JAIME B. SANTIAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City.

11-B

Details of Discrepancies attached to the said

BIR Formal Assessment Notice

(FAN) and

Letter of Demand dated 25 January 201 1.

11-C

Name and specimen signature of JAIME B. SANTIAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City.

11-D

Date of receipt of petitioner of the said BIR

Formal Assessment Notice (FAN) and Letter of

Demand dated 25 January 2011 with attached Details of Di sc re pan c~es .

12 Certified True copy of the Housing and Land Use Regulatory Board (HLURB) Decision dated 26 July 2005 in the case entitled " ln the Matter

of Imposition of Administrative Fine and Cease

and Desist Order - G & W Architect, Engineer and Project Dev't. Consultants, Inc.", docketed HLURB Case No. REM-A-041130-0 252.

12-A

Ruling/Order of the Housi ng and Land Use Regulatory Boa rd (HLURB) on the appeal filed by petitioner in HLURB Case No. REM-A- 0411 30-0252.

13

Certified

True

Copy

of

BIR

Revenue

Memorandum Order (RMO) No. 15- 2003 dated May 8, 2003 .

13-A

BIR Policies stated under sub-paragraph 11 of RMO 15- 2003 on the tax examination involving the transfer of rea l properties covered under the ONETT system of the BLR.( CTA Case Nos. 8358, 8 4 26 a nd 8 4 89 G & W Architects, ~ngineers and Project Consultants Co. vs. ClR

14

Certified

True

Copy

of

BJR

Revenue

Memorandum Circular No. 55-2010 dated June 28, 2010.

14-A

Name and specimen signature of JOEL L. TAN- TORRES, then

Commissioner

of

Internal

Revenue.

15 Certified True Copy of the Original BIR Ru ling No.

DA-956-03 dated February 24, 2003, issued by the BIR to petitioner for its Penhurst Parkplace Condominium project.

1 5-A

BJ R disclaimer/collatilla specified under the said BIR Ruling No. DA-056- 03 dated February 24, 2003, issued by the BIR to petitioner.

1 5-B

Name and specimen signature of MILAGROS V. REGALADO, Asst. Commissioner, Legal Service of the BIR.

16 Certified True Copy of the Original Bl R Ruling No.

DA-455-2007 _dated August 17, . 2007 issued by the

BIR

to petitioner for its Kensington Place Condominium project.

16-A

BlR disclaimer/collatilla specified under the said BIR Ru ling No. DA-455-2007 dated August 17, 2007, issued by the BIR to petitioner.

16-B

Name and specimen signature of JAMES H. ROLDAN, Asst. Commissioner, Legal Service of the BIR.

18 BlR Letter addressed to petitioner informing the latter about the revocation made by the CIR of BIR Ruling No. DA,-455-2007 dated August 17, 2007, issued for its Kensington Place Condo. project; BIR Ruling No. DA-624- 2004 dated December 10, 2004 issued for its

Kensington

Place Condo. Project; and BI R

Ruling

No.

DA-056-03 dated February 24, 2003, issued fro its

Penhurst

Parkplace

Condominium project.

18-A

Date of receipt by petitioner of the said BI R Letter/Notice of Revocation."

CTA Case Nos. 8 358 , 8 426 a nd 8 4 8 9 G & W Architects, [n~Ji 'neers and Project Consultants Co. vs. C!R

18-B

Name and specimen signature of JOEL L. TAN- TORRES, then Comm issioner of

Internal

Revenue.

20 Certified True Copy of the Memorandu m dated January 28, 2008 of the Chief, Lega l Division, BIR RR8 Makati City.

20-A

Name and specimen signature of ALBERTO R. BOMEDIANO, JR., Chief Legal Division BIR, RR8, Makati City.

2 1 Letter dated 3 April 2008 of petitioner through its counsel PACIS & REYES LAW FIRM, filed with the BIR Nationa l Office- Law Div., Quezon City in protest to the internal Memorandum dated

January

28, 2008

of ALBERTO

R.

BOMDEDJ.ANO, JR., Chief, BLR Lega l Division.

21-A

Specific statement made by petitioner under the sa id Letter dated 3 April 2008. · 22 BIR Notice for Informal Conference dated July 22, 2008 of the Revenue District Officer, BIR ROO 44, Taguig/Pateros.

22-A

Name and specimen signature of LElDA G. BUSCAINO, Revenue District Officer of BIR ROO 44, Taguig/Pateros.

22-B

Date of receipt of petitioner of the said BlR Notice for Informal Conference dated July 22, 2008.

23 Letter dated 20 May 2009 of the Regional Director, BIR RR8 Makati City.

23-A

Name and specimen signature of ALFREDO V. M £SAJON, then Regional Director of BJ R RR8 Makati City.

23- B

Date of receipt of petitioner of the said BIR Letter dated 20 May 2009.

25

BIR

Preliminary

Assessment

Notice

(PAN)

dated June 8, 20 10, assessing petitioner a deficiency Expanded Withholding Tax (EWT)

and Documentary

Stamp (DST) for taxable year 2004 for its

Penhurst Condominium

Project, located in Taguig City, Metro Manila.(

G & W 1\rchit.ects, Ln~Jineers and Project Consu ltants Co. vs. CIR

25-A

Nam e and specimen signature of JAIME B. SANTIAGO, CESO V, Regiona l Director, BIR Revenue Region No. 8, Makati City.

25-B

Details of Discrepancies attached to the said

BIR

Preliminary

Assessm ent

Notice

(PAN)

dated June 8, 2010.

25-C

Name and specimen signature of JAIME B. SANTIAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City. 26 Letter dated November 16, 2012 of the Chief, Lega l Division, RR8 Makati City, addressed to the Board of Com missioner's Housing and Land Use Regulatory Board (HLURB).

26-A

Name and specimen signature of OSCAR A. AGUILAR, Chief Legal Division of BIR, RR8, Makati City.

27 Letter dated November 16, 20 12 of the Chief, Legal Division, RR8 Makati City, addressed to the Ch ief, Law Division, BlR National Office, Diliman, Quezon City.

27-A

Name and specimen signature of OSCAR A. 28 AGUILAR, Chief Legal Division of BIR, RR8, Makati City.

Memorandum

dated respondent's witness, BARROGA.

March

Atty.

28, 2010 of CHRISTINA C.

28-A

Name

and specimen signature of Atty .

CHRISTINA C. BARROGA.

29 Judicial Affidavit dated March 25, 2013 of respondent's witness, Atty.

CHRISTINA

C.

BARROGA.

29-A

Name

and specimen signature of Atty.

CHRLSTINA C. BARROGA.

30 Amended Judicial Affidavit dated March 22, 20 1 3 of respondent's witness, Revenue Officer RHODORA S. DE VILLA.(.

CTA Case Nos. 8 358, 8 426 a nd 84 8 9 G & W /\rch itects, engineers and Project Consultants Co. VS. em

30-A

Name and specimen signature of Revenue Officer RHODORA S. DE VILLA.

CTA CASE No. 8426

Exhibit

Description

BLR Records

2 1st Notice for Presentation of Records dated October 5, 2009 2-a Stamped received by G & W on the 1 sL Notice for Presentation of Records dated October 5, 2009 2-b Signature of Catherine F. Tabagan 3 Second Notice dated November 9, 2009 3-a Stamped received by G & W on the Second Notice dated November 9, 2009 5 Letter dated February 1, 2010 5-a Stamped received by G & W on the Letter dated February 1, 20 10 5-b

Signature of Revenue District Officer Gerry

Dumayas

6 Memorandum dated March 1, 2010 6-a Signature of Revenue Officer Catherine F.

Tabagan

6-b Sig·nature of Group Supervisor Frederico Q.

Pilarca

6-c

Signature of Revenue District Officer Gerry

Dumayas

7 Notice of Decision in HLURB Case No. 7-a

HLURB Decision/Disposition of the Case

1 1 Memorandum dated August 23, 2010 11-a Signature of Revenue Officer Catherine F.

Tabagan~

G & W /\rchitects, Lngineers and Project Consultants Co. vs. CJR

11-b Signature of Group Supervisor Frederico Q.

Pilarca

11-c Signature of Gerry 0 . Dumayas 12 Letter dated October 1, 2010 12-a Stamped received by G &W on the Letter dated October 1, 20 10 12-b

Signature of Revenue District Officer -Gerry

Dumayas

14 Memorandum dated May 19, 2011 14-a Signature of Catherine C. Fuentes 14-b

Signature of Revenue District Officer Maridur

V. Rosario 1 5 Letter dated May 19, 2011 16

Assessment

Notices dated June 10, 201 1 together with the Formal Assessment Notice also dated

June

10, 2011 with its corresponding Details of Discrepancies 16-a

Signature

of

Regional

Director

Jaime

B.

Santiago on the front page of the Assessment Notice dated June 10, 20J 1 17 Stamped received by Johanna Co, Accounting Staff, on the Assessment Notices dated June 10, 20 11 on June 28, 2011 18

Memorandum of Assignment

19 Letter dated March 15, 20 12 19-a Stamped received by G & W on the Letter dated March 15, 2012 on March 15, 2012 with signature of Johanna Co 19-b Handwritten proof of receipt by Atty. Caganda on behalf of G & W 19-c Signature of Reven ue District Officer Maridur V. Rosariol

G & W Architects, l::ngineers and Project Consultants Co. v s. CIR

20 Memorandum dated January 28, 2008

20-a Signature of Alberto R. Bomediano Jr., Chief,

Legal Division

21 Letter dated May 20, 2009 21-a Signature of Alfredo V.

Misajon,

Regional

Director

22

Letter

addressed to the

President of the

petitioner by Commissioner Joel L. Tan -Torres 22-a

Signature

of

Joel

L.

Tan-Torres, the

Commissioner of Internal Revenue

22-b

Stamped

received by petitioner's representative in the person of Liza Chan, Admin . Head, on June 29, 2010 23 Revenue Memorandum Circular No. 55-2010 dated June 28, 2010 24

Judicial Affidavit of Revenue Officer Catherine

C. Fuentes 24-a Signature of Catherine C. Fuentes 25 Complaint in Civil Case No. 71615 (consisting of 16 pages) filed by Joseph Anthony M. Alejandro against G & w Architect, Engineers Project Development Consultants Co. et. al. 26 Amended Complaint (consisting of 16 pages) in Civil Case No. 7 1 615 filed by Joseph Anthony M.

Alejandro

against

G

&

W

Architect,

Engineers

Project

Development Consultants

Co. et. al.

27

Answer

with

Compulsory

Counterclaim

(consisting of 34 pages) of the counsel of G & W Architect, Engineers Project Development Consultants Co. in Civil Case No. 71615 28 Copy of the printouts gathered from the website (http://www.gw- architects .com/ grandhamptons) which advertised petitioner's sale of condo. units to prospective buyers.( CTA Case Nos. 8358, 8 426 a nd 8 4 8 9 G & W Architects, Engineers and Project Consultants Co. vs. CJR

28-a Page two of the Copy of the printouts gathered from the website (http://www.gw- architects.com/ grandhamptons) w hich advertised petitioner's sale of condo. units to prospective buyers - 29 Supplem ental Judicial Affidavit of Catherine C.

Fuentes

29-a Signature of Catherine C. Fuentes 30 Judicial Affidavit of Rhodora S. De Villa 30-a Signature of Rhodora S. De Villa

Exhibits

R- 1

R- 1-1

R-2

R-2-1

R-3

R-3- 1

R-4

R-4- 1

R-5

R- 5-1

R- 5- 2

CTA Ca se No. 8489

Description

Revenue Memorandum Order (RMO) No. 15- 2003 dated May 8, 2003

Sub-paragraph 11 of RMO 15- 2003

First Notice dated October 12, 2009 Name and signature of Revenue Officer (RO) MARY ANN G. ZAMUCO Second Notice dated November 9, 2009 Name and signature of Revenue District Officer (RO) GERRY 0 . DUMAYAS Schedule of Computation of the corresponding deficiency taxes due from petitioner based on the List of Unit Owner (so-called "investors") subrnilted by petitioner List of Unit Owner (so-called " investors") submitted by petitioner Post Reporting Notice (PRN) dated April 16, 2010

Name

and signature of

ROO

GERRY

0.

DUMAYAS

Date of Receipt on April 16, 2010~

G & W /\rch itects, Engineers and Project Consultants Co. vs. CJR

R-6

R-6-1

Memorandum Report dated May 12, 2010 Name and signature of RO MARY ANN G.

ZAMUCO

R- 7

Housing

and

Land

Use

Regulatory

Board

(HLURB) Decision dated July 26, 2005

R-8

Amended

Complaint

filed by Mr.

Joseph

Anthony M. Alejandro vs. G & W Architects,

Engineers

and

Project

Development

Consultants, et. al., docketed as Civil Case No. 71615, RTC Br. 271, Taguig City

R-9

Answer with Compulsory Counter-Claim filed by petitioner in the case "Joseph Anthony M. Alejandro vs. G & W Architects, Engineers and

Project

Development

Consultants, et.

al., docketed as Civil Case No. 71615, RTC Br. 271, Taguig City

R- 1 0

Computer

Print-Out

of petitioner's Advertisem ent for the Grand Hamptons Tower R-1 l BIR Letter dated November 16, 2012 signed by Atty . Oscar A. Agui lar addressed to the HLURB

R- 11- 1

R-12

R- 12-a

R- 13

R-13- 1

R-13-2

R-14

R- 14- 1

Name

and signature of Atty.

OSCAR

A.

AGUILAR

Memorandum dated March 28, 2010 Name and signature of ATTY. CHRISTINA C.

BARROGA

BIR letter addressed to petitioner informing the latter of the nullification of BIR Rul ing No. 337- 2007 dated June 20, 2007 and other BJR Rulings issued to petitioner Name and signature of then Commissioner JOEL C. TAN-TORRES Date of petitioner's Receipt on June 29, 201.0 Formal Assessment Notice (FAN) dated July 26, 2011 Details of Discrepancies attached to the FAN dated July 26, 2011. C

G & W 1\rchitects, E n~Jinee rs and Project Consultants Co. vs. CIR

R- 15

R-16

R-17

R- 17-a

R- 18

R-18-1

R-19

R-20

R-20-1

R-2]

R-2 J-l

R-22

R-22-1

Page 33 of 58

Schedule of Payments of petitioner 's clients Mr. JAYAN RUSSEL and Ms. JANETIE SY DY Schedule of Payments for petitioner's clients Sps.

ENRIQUE

B.

GEPILLANO

III

and GRETELWOLDA C. GEPILLANO Judicial Affidavit dated September 20, 2013 of ATIY. CHRISTINA C. BARROGA Name and signature of ATIY. CHRISTINA C.

BARROGA

Judicial Affidavit of Revenue officer MARY ANN G. ZAMUCO Signature of Revenue Officer MARY ANN G.

ZAMUCO

Manifestation dated September 2, 2005 filed by petitioner before the HLURB manifesting that it will no longer appeal or ask for a reconsideration of the HLURB's Decision dated July 26, 2005 Certificat e of Registration No. 20133 issued to petitioner as the project owner and developer

of THE GRAND HAMPTONS TOWER I

License to Sell No. 21947 issued to petitioner as the project owner and developer of THE GRAND HAMPTONS TOWER I , Certificate of Registration No. 24027 issued to petitioner as the project developer of THE

GRAND HAMPTONS TOWER II

License to Sell No. 25720 issued to petitioner as the project developer of THE

GRAND

HAMPTONS TOWER II

Certificate of Registration No. 24426 issued to petitioner as the project developer of THE

CRESCENT PARK RESIDENCES CONDOMINIUM

License to Sell No. 26181 issued to petitioner as the project developer of THE CRESCENT

PARK RESIDENCES ~O NDOMINIUMC

G & W Architects, Engineers and Proj ect Consultants Co. vs. CJR

R-23

R-23-1

R-24

R-24-1

Certificate of Registration No. 24418 issued to petitioner as the project developer of THE

BLUE SAPPHIRE RESIDENCES

License to Sell No. 26169 issued to petitioner as the project developer of

THE

BLUE

SAPPHIRE RESIDENCES

Certificate of Registration No. 24028 issued to petitioner as the project developer of THE

SAPPHIRE RESIDENCES

License to Sell No. 2527 1 issued to petitioner as the project developer of THE SAPPHIR

RESIDENCES

R-25

Judicial

Affidavit

of ATfY.

MARlA

LUlSA

PANGAN

R-25- 1

Name and signature of ATTY. MARIA LUISA

PANGAN

The Memorandum for the Petitioner62 was filed on

October

10, 2014 ;

while respondent's

Consolidated

Memorandum

was fi led throug h registered mail on November 11, 2014. 63 I n a

Resolution

dated

November

28, 2014, the consolidated cases were submitted for decision. 64

Based

on the

Pre-Trial

Brief

for

Petitioner

Ad

Cautelam65 , Respondent's Pre-Trial BrieF6 in CTA Case No. 8358, and Pre-Trial Orders in CTA Case Nos. 842667 and 8489 68 , the parties raised the following issues for this Courl's resolution:

6/

1. Whether or not there is a sale transaction from petitioner G & W to the unit owners; ( Cl/\ Case No. 8358, Docket, Vol. II, pp. 1'149 1476. fil CTA Case No. 8358, Dockel , Vol . I , pp. 179-202 and /05-206. 6~ CTA Case No. 8358, Dockel, Vol. I, pp. ns ~ ns and 217. (J', C I 1\ Case No. 8358, Docket, Vol. I, pp. 1 /9- 20 2 and 205-206. fif> CTA Case No. 8358, Dockel, Vol. I , pp. /15-218 and 217. 67 C I 1\ Case No. 84 26, Docket, Vol. II, pp. /72-7 78 and 773 774. f>H Cl/\ Case No. 8489, Docket, Vol. I , pp. 608-615 and 610-611 .

G & W Architects, Engineers and ProJect Consultants Co. vs. CIR

2. Whether or not petitioner G & W is liable for withholding taxes;

3. Whether or not the tax deficiency assessment is null and void for the following reasons, among others;

a. Whether or not the Letter of Authority covering prior years, is in violation of Revenue Memorandum Order No. 43- 90· ,

b. Whether or not the Letter of Authority was issued by the Revenue Region No. 8 beyond its jurisdiction, petitioner G & W being a registered taxpayer in Revenue District No. 30 of Revenue Region No. 6;

c. Whether or not the tax deficiency assessment had already prescribed;

d. Whether or not the tax deficiency assessment does not state the facts and law upon which it is based in violation of Section 228 of the Tax Code;

e. Whether or not the revocation of the subject BIR Rulings has no facts and law on which said revocation is based; and

f. Whether or not the revocation of subject

BIR

Rulings

cannot be retroactively applied in violation of petitioner G & W's vested proprietary rights;

4. Whether or not petitioner G & W is liable to the deficiency Expanded Withholding Tax (EWT) and Documentary Stamp Tax (DST) on the alleged sa le by petitioner of the condominium units;

5. Whether or not there was an investigation conducted to determine the legal basis for nullifying the BIR Ruling No. DA-337-2007 dated June 20, 2007;'

G & W Architects, Eng ineers and Project Consultants Co. vs. CLR

6. Whether or not the Assistant Commissioner of the Legal Service has the authority to issue BIR Ruling No. DA-337-2007 dated June 20, 2007; and

7. Whether or not the subject transactions are One-

Time

Transactions

(ONETT)

under

Revenue

Memorandum Order (RMO) No. 15-2003, where no

Letter of Authority

is required before verification can be made of such returns. Additional issues raised by respondent in CTA Case No. 8358:

8. Whether or not the deficiency expanded withholding tax and documentary stamp tax assessments of petitioner for the taxable year 2004 has already become final, executory and demandable pursuant to Section 228 of the 1997 Tax Code;

9 . Whether or not the Court has jurisdiction to entertain the instant case ; and

10. Whether or not petitioner filed with the BIR the required

Withholding Tax Remittance Return

(BIR Form 1606) and Documentary Stamp Tax

Declaration/Return (BIR Form 2000-0T) on the

transfer of the 111 condominium units of

Penhurst Parkplace Condominium Corporation

and 229 condominium units of Kensington Place ' Corporation both located at Global City Fort Bonifacio Taguig City.

Respondent alleges that the Court has no jurisdiction over the subject matter in CTA Case Nos. 8358 and 8489 since petitioner failed to submit the required documents in support of its protest against the FAN dated January 25, 2011 and July 26, 2011, wilhin sixty (60) days from the filing of its administrative protests on February 24, 2011 andt

G & W Architects, Engineers and Project Consultants Co. vs. CIR

August 25, 2011, respectively.

Hence, the deficiency EWT and DST assessment for taxable y ear 2004 has already become final, executory and demandable. As such, this Court has no jurisdiction to act on the instant petition . T his Court disagrees.

The Court finds instructive Section 228 of the NIRC of 1997, as amended, the pertinent portion of which reads : "SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his findings: Provided, however, That a preassessment notice shall not be required in the following cases:

XXX

XXX

XXX

Such

assessment may be protested administratively by filing a request for reconsideration or reinvestigation within thirty (30) days from receipt of the assessment in such form and manner as may be prescribed by implementing rules and reg ulations. Within sixty (60) days from filing of the protest, all relevant supporting documents shall have been submitted; otherwise, t he assessment shall become fina l.

If the protest is denied in whole or in part, or is not acted upon within one hundred eig hty (180} days from submission of documents, the taxpayer adversely affected by t he decision or inaction may appea l to the Court of Tax Appeals within thirty (30) days from receipt of the said decision, or from the lapse of the one hundred eighty (180)-day period; otherwise, the decision shall become final, executory and demandable."

Petitioner is given a period of sixty (60) days from the filing of the protest within which to submit supporting~

C & W Architects, Engineers and Project Consultants Co. vs. CIR documents. While respondent alleges that petitioner failed to submit supporting documents on its protests filed on February 24, 2011 and August 25, 2011, records show that petitioner submitted supporting documents to respondent on March 30, 2011 69 for its protest filed on February 24, 2011 and on October 18, 2011 70 for its protest filed on August 25, 2011. Counting from t he filing of supporting documents, respondent had 180 days, or until September 26, 2011 and April 15, 2012 within which to render her decision on the protests.

Since respondent fail ed to act on the said protests, petitioner had 30 days from the expiration of the 180 days, or until October 26, 2011 and May 15, 2012, wilhin which to file its appeal before this Court. Clearly, the Pelilions for Review filed on October 21, 2011 and May 11, 2012 pertaining to the protests filed on February 24, 2011 (in CTA Case No. 8358) and August 25, 2011 (in CTA Case No. 8489) were within the 30-day prescriptive period within which to file an appeal before the Court. The Court sha ll proceed to determine whether the deficiency tax assessment is null and void. Petitioner alleges that the tax deficiency assessments issued by respondent are null and void since the Letter of Authority issued covers prior years in violation of Revenue Memorandum Order (RMO) No. 43-90, and that the Letter of Authority issued by Revenue Region No. 8 was beyond its jurisdiction, since it is a registered taxpayer of Revenue District Office No. 30 of Revenue Region No. 6. On the other hand, respondent argues that the investigation on the taxability of petitioner for the alleged transfer of the subject condominium units are covered by Revenue Memorandum Circular (RMC) No. 55-2010 dated June 28, 2010, in relation to RMO No. 15- 2003 dated May 8, 2003, wherein no Letter of Authority is required before verification can be made to determine if indeed petitioner is liable to pay the subject deficiency taxes.(' (>'l Lxhibit " P", C II\ Case No. 8358, Petitioner's Exhibits in expanding envelope.

G & W 1\rchitects, Engineers and Project Consultants Co. vs. CIR

The then Commissioner of Internal Revenue issued RMO No. 15-2003 dated May 8, 2003, which set the policies, guidelines and procedures in the processing and monitoring of One-Time Transactions (ONETT) and the issuance of

Certificates

Authorizing

Registration

(CARs)

covering transactions subject to EWT on sale of real properties considered as ordinary assets, and other taxes including DST related to the sale/transfer of properties, among others. The significant portion of RMO No. 15-2003 reads: "I. OBJECTIVES:

This Order is issued to :

1.

Simplify

documentary requirements and procedures in the processing, verification/audit and review of tax returns on ONETT. 2.

Ensure

timely issuance of

Certificates

Authori zing Registration.

3. Ensure the imposition and collection of the correct tax(es).

4. Establish m easures to monitor the processing, review and evaluation of ONETT cases.

5. Provide sanctions to be imposed for non- compliance by revenue personne'l concerned. II. POLICIES:

In order to achieve the above objectives, the following policies shall be observed:

1. ONETT shall cover transactions subject to Final Capital Gains Tax (FCGT) on sale of real properties considered as capital assets as well as Capital Gains c CTA Case Nos. 8 358, 8426 and 8 4 89 G & W 1\rchitects, Engineers and Project Consultants Co. vs. CI R

Tax (CGT) on the Net Capital Gain on sale, transfer or assignment of stocks not traded in the

Stock

Exchange(s), Expanded Withholding Tax {EWT) on sale of real properties considered as ordinary assets, Donor's Tax (ON), Estate Tax (ES) and other t a xes r elated thereto including Documentary Stamp Tax (DST) .

XXX

XXX

XXX

11. Issuance of Tax Verification Notice or Letters of Authority {TVN/LA) for ONETT shall no longer be require d except for estate tax case with other tax liabilities of the decedent to determine the other internal revenue tax liabilities that should be paid by the estate before distribution of the properties to the heir/s." (Emphasis supplied) Under the said RMO, issuance of Tax Verification Notice (TVN) or Letters of Authority (LOA) for ONETT shall no longer be required.

The deficiency EWT and DST assessed on the alleged sale of real property considered as ordinary assets in this case being covered by the ONETT, the investigation on the said tax liabilities is sti ll va lid even without the Letters of Authority issued by respondent since LOAs or TVN for the said transaction are no longer required. Moreover, in RMC No. 55-201071 , Commissioner Joel L.

Tan-Torres

found that petitioner committed misrepresentation in its request for ruling on its "Build-To- Own or Build-Your-Own" concept for which it has obtained

BIR

Ru ling Nos.

DA-056-2003

(Penhurst

Parkplace

Condominium),

DA-624-2004

(Kensington

Place

Condominium), DA-455-2007 (Kensington Condominium), DA-410-2007 (Sapphire Residences), DA-409-2007 (Blue

Sapphire

Residences

Condominium), and

DA-337-2007

(Grand Hamptons Place Condominium) . Thus, in the same RMC, Commissioner Tan-Torres declared the said BIRt.:

' 1 exhibit "K", C f 1\ Case No. 84 26, Docket, Vol. I, pp. 622 623.

G & W 1\rchilects, En~Jineers and Project Consultants Co. v s. CJR

Rulings as null and void and ordered the conduct of a full blown audit and investigation to ascertain the amount of taxes owed by petitioner in connection with the said "Build- To-Own or Build-Your-Own" scheme.

Accordingly, the investigation on petitioner's transfer lax (EWT and DST) liabilities was clearly authorized by then BIR Commissioner Joel L. Ta n-Torres. Nevertheless, even if the Court would set aside the issue pertaining to the validity of the LOAs issued by respondent, perusal of the assessment reveals that the same has no factual basis.

In the Memorandum for Commissioner of Internal

Revenue Joel

L.

Tan-Torres dated

March

28, 201072, Assistant ROO Christina C.

Barroga and ROO Dumayas

req uested the nullification of BIR Ruling Nos. DA-056-2003, DA-624-2004, DA-455-2007 I DA-338-2007' DA-410-2007, DA-409-2007, and DA-337-2007, which exempted from tax the assignment and delivery of the developed units to each Joint Owner/Investor on the basis of a "Contract to Manage

and Execute the Construction of Condominium" with the

scheme "Build-To-Own or Build-Your-Own" in the following condominium projects all located at Bonifacio Global City:

1. Penhurst Parkplace;

2. Kensington Place;

3. Grand Hamptons Tower 1;

4. The Grand Hamptons ;

5. The Sapphire Residences;

6. Blue Sapphire; and

7. Crescent Park Residences. t: ;; Exhibit "28", C IA Case No. 8358, Docket, Vol. U, pp. 1252 1257.

G & W Architects, Eng ineers and Project Consultants Co. vs. CIR

According to Asst. ROO Barroga and ROO Dumayas, pelitioner did not pay income tax, VAT and DST on its construction of the above-enumerated condominium projects by reason of the afore- mentioned rulings issued in petitioner's favor.

The revenue officers claim that the Commissioners of Lhe Housing and Land Use Regulatory Board (HLURB) reject the concept of "Build-Your-Own" for being contrary to the policy behind Presidential Decree (PO) No. 957 or the

"Subdivision and Condominium Buyers' Protective Decree"

by virtue of its resolution directing petitioner to secure Certificate of Registration and License to Sell. They further argue that the facts upon investigation are different and therefore the said rulings, in so far as they exempt the assignment and delivery of the developed units to each Joint Owner, are null and void. As a result, the BIR Commissioner issued RMC No. 55- 2010, which granted the request of Asst. ROO Barroga and ROO Dumayas for the nullification of the afore-mentioned rulings and ordered the said revenue officers to conduct investigation to determine petitioner's tax liabilities in connection with the assignment and delivery of the condominium units involved in the said rulings. Formal Assessment Notices were then issued on January 2 5, 2 0 11 73 , June 1 0, 2 0 117 4 and J u I y 2 6, 2 0 117 5, finding petitioner liable to pay EWT and DST on the transfer of condominium units, detailed as follows:

DST

I

TOTAL

I CASE

PROJECT

PERIOD

c f/\ I CONDOMINIUM I UNITS I TAXABLE I

EWT

I

~~H i- - Penhurst - l ll_IL - / 004 -+ P 90,744,745.00, I P27,257,000.39 1 P117,996,745.39 1 ,

I

Parkplace

1

I

11 Fxhibil "J ", CTA Case No. 8358, Petitioner's Exhibits in expanding envelope. 1~ txllibit "M", in C 1/\ Case No. 8'126, Docket, Vol. I, p. 625. 7'' Lxhibil " M" , in CT/\ ,Case No . 8489, Docket, Vol. Jl, p. 727. (

G & W Architects, En~Jineers and Project Consultants Co. vs. CIR

~ I KensingtorlP!ace- 2/9- 2004 -~ P122,631,860.65 1 P36,829,511.15 1 P159,461,371.80

8-'126 I Grand Hampton I

190 July 10, Pl02,091,930.43 P30,760,748.62 Pl32,852,679.05

I

7004 I 8'189 1 Grand llarnpton_ll _ 192_ _ll}ne~OOjj_ Pll4,909,209.18 I P34,505,019.48 I Pl49,414,228.66 I n the Details of Discrepancies of the FAN, it was mentioned that the units of the condominium projects have already been issued Condominium Certificate of Title (CCT) in violation of the last paragraph of Section 56(A) of the Tax Code, as amended, which requires the certification of the BIR Commissioner or his duly authorized representative that such transfer has been reported, and the tax therein imposed, if any, has been paid, before the registration of any document transferring real property may be effected by the Register of Deeds.

Respondent also cited the nullification of the BIR Ru lings exempting the transfer of condominium units to the unit owners under the so-called co-development/build-to- own/build-your-own and similar schemes.

Considering

the foregoing, respondent found that petitioner failed to file the Withholding Remittance Return and pay the corresponding basic withholding tax on the transfer of the condominium units in violation of Section 2.58 of Revenue Regulations No. 2-98, and that petitioner likewise failed to file DST Declaration Return on the transfer of the condominium units under Section 200(8) of the NIRC of 1997, as amended.

Clearly, the findings of respondent in the FAN were based on the nullification of the BIR Rulings, the HLURB Decision, and respondent's assumption that the purported tra nsfer of condominium units to the individual unit owners was actually a sa le of condominium units from petitioner to Lhe unit owners.

A close scrutiny of the foregoing likewise shows that Lhe basis of respondent's conclusion that there was a sale of condominium unils between the unit owners and petitionerc

G & W 1\rchitects, Enqineers and Project Consultants Co. vs. CLR is the Contract to Manage and Execute the Construction of Lhe afore-mentioned condominiums. 76 Thus, the Court shall evaluate the terms and conditions embodied in the said contract to determine the actual relationship between petitioner and its clients. Article 1370 of the Civil Code provides:

"ART. 1370 . If the terms of a and leave no doubt upon the contracting parties, the literal stipulations shall control.

contract are clear intention of the meaning of its If the words appear to be contrary to the evident intention of the parties, the -latter shall prevait over the former."

In the case of Commissioner of Internal Revenue vs. Traders Royal Bank77, the Supreme Court said that in the inlerpretation of contracts, the ascertainment of the intention of the contracting parties is to be discharged by looking to the words they used to project that intention in Lheir contract, all the words, not just a particular word or two, and words in context, not words standing alone. In the same case, the Supreme Court also cited its ruling in Bautista vs. Court of Appeals, et a/. 78, wherein it was held that:

"The rule is that where the language of a contract is plain and unambiguous, its meaning should be determined without reference to extrinsic facts or aids. The intention of the parties must be gathered from that language, and from that language alone. xxx."C..

16 Fxhibils " K" and " l ", in CTA Case No. 8358, Petitioner's Folder of Exhibits; Fxhibits " D", "D-1", "D-7", and " D-3" in CTA Case No. 8426, Docket, Vol. I , pp. 525-560; Lxhibits "D", "D 1", and "0-2" in Cl/\ Case No. 8489, Docket, Vol. II, pp. 648 674. 11 G.R. No. 167134, March 18, /0 15, citing I imson vs. Court of llppeals, et. at., G.R. No. 13S929, /\pril 20, 2001.

7u G.R. No. 123655, .January 19, 2000.

G & W Architects, engineers and Project Consultants Co. vs. CIR

Petitioner presented that there is no sa le petitioner and its clients:

the following documents to prove of condominium units between

CONTRACT TO

MANAGE AND

EXECUTE THE

I

CONSTRUCTION OF

,

CONDOMINIUM

Fxhibit "K"

(C IA Case No. 835fll Fxhibit " l "

PROJECT

CLIENT

Penhurst Parkplace

Pek Eng Lim

Kensington P lace I Ellen S. Francisco

TRUST

AGREEMENT/

DEPOSITORY AND

DISBURSING

AGREEMENT

Exhibit "M"

(CTI\ Case No. 8358)

Exhibit "N"

(_C 1/\ Case No ~:,~)

Fxhibit "D"

' (C ll\ Case No. 8426) !:::xhibit "D t" (CIA Case No. 8426)

Lxhibit " D 2"

(C l l\ Case No. 8426)

Condominium

--- -- ____ 1 (CTA Case No. 8358)

Exhibit "E"

(CrA Case No. 8426)

Exhibit "E-1"

(CIA Case No. 8426)

Exhibit "E-2"

I (Cr/\ Case No. 8426)

Exhibit "E 3"

Lxhibit "D 3"

I ttamptons Place 1 Shrrtey Yap sy (C II\ Case No. 8426)

Condominium

(CTA Case No. 8426)

Lxhibit "D"

Grand I tamptons

Jayan Russel Dy and

Exhibit "E"

(Cll\ Case No. 8'189)

Place Condominium

Janette Sy Dy

(CrA Case No. 8489) exhibit "D 1" Grand llarnptons t::nrique G. Gepilano

Exhibit "E-1"

(Cll\ Case No. 8'189) I Place Condominium !II and Gretelwolda (CTA Case No. 8489) _ C. Gepilano __ -r-- --------l

Fxhibit "0-7"

F

Grand Hamptons

Mitchell 0. Soria and (C.TA Case No. 8489)

Place Condominium 1

Anna Marie P.

I

Arnorsolo

Exhibit "E-2"

(C.TA Case No. 8489) To determine whether the intention of the parties in the above-mentioned agreements is to enter in a contract of sale of condominium units, the Court shall further be guided by Article 1458 of the Civil Code of the Philippines, which provides that in a contract of sale, one obligates himself not only to deliver a determinate thing but also to transfer ownership thereto for a consideration: "ART. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A

contract of sale may be absolute or conditional. " (Emphasis supplied)C G & W 1\rchitects, Engineers and Project Consultants Co. vs. C lR I n the instant case, there is nothing in the said contracts which would show that there would be a transfer of ownership of the condominium units from petitioner to its clients for the transaction to be considered as a sale of the condominium units.

The Contract to Manage and Execute the Construction

of Penhurst Parkplace Condominium between petitioner and Mr. Pek Eng Lim (the client) 79 provides, among others, that:

1. The clients irrevocably names, appoints and constitutes petitioner as its true and lawful attorney-in-fact for Lhe execution of acts properly within the knowledge and expertise of petitioner and to do, among others, the following acts in its stead :

a. To prepare or cause the preparation of all the necessary documents for the purchase of the Subject Land and the subsequent registration thereof in the name of the

Trustee (International Exchange Bank) for

t he benefit of the Clients;

b. To apply for the issuance of individual

Condominium Certificates of Title in the

name of the

Trustee

(International

Exchange Bank), with the proper Registry

of Deeds XXX

c. To prepare or ca use the preparation of the necessary contracts for the conveyance by

the Trustee (International Exchange Bank) of the Condominium Certificates of Title

over t he units comprising the Project to the

Clients

and the

Condominium

Certificate of Title over the Common Areas to the Condominium Corporation;

d. To instruct the trustee

(International

Exchange Bank) to issue payments from the trust to t hird parties contracted by~ I<J Lxhibit "K", C 1/\ Case No. 8358, Petitioner's Exhibits in expand ing envelope.

G & W Architects, Lngineers and Project Consultants Co. vs. CI R

D E C I S I 0 N

Page 4 7 of 58

petitioner to perform and/or complete tasks for the project.

2. Any and all necessary contracts and/or documents arising out of or as a consequence of the foregoing acts while executed by and in the name of petitioner sha ll be understood to be for and in behalf of the clients.

3. For and in consideration of the services to be rendered by petitioner as overall project manager, an amount equivalent to four percent ( 4°/o) of the construction funding shall be paid to petitioner as and by way of professional fee.

4 . The construction funding is the amount to be paid by the client to defray the costs for the development and completion of the subject unit the client intends to own and the same shall be payable to the Trust.

5. The said Trust shall be managed by the Trustee (International Exchange Bank) for the clients benefit. The trustee shall own and hold title to the Project in trust for the clients.

In relation thereto, a Trust Agreement was executed between the trustee International Exchange Bank and the client, which provides how the trust fund shall be distributed: 80

1. To purchase the subject land and pay the purchase price of the said land and to register the same in the name of the trustee, for and in behalf of the clients;

2. To disburse and certify as to the completion of the necessary payments for the project to the variousc

G & W Architects, engineers and Proj ect Consultants Co. vs. C!R professionals employed for the project based on the certification of petitioner.

As to the Kensington Place Condominium, Hamptons

Place

Condominium

and

Grand

Hamptons

Place

Condominium Projects, the Contract to Manage and Execute the Construction of the said projects between petitioner and its clients8 1 contains similar stipulations with that of the

Contract to Manage and

Execute the Construction of

Pen hurst Parkplace, except for the fol lowing:

1. In the construction of

Kensington

Place

Condominium, Hamptons Place Condominium and Grand Hamptons Place Condominium, petitioner is named as the project manager and a trustee;

2. The clients irrevocably names, appoints and constitutes petitioner as its true and lawful attorney-in-fact to prepare or cause the preparation of all the necessary documents for the purchase of the Subject Land and the subsequent registration thereof in its name for the benefit of the Clients and to apply for the issuance of individual Condominium Certificates of Title in its name, with the proper Registry of Deeds xxx;

3. The construction funding shall be payable to an Account, to be delivered by the client to petitioner together with the signed copies of the Depository and Disbursing Agreement which account shall be held and managed by the Banco de Oro Universal Bank Trust Banking Group for the clients benefit. C.

G & W 1\rchitects, Enqineers and Project Consultants Co. vs. ClR

I n relation thereto,

Depository

and

Disbursing

Agreements82

were executed between

Banco

de

Oro

Universal Bank Trust Banking Group and the clients, which provide how the funds in the Account shall be distributed. The stipulations in the said agreements state that the fund in the said account shall be used for the necessary payments in connection with the construction and development of the project and the purchase of the land where the condominium building will be situated. Petitioner shall provide photocopies of source documents to the bank for each disbursement instruction. The source documents shall include but not be limited to bills, invoices, certifications of indebtedness issued by petitioner and other evidence of indebtedness in relation to services rendered or materials procured for the project. From the foregoing, it can be gathered that all of the acts of petitioner, including the execution and preparat ion of all necessary contracts and/or documents arising out of or as a consequence of the construction of the project, while may be executed by and in the name of petitioner, shall be understood to be for and on behalf of the clients. Thus, there ca n be no transfer of ownership of the condominium units between petitioner and its clients considering that petitioner merely acts for and on beha lf of i Ls clients.

At this juncture, it must be pointed out that the method of withholding tax at source is a procedure of collecting income tax which is sa nctioned by our tax laws. 83 Section 57(B) of the NIRC of 1997, as amended, provides :C.

G & W Architects, engineers and Project Consultants Co. vs. CIR

"SEC. 57. Withholding of_ Tax at Source. -

XXX

XXX

XXX

(B) Withholding of Creditable Tax at Source. - The

Secretary

of

Finance

may, upon the recommendation of the Commissioner, require the withholding of a tax on the items of income payable to natural or juridical persons, residing in the Philippines, by payor-corporation/persons as provided for by law, at the rate of not less than one percent (1 °/o) but not more than thirty-two percent (32°/o) thereof, which shall be credited against the income tax liability of the taxpayer for the taxable year.

Relevantly, Section 2. 57.2 of Revenue Regulations No. 2-98 covers the matters of income payments subject to creditable withholding tax, and the gross selling price or total amount of consideration paid to seller for the sale of real property other than capital assets as follows: "SECTION 2.57.2. Income Payment Subject to

Creditable

Withholding Tax and Rates Prescribed

Thereon. - Except as herein otherwise provided, there shall be withheld a creditable income tax at the rates herein specified for each class of payee from the following items of income payments to persons residing in the Philippines:

XXX

XXX

XXX

(J) Gross selling price or total amount of consideration or its equivalent paid to ·t he seller/owner for the sale, exchange or transfer of. - Real property, other than capital assets, sold by an individual, corporation, estate, trust, trust fund or pension fund and the seller/transferor is habitually engaged in the real estate business in accordance with the following schedule -

XXX

XXX

xxx" C C & W Architects, Engineers and Proj ect Consu ltants Co. vs. CIR However, in the instant case, the fact of actual sale of condominium units from petitioner to the unit owners was not clearly established in the investigation as well as in the FAN issued by respondent against petitioner. Notably, the construction funding which respondent considered as the clients payment for the sale of the condominium units is actually the amount held in trust by the bank pursuant to the trust agreement/depository and disbursement agreement in favor of the clients which will be excl usively used for the construction of the project and purchase of the land. In other words, petitioner appears to have no complete control over the said amount; thus, no part of the said fund ca n be considered as payment for the transfer of the condominium units from which the assessed creditable withholding tax can be deducted. Also, the evidence of petitioner, such as the Transfer Certificates of Title811 of the subject lots from which the condominium projects were built and the respective Deeds of Sale85, show that the said lots were directly transferred from Fort Bonifacio Development Corporation to the Grand

Hamptons

Tower

I

Condominium

Corporation,

Grand

Hamplons Tower II Condominium Corporation, Penhurst

Parkplace

Condominium

Corporation

and

Kensington

Parkplace

Condominium

Corporation . . Furthermore, the Condominium Certificates of Title86 that ·petitioner presented indicate that the condominium units were transferred directly from the said condominium corporations to the unit owners .

'

I

As already mentioned, the participation of petitioner in the transactions was based on t he Contracts to Manage and(' B t Lxhibits "l3", "C", "F" and "G", Cl 1\ Case No. 8358, Petitioner's Exhibits in expanding envelope; Fxhibit "H",

CTA

Case No. 8426, Docket, Vol. II, p. 865; Lxhibits "G" and " H", C I 1\ Case No. 8'189, Docket, Vol. II, pp. 702-707. w; Fxhibils "D" and "F", CTA Case No. 8358, Petitioner's Exhibits in expanding envelope; Fxhibil "F", CTA Case No. 84 76, Vol. I , pp. 577-589; Exhibit " F" ,

CTA

Case No. 8489, Docket, Vol. ll, pp. 687- / 01. - - sr, Fxhibit "H", CTA Case No. 83S8, Petitioner's Exhibits in expanding envelope; exhibits "I ", " I 1", " I 2" and "I -3", C I A Case No. 8426, Vol. I , pp. 598 6 17, Exhibits " 1", "L 1 " and "I 2", Cl/\ Case No. 8489, Docket, Vol. If, pp. 708 719.

CTA Case Nos. 8 358, 8426 a n d 8 4 8 9 G & W Architects, engineers and Project Consultants Co . vs. CIR.

o ,

Execute the Construction of t he condominium projects87, which in essence directed petitioner to prepare the documents necessary for the transfer of ownership of the subject land to the condominium co"rporation and the construction of the condominium units for a professional fee of four percent ( 4 °/o) of the construction funding. The Court observes that nothing in the said contracts indicate that the ownership of the subject land and the condominium units will first be transferred from FBDC to petitioner in its personal capacity and that after the construction of the condominium units, the ownership of the subject land and condominium units will be transferred from petitioner to Lheir clients. Thus, the transaction between petitioner and its clients, while it may still be considered as sale, is actually a sale of petitioner's services to its clients and not a sale of real property. Another basis for the issuance of the FAN against petitioner is the HLURB Decision, which concerns the invilation to prospective co-owners advertised in January and March 1994 offering petitioner's professiona l services to those interested to build their own condominium unit at direct cost by hiring petitioner as project manager with the l<ensington Place as the prospective site. In the said ruling, Lhe HLURB said that " there is no existing co-ownership of a parcel of land as the co-ownership remains an uncertainty and may not materialize in view of a number of variables such as whether there will be enough persons interested to raise the capitalization needed to finance the acquisition of a lot and the development of a condominium project, and whether the lot intended to be purchased will still be available if and when the required funds are finally raised". Thus, the sa id ruling affirm ed the order of the Expanded National Capital Region Field Office of the HLURB for petitioner to pay administrative fines and for it to cease and desist from further selling and/or advertising in any form until the necessary permits or license is secu red from the said office.( fll Lxhibits " K" and " L", in CT/\ Case No. 8358, ex hibits "D", "D- 1", "D- 2" and "D 3", in C l /\ Case No . 8'1 26, and Exhibits " D", " D- 1" and " D- 2" in C IA Case No . 8489.

G & W 1\rchitects, Lngineers and Project Consultants Co. vs. Cl R

Notably, the regulatory power exercised by the HLURB in the above decision appears to be based on variables which, at the time of the issuance of the ruling, remains an uncertainty and may not materialize. These uncertainties were found before the alleged transfer or delivery of the condominium units to the individual unit owners. While this may be considered in the determination of the tax liability of a taxpayer, the BIR should also have determined whether these uncertainties still existed at the time of the transfer of the condominium units.

The BIR should also have investigated on the true nature of the transaction between pelitioner and the unit owners, whether there is a sale of condominium units between them upon the transfer of the condominium units, based on facts and not based solely on Lhe HLURB decision.

In this regard, respondent may argue that her findings are not merely based on the HLURB ruling, but also on the following facts found upon their investigation which are allegedly different from the representation of petitioner when it was requesting for the subject BIR Rulings:

1. There are as many contracts as there are private investors/joint owners;

2. Petitioner's clients could not have grouped or organized themselves before contracting with petitioner and therefore could not have them selves undertook the construction;

3. Petitioner's act of persuading the clients to invest in Lhe condominium project;

_

4. Copies of petitioner's advertisements, flyers, FAQs, investors' guide, etc.;

5. The use of the terms "Buyers", "Units available for sale", "Pricing", " Prices start at f> __ , and the provision of payment terms or scheme that is either that of deferred cash or on installment;

6. Annotations in the said ads/flyers worded as follows: " Prices and terms of payment are subject to change without prior notice"; and

7. The Contract to Manage which shows "Particular Description of Subject Unit(s) and Parking(s)" the client/joint owner intends to own.(

G & W /\rchitects, Engineers and Project Consultants Co. vs. CIR

Pursuant to the Memorandum88 dated March 28, 2010, the foregoing facts support the conclusion that the contract is in substance a Contract to Sell and the scheme is actually a pre-selling/selling activity.

However, the alleged advertisements and the words used therein which, according to respondent, connote that the transaction is actually a sale of condominium units do not, by themselves, prove that- there is actual transfer of ownership of the condominium units from petitioner to the individual unit owners.

The alleged facts found upon investigation appear to be mere speculations and presumptions without any factual basis to support them. The contract is the best evidence to prove the agreement between the parties.

In order to disprove the stipulations therein, respondent should have exhausted all lawful means to determine the true nature of the transaction between petitioner and its clients. In connection thereto, even considering that petitioner, upon respondent's request, still failed to present any document, record, or books of account for tax audit purposes, or any proof or record of any liquidation report on the funds contributed by the alleged investors/joint owners, the same is not an excuse for respondent not to exert effort in gathering these information from other sources to establish that the transaction between petitioner and the unit owners is a sale of condominium units, since respondent may avail herself of the best evidence or other information or testimony by exercising her power or authority under paragraphs (A) to (D) of Section 5 of the NIRC of 1997, as amended, to wit:

"(A) To examine any book, paper, record or other data which may be relevant or material to such inquiry;( BB Lxhibit "28", Cl/\ Case No. 8358, Docket, Vol. II, pp. 1252- 1257.

G & W 1\rchitects, Lngineers and Project Consultants Co. vs. CI R

(B)

To obtain on a regu lar basis from any person other than the person whose internal revenue tax liability is subject to audit or investigation, or from any office or officer of the national and - local governments, government agencies and instrumentalities, including the Bangko Sentral ng

Pilipinas

and government-owned or -controlled corporations, any information such as, but not limited to, costs and volume of production, receipts or sales and gross incomes of taxpayers, and the names, addresses, and financial statements of corporations, mutual fund companies, insurance companies, regional operating headquarters of multinational companies, joint accounts, associations, joint ventures or consortia and registered partnerships, and their members;

(C)

To summon the person liable for tax or required to file a return, or any officer or employee of such person, or any person having possession, custody, or care of the books of accounts and other accounting records containing entries relating to the business of the person liable for tax, or any other person, to appea r before the Commissioner or his duly authorized representative at a time and place specified in the summons and to produce such books, papers, records, or other data, and to give testimony; (D) To take such testimony of the person concerned, under oath, as may be relevant or materia l to such inquiry; xxx Moreover, in the case of Commissioner of Internal Reven ue vs. Hantex Trading Co., Inc. 89, the Supreme Court ruled as follows:

"The law allows th e BIR access to all relevant or material records and data in the person of the taxpayer. It places no limit or condition on the type or form of th e m edium by which th e record subject to the order of t he BIR is kept. The purpose of the law is to enable the BIR to get at the taxpayer's records in( B<J G.R. No. 136975, March 31, 2005.

G & W Architects, [n~Jineers and Project Consultants Co. vs. CIR whatever form they may pe kept. Such records include computer tapes of the said records prepared by the taxpayer in the course of business. In this era of developing information-storage technology, there is no valid reason to immunize companies with computer-based, record - keeping capabilities from SIR scrutiny. The standard is not the form of the record but where it might shed light on the accuracy of the taxpayer's return.

In Campbell, Jr. v. Guetersloh, the United States (U.S.) Court of Appeals (5th Circuit) declared that it is the duty of the Commissioner of Internal Revenue to investigate any circumstance which led him to believe that the taxpayer had taxable income larger than reported . Necessarily, this inquiry would have to be outside of the books because they supported the return as filed. He may take the sworn testimony of the taxpayer;

he may take the testimony of third parties; he may examine and subpoena, if necessary, traders' and brokers' accounts and books and the taxpayer's book accounts. The Commissioner is not bound to follow any set of patterns. The existence of unreported income may be shown by any practicable proof that is available in the circumstances of the particular situation. Citing its ruling in Kenney v. Commissioner, the U.S. appellate court declared that where the records of the taxpayer are manifestly inaccurate and incomplete, the Commissioner may look to other sources of information to establish income made by the taxpayer during the years in question. " (Emphasis supplied) Respondent could have at least taken the testimony under oath of petitioner's clients to determine their true inlention in entering inlo the Contract of Management and Execution of the Condominium projects or of third parties as may be relevant or material to the assessment. However, during the hearing held on October 8, 2013, respondent's witness, Ms. Catherine C. Fuentes, testified that their office has no record of the statement of the purported buyers in4' G & W Architects, l::ngineers nnd Project Collsultants Co. VS. em Pa,ge 57 of 58 writing and under oath. 90 Instead, respondent chose to resort to presumptions and heavily relied on the HLURB Decision and on the nullification of the BIR Rulings, which may have supported the legal basis of the assessment, but failed to sufficiently establish its factual basis. It is true that all presumptions are in favor of the correctness of a tax assessment. However, the prima facie correctness of a tax assessment does not apply upon proof that an assessment is utterly without foundation, meaning it is arbitrary and capricious.

Where the BIR has come out with a "naked assessment," i.e., without any foundation character, the determination of the tax due is without rational basis. 91 In order to stand the test of judicial scrutiny, the assessment must be based on actual facts.

The presumption of correctness of assessment being a mere presumption cannot be made to rest on another presumption. 92 Hence, assessment should not be based on mere presumptions no matter how reasonable or logical sa id presumplions may be. 93 Accordingly, the presumption of correctness of the assessment does not apply in the instant case considering that respondent's conclusion, that the transaction between petilioner and the unit owners is a sale or transfer of ownership from the former to the latter, is not based on actual facts and are mere presumptions. Thus, the deficiency EWT and DST assessed for the alleged sale of rea l property has no factual basis and must therefore be ca ncelled.c_ 'Hl I ranscript of Stenographic Notes taken on October 8, 2013, pp. 33 36. q ) Commissioner of Internal Revenue vs. Hanlex Trading Co., Inc., G.R. No. 136975, March 31, 700~.

G & W Architects, Engineers and Project Consultants Co. vs. CIR

Consequently, the resolution of the remaining issues is already deemed moot.

WHEREFORE, the instant Petitions for Review filed on October 21, 201 1, February 15, 2012 and May 11, 2012 are hereby GRANTED.

Accordingly, the deficiency expanded withholding tax and documentary stamp tax assessed for the periods 2004, July 10, 2004, and June 2004, in the amounts of P277,458,117.19, P132,852,679.05, and P149,414,228 .66, respectively, or in the total amount of P559,725,024.90, are hereby CANCELLED.

WE CONCUR:

(With Dissenti~ OpmTOn)

ROMAN G. DEL ROSARIO

Presiding Justice

Associate Justice

' ER~P.UY

Associate Justice

CERTIFICATION

Pursuant to Article VlU , Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court 's Division.

Presiding Justice

Chairperson, 1 st Division

REPUBLIC OF THE PHILIPPINES

Court of Tax Appeals

QUEZON CITY

First Division

G & W ARC HITECTS, CTA CASE Nos. 8358, 8426 and 8489

ENGINEERS AND PROJECT

CONSULT ANTS CO., Petitioner,

Members:

DEL ROSARIO, Chairperson, -versus- UY, and MINDARO-GRULLA, .!.!.

COMMISSIONER OF

Promulgated:

INTERNAL REVENUE,

DISSENTING OPINION

DEL ROSARIO, PJ.:

With due respect, 1 dissent with the ponencia in granting the Petition lor Review and cancelling the deficiency expanded withholding tax (EWT) and documentary stamp lax (DST) assessed for the periods June 24, 2004, July I 0, 2004, and June 2004.

Petitioner's Built-to-Own or Build-Your-Own-Horne concept of purportedly pooling condominium unit owners' funds to be used for the construction of the condominium units on behalf of the fund owners constitute a taxable sale, exchange or disposition of real property, hence, subject to EWT and DST.

Petitioner' s aforementioned Built-to-Own or Build-Your-Own-Home activity is covered by three (3) agreements, particularly: the Contracts to Manage and Execute the Construction of the Condominium between petitioner and the condominium unit owners; 1 the Trust Agreements established by the condominium unit owners, naming a trustee to hold in trust the pooled funds of the condominium unit owners and the land where 1 Exhibits "K'', and "'L" in CT A Case No. 8358. Exhibits " D", " D-1 ", ·'D-2'', and " D-r in CTA Case No. 8-126, Exhibits ·'D" and " D-1 ,. in CTA Case No. 8489. ~

Dissenting Opinion

the condominium project will be located;2 and the Depository and Disbursing Agreements between Banco De Oro Universal Bank Trust Banking Group and the condominium unit owners.3 On its face, the Contract to Manage and Execute the Construction of the Condominium appears to be a contract for services where the unit owners pay petitioner for the construction and management of the condominium projects. The Trust Agreement, on the other hand, regulates the pooled funds of the condominium unit owners to be used for the construction of the condominium project and for the purchase of the land where the condominium project will be built. The Depository and Disbursing Agreement, on the other hand, governs the disbursement of the construction funding held in trust. True, the best evidence of the intention of the parties to a contract is the contract itself being the formal expression of the parties' rights, duties and obligations:' The stipulations of the contract and not its title are controlling and such stipulations confirm the nature of the contract.5 When the real intention of the parties to the contract is in issue, however, their subsequent or contemporaneous acts must be principally considered to reveal their true intention.6 Interestingly, the following provisions in the Contract to Manage and Execute the Construction of the Condominium, - the Trust Ag•·eement, and the Depository and Disbursing Agreement amplify respondent's theory that petitioner is a seller and the unit owners are the buyers thereof:

CONTRACT TO MANAGE & EXECUTE THE CONSTRUCTION OF

CONDOMINIUM7

XXX

XXX

XXX

SECTION 3

l Exhibit "M" in CTA Case No. 8358. ' [xhibit "N'" in CTA Case No. 8358, Exhibits "E"', "E- 1 ", "E-2" and "E-3" in CTA Case No. 8426, Exhi bits "E", "E-1 ",and "E-2" in CTA Case No. 8489. 1 Nor/on Resources and Development Corpora/ion v. All Asia Bank C01pora1ion, G.R. No. 162523, November 25, 2009.

< l'eo1J/cs Industrial and Commercial Corpora/ion, vs. Courl of Appeals and Mar-lck Investmenl Corpora/ion, G.R. No. 112733, October 24, 1997. 1' 1\rticle 137 1. Civil Code; Ani/a C. Buce l 'S. The Honorable Court of Appeals, el af., G.R. No. I 36913, l\1n; 12. 2000.

7 Exhibit "K" and ''L".

d1 C TJ\ Case Nos. 8358, 8426 and 8489

Dissenting Opinion

l'age 3 of 16

DEVELOPMENT AN D MANAGEMENT OF THE PROJECT

3.0 1 Engagement ofG & W The Client hereby engages the services of G & W as project manager in relation to the Project and trustee in relation to, the Subject Land and G & W, by virtue of such engagement, shall assume the responsibilities enumerated in thi s Section. The Client, however, acknowledges and confirms that G & W does not assume the role of developer of the Project and hence, has not made and is not making any representation that it is, in its own capacity, selling the units comprising the Project.

3.03

G & Was Project Manager

Pursuant to the engagement of G & W as project manager, Client requires G & W to do the following acts on behalf and for the collective bene (it of the Clients and in furtherance of the development of the Project:

XXX

XXX

XXX

The power and authority hereby granted to G & W shall terminate upon the Acceptance and Turnover of the Subject Unit(s) by the Client and the conveyance of the common areas of the Proj ect to the Condominium Corporation as provided irL Subsection 5.05. For purposes of this Cont.-act, Acceptance and Turnover shall mean that point in time when the Project is conclusively deemed completed through the joint certification of G & W and the Construction Manager. The Client expressly acknowledges that the aforesaid entities possess the required technical expertise to properly ascertain that the Project is completed. Without in any manner limiting the exclusive authority of G & W and the Construction Manager to jointly certify that the Project is completed, Project completion shall consist of the following:

XXX

XXX

XXX

Upon Acceptance and Turnover and the Trustee's certification of full payment by the Client of all amounts provided in this Contract, the Subject Unit shall be conveyed by the Trustee to the Client and this Contract shall terminate.

XXX

XXX

XXX

3.07

Scope of Obligations

Any and all acts to be done and performed by G & W pursuant to its responsibilities hereunder shall be deemed to have been done and performed by it in representation and on behalf of the Clients for the effective development of the Project. In the absence of willful default or cl' C l /1. Case Nos. 8358. 8426 and 8489

Dissenting Opinion

l'nge 4 of 16 misconduct, fraud, bad faith or gross negligence or violation of any provision of this Contract on the part of G & W, the Clients shall be bound by all the obligations which G & W may have contracted within the scope of its authority. The Client agrees to hold G & W free and harmless from any and all losses, claims, damages, liabilities and expenses, or actions \Yith respect thereto arising out or by virtue of the failure of the Client to comply with any of its undertakings, covenants or obligations herein not otherwise attributable to the fault or negligence o[f] G & W.

XXX

XXX

XXX

SECTION 5

CLIENT'S SHARE OF INTEREST IN THE PROJECT

5.01 Subject Unit(s)/ Parking Unit(s) As part of his interest in the Project, the Client shall be assigned:

(i) the Subject Unit(s), which is/are more particularly described in Schedule "A.'" hereof, and (ii) the Parking Unit(s), which is/are more particularly described also in Schedule "A" hereof, which represents a percent proportionate of the entire project which shall be indicated in the Master Deed.

XXX

XXX

XXX

5.04

Non-assignability of Interest

T he rights and interests of the C lient in the Project, the Subject Unit, the Par·king Unit, and the corresponding proportionate undivided interest in the Common Areas of Project shall not be assignable, unless with the prior written approval of G & W. In the event G & W should grant such an approval, the Client shall be required to pay G & W a processing fee of Pesos: Fifteen Thousand (Php 15, 000.00). 5.05 Conveyance of Title to the Subject Unit and Common Areas Upon completion of the Project and full payment by the C lient of a ll a mounts payable under this Contract, title to the Subject Unit including the Parking Unit shall be conveyed by G & W to the C lient. Upon completion of the Project, title to the Common Areas shall be conveyed by G & W to the Condominium Corporation which shall be established in accordance with the provisions of the Master Deed.

XXX

XXX

XXX

SECTION 7

REMEDIES f.OR DELAY TN PAYMENT 7.0 I Payment of Penalty rf\

Dissenting Opinion

The Client hereby acknowledges that time is of the essence in this contract. Furthermore. the Client hereby agrees and acknowledges that any delay in payments to the Trustee through G & W of the Construction Funding or any delay in payments to G & W of Labor Cost Overruns or Miscellaneous Expenses in accordance with the schedule of payments provided herein will cause the delay of the completion of the whole project. Accordingly, a penalty of one and a half percent (1.5% ) a month s hall be imposed fo1· such late payments, based on the amount which should have been contributed 01· paid for every calendar day of delay.

7.02 Free and Harmless Cause The Client acknowledges that his delay in any payment to the Trustee through G & W of the Construction Funding, or his delay in any payment to G & W of the Miscellaneous Fees or Labor Cost Overruns, or his failure to comply with any of his other obligations under this Contract, may result in a default by G & W on its obligations to the other Clients under the Contracts with such other Clients. In addition to the penalty interest under Section 7.0 I, the Client hereby agrees to hold G & W free and harmless against any and all claims for damages which may be made or filed against G & W by the other Clients or other third parties as a result of or arising from the delay by the Client in any payment of the Construction Funding or his failure to comply with any of his other obligations under this Contract.

XXX

8.0 I

Violation or Default

XXX

SECTION 8

TERMINATION

XXX

G & W shall have the right to rescind, terminate or cancel this Contract including the trust herein created with respect to the Subject Land. without need of judicial action, in case any one of the events of default stipulated hereunder occurs. and the Client fails to remedy or cure to the satisfaction o f G & W such default, within five (5) days from receipt of written notice from G & W pf the occurrence of such default:

(a) Failur·e to pay any of the Construction Funding payments in accordance with the schedule of payment herein provided for over 60 days;

(b) Failure to pay the Client's po1·tion of the Cost Advan ces or La bor Cost Overruns if any, or any portion thereof; Upon such termination, G & W shall have the right to acquire, 01· identify a substitute client to acquire all the rights and interests of the Client in the Project and to assume the corresponding remaining obligations hereunder. If at the time the violation or default occurs, (11 C l A Case Nos. 8358, 8426 and 8489

LJissenting Opinion

Pnge 6 of 16

Client had paid thi rty fi ve percent (35%) or Jess of the Construction Funding (including accrued cost Overruns and Cost Advances), any and all amounts already paid by the Client shall automa tically be forfeited l>y way of liquida ted damages in favor· of G & W, without need of j udicial intervention. If at the time the violation or default occurs, Client had paid more than thirty fi ve percent (35%) of the Construction Funding (including accrued Cost Overruns and Cost Advances), the excess over the said percentage shall be returned to the Client after deducting all expenses and costs involved including the Bank's professional fees, attorney's fees and other acts of administration.

The remedy herein granted is without prejudice to the right of G & W to avail of the remedies to which it is entitled under Section 7 hereof. Should G & W deem that it is not feasible to continue with the Project, it may also terminate this Contract by advance written notice to the C lient of a t least five working d a~s. ln such case, all Construction Funding payments which have been deposited in the Account shall be returned to the Client, together with all interests which in the meantime have accrued thereon after deducting professional fees due to the Bank under the terms of this Contract and the Depository and Disbursement Agreement. Should professional fees due to the Bank exceed interest earned from the Account, G & W undertakes to pay the aforesaid deficiency.

8.02

Effect of Termination

Unless termination was made in accordance with Section 8.01 above, termination of this Contract shall not relieve the C lient from the obligation to pay or remit any amounts payable under this Contract a nd accrued as of the effective date of termina tion.

XXX

XXX

XXX

11 .03

Binding Effect

This Contract shall be binding upon and shall be enforceable against the Client and G & W and their respective successors and assigns; provided. however, that the Client shall not have the right to transfer or assign a ny and all of his rights or obligations herein without the prior written consent of G & W."

~ C 1/\ Case Nos. 8358, 8426 and 8489

Dissenting Opinion

Page 7 of 16

TRUST AGREEMENT8

DISTRIBUTION OF TRUST FUND

4.0 The Trustee shall distribute the Trust fund in accordance with the fo llowing instructions of the Trustor:

XXX

XXX

XXX

(d) To convey the Condominium Certificate of Title over the Subject Unit(s) to and in favor of tbe Trustor;

(e) To convey the Condominium Certificate of Title over the Common Areas to the Condominium Corporation;

(f) To transfer to the name of G & W or a substitute client identified by G & W the amounts in trust as liquidated damages in cases of violation or· default of the Trustor of or· in his obligations under the Contract which results in G & W acquiring the right, or identifying a substitute client to acquire all the rights and interests of the Trustor· thereunder, including any and all contracts and agreements arising in connection therewith;

(g) To return the Construction Funding to the Trustor together with all accrued income and interests thereon where instructed by G & W; and,

(h) To sign, execute and deliver such documents as may be necessary to carry out the foregoing instructions.

4. 1 The Trust hereby created as well as this Agreement shall automatically be terminated upon: (i) violation or default of the Trustor of or in his obligations under the Contract which results in G & W acquiring the right, or identifying a substitute client to acquire all the rights and inter·ests of the Trustor of or in identifying a substitute client to acquire all the rights and interests of the Trustor, and to assume the corresponding obligations; (ii) the return of the Construction Funding to the Trustor in accordance with Subsection 4.0 (g) above, or, (iii) completion of the Project and the complete delivery and transfer of title to the Subject Unit to the Trustor and the Subject Land and Common Areas to the Condominium Corporation. Any remaining balance of the Trust may also be terminated in accordance with the procedure set forth in Subsection 5.04 of the Contract.

XXX

XXX

XXX

DEPOSITORY AND DISBURSI NG AGREEMENT9

XXX

XXX

XXX

"9. TERM INATJON OF THE AGREEMENT R r=xhibit '"M" in CTA Case No. 8358. Q b hibit "N"', petitioner's Formal O ffer of Evidence folder. ~ C l /1. Case Nos. 8358, 8426 and 8489 IJi~sen t i ng Opinion l'age 8 of 16 9.0 1 This Agreement shall automatically terminate upon: a) violation or default of the PRlNCI PAL of his obligation under the Contract which results in G & W acquiring th e right or identifying a substitute client to acqui•·e all the rights and interests ol the PRINCIPAL and assume the corresponding obligations in the Contract; b) the return of the Funds to the PRINCIPAL in accordance with Sec. 2.02 hereof; c) completion of the Project as certified by G & W.'· (Emphases supplied) Prom the afore-quoted provisions, it is apparent that all the attributes of ownership of the condominium project are integrated into, and are being exercised by, the petitioner. The Contract to Execute and Manage the Construction of the Condominium pretentiously suggests that petitioner is simply the manager of the project, when in truth, ownership rights of petitioner's purported "clients" over the project or any of the condominium units accrue and become vested upon them only upon full payment of the said units. Note that under the said contract, petitioner has the potent authority to terminate the contract when the supposed "clients" fail to pay the amounts payable, and the power to substitute the client who violated its terms or defaulted in the payment. T he supposed " clients"' only obligation mlllca· the said contract is confined to payi ng a specified amount and upon full payment, the clients will acq uire ownership of their respective condominium units. Such arra ngement cannot be any different from a contract to sell. Upon full payment by the clients, the tra nsaction is properly deemed a sale of condominium unit. Article 1458 of the Civil Code defines a contract of sale: "Article 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

1\ contract of sale may be absolute or conditional.'' The essential elements of a contract of sale arc the following:

(a) consent or meeting of the minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subject matter; and (c) price certain in money or its equivalent. 10 In the case at bar, all the essential elements of a contract of sale are present. The first element, consent to transfer ownership in exchange for the 11' Mila A. Reyes vs. I 'ictoria T Tuparun, G.R. No. 188064, June I, 20 II . ~

Dissenting Opinion

price, is clearly stated in the Contract to Manage and Execute the Construction or the Condonl.inium: 5.05 Conveyance of Title to the Subject Unit and Common Areas Upon completion of the P•·oject and full payment by the Client of all amounts payable under this Contract, title to the Subject Unit including the Parking Unit shall be conveyed by G & W to the Client. Upon completion of the Project, title to the Common Areas shall be conveyed by G & W to the Condominium Corporation which shall be established in accordance with the provisions of the Master Deed. (Emphasis supplied) The second element, determinate subject matter, is the completed condominium unit, and the third element, price certain in money, is the amount payable under the purported Contract to Manage and Execute the Construction of the Condominium which is further subject to the relevant provisions of the Trust Agreement and the Depository and Disbursement Agreement.

Under these circumstances, there rs no denying that the transaction contemplated under the Contract to Manage and Execute the Construction of the Condominium is a sale of condominium units despite the contractual embellishments that attempt to conceal its true nature. f urthermore, records disclosed petitioner's contemporaneous and subsequent acts that point to a contract of sale/contract to sell. Its own advertisement for the sale or the condominium units in its website to buyers, particularly that for Grand Hampton's Tower 11 , is consistent with a seller's act as it tcllingly reads:

"4 Easy Steps for Foreign Buyers

STEP I

Select a Desired Unit

XXX

XXX

XXX

11

Exhibits

"28"

(Copy

of the printouts gathered from the website (http://www.gw- mchitects.com/grandhamptons) which advertised petitioner's sale of condo. Units to prospective buyers) and "28-a·· (Page two of the Copy of the printouts gathered from the website (http://www.gw- architects.com/grandhamptons) which advertised petitioner's sale of condo. units to prospective buyers) in CT A Case No. 8426, and Exhibit " R- 1 0" (Computer Print-Out of petitioner's Adve1tisement for the Grand I Iampton's Tower) in CTA Case No. 8489.

M

C IA Case Nos. 8358, 8426 and 8489

Dissenting Opinion

Page 10 of 16

STEP 2

Reserve Your Unit

XXX

XXX

XXX

Reservation Pees are as follows:

I) Penthouse [1 7 1.75 sqm ( 1848.70 sq. ft.)] - Php 75,000 2) 3-Bedroom [ 128.27 sqm (I ,380.69 sq. ft.)] - Php 75,000 3) 2-Bedroom [77.91 sqm (838.62 sq. ft.)]. - Php 50,000 4) !-Bedroom [48.28 sqm (5 19.68 sq. ft.)] - Php 50,000 5) !-Bedroom [46.00 sqm ( 495 .1 4 sq. ft.)] - Php 50,000

XXX

XXX

XXX

STEP 3

Sign Contract

XXX

XXX

XXX

STEP 4

Directly Remit payments to Banco De Oro under your account name

XXX

XXX

XXX

(Emphasis supplied) With such open invitation to the pub! icon the mode and manner of acquiring a condominium unit, one must indeed be extremely naive to accept petitioner's claim that it is merely a "contractor" under the Contract to Manage and Execute the Construction of the Condominium. Not only that, petitioner even applied [or and was granted Licenses to Sell the condominium units by the Housing and Land Use Regulatory Board (I ILURB), thereby tacitly admitting that it was engaged in the selling of condominium units. The following Licenses to Scll 12 of petitioner bolster its status as a seller of condominium units:

-Exhibits

Descri ~t i o ns Certificate of registration No. 20133 issued to petitioner as the

"R-20"

project owner and developer of THE GRAND HAMPTONS

TOWER 1

- aR-20-1" License to Sell No. 2 1947 issued to petitioner as the project owner - and developer of THE __QRAND HAMPTONS TOWER I

"R-21"

Certificate of registration No. 24027 issued to petitioner as the -- '' Exhibits "R-20", " R-20-1 ", "R-2 1 ", "R-2 1-1"', "R-22", "R-22- 1"', "R-23", " R-23- 1 ", "R-24", and "R-24- 1 .. in CTA Case No. 8489.

at\ C IA Case Nos. 8358, 8426 and 8489 Di~senting Opinion

Page I I or 16

-·------ project owner and developer of THE GRAND HAMPTONS

TOWER 11

"R-21-1 "

License to Sell No. 25720 issued to petitioner as the project owner and developer of THE GRAND HAMPTONS TOWER II Certificate of registration No. 24426 issued to petitioner as the

"R-22"

project owner and developer of

CRESCENT

PARK

RESIDENCES CONDOMINIUM

.

------· License to Sell No. 26 181 issued to petitioner as the project owner

"R-22-1"

and developer of

CRESCENT

PARK

RESIDENCES

CONDOMINIUM

Certificate of registration No. 24418 issued to petitioner as the

" R-23"

project owner and developer of

CRESCENT

PARK

RESIDENCES CONDOMINIUM

---- License to Sell No. 26169 issued to petitioner as the project owner

" R-23-J"

and developer of

CRESCENT

PARK

RESIDENCES

CONDOMINIUM

--- Certificate of registration No. 24028 issued to petitioner as the

"R-24"

project owner and developer of

CRESCENT

PARK

RESIDENCES CONDOMIN IUM

License to Sell No. 2527 1 issued to petitioner as the project owner

"R-24-1"

and developer of

CRESCENT

PARK

RESIDENCES

CONDOMIN IUM

- - -------- - --- Indeed, there would have been no necessity to secure the afore-listed Licenses to Sell, if petitioner were not engaged in selling condominium units, as it tenaciously claims.

Section 5 of Presidential Decree 957 13 requires a license to sell as a condition sine qua non first obtained before selling condominium units: Section 5. License to sell. Such owner o1· dealer to whom has been issued a registration certificate shall not, however, be authorized to sell any subdivision lot or condominium unit in the registered project unless he shall have fi rst obtained a license to sell the project within two weeks from the registration of such project. The Authority, upon proper application therefor, shall issue to such owner or dealer of a registered project a license to sell the project if, after an examination of the registration statement filed by said owner or dealer and all the pertinent documents attached thereto, he is convinced that the owner or dealer is of good repute, that his business is financially stable, and that the proposed sale of the subdivision lots or condominium units to the public would not be fraudu lent. (Emphasis supplied) Presidential Decree No. 957 is implemented by the HLURB. 14 11 I he Subdivision and Condominium Buyers' Protective Decree. d Cl A Case Nos. 8358, 8426 and 8489

Dissenting Opinion

!'age 12 of 16 In HLURB Case No. REM-A-041130-0252, where petitwner appealed the order of the Expanded National Capital Region Field Office of the BLURB imposing an administrative fine on petitioner for selling condominium units without a license to sell, for failure to secure certificate of registration and for advetiising without prior approval, and ordering it to cease a nd desist from further selling and advertising until all the necessary permits or license is secured, the HLURB denied petitioner's appeal and affirmed the order of imposition of fine, and cease and desist order. 15 Expcctedly, the llLURB required petitioner to secure licenses to sell and petitioner complied with the said directive. With regard to petitioner's claim that it was denied due process when BIR Ru ling Nos. DA-056-2003, DA-624-2004, DA-455-2007, DA-338- 2007, DA4l0-2007, DA-409-2007 and DA-337-2007 were revoked by respondent, 1 disagree.

The BIR Rulings were issued pursuant to Section 7 of the National Internal Revenue (NlRC) of 1997, as amended, which provides that the Commissioner of the Internal Revenue (CIR) has the power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau. Generally, once a ruling has been issued, the revocation, modification or reversal of its rulings cannot be given retrmictive effect pursuant to Section 246 of the NIRC of 1997, as amended. The same provision, however, provides that "(a) where the taxpayer deliberately misstates or omits matet·ial facts ft·om his retur·n or any document requit·ed of him by the Bureau of Internal Revenue; (b) Where the facts subsequently gather·ed by the Bureau of Internal Revenue are matedally different from the facts on which the ruling is based; or (c) \Vhere the taxpayer acted in bad faith", the Commissione•· may revoke the sa me as an exception to Section 246 of the NIRC of 1997, as amended.

11 Executive Order No. 90. December 17, 1986; Executive Order No. 648, February 7, 198 1. '' Exhibits " 12" (Certified True Copy of the Housing and Land Use Regulatory Board (HLURB) Decision dated 26 July 2005 in the case entitled "In the Matter of Imposition of Administrative Fine and Cease and Desist Order - G & W Architect, Engineer and Project Dev't. Consultants, Inc.", docketed HLURB Case No. REM-A-04 1130-0252) and " 12-A" (Ruling/Order of the Housing and Land Use Regulatory Board (II LURB) on the appeal filed by petitioner in HLURB Case No. REM-A-04 11 30-0252) in CTA Case No.

R358:

Exhibits ··r (Notice of Decision in IILURB Case No.) and "7-a" (HLURB Decision/Disposition or the Case) in CTA Case No. 8426; Exhibit " R-7'' (I lousing and Land Use Regulatory Board (HLURB) Decic;ion dated July 26, 2005) in CT A Case No. 8489. ~

Dissenting Opinion

In the case of Republic of the Philippines, represented by the Bureau <?( Food and Drugs vs. Drugmaker's Laboratories, Inc. and Terramedic, Inc. 16, the

Supreme

Court

tersely clarified the classifications of administrative regulations, viz:

"An administrative regulation may be classified as a legislative rule, an interpretative rule, or a contingent rule. Legislative rules are in the nature of subordinate legislation and designed to implement a primary legislation by providing the details thereof They usually implement existing law, imposing general, extra-statutory obligations pursuant to authority properly delegated by Congress and effect a change in existing law or policy which affects indi vidual rights and obligations. Meanwhile, interpretative rules are intended to interpret, clarify or explain existing statutory regulations under which the administrative body oper·ates. Their purpose or objective is merely to construe the statute being administered and purport to do no more than interpret the statute. Simply, they try to say what the statute means and refer to no single person or party in particular but concern all those belonging to the same class which may be covered by the said rules. Finally, contingent rules are those issued by an administrative authority based on the existence of certain facts or things upon which the enforcement of the law depends." In general, an administrative regulation needs to comply with the requirements laid down by Executive Order No. 292, s. 1987, othen vise known as the "Administrative Code of 1987," on prior notice, hearing, and publication in order to be valid and binding, except when the same is merely an interpretative r ule. T his is because " lw]hen an administrative rule is merely interpretative in nature, its applicability needs nothing fu rther· than its bare issuance, for it gives no real consequence more than what the law itself has ah·eady prescribed. When, on the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly· informed. before that new issuance is given the force and effect of law." (Citations omitted and emphasis supplied) Simply stated, the requirements of prior notice, hearing and publication arc necessary when the administrative ruling partakes of a legislative nature. On the other hand, interpretative rules, as those involved in the present controversy, need no prior notice, hearing and publication to be valid and binding.

1c' G.R. No. I908J7,March 5,20 14. cf1 C I A Case Nos. 8358, 8426 and 8489

Dissenting Opinion

Page 14 of 16

Misamis Oriental Association of Coco Traders, inc. vs. Department of Finance Secretary, et a/. 17 was categorical in declaring that the inquiry to be made by cou1is in considering interpretative rulings is not into the validity but into the correctness or propriety of the rule: Second. Petitioner complains that it was denied due process because it was not heard before the ruling was made. There is a distinction in administrative law between legislative rules and interpretative rules. 3 There would be force in petitioner's argument if the circular in question were in the nature of a legislative rule. But it is not. It is a mere interpretative rule.

XXX

XXX

XXX

Accordingly, in considering a legislative rule a court is free to make three inquiries: (i) whether the rule is within the delegated authority of the administrative agency; (ii) whether it is reasonable; and (iii) whether it was issued pursuant to proper procedure. But the court is not free to substitute its judgment as to the desirability or wisdom of the rule for the legislative body, by its delegation of administrative judgment, has committed those questions to administrative judgments and not to judicial judgments. In the case of an interpretative rule, the inquiry is not into the validity but into the conectness or propriety of the rule. As a matter of power, a cour·t, when confr·onted with an interpretative rule, is free to (i) give the force of Jaw to the rule; (ii) go to the opposite extreme and substitute its judgment; or (iii) give some intermediate degr·ee of author·itative weight to the interpr·etative rule.6 (Emphasis supplied) An interpretive rule may be further classified as general interpretative rule or a specific interpretative rule, as differentiated in CBK Power Company Limited vs. Commissioner of internal Revenue18 : Thus, the only issue is whether 13IR Ruling No. DA-489-03 is a general interpretative rule applicable to all taxpayers or a specific ruling applicable only to a particular taxpayer. BJR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a particular taxpayer, but b.y a government agency asked with processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. This government agency is also the addressee, or the entity responded to, in BlR Ruling No. DA-489-03. Thus, while this government agency mentions in its query to the Commissioner the administrative claim of Lazi Bay Resources Development. lnc., the agency was in fact asking the Commissioner what to do in cases like the tax claim of Lazi Bay 17 G. R. No. 108524, November 10, 1994. IR G.R. Nos. 198729-30, January 15, 20 14. ~ C r/\ Case Nos. 8358, 8426 and 8489

Dissenting Opinion

Page 15 of 16

Resources Development, lnc., where the taxpayer 'did not wait for the lapse of the I 20-day period. (Emphasis supplied) In the case at bar, the revoked BJR rulings involve petitioner's request for an administrative pronouncement on whether its Built-to-Own or Build- Your-Own-Home activity is a taxable event being purportedly a transfer of property held in trust by the Trustee for t)1e individual Trustor._ Respondent undeniably answered in the affirmative, which response or rulings constitute speci fie interpretative rules having been issued upon request of the petitioner.

I submit, therefore, that the validity of the revocation of the BIR rulings and the retroacti ve application of their revocation are warranted on the following grounds:

I . The afore-listed BIR rulings and subsequent BIR ruling revoking them are interpretative rules which do not require prior notice, hearing and publication for their validity;

2. The revocation of the said rulings is the result of the investigation conducted by the BIR which eventually arrived at the conclusion that petitioner misrepresented the facts upon which the revoked rulings were based; and

3. Respondent is not bound by the ruling of her predecessors.19 It has been settled in cases too numerous to cite that findings of fact of administrati ve agencies and quasi-judicial bodies, including those of the llL URB and the BlR, which acquired expertise because their respective jurisdictions are confined to speci fie matters, are generally accorded great respect.20 Jn fine, transactions crafted to appear as something they are not cannot be countenanced especially if such transactions are contrary to public policy or are used as a tool for committing tax evasion. 1 1) Section 7, N I RC of 1997, as amended; f3PI Fami~l' f3ank vs. Court of Appeals, et at., G.R. No. 11 7319, Jul) I 9. 2006.

'" .lnse Geukeko 1·s. lion. Sall'ador Araneta, Secretary C)/Agriculture and Natural Resources, etc., G.R. No. L-1 0182, December 24. 1957; Alexander B. Gat us vs. Social Security System, G.R. No. 174725, January 26, 20 I I.

~ C I A Case Nos. 8358, 8426 and 8489

Dissenting Opinion

Page 16 of 16

All told, I VOTE to DENY the Petition for Review filed by G & W Architects, Engineers and Project Consultants in CTJ\. Case Nos. 8358, 8426 and 8489, and UPHOLD the subject assessments for deficiency EWT and DST for the periods of June 24, 2004, July 10, 2004, and June 2004, in the amounts of P277,458.ll7.19, Pl32,85-2,679.05, and Pl49,414,228.66, respectively, or in the total amount of 1:!559,725,024.90.

Presiding Justice