CTA Case No. 668 (Decision)

// / II .':"""!J LJC . 0!' TH~ J" H!L I li" :NtJa ~ JU T (;F 'I .\X A!JAll~ M .N.I $ � THE CH I ST I AN ND HI JS I ON RY C. T. � � ALLIANCE CHURCHES OF THE CASE 1JO. 668 PHI LI Pl""'I NES , Pe t i t i o ne r , Yersus - COLL:2:CTOR OF Il~TER iT L .:.~EVEN"JE , :rte s ) o nd e nt. X- - - - - - - - - - - - - - - X DECI S I 0 N The p e ti t ioner i s a r e li gi ous c orp ora ti o n d uly organizeO. and e x i s t ing tmd e r and by v i r t ue of t he laws of t e Flilipp i ne s , \vi th pr i nci ) al offi ce in Zamb oa nga Ci t y , Phil i q,; i nes . On r�:a rc h lt , l 95lt and on Februa r y 17 , 1 956 , t he p e ti ti::me r rec e iYed by wa y of d onat i on from t he Christ- i a n a no l�:iss io n::1 r y Allianc e 11 a nd t �1 e Phi l i p ,; i ne Hi s sion of sa i d corpora tion , 11 a to t a l of t\v elve (1 2) pa r cels of l an3, and t he i mpr oYements t '�le r eon . ( Pa r . 1 , St i p- ula tlo n of Facts , i1ere i naf t er ref e rred to as 8tifacts , pp . SLr- 85 , C'r A re c . ) The ll onor, C ~1r istla n and l:is sion- a r y l l i a nc e , l i k e t i e pe titioner lmre i n , is a l s o a religious c or p ora tio n . ( �p a r . 2 , S t if'a c t s ) The prop- e rties , s ubj ect rna t t er of t i1e a fo r er1e n t io ned d o na t io ns , we re a l ready d evoted t o r al i gl ous p urp os e s p rior to the h erei n d o na ti o ns , a nd co n t inued t o be used by t he p et l ti oner- cl onee f or t h e same p .~ rpose s to wh lc h t h ey had be e n e mp lo:{ed by t :1e d o nor pr ior to t he d o na tions. ( Pars . 3 & 4, o t ifacts)

I ' :)EC ISION C. T. A. Ca se T_Io . 668 - 2- On Februar y 21, 19 56 , t he petitioner applied wi t :1 the Bureau of Internal Revenue for tax clearance certificates for t he above donations , as donations exemp t from taxation , f or t he p'.lrpose of re g istering t he d e eds of d onation wi t h t he 3.egis ter of De ed s of Zamboanga City and effe ct ing t he transfer of t he cer- tificates of title of t he proper tie s d onated in favor of t he petitioner . ( Par . 5, becond �l.mended .t?eti tion for Review , hereinafter referred to as Petition; pp . 123- 129 ; Pa r . 1 , n svJer t o Ame nd ed .1:-'etitlon fo r ~ieview , hereinafter referred to as Answer , pp . 142- lll-5) Instead of is sui ng t l~ tax clea rance cer tificate s appl ied for, t 11e res1Jond e ;1 t , on Se ::J te;-nber 24, 1957 , as!::l e ssed agains t and d ema nc~. e d from t he petitioner t he amounts of ii-16 , 153 . 80 and ~7 , 158 . 90 as .one e ' s g ift taxes for t he years 1954 a nd 19 56 , res pectively , or t :le total sum of * 23 , 312. 70 . . ( Pars . 5 & 6 , S tifa cts ) On October 21 , 1957 , t l;e petitioner protested against t he said a ssessments for donee ' s g ift t axes and req:.1 es ted for t he reconsideratio n a nd cancella tio t1 of t he s ame . Hmvever, on Ha rc h 16 , 1959 , t ~J.e res p onden t d enieri t t1e reques t for re co nsideration and insisted on t :.e payment by the petitioner of t he d isp uted donee ' s gift tax assessments . ( p . 163 , BIR rec .) Hence, the present appeal. I

tECib iON C. T. A. CAC>E EO. 668 - 3- The only i ssue in t hi s cas e , as correctly p ointed out by t ne pe titioner am~ ag reed to by t he respondent , is t he determina tion of t he lega l question whether or not donations of real properties devoted exclusively to religious purposes , by a re~igious corporation in f avor of anotner r el i gious corporation , f or the pur- pose of devoting said properties exclusively to the same religious purposes tba t it 11.a.d been here tofore c"i evoted to , are sub j ect to t -:1e payment of gift taxe s . ( Par . 10, Peti tion; Par . 1 , nswer) In s nort , is t he petitioner herei n liable f or t he donee ' s gift tax assessed agains t it by t he res.-, ondent? ( Par . 7 , Stifa cts) He believe and so hold t ba t petitioner Chr istian and Hissionary Alliance Chur ches of t he Phi lippines is not lia ble for t he payment of t he donee ' s gi f t t axes on the tv1elve (12) parcels of l and and the im_)rovements t he reon which it received from t he Christian and Nission- ary lliance . One of the esse ntial elements of a taxa- ble gift is that t here must be a clear and unmistakable inten t on t he par t of t he don or to make t i1e gift . In ot he r \vords , t he dona tive intent mus t be present in t he transfer of proper ty in ord er t ha t t ,1e gif t t axes can be assessed and collected . (P...:H Federal Gift Tax , (1956 ), par . 125 , 010) In t he case at bar , t he d ona tive int ent is wanting . 'rhe cause or consideratio n i s neither fond - ne ss , liberality , admiration, generosity , grat it ude f I~

DEC: IS ION I'W . 668 nor pity . (p . 787, Vol . I, Cagu.i oa ' s Comments and Cases on Civil Law ) He have caref ully exa mined and scrutinized t he d eeds of donation ex ec ll ted by Christian and Hission- ary Alliance in favor of t he petitioner , and. ~tve noted t~ e f ollowing cond ition w~ich is present i n all said C:tona tions: 11 Tha t t i1e c on~~ i tion of tt~is Donation is t .-..EL t t ~1e ].) 0IJ~E s ~~all use an:J ap ply t he above- des cribed properties , s ubj ect matter of t i1is Donation , to the uses and purposes for Hhic ::1- t~1e same were annlied and intended by the DOJ::OR, and for no purpose othe r than relir;ious or to fulfill t he ob jects for \v~l ic h t i1e .. mJEE \vas created , a n~~ on the fa ilu r e of said DONEE to comply wi t~1 V1ese conc3i tions , t he s aid pro ~) erties s hall r e- ver t to t :1e DONOR as if this Donation has not been execu ted in t he f irst place. " C ee S tifa cts , Annexes to A- 5 , pp . 86- 102 , CT rec . ) To our mind , considering t '1e above- quoted con- ' d ition and all t he other provisions of t he deed s of d ona tion , t he Christian and Lissionary Alliance did not tra nsfer by g ift Hi b1in t he purview of t :1e Gif t Tax Law t he properties mentione d in t he contra cts . TaX',vise , it c.d d not ;_)erform an act of liberality Hhere- by it d isposed gr atu i tously of t ~1e twelve ( 1 2) parcels of la nd s and t he improvemen t s t l1e reon in f avor of t he Chr istian a nd Hissionary Alliance Cimrches of the Philip9ines . The petitioner did not receive a t hing

DECit:J ION C. T. A. C SE NO 668 - 5- or right unJ er t he deeds of donation . ( rt . 725 , Civil Code) On t he contrary, it assumed an obliga- tion to admidister t he properties transferred to i t for religious purposes only - t he same religious pur- pos es for which t he donor was created atJd still exists toc.ay . The pe titioner received no t hing of rna terial value whic h could possibly be reached by gift taxa tion . Sub ject to t he restrictive and resolutory condi- tion stated above , t r1e properties mentioned in t he llonations have no 11fair marke t value 11 as t hat term is used in �actio n 113 of t he Na tional Internal ' avenue .) Code . The transfers of sa i~ properties from Chris tian and I1issior.13.ry Alliance to t ha t of t he pe titioner \�Jer e in name only , and mere ly to enable t he l a t t er to better perform its obligation to adninis ter t je properties in question for religious purposes only , and accomplish i ts mi s sion in t he Phi l i pp i nes to 11 go ye i nt o all t he vm rld and preach t he gospel to every creature. 11 ( Exh . E, p . 58 , CT rec .) tf.arec:1ver;: t he records show t ha t pe tit i oner Chris tian and g issionary lliance Churches of t he ?hilip ines , Inc . is simply 11 a reli gious society , connected with , ~ubord inate to and a dis trict organizat i on of t h e ' The Christian and Nissionary Alliance 1'1~ission of the Philip- pines ' , 11 and is 11 c harg ed with the a dministration of t he

D rGISION C. T�� CAS E NO . 668 - 6- t temporal i ties and management of t lle estates and prop- erties of the Christian anci �dssionary lliance Lission of the Philippines , within t he territorial jurisdiction of t he Islan6.s of h indanao and uulu , which territories are portions of t ' .e 1-'hilipp ines . 11 (....:;xh . F , pp . 62- 69 , CTA rec . ; Underscoring supplied . ) nd t he records furt her s how t r:a t 11 t :1.e Christian and Hissionary Alliance Lission of t :1e rhi lippinestt is just t :1e Phil ip~' ine arm of t he d onor - 11 t he Chr istian and lassionary lliance 11 - t he local organization or Piilip ~ ine branch or mission of the latter . ( ' ee Exh . h , p . 175, CT rec . ; See also T~N, pp . 29- 30; 59- 85) Hence , in all t :1e instruments of d onation unc~ er review , t l1e d onor is allvays d escribed as 1' The .Christian and l1issionary lliance , x x x and t he Philippine Lission of said corporation. '' (Par . l , .:.tifacts) F'rom t l-).e eyes of t he Gift Tax 1aw , t i1e trans - fers of t he twelve (12) parcels of land and t .1e improve- ments t 11ereon to t i�1e .Petitioner h e1�ein were , in effect , tra nsfers from t he rig ht :nnd to t he left hand . There s houlc , t '1erefore, be e xclud ed from t he category o;e donations all t hos e act s \v:1.ic :1 t hough e rant benefits without compensation do not require any corresponding patrimonial loss; t 1ere must e xist t :.,.e animus d onandi t l1at is, t he intention to give be nefit or e :1ric lm1en t to t he d onee (p . 792, Vol . I , �:;aguioa ' s Cor�1rnents and Cases on Civil Law) . 1le are of tne opinion and so hold t ha t suc h .kin.. s of transfers of properties are not sub- ject to gift taxes . �"

DECib iON C. T�� C ~ E NO 668 / ,,J,...,.I�H:P1i'Ft � ~ ......,:\...., O~ E ' - 7- .i. in vie1:1 of t he fore goincr consider- ations , t he dec is ion of the respondent Collector (now Commissione r) of Internal J.evenue is hereby reversed , and t 11e don:'l tions of t he t welve (12) parcels of land and t he improvements t hereon mad e by the Christian and Missionary Alliance and its Philippine l1ission to petitioner Christian and Ni ss ionary lliance Churches of t he l1ilippines , are he reby declared .not subject to gift t axes . SO 0 :l.DERED . Manila , August 21, 1964 . E CONCUR: ~~~ Presiding Judge RO:tv N M. UMALI f1.S3ociate Jldge