G&W ARCHITECTS, ENGINEERS AND PROJECT CONSULTANTS CO. v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with CTA Case No. 8426 & 8489
Repub lic of t he Phili ppines COURT OF TAX APPEALS Qu ezon City FIRST DIVISION G & W ARCHITECTS, CTA Case Nos. 8358, ENGINEERS AND PROJECT 8426 and 8489 CONSULTANTS CO., For: Assess m e nt Pet i t i o n er, Me mb e rs: - v ersus- DEL ROSARIO, Chairperson UY,and MINDARO-GRUllA, JJ. COMMISSIONER OF Promul gate d: I NTERNAl REVENUE, NOV 0~015' ; 9 : ()tJL:J �~ Respo ndent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - DECISION MINDARO-GRULLA, }_. : Th e insta nt case is a conso lid ati on of t h ree ( 3) Petiti ons for Rev iew fi led by G & W Architects, Engin eers a nd Proj ect Consu lta nt s Co . as petit ione r, aga in st th e Com missio ner of Inte rnal Revenue (CIR), as respo nd ent, wi t h t he Court in Div ision, pursuant to Sectio n 7 (a) (1) of Re public Act (RA) No . 11 25, An Act Creating t he Court of Tax Appea ls, as am end ed 1, as w ell as Rule 4, Secti on 3 (a) (1), in relati on to Rule 8, Section 4( a), of th e Rev ised Rul es of t he Co urt of Tax A ppea ls (RRCTA) 7 . ~ 1 Sec. 7. Jurisdiction. - T he CTA sha ll exe rcise: (a) Fxclu sive appe llate jurisdict io n to review by appeal, as herein provided : XXX XXX (1 ) Decisions of t he Com m issioner of I nte rn al Revenue in cases invo lv ing disputed assess m ent s, refund s of int ern al revenue taxes, fees o r oth er ch arges, penalties in relation th ere to, or o ther m atters arising under the Nat ional Int ernal Reven ue Cod e or other laws admi n istered by t he Bureau of I n ternal Rev enu e; XXX XXX ? Rule 4. Sec. 3. Cases within lh e jurisdiction of th e Courl in Divis ion. - T he Cou rt in Division. shall exercise:
CTA Case Nos. 8358, 8426 and 8489 Page 2 of 58 G & W Architects, Engineers an d Proj ect Consu ltants Co. vs. CIR DEC ISION 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 2004 I P213,376,605 .65 P64,081,511.54 1 P 277,458,117.1 8426 30,760,748.62 1 132,852,679.051 8489 July 10, 2004 , 102,091,930.43 34,505,019.48 . 149,414,228.665 TOTAL I June 2004 114,909,209.18 I P559,725,024.90 I Petitioner G & w Architects, Engineers and Project Co nsultants 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 th e Commissioner of Lhe Burea u of Inte rnal Revenue, who is v ested with< (a) Exclusive original over or appell ate jurisdiction to review by a ppea l the following: XXX XXX (1) Decisions of the Co mmissioner of [nternal Revenue in cases involving d isputed assessments, r efunds of inte rnal reve nue taxes, fees or other charges, penalties in relation thereto, or other rnatlers arising under the National Internal Revenue Code or other laws administered by t he 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 Commi ssio ner o f Inte rnal Reven ue on disputed assessments o r claim for r efund of internal revenue taxes erroneously or illega lly collected; the decision or ruling o f t he Commissione r of Customs, the Secretary of finance, the Secretary of Trade & Industry, the Secretary o f Agricu lture, and the Regiona l I rial Court in t h e exercise of th ei r origina l jurisdiction, shall be taken to the Court by filing before it a petiti on for r eview as provided in Ru le 42 of the Rules o f Court. �1he Court in Division sh all act on the appea l. 1 Petition for Review, CT/\ Case No. 8358, Docket, Vo l. 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 Pag e 3 of 58 G & W 1\rchitects, Engineers and Project Consultants Co. vs. CIR DECISION authority to administer and enforce Nat ional I ntern al Revenue Laws. 7 On different dates, petitioner obtained severa l -r confirmatory BIR Rulings for the fo ll owi ng projects: BI R Ruling --c- ondominium Project DA-338-20078 Grand Hamptons Tower I DA-33 7- 200 iJ _� rand Hamptons Tower_l_I__ DA- 056- 20 0 3 1- Penhurst Parkplace DA- 455- 2007 Kensington Condominium Project Acco rding to said BI R Ru lings, petitioner's Bu il d -To- Own concept of pooling of unit owners' f unds to be used for t he construction of condominium units on behalf of the fund owners is tax-exempt because it does not constit ute a ta xable sale, exchange, or disposition of rea l property by pelilioner, hence, not subject to creditable withholding tax (CWT) or capital gains tax (CGT), value - added tax (VAT) and DST, exce pt 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 we re origina lly owned by Fort Bonifacio Deve lop m ent Corporation (FBDC) and these were su bseq uently sold to the projects' respective condom inium corporations via Deed of Abso lute Sa le, summarized as fo llows: i 1Date of Executio n o f Ca n celle d TCTs in T CT s issued in th e I Deed of A b solute names of the the name of FBDC Sa le (seller) I +-� September fi, 200710 No. 3127611 , - - , � .: ' ~ I I I name of Grand I< _____________ Hamptons Tower 1 Pa r . 7, Admitted Fact s, Pre-Tria l Ord e r, CTA Case No. 8489, Docket, Vol. I , p. 609. B Lxllibit "J" in C l/\ Case No . 8 489 , Dock et , Vo l. 11, pp . 720 - 723. <J L x hibit ".J " in C l /\ Case No. 81126, Docket, Vol . I , pp. 618- 621.
CTA Case Nos. 8358, 8426 and 8489 Page 4 of 58 G & W Architects, engineers and Project Consultants Co. vs. CIR DEC ISION Jun e l6, -20 08B - No. 312751 Co ndominium Cor oration - - - ------i December 17, 200316 No. 3584717 No. 2434- P ~ in th e No. 35849 70 name of Grand 1 Hamptons Tower II Condom inium I CorJ2orat ion July 21, 2006 19 No. 30 - P18 in th e name of Penhurst - -- Parkplace Condominium Co rporation No. J 402 - P7 I in the name of Kensington Parkplace Cond om inium Cor oration Respondenl's representatives issued Letter of Authority Nos. 000 2763622, 0002763923, and 0002763724 , all on September 29, 2009 , to exa mine petitioner 's books of acco unts for T ran sfer Taxes (EWT a nd DST) involving Pe nhurst Parkplace and Kensington Place , Grand Hamptons Tower I, and The Gra nd Hampton s. The rea fter, a letter25 was sent by BIR Revenue Distri ct Offi cer (ROO) Gerry 0. Dumayas to petition er, requiring the submission of documents. This was follow ed by a Second Request for Prese ntation of Records26 dated Novembe r 9, 2009 .[. �1 Fxhibit "F", CTA Case No. 84 26, Docket, Vol. I, pp . 577-589. 11 Fx hibit "G", CTA Case No. 8476, Docket, Vo. I, pp. 590-593. 17 Lx hibit " II ", CT/\ Case No. 8426, Dock et, Vol. 11, p . 865. 11 Exh ibit "F", CTA Case No. 8489, Docket , Vol. II, pp. 687 -701. 11 Lxhibit "G", C I 1\ Case No . 8489, Docket, Vo l. II, pp. 702 7 05. ' 1 Lxhibit " II ", C I 1\ Case No . 8489, Docket, Vol. II, pp. 7 06 707. '' IG Fx hibit "D", CTA Case No. 8358, Petitioner's Ex hibits in ex panding enve lope. 11 Lx hibit " 13" , C I A Case No. 8358, Petitioner's [xh ibi ts in ex panding enve lope . IB Lx hibit " I-", Cl 1\ Case No. 8358, Petitioner's Exhibits in ex pa ndin g e nvelope. 1� Fx hibit "E", CTA Case No. 8358 , Petitioner's Exhibit s in expanding e nvelope. Jo exhibit "C", Cl A Case No. 8358, Petitioner's Lxhibits in expa nding envelope. ) I Ex hibit "G" , CTA Case No. 83~8, Petitione r's Exh ibits in ex panding e nvelope . n Fx hibit " I ", CTA Case No. 8358, Petitioner's Ex hibits in ex panding e nvelope. 11 Lx hibit " L", in C I 1\ Case No. 81126, Docket, Vol. I , p . 624. 7 Fxhibil " I ", in CTA Case No. 8489, Dock et, Vol. II, p. 726. ' )~ Cx hibit "2", 131R Reco rd s, p . 911 . .,h Lx hibit "3", �3lR Reco rd s, p. 95.
CTA Case Nos. 8358, 8426 and 8489 Page 5 of 58 G & W Architects, Engi neers an d Proj ect Consulta nts Co. vs. CIR DEC ISION A Notice of Inform al Confere nce dated January 20, 2 010 was issued by ROO Oumayas, inviting petition er to an informa l confere nce regard ing the results of the investig atio n on petitioner's EWT and OST liabilities on the transfer of units in Kens ington and Pen hurst Pl ace. 27 In a Memorandum for Commissioner of Internal Revenue Joel L. Tan -Torres dated March 28, 2010, Assistant ROO Christin a C. Barroga and ROO Oumaya s requ ested the nullification of BIR Ruling Nos. OA- 056 - 2 003, OA- 6 24 -2 004, DA-4 55 - 2007, DA- 338 - 200 7, DA-4 10-2007, DA-409 -2 007, and DA- 337- 2007. 28 On Jun e 28 , 2010, Revenue Memora ndum Circu lar (RMC) No. 55 - 2010 29 was iss ued by th e BIR, declaring, among others, BIR Ruling Nos. DA-337 - 2007, DA- 056 - 2003, and DA-455- 2007 as null and void. As a res ult, res pond ent issued Pre liminary Assess m ent Notices dated June 8, 201030 and July 1, 201031 , finding petiti o ne r li ab le to pay EWT and DST for th e transfer of the 111 co ndominium units in Pen hu rst Parkplace an d 229 units in Ke nsington Place. Subsequently, respondent issued the assa il ed Formal Assess ment Notices (FAN) on Ja nuary 25, 2011 32 , June 10, 20 1133 and July 26, 201134 , finding petiti oner liable to pay EWT and DST on the transfer of condominium units in Penhurst Parkplace, Kensingto n Place, Grand Hampton I, and Gra nd Hampton ILL /t Fxhibit " 4", BIR Records, pp. 103-105. :>a exh ibit "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 . 1 5'1 - 156. 17 Exh ib it")", CTA Case No. 83:,8, Petitioner's Fxhibit s in expanding e nvelope. ll l::xh ibit " M", in Cl 1\ Case No. 8426, Dock et, Vol. I, p. 625. 31 l.:x hi bit "M", in Cl/\ Case No . 81189, Dock et, Vol. II, p. 727.
CTA Case Nos. 8358, 8426 and 8489 Page 6 of 58 G & W /\rch itects, Lngineers and Project Consultants Co. vs. CLR DECISION 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, 201137 and submitted its supporting documents on July 27, 2011 38 ; while on August 25, 2011 39, petitioner protested the FAN issued on July 26, 2 011 and submitted supporting documents on October 18, 201140. Due to respondent's inaction on the protest, petitioner fil ed the instant Petitions for Review on October 21, 2 01 1 fo r 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 fo ll ow ing Specia l and Affirmative defenses in the Answer4 1 fil ed on December 7, 2011: "7 . Sh e reiterate s and rep leads the preceding paragraphs of this answer as part of her Specia l and Affirmative Defenses; 8. Section 228 of the 1997 Tax Code partly rea ds as follows: 'SEC. 228. Protesting of Assessment - XXX XXX XXX Such assessment may be protested administrative ly �by fi lin g 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, Petitione r's Ex hibits in expa nding envelope. lh Fxh ibil " P", CTA Case No. 8358 , Petitioner's Exhibits in expa nding e nvelope. 1 ' Fx hibit " N" , in CTA Case No. 84/6, Docket , Vol. I , pp. 630-7/3. m Lx hibit " 0 ", in C l/\ Case No. 8-126 , Docket, Vol. I, pp. 724 - 7 56. l<l Fx hibil " N", in CTA Case No. 8489, Docket, Vo l. II , pp. 737-753. ~0 l x hibit " 0", in C I 1\ Case No. 8-189, Docket , Vol. 11, pp. 877 -904. 11 C I 1\ Case No. 8358, Docket, Vo l. I, pp. 152 158. '
CTA Case Nos. 8358, 8426 and 8489 Page 7 of 58 G & W 1\rchitects, L:n9ineers and Project Collsult:ants Co. VS. ClR DEC ISION form and manner as may be prescribed by the implementin g rules and reg ulations. Within sixty (60) days from filing of the protest, all releva nt 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 subm ission of documents, th e taxpayer adversely affected by the decision or inaction may ar;mea l to the Court of Tax Appeals within thirty (3 0) days from receipt of the said decision, or from t he lap se of the one hundred eighty ( 180) - day period; otherwise the g~cis ion_ ~ha ll become fina l, executo ry and gemaQdahl_~.' [Emphasis supp li ed] Implem ent in g th e aforesa id provision, Section 3, 3.1.5 of the Revenue Regulations No. 12-99 dated September 6, 1999, provides that the taxpayer sha ll submit the required docum~nts in support Qf his protest within sixt y (60) days from date of filing of his letter of protest, otherwise, t he assessment shall become final, executory, and demandable. The phrase 'subm itted the required documents' includes subm ission or presentation of the pertinent documents for scrutin y and evaluation by the Revenue Officer cond uctin g the audit and the said Revenu e Officer shall state this fact in his report of investigation. In the instant case, pursuant to the report of re- investiga ti on of the co ncerned BIR Examiner, the latter found that despite considerable length of time given to herein petitioner, it fail ed to subm it the required documents in support of its protest agai nst the BIR Formal Assessm ent 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 w ithho ldin g tax and documentary stamp tax, respectively for ta xable year 2004 has already become final, executory and demandable. As such, this(
CTA Case Nos. 8358, 8426 and 8489 Page 8 of 58 G & W /\ rchitect s, Enginee rs a nd Project Consulta nts Co . vs. ClR DEC ISION Honorable Court has no jurisdiction to act on the instant petition. 9. Well - settled is t he ru le that if the court has no jurisdiction over the nature of an action, its only jurisdiction is to dismiss the case. The co urt cou ld 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 App eal s, being a court of special juri sd iction , can take cognizance on ly 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 ca se 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 t im f1, such reauirement is jurisdictional and failure to comply therewith may be raised in a motion to dismiss.' [Empha sis supp li ed] 11 . Moreover, in the case of Yao vs. Court of Appeals, et al., G.R. No. 132428, October 24, 2000, th e 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 ap pea l is not a natural right nor part of due process, it may be exercised only in the manner and in L
CTA Case N os. 8 358 , 8 426 a nd 8 489 Page 9 of 58 C & W Architects, engineers and Project Co nsu ltants Co. vs. CJR DECISIO N accordance with the provisions of law. Corollary, its requirements must be s tric tly 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 -comp lian ce with such legal require m ents is fata l, fo r it renders t he decision sought to be appealed fina l and executory, with the end result that no co ur t ca n exe rcise appell ate jurisdiction to revi ew th e decisio n. ' [E mpha sis supplied] Thu s, it mu st be emphasized that jurisdiction over th e subject m atter or nature of an action is fund am ental for th e co urt - to act on a given co nt ro versy (Commiss ion er of Internal Revenue, vs. Villa, et a l., G.R. No. L- 23988, January 2, 1968) , and is conferred on ly by law and not by th e con se nt o r w aiver upo n the court which, oth erwi se , wo uld have no jurisdiction over th e subject matter or nature of an action . Lack of jurisdiction of th e court ove r an action or the subject matter of an action ca nn ot be cured by th e sil ence , acquiescence, or ev en by ex press con sent of th e parti es (Lares ma vs. Abel/a n a, G .R. N o. 1 4 097 3, November 11, 2004) . 12. On th e oth er hand , assum ing without admitting that t his Hon orab le Court ha s jurisdiction to act on th e inst ant petitio n, Pet itioner wa s assessed for d efi ciency expand ed wi t hho ldin g ta x and docum entary sta mp tax , res pecti ve ly for taxa ble y ea r 2 004 , for the reaso n t hat during th e administrative investigati on of its t ax case by th e BIR, peti t io ner fa iled to subst ant iat e o r submit supportin g evid ence again st t he BtR f indin gs, m ore specifica lly shown und er th e Details of Discrepancies attached t o th e Formal Assess m e nt No ti ce (FAN) dat ed Janu ary 25, 2011, th e Pre li m inary Assess m ent Notice (PAN ) da t ed Jun e 8 , 2010 , which are br iefly discussed hereund er, v iz : XXX XXX XXX t::
CTA Case Nos. 8358, 8426 and 8 489 Page 10 of 58 G & W Architects, lngineers and Project Co 11sulta nts Co. v s. CIR DECISION 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/bui lt - to -own/built- your- own a nd 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 Assessm ent Notice (FAN) dated January 25, 20 11 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 Co nfere nce 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 2 004, through the receipt of the Details of C.
CTA Case Nos. 8358, 8426 and 8489 Page 11 of 58 G & W Architects, Lngineers and Project Co nsultants Co . vs. CJR DECIS ION Discrepancies attached to the Forma l Assessment' Notice (FAN) dated January 25, 2011 and the Prelim inary Assess ment Notice (PAN ) dated June 8, 2010, as w ell as other BIR Correspondence/Notices du ly received by petitioner which ar e found in the BIR records of thi s 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 f il e the required Withhold in g Tax Remittance Return (BIR Form 1606) and Documentary Stamp Tax Declaration/Return (BIR Fo rm 2000- 0T) on the transfer of t he 111 condom inium units of Penh urst Pa rkplace Co ndominium Corpo ration and 229 con dominium units of Kensington Place Corporation both located at Global City Fort Bon ifacio, Taguig City; 17. The assessments issued against petitioner for deficiency expanded withholding tax and documenta ry sta mp ta x for taxab le year 2004 were made in accordance with law and regulations. 18. All presumptions are in favor of the correctness of tax assessments ( i. e. expa nd ed withholding tax and documentary stamp tax for taxable year 2004) issued by the respondent." Respond ent likewise fil ed by reg istered mail her Answer to the Pelition for Review in CTA Case No. 8426 on May 14, 201242, and interposed denial s to the allegations in the said petition . Respo nd ent fil ed her Answer43 to the Petition for Rev iew 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. 13 Cl/\ Case No . 8489, Docket, Vol. I , pp. 260- 263.
CTA Case Nos. 8358, 8426 and 8489 Page 12 of 58 G & W 1\rchitects, l::ngineers and Project Co nsultants Co. vs. ClR DECI SION "3. She reiterate s a nd rep leads 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 th e instant petition for review filed on May 11, 201 2, hence, th e Honorabl e CTA has no jurisdiction to take cog niza nce of th e case . Under Sectio n 228 of t he 1997 Tax Code, as impl eme nted by Revenue Reg ul ation s No 12- 99, a t axpayer ha s thirty (30) days from receipt of an assessment to file a protest, and another sixty (60) days from such filing to submit all releva nt/pertin ent documents. Thereafter, th e BIR has on e hundred eighty (180) days within wh ich to rule on the protest. The taxpayer has 30 days to appea l to t he Co urt of Tax Appea ls (CTA), reckoned from the receipt of decision or the lapse of t he 180 day period. However, if no releva nt/pertin ent 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 app ealab le to th e 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 Interna l Revenue, CTA EB No. 343, June 12, 2008) . 6. In case of transfer of rea l properties, t he situ s of taxation is w here th e property is located. Thus, th e corre spond in g cred itab le withho lding tax and documentary du e on the transfe r ar e to be pa id with t he Revenue District office wh ich has juri sdi ction over the location of the properties . 7. Und er Section 22 (N) of t he NIRC of 1997, as amended , the term 'taxpayer' m ea ns any perso n subject to tax imposed by thi s T it le . Thu s, thet:
CTA Case Nos. 8358, 8426 and 8489 Page 13 of 58 G & W Arch itects, l::ngineers and Project Consultants Co . vs. ClR DECIS ION Revenue District Office No. 44 of the Revenue Region No. 8 has jurisdiction to assess taxpayers ove r the transfer taxes (i.e., cred itable withholding tax and documentary stamp tax) due on the properties loca t ed within its jurisdiction. 8 . The ' Build-To-Own or Build-Your-Own' concept emp loyed by petitioner is co nsid ered pre- selling/selling that should have been subjected to expanded withholding tax (EWT) and documentary stamp tax (DST). 9. Upon exam ina t ion of RDO No . 44, the facts are not as represented by the petitioner in its req uest for ru ling. Hence, the transaction s should be treated as pre- selling/sellin g and therefore su bj ect to EWT and DST. T he BIR Ruling DA- 338 - 2007 dated June 20, 200 7 issued to petitioner was issu ed with a very specific co ll ati ll a, to wit: 'This ru lin g is being issu ed on th e 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 co nsidered 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 con cepts mainly co nsist of the d eve loper 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 on ly. Moreover, in t he above scheme, the assignment and delivery of the developed un its to joint owners (i ndivid ual investors), is claim ed 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
CTA Case Nos. 8358, 8426 and 8489 Page 14 o f 58 G & W /\ rc hi tect s, En g inee rs a nd Proj ect Co11sulta nts Co . v s . C l R DECISION 11. Th e Hou se and Land Use Regulatory Board ( HLURB) r ej ect s the above-schem e being contrary to th e policy be hind Presid ential Decree (P.O .) No. 957, oth erwi se known as 'The Subdivision and Condominium Buyer's ProtectiYe Decree' (as amended by P.O. 12 16). 12 . The Assistant Commissioner of the BIR Legal Service had exceeded his delegated authority to rende r the questioned/ cancelled BIR Ruling DA- 338- 2007 dated June 20, 200 7 whi ch is a case of first impression whi ch he has no authority to do under Sec. 7 (b) of th e NIRC of 1997. Hence, th e said BIR Ruling ( DA-338-200 7) is void and of no effect. 13 . T he defi ciency assessments against petitioner a rose from the transactions covered by One-Time Tran saction s (ONETT) . Under Revenue Memorandum Ord er (RMO) No. 15- 2003, no Letters of Authority (LA) is required before verification can be made of such returns on one-time transactions (ON En -) . T hus, any defect in th e issuance of the Letter o f Au t ho rity No . 0002 7637 dated September 29, 2009 has no effect on th e validity of th e subject defi ciency t ax assessm ents and the issuance of the sa id LA would ju st be a surplusag e because of the afo restated ex isting RMO 15-2003 . 14. All pres umption s are in favor of the correctn ess of th e t ax assessm ent (Interprovincial Autobus vs. Collector of Internal Revenue, 98 Phil. 290). " Th ereafter, the three (3) cases were set for Pre-Trial Conference on January 19, 201244, June 22, 201245 , and Augu st 10, 201246. Accordingly , in CTA Case No. 8358, th e Pre -Trial Brief for Petitioner Ad Cautelam4 7 and Respondent's Pre-Trialc 11 C l f\ Case No. 83 58 , Dock et, Vo l. I , p. J59 . 1 CT A Case No. 8476, Docket, V o l. I, p. 167. '' 1 C l !\ Case No. 81189 , Docket , Vol. 1, p. 2 6 5. '' 11 C l f\ Case No . 8 3 5 8, Doc ke t, Vol. 1, pp. 179 - 2 12.
CTA Case Nos. 8358, 8426 and 8489 Page 1 5 of 58 G & W /\rcllitect s, Lng ineers a nd Project Consul ta nts Co. vs. CIR DECISION Bri efl8 were filed on January 16, 2012 and February 14, 2012, respectively. On the other hand, Petitioner's Pre-Trial Briefl9 and the Pr e-Trial Brief (for Respondent) 50 in CTA Case No. 8426 were fil ed 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 st ating 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, 2 01 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 Lh eir respective documentary and test imonial 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, Ex hibits "A" to "P- 1" in CTA Case No. 842657 , and Ex hibits "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, Vo l. 1, pp. 163 - 1 711. ' �,o C l/\ Case No. 81126, Docket, Vol. I, pp . 18 1 - 1811 . .,, CTA Ca se No. 8489, Docket , Vol. I , pp . 266-/77 . ~' C l/\ Ca se No. 8"1 89, Docket, Vol. I, p p. 280 - 283. 'd CTA Ca se No. 8358, Docket, Vo l. l, pp. 733- 2 35. r, , CTA Case No. 8426, Docket, Vo l. I , pp. 186- 197. ~~ C r/\ Case No. 8489, Docket, Vol . l, pp. 29 7 306. r,r, CTA Case No. 8358, Docke t, Vol. II, pp. 6 16-617. ~7 C I/\ 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 , 842 6 a nd 8489 Page 16 of 58 C & W Arc h itec ts, Engin eers a nd Project Con su ltants Co. v s . CTR DECISION Th e docume ntary evidence forma lly offere d by th e petitione r and adm itted by t he Court a re as fo ll ow s : Ex hi bit CTA Case N o. 8 358 A B Desc ription c Certifi cat e of Registrati on (BIR Form No. 23 03 ) show ing G&W's registration at Rev en ue Region D No. 6 und er Revenue District Office No. 30 E Tra nsfer Certifi cate of Titl e (TCT) No. 3 5847 regist e red under th e nam e of Fort Bo nifacio F Development Corporation ( FBDC) G TCT No . 35849 regist ered und er th e name of H FBDC Deed of Absolute Sa le betw ee n FBDC and Penhu rst Parkplace Condominium Corporation notarize d on 17 Decembe r 200 3 Deed of Abso lute Sale between FBDC and Kensi ng to n Place Cond omini u m Corporation nota ri zed on 2 1 Ju ly 2006 TCT No. 30-P regist ered und er t he name of Penhu rst Park place Cond ominium Corporation TCT No. 140 2- P reg ist ered under th e name of Kensington Place Condomin ium Corpora t ion Condomi nium Certifi cate of Title (CCT) Nos. 23 1 registered und er th e nam e of Ad ele A. Ja ucian; CCT No. 4 79 regist ered under th e nam e of Sps. Edwa rd K. Sy and Emi ly C. Sy ; CCT No . 240 reg istered under th e name of Ca thy G. Ko ng; CCT No . 23 5 regi st ed u nde r th e nam e of Pe k Eng Lim; CCT No. 223 regist ered under th e nam e of Glenda T. Endaya; CCT No . J 130 2 regist ered unde r th e nam e of Alv in Cl ifton T. Go ; CCT No. 8115 registered unde r t he nam e of Ang ela S. Agui lar ; CCT No. 12128 registe red u nder the nam e of Elizabeth Q . Alv ina ; an d CCT No. 10 535 regist ered und er t he nam e of Gina G. Tan LO A 27 636 date d 29 Se pte m ber 2 009 ~
CTA Case Nos. 8358, 8 4 26 and 8 4 89 Page 17 of 58 G & W 1\rchitects, Eng inee rs a nd Proj ect Co nsu ltants Co. vs. CIR DEC I S ION J Forma l Assessme nt Noti ce (FAN) dated 25 K January 20 11 L M Co ntract to -Manag e a nd Execute th e N 0 Constru ct ion of Penhurst Parkplace P Q Co n d o m i n i u m Q- 1 Contract to Manage a nd Execute t he Ex h i b it Con stru ction of Ke nsington Pl ace Co ndo m inium A B Trust Agreement dated 03 July 2002 C De posi to ry and Disbu rsing Ag ree me nt dated 23 Ma rch 2004 D D- 1 Letter Prot est d ated 24 Fe bruary 2011 fi led with th e Burea u of Int erna l Rev enu e (BTR) Supporting docume nts submitted t o t he BI R and Letter dated 29 March 2 01 1 Judicia l Affidavit of Arch. Gilbert C. Yu dated 13 June 2012 Signature of Arch. Gilber t C. Yu CTA Case No. 8426 Desc r ipti o n G&W's Arti cles of Part ner ship du ly fi led w it h th e Securities and Excha ng e Commi ssion G&W's Am ended Arti cles of Partn e rship d u ly fil ed with t he Securities and Exchang e Co mm ission BI R Certifi cate of Registrati o n (BIR Fo rm No. 2303) , showin g G&W's reg istrat ion at Rev enue Reg ion No. 6 unde r Revenu e Distri ct Office No . 30 Con t ract to Ma nage and Execute th e Co nstructio n of Ha mpto ns Place Condomini um Contract t o Manage a nd Execute t he Construct ion of Hamptons Place Condo m iniu m L..
CTA Case Nos. 8358, 8426 and 8489 Pag e 18 of 58 G & W 1\rchi te c:ts, Engin ee rs and Proj ect Consultan ts Co . vs. CI R DECISION D- 2 Cont r act to Manage and Execute the Co nstru cti on of Hamptons Place Condominium D-3 Contract to Manage and Execute th e Constru ctio n of Ha mpto ns Place Condominium E De pository and Disbursing Agreem e nt dated 17 Jun e 200 5 E- 1 Deposit o ry and Disbursing Agreem ent dated 30 June 200 5 E- 2 Depository and Disbursing Agree m ent dated J 9 Octo ber 2 00 5 E- 3 Depository and Disbursing Agree m ent dated 13 June 200 7 F Deed of Abso lute Sa le betw ee n Fo rt Bonifacio Develo pm ent Co rpor ati on and Th e Grand Hampto ns Tower 1 Condominium Corporation G T r an sfer Certi ficate of Titl e (TCT) No. 3 127 6 und er t he name of Fort Bonifacio Dev elopment Co rp oratio n ( FBDC) H TCT No. 2270 - P und er the na m e of T he Grand Hampto ns Towe r I Condominium Corpo ration I Cond ominium Certifi ca t e of T itle No. 303 7 5 unde r th e nam e of Nelly Uy Yu I-1 Condominium Certifi cate of Titl e No . 29777 unde r th e nam e of Micha el Joseph B. Celis I-2 Co nd ominium Certifi cate of Titl e No . 29764 und er th e nam es of Sps. Ern esto S. Esmani a nd Rebecca E. Esrn ani I-3 Co ndo minium Certifi cate of Titl e No. 30 37 1 under t he name of Shirley Y. Sy J BIR Ruling No . DA-::3 37 -200 7 dated 2G June 20 0 7 K Reven ue Me mo randum Circular No . 55 - 2010 dated 28 June 201 0 L Letter of Au thority No . 2 008000 276 39 dated 29 September 2009 (" LOA 27 639 " )(
CTA Case Nos. 8358, 8426 and 8 489 Page 19 of 58 G & W Architects, Engineers and Project Consulta nts Co. vs. CIR. DECISION M Forma l Assessment Noti ce ("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 2 011, filed by petition er G&W on 27 Ju ly 2 01 1 P Judicial Affidavit of Arch. Gilbert C. Yu dat ed 17 October 201 2 with sub marking Sig nature of-.Arch. Gilbert C. Yu Exhibit " P-1" CTA Case No. 8489 Exhibit Description A G&W's Arti cles of Partnership duly fi led with and certifi ed by the Securities and Exchange B Commission ("SEC") on 3 J January 197 8 c G&W's Amended Articles of Partnership du ly filed w ith and ce rtified by th e SEC on 15 D Ja nu ary 1998 0- l BIR Certificate of Registration (BIR Form No. 23 0 3) No. 1RC0000586533 issued on 01 D- 2 January 1996, showing G&W's reg istration at Revenue Region No. 6 under Revenue District Office No. 30 Contract to Manag e an d Execute the Construction of Hamptons Place Condominium executed by and between Jayan Russel S. Dy a nd Janette Sy Dy and petitioner G&W dated 23 August 2006 Contract to Manage a nd Execute th e Constructi on of Hampto ns Place Condom inium executed by and betwee n Enriqu e B. Gcpilano, Ill and Gretelwo ld a C. Gepi lano a nd petitio ner G&W dated 29 June 2006 Contract to Manage a nd Execute the Construction of Hamptons Place Cond om inium executed by and between Mitch ell 0. Soria a nd4C
CTA Case Nos. 8358, 8426 and 8489 Page 20 of 58 G & W Architects, Engineers and Project Con sultants Co . v s. CIR DECISION Anna Marie P. Amoroso and petitioner G&W dated 11 May 200 7 E Depository and Disbursing Agreement dated 01 September 2006 executed by and between Jayan Russe l 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. Ge pilano and Banco de Oro Unive rsal Bank - Trust Banking Group E- 2 Depository and Disbursing Agreem ent 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 Bo nifacio 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 Ha mptons Tower lJ Condomini um Corporation I Condominium Certifi ca t e of Titl e No. 360 79 under the names of Jayan Russe l Sy Dy and Janette Sy Dy I-1 Condomi nium Ce rtifi cate of Titl e No . 36099 under the names of- Sps. Enrique B. Gepila no and Gretelwo lda G. Gepi lano I -2 Cond ominium Ce rtifi ca t e of Titl e No. 36104 under th e nam es of Sps. Mitch ell Oliva Soria a nd An na Marie Amoroso Soria J BIR Ruling No. DA- 337 - 2 007 dated 20 June 2007 K Revenue Mem ora ndum Circular No . 55-2010 dated 28 June 2010C
CTA Case Nos. 8358, 8426 and 8489 Page 21 of 58 G & W Architects, Lngineers and Project Co11sultants Co. vs. C!R DE CISION L Letter of Authority No. 2 008 00027637 dat ed 29 September 2009 (" LOA 27637") M Form al Assessme n t Notice (" FAN ") dat ed 26 (with sub- markings July 20 1 1 " M 1" to " M 4) N Letter Protest dated 24 Aug ust 2011, f iled by petitioner G&W on 25 August 2011 0 Su pporting Docum ents su bmitted to t he B1R and Letter dated 14 October 201 1, fi led by petitio ner G&W on 18 October 201 1 P Jud icia l Affidav it of Arch . Gi lbert C. Yu da gted 12 November 20 12 wi th sub marking Sig nature of Arch. Gil bert C. Yu Ex hib it" P-1" During the prese ntation of respondent's evidence, res pond ent fil ed her Manifestation with Urg ent Motion fo Consolidate CTA Case Nos . 8358, 8426 and 8489 on Sept em ber 12, 201 359 , w hi ch was later granted during the hearin g he ld on Septe mber 2 0, 201 360 . The Court admitted as part of responde nt's evide nce Ex hibi ts "1" t o "3 0 -A" , with th e excepti o n of Ex hibits " 17-A ", " 19", "19-A ", "24", a nd "24-A" fo r CTA Case No. 8358 ,� Exhib its "1" t o "3 0- a", except Ex hibi ts " 4 ", " 4 - a" ' " 4 - b" , " 4 - c' " I "8"I "8-a" " 8-b"I "9"I "9-a"I " 10" " 13"f " 13-a"I " 13- b"f f f and " 15-a" for CTA Case No. 84 2.6; and Exhibi ts " R- 1" to "R- 25-1" fo r CTA Ca se No . 8489 .61 Respo nd ent's co nso lid ated docum entary evid ence are as follows: Exhibit CTA Case No. 8358 Description'- '''1 CTA Case No. 83~8, Docket, Vol. II, pp. 761 -765; CTA Case No. 8426, Docket, Vol. II , pp. 917 9 21; 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, Vo l. II, pp . 923 924; Cl/\ Case No. 84 89, Docket, Vol. II, pp. 946- 947. 6 1 C l/\ Case No. 8358, Docke t, Vol. 11, pp . 1395- 1397 and 1443- 1448.
CTA Case Nos. 8358, 842 6 and 8489 Page 22 of 58 G & W Arch itects, Eng inee rs and Proj ect Consul ta nts Co. vs. CIR DECISI ON BlR Reco rd s bea ring th e re port of invest igation on th e defi cie ncy Ex pand ed Withh old ing Ta x ( EWT) and Docume ntary Stamp Ta x (DST) liabilities of petitioner for taxa ble year 2014. 2 BIR Fi rst Notice dated Oct obe r 6 , 2009 to present records addressed to petitioner . 2-A Nam e and specim en signature of GERRY 0 . DUMAYAS, Revenue Distri ct Officer of BI R ROO 4 4, Tag uig/ Pat eros. 2-B Da t e of rece ipt of petitioner of t he sa id BIR First Noti ce dat ed October 6, 2009 . 3 BIR Second Re qu est to Prese nt Records dated Nove mber 9, 2 009 addressed to pet ition er. 3-A Nam e a nd specim en signature of GERRY 0 . DUMAYAS, Reve nue Dist rict Office r of BI R ROO 44 , Tag ui g/Pateros. 3- B Da te of rece ipt of peti t io ner of th e said BIR Second Reques t to Prese nt Record s dat ed Novem ber 9, 2009 . 4 BIR Letter dated January 20, 2010 addressed t o petiti o ner , inv iting fo r an info rma l confe rence. 4-A Name a nd specime n sig nature of GE RRY 0 . DUMAYAS, Reve nue Distri ct Office r of BI~ ROO 44, Tag uig/Pater os. 4-B Summary of Computat io n of t he Tax Li ability of petitio ne r fo r taxab le y ea r 2004 w hich w as attached to th e sa id BIR Letter dated Janu ary 20, 201 0. 4-C Date of rece ipt of petiti oner of t he sa id BI R Letter d at ed Janu ary 2 0 , 2010 w ith attached Summa ry of Com putati on of its Tax Li abil ities for taxable year 2004. 5 Memorand um Report d at ed March 23, 2010 of Reven ue Officer RHODORA S. DE VILLA . 5-A Name and specim en signatur e of Revenue Office r RHODORA S. DE VILLA.~
CTA Case Nos. 8358, 8426 and 8489 Page 23 of 58 G & W /\rchitects, Engineers and Project Co nsu ltants Co. vs. CIR DECISION 6 BJR Pr elimin ary Assessment Noti ce (PAN) dated July 1, 2010, assessing petitioner a 6-A deficiency Ex pand ed Withholding Ta x (EWT) 6-B and Documentary Stamp Tax (DST) for taxable 6-C year 2 004 for its Kensington Place 6-D Condomin ium Project, located in Taguig City, 7 Metro Manila . 7-A 8 Name a nd specime n signature of JAIM E B. 8-A SANTIAGO, CESO V, Regional Director, BIR 9 Revenu e Region No. 8, Makati City. 9-A 9-B Details of Discrepancies attached to the said Bl R Pre liminary Assessment Notice (PAN) dated Ju ly 1, 20 10. Name a nd specime n signature of JAIME B. SANTlAGO, CESO V, Regiona l Di rector, BIR Reve nue Regio n No. 8, Makati City. Date of receipt of peti tioner of t he said BlR Preliminary Assessment Notice (PAN) dated July 1, 2010 with attached Deta ils of Discrepancies. Memora ndum Report dated Augu st 10, 2010 of Revenu e Officer RHO DORA S. DE VI LLA. Nam e and specimen signatu re of Revenue Officer RHODORA S. DE VILLA . BIR Lette r dated Augu st 18, 20 10, in reply to petitioner's protest against the BIR Preliminary Assessment Notices (PAN) dated July 1, 2010. Name a nd specim en signature of GERRY 0. DUMAYAS, Revenue Distri ct Officer of BIR RDO 44, Taguig/Pateros. BIR Letter dat ed October 1, 2010, in re ply to petit io ner 's Lette r dated Septembe r 14, 2010. Name and specim en sig nature of GERRY 0 . DUMAYAS, Reven ue District Officer of BIR RDO 44, Tag uig/ Pateros. Date of receipt of petitioner of the said BlR Letter da ted October 1, 20 10.C
CTA Case Nos. 8358, 8426 and 8489 Page 24 of 58 G & W Architects, Engineers and Project Consultants Co. vs. CIR DECISION 10 Memorandum Report dated December 2, 2010 10-A of Revenue Office r RHODORA S. DE VILLA. 11 11 - A Name and specimen signature of Revenue 11 - B Office r RHODORA S. DE VILLA. 11 - C 11- D BIR Formal Assessment Noti ce (FAN) and 12 Lette r of Dem and dated 25 January 2011 addressed to petitioner. 12-A 13 Nam e and specim en signature of JAIME B. 13-A SANTIAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City. Detail s of Discrepancies attach ed to the said BIR Formal Assessm ent No ti ce (FAN) and Lett er of Demand dated 25 January 201 1. Name and specimen signature of JAIME B. SANTIAGO, CESO V, Regional Director, BIR Revenue Region No. 8, Makati City. Date of re ceipt of petitioner of th e said BIR Formal Assessm ent Notice (FAN) and Letter of Demand dated 25 January 2011 with attached Deta il s of Di sc re pan c~es . Ce rtifi ed Tru e copy of th e 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 Ord er - G & W Architect, Engineer and Proj ect Dev't. Consultants, Inc.", docketed HLURB Case No. REM-A-041130-0 252 . Ruling/Order of th e Hou si ng and Land Use Regulatory Boa rd (HLURB) on th e appeal filed by petitioner in HLURB Case No. REM-A- 0411 30-0252. Certified True Copy of BIR Revenue Memorandum Order (RMO) No. 15- 2003 dated May 8, 2003 . BIR Poli cies stated under sub- paragraph 11 of RMO 15- 200 3 o n th e tax exam inati on 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 Page 25 of 58 G & W Architects , ~ngineers and Proj ect Consulta nts Co. v s. ClR DECISI ON 14 Certified True Copy of BJR Revenue 14-A 15 Memorandum Circular No. 55 - 2010 dated Ju ne 15-A 15-B 28, 2010. 16 16-A Name and specimen signature of JOEL L. TA N- 16-B TORRES, then Comm issioner of Internal 18 Revenue. 18-A Certified True Copy of the Original BIR Ru ling No. DA-956-03 dated February 24, 2003, issu ed by the BIR to petitioner for its Penhurst Parkplace Condominium project. BJ R disclaimer/collatil la specified under the said BIR Ruling No. DA- 056- 03 dated February 24, 2003, issued by the BIR to petitioner. Name and specimen signature of MILAGROS V. REGALADO, Asst. Comm issioner, Legal Service of the BIR. Certified True Copy of the Original Bl R Ru li ng No. DA- 455 - 2007 _dated August 17, . 2007 issued by the BIR to petitioner for its Kensington Pla ce Condominium project. BlR disclaimer/co llatilla specified under the said BIR Ru ling No. DA-455- 2007 dated August 17, 2007, issued by the BIR to petitioner. Name and specimen signature of JAMES H . ROLDAN, Asst. Commission er, Legal Service of the BIR. 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. 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 Pag e 26 of 58 G & W Architect s, [n~Ji'neers a n d Project Consu lta nts Co. v s. C !R DECISION 18-B Name and specimen signa ture of JOE L L. TAN- 20 TORRES, then Comm issioner of Inte rnal 2 0 -A Reve nue. 21 Certified True Copy of the Memorandu m dated 2 1- A January 28, 2008 of th e Chief, Lega l Division, 22 BIR RR8 Makati City . 22-A 22 -B Name and specime n signature of ALBERTO R. 23 BOMEDIANO , JR., Chi ef Legal Division BIR, 23-A RR8, Makati City. 23- B 25 Letter dated 3 April 2008 of petitioner through its co unsel PACIS & REYES LAW FIRM, filed with th e BIR Nationa l Office- La w Div., Quezon City in protest t o th e internal Me morandum dated January 28, 2008 of ALBERTO R. BOMDEDJ.ANO, JR., Chief, BLR Lega l Division. Specific statement made by petitioner under t he sa id Letter dated 3 April 2008 . � BIR Notice fo r Info rmal Confer ence dated July 22, 2008 of the Revenue District Officer, BIR ROO 44, Taguig/Pateros. Name and specimen sig nature of LElDA G. BUSCAINO, Revenue District Officer of BIR ROO 44, Tag uig/Pateros. Date of receipt of petitioner of t he sa id BlR Notice for Informa l Conference dated July 22, 2008. Letter dated 20 May 2009 of the Regional Direct or, BIR RR8 Makati City. Name and specime n signature of ALFREDO V. M �SAJON , th en Regional Director of BJ R RR8 Makati City. Date of receipt of petition er of the said BIR Letter dated 20 May 2009. BIR Pre lim inary Assessment Notice (PAN) dated June 8, 20 10, assessing petitioner a defi ciency Expanded Withholding Tax (EWT) and Documentary Stamp (DST) for taxable year 2004 for its Penhurst Condominium Project, located in Tagui g Ci ty , Me tro Man ila.(
CTA Case Nos. 8358, 8426 and 8489 Page 27 of 58 G & W 1\rchit.ects, Ln~Jineers and Proj ect Consu ltants Co. vs. CIR DEC ISION 25-A Nam e and specimen signature of JAIME B. 25 - B SANTIAGO, CESO V, Regiona l Director, BIR 25 - C Revenue Region No. 8, Makati City. 26 Detail s of Discre pancies attached to th e said 26-A BIR Preliminary Assessm ent Notice (PAN) 27 dated June 8, 2010. 27-A Name and specimen signature of JAIME B. 28 SANTIAGO, CESO V, Reg io nal Director, BIR 28 - A Revenue Region No. 8, Makati Ci ty. 29 29-A Letter dated November 16, 2012 of the Chief, 30 Lega l Division, RR8 Ma kati City, addressed to the Board of Com missioner's Housing and Land Use Regu latory Board (HLURB). Name and specim en signatu re of OSCAR A. AGUILAR, Chief Legal Di visio n of BIR, RR8, Makati City . Let ter dated November 16, 20 12 of the Chief, Lega l Division, RR8 Makati City, addressed to t he Ch ief, Law Division, BlR National Office, Diliman, Quezon City. Name and specimen signatu re of OSCAR A. AGUILAR, Chief Lega l Division of BIR, RR8, Makati City. Memorandum dated March 28, 2010 of respondent's w itness, Atty. CHRISTINA C. BARROGA. Name and specimen signature of Atty . CHRISTINA C. BARROGA. Judicia l Affidavit dated March 25, 2013 of respondent's witness, Atty. CHRISTINA C. BARROGA. Name and specim en signature of Atty. CHRLSTINA C. BARROGA . Amended Judicial Affidavit dated March 22, 20 13 of respondent's witness, Revenue Officer RHODORA S. DE VILLA.(.
CTA Case Nos. 8 358, 8 426 a nd 8 4 8 9 Page 28 of 58 G & W /\rch itects, engineers and Project Consu ltants Co. VS. em DECIS I O N 30-A Name and speci men signatu re of Revenue Officer RHODORA S. DE VILLA. Exhibit CTA CASE No. 8426 2 2-a Desc ription 2-b BLR Records 3 3-a 1st Notice for Presentation of Records dated 5 October 5, 2009 5-a 5-b Stamped received by G & W on the 1sL Notice 6 for Presentation of Records dated October 5, 6-a 2009 6-b 6-c Signature of Catherine F. Ta bagan 7 7-a Second Notice dated November 9, 2009 11 11 - a Stamped received by G & W on the Second Notice dated November 9, 2009 Letter dated February 1, 201 0 Stamped received by G & W on the Letter dated February 1, 20 10 Signature of Revenue District Officer Gerry Dumayas Me morandum dated March 1, 2010 Sig nature of Revenue Officer Catherine F. Tabagan Sig�nature of Group Supervi sor Frederico Q. Pilarca Signature of Revenue District Office r Gerry Dumaya s Notice of Decision in HLURB Case No. HLURB Decision/D isposition of the Case Memorandum dated Augu st 23, 2010 Signature of Revenu e Officer Catherine F. Tabagan~
CTA Case Nos. 8358, 8426 and 8489 Page 29 of 58 G & W /\rchitects, Lngineers and Project Consultants Co. vs. CJR DECISION 11-b Signature of Group Supervisor Fr ederico Q. 11-c Pilarca 12 12-a Sig nature of Gerry 0 . Dumayas 12-b 14 Lette r dated October 1, 2010 14-a 14-b Stamped received by G &W on the Letter dated 15 October 1, 20 10 16 Signa tu re of Revenue District Officer -Ge rry 16- a Dumayas 17 Memorandum dated May 19, 2011 18 Signature of Catherin e C. Fuentes 19 19- a Signatu r e of Revenu e District Offi cer Maridur V. Rosario 19- b 19-c Le tter dated May 19, 2011 Assessment Notices dated June 10, 201 1 together with the Formal Assessment Notice a lso dated June 10, 2011 with its correspond in g Details of Discrepancies Sig nature of Regional Director Jaime B. Santiago on the front page of the Assessment Notice dated June 10, 20J 1 Stamped received by Johanna Co, Accou nting Staff, on the Assessment Notices dated June 10, 20 11 on June 28, 2011 Memorandum of Assignm ent Letter dated March 15, 20 12 Stamped received by G & W on the Letter dated March 15, 20 12 on March 15, 2012 with signature of Johanna Co Handwritten proof of receipt by Atty. Caganda on behalf of G & W Signature of Reven ue District Officer Maridur V. Rosariol
CTA Case Nos. 8358, 8426 and 8489 Page 30 of 58 G & W Architects, l::ngineers and Project Co ns ultants Co. v s . CIR DECISION 20 Memorandum dated January 28, 2008 20-a 21 Signature of Alberto R. Bomediano Jr., Ch ief, 21-a Legal Division 22 22-a Letter dated May 20, 2009 22- b 23 Signature of Alfredo V. Misajon, Reg ional 24 Director 24-a 25 Letter addressed to the President of the petitioner by Commissioner Joel L. Tan -Torres 26 Signature of Joel L. Tan-Torres, the 27 Commissioner of Internal Revenue 28 Stamped received by petitioner's representative in the person of Liza Chan, Admin . Head, on June 29, 2010 Revenue Memorandum Circu lar No. 55-2010 dated June 28, 2010 Judicial Affidavit of Revenue Officer Catherine C. Fuentes Signature of Catherine C. Fuentes Comp laint in Civi l Case No. 71615 (consisting of 16 pages) filed by Joseph Anthony M. Alejandro against G & w Architect, Engineers Project Development Consultants Co. et. al. Amended Complaint (consisting of 16 pages) in Civi l Case No. 7 1615 filed by Joseph Anth ony M. Alejandro against G & W Architect, Engin eers Project Development Consultants Co. et . al. Answer with Compulsory Counterclaim (consisting of 34 pages) of the counsel of G & W Architect, Eng in eers Proj ect Development Consultants Co. in Civil Case No. 7 1615 Copy of the printouts gathered from the website (http : //www .g w - 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 Page 31 of 58 G & W Arch itects, Engineers and Project Co nsultants Co . vs. CJR DECISI O N 28-a Page two of the Copy of the printo uts gathered 29 from the websit e (http://www.gw- 29-a 30 architects.com/ grandhamptons) w hich 30-a advertised petiti oner's sa le of con do. units to Ex h i b i t s R- 1 prospective buyers R- 1- 1 R-2 - R-2-1 R-3 Supplem ental Judicial Affidavit of Ca th erine C. R-3 - 1 Fuentes R-4 Signature of Ca th e rin e C. Fuentes R- 4 - 1 R-5 Judicial Affidavit of Rhod ora S. De Villa R- 5 - 1 R- 5- 2 Signature of Rhodora S. De Vill a CTA Ca se No. 8489 Description Revenu e Memorandum Order (RMO) No. 15- 2003 dated May 8, 200 3 Sub- paragraph 11 of RMO 15- 2003 First Notice dated October 12, 2009 Name and signature of Revenue Officer (RO) MARY ANN G. ZAMU CO Second Notice dated November 9, 2009 Name and sig nature of Revenue District Officer (RO) GERRY 0 . DUMAYAS Schedule of Computation of the correspond ing defi ciency taxes due from petitioner based on t he Li st of Unit Owner (so -ca lled "investor s") subrni lted by petitioner Li st of Unit Owner (so -ca lled " invest o rs") subm itted by petitioner Post Reporting Notice (PRN) dated April 16, 2010 Name and sig nature of ROO GERRY 0. DUMAYAS Date of Re ce ipt on April 16, 2010~
CTA Case Nos. 8358, 8426 and 8489 Page 32 of 58 G & W /\rch itects, Engineers and Project Cons ulta nts Co. vs. CJR DECISION R-6 Me morandum Report dated May 12, 2010 R-6 - 1 R- 7 Name and signature of RO MARY ANN G. R-8 ZAMU CO R- 9 Housing and Land Use Regulatory Board (HLURB) Decision dated July 26, 2005 R- 10 R-1 l Amended Complaint filed by Mr. Joseph R- 11- 1 Anthony M. Al ejandro vs. G & W Architects, R-12 Enginee rs and Project Development R- 12-a Consultants, et. al., docketed as Civil Case No. R- 13 7 1615, RTC Br. 27 1, Taguig City R- 13- 1 An swer with Compulsory Counter-Cla im filed R-13-2 by petition er in th e case "Joseph Anthony M. R- 14 Al ejandro vs. G & W Architects, Engineers and R- 14- 1 Project Development Consultants, et. al., docket ed as Civil Case No. 716 15, RTC Br. 271, Taguig City Co mputer Print-Out of petitioner's Ad ve rti sem ent for th e Grand Hamptons Towe r BIR Letter dated November 16, 2012 signed by Atty . Oscar A. Agui la r addressed to the HLURB Name and sig nature of Atty. OSCAR A. AGUILAR Memora ndum dated March 28, 2010 Nam e and signature of ATTY. CHRISTINA C. BARROGA BIR letter addressed to petitioner informing the latter of th e nullification of BIR Rul ing No. 337- 2007 dated June 20, 2007 and other BJR Rulings iss ued to petition er Name and signature of th en Commissioner JOEL C. TAN -T ORRES Date of petitioner's Receipt on June 29, 201.0 Formal Assessment Notice (FAN) dated July 26, 2 011 Details of Discrepanci es attached to the FAN dated July 26, 2011. C
CTA Case Nos. 8358, 8426 and 8489 Page 33 of 58 G & W 1\rchitects, E n~Jinee rs and Proj ect Cons ultants Co. vs. CIR DECISION R- 15 Sched ule o f Paymen ts of pe titioner 's clie nts Mr. R-16 JAYAN RUSSEL and Ms. JANETIE SY DY R-17 R- 17- a Schedule of Payments for petition er's clients R- 18 Sps. ENRIQUE B. GEPILLANO III a nd R-18-1 GRETELWO LDA C. GE PILLANO R-19 Judicial Affidavit dated September 20, 2013 of R-20 ATIY . CHRISTINA C. BARROGA R-20 -1 R-2] Nam e and signature of ATIY. CHRISTINA C. R-2 J-l BARROGA R-22 R-22-1 Judi cial Affida v it of Rev enue officer MARY ANN G. ZAMU CO Signature of Reve nue Officer MARY ANN G. ZAMUCO Ma nifestation dated September 2, 2 005 filed by petitioner before the HLURB manifesting that it will no lo nger appeal or ask for a reconsideration of the HLURB's Decision dated July 26, 2005 Certificat e of Registration No . 20133 issued to petition er as th e project owne r a nd deve lope r of THE GRAND HAMPTONS TOWER I License to Sell No. 21947 issued to petitioner as th e project own er and developer of THE GRAND HAMPTONS TOWER I , Certi ficate of Registration No. 24027 issued to petitioner as the project developer of THE GRAND HAMPTONS TOWER II Li ce nse to Sell No. 25720 iss ued to petitioner as the project developer of THE GRAND HAMPTONS T OWER II Certificate of Registration No . 24426 issued to petitioner as the project developer of THE CRESCENT PARK RESIDENCES CO NDOMINIUM License to Sell No. 26181 issued to petitioner as the project deve loper of T HE CRESCE NT PARK RESIDENCES ~O NDOMINIUMC
CTA Case Nos. 8358, 8426 and 8489 Page 34 of 58 G & W Architects, Engineers and Proj ect Consu lta nts Co. vs. CJR DEC ISION R-23 Certificate of Registration No. 24418 issued to R-2 3-1 petition er as the project develope r of THE R-24 BLUE SAPPHIRE RESIDEN CES R-24 -1 R-25 Li ce nse to Sell No. 26169 issued to petitioner R- 25- 1 as the project developer of THE BLUE SAPPHIRE RESIDE NCES Certificate of Registratio n No. 24028 issued to petitione r as th e project d eveloper of THE SAPPHIRE RESIDENCES Li ce nse to Sell No. 252 7 1 issued to petitioner as t he project deve loper of THE SAPPHIR RESIDEN CES Judicial Affidavit of ATfY . MARlA LUlSA PANGAN Name and signature of ATTY. MARIA LUISA PANGAN T he Memorandum for the Petitioner62 was filed on Octo ber 10, 2014 ; while respondent's Consolidated Memorandum was fi led throug h regi st ered mail on Nov ember 11, 2014. 63 I n a Resolution dated November 28, 2014, the co nso li dated cases we re submitted for decision. 64 Based on th e Pre-Tria l Brief for Petition er Ad Ca utelam65 , Respondent's Pre -Trial Bri eF6 in CTA Case No. 8358, and Pre -Trial Orders in CTA Case Nos . 842667 and 8489 68 , th e parti es raised th e fo ll owin g issues for this Courl's resoluti on: 1. Wh eth er or not th ere is a sa le tran saction from petitioner G & W to the unit owners; ( 6/ C l/\ Case No. 8358, Docket, Vol. II, pp. 1'14 9 14 76 . fil CTA Case No. 8358, Docke l , Vol . I , pp. 179-202 a nd /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 - 2 0 6. fif> CTA Case No. 8358, Dockel, Vol. I , pp. /15-218 a nd 217. 67 C I 1\ Ca se No. 84 26, Docket, Vol. II, pp . /72 - 7 78 and 773 774. f>H C l/\ Case No. 8489, Docket, Vo l. I , pp . 608 - 615 and 61 0 - 611 .
CTA Case Nos. 8358, 8426 and 8489 Page 35 of 58 G & W Architects, Enginee rs and ProJect Consultants Co. vs. CIR DECISION 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 fo ll owing 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 juri sdiction, petitioner G & W being a registered taxpayer in Revenue District No. 30 of Revenue Region No. 6; c. Wh ether 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 vio lation 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. Wh ethe r or not the revocation of subject BIR Rulings cannot be retroactively ap pli ed in violation of petitioner G & W's vested proprietary rights; 4. Wh ether 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 co ndominium units; 5. Whether or not there was an investigation co nducted to determine the lega l ba sis for nullifying the BIR Ruling No . DA-337 - 2007 dated June 20, 2007;'
CTA Case Nos. 8358, 8426 and 8489 Page 36 of 58 G & W Architects, En g ineers and Project Co nsu lta nts Co. vs. C LR DECISION 6. Whether or not the Assistant Commissioner of the Legal Servi ce 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- Tim e 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 re spondent 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 . Wh ether 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 loca ted at Glob'al City Fort Bonifacio Taguig City. Respondent all eges 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
CTA Case Nos. 8358, 8426 and 8489 Page 37 of 58 G & W Architects, Engineers and Project Consu ltants Co. vs. CIR DECISION 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 Comm issioner or his duly authorized represe ntative finds that proper ta xes should be assessed, he shall first notify the taxpayer of hi s findings: Provided, however, That a prea ssess ment notice sha ll not be required in the following cases: XXX XXX XXX Such assessment may be protested administratively by filing a requ est for reconsideration or reinvestigation within thirty (30) days from receipt of th e assessment in such form and manner as may be prescribed by implementing rules and reg ulations. With in sixty (60) days from filing of the protest, all re levant su pporting docum ents sha ll have been subm itted; otherwise, t he assessment shall become fina l. If the protest is denied in whole or in part, or is not act ed upon within one hundred eig hty (180} days from submi ssion of documents, the taxpayer adversely affected by t he decision or inaction may appea l to the Court of Ta x Appeals within thirty (30) days from receipt of the sa id decision, or from the lapse of the one hundred eighty ( 180)-day period; otherwise, th e deci sion shall become final, executory and demandable." Petitioner is given a period of sixty (60) days from the filing o f the protest within which to submit supporting~
CTA Case Nos. 8358, 8426 and 8489 Page 38 of 58 C & W Architects, Engineers and Project Co nsultants Co. vs. CIR DECISION 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 fil ed 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 deficie ncy 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 cov ers prior years in violation of Revenue Memorandum Order (RMO) No. 43-9 0, and that the Letter of Authority issu ed 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 Ju ne 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 li abl e to pay the subject deficiency taxes.(' (>'l Lx hibit " P", C II\ Case No. 8358, Petitione r's Exhibi ts in expa nding e nvelope. 70 Lx hibit " 0 ", C 1/\ Case No. 8489, Docket, Vol. II, pp. 877 - 904.
CTA Case Nos. 8358, 8426 and 8489 Page 39 of 58 G & W 1\rchitects, Eng ineers and Project Consultants Co. vs. CIR DECISION 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 Ce rtificates Authorizing Registration (CARs) covering transactions subject to EWT on sa le of real properties co nsidered as ordinary assets, and other taxes including DST related to the sale/transfer of properties, among others. The significant portion of RMO No. 15-2 003 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 co llection 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 - co mpliance by rev enu e personn e'l concerned. II. POLICIES: In order to achieve the above objectives, the fo ll owing policies shall be observed: 1. ONETT shall cover transactions subject to Final Capital Ga in s Tax (FCGT) on sa le of rea l properties co nsid ered as cap ital assets as well as Ca pital Gains c
CTA Case Nos. 8 358, 8 426 and 8 4 89 Pag e 40 o f 58 G & W 1\rchitects, Eng ineers an d Pr oject Cons ulta nts Co. vs. CI R DECISION Tax (CGT) on the Net Capita l Gain on sa le, 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 sa id RMO, issua nce of Tax Verification Notice (TVN) or Letters of Authority (LOA) for ONETT sha ll no longer be required. The deficiency EWT and DST assessed on the alleged sale of real property co nsidered as ordinary assets in th is case being covered by the ONETT, t he investigation on the said tax liabi lities is sti ll va lid even without t he Letters of Authority issued by respondent since LOAs or TVN fo r 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 req uest for ru ling on it s "Build-To- Own or Build-Your-Own" concept for w hich it has o bta ined BIR Ru ling Nos. DA- 056-2003 (Penh urst Parkplace Condominium), DA-624- 2004 (Kensi ngton Place Condominium), DA-455-2007 (Kensi ngton Condominium), DA- 410 - 2007 (Sapphire Res id ences), DA-409 - 2007 (Blue Sapph ire Residences Condomin ium), 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, Vo l. I, pp. 622 623. '
CTA Case Nos. 8358, 8426 and 8489 Page 41 of 58 G & W 1\rchilects, En~Jineers a nd Proj ect Co nsultants Co. v s. C JR DECISI ON 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 co nnection with the said "Build - To-Own or Build -Your-Own" scheme. Accordingly, the investigation on petitioner's transfer lax (EWT and DST) liabi li ties was clearly authorized by then BIR Commissioner Joel L. Ta n-Torres. Neverthel ess, even if the Court would set aside the iss ue pertaining to t he validity of the LOAs issued by respondent, perusal of the assessment reveals that the same has no fa ctual basis . In the Memorandum for Commissioner of Internal Reven ue Joel L. Tan -Torres dated March 28 , 201072, Ass ista nt ROO Christina C. Barroga and ROO Dumayas req uested the nullification of BIR Ruling Nos. DA- 056-2 003, DA-624- 2004, DA-455 - 2007 I DA-338- 2007' DA- 410-2007, DA-409 -200 7, and DA-33 7-2007, 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 "Bui ld -To- Own or Build -Your-Own" in the following co ndominium 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: ;; Exh ibit "28", C IA Case No . 8358, Docket, Vol. U, pp . 1252 1257.
CTA Case Nos. 8358, 8426 and 8489 Page 4 2 of 58 G & W A rc hitects, Eng ineers and Project Consulta nts Co. vs. CIR DECISION 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 Ce rtificate 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 res ult, 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 co nnection with the assignment and delivery of the co ndominium units involved in the said rulings . Formal Assessment Notices were then issued on January 25, 20 11 73 , June 10, 20 11 74 and J uIy 2 6, 20 117 5, finding petitione r liable to pay EWT and DST on the transfer of condominium units, detailed as follows: I c f/\ I CONDOMINIUM I UNITS TAXABLE I EWT I DST I TOTAL I CASE PROJECT PERIOD ~~H l ll_IL -+ I i- - Penhurst - - / 004 P 90,744,745.00, P27,257,000.39 1 P117,996,745.39 1 , I Parkplace 1 I ( 11 Fxhibil "J " , CTA Case No. 8358, Petitioner's Ex hibits in expa nd i ng e nvelo pe. 1~ txllibit "M", in C 1/\ Case No. 8'126, Docket, Vol. I, p. 625. 7 L xh ibil " M" , in CT/\ ,Case No . 8489, D oc ket, Vol. Jl, p. 727. ''
CTA Case Nos. 8358, 8426 and 8489 Page 43 of 58 G & W Architects, En~Jineers and Project Con su ltants Co. vs . CIR DECISION ~ I Ke nsingtorlP!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 8'1 89 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 ling s exem pt ing the transfer of condominium units to the unit owners under the so-ca lled co-development/bui ld -to- own/build-your-own and similar schemes. Consi dering th e foregoing, respondent found that petitioner failed to file the Withholding Remittance Return and pay th e 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 t o fil e DST Declaration Return on the transfer of the condomin ium 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 Decisio n, and respondent's assumption that the purported tra nsfer of co ndominium units to the individual unit owners was actually a sa le of co ndominium uni ts from petitioner to Lhe unit owners. A close scruti ny of the foregoing likewise shows that Lhe basis of respondent's co nclusion that there was a sale of condominium unils between th e unit owners and petitionerc
CTA Case Nos. 8358, 8426 and 8489 Page 44 of 58 G & W 1\rchitects, Enqinee rs and Project Co nsu ltants Co. vs. CLR DECISION is the Contract to Manage and Execute the Construction of Lhe afore-mentioned co ndominiums. 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. 137 0 . If the terms of a contract are clear and leave no doubt upon the intention of the co ntra cting parti es, th e literal meaning of its stipulations shall co nt rol. 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 loo king to the words they used to project that intention in Lheir co ntract, 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 rul e is that where the language of a co ntract is plain and unambiguous, its m eaning should be det ermin ed without reference to extrinsic facts or aid s. The intention of the parties must be gathered from that language, and from that la nguage alone. xxx."C.. 16 Fx hibils " K" an d " l ", in CTA Case No. 8358, Petiti oner's Fol d er o f Exh ibits; Fxhibits " D", "D-1", "D-7", and " D- 3 " in CTA Case No. 8426, Docket, Vol. I , pp. 525-560; Lxh ibits "D", "D 1", and "0 - 2" in C l/\ 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.
CTA Case Nos. 8358, 8426 and 8489 Page 45 of 58 G & W Architects, engineers and Project Consu lt ants Co. vs. CIR DECISION Petitioner presented the fol lowing documents to prove that there is no sa le of co ndom inium units between petitioner and its clients: CONTRACT TO PROJECT CLIENT TRUST MANAGE AND AGREEMENT/ EXECUTE THE DEPOSITORY AND CONSTRUCTION OF DISBURSING I, CON DOMINIUM AGREEMENT Fxhibit " K" Penhurst Parkplace Pek Eng Lim Exhibit "M" (C I A Case No. 835fll KensingtonP lace I Ellen S. Francisco (CTI\ Case No. 8358) Fxhibit " l " Exhibit " N" (_C 1/\ Case No ~:,~) - C-ond-omi n-ium- _ _ _ _ (CTA Case No. 8358) Fxhibit "D" 1 Exhibit "E" ' (C ll\ Case No . 8426) (CrA Case No. 8426) !:::xhibit "D t" Exhibit "E-1" (CIA Case No. 8426) (CIA Case No. 8426) Lxhibit " D 2" I Exhibit "E-2" (Cr/\ Case No. 8426) (C l l\ Case No. 8426) Exhibit "E 3" Lxhibit "D 3" I ttamptons Place 1 Shrrtey Yap sy (C I I\ Case No. 8426) Condominium (CTA Case No. 8426) Lxhibit "D" Grand I tamptons Jaya n Russel Dy and Exhibit "E" (Cll\ Case No. 8'189) Place Condominium Janette Sy Dy (CrA Case No. 8489) I exhibit "D 1" Grand llarnptons t::nrique G. Gepilano Exhibit "E-1" (Cll\ Case No. 8'189) Place Condominium !II and Gretelwolda (CTA Case No. 8489) _ C. Gepilano_ _-r-- - - - - - - - - l Fxhibit "0-7" F Grand Hamptons Mitchell 0. Soria and Exhibit "E-2" (C.TA Case No. 8489) Place Condominium 1 Anna Marie P. (C.TA Case No. 8489) Arnorsolo I To determine whether the intention of the parties in the above- m entioned 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 Ph ilippines, which provides that in a contract of sale, one obligates himself not only to deliver a determinate thing but also to transfer ow nership thereto for a consid eration: "ART. 1458. By the contra ct of sale one of the co ntra cting parti es obligates himself to transfer the ownership of and to del iver a determinate thing, and the other to pay therefor a price certain in money or its equivalent. A contract of sal e may be absolute or co nditional. " (Emphasis supplied)C
CTA Case Nos. 8358, 8426 and 8489 Page 46 of 58 G & W 1\rchitects, Enginee rs and Project Consultants Co. vs. C lR DECISION I n the instant case, there is nothing in the said co ntracts which would show that there would be a transfer of ow nersh ip of th e condominium units from petitioner to its cli ents for t he transaction to be considered as a sale of the condominium uni ts. The Contract t o Ma nage and Execute the Construction of Penhurst Parkpla ce Condominium between petitioner and Mr. Pek Eng Lim (the client) 79 provides, amo ng others, that: 1. The clients irrevocab ly nam es, appoints and constitutes petitioner as its true and lawful attorney- in - fact for Lh e execution of acts properly within the knowledge and expertise of petitioner and to do, among others, the following acts in its st ead : a. To prepare or ca use the preparation of all t he necessa ry 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 th e iss uan ce of individual Co ndominium 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 th e preparation of th e necessa ry contracts for th e co nveyance by th e Trustee (I nternational Exchange Bank) of th e Co nd ominium Certifi cates of Title over t he units co mpri si ng the Project to the Cli ents and the Co nd o minium Certifica te of Titl e over the Common Areas to the Co nd ominium Corporation; d. To instruct the trustee (International Exchange Bank) to issue payments from the tru st to t hi rd parti es co ntracted by~ I<J Lxhibit "K", C 1/\ Case No. 8358, Petitioner's Exhibi t s in expand in g e nvelope .
CTA Case Nos. 8358, 8426 and 8489 Page 47 of 58 G & W Architects, Lngineers and Project Co nsu ltants Co. vs. CI R DECI S I 0 N petitioner to perform and/or complete tasks for the project. 2. Any and all necessary con tracts 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 th e services to be rendered by petitioner as overall project manager, an amount eq uivalent to four percent (4�/o ) of the construction funding sha ll 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 sa id Tru st sha ll 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 th e clients . In relation thereto, a Trust Agreement was executed between the trustee International Exchange Bank and the client, which provides how th e trust fund shall be distributed: 80 1. To purchase th e subject land and pay the purcha se price of th e sa id land and to register the same in th e name of the trustee, for and in behalf of th e clients; 2. To disburse and ce rtify as to the comp letion of the necessa ry payments for the proje ct to th e variousc 130 L x hibit " M", C 11\ Case No. 8358, Petitio n er's Exhib its in expanding envelope.
CTA Case Nos. 8358, 8426 and 8489 Page 4 8 of 58 G & W Architects, e ngi nee rs a nd Proj ect Consultan t s Co . vs. C!R DECISION professionals employed for the project based on the certification of petitioner. As to th e Kensington Place Condom inium, Hamptons Pla ce Condominium and Grand Hamptons Place Condominium Projects, the Contract to Manage and Execute the Construction of the said projects between petitioner and its clients81 contains simi lar stipu lations with that of the Contract to Manage and Execute the Construction of Penhurst Parkplace, except for the fol lowing: 1. In the construction of Kensington Place Condominium, Hamptons Place Condominium and Grand Hamptons Place Condominium, petitioner is nam ed as th e project manager and a trustee; 2. The clients irrevocably names, appoints and consti t utes 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 Reg istry of Deeds xxx; 3. The construction funding shall be payable to an Account, to be delivered by the client to petitioner tog ether with the signed copies of the Depository and Disbursing Agreem ent which account shall be held and managed by the Banco de Oro Universal Bank Trust Banking Group for the clients benefit. C. 11 1 Fx hibil " I ", CTA Case No . 8358, Pet itioner's Fxhibits in expanding e nvelope; Lx ll ibits " D", " D 1", " D 2", a nd "D 3", C I 1\ Case No. 84 26, Docket , Vo l . I, pp. 525- 560; Lx hi bits "D", "D 1" and " D 2", C l /\ Case No. 81189, Docket, pp. 648-674/
CTA Case Nos. 8358, 8426 and 8489 Page 49 of 58 G & W 1\rchitects, Enqinee rs and Project Co nsultants Co. vs. ClR DECISION I n relation thereto, Depository and Disbursing Agree m ents82 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 shal l be used for the necessary payments in connection with the construction and development of the project and the purchase of the land w here the condominium bui lding will be situated. Petitioner shall provide photocopies of source documents to the bank for each disbursem ent instruction. The source documents shall include but not be limited to bills, invoices, ce rtifications of indebtedness issued by petitioner and other evid ence of indebtedness in relation to services rendered or materials procured for the project. From the forego ing, it can be gathered that all of the acts of petitioner, including the execution and preparat ion of all necessary co ntracts and/or documents arising out of or as a conseq uence of the co nstru ction of the project, whi le may be executed by and in the name of petitioner, shall be understood to be for and on behalf of the clients. Thu s, there ca n be no transfer of ownership of the co ndominium units between petitioner and its clients considering that petitioner m erely acts for and on beha lf of iLs clients. At this juncture, it mu st be pointed out that the method of withholding tax at so urce 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, prov id es :C. 87 Fxhibit " N", CTA Case No. 8358, Petilioner's Exhibit in expand ing envelope, lxhibits " L", "E J ", " L ~ 2" and "E 3", CTA Case No. 8426, Docket, Vol. I, pp. 561 - 576, Fxhibils " F", " F-1" and " F-7", CTA Case No. 8489, Docket, Vol. II, pp. 675-686. 83 Chamber of Real Lstate and Builders' Associations, Inc. vs. The f~fon. Executive Secretary Alberto aomulo, et. a/., G.R.. No. 160756, March 9, 2010.
CTA Case Nos. 8358, 8426 and 8489 Page 50 of 58 G & W Architects, engineers and Project Consultants Co. vs. CIR DECISION "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 sha ll be cred ited 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 rea l property other than capita l 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 cred itable income tax at the rates herein specified for each class of payee from the following items of in come 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 sa le, exchange or transfer of. - Real property, other than capital assets, sold by an individual, corporation, estate, trust, trust fund or pension fund and the se ll er/transferor is habitually engaged in the real estate business in accordance with the following schedule - XXX XXX xxx" C
CTA Case Nos. 8358, 8426 and 8489 Pag e 51 of 58 C & W Architects, Engineers and Proj ect Co nsu lta nts Co. vs. CIR DECISION Howeve r, in the instant case, the fact of actual sa le of cond ominium units from petitioner to the unit owners was not clearly esta blished in the investigation as well as in the FAN issued by respondent against petition er. Notably, the co nstru ction funding whi ch respondent cons idered as t he clients payment for the sa le 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 usive ly used for the co nstruction of th e proj ect and purchase of the land. In other words, petition er appears to have no complete co ntrol over th e said amount; thus, no part of th e sa id fund ca n be con sid ered as paym ent for the transfer of the cond omi nium units from which the assessed cred itable withholding tax ca n be deducted. Also, the evidence of petitioner, such as the Transfer Certifi cates of T itl e811 of the subject lots from which the condom inium projects were built and the respective Deeds of Sa le85, show that the sa id lots w e re directly transferred from Fort Bonifacio Development Corporation to the Grand Hamptons Tower I Condom inium Corporation, Grand Hamplons Tower II Condom inium Corporation, Penhurst Parkp lace Cond omin ium Corporation and Kensington Parkp lace Condom inium Corpo ration . . Furthermore, th e Condom inium Certificates of Title86 that �petition er prese nted indicate that the co nd ominium units were transferred d irectly from the said condominium co rporations to th e unit owners . ' I As already m ention ed, the participation of petitioner in th e transactions was based on t he Co ntracts to Manag e and(' B t Lxhibits "l3", "C", "F" and "G", Cl 1\ Case No. 8358, Petitione r's Ex hibits in expanding e nvelope; Fxhibit " H", CTA Case No . 84 26 , Dock et, Vo l. II, p. 865; Lx hibi ts "G" a nd " H", C I 1\ Case No. 8'189 , Dock et , Vol. II, pp . 702 - 707. w; Fxhibi ls "D" a nd "F", CTA Case No. 8358, Petitio ner 's Ex hibits in ex pa nding envelope; Fxhibil "F", CTA Case No. 84 76, Vo l. I , pp. 577-589; Ex hibit " F" , CTA Case No. 8489, Docket , Vol. ll, pp . 687 - / 01. - - sr, Fxh ibi t " H", CTA Case No. 83S8 , Pe titio ner's Exhibits in ex panding e nve lo pe; ex hibits " I ", " I 1", " I 2" a nd " I - 3", C I A Case No. 84 26 , Vol. I , p p. 598 6 17 , Ex hibits " 1", "L 1 " a nd " I 2", Cl/\ Case No. 8489, Docket , Vo l. If , pp. 7 0 8 7 19.
o, CTA Case Nos. 8 358, 8426 a n d 8 4 8 9 Page 52 of 58 G & W Arc hitects, enginee rs a nd Project Cons u lt a nts Co . vs. CIR. DECISION Execute th e Construction of t he condom inium projects87, which in essence direct ed petitioner to prepare the documents necessa ry for the transfer of ownership of the subject land to the condomi nium co"rporation and the constru ction of the co ndominium un its for a professiona l fee of four perce nt (4 �/o) of the co nstruction funding. The Court observes that nothing in the said contracts indicate that the ownership of the subject land and the condominium units w ill 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 cond om inium units will be transferred from petitioner to Lheir clients. Thus, the transaction between petitioner and it s clie nts, while it may still be considered as sale, is actua lly a sale of petitioner's services to its clients and not a sale of real property. Another basis for the issuance of t he FAN against petitioner is t he HLURB Decision, which co ncerns the invilation to prospective co -owners advertised in January and March 1994 offering petition er's professiona l se rvices to those interested to build their own condominium unit at direct cost by hiring petitioner as project manager with the l<e nsington Place as th e prospective site . In the said ruling, Lh e HLURB sa id that " th ere is no exis ting co- ownership of a parcel of land as t he co-o wnership remains an uncertainty and may not m ateriali ze in view of a number of variables such as whether t here will be enough persons interested to raise the capitali zation needed to finan ce the acquisition of a lot and the development of a condominium project, and w heth er the lot intended to be purchased will still be available if and when the required funds are fina lly raised". Thu s, th e sa id ruling affirm ed the order of th e Expand ed National Capital Region Field Offi ce of the HLURB for petitio ner to pay ad ministra tive fines and for it to cease and desist from further selling and/or adv erti sing in any form until t he necessary permits or license is secu red from the said office .( fll Lx hibi t s " K" a n d " L", in CT/\ Case No . 8358 , ex hibi t s "D" , "D- 1", "D- 2 " and "D 3", in C l /\ Case No . 8'1 2 6, a n d Exh ibit s " D" , " D- 1" a nd " D- 2" in C I A Case No . 8489.
CTA Case Nos. 8358, 8426 and 8489 Page 53 of 58 G & W 1\rc hitect s, Ln g inee rs a nd Project Consulta nts Co. vs. Cl R DECISION 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 condom inium 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 d ecision. In t his regard, respondent may argue that her findings are not m ere ly based on the HLURB ruling, but also on the following facts found upon their investigation which are all eg edly 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 . Petition er 's cli ents could not have grouped or organized themselves before contracting with petitioner and therefore could not have th em selves undertook the construction; 3. Petitioner's act of persuading the clients to invest in Lh e co ndominium project; _ 4. Copies of petitioner's advertisements, flyers, FAQs, investors ' guide, etc.; 5. The use of the terms "Buyers", "Units available for sal e", "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 t erms 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.(
CTA Case Nos. 8358, 8426 and 8489 Page 54 of 58 G & W /\rchitects, Enginee rs a nd Project Consultants Co. vs. CIR DECISION 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 th emselves, 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 presu mptions 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 stipu lations therein, respondent should have exhausted all lawful m ea ns 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, th e 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 sa le 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 exam in e any book, paper, record or other data which may be relevant or material to such inquiry;( BB Lxhibi t "28", Cl/\ Case No. 83 58, Docket, Vol. II, pp. 1252- 1257.
CTA Case Nos. 8358, 8426 and 8489 Page 55 of 58 G & W 1\rchitects, Lngineers and Project Consultants Co. vs. CI R DECISION (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 - loca l governments, government agencies and instrumentaliti es, including the Bangko Sentral ng Pilipinas and government-owned or -controlled corporation s, 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 compani es, insurance companies, regional operating hea dquarters of multinationa l compan ies, joint accounts, associations, joint v entures or consortia and registered partnerships, and their m embers; (C) To summon the person liable for tax or required to file a return, or any officer or em ployee of such person, or any person having possession, custody, or ca r e of th e books of accounts and other accounting records co ntaining entries relating to th e bu si ness of th e person liabl e for ta x , or any other person, to appea r before the Commissioner or his duly auth o ri zed representative at a time and place specified in the summons and to produce such books, pap ers, record s, or other data, and to give testimony; (D) To take such testimony of the person concerned, under oa th, as may be relevant or materia l to such inquiry; xxx Moreover, in th e case of Commissioner of Internal Re ven ue vs. Hantex Trading Co., Inc. 89, the Supreme Court ru led as fo ll ows: "The law all ows th e BIR access to all relevant or materia l records a nd data in the perso n of th e taxpayer. It pl aces 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 e nabl e th e BIR to get at th e taxpayer's records in( B<J G.R. No . 136975, Ma rch 3 1, 2005 .
CTA Case Nos. 8358, 8426 and 8489 Page 56 of 58 G & W Architects, [n~Jineers and Project Consultants Co. vs. CIR DECISION 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 techno logy, there is no valid reason to immunize compa nies with co mputer- based, record - keeping capabi lities 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 wou ld 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 cou ld 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 th e hearing held on October 8, 2013, respondent's witness, Ms. Catherine C. Fuentes, testified that their offi ce has no record of the statement of the purported buyers in4'
CTA Case Nos. 8358, 8426 and 8489 Pa,ge 57 of 58 G & W Arch itect s, l:: ngineers nnd Project Collsulta nts Co. VS. em DECISION 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 co rrectness 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 assessm ent 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 m ere presumptions no matter how reasonable or logical sa id presumplion s may be. 93 Accordingly, the pres umption of correctness of the assessment does not apply in the instant case considering that responde nt's co nclusion, that the transaction between petilioner and the unit owners is a sale or transfer of ow ne rship from the former to the latter, is not based on actual facts and are mere presumptions. Thu s, the deficiency EWT and DST assessed for the alleged sa le of rea l property has no factual basis and must th erefore be ca ncell ed .c_ 'Hl I ranscript of Stenograp hic Notes taken on October 8, 2013, pp. 33 36. q ) Commissioner of Int ernal Revenue vs. Hanlex Trading Co ., Inc., G.R. No. 136975, March 3 1 , 700~. 97 Commissioner of Internal Revenue vs. Alberto D. Benipayo, G.R�. No. L- 13656, January 31, 1967. 93 Commissioner of Internal N.evenue vs. Island Garment Manufacturing Corporation and the Court of lax Appeals, G.R. No. L- 466114, September 11 , 1987.
CTA Case Nos. 8358, 8426 and 8489 Page 58 of 58 G & W Architects, Engineers and Proj ect Consultants Co. vs. CIR DECIS ION Consequently, the resolution of the remaining issues is alrea dy deemed moot. WHEREFORE, the instant Petitions for Review filed on October 21, 201 1, February 15, 2012 and May 11, 2012 are hereby GRANTED. According ly, 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. SO ORDERED. ~ ~l M~~- C~ WE CONCUR: CIELITO N. MINDARO-GRULLA Associate Justice (With Dissenti~ OpmTOn) ER~P.' UY ROMAN G. DEL ROSARIO Associate Justice Presiding Justice CERTIFICATION Pursuant to Article VlU , Secti on 13 of the Co nstitution, it is hereby certifi ed t hat t he conclu sions in t he above Decision were reached in consu ltation before the case was assigned to the writer of the opinion of th e Court 's Division. Presiding Justice Chairperson, 1 st Division
REPUBLIC OF THE PHILIPPINES Court of Tax A ppeals QUEZON CITY First Division G & W ARC HITECTS, CTA CASE Nos. 8358, 8426 and 8489 ENGINEE RS AND PROJ ECT M e mbers : CONSULTANTS CO., Petitioner, -ve rsus- DEL ROSARIO, Chairperson, UY, and M INDARO-G R ULL A, .!.!. COMMISSIONER OF Promulgated: INTERNAL REVENUE, DISSENTING OPINION DEL ROSARI O, PJ.: With due respect, 1 dissent with the ponencia in granting the Petition lor Review and cancelling the defi ciency expanded withholding tax (EWT) and documentary stamp lax (DST) assessed for the periods June 24, 2004, July I0, 2004, and June 2004. Petitioner's Built-to-Own or Build-Your-Own-Horne concept of purportedly pooling condominium unit owners ' fund s to be used for the construction o f the condominium units on behalf of the fund owners constitute a taxa ble sale, exchange or disposition of real property, hence, subject to EWT and DST. Petitioner ' s aforementioned Built-to-Own or Build-Your-Own-Home acti vity is covered by three (3) agreements, particularly: th e Contracts to Manage and Execute the Construction of the Condominium between peti ti oner and the condominium unit owners; 1 th e Trust Agreements established by the condominium unit owners, naming a trustee to hold in trust the pooled funds of the condominium unit owners and th e land where 1 Ex hibits " K'', and "' L" in CTA Case No. 835 8. Exhibits " D", " D- 1", �' D-2'', and " D-r in CTA Case No. 8-126, Ex hi bits �'D" and " D- 1,. in CTA Case No. 8489 . ~
CTA Case Nos. 8358, 8426 a nd 8489 Dissenting Opinion th e condominium proj ect wi ll be located ;2 and the D epository and Disb ursing Ag reements 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 co ndominium projects. The Trust Agreement, on th e other hand, regulates the pooled fund s of the condomin ium unit owners to be used for the construction o f the condominium project and for the purchase of the land where the condominium proj ect will be built. The Depository and Disbu rsing Agreeme nt, on the other hand, governs the di sbursement of the construction funding he ld in trust. True, th e best evidence of the intention of the parties to a contract is the contract itself be ing the formal expression of the parties' ri ghts, duties and obligations:' The stipul ations of the contract and not its title are co ntro lling and such stipulations confirm th e 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 tru e intention.6 Inte restingly, the following provisio ns in th e Contract to Manage and Execute the Constructio n of the Condominium, - th e Trust Ag��eement, and the Depository and Dis bursing Ag reement amplify respondent's theory that petitio ner is a seller and th e unit owners a re the buyers the reo f: CONTRACT TO MANAGE & EXECUTE THE CONSTRUCTION OF CON DOM INIUM7 XXX XXX XXX SECTION 3 l Exhibit "M" in CTA Case No. 8358. ' [xh ibi t "N'" in CTA Case No. 8358, Ex hibits "E"', "E- 1", "E-2" and "E-3" in CTA Case No. 8426, Exhi bits "E", "E- 1",a nd "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, Octobe r 24, 1997. 1' 1\rt ic le 137 1. C ivil Code; Ani/a C. Buce l 'S. The Honorable Court ofAppeals, el af., G. R. No. I36913, l\1n; 12. 2000. 7 Ex hibit "K" and '' L". d1
C TJ\ Case Nos. 8358, 8426 a nd 8489 Dissent ing Opinion l'age 3 of 16 D EVELOPMENT AN D MANAGEMENT OF T HE PROJECT 3.0 1 Engagement ofG & W The Clie nt hereby engages the services of G & W as proj ect manager in relation to the Project and trustee in relation to, the Subject Land and G & W , by virtue of such e ngagement, shall assume the respons ibiliti es enumerated in thi s Section. The Client, however, acknowledges and confirms that G & W does not assume the role of develope r of the Proj ect and hence, has not made and is not making any re presentation that it is, in its own capacity, selling the units comprising the Proj ect. 3.03 G & Was Project Manager Pursuant to the engageme nt of G & W as project manager, Client requ ires G & W to do the following acts o n behalf and for the collective bene (it of the C lients and in fu rthera nce of the development o f the Project: XXX XXX XXX The power and autho rity hereby g ranted to G & W shall terminate upo n the Acceptance and Turnover of the Subject Unit(s) by the C lient and the conveyance of the common areas of the Proj ect to the Condo minium Corporation as provided irL Subsection 5.05. For purposes of this Co nt.-act, Acceptance and T urnover shall mean th at point in time w hen th e Project is co ncl usively deemed completed through the joint certification of G & W and th e Construction M anager. The C lie nt expressly acknowledges that the aforesai d entities possess the required techni cal expertise to properly ascertain that the Proj ect is completed. Without in any manner lim iting the exclusive a uthority of G & W and the Construction Manager to jointly certify that the Project is completed , Project co mpletio n shall consist of the following: XXX XXX XXX Upo n Acceptance and T urn over and the T rustee's certification of full pay ment by the Client of all amounts prov ided in this Contract, the Subject Unit shall be conveyed by the Trustee to th e C lient and this C ontract shall termin ate. XXX XXX XXX 3.07 Scope of Obligations Any and all acts to be done and performed by G & W pursuant to its responsibil ities hereunder shall be deemed to have been done and performed by it in re presentation and o n behalf of the C lients for the e ffective development of the Proj ect. In the absence of w illful default o r cl'
C l /1. Case Nos. 8358. 8426 a nd 8489 Dissenting Opinion l'nge 4 of 16 mi scond uct, fraud , bad faith or gross negli gence o r violation of any provisio n of thi s Contract on the part of G & W, the Clients shall be bound by all the o bligatio ns which G & W may have contracted within the scope of its autho rity. The Client agrees to hold G & W free and harmless from any and all losses, claims, damages, li abi lities and expenses, o r actio ns \Yith respec t thereto arising out or by virtue of the failure of the Client to comply with any o f its undertakings, covenants or o bligati ons herein no t o therwise attri butab le to the fault or neg ligence o[f] G & W. XXX XXX XXX SECTION 5 CLI ENT'S SHA RE OF INT EREST IN THE PROJ ECT 5.0 1 Subject Unit(s)/ Parking Unit(s) As part of hi s interest in the Proj ect, the Client shall be ass igned: (i) the Subj ect Unit(s), which is/are more particu larly descri bed in Schedule "A.'" hereo f, and (ii) the Parking Unit(s), which is/are more parti cularl y described a lso in Schedule "A" hereof, which represents a percent propo rtio nate of the entire proj ect which shall be indicated in the Master Deed. XXX XXX XXX 5.04 Non-assignability of Interest T h e rig hts and inter ests of the C lient in the Project, the S ubj ect Unit, th e Par�king Unit, and the corresponding proportionate undivided interest in the Common Areas of Project shall not be a ssign able, 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 o f Pesos: Fifteen Tho usand (Php 15, 000.00). 5.05 Conveyance of T itle to the Subject Unit and Commo n A reas Upon co mpletion of the Proj ect and full p aym ent by the C lient of a ll a mounts payable und er this Contract, title to the S ubject Unit including the Parking U nit shall be co nveyed by G & W to the C li ent. Upon completio n o f the Project, title to the Comm on A reas shall be conveyed by G & W to the Condominium Corporati on which shall be established in acco rdance with the prov isio ns o f the Master Deed. XXX XXX XXX SECTION 7 REM ED IES f.OR DELAY TN PA YM ENT 7.0 I Payment of Pena lty rf\
CTA Case Nos. 8358, 8426 and 8489 Dissenting Opinion Page 5 o f 16 The C lient hereby acknowledges that time is of the essence in thi s contract. Furthermore. the Cli ent hereby agrees and acknowledges that any de lay in pay ments to th e Trustee through G & W of the Constructio n Funding or any delay in payments to G & W of Labor Cost Overruns or M isce llaneous Ex penses in accordance with the schedule of payments p rovided herein will cause the delay of the completio n of the whole proj ect. Accordingly, a penalty of one and a half p ercent (1.5 % ) a month s hall be imposed fo1� such late payments, based on th e amount which s hould have b een contributed 01� paid for every calendar day of d e la y. 7.02 Free and H arm less Cause T he C lient acknowledges that his delay in any payment to the Trustee through G & W of the Construction Funding, o r his delay in any payment to G & W of the Mi scell aneous Fees or Labor Cost Overruns, o r hi s fa ilure to comply with any of hi s o ther o bligatio ns under this Contract, may result in a de fault by G & W on its obligations to the o ther Clients under the Contracts with such other Cli ents. In additio n to the penalty interest unde r Section 7.0 I, the Clie nt he reby agrees to ho ld G & W free and harml ess against any and all cl aim s for damages w hich may be made o r filed against G & W by the o ther Clients or other th ird parties as a result of or aris ing from the delay by the Client in any payment of the Constructio n Funding o r hi s failure to comply with any of his other o bligations under this Contract. XXX XXX XXX SECTION 8 TE RMINATION 8.0 I V io latio n o r Defau lt G & W shall have the right to r escind, terminate or cancel this C o ntract includ ing the trust herein created with respect to the Subject Land . witho ut need of judicial acti on, in case any one of the events of default stipu lated hereunder occurs. and the Client fails to remedy or cure to the sa ti sfactio n o f G & W such de fault, within five (5) days fro m receipt of written no ti ce fro m G & W pf the occurrence of such default: (a) Fa ilur�e to pay any of the Cons truction Funding payments in accordance with th e schedule of pay ment herein provided for over 60 days; (b) Failure to p ay the C lient' s po1�tion of the Cost Advan ces or L a bor Cost Overruns if any, or any portion th ereof; Upon such termination, G & W shall have th e right to acquire, 01� identify a substitut e client to acquire all th e rights and interests of th e C lient in th e Project and to assume th e corresponding remaining o bligation s h er eund er. If at the time the violation o r default occurs, (11
C l A Case Nos. 8358, 8426 and 8489 LJ issenti ng Opinion Pnge 6 of 16 Client had paid thi rty fi ve percent (35%) or Jess of the Construction Fund ing (includi ng accrued cost Overruns and Cost Advances), any and all amounts a lready pa id by the C lient shall automa tically be forfeited l>y way of liquida ted d a m ages in favo r� of G & W , without need of j ud icial intervention . If at the ti me the violati on or default occurs, Client had paid more th an thirty fi ve percent (35%) o f the Construction Funding (including accrued Cost Overruns and Cost Advances), the excess over the said percentage sha ll be returned to the Cli ent after deducting all expenses and costs invo lved including the Bank's professional fees, attorney' s fees an d other acts of adm inistration. T he remedy herein granted is without prejudice to the right of G & W to ava il of the remedies to wh ich it is entitled under Secti on 7 hereof. S hould G & W d ee m tha t it is not feasible to continue with the Project, it m ay a lso terminate t his C ontract by ad van ce w ritten notice to the C lient of a t least five working d a~s. ln such case, all Construction Funding paym ents which have been depos ited in the Account shall be returned to the Client, together with all interests whi ch in the meantime have accrued thereon after deducti ng professional fees due to the Bank under the terms of thi s Con tract and the Depository and D isbursement Agreement. Should professional fees due to the Bank exceed interest earned from the Account, G & W undertakes to pay the aforesaid defici e ncy . 8.02 Effect of Termi nation Un less termi nation was made in accordance with Section 8.0 1 above, ter mination of this Contract sh all not relieve the C lient from th e obligation to pay or r emit a ny am ounts p ayable under this C on tract a nd accrued a s of th e effective da te of termina ti on . XXX XXX XXX 11 .03 Bindi ng Effect T his Contract shall be bindi ng upon and shall be enforceable against the C lient and G & W and their respecti ve successors and assigns; pro vided. however, that the C lient shall not have the right to transfer or a ssign a ny a nd a ll of his rights or ob ligations her ein wi thou t the prior w r itten consent of G & W." ~
C 1/\ Case Nos. 8358, 8426 and 8489 Dissentin g Op ini on TRUST AG REEMENT8 DISTRIBUTION OF TRUST FUND 4.0 The Trustee shall distribute the Trust fund in accordance with the fo llowing instructions of the Trusto r: XXX XXX XXX (d) To convey the Cond ominium 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 Corporatio n; (f) To t ransfer to th e nam e of G & W or a substitute client id entified by G & W the a mounts in t r ust as liquidated damages in cases of violati on or� default of the Trustor of or� in his obligations under the Contract w hich results in G & W acquiring the right, or identifying a s ubstitute client to acquire all the rights and interests of the Trustor� thereunder, including any and all contracts and agreem ents arising in co nnection therewith ; (g) To return the Constructio n Funding to the Trustor together with all accrued income and interests thereon where instructed by G & W; and, (h) To sig n, execute and deliver such documents as may be necessary to carry out the foregoing instructions. 4. 1 T he Trust hereby created as well as thi s Agreement shall automati cally be terminated upon: (i) v iolation or default of the Trustor of or in his obligations under the Contract which results in G & W acquiring the right, or identifying a s ubstitute client to acquire all the rights and inter�ests of the Trustor of or in identifying a s ubstitute client to acquire a ll the rights and interests of the Trustor, and to assume the correspondin g obliga tions; (ii) the return of the Construction Funding to the Trustor in accordance w ith Subsectio n 4.0 (g) above, or, (iii) completi on of the Project and the complete de li very and transfer of title to the S ubj ect Unit to the Trustor and the Subj ect Land and Commo n Areas to the Condo minium Corporatio n. Any remaining balance of the Trust may also be terminated in accordance with the procedure set fo rth in Subsecti on 5.04 of the Contract. XXX XXX XXX DEPOSITORY AND DI SBURSI NG AGR EEMENT9 XXX XXX XXX "9. TERM INATJON OF TH E AGREEMENT R r=xhibit '" M" in CT A Case No. 8358. Q b h ibit "N"', petitio ner' s Forma l O ffer of Ev idence fo lder. ~
C l /1. Case Nos. 8358, 8426 and 8489 IJi~sen t i ng Opini on l'age 8 of 16 9.0 1 This Agreement shall automatically terminate upon : a) v iolation or default of the PRlNC I PAL of his obligation under th e Con tract which results in G & W acq uiring th e right or id entifying a substitute client to acqui ��e all the rights and int eres ts ol the PRINCIPAL a nd ass ume the corresponding obligations in th e Contract; b) the return of the Fund s to the PRINC IPAL in accordance w ith 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 proj ect 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 simpl y the manager of th e proj ect, when in truth, ownership rights of petitioner' s purported "clients" over the project or any of the condominium units accrue and become ves ted upon them only upon full payment of the sa id units. Note that under the said contract, petitioner has the potent a uthority to te rminate 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 s upposed " clients"' only obligation mlllca� the sa id co ntract is confined to payi ng a s pecified amount and upon full payment, the clients will acq uire ownership of their respective condom inium units. Such arra ngeme nt 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 C ivil Code defines a contract of sale: "Article 1458. By the contract of sale one of the contracting parties obligates him self to tran sfer the ownership and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equiva lent. 1\ contract of sale may be abso lute or co nditi onal.'' The essential elements of a contract of sale arc the fo llowing: (a) consent or meeting of th e minds, that is, consent to transfer ownership in exchange for the price; (b) determinate subj ect matter; and (c) price certain in mo ney or its equi va lent. 10 In the case at bar, all the essenti al e lements of a contract of sale are present. The first elem ent, 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 . ~
CTA Case Nos. 8358, 8426 and 8489 Dissenting Opin ion price, is clearly stated in th e Contract to Manage and Execute the Construction or the Condonl.inium: 5.05 Conveyance of Title to the Subj ect Unit and Commo n Areas Upon completion of th e P��oject and full payment by th e C lient of a ll a m ounts payabl e under this C ontra ct, title to the Subj ect Unit including the P arkin g Unit sha ll be con veyed by G & W to the C lient. Upon completio n o f the Project, title to the Common Areas shall be conveyed by G & W to the Condo minium Corporatio n whi ch shall be established in acco rdance with the provisio ns 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 amo un t payab le under the purported Contract to M anage and Execute the Construction of the Condominium which is further subject to the relevant provisions of the Trust Agreement and the Depository and Disbursement Agreeme nt. Under these c ircumstances, there rs no deny ing that the transacti on contemplated under the Contract to Manage and Exec ute the Constru ction of the Cond ominium is a sa le of condominiu m units despite the contractual embellishments that attempt to conceal its true nature. f urthermore, records disclosed petitioner's contemporaneous and subseq uent acts that point to a contract of sale/contract to sell. Its own advertisement for the sale o r the condominium units in its website to buyers, parti cul arl y that for Grand Hamp ton's Tower 11 , is consistent with a seller's act as it tclli ngly reads: " 4 Easy Steps for Fo reign Buyers STEP I Select a Desired Unit XXX XXX XXX 11 Exhibits "28" (Copy of the printouts gath ered from the website (http://www.gw- mc hitects.com/grandhamptons) which advertised petitione r's sale of condo. Un its to prospective buyers) and "28-a�� (Page two of the Copy of the printouts gathered from the website (http://www.gw- architects.com/g randhampton s) which adverti sed peti tioner's sale o f co nd o. units to prospective buyers) in CTA Case No. 8426, and Exhibit " R- 10" (Computer Print-Out of pet iti o ner's Adve1ti sement for the Grand IIampto n's T ower) in CTA Case No. 8489. M
C I A Case Nos. 8358, 8426 and 8489 Dissenting Opinion 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 (Emphas is supplied) With such open invitation to th e pub! icon the mode and manner of acquiring a condominium unit, one must indeed be extremely naive to accept petiti oner's claim tha t 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 tacitl y admitting that it was engaged in the selling of condominium units. The fo llowing Licenses to Scll 12 of petitioner bolster its status as a seller of condominium units: - Descri ~ti o ns Exhibits Certificate of registration No. 20 133 issued to petitioner as the project owner and developer of THE GRAND HAMPTONS "R-20" TOWER 1 License to Sell No. 2 1947 issued to petitioner as the project owner - and developer of THE__QRAN D HAMPTONS TOWER I Certificate of registration No. 24027 issued to petitioner as the aR -2 0-1 " - -"-R-21" ' ' Exhibi ts " 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 petiti oner as the " R-22" project owner and developer of CRESCENT PARK . -- -- - - � RESIDENCES C O N D O M IN I U M petitioner as the owner License to Sell No. 26 18 1 issued to project " R-22- 1" and developer of CRESCENT PARK RESIDENCES CONDOMINIUM Certificate of registration No. 244 18 issued to petitioner as the " R-23" proj ect owner and developer of CRESCENT PARK ---- RESIDENCES CONDOMIN IUM License to Sell No. 26169 issued to petitioner as the project owner " R-23- J" and developer of CRESCENT PARK RESIDENCES --- CONDOM INIUM Cert ificate of registration No. 24028 issued to petitioner as the " R-24" project owner and developer of CRESCENT PARK RESIDENCES CONDOMIN IUM Licen se to Se ll No. 2527 1 issued to petitioner as the project owner " R-24-1" and developer of CRESCENT PARK RESIDENCES - - - - - - - -C-O-NDO- M- IN I- UM- Indeed, there wo uld have been no necessity to secure the afore-listed Licenses to Sell, if petitioner were not engaged in selling condominium units, as it tenac iously cla ims. Section 5 of Pres identi al Dec ree 957 13 requires a license to sell as a condition sine qua non first obtained before selling condominium units : Section 5. License to sell. S uch owner o1� dea ler to w hom h as been issued a registration certifi cate shall not, however, be a uthorized to sell a ny subd ivision lot or condomin ium unit in th e registered project u nless h e sh a ll have fi rst obta in ed a license to sell the project w ithin two weeks fr om the registra tion of such project. The Authority, upon proper application therefor, shall issue to such owner or dea ler 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 docum ents attached thereto, he is convinced that the owner or dealer is of good repute, that his business is fin ancially stable, and that the proposed sa le of the subdivision lots or condominium units to the public would not be fraudu lent. (Emphasis supplied) Presiden tial Decree No . 957 is implemented by the HLURB. 14 11 I he Subdivision and Condominium Buyers' Protecti ve 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 adminis trative fine on petitioner for selling condominium units without a license to sell, for failure to secure certifi cate of registration and for advetiising without prior approval, and ordering it to cease a nd d esist from further selling and advertising until all the necessary p ermits or license is secured, the HLURB denied petitioner's appeal and a ffirmed the order of imposition of fine, and cease and desist order. 15 Expcctedly, the llLURB required petitioner to secure licenses to sell and petitioner comp lied with the said directive. With rega rd 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-33 7-2007 were revoked by responde nt, 1 disagree. The BIR Rulings were iss ued pursuant to Section 7 of the National Interna l Revenue (NlRC) of 1997, as amended, wh ich prov ides that the Com missioner of the Internal Revenue (CIR) has the power to issue rulings of first impress ion 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 NIR C of 1997, as amended. The same prov ision, however, provides that "(a) where th e taxpayer d eliberately misstates or omits m a te t�ial facts ft�om his r etur�n o r any docum ent requit�ed of h im by the Bureau of Internal R evenue; (b) Where the facts s ubsequently ga th er�ed by th e Bureau of Interna l Revenue are matedally different fro m the facts on which the ru ling is based ; or (c) \Vhere the taxpayer acted in bad fa ith", the Commissione�� may revoke th e sa me as an exception to Sectio n 246 of the NIRC of 1997, as amended. 11 Executi ve 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 Jul y 2005 in the case entitled " In the Matter of Im position of Administrative Fine and Cease and Desist Order - G & W Arc hitect, Engineer and Project Dev't. Consu ltants, Inc.", docketed HL URB 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 HL URB 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'' ( Ilousing and Land Use Regulatory Board (HLURB) Decic;ion dated July 26, 2005) in CTA Case No. 8489. ~
CTA Case Nos. 8358, 8426 and 8489 Dissenting Opinion Page 13 o f 16 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 adm inistrati ve regulations, viz: "A n administrative regu lation may be classified as a legislative rule, an interpretative rule, o r a contingent rule. Legislative rul es are in the nature of subo rdinate legislati on and designed to implement a primary legislatio n by providing the deta ils thereof They usually implement existing law, imposing general , ex tra-statutory obligatio ns pursuant to au thority properly delegated by Congress and effec t a change in existing law or po licy whi ch affects indi vidual rights and ob ligations . Meanwhi le, inte rpreta tive rules are intended to interpret, cla rify or expla in existin g sta tutory regulations under which the administrative body op er�ates. Their purpose o r objective is m erely to construe the statute being ad min istered and purport to do no more than interpret the statute. S imply, they try to say what the statute means and refer to no s ingle person or party in parti cular but concern all those belong ing to the same class which may be covered by the said rul es. Finall y, contingent rules are those issued by an adm inistrati ve autho rity based on the existence of certain facts or things upon whic h the enforcement of the law depends." In gener a l, a n a dministra tive r egula tion need s to comply w ith the requirem ents la id d ow n by Executive Ord er No. 292, s. 1987, othen vise know n as the "Admin istra tive Cod e of 1987," on prior notice, h earin g, and publica tion in order to be valid and binding, excep t w h en the sa me is mer ely a n interpreta tive r ule. T his is because " lw ]hen a n a dminis tra tive rule is merely interpreta tive in na ture, its applica bili ty needs nothin g fu r ther� th an its ba r e iss uan ce, for it gives no real conseq uence m ore th a n wh a t th e law itself has a h�eady p rescribed . When, on the other hand, the admini strative rule goes beyond merely prov iding for the means that can facilitate o r render least c umbersome the im plementation of the law but substantially increases the burden of those governed, it behooves the agency to acco rd at least to those di rectly affected a chan ce to be heard, and thereafter to be duly� info rmed. before that new issuance is g iven the fo rce and effect of law." (Ci tatio ns om itted and emphasis supplied) Simply stated, the require ments of prior notice, hearing and publication arc necessary when the administrative ruling partakes of a legislati ve nature. On th e other hand, interpretative rules, as those invo lved 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 Dissentin g Opinio n Misamis Oriental Association of Coco Traders, inc. vs. Department of Finance Secretary, et a/. 17 was catego ri cal in declaring that the inquiry to be made by cou1is in considering interpretative rulings is not into the validity but into the correctn ess or propriety of the rul e: Second. Petiti o ner compla ins that it was de nied due process because it was not heard before the ruling was made. There is a di stinction in admin istrati ve law between legislative rules and inte rpretative rules. 3 There would be force in petitioner's a rgument if th e c irc ular in question were in the nature of a legis lati ve rule. But it is not. It is a mere inte rpre tati ve rule. XXX XXX XXX According ly, in conside ring a legislative rule a court is free to make three inquiries: (i) whether the rul e is w ithin the delegated authority of the administrative agency; (ii) whether it is reasona ble; and (iii ) whe the r it was issued pursuant to proper procedure. But the court is not free to s ubstitute its judgme nt as to the desirability or w isdom of the rule for the legislative body, by its delegation of administrative judgment, has committed those questi ons to administrative judgme nts and not to judic ial judgments. In th e case of an int erpretative ru le, the inquiry is not into the va lidity but into th e conectness or propriety of th e 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 extrem e and substitute its judgment; or (iii) give some intermediate d egr�ee of a uthor�itativ e weight to th e interpr�etative rule.6 (Emphasis supplied) An interpretive rule may be further classified as general interpretative ru le or a specific interpretative rul e, as differentiated in CBK Power Company Limited vs. Commissioner ofi nternal Revenue18 : Thus, the only issue is whe ther 13IR Ruling No. DA-489-03 is a general inte rpre tative ru le applicable to a ll taxpayers or a s pecific ruling applicable o nl y to a partic ula r tax payer. BJR Ruling No. DA-489-03 is a general interpretative rule beca use it wa s a res ponse to a query made, not by a particular taxpayer, but b.y a government agency asked wi th processing ta x refund s a nd credits, that is, the One S top Shop Inter-Agency Tax C redit and Drawback Center of the De partme nt of F inance. T his gove rnme nt agency is al so the addressee, or the e ntity responded to, in BlR Ruling No. DA-489-03. Thus, whi le this governme nt agency me ntions in its q ue ry to the Commiss ione r the ad ministrative c laim of Lazi Bay Resources Developme nt. lnc., the agency was in fact asking the Comm issione r wha t to do in cases like the tax claim of Laz i Bay 17 G. R. No. 108524, Nove mber 10, 1994. IR G.R . Nos. 198729-3 0, January 15, 20 14 . ~
C r/\ Case Nos. 8358, 8426 and 8489 Dissenting Opin io n Resources Development, ln c., where the taxpayer 'did not wait fo r the lapse of the I20-day peri od. (Emphasis sup plied) In the case at bar, th e revoked BJR rulings involve petitioner' s request fo r an administrative pronouncement on whether its Built-to-Own or Build- Yo ur-Own-Home acti vity is a taxable event being purportedly a transfer of property held in trust by the Trustee for t)1e indiv idual Trustor._Respondent undeniably answered in the affirmative, which response or rulings constitute spec ifi e interpretati ve rules hav ing been issued upon request of the pet iti on er . I submit, therefore, that the va lidi ty of the revocation of the BIR ru lings and the retroacti ve application of th eir revocation are warranted on the following grounds: I . The afore-lis ted BIR rulings and subsequent BIR ruling revoking them are interpretative rul es which do not require prior notice, hearin g and publication for their validity; 2. The revocati on of the said rulings is the result of the in vestigation conducted by the BIR which eventually arri ved at the conclusion that petitioner misrepresented the facts upo n which the revoked rulings were based; and 3. Respondent is not bound by the ruling of he r predecessors.19 It has been settled in cases too n umero us to cite that findings of fact of adm inistrati ve agencies and qu asi-judicial bodies, including those of the llL URB and the BlR, which acquired expertise because their respective j urisdictions are confined to specifi e matters, are generally accorded great respec t. 20 Jn fin e, transacti ons crafted to appear as something they are not cannot be countenanced especia lly if such transactions are contrary to public policy or are used as a tool for committing tax evasion. 1 Section 7, N IRC of 1997, as amended; f3PI Fami~l' f3ank vs. Court of Appeals, et at., G .R. No. 11 7319, 1) Jul) I9. 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. Gatus vs. Social Security System, G.R. No. 174725, January 26, 20 I I . ~
C I A Case Nos. 8358, 8426 and 8489 Dissenting Opinion All told, I VOTE to DENY the Petition for Review filed by G & W Architects, E ng ineers a nd Proj ect Cons ultants in CTJ\. Case Nos. 8358, 8426 and 8489, and UPHOLD the subj ect assessments for deficiency E WT and DST for the periods of June 24, 2004, July 10, 2004, and June 2004, in the amou nts of P277,458.ll7.19, Pl32,85-2,679.05, and Pl49,414,228.66, respec ti vely, or in the total amo unt of 1:!559,725,024 .90. Presiding Justice
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