COMMISSIONER OF INTERNAL REVENUE v. KEPWEALTH, INC.

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 3002 INTERNAL REVENUE, (CTA Case No. 10353) Petitioner, Present: -versus- DEL ROSARIO, P.J., RINGPIS-LIBAN ,� MANAHAN, BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO, CUI-DAVID, FERRER-FLORES, and ANGELES, JJ. Promulgated: ~~~p-o~~~~t.- KEPWEALTH, INC., - - - SEP 2 3 2-0'i2!5JI=f_)� (!~...., . x-- ------- -- - - - - ---- DECISION CUI-DAVID, J.: Before the Court En Bane is a Petition for Review1 filed by petitioner Commissioner of Internal Revenue (CIR) seeking to reverse and set aside the Decision dated April 17, 20242 (assailed Decision) and the Resolution dated September 9 , 20243 (assailed Resolution) of the Court's Special Third Division (Court in Division), which cancelled and set aside the deficiency donor's tax assessment for taxable year (TY) 2017 issued against respondent Kepwealth, Inc. 1 En Bane (�8) Docket- Vol. I, pp. 6-19. 2 !d. at 37-58. 3 !d. at 42-46.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X THE PARTIES Petitioner is a public officer duly appointed by the President of the Philippines and serves as the head of the Bureau of Internal Revenue (BIR), the government agency officially responsible for the assessment and collection of all national internal revenue taxes, fees, and charges.4 Respondent Kepwealth, Inc. is a corporation duly organized and existing under the laws of the Republic of the Philippines. It is registered with the BIR with Tax Identification Number (TIN) 205-041-890-000. Its principal office address is at 3-B Country Space I, 133 Sen. Gil Puyat Avenue, Salcedo Village, Barangay Bel-Air, Makati City.s THE FACTS AND THE PROCEEDINGS The facts, as culled by the Court in Division, are as follows: On October 27, 2017, [respondent] sold its common shares in Kepwealth Property Phils., Inc. (KPPI) to these buyers: Buyer No. ofCommon Total Purchase Price per Shares Sold Price Share Sold Las Tuazon & Sons 356,090 !>8,311,389.84 P23.34 Realty, Inc. (the Las Tuazon (Las Tuazon) shares) Crown Castle 4,795,410 !'111,928,225.94 !'23.34 (the Crown Holdings.Com, Inc. Castle shares) (Crown Castle) [Respondent] then applied for the Certificate Authorizing Registration for the sale of its KPPI common shares to Las Tuazon and Crown Castle. During the CAR processing, [petitioner], through Revenue District Office No. 49, claimed that [respondent] is liable for donor's tax pursuant to Section 100 of the Tax Code because [respondent] allegedly sold the Las Tuazon Shares and Crown Castle Shares (Sale Shares) for less than their full and adequate consideration. On February 20, 2018, [respondent], through Ms. Felicidad V. Razon, received the Letter of Authority (LOA), authorizing the examination of petitioner's accounting records ~ !d. at38. /d.at37.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X for donor's tax for the period "October 27, 2017 to October 27, 2017." Thereafter, on March 6, 2018, [respondent], through Ms. Kristina Frias, received the Notice for Informal Conference, requesting [respondent] to offer its explanation or present its objection to the initial findings of respondent. On July 19, 2018, [respondent] received [petitioner's] Preliminary Assessment Notice (PAN) dated July 16, 2018. The PAN contains the assessed donor's tax of petitioner in the total amount of P85,585,729.48, inclusive of surcharge, interest and penalties, for taxable year 2017. Subsequently, on August 3, 2018, [respondent] then filed with the BIR the letter of even date, requesting for the withdrawal and cancellation of the said PAN. On July 4, 2019, [respondent] received the Formal Assessment Notice (FAN) dated June 19, 2019 with the Details of Discrepancies. [Respondent] then filed with the BIR, on July 31, 2019, the letter of even date (request for reconsideration), requesting for the withdrawal and cancellation of the said FAN. On August 5, 2020, [respondent] received the Final Decision on Disputed Assessment (FDDA) dated August 3, 2020. The FDDA upheld the donor's tax assessment, inclusive of surcharge, interest and compromise penalty, against [respondent] in the amount of P98,318,731.68. On September 17, 2020, [respondent] filed the present Petition for Review. Within the extended time granted by the Court, [petitioner] posted his Answer (With Special and Affirmative Defenses), asserting that the Court lacks jurisdiction to entertain the present case, as the Petition for Review was filed beyond the prescribed thirty (30)-day period to file an appeal before this Court reckoned from the date of receipt of the FDDA. Hence, according to [petitioner], the assessment has become final, executory and demandable pursuant to Section 228 of the National Internal Revenue Code (NIRC) of 1997, as amended. [Petitioner] also contends that [respondent] is liable for donor's tax, amounting to 1"98,318,731.68, inclusive of interests and surcharge, as well as compromise penalty, amounting to 1"100,000.00; and prayed for the dismissal of the Petition for Review. Thereafter, [petitioner] transmitted the BIR Records for the present case on December 21, 2020, consisting of two (2) folders.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. x------------------------------------------------------------------------------------x On January 4, 2021, [respondent] filed its Reply to respondent's Answer. In the Resolution dated March 12, 2021, the Court denied [petitioner's] prayer to dismiss the present case. The Pre-Trial Conference was initially set on April 19, 2021, and was reset to June 16, 2021. [Petitioner's] Pre-Trial Briefwas posted on April15, 2021; while [respondent] filed its Pre-Trial Brief on June 14, 2021. However, during the June 16, 2021 hearing, the parties were instead ordered to immediately proceed and to personally appear, or through their authorized representative, before the Philippine Mediation Center-Court of Tax Appeals (PMC-CTA) on July 12, 2021, and the Pre-Trial Conference set on said day was cancelled. Thereafter, the PMC-CTA issued the No Agreement to Mediate dated July 12, 2021, stating that the parties decided not to have their case mediated. Thus, in the Resolution dated July 15, 2021, the Court set the Pre-Trial Conference anew on September 8, 2021, which was later reset to, and held on, November 22, 2021. On January 6, 2022, the parties posted their Joint Stipulation of Facts, which was approved and adopted by the Court in the Pre-Trial Order dated March 14, 2022. Trial then ensued, with the parties presenting their respective testimonial and documentary evidence. [Respondent] offered the testimonies of the following witnesses, namely: (1) Mr. Alan I. Claveria, petitioner's President; (2) Ms. Felicidad V. Razon, [respondent]'s Treasurer; and (3) Prof. Joselito G. Florendo, [respondent]'s expert witness to opine on the computation of the book value per share (BVPS) of KPPI's common shares. [Respondent] filed its Offer of Evidence on June 24, 2022. [Petitioner] posted its Comment (to [Respondentj's Offer of Evidence dated 24 June 2022) on July 19, 2022. In the Resolution dated September 20, 2022, the Court admitted [respondent]'s offered exhibits, except for Exhibits "P-7", "P-7- faa"i'lu"rPe-8to" ' su"Pb-m8-iat"t'he"Po-r9i"g'in"aPl-s9f-oar" 'co"mP-p1a0r"i'soann.d "P-1 0-a" ' for On October 4, 2022, [respondent] then filed its Motion for Reconsideration, to which [petitioner] posted his Comment (Re: [Respondent]'s Motion for Reconsideration dated 04 October 2022) on October 14, 2022. For his part, [petitioner] offered the testimony of Revenue Officer (RO) Karen R. Esparraguerra.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X [Petitioner's] Fonnal Offer of Evidence was filed on October 21, 2022. [Respondent] posted its Comment on/ Objection to [Petitioner's} Fonnal Offer of Evidence dated October 21, 2022 on November 3, 2022. In the Resolution dated January 23, 2023, the Court: (1) granted [respondent's] Motion for Reconsideration, thereby admitting Exhibits "P-7-a", "P-8", "P-8-a", "P-9", "P-9-a", "P- 10", and "P-10-a"; and (2) admitted [petitioner's] offered exhibits. The Memorandum for the [Respondent} was filed on March 8, 2023; while [petitioner] filed his Memorandum on March 21, 2023. On April 17, 2024, the Court in Division rendered the assailed Decision, disposing of the case as follows: WHEREFORE, premises considered, instant Petition for Review be GRANTED. Accordingly, the deficiency donor's tax assessment issued against [respondent] for taxable year 2017, inclusive of surcharge, interest and compromise penalty, in the aggregate amount of1"98,318,731.68, is CANCELLED and SET ASIDE. SO ORDERED. On May 23, 2024, petitioner filed, via licensed courier, a Motion for Reconsideration (Re: Decision 17 April 2024},6 to which respondent filed a Comment/ Opposition (re Motion for Reconsideration dated May 23, 2024)7 on June 10, 2024. The Court in Division denied petitioner's motion for reconsideration in the assailed Resolution dated September 9, 2024, the fallo of which reads: WHEREFORE, premises considered, [petitioner's] Motion for Reconsideration (Re: Decision 17 April 2024) is DENIED for lack of merit. SO ORDERED. On September 30, 2024, petitioner filed, via licensed courier, a Motion for Extension to File Petition for Review, 8 which was granted on October 4, 2024. Consequently, petitioner's Division Docket, Vol. VII, pp. 3832-3846. Jd. at 3850-3863. EB Docket. pp. 3-5.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X period to file the Petition for Review was extended by fifteen (15) days from October 1, 2024, or until October 16, 2024. 9 On October 16, 2024, petitioner filed the instant Petition for Review. In compliance with the directive of the Court En Bane, JO respondent filed a Comment on the Petition for Review dated October 15, 202411 on December 20, 2024. The Court En Bane noted respondent's comment and submitted the case for decision on January 8, 2025. 12 THE ISSUES Petitioner ascribes to the Court in Division the following errors: 13 I. WHETHER THE HONORABLE COURT IN DIVISION ERRED IN HOLDING THAT IT HAS JURISDICTION OVER THE PETITION FILED BY RESPONDENT. II. WHETHER THE HONORABLE COURT IN DIVISION ERRED IN HOLDING THAT PETITIONER ERRONEOUSLY APPLIED SUPPLETORILY SECTION 2(V) OF RR NO. 6-2008 IN COMPUTING THE FAIR MARKET VALUE OF RESPONDENT'S SALE OF SHARES OF STOCK IN 2017. III. WHETHER THE HONORABLE COURT IN DIVISION ERRED IN HOLDING THAT RESPONDENT IS NOT LIABLE FOR DONOR'S TAX ARISING FROM THE TRANSFER FOR INSUFFICIENT CONSIDERATION OR DEEMED GIFT. Petitioner's arguments Petitioner argues that the Court in Division lacks jurisdiction over the Petition for Review filed by respondent, as the tax assessment had already attained finality due to respondent's belated filing. Respondent received the Final Decision on Disputed Assessment (FDDA) on August 5, 2020, !d at 10. Notice of Resolution. 10 !d. at 69. Notice of Resolution. II /d. at71-84. 12 !d. unpaged, Notice of Resolution. 13 /d. at 15-16. Petition for Review. Issues for Resolution.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X and thus had only until September 4, 2020, or thirty (30) days therefrom, to either file a Petition for Review before the Court of Tax Appeals (CTA) or a motion for reconsideration before the CIR. However, respondent filed its Petition for Review only on September 17, 2020, beyond the reglementary period, thereby rendering the appeal time-barred. Petitioner further disputes the Court in Division's ruling that the Petition for Review filed on September 17, 2020, was timely under Supreme Court Administrative Circular (SC AC) No. 43A-2020. Petitioner contends that the said circular applies only to petitions or appeals governed by the Rules of Court, pursuant to the Supreme Court's rule-making power. Even assuming, arguendo, SC AC No. 43A-2020 is applicable, petitioner maintains that respondent was still required to file its appeal within 30 days from receipt of the FDDA, or no later than September 4, 2020. Finally, petitioner challenges the Court in Division's finding that it erroneously applied Section 2(v) of Revenue Regulations (RR) No. 6-2008 14 in determining the value per share sold, since the sale transaction took place on October 27, 2017, the applicable provision is Section 7(c.2.2) of RR No. 6- 2008, as amended by RR No. 6-2013. Petitioner argues that the amendment under RR No. 6-201315 is consistent with, and reconcilable with, Section 2(v) ofRR No. 6-2008. Here, petitioner posits that the fair market value (FMV) of the common shares sold by respondent exceeded the consideration received, and the excess amount is deemed a gift subject to donor's tax under Section 100 of the National Internal Revenue Code (NIRC) of 1997, as amended. Respondent's arguments Respondent asserts that the present Petition for Review should be denied outright, as it merely reiterates petitioner's prior arguments before the Court in Division. Respondent maintains that the Court in Division has jurisdiction over its petition, which was timely filed in accordance with SC AC No. 43A-2020, which suspended the reglementary periods for filing 14 " CONSOLIDATED REGULATIONS PRESCRIBING THE RULES ON THE TAXATION OF SALE. BARTER. EXCHANGE OR OTI!ER DISPOSITION OF SHARES OF STOCK I!ELD AS CAPITAL ASSETS, Apcil 22, 2008 (Published in Manila Bulletin on May' 5. 2008). 15 Amending Certain Provision of Revenue Regulations No. 06-2008 Entitled Consolidated Regulations Prescribing the Rules on the Taxation of Sale, Barter. Exchange or Other Disposition of Shares of Stock Held as Capital Assets. April I I, 20I3 (Published in Manila Bulletin on April24. 2013).

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. x------------------------------------------------------------------------------------x petitions, appeals, complaints, motions, pleadings, and other court submissions from August 4, 2020, to August 18, 2020. Consequently, the 30-day period to appeal commenced only on August 19, 2020. Respondent further insists that it is not liable for donor's tax, emphasizing that RR No. 6-2013 removed any reference to "book value" in Section 7(c.2.22) of RR No. 6-2008. Therefore, the definition of "book value per share" under Section 2(v) of RR No. 6-2008 cannot be applied in determining the FMV of shares not traded on a local stock exchange. Respondent avers that the amendment introduced by RR No. 6-2013 is an express amendment that clearly modifies the existing regulation, RR No. 6-2008. Had petitioner correctly applied the provisions of RR No. 6-2013, it would not have concluded that respondent sold the shares for less than full and adequate consideration, which could give rise to donor's tax liability. THE COURT EN BANC'S RULING The present petition is without merit. The instant Petition for Review was timely filed. Section 3(b), Rule 8 of the Revised Rules of the Court of Tax Appeals (RRCTA) provides: SEC. 3. Who may appeal; period to file petition. - (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementary period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. (Emphasis supplied)

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X In this case, petitioner received the assailed Resolution on September 16, 2024.16 Counting 15 days from that date, petitioner had until October 1, 2024, to file an appeal with the Court En Bane. Before the lapse of the said reglementary period, petitioner filed, via licensed courier, a Motion for Extension of Time to File Petition for Review on September 30, 2024, requesting a 15-day extension, which the Court En Bane granted. Within the extended period, petitioner filed the instant Petition for Review on October 16, 2024. Accordingly, the petition was timely filed, and the Court En Bane validly acquired jurisdiction over the present case. Respondent's Petition for Review was timely filed under SC AC No. 43A-2020. Hence, the Court in Division did not err in upholding its jurisdiction over respondent's petition. Petitioner argues that the deficiency donor's tax assessment had attained finality due to respondent's alleged failure to file its Petition for Review within the 30-day regulatory period from receipt of the FDDA on August 5, 2020. This argument is untenable. The Court in Division correctly applied SC AC No. 43A- 2020, which suspended reglementary periods for filing petitions and other pleadings from August 4 to 18, 2020, due to the COVID-19 pandemic. Consequently, the 30-day period to appeal the FDDA received on August 5, 2020, was suspended and resumed on August 19, 2020. Counting 30 days from that date, the deadline to file the Petition for Review was September 18, 2020. Respondent filed its appeal on September 17, 2020, well within the prescribed period. Moreover, while the CTA is a special court with its own procedural rules, it remains subject to the administrative supervision of the Supreme Court pursuant to Article VIII, Section 6 17 of the 1987 Constitution. As such, administrative 16 EB Docket p. 59. 17 SEC. 6. The Supreme Court shall have administrativ~ supervision over all courts and the personnel thereof.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X circulars issued by the Supreme Court, including SC AC No. 43A-2020, apply to proceedings before the CTA. Petitioner's narrow view of the Supreme Court's rule- making power is untenable. Petitioner claims that SC AC No. 43A-2020 applies only to petitions and appeals governed by the Rules of Court. Yet, in asserting that the appeal should be filed within 30 days from receipt of the FDDA, petitioner relies on Section 11 of Republic Act (RA) No. 1125, as amended by RA No. 9282, which expressly provides that appeals from the CIR's decision, ruling or inaction to the Court in Division are governed by Rule 42 of the Rules of Court.1s Petitioner cannot invoke Section 11 of RA No. 1125, as amended, to apply Rule 42, while simultaneously denying the applicability of a Supreme Court administrative circular that temporarily suspended the reglementary period under the same rule. Such a selective and self-serving application of procedural rules undermines the fair and efficient administration ofjustice. Petitioner's use of an outdated valuation method invalidates the donor's tax assessment; RR No. 6- 2013, not RR No. 6-2008, governs FMV computation. Hence, the Court in Division did not err in holding that respondent is not liable for donor's tax. Petitioner assessed donor's tax on the sale of shares by respondent, asserting that the shares were sold for less than full and adequate consideration, thereby subjecting the transaction to donor's tax under Section 100 of the NIRC of 1997, as amended. In support of this assessment, petitioner relied on Section 2(v) of RR No. 6-2008 to determine the FMV of the shares, claiming that the excess of FMV over the sale price constituted a deemed donation. ~ 18 SEC. 11. Who ;\Ja_v Appeal: Mode ofAppeal; Effect ofAppea/. -Any party adversely affected by a decision. ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs. the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period fixed by law for action as referred to in Section 7(a)(2) herein. Appeal shall be made by filing a petition for review under a procedure analogous to that provided for under Rule 42 of the 1997 Rules of Civil Procedure \Vith the CTA within thirty (30) days from the receipt of the decision or ruling or in the case of' inaction as herein provided. from the expiration of the period fixed by Ia,,� to act thereon. A Oi\'ision of the CTA shall hear the appeal: .... (Emphasis supplied)

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X Respondent counters that RR No. 6-2013 had already amended RR No. 6-2008 by deleting references to "book value" under Section 7(c.2.22), replacing it with the Adjusted Net Asset Method for valuing unlisted shares. As such, petitioner's reliance on RR No. 6-2008 was misplaced, and no donor's tax liability arose. The Court En Bane finds for respondent. The transaction in question occurred on October 27,2017. At that time, RR No. 6-2013 was already in full force and effect. The proper valuation of shares for tax purposes must be based on the revenue regulations in effect at the time of the transaction. RR No. 6-2013, which took effect prior to the October 27, 2017 transaction, governs the determination of FMV in this case. Hence, petitioner's continued reliance on RR No. 6-2008 is misplaced. A comparison of the relevant provisions of RR No. 6- 2008 and RR No. 6-2013 reveals the following differences: RR No. 6-2008 RR No. 6-2013 SEC. 7. Sale, Barter or Exchange SEC. 7. SALE, BARTER OR of Shares of Stock Not Traded Through a Local Stock Exchange EXCHANGE OF SHARES OF Pursuant to Sees. 24 (C), 25 (A)(3), 25 (B), 27 (D) (2), 28 (A) (7) (C), 28 STOCK NOT TRADED THROUGH (B) (5) (C) of The Tax Code, as Amended.- A LOCAL STOCK EXCHANGE PURSUANT TO SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF THE TAX CODE, AS AMENDED. - (c.2) Definition of "fair market (c.2) Definition of "fair market value" of the Shares of Stock. - value" of the Shares of Stock.- For For purposes of this Section, "fair purposes of this Section, "fair market value" of the share of stock market value" of the shares of sold shall be: stock sold shall be: (c.2.1) 0000 (c.2.2) In the case of shares of (c.2.2) In the case of shares of stock not listed and traded in the stock not listed and traded in the local stock exchanges, the value local stock exchanges, the book of the shares of stock at the value of the shares of stock as time of sale shall be the fair shown in the financial market value. In determining the statements duly certified by an value of the shares, the Adjusted independent certified public Net Asset Method shall be used accountant nearest to the date whereby all assets and liabilities are adjusted to fair market ~/

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. X------------------------------------------------------------------------------------X of sale shall be the fair market values. The net of adjusted asset value. minus the liability values is the indicated value of the equity. For purposes of this section, the appraised value of real property at the time of sale shall be the higher of- (1) The fair market value as determined by the Commissioner, or (2) The fair market value as shown in the schedule of valued fixed by the Provincial and City Assessors, or (3) The fair market value as determined by Independent Appraiser. RR No. 6-2013 eliminated the book value approach and mandated the use of the Adjusted Net Asset Method for valuing unlisted shares. Petitioner's application of RR No. 6-2008 was therefore incorrect. The Court in Division correctly found, and the Court En Bane affirms, that RR No. 6-2013 is the applicable regulation, not RR No. 6-2008. Applying the Adjusted Net Asset Method under RR No. 6-2013, the FMV per share was properly computed as follows: Total Assets !'45,533,582.00 Current Assets 788,531,000.00 Non-current Assets (FMV as determined by Independent !'834,064,582.00 Appraiser) (43,222, 131.00) Total Adjusted Assets 1'790,842,451.00 Less: Total Liabilities 34,002,500 Adjusted Net Assets 1'23.26 Divided by: Total Shares Outstanding FMV per share Respondent sold the shares for P23.34 each, which is higher than the computed FMV of 1'23.26. Thus, no deemed donation occurred:

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. x------------------------------------------------------------------------------------x Buyer No. of FMV Total FMV Total Price Difference, Shares per (P23.34/share) i.e., Deemed share Gift Las I 356,090 !'8,282,653.401 !'8,311,389.841 (P28,736.44) Tuazon Crown 4,795,410 !'23.26 !'111,541,236.60 I' 111 '928,225. 94 (P386,989.34) Castle Total 5,151,500 !'119,823,890.00 !'120,239,615.78 (P415,725.78) Under Section 100 of the NIRC of 1997, as amended, a transfer of property for less than full and adequate consideration is considered a deemed gift, and the difference between the FMV and the actual consideration is subject to donor's tax. In this case, the actual selling price exceeded the FMV. There was no deficiency in consideration, only a surplus. This means that the transfer was made for full and adequate consideration, and no portion of the transaction may be deemed a gift. The tax assessment was premised on an incorrect application of RR No. 6-2008, which had already been superseded by RR No. 6-2013 at the time of the transaction. The use of an outdated valuation method rendered the assessment erroneous. Tax assessments must rest on current and applicable law. Here, petitioner's reliance on a superseded regulation nullifies the presumption of correctness usually accorded to BIR assessments. In sum, as there is no deemed gift, no donor's tax is due; hence, the assessment must be struck down for lack of legal basis. WHEREFORE, premises considered, the instant Petition for Review filed by the Commissioner of Internal Revenue is hereby DENIED for lack of merit. Accordingly, the assailed Decision dated April 17, 2024, and Resolution dated September 9, 2024, issued by the Court's Special Third Division in CTA Case No. 10353 are AFFIRMED.

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. x------------------------------------------------------------------------------------x SO ORDERED. ~Jp~ WE CONCUR: LANEE S. CUI-DAVID Associate Justice Presiding Justice ON LEAVE MA. BELEN M. RINGPIS-LIBAN Associate Justice ~"7~ CATHERINE T. MANAHAN Associate Justice MARIARO\VEN Justice I Ass r. ~ fk, f4vA- fa-,4.~ MARIAN IVY -tJ_ REYE~-FAJ.NRDO Associate Justice HENRY ~Jf:.NGELES Associate Justice

DECISION CTA EB No. 3002 (CTA Case No. 10353) Commissioner of Internal Revenue v. Kepwealth, Inc. x------------------------------------------------------------------------------------x CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. 0 Presiding Justice