CTA Case No. 4296 (Decision)

1\ REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY MANUEL G. ABELLO, JOSE C. CONCEPCION, TEODORO D. REGALA and AVELINO V. CRUZ, Petitioners~ --versus - C.T.A. CASE NO. 4296 COMMISSIONER OF INTERNAL REVENUE, Respondent. ~�{---� - - - - - - - :�{ DEC 0N F'eti tioners have been assessed g i �f t ta:�:es in the amount of P263~032.66 each for their cash contributions in the electoral campaign of elected Senator Edgardo J. Angara. Through a letter to the Commissioner dated August 2~ 1988 ( p. 51~ Record) ~ petitioners submitted their position that a political or electoral contribution is not a gift within the contemplation of the National Internal Revenue Code (NIRC). Their- position having been denied in a reply by r-c-?spondent on Augu st 4~ 1988 (received August 12~ 1988)~ petitioners filed this petition and point to these grounds for t heir case. 4?6

DECISION CTA CASE NO. 4296 - 2- a) The history and purpose of the Philippines' gift ta>: law show that a political contribution is not a gift withi~ the contemplation o �f the Ta:�: Code. The underlyin~ purpose behind the adopticm of the Philippines' gift ta:�: la11-1 is to camp 1emen t estate and in her� i tance ta>:es ~ in order to forestall possible attempts by property o11-mers to void the estate and inheritance taxes by transferring their property by way of donations inter ~1 ivo s . 'I However~ a political contribution is not made to avoid payment of estate taxes or inheritance taxes. b) A po 1 i tic a 1 contribution does not meet the definition of a gift. Because the Ta:�: Code contains no set t 1ed definition of a donation or� a transfer by way of gift~ the Ci vi 1 Code definition must control. However~ a political contribution does not meet the definition of a donation in Article 728 of the Civil Code~ namely~ "an act of liber�ality whereby a person disposes gratuitously of a thing or right in favor of another~ who accepts it"; c) The definition of an "electoral contribution" set forth in Section 94 (a) of the Omn�i bus Election Code~ c 1 ear� l y states that i t is . 4?7

DECISION CTA CASE NO . 4 2 96 - 3- "made for the purpose of influencing the results of the elections". According 1y, it cannot be an act of liberality, since its objective precludes donative intent; d) Ass uming, arguendo~ that a political contl~ibLlticm is a donation~ then .lt is a donation where a burden is imposed upon a donee which is not subject to a donor's tax~ because the burden imposed on the donee is considered adequate �I consideration. A donee is at liberty to use and/or di s pose of the donated property any way he pleases. However, under Section 102 of the Omninus Election Code, a political contribution must be used exclusivel y for election - related ~xpenses; e) Ot..\1'" gift ta:�: law was lifted bodily from the Federa l gift t<;n: law of the Un .ited States. However~ in Stern b. U .S.~ 436 F 2d, 1329, where a t axpayer contributed handbills, posters, sample ballots and newspaper and te levision advertising to the u.s . Court of Appeals, 5th CircLiit, held that the contributions were made by the desire to promote a slate of candidates t hat would protect and a dvance the contributor's personal and property interests and that the contribution was made for an adequate and full 4?8

DECISION CTA CASE NO. 4296 - 4- consideration~ among others~ since the contributor was making : an economic investment that she believed would have a direct and favorable effect upon her property holdings and business interest . f) In Carson vs. Commissioner~ 641 F 2 d, 864~ the United States Court of Ap~eals affirmed a decision of the Tax Court to the effect that "camp a ign contribution s ~ >:>: >: when consider e d in the 1 ight of the history and purpose of the gi 'ft ta :;, , �I a re s imply not gifts within the meaning of the gift ta>: laws". g) In .1982, the Internal Revenue Service of the United States issued Revenue Ruling No. 82- 216 where the Internal Revenue Se r vice � stated that it would not contend that political contributions are transfers subject to the gift tax. h) The giving of electoral contributions is a manifestation of the exercise of one's political r- i g h t s . To subject political contributions to donor's tax would thereof cons~itute an undue restraint on the exercise of political rights. i) Because the Philippine law on gift taxes merely reproduced the Federal law on gift taxes and becaL1se of the similar circumstances under which political contributions are made in the United 4? ~

DECISION CTA CASE NO. 4296 - 5- States and in the Phi 1ippines, the judicial and administr-ative inter-pr-etation o'f the gift ta}: law in the United States not only has str-ong per-suasive ef feet in the Phi 1 ippines ~� but should be adopted~ par-ticular-ly because the evidence on hand indicates that it is only r-ecently that the SIR has attempted to s ubject political contr-ibutions to donor-'s ta:�:es. j ) The gift taH law should be cdnstr�ued 'I liber-ally in favor- of the petitioner-s and most str-ongly against the gover-nment~ because bur-dens ar-e not to imposed beyond what statutes e:�:pr-essly and clear-ly i mpor-t, par-ticular-ly if such statutes impose a 1 iabi 1 i ty for- ta:�:es." Res pondent's opposite view r-ests on these ar-guments: a) Petitioner-s' political contr-ibution ar-e gifts consider-ing the r-elationship between the petitione r-s/donor-s and the donee, being par-tner-s in the law fir-m of Angar-a, Abello, Concepcion, Regala and Cr-uz or- ACCRA. b) Even if the pur-pose of a political contr-ibution is to influence the r-esults of the election, suc h pur-pose is immater-ial since t he gift tax is imposed r-egar-dless of the pur-pose of the 430

DECISION CTA CASE NO. 4296 - 6- transfer-. c) Whether under the Civil Code or the gift tax law~ a political contributi6n is a donation or a gift because it is an act or� liber-ality or a voluntary transfer without any consideration or compensation. d) The cited United States court dec is ions are not binding nor persuasive. e) The gift ta:�: is not an in �fringement on .' the exercise of political rights. f) Tax exemptions are construed strictly against the. taxpayer. The provisions on (Gift) Donor's Ta:�: in controver-sy state! : "Sec. 91. Imposition of ta :�:. (a) There shall be levied~ assessed~ c o 11 ec ted~ and pa .id upon the trans fer by any person~ resident~ or non - resident, of the proper-ty by gift~ a ta:�: computed as provided in Section 92." (b) The tax shall apply whether the transfer- is in trust or otherwise~ whethet- the gift is direct or indirect, and whether the pr-operty 1s real or personal~ tangible or intangible." "Sec. 93. Tt-ansfer- for l ess than adequate and full consideration. - Where the proper-ty~ other than real property r-eferred to in Section 21(e)~ is tr-ansferred for less than an adequate and full consider-ation in money or money's worth, then the amount by which the fair market value of the property exceeded the 4~1

DECISION CTA CASE NO. 4296 - 7- va lue o f the consideration shall~ for the purpose of the tax imposed by thi s Chaptqr-� ~ be de e me d a gift~ a nd s hall b e included in computing the a mount of gift s made during the calendar � year. (A s amended by P.O . 1773 a nd EO 37) It is acknowledged th,::~t our-� gJ �ft. ta:-: law was bodJl y lifted from the Federa l gi ft" tax law of the .! United S tates ( St. S teph e n 's Assoc iati o n v � \I Co lle c t o r of Internal Re v enue , C.T.A. Ca s e No . 173, i ....,. I'Tay 2.3.. .1. �.~ .5'."9 .� G. R. No � L - 15.56 :2 .� Na y .3.1. SCRA 11anila Uine Her c hants, In c . v s . Co�mi ss ioner of Internal Revenue ~ G.R. No. L - 26145, February 2C'-. 1984 .: 1 2"l SCRA 48.3) As a result~ i t �has also been recognized that "it woul d be prope r tel res ort to app l icabl e cases decided by the Federal Courts guidci:lnr.:e enlightenment.." (fotan.ila J..line ~I � Commis :.::: .ioner .� supra) . � In this p ar ticul .:u- case ~ hovJe ver ~ re s pondent voices resistance to the u se of interpretation derived from American law for the � reas on t hat suc h constructi on was not known at the time of the adoption of the gift tax 1aw in the Phi 1 i pp.ines (citing 82 C.J.S . 866). Respondent i s referring to t h e recent cases o �f Stern v. U.S. (4 :~:6 F 2 d 1 327) and Carson v. Commissioner of Internal Revenue (641 4~2

DECISION CTA CASE NO. 4296 - 8- F 2d 864)~ the latter affirming the decision of the U.S. Ta>:: Court that "campaign contributions when considered in light of the history and purpose of the gift tax~ are simply not 'gifts' within the meaning of the gift ta>: law". It i s not sufficient for respondent to hold that the cons truction of the gift tax law pronounced in the abovec i ted U.S. cases were not yet in e>: istence at the time ~o<Je adopted �the U.S. 'I gift tax law. For, it has also been reali~ed that: "In inter-ept~eting a statute i t is not enough to check the legislative intent with r-espect to the exact question that pr-esented themselves to the legislative mind at the time the statute ~a s enacted. The constr-uction of statutes is not such a har-r-ow fact- finding pr-ocess. One has to deter-mine what the intention would have been if the pr-oblem befor-e the cour-t had pr-esented .its elf to the legislative mind when the s tatute was enacted (Paul, Federal Estate & Gift Taxation, Vol. I Section 1.08, p. 44, [1921]; citing Cardozo~ The Nautr-e of the Judicial Pr-ocess~ p. 15 [1921]; Gr-ay~ The Natur-e and Sour-ces of the Law, p. 176 (2d Ed.~ 1921). Compar-e Estate of Sanford v. Comm.~ 308 U.S.~9, 48 (1939)~ in which the Cour-t said: "We ar-e c oncer-ned her-e with a question to which Congr-ess has given no answer- in the wor-ds of the statute, and it must be decided in confor-mity to the cour-se of judicial decision applicable to a unified scheme of ta:�:a tion of gifts whether- made inter ~~i~'OS or- at death." Consider-ing fur-ther- the extensive and elabor-ate

DECISION CTA CASE NO. 4296 - 9- phases and development the gift tax law has undergone~ the Stern and Carson cases are indispensable in this case. If in the Carson case it was cone 1uded that based on the history and purpose of the gift ta:{ campaign contributions are simply not ' gifts' within the meaning of the gift ta>: law~ i t would ��.\ seem th<:~.t all suggestions otherwise are rendered . Llnc:wa i 1 ing. We likewise think i t must be sd .,. Two cases are cited in the Carson case as repr-esentative of the purpose of the gift ta>: and why contributions in elections are not ta:.:able as "gifts"~ Harris v. Commissioner (340 U.S. 106~ 71 S. Ct. 181~ 95 L. Ed. 111 [1950]) and Estate of Sanford v. Commissioner ( 308 U.S. 39~ 44 60 S. Ct. 51~ 56~ 84 L. Ed. 20 [1939]). In the landmark case of Estate of San ford v. Commissioner~ su pra .~ the history and purpose of the gift ta:{ in the United States was noted as "to prevent or compensate for avoidance of death ta:.:es by ta>:ing the gifts of property inter vivos which~ but for the gifts~ would be subject in its original or converted form to th~ ta x laid upon transfers at death. The design for the Philippine gift tax law is si�mi 1 ar ~ thus: 4:i4

DECISION CTA CASE NO. 4296 - 10 - "I!Jhy gift ta:-:es are imposed. - With the adoption 6f an estate tax to suppl~ment the inheritance tax. i t is possible that some property o!.-'mers might attempt to avoid the estate and inher-itance ta}:es by tr-ansfer-r-ing their- pr-oper-ty by way of donation inter ~1 ivo:.:: \l'lhic h, under the present law, is exempt fr-om inher-itance t.:n:. It is not unnatur-al that they may desire to avoid the imposition of the inher-~tance tax upon th ei r� estates so that such estates may pass on to the objects of their- bounty unimpair-ed. To for-estall such attempts, it is pr-oposed to tax ever-y tr-ansfer- without valuable or- adequate consider-ation in money or- money's wor-th, at 75/. (r-at es of the two ta:{es ar-e n'dli'l � the same) of the r-ates of the estate or- inher-itance taxes. While the lower- r-ates of the gift ta}: may constitute a str-ong incentive on the par-t of pr-operty owner-s to d onate their- pr-oper-ty to the objects o f their- bounty, so as to avoid in the futur-e the payment of a higher- r-ate of estate and inher-itance taxes, it is believed that whatever- loss the Gover�nment may entai 1 as a consequence ther-eof wi 11 be com pen sa ted by the e ar 1 ier- payment o �f the gift ta}: and by the acce 1er-ation of the distr-ibution of wea 1 th. ( Aranas, Anno. & Jurisprudence on the NIRC, Vol. I [1983 ed] p. 691, qL\otin9 the Report of the Ta >~ Commission)". The gift ta}: statute r-efer-s to transfer- of proper-ty "by gift" and that theta:-: shall apply "whether- the transfer is in tr-ust or other-wise, whether- the gift is direct or indir-ect, and whether the pr-operty is r-eal or- per-sonal, tangible or- intangible". Further-, i f "proper-~y is tr-an fer r-ed for less than adequate and full consideration then 4~5

DECISION CTA CASE NO. 4296 - 11 - the amount by 11-Jhich the fair market value of the property er-:ceeded the value of the consideration shall be deemed a gift~ and shall be included in computing the amount of gifts made during the ca 1endar year". We are not oblivious of the interpretation that the terms "property"~ "transfer"~ "gift"~ and "indirectly" ar�e used in the broadest an~ most comprehensive s ense. (Angela Perez Y. Tuazon, C.T.A. Case No. 1707, Febru~ry 10, I ,. 1969 .� G. R. No. L- .3040.3 . ~7ul y .3 . 196'.~ .: Burnet v. Guggenhei� , 288 U.S. 280, 286 C193.3JJ. Despite this expansive interpretation of the statute~ a complete enumeration of transfers subject to tax has not been made. Nevertheless~ the ingredients of a ta:-:able gift have been e:.:amined in numerous cases. It is appropriate that the Stern and Carson cases have added refinements to the meaning of a gift vis-a-vis contributions in elections. An e>:amina tion of the meaning of "contribution" and "e:�: penditure" in elections has given LIS the view that "contribution" or "e :-: penditure" in elections do not involve acts meant to avoid the estate tax. The foremost reason is that the definitions given to these terms by the law (Omnibus Election Code of the Philippines, 4~R

DECISION CTA CASE NO. 4296 - 12 - Batas Pambansa Blg. 881~ De c ember 3~ 1985) plainly says so. "Sec. 94. - The term "contribution" in c lude s a gift~ donation~ subscription~ lo a n~ advance or deposit of money or anything of value~ or a contract~ promise or agreement to contribute~ whether or not 1ega 11 y en forceab 1e ~ mad.~_. ____fq_r_____j;.b_~ QL\ r Q.Q sg_ q _:L.J:.o..f...l_IJ.~.n~;.J. .O..Q..._j::._IJJiL~?...bt!J;1Lo f_j:;JJ~. e!_g_~.t...!on~ but sh a ll not in c lude services rendered without compenss ation by individuals voluntee ring a portion or all of thei r time in behalf of a candidate or politic al party. It s hall also include the use of facilities voluntarily donated by s om e per s ons~ the money value of whicH can be a sse ssed based on the r a tes pr e v a i 1 ing in the area." (Under-s c oring s upplied) "The term "e :-:pendi ture" includes the payme nt of delivery of money or a nything of value~ or a contr a ct, promi s e or a gt- eement to make an e:-:penditure, f g.r:.._..:!;.h ~ Q..ld.Q?.o ?..!~L..Q_f___J.._IJ.�f..l.b.~~-O.f:.J...D..Q.......t h E'L . r e .�..hLlt_\'?.......Q_f._.....t... b..~ ~J_.�.!;...t..!.Q.D..� It shall also include the use of facilities personally owned by the candidate~ the money value of the use of 1-'Jhich can be assessed bas ed on the rates prevai 1 ing in the area." (Underscoring SLipp 1 ied) Section 102 of the same Code curtails the purposes for which e x penditures may be devoted. The paramount purpose for whic�h "contribution" or "e:-:penditure" is intended, which is to influence the reSLilts of the electl.on, can be isolated from other imagined intentions like the avoidance of estate ta:-:. More so when we consider the case of political parties who also spend for the election 4 ~7

DEC IS I ON CTA CASE NO. 4296 - 13 - of i t s candidates, yet, e:�: penses in c urred .in this r e gard may not be counted as c ontributions or e :-:pen s e s of the cand .id a te but includ e d instead in th e computation of the total e >:penditures of the po J. i ti c a 1 party (See Section 101 of th e Omnibus Election Code.) In this partic ular case, the refore, the purpose of the "con tr i bu tion " or " e>: pend i tun? " a s being in tended to i nf 1 uence the res ults of the election i s bes t of all emphasized. tI Avo id a nc e of the estate or donativ e intent, for that ma tter , s hould be th e least of the c on s iderations th e r e fore wh e n we talk of electoral "c o ntribution ' or "e:�:pe nditure". The po s ition of r� espondent i 5 s usceptible of i n c onsi s t e ncies as agaiost the provi s ions of the gift ta x law in other respects. It i s not correct for re s pond e n t to s ay t.ha t " re �f erebc e to t h e purpos e of the legi s lature in enacting the gift tax law in not material" f or he hi mself h ad in qui red into this s ubject in this argume~t. s . Looking into the purpose of the g i ft tax l aw is surely necessa r y considering i t s bread th and t h e s wee p i n g extent it hoped t o en c l~se. ~ It ha s b~en considered re l evant. i n deci d ing a tra n s fer of ~)t- operty as invol v.ing a gift to look 4~8

DECISION CTA CASE NO. 4296 - 14 - in to whether- str-ings upon pr-oper-ty may have been r-etained despite the r-e 1 inqui shmen t of the nor-ma 1 incidents of o11mer-ship (�state o'f San 'ford 1/, Commis s ioner, supra). In so far- as the gift tax is concer-ned, r-e 1easing the str-ings means mor-e than the sur-r-ender� of beneficia 1 enj oynien t of pr-oper-ty (ld,) � "The r-etention or- enjoyment of a cer-tain .indicia of o~mer-shi p r-aises the questicm whether- they negative or- har-moni ze with a definitive tr-ansfer-" (Blanche S. Ross, 'I 28 BTA 39, 67 F 2d 989). Although Estate of Sanfor-d v. Commissioner-, supra, r-efer-s to the gift tax status of tr-ansfer- in tr-ust, the r-easons adopted in the r-uling ar-e per-tinent to the pr-esent case. Thus, :-::o: the essence of a tr-ansfer- is the passage of contr-ol of the economic benefits of pr-oper-ty ��� " / we take it then that the transfer of property / : .n the for�m o�f contr-ibutions or- e:�: pend i tur-es in e 1ec tions ar-e not gifts within the meaning of the gift ta>: law a l so because the contr-ibutor- has r-etained some measur-e of contr-ol in the disposi tion of pr-oper-ty tr-ansfer-r-ed. The sur-r-ender- of contr-o l over- economic benefits is the test of a completed gift (F'aul, Feder-al Estate and Gift Taxation, supra, Vol. II, Section 1707, p. 1146, [1940], 4~9

DECISION CTA CASE NO. 4296 - 15 - citing Bur-net v. Guggenheim and Estate of San for-d v. Commissioner-~ s upra). In the contr-ibutions or- expenditur-es in elections i t ca~ not be said that a total r-elinquishment of owner-ship h as been made with the imposition by the contr-ibutor- of the u s e to which the pr-oper-ty should be �app 1 ied. This element is nowher-e mor-e under-standable when the con tr- i bu tion or- ex pend i tur-e in the e 1ec tion is in the for-m of mer-e use of facilitie s owned b~ other- 'I per-sons for- the benefit of the candidate . Hence~ only the beneficial use of the pr-oper-ty is tr-ansfer-r- e d to the candidate dur-ing the campaign. use and enjoyment of the pr-oper-ty r-ever-ts to the owner-. Ar-ti e 1e 726 of the New Ci vi 1 Code pr-ovides "~'~!hen the g i f t imposes upon the donee a bur-den which is le ss than the value of the thing given~ ther-e also a donation". Thus ~ i t may be e r-r-oneously supposed that contr-ibutions or- expenditur-es in elections ar-e don~tions subject to donor- 's (gift) tax even assuming ther-e is a bur-den since such bur-den is at ~ost less than an adequate and �fu 11 consider-ation for- the pr-oper-ty tr-ansfer-r-ed. I t is e:�:plained by author-ities that any� 1 imitation~ char-ge or- condition imposed upon 440

DECISION CTA CASE NO. 4 2 96 - 16 - the donee must be con s ider-e d as a bur-d e n. The �bu r- den may con s ist in a r- e al or- per- s onal char-ge c a pab 1e of va 1ua tion in money or- not capab 1e of valuation in money ( Tolentino, Commentaries and Juri s p r udence on the Civil Code ~ Vol. II p. 465~ [ 1963] citing other- author-ities). � Gr� at i tude~ for- ha s no economic value <.'l. nd is not a consider-a t .ion. ( Pir (.wano v . Co ��i ss io n er .� L- 1965 .� c1 u 1 y .31 .� 19 6.5 .: 14 SC R A 8.3 2 ) But the a~pec t of 'I . consider-ation is focused only if t her-e is an ab s ence of com mer-cial conte :�:t in the tr- a n s fer- of the pr�oper-ty . (Paul~ Feder-a l Estate and Gift Tr- a n sa ction~ s upra~ Vol . II Section 16.14~ p . 1113 ). The ex c eption to the r u l e that gift tax can be avo i ded o nly if the tr- a n s f e r- is for a fu ll and adequate con sider-ation i s t hat a s ale, e xc h ange or- othe r- tr-an s fer of pr-operty made in the or-d i nar-y c ourse o �f business (a tr a n s action which is bona �fide~ .:\t ar-m s length and free from any do n ative intent) will be cons ider-ed as made for- an adequate a n d f ull con s ideration in money or- money� s wet- t h. It was t h cJug h t t h at in tr-yi n g t o r- each sa l es an d e }: changes wit h com par-ative d isparity in consider-ation so me sor-t of s tatu t ory fiction is 441.

DECISION CTA CASE NO. 4296 - 17 - being cr-eated by tr-eating as gift a sale or- exchange tr-ansaction. However-~ a sale~ exchange or- other- tr-ansfer- of pr-oper-ty in the or-dinar-y cour-se of business wer-e eventually excluded from the influence of gift ta>: pr-ovisions. (Paul~ Feder- a 1 Estate and Gift Ta>:ation, :;upr a �~ Sec. 16.14, p. 1111) In t�he case of Har-r-is v. Commissioner-~ :..�upra . a compr� omis~ agr-eement between husband and wife disposing their- pr-oper-ty inter-ests guid~d by a 'I . divor-ce decr-ee was deemed a tr-ansaction "in the or-dinar-y cour-se of business". This~ even i f the tr-ansaction vJas not "in the or-d inar� y cour-se of business" in any conventional sense". With the same for-ce~ e 1 ector-a 1 contr-ibutions or e>: pend i tur� es can be tr-eated for- g i f t ta}~ pur-poses a s one "in the or-dinar-y cour-se of business"~ that is~ bona fide~ at ar-ms length , and fr-ee fr-om any donative intent. As stated in Harris and as well tr-ue to the case on hand~ "Sur-ely i t 1r~i 11 not be said that ther-e may not be a genuine business tr-an s action not dir-ect 1y connected with the taxpayer-'s tr-ade or- b' usiness or- even though the ta:-:payer- be not engaged in �car-r-ying on any tr-ade or- business (Citing Hi gg i n s v . Commissio ner, 442

DECISION CTA CASE NO. 4296 - 18 - 85 L. Ed. 783~ 788~ where petitioner in this case was held not carrying on business as he merely kept r�ecords and collected interest and dividends from his securities~ through managerial attention for his investments). It may cross people's minds~ as i t did ours~ that this decision may reduce such an important e:�:ercise of political rights as elections into a mere business e ndeavor . This does not appear to be 'I . the effect that we fo resee wi 11 be achieved nor s hould even result as an incident. The pr-oceedings we had is a necessary process in the continuing deter-mination of the parts of the Bquation of the gift tax. "A meticulous sifting of motives and external acts is required to ascertain whether� ownet- ship has pa s sed by way of gratuitous transfer." (Paul~ Estate and Gift Ta:.:ation~ ::::upra .� Section 16.03~ p. 1071) One of the constituent e l ements of a gift~ which is the intention to make a gift~ is subjective. "In gift tax cases we run against the necessity~ frequent in human re 1a tions ~ of ascertaining what goes on in other's minds. " ( I d. ~ p. 1070 ) The truth is, and as had been recognized in the Stern case (supra~ p. 1330)~ transactions like

DECISION CTA CASE NO. 4296 - 19 - cvY \.>Jha t we have here ,1 "per mea ted with comrnerc ia 1 and economic factors". Not that the candidate when elected would serve the personal or collective inter�est s of his contributor� /s at the e}:pense of public interest, .fpJ.?_t .�!..L ....�........~.P..rJ..c:!..:!. t..;\,.P..D..?..............II!.9..r.:.~............1. 9.Y..Q!.:"_<~t!:?.J..~ ............t9___~cp..!J..9..ffi.:!:_<;. 9 .r.:.Pld...tt1. � In effect, petitioners here wer e making an "economic investment" that would have a direct and �favorable consequence to their intere s ts. ' These '' considerations make their contributions bona fide, at arms length and fr ee fr�om donative intent and t h erefor� e, made for an adeqLla te and �fu 11 consideration. WHEREFORE, judgment is rendered in favor of petitioners. Respondent is hereby ordered to withdraw his letters dated April 21, 1988 and August 4, 1988 assessing donor 's taxes and to desist from collecting donor's taxes from petitioners. SO ORDERED. Quezon City, Metro Manila, October 7, 1991. . ct~{2 0~ ERNESTO D. ACOSTA Associate Judge 444

DECISION - 20 - CTA CASE .NO. 4296 WE CONCUR: x- QissPnts Ai~t:LE seJK:la�:J':R~q�_',-t'Y.e'_ESo.n~ ininn � ROAQUIN Judge CERTIFICATION �I I h ere by certi �fy that this decision ~~~as reached after due c on s ultation among the memb ers of t he Court of Ta x Appeal s in accordance with Sec tion 13 ~ Article VIII of the Constitution. Presiding Judge Court of Tax Appea ls

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY MANUEL G. ABELLO JOSE C. CONCEPCION TEODORO D. REGALA and AVELINO V. CRUZ, Petitioners, -versus - C.T.A. CASE NO. 4296 COMMISSIONER OF INTERNAL REVENUE, Respondent. J<---- ------�x DISSENTING OPINION ' I I take exception to the view that poll tical contribution i s not subject to Donor� s (Gift) Tax imposed in Section 91 of the Tax Code, t hat: "There shall be levied, assessed, co llected, and paid upon the transfer by any person, resident or non- resident, of the property by gift , a ta x , com put ed as pt- ovided in Section 121." Under the Omnibus Election Code electoral con tributi on inc ludes, among others, a gift, whether or not lega l! y enforceable made for the purpose of i nfluencing the results of the election. And, a "gift", judicially defined, is a v alid transfer of property from one person to another without consideration or compensation therefor

DECISION CTA CASE NO. 4296 - 2- (Prentice- Hall Federal Tax Course), essentially characterized by ( 1 ) capacity of the donor; (2) donative intent; (3) acceptance by the donee; and (4) delivery to the donee either actually or cons true tive 1y (No 11 edo' s Commentaries) . The tax is imposed on the transfer and not on the property transferred. Without recasting the facts obtaining in the majority's decision, it appears more than sufficient that such gratuitous elect.'oral contribLltion, hewed close to the requisites thus required, can readily slip into that warm cubby- hole of a "gift", infused valid cognizance, unless petitioners are unwilling to assume liabilities or simply unable to discern what it is. "What ' s in a name? That which we call a t-ose, by any other name WOLll d sme 11 as sweet. " Se ttled is the rule that the first and fundamental duty of the court is to apply the law. Construction and interpretation com~ only after it has been demonstrated that ci'.pplication is impossible or inadequate without them. This court cannot deem itself authorized to depart from the plain meaning of the statute so explicit in term!l and so searching in extent. In the words of Justice Cardozo, "The court has no power to arrest

DECISION CTA CASE NO. 4296 - 3- nor dilute enforcement, however unwise or unjust the law may be. The law must be obeyed. It is not enough that it may seem to us to be impolitic or even oppressive. It is not enough that in its making, great and historical traditions of generosity have been ignored. Our duty is done when we ascertain that it has kept within its power." I find the decision of my distinguished colleagues a trifle confusing in having portrayed the petitioners-donor in the best possible light as neither fish nor fmd for tax purposes. Neither can I lend currency to an aggravated chutxpah by further fashioning possibilities out of dead ends or grafting flip- f lop precipitous ruling beyond the clearly intended meaning of the statute. Ludicrous and expedient piffle indeed to have the compelling import and enforcement of Section 91 of the Tax Code (donor's ta:-:) be simply defused in a cul de �� sac of impotency. Na tura v a c u ua ab~ o re t. Let the chips fall where they may. Quezon City, Metro Manila, November 21, 1991. Z.~ ALEX Presiding Judge�