ESTELITA R. RODRIGUEZ, MARIA CHRISTINA M. RODRIGUEZ, GERARDO M. RODRIGUEZ, JOSE MARIANO M. RODRIGUEZ and EDMOND M. RODRIGUEZ, v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION ESTELITA R. RODRIGUEZ, CTA CASE NO. 10151 MARIA CHRISTINA M. RODRIGUEZ, GERARDO !embers: M. RODRIGUEZ, JOSE MARIANO M. RODRIGUEZ RINGPIS-LIBAN, Chairperson, AND EDMOND M. and RODRIGUEZ, MODESTO-SAN PEDRO, ]].. Petitiomrs, - versus - COMMISSIONER OF P r o m u lga ted: INTERNAL REVENUE, JUL20 2m3 - A Respondent. X-----------------------------------------------------------------------------------------------X DECISION RINGPIS-LIBAN, ].: THE CASE The Petition for Review prays that a Decisio n be rendered in favor o f petitioners as ro!low": 1. Re\T rsing and se rring aside rhe Decision dated July 3, 20 19 issued by respondent; and 'J Cranring th e claim of petitioners for refund of the proportio n of the cap ital ga in s ta:\ amounting to f> 990,000.00, plus legal interest~ 1 Statement of the Case, Pre-Trial Order dated February 3, 2021, Docket, p. 355.

DECISION CTA Case No. 10151 THE PARTIES Petitioners Estclita R. Rodriquez, r-.Iaria Cristina M. Rodriguez, Gerardo M. Rodriguez, J osc Mariano M. Rodriguez, and Edmond M. Rodriguez, arc individual taxpayers with residence at 23 St. Mary, Paradise Village, Quezon City. 2 Respondent, on the other hand, is the duly appointed Commissioner of the Bureau Internal Revenue (BIR), with principal office at the srh Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.3 He is vested with authority to administer all laws pertaining to internal revenue taxes and has jurisdiction to decide disputed tax asscssments.4 THE FACTS On December 14, 2017, pet1t1oners paid capital gains tax of P8,835,312.00, for the sale of residential property covered by Transfer Certificate of Title No. 101691, as shown in BIR Form No. 1706 - Capital Gains Tax Return stamped received by Revenue District Office (RDO) No. 38 on the same datc.5 Subsequently, on July 3, 2019, petitioners filed their claim for refund of capital gains tax for taxable year 2017, in the amount of P990,000.00 at RDO No. 38. 6 On the same date, pursuant to his delegated authority from respondent to grant or deny claims for refund of internal revenue taxes, 7 Revenue District Officer Rcnato N. Molina of RDO No. 38 denied petitioners' claim for refund, 8 on the ground that "the sellers did not flle a sworn declaration of intent/ escrow agrecmcnt".9 The present Petition for Review was flied on August 15,2019.10 Within the extended period granted by the Court, 11 respondent filed his Answer on January 6, 2020. 12 On January 24, 2020, petitioners filed their Rep!J./ 2 Par. 1, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI), Docket, p. 343. 3 Par. 2, Stipulation of Facts, JSFI, Docket, p. 343. 4 Par. 3, Stipulation of Facts, JSFI, Docket, p. 343. 5 Par. 4, Stipulation of Facts, JSFI, Docket, pp. 343 to 344; Exhibit "P-22", Docket, p. 508; and BIR Records (Exhibit "R-1"), pp. 18 to 20. 6 Par. 5, Stipulation of Facts, JSFI, Docket, p. 344; Exhibit "P-8", Docket, pp. 444 to 446; and BIR Records (Exhibit "R-1"), pp. 42 to 49. 7 Refer to par. 2, Petition for Review, vis-a-vis par. 1, Answer, Docket, pp. 10 to 11, and 90, respectively. 8 Par. 6, Stipulation of Facts, JSFI, Docket, p. 344; Exhibit "P-7", Docket, p. 403. 9 Par. 25, Petition for Review, vis-a-vis par. 1, Answer, Docket, pp. 16 and 90, respectively. 1o Docket, pp. 10 to 24. 11 Resolution dated December 3, 2019, Docket, p. 89. 12 Docket, pp. 90 to 96.

DECISION CTA Case No. 10151 After being directed by the Court,14 respondent transmitted the docket (BIR Ruords) for this case, consisting of fifty-four (54) pages, on February 19, 2020. 15 The Pre-Trial Conference was initially set on March 26, 2020,16 but was eventually reset to, 17 and held on, December 3, 2020. 18 Prior thereto, petitioners' Pre-Tria/ Brief was submitted on August 20, 2020, 19 while the Respondent's Pre-Tria/ Briefwas flled via electronic mail on August 24, 2020.20 On December 11, 2020, the parties submitted their Joint Stipulation of Fads and Issms, 21 which the Court admitted and approved in the Resolution dated December 21, 2020,22 thereby deeming the termination of the Pre-Trial. The Court then issued the Pre-Trial Order dated February 3, 2021.23 As the trial ensued, the parties presented their respective testimonial and documentary evidence. Petitioners offered the testimonies of the following individuals, namely: (1) Ms. Estelita R. Rodriguez/~ (2) Ms. Maria Christina M. Rodriguez;25 (3) Mr. Edmond M. Rodriguez;26 and (4) Ms. Rosalia E. Resare.27 On July 7, 2021, petmoners filed their Forma/ Offer of Evidence. 28 Respondent filed his Manifestation on July 30, 2021,29 manifesting, inter alia, that he had no objection to the admission of petitioners' exhibits. In the Resolution dated December 16, 2021,30 the Court admitted all the offered exhibits of petitioners~ n Docket, pp. 99 to 108. 14 Resolutions dated December 3, 2019 and February 6, 2020, Docket, pp. 89, and 113 to 114, respectively. 15 Letter dated February 19, 2020, Docket, p. 115. 16 Notice of Pre-Trial Conference dated January 8, 2020, Docket, pp. 97 to 98. 17 Notice ofResetting dated June 4, 2020, Docket, p. 117; Resolution dated September 2, 2020, Docket, pp. 159 to 160. 18 Minutes of the hearing held on, and Order dated, December 3, 2020, Docket, pp. 335, and 340 to 342, respectively. 19 Docket, pp. 123 to 132. 2o Docket, pp. 140 to 144. 21 Docket, pp. 343 to 346. 22 Docket, pp. 352 to 353. 23 Docket, pp. 355 to 361. 24 Exhibit "P-1", Docket, pp. 165 to 176; Minutes of the hearing held on, and Order dated, Apri l 22, 2021, Docket, pp. 371 to 373. 25 Exhibit "P-2", Docket, pp. 210 to 223; Minutes of the hearing held on, and Order dated, April 22, 2021, Docket, pp. 371 to 373. 26 Exhibit "P-5", Docket, pp. 286 to 292; Minutes of the hearing held on, and Order dated, June 22, 2021, Docket, pp. 389 to 391. 27 Exhibit "P-6", Docket, pp. 327 to 331 Minutes of the hearing held on, and Order dated, June 22, 2021, Docket, pp. 389 to 391. 2s Docket, pp. 393 to 403. 29 Docket, pp. 531 to 532. 3o Docket, pp. 536 to 537.

DECISION CfA Case No. 10151 For his parr, respondent offered the testimo ny of Revenue Officer Buena C. Salud. 31 Respondent's Formal Offer of Evidence was flied on May 2, 2022,32 to which petitioners posted their O~jections/ Comment to Respondent's Formal Offer ofEvidence on May 16, 2021 _33 In the Resolution dated June 22, 2022,34 the Court admitted respo nd ent's offered ex hibits. The Memorandum for Petitioners was flied on August 22, 2022, 35 while respo ndent submitted his Memorandum on August 23, 2022.36 The present case was deemed submitted for decision on August 25, 2022. 37 TH E ISSUES The following issue was stipulated by the parties for this Court's resolutio n, viz.: "\'(!hether or not the Petitioners are entitled to the claim for refund o f the capital gains tax amounting to P990,000.00."38 P etitioners' arg umen ts: Petitio ners argue that they co mplied with the essential basic conditions for exemption from payment of capital gains tax for sale of principal residence set forth under pertinent provisions o f law and existing jurisprudential declarations; and that the capital gains tax paid by petitioners was erroneously collected by the BIR. R esp ondent's counter-arguments: Respondent contends that petitioners arc not entitled o nly for refund, but also for the exemption under Revenue Regulations (RR) No. 13-99, as amended by RR No. 14-2000; that petitioners failed to notify respo ndeny 31 Exhibit "R-6", Docket, pp. 311 to 316; Minutes of the hearing held on, and Order dated, Apri l 26, 2022, Docket, pp. 538 to 540. 32 Docket, pp. 541 to 543. 33 Docket, pp. 549 to 552. 34 Docket, pp. 557 to 558. 3s Docket, pp. 562 to 580. 36 Docket, pp. 582 to 587. 37 Order dated August 25, 2022, Docket, p. 594 . 38 Stipulation of Issue, JSFI, Docket, p. 344.

DECISION CTA Case No. 10151 within thirty (30) days from the date of sale or dispositio n of their intention to avail of the tax exemption as required by National Internal Revenue Code IRC) of 1997, as amended by T RJ\IN Law/Republic Act (RA) No. 10963, Section 24 (D)(2); that granting there was payment of capital gains tax, petitioners failed to file an Escrow Agreement as required by RR No. 14-20, Section 2.2(1) (amended section 3 of RR No. 13-99); that the unnumbered BIR Ruling dated D ecember 6, 1996 was iss ued prior to the Tax Reform Act of 1997, thus, the same is no lo nger applicable pursuant to RR 05-2012 dated April 2, 2012; that assuming but without admitting that petitioners is entitled to refund, it is incumbent upon the petitioners to show compliance with the procedure as mandated by law and regulations, and their failure to prove the same is fatal to their claim for refund; and that claims for refund are strictly construed against the taxpayer as the same partakes the nature of a tax exempnon. THE COURT'S RULING The present Petilion for Ret,iew must be denied. Govermng provisions for re fund claim s. Sections 204(C) and 229 of the N IRC o f 1997 read: "SEC. 204. Authority of the Commissioner to Compromise/Abate and Rej11nd or Credit Taxes. - 'fhc Commissio ner may - XXX XXX XXX (C) Credit or refund taxes erroneously or illegally received or penalties imposed withou t authority, refund the value of internal revenue stamps when they arc returned in good condition by the purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for use and refund their value upon proof o f destruction. No credit or refund of taxes o r p en alties sh all b e allowed unless the taxpayer files in wri ting wi th the Commissio ne r a claim for c redit o r refund wi thin two (2) years afte r the p aym en t of the tax or p e n alty: Provided, however, that a return filed showing an overp ayment shall be considered as a written claim for credit or refund. " (Emphasis added) "SJ~C. 229. Rewvery of Tax E ITOmous!J or Illegai!J Co/luted. - No suit o r proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to h ave b een e rroneously or illegally ass essed or collected, or of any p en alty claimed to h ave b een collected without ,�"

DECISION CTA Case No. 10151 authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly ftled with the Commissio ner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid." (EmphaJeJ added) The aforequo ted provisions are clear: within two (2) years from the date of payment of tax, the claimant must first file an administrative claim with respo ndent before filing its judicial claim with the courts of law. Both claims must be ftled within a two (2)-year reglementary period. Timeliness of the filing of the claim is mandatory and jurisdictional, and thus the Court cannot take cognizance of a judicial claim for refund filed either prematurely or out of time. It is worthy to stress that as for the judicial claim, tax law even explicitly provides that it be filed within two (2) years from payment of the tax " regardless of any supervening cause that may arise after payment." 39 Moreover, the foregoing prov1s1ons allow the recovery of taxes erroneously or illegally collected. An "erroneous or illegal tax" is defined as one levied without statutory authority, or upo n property no t subject to taxation, or by some officer having no authority to levy the tax, or one which is some o ther similar aspect is illegal.40 In other words, what can be re funded or credited is a tax that is erroneously, illegally, excessively or in any manner wrongfully collected . In short, there must be a wrongful payment because what is paid, or part of it, is not legally due.-~ 1 Thus, for the present claim for refund to prosper, pet1t1oners must not only establish that they timely filed their refund claim, they must likewise prove r that the subject capital gains tax paid is erroneous, illegal, or wrongful. 39 Commissioner of Internal Revenue vs. San Miguel Corporation, etseq., G.R. Nos. 180740 and 180910, �November 11, 2019. 4 Commissioner of Internal Revenue vs. Pilipinas Shell Petroleum Corporation, G.R. No. 188497, April 25, 2012, citing the definition provided in BLACK'S LAW DICTIONARY, Fifth Edition, p. 486. 41 Commissioner ofInternal Revenue vs. San Roque Power Corporation, et seq., G.R. Nos. 187485, 196113, and 197156, February 12, 2013.

DECISION CTA Case No. 10151 Petitioner timely filed its administrative and judicial claims. In this case, it is shown that petitioners paid capital gains tax totaling P8,835,312.00 to the BIR on December 14, 201 7.42 Counting from this date, petitioners had until December 14, 2019 to file its administrative and judicial claims for refund. Notably, petitioners' administrative claim for refund was flied on July 3, 2019 before rcspondent,43 and the judicial claim for refund flied before this Court on August 15, 2019.44 Thus, both administrative and judicial claims fell within the two-year prescriptive period. Correspondingly, petitioners timely filed their administrative and judicial claims. However, petitioner falled to show that there was an erroneous or illegal capital gains tax which was collected by the government. Section 24(D) of the N IRC of 1997 provides as follows: "SE C. 24. Income Tax Rates. - XXX XXX XXX (D ) Capital Gaimji'Om Salf q[Rea/ Prope1~1y.- ( I) In Gmem! - The prov1s10ns of Section 39(B) notwithstanding, a final tax of six percent (6%) based on the gross selling price or current fair market value as determined in accordance with Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including pacta de retro sales and other forms of conditional sales, by individuals, including estates and trusts: xxx (:?.) hYi'eptioll.- The prov1s1ons of paragraph (1) of this Subsection ro the contrary notwithstanding, capital gains presumed to have been realized frotn the sale or disposition of their principal residence by natural persons, the proceeds ~ 42 Par. 4, Stipulation of Facts, JSFI, Docket, pp. 343 to 344; Exhibit "P-22", Docket, p. 508; and BIR Records (Exhibit "R-1"), pp. 18 to 20. 43 Par. 5, Stipulation of Facts, JSFI, Docket, p. 344; Exhibit "P-8", Docket, pp. 444 to 446; and BIR Records (Exhibit " R-1"), pp. 42 to 49 . 44 Docket, pp. 10 to 24.

DECIS ION CTA Case No. 10151 of which is fully utilized in acquiring or constructing a new principal residence within eighteen (18) calendar months from the date of sale or disposition, shall be exempt from the capital gains tax in1posed under this Subsection: Provided, That the historical cost or adjusted basis of the real property sold or disposed shall be carried over to the new principal residence built or acquired: Provided, further, That the Commissioner shall have been duly notified by the taxpayer within thirty (30) days from the date of sale or d isposition through a prescribed return of his intention to avail of the tax exemption herein mentioned: Provided, still further, That th e said tax exemption can only be availed of once every ten (10) years: Provided, finally, That if there is no full utilization of the proceeds of sale or disposition, the portion of the gain presumed to have been realized from the sale or disposition shall be subject to capital gains tax. h)r this purpose, the gross selLing price or fair market value at the time of sale, whiche\'er is higher, shall be multiplied by a fraction which the unutilized amount bears to the gross selling price in order to determine the taxable portion and the tax prescribec.l under paragraph (1) of this Subsection shall be imposec.l thereon." (Empba.,�eJ added) Based on the foregoing provisions, the capital gains presumed to have been realized from the sale, exchange, or other disposition of real property located in the Philippines, classified as capital assets, including patio de retro sales and othe r forms of conditional sales, by inc.lividuals, including estates and trusts, arc subject ro the capita l gains tax of six percent (6%). However, the capi tal gains presumed to have been realized from the sale or disposition of a principal residence by natural persons shall be exempt from the said capital gains tax upon the fulfillment of the following co nditions, to wit: 1) the proceeds of the sale or disposition arc fully utilized in aC<.]uiring or cons tructing a new principal residence within eigh teen (18) calendar months from the date of sale or disposition; 2) the historical cost or adjusred basis of the real property sold or disposed shall be carried over ro the new principal residence built or acquired; 3) respondent shall have been July notified by the taxpayer within th irty (30) days from the date of sale or disposition through a prescribec.l return of his or her intention to avail of the said tax exemption; 4) the said tax exemption can only be availed of once every ten ( 10) years; an~

DECISION CTA Case No. 10151 5) if rherc i ~ no full utili zation o f the proceeds of sale or disposi tio n. rhe portio n of rhc gain presumed to have been rea lized from the ~ale o r dispositio n ~ h a ll be subjec t to capital ga tn ~ tax. Implementing the aforequoted Section 24(D) relative to the granting of exemption from the capital gains tax, Section 3 of RR No. 13-9945, as amended by RR No. 14-200046, read s as follows: "Sl ~C. 3. Conditions f or E xemption. - The general provisions of the Code to the contrary notwithstanding, capital gains presumed to have been realized from the sale, exchange or dispositio n by a natural person of his Principal Residence shall not be imposed with six percent (6%) capital gains tax, subject to compliance with the following: (1) Est-row Agreement. - The six percent (6%) capital gains tax otherwise due on the presumed capital gains derived from the sale, exchange or disposition of his Principal Residence shall be deposited in cash or manager's check in interest-bearing account with an ~\uthorized .\ gent Bank (,\ ,\B) under an Escrow .\ greement (,\ NN EX .\ hereo f) between the concerned Revenue District Officer, the Seller/ Transferor and the AAB to the effect that the amount so deposited, including its interest yield, shall only be released to such Seller/ Transferor upon certification by the said RDO that the proceeds of sale or disposition thereof has, in fact, been utilized in the acquisition or construction of the Seller/ Transferor's new Principal Residence within eighteen (18) calendar mo nths from date of the said sale or disposition. The date of sale or dispositio n of a property refers to the date of notarization of the document evidencing the transfer of said property. In general, the term ' Escrow' means 'A scroll, writing or deed, delivered by the grantor, promisor or obligor into the hands o f a third person, to be held by the latter until the happening of a contingency or performance of a condition, and then by him delivered to the grantee, promisee or obligee.' (2) Capital Gaim Tax Return. - The Seller/ Transferor shall file, in duplicate, his Capital Gains Tax Return (BIR FORM No. 1706) covering the sale or disposition of his Principal Residence with the concerned Revenue District Office within thirty (30) days from <.late of its sale or dispositio n: Provided, bowevet~ that the Seller/ Transferor shall no t be required to pay any capital gains tax during the 18-month period on the sale o f his IV"" 45 SUBJECT: Exemption of Certain Individuals from the Capital Gains Tax on the Sale, Exchange or Disposition of a Principal Residence under Certain Conditions. 46 SUBJECT: Amending Sections 2(2), 3 and 6 of Revenue Regulations No. 13-99 vis-a-vi s Sale, Exchange or Disposition, by a Natural Person , of His "Principal Residence".

DECISION CTA Case No. 10151 principal residence duly established as such: Provided, further, that for purposes of the capital gains tax otherwise due on the sale, exchange or disposition of the said Principal Residence, the execution of the Escrow Agreement referred to in the immediately preceding Section 3(1) hereof shall be considered sufficient. XXX XXX XXX (3) Post Reporting Requirement. - The proceeds from the sale, exchange or disposition of his old Principal Residence must be fully utilized in acquiring or constructing his new Principal Residence within eighteen (18) calendar months from date of its sale, exchange or disposition, in order to show proof that positive action was undertaken to utilize the proceeds for the acquisition or construction of his new Principal Residence within the 18- month reglementary period, he shall submit to the RDO concerned, within thirty (30) days from the lapse of the said period, the following documents: (a) 1\ sworn statement that the total proceeds from the sale or disposition of his old Principal Residence has been actually utilized in the acquisition or construction of his new Principal Residence or, if the construction of his new Principal Residence is still in progress, a sworn statement that such amount shall be fully utilized to procure the necessary materials and pay for the cost of labor and other expenses for the construction thereof; (b) A certified statement from his architect or engineer, or both, showing the cost of materials and labor for the construction of his new Principal Residence; (c) "\ certified copy of the Building Permit issued by the Office of the Building Official of the City or Municipality where his new Principal Residence shall be constructed as well as xerox copies of documents (e.g., building specification plan, construction plans, or construction cost estimates) submitted with his application for the said Building Permit on which computation of the amount of the building license fee has been based; (d) In case his new Principal Residence is acquired by purchase, a duplicate original copy of the Deed of Absolute Sale covering the purchase of his new Principal Residence. (4) Releasefrom the Escrow Agreement. - Upon a showing, based on the foregoing documents, that the proceeds of sale, exchange or disposition of his old Principal Residence have already been fully utilized in the acquisition or construction of his new Principal Residence, the concerned Revenue District Officer ,....y--

DECISION CTA Case No. 10151 shall, within fifteen (15) days from date of submission by the Seller/Transferor o f the foregoing documents, release the E scrow on the aforesaid bank deposi t in favor of the Seller/Transferor (ANNEX B hereof). (5) U.mitatiot1 on Tax Exemption Pn'vi/ege. - The tax exemptio n herein granted may be availed of only o nce every ten (10) years; (6) Cost Basis of tbe New 'Primipal Residente'. - The historical cost or adjusted cost basis o f his old Principal Residence sold, exchanged or disposed shall be carried over to the cos t basis of his new Principal Residence; and (7) Assessmentfor De.fidetlry Capital Gains Tax; Applitation of the Estro1ved Bank Deposit Against tbe De.fidenry Tax. - If the Seller/ Transfero r fails to submi t documen tary evidence within thirty (30) days after the lapse o f the aforesaid 18-month period, showing that he has utilized the proceeds o f sale, exchange or disposition o f his old Principal Residence to acquire or construct his new Principal Residence, it shall be presumed that he did not, in fact, utilize th e aforesaid proceeds of sale for the construction or acquisition o f his new Principal Residence, in which case, he shall be treated deficient in the payment of his capital gains tax from the sale or disposition of his aforesaid Principal Residence, and shall be accordingly be assessed for deficiency capital gains tax, inclusive of the 20% interest per annum, pursuant to the provisio ns of Section 228 of the Code, as implemented by Revenue Regulatio ns No. 12-99, in relation to Section 249 o f the said Code. Pursuant to the provisio ns of Revenue Regulatio ns No. 12- 99, the taxpayer shall be issued with the required Post Reporting No tice informing him, in writing, of the aforementioned facts, in order that he may present his side of the case through informal conference, and the required Preliminary Assessment Notice, before issuan ce of the Formal Assessment No tice. If, at this point in time, the escrowed tax mo ney is still in the custody of the Depository Bank, the full amount thereo f, including its interest earnings, shall be applied in computing for the taxpayer's deficiency capital gains tax. Upon the time that the said deficiency tax assessment has become final and executory, the deposit in escrow, inclusive of its interest earnings, shall be forfeited and applied against the taxpayer's deficiency capi tal gains tax liability. The depository Bank shall forthwith be informed of this action, and shall, upon demand in writing, by the Commissioner or his duly autho rized representative (1\ NNEX C hereof), turn over the mo ney for application in paymen t of the taxpayer's deficiency tax liability. If th e same is insufficient to cover the entire amount ;v'

DECISION CTA Case No. 10151 assessed, the seller / transferor shall remain liable for the remaining balance of the assessment. On the other hand, the excess of the deposit in escrow, if any, shall forthwith be returned to the Seller/ Transferor, by the Bank, upon written authorization from the Commissio ner or his duly authorized representative. (8) Partial Utilization of the Prot�eeds of Safes Exchange or Disposition. - If there is no full utilization of the proceeds of sale, exchange or disposition of his old Ptincipal Residence for the acquisition or construction of his new Principal Residence, he shall be liable for deficiency capital gains tax, inclusive of 20% interest per annum, computed from the 31st day after the date of sale or disposition of the said old Principal Residence." In this case, there is no indication that petltloners fulfilled the third condition for the tax exemption granted under Section 24(D)(2) of the NIRC of 1997, i.e., rc~ponde nr ~ hall ha \'C.' been duly notified by petitioners within thirry (30) days from the date o f ~ale or dispo~ition through a prescribed rerum of their intention to avail of the said tax exemption. In fac t, \\'hen the presc ribed return (i.e., BIR hmn 0Jo. 1706 - Capi tal Cains Tax Return) for the transacrion was filed on December 14, 20 17,47 or nine (9) days from the date oft he subject Deed qf/lbsolllte Sale48, petitioners did not treat the transac tion as an a/ ~.\.'empt" ~alc.49 ,\ lo reove r, the same T ax Return is to the effect th at the property being ~old is not the "prilllipal m'idwce" of petirioners.so and that the latter do not "intend to conxtmd oracq11ire a new primipal midentf within IS 1/IOIItiJ.r.fi'vm the dt~te qf di.rpositioii/Jale",51 consistent with the said information that the said transaction is nor an exempt sale. Thus, on thi s score alone, there being no nori fication to respondent of petitioners' intention to a\�ail o f the capital gains tax exemption under Section 24(D)(2) of the N IRC of 1997, the refund claim must already fail. Be that as it may, the failure of petitioners to submit the required Escrow Agreement, as a condition for the said capital gains tax exemption, as set forth in the above-quoted Section 3 of RR No. 13-99, as amended by RR No. 14-2000, is likewise fatal to its refund claim. RR or administrative iss uances have the force of law and arc entitled to great weight. 5~ ~ 47 Par. 4, Stipulation of Facts, JSFI, Docket, pp. 343 to 344; Exhibit "P-22", Docket, p. 508; and BIR Records (Exhibit "R-1"), pp. 18 to 20. 48 Exhibit "P-20", Docket, pp. 503 to 506; and BIR Records (Exhibit "R- 1"), pp. 22 to 25. 49 Refer to Box 21, Exhibit "P-22" (BIR Form No. 1706 - Capital Gains Tax Return), Docket, p. 508; and BIR Records (Exhibit " R-1"), pp. 18 to 20 . 50 Refer to Box 17, Exhibit " P-22" (BIR Form No. 1706 - Capital Gains Tax Return), Docket, p. 508; and BIR Records (Exhibit " R-1"), pp. 18 to 20. 51 Refer to Box 18, Exhibit "P-22" (BIR Form No. 1706 - Capital Gains Tax Return), Docket, p. 508; and BIR Records (Exhibit " R-1"), pp. 18 to 20. 52 Atlas Consolidated Mining and Development Corporation vs. Commissioner ofInternal Revenue, G.R. No. 159490, February 18, 2008.

DECISION CTA Case No. 10151 "-otably, RH. "-o. 13-99,~ and it~ amend ment thereto, RR No. 14-2000,:; 1 were promulgated purs uant to Sec tion 244 of the N 1RC of 1997, to wit: ''S I �~C. 244. , l11thori(J�q{Seodao� q{ t-i'.Hana to Ptv11m{~ate B;t/es a11rl R fg11lation.r. - The Sec retary of 1-'inance, upon recommendation of th e Commissioner, shall promulgate all needful rules and regu lations for the effecti\T enfo rcement of the provisio ns of this Code." The foregoing prov1s1o n g rants aut hority to the Secretary of hnance, upon the recommend atio n of respondent, to promulga te all needful rules and regulation~ ]or the ~[lfdil'r: l'l~(ol'(e/Jimt q{ the provision.r" of the 1\:IRC of 1997. Co rrespond ingly, I{R "-o. 13-99 and RR )..o. 14-2000 were promulga ted for the cffecti\T enforcen1cnt of the provisions o f the same law, pa rticularly Section 24(D)(2) thereof. Relative th ereto, the wisd om behind the required submissio n of the r~scrow \ greemcnr under th e aforeLJU<Hed Section 3 o f RR No. 13-99, as amended by RR No. 14-2000, is nor hard to discern. It is noteworth y tha t the capital gains tax exemption under Secrion 24(D)(2) is co nditioned o n the fact that " the proceeds of the sale or disposition arc fully utilized in aclluiring or constructi ng a new principal residence within eighteen ( IH) calendar month s from the date of sale or disposition" . Thus, as of the date of sale o r di sposition of the principal resid ence, and even within the presc ribed petiod o f filing the pe rrinent Capital Gains T ax Returns (BIR Form o. 1706), which is thirty (30) days following such sale o r disp osition,55 it is still impossible to d etermine w hether the seller o r sellers has/ have fully utilized the proceeds thereof, and thus, the i~sue of w hether o r not the transaction sh ould alread y be ~ ubjected to the capita l gains tax o r sh ou ld alread y be treated as exempt th e refrom is likewise cannot yer be de termined. T o address rhe co nundrum, the Secreta ry o f Finance, upon the recommendation of respo ndent, came up with the requirem ent, i11ter alia, of an E scrow .\ greem ent between th e co ncern ed Rev enue Dis trict Officer, the seller/transferor, and the co ncerned "\uthorized .\ gent Rank (1\ I\R), involv ing the amou nt equi,�alcn t ro the six percent (6�'o) capital gain s tax deposited in cash or manage r's chec k in an interest-bearing accoun t with the said .\ .\B. The said l �~scro\\' _\ g recm cnr is ro the e ffect that the amount dep osited , including its inreres t yield , shall o nly be released to said seller/ trans feror upon certification by the said Reve nue District ( )fficer that the subject proceeds of sale or disposition ha\'e, in fact, been utilized in the acc.1uisiri o n o r construction of the ~ 53 Section 1, RR No. 13-99. 54 Section 1, RR No. 13-99. 55 Refer to Section 51(C)(2)(b), NIRC of 1997.

DECISION CTA Case No. 10151 1~tmsa\7agxo0irdn6eu)teps.hmeoselnlnefrtrr/ho,etmrthafnieltsihsnfeeeglrloodcarrf/'tsrrehrneaonepfwsefsrcarprimornirnecncwitspoaCaulelladproienrtsaoilddt GiebsnpaecioenrsesiqtwiTuoiaitnrhx.eidnR\tee'o<tilugiptrhhantyesteht(nhBeeI(Rs1caa8iFp)diotcraEamllsegcnNardionoaws.r dt(spOsfh1euerr5afpcoolf)tlohmci-ecesderifefea/tafrtdytWecrihscnactpe,ientotefrsthtaftrhdfoaiivetenaoiohnrttdoreehcthrdoeosfionoarrfciotcclyfsoetmeuhnrom(sercn3aerte0seelqheedr)dnuenlitdliseseorRspaderuryeot/dobsvsAtdmrieef1tatini\orsisnoBoustpsasnemo,sfibeoushlrDriintebaotshliivmhreseoo.ea,tnifrlstabaiictmpneohttgseoeofeOnntsohfttfgahfhuefiieelodcltEtyhehdscoreuecoolstredrcnishioluc,giawzmeplhtelrrhtdenoieienn.seensctndfsuiUatp,e(hcpaR1,taelo8ewt)canhv-riefaemetoarhtnstroiiisuetfdnhnhseiecoateanhaiwDdctsfiepiuiionb,fesbntgatrjerienteiotohcckondeftt asdreodgieetuesfcsneentcphuafaolhhmetoiptolfelrrhirgloaeitirynmolonrhraolrrherletitdcisse/eamhyrntrnitetsdei/tuetgrizrthteepeiautntaaaseidHcdehrnosmxg,cxnnd(asanion3topcsnso(ioir0ddberawfh1nlosoibfue)ieisa8zyfanacenfpenccrtle)eelybhaolgvarrtrdroicreinoproo'eflbhssarb,siccwrirrrafteactlcoaase,yedxaes,un.pecmpclunsftsspotirtorthteaadpigtahvhieorsaofelstcaoaeaesfTeslnsiniriede\nlteteclnhg',hishnesumosntsaaeaea.iewnefs,crniianombdmdlnt:rilaadneddsiltiteexsutah\tshiretssnT,sahsrtneaepeeesahxepttsmi,dnhsxol,ranloeste.olsleascfeustivalmarielaral,hfilprtoetul/htuIoneeeulipntnsmibetotndhreplrlithrymedii\tiuaneosr/egTo.etynua-ndhthrr.pbsaclsrhceioetesoarfazdh,aaetile\fnIsaunsgvdleetnrriesshtkcriaeamncotdiurfnnaetitlor/eehnaetsaei'bnefortsmnesneidniroeorntr,(ccdaeeosrIefeinfnbttas8necnhrtsihsestym)hnnooacseeaef-wtetsmyruhefmmewhteopttarhiaaewofierorclliepslorxitoinrronehr,ztfspreviioicrneatetnnrnasiioahoodrlercnsyspgcet.pmeniemhcueioopsbporcilefarhnaiunlnnUyefap'slrisiidoseslrcenpcdiarndewatpadrvioeoihseinnretaeesssoineefdnltyfpo,tpeids\iethmaRoonsciota,r,xobadhst\f'isRcneLcoleBomrteeiqedneti\nnfittuNtceBsetfcohshhcpsoiinnysnfoneieesavstoihti,to.aintycaerosnoilnwwftaml1uoridleosrtp2byiinutatrtettttihhh-hehjitlmhtbhn9oechiyeaeseeoiiest9ecelenftnrt ercscbexuoayqcrbnruhmac\-ia'nerinresonga\msudee\iot'e,dmhnneoiitRrntro,esieifson\atTfatruhslnaninteteuaicurlvet't:ueidosotDciefansrigoppsds.ewtoaornSys<ic,ccii.stn\tyigg,noIOrontlethafhtcvfeoermiiecfnaceqe<ggaanruep,rinptirathceeraniiynlnsadtgncemiiatyrpnhaeianypedlsamcarirtntiodeainrxcnosodiupcd,tletbheartynaranhtncpeitesymhdr.oearCc.e\ysTeaoe.d\bhsulBuloeurernt,rsde/,aiufsbtttireolnhaaedeonbrsmsneeffaaeefttisrohhtloohulealrnorto,esadwabttolhheleteedofe, ~ 56 Chamber of Real Estate and Builders' a!., G.R. No. 160756, March 9, 2010. Association, Inc. vs. Han. Executive Secretary Alberto Romulo, et

DECISION CTA Case No. 10151 petmoners to execute and submit the required l ~scrow .\grecment for the subject transacrjon warranrs the denial of the present refund claim. Tn sum, the present refund claim must be Jenieu: (I) for failure of petitioners to notify respondent, through Capital Gains Tax Returns (BIR Form No. 1706), of their intention ro avail of the capital gains tax exemption, pursuant to Section 24(D)(2) of the N IRC of 1997; and (2) for their failure to execute anu submit the rcquircu I �:scrow \greemcnt as required under Section 3 of RR No. 13-99, as amended by RR No. 14-2000. Correspondingly, in this case, it cannot be said that there was an erroneous collection of capital gains tax. ,\ctions for tax refund, as in the instant case, arc in the nature of a claim for exemption. "\s such, the law is not only construed in strzdissimijuris against the taxpayer, the pieces of evidence presented entitling a taxpayer to an exemption must also be strictzssimi scrutinized and duly provenY Since taxes are the lifeblood of the government, tax laws must be faithfully and strictly implemented. They arc not intended to be liberally construed.58 The taxpayer has the burden to show that it has strictly complied with the conditions for the grant of the tax rcfunu. WHEREFORE, the present Petition for Review is DENIED for lack of merit. SO ORDERED. O&r. ~ ~ '----- MA. BELEN M. RINGPIS-LIBAN AssodateJustz.ce I CONCUR� MARIARO 57 Kepco Philippines Corporation vs. Commissioner ofInternal Revenue, G.R. No. 179961, January 31, 2011. 58 Coca-Cola Bottlers Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 221694 (Notice), January 19, 2021.

DECISION CTA Case No. 10151 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer o f the opinion of the Court. ~-~ --~ MA. BELEN M. RINGPIS-LIBAN Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, 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. Presiding Justice