CASE 2017-0023-REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS (DPWH) VS. SPOUSES SENANDO F. SALVADOR AND JOSEFINA R. SALVADOR (G.R. NO. 205428, 07 JUNE 2017, DEL CASTILLO, J.) (SUBJECT/S: WHO SHOULDER CAPITAL GAINS IN EXPROPRIATION PROCEEDINGS; WHEN CAN ONE CLAIM CONSEQUENTIAL DAMAGES IN EXPROPRIATION PROCEEDINGS) (BRIEF TITLE: REPUBLIC VS. SPOUSES SALVADOR)

 

DISPOSITIVE:

 

“WHEREFORE, we GRANT the Petition for Review on Certiorari. The Decision dated August 23, 2012 and the Order dated January 10, 2013 of the Regional Trial Court, Branch 270, Valenzuela City, in Civil Case No. 175-V-11, are hereby MODIFIED, in that the award of consequential damages is DELETED. fa addition, spouses Senando F. Salvador and Josefina R. Salvador are hereby ORDERED to pay for the capital gains tax due on the transfer of the expropriated property.

 

SO ORDERED.”

 

SUBJECTS/DOCTRINES/DIGEST:

 

IN EXPROPRIATION PROCEEDINGS, WHO SHOULDERS THE CAPITAL GAINS TAX?

 

IT IS THE SELLER. CAPITAL GAINS TAX IS A TAX ON PASSIVE INCOME. THUS THE SELLER IS LIABLE TO SHOULDER THE TAX.

 

“This is clearly an error. It is settled that the transfer of property through expropriation proceedings is a sale or· exchange within the meaning of Sections 24(D) and 56(A)(3) of the National Internal Revenue Code, and profit from the transaction constitutes capital gain.32 Since capital gains tax is a tax on passive income, it is the seller, or respondents in this case, who are liable to shoulder the tax.33’

 

In fact, the Bureau of Internal Revenue (BIR), in BIR Ruling No. 476-2013 dated December 18, 2013, has constituted the DPWH as a withholding agent tasked to withhold the 6’% final withholding tax in the expropriation of real prope1ty for infrastructure projects. 11ms, as far as the government is concerned, the capital gains tax in expropriation proceedings remains a liability of the seller, as it is a tax on the seller’s gain from the sale of real property.34

 

WHEN IS CONSEQUENTIAL DAMAGES AWARDED IN EXPROPRIATIATION PROCEEDINGS?

 

ONLY IF AS A RESULT OF THE EXPROPRIATION, THE REMAINING PROPERTY OF THE OWNER SUFFERS FROM IMPAIRMENT OR DECREASE IN VALUE.

 

“Besides, as previously explained, consequential damages are only awarded if as a result of the expropriation, the remaining property of the owner suffers from an impairment or decrease in value.15 In this case, no evidence was submitted to prove any impairment or decrease in value of the subject property as a result of the expropriation. More significantly, given that the payment of capital gains tax on the transfer· of the subject property has no effoct on the increase or decrease in value of the remaining property, it can hardly be considered as consequential damages that may be awarded to respondents.”

 

TO READ THE DECISION, JUST CLICK/DOWNLOAD THE FILE BELOW.

 

SCD-2017-0023-Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH) Vs. Spouses Senando F. Salvador and Josefina R. Salvador

 

NOTE: TO RESEARCH ON A TOPIC IN YAHOO OR GOOGLE SEARCH  JUST TYPE “jabbulao and the topic”. EXAMPLE: TO RESEARCH ON FORUM SHOPPING JUST  TYPE “jabbulao and forum shopping”.