Spouses Senando and Josefina Salvador were the owners of a parcel of land in Valenzuela City. The land was expropriated by DPWH for a road widening project.
Accordingly, the RTC rendered a decision ruling that consequential damages be awarded on top of the zonal value of the land and the cost of the structure on the land.
Said consequential damages is equivalent to the value of the capital gains tax and other taxes necessary for the transfer of the subject property in the Republic's name.
DPWH questioned the award of the consequential damages, since the payment of the capital gains tax and other transfer taxes is just a consequence of the expropriation proceedings.
Issue: W/N the capital gains tax on the transfer of the expropriated property can be considered as consequential damages that may be awarded to spouses Senando and Josefina.
Ruling: No.
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. 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.
The capital gains tax even 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.
No comments:
Post a Comment