Apollo A.

Villanueva

3 - Manresa

COMMISSION OF INTERNAL REVENUE vs. AQUAFRESH SEAFOODS, INC. G.R. No. 170389; October 20, 2010; SECOND DIVISION; 634 SCRA 82 FACTS: Aquafresh Seafoods Inc. sold to Philips Seafoods, Inc. two parcels of land, including improvements thereon, for Php 3,100, 000.00. Aquafresh paid Php 186,000.00, representing the Capital Gains Tax (CGT) and Php 46,500.00, representing the Documentary Stamp Tax (DST) due from the said sale. The Bureau of Internal Revenue (BIR) received a report that the lots sold were undervalued for taxation purposes. After an investigation, BIR concluded that the subject properties were commercial with a zonal value of Php 2,000.00 per square meter. BIR assessed Aquafresh of CGT and DST defencies in the sum of Php 1,372,171.46 and Php 356,267.62, respectively. Aquafresh protested the assessments. Aquafresh's argued that the subject properties were located in Barrio Banica, Roxas, where the pre-defined zonal value was Php 650.00 per square meter based on the Revised Zonal Values of Real Properties in the City of Roxas. Aquafresh argued that since there was already a pre-defined zonal value for properties located in Barrio Banica, the BIR officials had no business re-classifying the subject properties to commercial. ISSUE: Whether the existing Revised Zonal Values of Real Properties in the City of Roxas or the fair market value as determined by BIR will be used as basis for the capital gains tax and documentary tax HELD: The Revised Zonal Values of Real Properties in the City of Roxas must be followed for purposes of computing the CGT and DST. It is undisputed that at the time of the sale of the subject properties found in Barrio Banica, Roxas City, the same were classified as RR, or residential, based on the 1995 Revised Zonal Value of Real Properties. CIR, thus, cannot unilaterally change the zonal valuation of such properties to commercial without first conducting a re-evaluation of the zonal values as mandated under Section 6(E) of the NIRC. Zonal value is determined for the purpose of establishing a more realistic basis for real property valuation. Since internal revenue taxes, such as CGT and DST, are assessed on the basis of valuation, the zonal valuation existing at the time of the sale should be taken into account.