FORT BONIFACIO DEVELOPMENT CORPORATION v. CIR, ET. AL., G.R. No. 173425, Janua !

22, 2"13 Taxation; Transitional input tax credit; Prior payment of taxes is not a prerequisite before a taxpayer could avail of the transitional input tax credit. To reiterate, prior payment of taxes is not necessary before a taxpayer could avail of the 8% transitional input tax credit. This position is solidly supported by law and jurisprudence, viz: First. ection !"# of the old $ational %nternal &evenue 'ode ($%&') clearly provides that for a taxpayer to avail of the 8% transitional input tax credit, all that is re*uired from the taxpayer is to file a be+innin+ inventory with the ,ureau of %nternal &evenue (,%&). %t was never mentioned in ection !"# that prior payment of taxes is a re*uirement. econd. ince the law ( ection !"# of the $%&') does not provide for prior payment of taxes, to re*uire it now would be tantamount to judicial le+islation which, to state the obvious, is not allowed. Third. - transitional input tax credit is not a tax refund per se but a tax credit. .o+ically, prior payment of taxes is not re*uired before a taxpayer could avail of transitional input tax credit. -s we have declared in our eptember /, 0"!0 1ecision, 23t4ax credit is not synonymous to tax refund. Tax refund is defined as the money that a taxpayer overpaid and is thus returned by the taxin+ authority. Tax credit, on the other hand, is an amount subtracted directly from one5s total tax liability. %t is any amount +iven to a taxpayer as a subsidy, a refund, or an incentive to encoura+e investment.6

FACT#$ 7etitioner was a real estate developer that bou+ht from the national +overnment a parcel of land that used to be the Fort ,onifacio military reservation. -t the time of the said sale there was as yet no 8-T imposed so 7etitioner did not pay any 8-T on its purchase. ubse*uently, 7etitioner sold two parcels of land to 9etro 7acific 'orp. %n reportin+ the said sale for 8-T purposes (because the 8-T had already been imposed in the interim), 7etitioner claimed transitional input 8-T correspondin+ to its inventory of land. The ,%& disallowed the claim of presumptive input 8-T and thereby assessed 7etitioner for deficiency 8-T. I##%E$ %s 7etitioner entitled to claim the transitional input 8-T on its sale of real properties +iven its nature as a real estate dealer and if so (i) is the transitional input 8-T applied only to the improvements on the real property or is it applied on the value of the entire real property and (ii) should there have been a previous tax payment for the transitional input 8-T to be creditable: R%LING$ ;< . 7etitioner is entitled to claim transitional input 8-T based on the value of not only the improvements but on the value of the entire real property and re+ardless of whether there was in fact actual payment on the purchase of the real property or not. The amendments to the 8-T law do not show any intention to ma=e those in the real estate business subject to a different treatment from those en+a+ed in the sale of other +oods or properties or in any other commercial trade or business. >n the scope of the basis for determinin+ the available transitional input 8-T, the '%& has no power to limit the meanin+ and covera+e of the term ?+oods? in ection !"# of the Tax 'ode without statutory authority or basis. The transitional input tax credit operates to benefit newly 8-T@re+istered persons, whether or not they previously paid taxes in the ac*uisition of their be+innin+ inventory of +oods, materials and supplies.