Abakada Guro v. Ermita (G.R. No. 168056, July 5, 2005) constitutional bounds.
July 5, 2005) constitutional bounds. The Motions for Reconsideration are hereby DENIED WITH FINALITY.
Facts: Motions for Reconsideration filed by petitioners, ABAKADA Guro party List Officer and
et al., insist that the bicameral conference committee should not even have acted on the no pass-
on provisions since there is no disagreement between House Bill Nos. 3705 and 3555 on the one
hand, and Senate Bill No. 1950 on the other, with regard to the no pass-on provision for the sale
of service for power generation because both the Senate and the House were in agreement that
the VAT burden for the sale of such service shall not be passed on to the end-consumer. As to the
no pass-on provision for sale of petroleum products, petitioners argue that the fact that the
presence of such a no pass-on provision in the House version and the absence thereof in the Senate
Bill means there is no conflict because “a House provision cannot be in conflict with something
that does not exist.”
Escudero, et. al., also contend that Republic Act No. 9337 grossly violates the constitutional
imperative on exclusive origination of revenue bills under Section 24 of Article VI of the
Constitution when the Senate introduced amendments not connected with VAT. Petitioners
Escudero, et al., also reiterate that R.A. No. 9337’s stand- by authority to the Executive to increase
the VAT rate, especially on account of the recommendatory power granted to the Secretary of
Finance, constitutes undue delegation of legislative power. They submit that the recommendatory
power given to the Secretary of Finance in regard to the occurrence of either of two events using
the Gross Domestic Product (GDP) as a benchmark necessarily and inherently required extended
analysis and evaluation, as well as policy making. Petitioners also reiterate their argument that
the input tax is a property or a property right. Petitioners also contend that even if the right to
credit the input VAT is merely a statutory privilege, it has already evolved into a vested right that
the State cannot remove.
Issue: Whether or not the R.A. No. 9337 or the Vat Reform Act is constitutional?
Held: The Court is not persuaded. Article VI, Section 24 of the Constitution provides that All
appropriation, revenue or tariff bills, bills authorizing increase of the public debt, bills of local
application, and private bills shall originate exclusively in the House of Representatives, but the
Senate may propose or concur with amendments. The Court reiterates that in making his
recommendation to the President on the existence of either of the two conditions, the Secretary
of Finance is not acting as the alter ego of the President or even her subordinate. He is acting as
the agent of the legislative department, to determine and declare the event upon which its
expressed will is to take effect. The Secretary of Finance becomes the means or tool by which
legislative policy is determined and implemented, considering that he possesses all the facilities
to gather data and information and has a much broader perspective to properly evaluate them. His
function is to gather and collate statistical data and other pertinent information and verify if any
of the two conditions laid out by Congress is present.
In the same breath, the Court reiterates its finding that it is not a property or a property right, and
a VAT-registered person’s entitlement to the creditable input tax is a mere statutory privilege. As
the Court stated in its Decision, the right to credit the input tax is a mere creation of law. More
importantly, the assailed provisions of R.A. No. 9337 already involve legislative policy and
wisdom. So long as there is a public end for which R.A. No. 9337 was passed, the means through
which such end shall be accomplished is for the legislature to choose so long as it is within
The temporary restraining order issued by the Court is LIFTED.
Commissioner of Internal Revenue v. Seagate Technology(G.R. No. 153866. February 11,
2005)
FACTS: Respondent is a resident foreign corporation duly registered with the Securities and
Exchange Commission to do business in the Philippines and is registered with the Philippine
Export Zone Authority (PEZA). The respondent is Value Added Tax-registered entity and filed
for the VAT returns. An administrative claim for refund of VAT input taxes in the amount of
P28,369,226.38 with supporting documents (inclusive of the P12,267,981.04 VAT input taxes
subject of this Petition for Review), was filed on 4 October 1999 and no final action has been
received by the respondent from the petitioner on the claim for VAT refund. Hence, petitioner is
sued in his official capacity. The Tax Court rendered a decision granting the claim for refund and
CTA affirmed the decision. Hence, the present petition for certiorari.
ISSUE: Whether or not respondent is entitled to the refund or issuance of Tax Credit Certificate
in the amount of P12,122,922.66 representing alleged unutilized input VAT paid on capital goods
purchased for the period April 1, 1998 to June 30, 1999
HELD: The Petition is unmeritorious. As a PEZA-registered enterprise within a special economic
zone, respondent is entitled to the fiscal incentives and benefit provided for in either PD 66 or EO
226. It shall, moreover, enjoy all privileges, benefits, advantages or exemptions under both
Republic Act Nos. (RA) 7227 and 7844. Respondent as an entity is exempt from internal revenue
laws and regulations. This exemption covers both direct and indirect taxes, stemming from the
very nature of the VAT as a tax on consumption, for which the direct liability is imposed on one
person but the indirect burden is passed on to another. Respondent, as an exempt entity, can
neither be directly charged for the VAT on its sales nor indirectly made to bear, as added cost to
such sales, the equivalent VAT on its purchases. The exemption is both express and pervasive,
among other reasons, since RA 7916 states that “no taxes, local and national, shall be imposed on
business establishments operating within the ecozone”. Even though the VAT is not imposed on
the entity but on the transaction, it may still be passed on and, therefore, indirectly imposed on
the same entity -- a patent circumvention of the law. That no VAT shall be imposed directly upon
business establishments operating within the ecozone under RA 7916 also means that no VAT
may be passed on and imposed indirectly. Quando aliquid prohibetur ex directo prohibetur et per
obliquum. When anything is prohibited directly, it is also prohibited indirectly. Special laws
expressly grant preferential tax treatment to business establishments registered and operating
within an ecozone, which by law is considered as a separate customs territory. As such,
respondent is exempt from all internal revenue taxes, including the VAT, and regulations
pertaining thereto. Thus, the petition is denied and the decision of lower courts affirmed.
Fort Bonifacio v CIR (2009)
Facts:- The Commissioner of Internal Revenue (CIR) disallowed Fort Bonifacio Development
Corporation’s (FBDC) presumptive input tax credit arising from the land inventory on the basis
of Revenue Regulation 7-95 (RR 7-95) and Revenue Memorandum Circular 3-96 (RMC 3-96).
Specifically, Section 4.105-1 of RR 7-95: Sec. 4.105-1. Transitional input tax on beginning
inventories. – Taxpayers who became VAT-registered persons upon effectivity of RA No. 7716
who have exceeded the minimum turnover of P500,000.00 or who voluntarily register even if
their turnover does not exceed P500,000.00 shall be entitled to a presumptive input tax on the
inventory on hand as of December 31, 1995 on the following: (a) goods purchased for resale in
their present condition; (b) materials purchased for further processing, but which have not yet
undergone processing; (c) goods which have been manufactured by the taxpayer; (d) goods in
process and supplies, all of which are for sale or for use in the course of the taxpayer’s trade or
business as a VAT-registered person.- According to sec 105, The transitional input tax shall be
8% of the value of the inventory or actual VAT paid, whichever is higher, which amount may be
allowed as tax credit against the output tax of the VAT-registered person. However, in the April
2, 2009 Decision sought to be reconsidered, the Court struck down Section 4.105-1 of RR 7-95
for being in conflict with the law. It held that the CIR had no power to limit the meaning and
coverage of the term "goods" in Section 105 of the Old NIRC sans statutory authority or basis
and justification to make such limitation. This it did when it restricted the application of Section
105 in the case of real estate dealers only to improvements on the real property belonging to their
beginning inventory. -o Sec. 105. Transitional Input tax Credits. – A person who becomes liable
to value-added tax or any person who elects to be a VAT-registered person shall, subject to the
filing of an inventory as prescribed by regulations, be allowed input tax on his beginning
inventory of goods, materials and supplies equivalent to 8% of the value of such inventory or the
actual value-added tax paid on such goods, materials and supplies, whichever is higher, which
shall be creditable against the output tax.- The term "goods or properties" by the unambiguous
terms of Section 100 includes "real properties held primarily for sale to costumers or held for
lease in the ordinary course of business." Having been defined in Section 100 of the NIRC, the
term "goods" as used in Section 105 of the same code could not have a different meaning.
Issues: Whether or not a Revenue Regulation may contravene the provisions of the NIRC on
thedescription or definition of the term “goods”?
Ruling:- The rules and regulations that administrative agencies promulgate, which are the product
of a delegated legislative power to create new and additional legal provisions that have the effect
of law, should be within the scope of the statutory authority granted by the legislature to the
objects and purposes of the law, and should not be in contradiction to, but in conformity with, the
standards prescribed by law.- To be valid, an administrative rule or regulation must conform, not
contradict, the provisions of the enabling law. An implementing rule or regulation cannot modify,
expand, or subtract from the law it is intended to implement. Any rule that is not consistent with
the statute itself is null and void. - While administrative agencies, such as the Bureau of Internal
Revenue, may issue regulations to implement statutes, they are without authority to limit the scope
of the statute to less than what it provides, or extend or expand the statute beyond its terms, orin
any way modify explicit provisions of the law. - Indeed, a quasi-judicial body or an administrative
agency for that matter cannot amend an act of Congress. Hence, in case of a discrepancy between
the basic law and an interpretative or administrative ruling, the basic law prevails.- To
recapitulate, RR 7-95, insofar as it restricts the definition of "goods" as basis of transitional input
tax credit under Section 105 is a nullity.
SAN ROQUE POWER VS CIR (2009)
Facts: Petitioner San Roque Corporation entered into a Power Purchase Agreement
(PPA) with the National Power Corporation (NPC) to develop the hydro potential of the
Lower Agno River, and to be able to generate additional power and energy for the Luzon Power
Grid, by developing and operating the San Roque Multipurpose Project. The PPA provides
that petitioner shall be responsible for the design, construction, installation, and completion
and testing and commissioning of the Power Station and it shall operate and maintain the same,
subject to the instructions of the NPC. During the cooperation period of 25years commencing
from the completion date of the Power Station, the NPC shall purchase all the electricity
generated by the Power Plant. Because of the exclusive nature of the PPA between
petitioner and the NPC, the former applied for and was granted five Certificates of Zero Rate by
the BIR. For January to December 2002, petitioner filed with the respondent Commissioner of
Internal Revenue its Monthly VAT Declaration and Quarterly VAT Returns. The latter
showing excess input VAT payments on account of its importation and domestic purchases of
goods and services. Petitioner filed with the BIR four separate administrative claims for
refund of Unutilized Input VAT. Respondent failed to act on the request for tax refund or credit
of petitioner, which prompted the latter to file with the CTA in Division, a Petition for Review.
After a hearing on the merits ,the CTA Second Division denied petitioner's claim for tax refund
or credit.
Issue: Whether or not petitioner may claim a tax refund or credit.
Ruling: Yes. To claim refund or tax credit petitioner must comply with the following criteria:
(1)the taxpayer is VAT registered; (2) the taxpayer is engaged in effectively zero-rated or
zero-rated sales; (3) the input taxes are due or paid; (4) the input taxes are not transitional input
taxes; (5) the input taxes have not been applied against output taxes during and in the succeeding
quarters; (6) the input taxes claimed are attributable to zero-rated or effectively zero-rated sales;
(7) for zero-rated sales under Section 106 (A) (2) (1) and (2); 106 (B); and 108 (B) (1) and (2),
the acceptable foreign currency exchange proceeds have been duly accounted for in accordance
with BSP rules and regulations; (8) where there are both zero-rated or effectively zero-rated sales
and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any
of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and
(9) the claim is filed within two years after the close of the taxable quarter when such sales were
made. San Roque Corporation complied with the abovementioned requirements. It bears
emphasis that effective zero-rating is not intended as a benefit to the person legally
liable to pay the tax, in this case the petitioner, but to relieve certain exempt entities,
such as the NPC, from the burden of indirect tax so as to encourage the development of particular
industries.
KEPCO PHILIPPINES CORPORATION, petitioner, vs. COMMISSIONER OF
INTERNAL REVENUE, respondent.||
Korea Electric Power Corporation (KEPCO) Philippines Corporation (petitioner) is an
independent power producer engaged in selling electricity to the National Power Corporation
(NPC).
After its incorporation and registration with the Securities and Exchange Commission on June 15,
1995, petitioner forged a Rehabilitation Operation Maintenance and Management Agreement
with NPC for the rehabilitation and operation of Malaya Power Plant Complex in Pililia, Rizal. 1
On September 30, 1998, petitioner filed with the Commissioner of Internal Revenue (respondent)
administrative claims for tax refund in the amounts of P4,895,858.01 representing unutilized input
Value Added Tax (VAT) payments on domestic purchases of goods and services for the 3rd
quarter of 1996 and P4,084,867.25 representing creditable VAT withheld from payments received
from NPC for the months of April and June 1996.
Petitioner also filed a judicial claim before the Court of Tax Appeals (CTA), docketed as CTA
Case No. 5765, also based on the above-stated amounts.
Petitioner filed before respondent on December 28, 1998 still another claim for refund
representing unutilized input VAT payments attributable to its zero-rated sale transactions with
NPC, including input VAT payments on domestic goods and services in the amount of
P13,191,278.00 for the 4th quarter of 1996. Petitioner also filed the same claim before the CTA
on December 29, 1998, docketed as CTA Case No. 5704. IDAaCc
The two petitions before the CTA for a refund in the total amount of P22,172,003.26 were
consolidated.
In his report, the court-commissioned auditor, Ruben R. Rubio, concluded that the claimed
amount of P20,550,953.93 was properly substantiated for VAT purposes and subject of a valid
refund.
By Decision of March 18, 2003, the CTA granted petitioner partial refund with respect
to unutilized input VAT payment on domestic goods and services qualifying as capital
goods purchased for the 3rd and 4th quarters of 1996 in the amount of P8,325,350.35. All other
claims were disallowed.
Petitioner filed an urgent motion for reconsideration, claiming an additional amount of
P5,012,875.67.
By Resolution of July 8, 2003, 2 the CTA denied petitioner's motion, it holding that part of the
additional amount prayed for — P1,557,676.13 — involved purchases for the year 1997, and with
respect to the remaining amount of P3,455,199.54, it was not recorded under depreciable asset
accounts, hence, it cannot be considered as capital goods.
Petitioner appealed under Rule 43 of the Rules of Court before the Court of Appeals, 3 praying
only for the refund of P3,455,199.54, claiming that the purchases represented thereby were used
in the rehabilitation of the Malaya Power Plant Complex which should be considered as capital
expense to fall within the purview of capital goods. AaSIET
The appellate court, by Decision of December 11, 2006, affirmed that of the CTA. In arriving at
its decision, the appellate court considered, among other things, the account vouchers submitted
by petitioner which listed the purchases under inventory accounts as follows:
1) Inventory supplies/materials
2) Inventory supplies/lubricants
3) Inventory supplies/spare parts
4) Inventory supplies/supplies
5) Cost/O&M Supplies
6) Cost/O&M Uniforms and Working Clothes
7) Cost/O&M/Supplies
8) Cost/O&M/Repairs and Maintenance
9) Office Supplies
10) Repair and Maintenance/Mechanics
11) Repair and Maintenance/Common/General
12) Repair and Maintenance/Chemicals
Reconsideration of the appellate court's decision having been denied by Resolution of August 17,
2007, the present petition for review on certiorari was filed.
In the main, petitioner faults the appellate court for not considering the purchases amounting to
P3,455,199.54 as falling under the definition of "capital goods."
The petition is bereft of merit.
Section 4.106-1 (b) of Revenue Regulations No. 7-95 defines capital goods and its scope in this
wise: DaACIH
xxx xxx xxx
(b) Capital Goods. — Only a VAT-registered person may apply for
issuance of a tax credit certificate or refund of input taxes paid on capital
goods imported or locally purchased. The refund shall be allowed to the
extent that such input taxes have not been applied against output taxes.
The application should be made within two (2) years after the close of the
taxable quarter when the importation or purchase was made.
Refund of input taxes on capital goods shall be allowed only to the extent
that such capital goods are used in VAT taxable business. If it is also used
in exempt operations, the input tax refundable shall only be the ratable
portion corresponding to taxable operations.
"Capital goods or properties" refer to goods or properties with estimated
useful life greater that one year and which are treated as depreciable assets
under Section 29 (f), 4 used directly or indirectly in the production or sale
of taxable goods or services. (underscoring supplied)
For petitioner's purchases of domestic goods and services to be considered as "capital goods or
properties," three requisites must concur. First, useful life of goods or properties must exceed one
year; second, said goods or properties are treated as depreciable assets under Section 34
(f) and; third, goods or properties must be used directly or indirectly in the production or sale of
taxable goods and services. cHCIEA
From petitioner's evidence, the account vouchers specifically indicate that the disallowed
purchases were recorded under inventory accounts, instead of depreciable accounts. That
petitioner failed to indicate under its fixed assets or depreciable assets account, goods and services
allegedly purchased pursuant to the rehabilitation and maintenance of Malaya Power Plant
Complex, militates against its claim for refund. As correctly found by the CTA, the goods or
properties must be recorded andtreated as depreciable assets under Section 34 (F) of the NIRC.
Petitioner further contends that since the disallowed items are treated as capital goods in the
general ledger and accounting records, as testified on by its senior accountant, Karen Bulos,
before the CTA, this should have been given more significance than the account vouchers which
listed the items under inventory accounts.
A general ledger is a record of a business entity's accounts which make up its financial statements.
Information contained in a general ledger is gathered from source documents such as account
vouchers, purchase orders and sales invoices. In case of variance between the source document
and the general ledger, the former is preferred.
The account vouchers presented by petitioner confirm that the purchases cannot qualify as capital
goods for they are held as inventory items and not charged to any depreciable asset account.
Petitioner has proffered no explanation why the disallowed items were not listed under
depreciable asset accounts. DIcTEC
It is settled that tax refunds are in the nature of tax exemptions. Laws granting exemptions are
construed strictissimi juris against the taxpayer and liberally in favor of the taxing
authority. 5 Where the taxpayer claims a refund, the CTA as a court of record is required to
conduct a formal trial (trial de novo) to prove every minute aspect of the claim. 6
By the very nature of its functions, the CTA is dedicated exclusively to the resolution of tax
problems and has consequently developed an expertise on the subject. Absent a showing of abuse
or reckless exercise of authority, 7 the Court appreciates no ground to disturb the appellate court's
Decision affirming that of the CTA.
IN FINE, petitioner having failed to establish that the disallowed items should be classified as
capital goods, the assailed Decision of the Court of Appeals must be upheld.
COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. AMERICAN EXPRESS
INTERNATIONAL, INC. (PHILIPPINE BRANCH), Respondent. (2005)
FACTS: American Express International, Inc. is a Philippine branch of American Express
International, Inc., a corporation duly organized and existing under and by virtue of the laws of
the State of Delaware, U.S.A., with office in the Philippines. It is a servicing unit of American
Express International, Inc. - Hongkong Branch (Amex-HK) and is engaged primarily to facilitate
the collections of Amex-HK receivables from card members situated in the Philippines and
payment to service establishments in the Philippines. Amex Philippines registered itself with the
Bureau of Internal Revenue (BIR), Revenue District Office No. 47 (East Makati) as a value-added
tax (VAT) taxpayer effective March 1988 and was issued VAT Registration Certificate No.
088445 bearing VAT Registration No. 32A-3-004868.On April 13, 1999, [respondent] filed with
the BIR a letter-request for the refund of its 1997 excess input taxes in the amount
of P3,751,067.04, which amount was arrived at after deducting from its total input VAT paid
ofP3,763,060.43 its applied output VAT liabilities only for the third and fourth quarters of 1997
amounting to P5,193.66 and P6,799.43, respectively. The Court of Tax Appeals finds the
[petition] meritorious and in accordance with law. Accordingly, [petitioner] is
hereby ORDERED to REFUND to [respondent] the amount of P3, 352,406.59 representing the
latter’s excess input VAT paid for the year 1997. Thus, the Court of Appeal affirmed the decision
of the CTA.
ISSUE: Whether or not the Court of Appeals committed reversible error in holding that
respondent is entitled to the refund of the amount of P3, 352,406.59 allegedly representing excess
input VAT for the year 1997.
DECISION: The legislature is presumed to have reenacted the law with full knowledge of the
contents of the revenue regulations then in force regarding the VAT, and to have approved or
confirmed them because they would carry out the legislative purpose. The particular provisions
of the regulations we have mentioned earlier are, therefore, re-enforced. "When a statute is
susceptible of the meaning placed upon it by a ruling of the government agency charged with its
enforcement and the [l]egislature thereafter [reenacts] the provisions [without] substantial change,
such action is to some extent confirmatory that the ruling carries out the legislative purpose."
In sum, having resolved that transactions of respondent are zero-rated, the Court upholds the
former’s entitlement to the refund as determined by the appellate court. Moreover, there is no
conflict between the decisions of the CTA and CA. This Court respects the findings and
conclusions of a specialized court like the CTA "which, by the nature of its functions, is dedicated
exclusively to the study and consideration of tax cases and has necessarily developed an expertise
on the subject. Furthermore, under a zero-rating scheme, the sale or exchange of a particular
service is completely freed from the VAT, because the seller is entitled to recover, by way of a
refund or as an input tax credit, the tax that is included in the cost of purchases attributable to the
sale or exchange. "[T]he tax paid or withheld is not deducted from the tax base." Having been
applied for within the reglementary period,respondent’s refund is in order.
WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. No
pronouncement as to costs.
CONTEX CORPORATION, petitioner, vs.HON. COMMISSIONER OF INTERNAL
REVENUE, respondent.
FACTS: As an SBMA-registered firm, Contex is exempt from all local and national internal
revenue taxes except for the preferential tax provided for in Section 12 (c)5 of Rep. Act No. 7227.
Contex also registered with the Bureau of Internal Revenue (BIR) as a non-VAT taxpayer under
a Certificate of Registration. Contex purchased various supplies and materials necessary in the
conduct of its manufacturing business. The suppliers of these goods shifted unto Contex the
10% VAT on the purchased items , which led the Contex to pay input taxes in the amounts
of P 539,411.88and P 504,057.49 for 1997 and 1998, respectively. Acting on the belief that
it was exempt from all national and local taxes, including VAT, Contex filed two applications
with RDO for tax refund or tax credit of the VAT it paid. Revenue District Officer DENIED.
Regional Director – NO RESPONSE. CTA – PARTIAL GRANT. CTA ruled that Contex misread
Sections 106(A)(2)(a) and 112(A) of the Tax Code. These provisions apply only to those entities
registered as VAT taxpayers whose sales are zero-rated. Contex does not fall under this category,
since it is a non-VAT taxpayer as evidenced by the Certificate of Registration. Nonetheless, the
CTA held that the Contex is exempt from the imposition of input VAT on its purchases of supplies
and materials. It pointed out that under Bases Conversion and Development Act of 1992 (RA
7227), all that Contex is required to pay as a SBFZ-registered enterprise is a 5% preferential tax.
The CTA also disallowed all refunds of input VAT paid prior to June 29, 1997 for being barred
by the two-year prescriptive period under Section 229 of the Tax Code. The tax court also limited
the refund only to the input VAT paid on the supplies and materials directly used in manufacture
of its goods. It struck down all claims for input VAT paid on maintenance, office supplies, freight
charges, and all materials and supplies shipped or delivered to the Contex’s Makati and Pasay
City offices. CA – REVERSED. CIR maintained that the exemption of Contex under Rep. Act
No. 7227 was limited only to direct taxes and not to indirect taxes such as the input component
of the VAT. The Commissioner pointed out that from its very nature, the value-added tax is a
burden passed on by a VAT registered person to the end users; hence, the direct liability for the
tax lies with the suppliers and not Contex. The Court of Appeals held that the exemption from
duties and taxes on the importation of raw materials, capital, and equipment of SBFZ-registered
enterprises under Rep. Act No. 7227 and its implementing rules covers only "the VAT imposable
under Section 107 of the [Tax Code], which is a direct liability of the importer, and in no way
includes the value-added tax of the seller-exporter the burden of which was passed on to the
importer as an additional costs of the goods."
SC – DENIED. VAT is an indirect tax. As such, the amount of tax paid on the goods, properties
or services bought, transferred, or leased may be shifted or passed on by the seller, transferor, or
lessor to the buyer, transferee or lessee. Unlike a direct tax, such as the income tax, which
primarily taxes an individual’s ability to pay based on his income or net wealth, an indirect tax,
such as the VAT, is a tax on consumption of goods, services, or certain transactions involving the
same. The VAT, thus, forms a substantial portion of consumer expenditures. Further, in indirect
taxation, there is a need to distinguish between the liability for the tax and the burden of the tax.
As earlier pointed out, the amount of tax paid may be shifted or passed on by the seller to the
buyer. What is transferred in such instances is not the liability for the tax, but the tax burden. In
adding or including the VAT due to the selling price, the seller remains the person primarily and
legally liable for the payment of the tax. What is shifted only to the intermediate buyer and
ultimately to the final purchaser is the burden of the tax. Stated differently, a seller who is directly
and legally liable for payment of an indirect tax, such as the VAT on goods or services is not
necessarily the person who ultimately bears the burden of the same tax. It is the final purchaser
or consumer of such goods or services who, although not directly and legally liable for the
payment thereof, ultimately bears the burden of the tax. Exemptions from VAT are granted by
express provision of the Tax Code or special laws. Under VAT, the transaction can have
preferential treatment in the following ways:(a) VAT Exemption. An exemption means that the
sale of goods or properties and/or services and the use or lease of properties is not subject to VAT
(output tax) and the seller is not allowed any tax credit on VAT (input tax) previously paid.20
This is a case wherein the VAT is removed at the exempt stage (i.e., at the point of the sale, barter
or exchange of the goods or properties).The person making the exempt sale of goods, properties
or services shall not bill any output tax to his customers because the said transaction is not subject
to VAT. On the other hand, a VAT-registered purchaser of VAT-exempt goods/properties or
services which are exempt from VAT is not entitled to any input tax on such purchase despite the
issuance of a VAT invoice or receipt.21(b) Zero-rated Sales. These are sales by VAT-registered
persons which are subject to 0% rate, meaning the tax burden is not passed on to the purchaser.
A zero-rated sale by a VAT-registered person, which is a taxable transaction for VAT purposes,
shall not result in any output tax. However, the input tax on his purchases of goods, properties or
services related to such zero-rated sale shall be available as tax credit or refund in accordance
with these regulations.22Under Zero-rating, all VAT is removed from the zero-rated goods,
activity or firm. In contrast, exemption only removes the VAT at the exempt stage, and it will
actually increase, rather than reduce the total taxes paid by the exempt firm’s business or non-
retail customers. It is for this reason that a sharp distinction must be made between zero-rating
and exemption in designating a value-added tax.23Apropos, the Contex’s claim to VAT
exemption in the instant case for its purchases of supplies and raw materials is founded mainly
on Section 12 (b) and (c) of Rep. Act No. 7227, which basically exempts them from all national
and local internal revenue taxes, including VAT and Section 4 (A)(a) of BIR Revenue Regulations
No. 1-95.24On this point, Contex rightly claims that it is indeed VAT-Exempt and this fact is not
controverted by the respondent. In fact, Contex is registered as a NON-VAT taxpayer per
Certificate of Registration25 issued by the BIR. As such, it is exempt from VAT on all its sales
and importations of goods and services. While it is true that the Contex should not have been
liable for the VAT inadvertently passed on to it by its supplier since such is a zero-rated sale on
the part of the supplier, the Contex is not the proper party to claim such VAT refund. Since the
transaction is deemed a zero-rated sale, Contex’s supplier may claim an Input VAT credit with
no corresponding Output VAT liability. Congruently, no Output VAT may be passed on to the
petitioner. Contex is registered as a NON-VAT taxpayer and thus, is exempt from VAT. As an
exempt VAT taxpayer, it is not allowed any tax credit on VAT (input tax) previously paid. In
fine, even if we are to assume that exemption from the burden of VAT on petitioner’s purchases
did exist, petitioner is still not entitled to any tax credit or refund on the input tax previously paid
as petitioner is an exempt VAT taxpayer .Rather, it is the Contex’s suppliers who are the proper
parties to claim the tax credit and accordingly refund the Contex of the VAT erroneously passed
on to the latter. Accordingly, we find that the Court of Appeals did not commit any reversible
error of law in holding that petitioner’s VAT exemption under Rep. Act No. 7227 is limited to
the VAT on which it is directly liable as a seller and hence, it cannot claim any refund or
exemption for any input VAT it paid, if any, on its purchases of raw materials and supplies.
COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. COURT OF APPEALS and
COMMONWEALTH MANAGEMENT AND SERVICES CORPORATION, respondents
FACTS: Commonwealth Management and Services Corporation (COMASERCO, for
brevity), is a corporation duly organized and existing under the laws of the Philippines. It is
an affiliate of Philippine American Life Insurance Co. (Philamlife), organized to perform
collection, consultative and other technical services, including the functioning as an
internal auditor of Philamlife and its other affiliates. On January 24, 1992, the Bureau of Internal
Revenue (BIR)issued an assessment to private respondent COMASERCO for deficiency
value-added tax (VAT) amounting to P351,851.01, for taxable year 1988.COMASERCO's
annual corporate income tax return ending December 31, 1988 indicated a net loss in its
operations in the amount of P6,077.00.February 10, 1992, COMASERCO filed with the BIR, a
letter-protest objecting to the latter's finding of deficiency on VAT. On August 20, 1992, the
Commissioner of Internal Revenue sent a collection letter to COMASERCO demanding
payment of the deficiency VAT .On September 29,1992, COMASERCO filed with the Court
of Tax Appeals a petition for review contesting the Commissioner's assessment. COMASERCO
asserted that the services it rendered to Philamlife and its affiliates, relating to collections,
consultative and other technical assistance, including functioning as an internal auditor,
were on a "no-profit, reimbursement-of-cost-only" basis. It averred that it was not engaged in the
business of providing services to Philamlife and its affiliates. COMASERCO was established to
ensure operational orderliness and administrative efficiency of Philamlife and its
affiliates, and not in the sale of services. COMASERCO stressed that it was not profit-
motivated, thus not engaged in business. In fact, it did not generate profit but suffered a net loss
in taxable year 1988. COMASERCO averred that since it was not engaged in business, it was not
liable to pay VAT. On June 22, 1995, the Court of Tax Appeals rendered decision in
favor of the Commissioner of Internal Revenue, Ordering COMASERCO to pay the
Commissioner of Internal Revenue the amount of P335,831.01 inclusive of 25% surcharge
and interest plus 20% interest from January 24, 1992. COMASERCO filed with the Court of
Appeals, a petition for review of the decision of the Court of Tax Appeals. The Court of Appeals
rendered a decision reversing and setting aside that of the Court of Tax Appeals. Hence, this
petition for review.
ISSUE: Whether COMASERCO was engaged in the sale of services, and thus liable to pay VAT
thereon.
ANSWER: Yes, COMASERCO was engaged in the sale of services and is liable to pay VAT.
HELD: The Commissioner is correct in stating that the services rendered by COMASERCO
to Philamlife and its affiliates, for a fee or consideration, are subject to VAT. VAT is a tax on the
value added by the performance of the service. It is immaterial whether profit is derived from
rendering such service.
"SEC. 105. Persons Liable. - Any person who, in the course of trade or business, sells, barters,
exchanges, leases goods or properties, renders services, and any person who imports goods
shall be subject to the value-added tax (VAT) imposed in Sections 106 and108 of this Code. Even
a non-stock, non-profit, organization or government entity, is liable to pay VAT on the sale of
goods or services. VAT is a tax on transactions, imposed at every stage of the distribution process
on the sale, barter, exchange of goods or property, and on the performance of services, even in
the absence of profit attributable thereto. The term "in the course of trade or business" requires
the regular conduct or pursuit of a commercial or an economic activity, regardless of whether or
not the entity is profit-oriented. Section 108 of the National Internal Revenue Code of 1997defines
the phrase "sale of services" as the "performance of all kinds of services for others for a fee,
remuneration or consideration." It includes "the supply of technical advice, assistance or
services rendered in connection with technical management or administration of any scientific,
industrial or commercial undertaking or project." Hence, it is immaterial whether the primary
purpose of a corporation indicates that it receives payments for services rendered to its affiliates
on a reimbursement-on-cost basis only, without realizing profit, for purposes of determining
liability for VAT on services rendered. As long as the entity provides service for a fee,
remuneration or consideration, then the service rendered is subject to VAT.
CIR VS CEBU TOYO CORP.
FACTS: Respondent Cebu Toyo Corporation is a domestic corporation engaged in the
manufacture of lenses and various optical components. Its principal office is located at the Mactan
Export Processing Zone (MEPZ) in Lapu-Lapu City, Cebu and is a subsidiary of Toyo Lens
Corporation, a non-resident corporation organized under the laws of Japan. It is a zone export
enterprise registered with the Philippine Economic Zone Authority (PEZA), pursuant PD 66 and
is also registered with the BIR as a VAT taxpayer. The sales of respondent are considered export
sales subject to VAT at 0% rate under Section 106 of the NIRC, as amended.
Respondent then filed, an application for tax credit/refund of VAT paid for the period April 1,
1996 to December 31, 1997 amounting to P4,439,827.21 representing excess VAT input
payments. Respondents claim that they can avail of the tax credits as they are VAT-registered
exporter of goods at the rate of 0%. The CIR oppose such stating that they are not entitled to the
tax credit as the claims for refund are strictly construed against respondents as it is of the nature
of tax exemption. The CTA granted the motion partially to the respondents as they only lowered
the tax credits to P2,158,714.46 representing unutilized input tax payments. The CIR filed a
petition with the CA which was denied.
ISSUE: Whether Cebu Toyo Corporation can avail of the tax credits.
RULING: YES. Respondents availed of an income tax holiday as provided in the Omnibus
Investments Code ( EO 226). It is one of the fiscal incentives granted to PEZA-registered
enterprises and one of the options to its tax burden. Both the CA and CTA found that respondent
availed of the income tax holiday for four (4) years as it was shown in their Annual Corporate
Income Tax Returns. In it also is where respondent specified that it was availing of the tax relief
under EO 226. Hence, respondent is not exempt from VAT and it correctly registered itself as a
VAT taxpayer. In fine, it is engaged in taxable rather than exempt transactions.
Taxable transactions are those transactions which are subject to value-added tax either at the rate
of ten percent (10%) or zero percent (0%). In taxable transactions, the seller shall be entitled to
tax credit for the value-added tax paid on purchases and leases of goods, properties or services.
An exemption means that the sale of goods, properties or services and the use or lease of
properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on VAT
(input tax) previously paid. The person making the exempt sale of goods, properties or services
shall not bill any output tax to his customers because the said transaction is not subject to VAT.
Thus, a VAT-registered purchaser of goods, properties or services that are VAT-exempt, is not
entitled to any input tax on such purchases despite the issuance of a VAT invoice or receipt. The
court also held that respondent is subjected to VAT at 0% rate as it is engaged in the export
business.
Intel Technology Phils. Inc. vs. CIR (GR No. 166732 | April 27, 2007)
Facts:
Intel Tech
- domestic corporation engaged primarily in the business of designing, developing,
manufacturing and exporting advanced and large- scale integrated circuit components
- registered with the BIR as VAT entity
- registered with PEZA
As a VAT-registered entity, Intel file its monthly VAT declarations and quarterly VAT return
During the 2Q of 1998, Intel declared zero-rated export sales of 2.5Mn and VAT input taxes
from domestic purchases of goods and services of 11.7Mn
- Zero-rated export sales were paid in acceptable foreign currency and were inwardly remitted
On 1999, a claim for tax refund/credit of VAT input taxes was filed by Intel
Prior to the lapse of 2-year prescriptive prd and due to inaction by the CIR, a petition for review
was filed with the CTA and prayed for the issuance of a tax credit certificate amtg to 11.7Mn
- for the period covering April 01, 1998 to June 30, 1998, having generated zero-rated sales and
paid VAT input taxes in the course of its trade or business, which VAT input taxes are attributable
to the zero-rated sales and have not been applied to any VAT output tax liability for said period
or any succeeding quarter or quarters nor has been issued any tax credit certificate, it follows that
it is entitled to the issuance of a tax credit certificate for VAT input taxes in the amount of
PhP11,770,181.70
CTA decision: denied the claim for tax refund or issuance of a tax credit certificate since the
export invoices offered as evidence could not be considered as competent evidence to prove its
zero-rated sales of goods for VAT purposes and for refund or issuance of a tax credit certificate
because no BIR authority to print said invoices was indicated
A petition for review was filed before the CA, arguing that the info (seller’s TIN, statement that
seller is VAT-registered) required to be printed in the invoice or receipt do not apply to its export
sales since no input VAT may be claimed and that the absence of BIR authority to print its TIN-
V in some of the invoices is not fatal to its claim for refund or issuance of a tax credit certificate
as to invalidate the documents used to prove its export sales
 CA decision: since Intel issued invoices with the BIR’s authority to print, it must be concluded
that these invoices were not registered as they did not comply with the invoicing requirements
under Section 113, and the requirements for issuance of receipts or sales or commercial invoices
under Section 237. Thus, an unregistered receipt could not be used as supporting document for
input tax
Issue: W/N Intel is not entitled to a tax refund/credit for failure to comply with the invoicing
requirements?
Ruling:
a taxpayer engaged in zero-rated or effectively zero-rated transactions may apply for a refund
or issuance of a tax credit certificate for input taxes paid attributable to such sales upon complying
with the following requisites: (1) the taxpayer is engaged in sales which are zero-rated (like export
sales) or effectively zero-rated; (2) the taxpayer is VAT-registered; (3) the claim must be filed
within two years after the close of the taxable quarter when such sales were made; (4) the
creditable input tax due or paid must be attributable to such sales, except the transitional input
tax, to the extent that such input tax has not been applied against the output tax; and (5) in case of
zero-rated sales under Section 106(A)(2)(a)(1) and (2), Section 106(B), and Section 108(B)(1)
and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for
in accordance with BSP rules and regulations.
The docu evid submitted by Intel such as summary of export sales, sales invoices, official
receipts, airway bills and export declarations, prove that it is engaged in the "sale and actual
shipment of goods from the Philippines to a foreign country." Hence, Intel is considered engaged
in export sales (a zero-rated transaction) if made by a VAT-registered entity
the certification of inward remittances attests to the fact of payment "in acceptable foreign
currency or its equivalent in goods or services, and accounted for in accordance with the rules and
regulations of the BSP
Therefore, Intel’s evidence, juxtaposed with the requirements of Sections 106 (A)(2)(a)(1) and
112(A) of the Tax Code, as enumerated earlier, sufficiently establish that it is entitled to a claim
for refund or issuance of a tax credit certificate for creditable input taxes.
while entities engaged in business are required to secure from the BIR an authority to print
receipts or invoices and to issue duly registered receipts or invoices, it is not required that the BIR
authority to print be reflected or indicated therein. Only the following items are required to be
indicated in the receipts or invoices:
a. a statement that the seller is a VAT-registered entity followed by its TIN-V;
b. the total amount which the purchaser pays or is obligated to pay to the seller with the indication
that such amount includes the value-added tax;
c. date of the transaction;
d. quantity of merchandise;
e. unit cost;
f. description of merchandise or nature of service;
g. the name, business style, if any, and address of the purchaser, customer or client in the case of
sales, receipt or transfers in the amount of P100.00 or more, or regardless of the amount, where
the sale or transfer is made by a person liable to VAT to another person also liable to VAT, or
where the receipt is issued to cover payment made as rentals, commissions, compensations or
fees; and
h. the TIN of the purchaser where the purchaser is a VAT-registered person.
while the pertinent provisions of the Tax Code and the rules and regulations implementing them
require entities engaged in business to secure a BIR authority to print invoices or receipts and to
issue duly registered invoices or receipts, it is not specifically required that the BIR authority to
print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority
to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are
duly registered.
Intel, as a VAT-registered entity, is engaged in export sales of advanced and large-scale ICs
and, as such, under Section 106 (A)(2)(a)(1) of the Tax Code, its sales or transactions are subject
to VAT at 0% rate. Further, subject to the requirements stated in Section 112(A), it is entitled to
claim refund or issuance of a tax credit certificate for input VAT taxes attributable to its export
sales. As the Court had the occasion to explain since no output VAT was imposed on the zero-
rated export sales, what the government reimburses or refunds to the claimant is the input VAT
paid – thus, the necessity for the input VAT paid to be substantiated by purchase invoices or
official receipts. These sales invoices or receipts issued by the supplier are necessary to
substantiate the actual amount or quality of goods sold and their selling price, and, taken
collectively, are the best means to prove the input VAT payments of the claimant
In a claim for refund or issuance of a tax credit certificate attributable to zero-rated sales, what
is to be closely scrutinized is the documentary substantiation of the input VAT paid, as may be
proven by other export documents, rather than the supporting documents for the zero-rated export
sales. And since petitioner has established by sufficient evidence that it is entitled to a refund or
issuance of a tax credit certificate, in accordance with the requirements of Sections 106
(A)(2)(a)(1) and 112(A) of the Tax Code, then its claim should not be denied, notwithstanding its
failure to state on the invoices the BIR authority to print and the TIN-V.
The incentives offered to PEZA enterprises, among which are tax exemptions and tax credits,
ultimately redound to the benefit of the national economy, enticing as they do more enterprises to
invest and do business within the zones, thus creating more employment opportunities and
infusing more dynamism to the vibrant interplay of market forces.
COMMISSIONER OF INTERNAL REVENUE vs. PLACER DOMETECHNICAL
SERVICES (PHILS.), INC.
Facts: At the San Antonio Mines in Marinduque owned by Marcopper Mining Corporation
(Marcopper), mine tailings from the Taipan Pit started to escape through the Makulapnit
Tunnel and Boac Rivers, causing the cessation of mining and milling operations, and causing
potential environmental damage. To contain the damage and prevent the further spread of the
tailing leak, Placer Dome, Inc.(PDI), the owner of 39.9% of Marcopper, undertook to perform the
clean-up and rehabilitation of the Makalupnit and Boac Rivers, through a subsidiary.
To accomplish this, PDI engaged Placer Dome Technical Services Limited (PDTSL),a non-
resident foreign corporation with office in Canada, to carry out the project. In turn, PDTSL
engaged the services of Placer Dome Technical Services(Philippines), Inc. (respondent)
a domestic corporation and registered Value-Added Tax (VAT) entity, to implement the
project in the Philippines. PDTSL and respondent thus entered into an Implementation
Agreement. Due to the urgency and potentially significant damage to the environment, respondent
had agreed to immediately implement the project, and that PDTSL was to pay respondent "an
amount of money, in U.S. funds, equal to all Costs incurred for Implementation Services as well
as a fee agreed to one percent (1%) of such Costs." Respondent amended its
quarterly VAT returns. In the amended returns, respondent declared a total input VAT
payment of P43,015,461.98 for the said quarters, and P42,837,933.60 as its total excess input
VAT for the same period. Then respondent filed an administrative claim for the refund of its
reported total input VAT payments in relation to the project it had contracted from PDTSL,
amounting to P43,015,461.98. Respondent argued that the revenues it derived from services
rendered to PDTSL qualified as zero-rated sales under Section102(b)(2) of the then Tax
Code, since it was paid in foreign currency inwardly remitted to the Philippines. When the CIR
did not act on this claim, respondent duly filed a Petition for Review with the CTA. CTA ruled in
favor of respondent but only the resulting input VAT of P17,178,373.12 could be refunded. The
Court of Appeals affirmed such ruling.
Issue: Whether Placer is entitled to the refund as the revenues qualified as zero-rated sales.
Ruling: Yes. Section 102(b) Transactions Subject to Zero Percent (0%) Rate ─ The following
services performed in the Philippines by VAT-registered persons shall be subject to zero percent
(0%) rate:(1) Processing, manufacturing or repacking goods for other persons doing business
outside the Philippines which goods are subsequently exported, where the services are
paid for in acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in
the preceding subparagraph, the consideration for which is paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the [BSP].
It is Section 102(b)(2) which finds special relevance to this case. The VAT is a tax on
consumption "expressed as a percentage of the value added to goods or services" purchased by
the producer or taxpayer. As an indirect tax on services, its main object is the
transaction itself or, more concretely, the performance of all kinds of services conducted in
the course of trade or business in the Philippines. These services must be regularly conducted in
this country; undertaken in "pursuit of a commercial or an economic activity;" for a valuable
consideration; and not exempt under the Tax Code, other special laws, or any international
agreement. Yet even as services may be subject to VAT, our tax laws extend the benefit of zero-
rating the VAT due on certain services. Under the last paragraph of Section 102(b), services
performed by VAT-registered persons in the Philippines, when paid in acceptable foreign
currency and accounted for in accordance with the rules and regulations of the BSP, are zero-
rated. Petitioner invokes the "destination principle," citing that respondent’s services,
while rendered to a non-resident foreign corporation, are not destined to be consumed abroad.
Hence, the onus of taxation of the revenue arising there from is also within the Philippines.
The Court in American Express debunked this argument. As a general rule, the VAT system
uses the destination principle as a basis for the jurisdictional reach of the tax. Goods and services
are taxed only in the country where they are consumed. Thus, exports are zero-rated,
while imports are taxed. Confusion in zero rating arises because petitioner equates the
performance of a particular type of service with the consumption of its output abroad. The
consumption contemplated by law does not imply that the service be done abroad in order to be
zero-rated. Consumption is the use of a thing in a way that thereby exhausts it. Applied to services,
the term means the performance or successful completion of a contractual duty, usually resulting
in the performer's release from any past or future liability. Its services, having been performed in
the Philippines, are therefore also consumed in the Philippines. Unlike goods, services cannot
be physically used in or bound for a specific place when their destination is determined.
Instead, there can only be a predetermined end of a course when determining the service location
or position for legal purposes. However, the law clearly provides for an exception to the
destination principle; that is, for a zero percent VAT rate for services that are
performed in the Philippines, paid for in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP. Further, the cost of respondent's
service to be zero-rated need not be tacked in as part of the cost of goods exported. The law neither
imposes such requirement nor associates services with exported goods. It simply states that the
services performed by VAT-registered persons in the Philippines if paid in acceptable
foreign currency and accounted for in accordance with the rules and regulations of the BSP,
are zero-rated. The service rendered by respondent is clearly different from the product
that arises from the rendition of such service. The activity that creates the income must not
be confused with the main business in the course of which that income is realized. The law neither
makes a qualification nor adds a condition in determining the tax situs of a zero-rated service.
Under this criterion, the place where the service is rendered determines the jurisdiction to impose
the VAT. Performed in the Philippines, such service is necessarily subject to its jurisdiction,
for the State necessarily has to have "a substantial connection" to it, in order to enforce
a zero rate. The place of payment is immaterial; much less is the place where the output
of the service will be further or ultimately used.
CIR VS BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR MINDANAO
INC
Facts: Respondent Burmeister is a domestic corporation duly organized and existing
under and by virtue of the laws of the Philippines. A foreign consortium composed of
Burmeister and Wain Scandinavian Contractor A/S (BWSC-Denmark), Mitsui Engineering
and Shipbuilding, Ltd., and Mitsui and Co., Ltd. entered into a contract with the National Power
Corporation (NAPOCOR) for the operation and maintenance of NAPOCOR’s two power barges.
The Consortium appointed BWSC-Denmark as its coordination manager. BWSC-Denmark
established Burmeister (respondent) which subcontracted the actual operation and maintenance
of NAPOCOR’s two power barges as well as the performance of other duties and acts which
necessarily have to be done in the Philippines. NAPOCOR paid capacity and energy fees to
the Consortium in a mixture of currencies (Mark, Yen, and Peso). The freely convertible non-
Peso component is deposited directly to the Consortium’s bank accounts in Denmark and Japan,
while the Peso-denominated component is deposited in a separate and special designated bank
account in the Philippines. On the other hand, the Consortium pays the respondent in foreign
currency inwardly remitted to the Philippines through the banking system. In order to
ascertain the tax implications of the transactions, Burmeister sought a ruling from the BIR
which responded that if Burmeister chooses to register as a VAT person and the consideration for
its services is paid for in acceptable foreign currency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas, the aforesaid services shall be
subject to VAT at zero-rate. For 1996, Burmeister filed VAT Returns reflecting a total
zero-rated sales ofP147,000,000 with VAT input taxes of P3,300,000. The next year, it availed
of the Voluntary Assessment Program (VAP) of the BIR, allegedly misrepresented certain
regulations to be applicable to its case. Burmeister in 1999 secured a ruling from the VAT
Committee that services provided by the former is VAT-free who then filed a claim for a tax
credit certificate for the erroneously paid output VAT in 1996.
Issue: Whether or not respondent is entitled to the refund of the erroneously paid output VAT for
the year 1996.
Ruling: No. Court declares that the denial of the instant petition is not on the ground that
respondent’s services are subject to 0% VAT. Rather, it is based on the non-retroactivity of
the prejudicial revocation of BIR Ruling No. 023-95 and VAT Ruling No. 003-99,
which held that respondent’s services are subject to 0% VAT and which respondent invoked in
applying for refund of the output VAT. The Tax Code enumerates which services are zero-rated,
thus:
(1) Processing, manufacturing or repacking goods for other persons doing business outside
the Philippines which goods are subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP);(2) Services other than those mentioned in the preceding
sub-paragraph, the consideration for which is paid for in acceptable foreign currency
and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP);(3) Services rendered to persons or entities whose exemption under special laws or
international agreements to which the Philippines is a signatory effectively subjects the supply of
such services to zero rate;(4) Services rendered to vessels engaged exclusively in
international shipping; and(5) Services performed by subcontractors and/or contractors in
processing, converting, or manufacturing goods for an enterprise whose export sales exceed
seventy percent (70%) of total annual production. Another essential condition for qualification to
zero-rating under the tax code is that the recipient of such services is doing business outside
the Philippines. Services other than processing, manufacturing, or repacking of goods
must likewise be performed for persons doing business outside the Philippines. If the provider
and recipient of the “other services” are both doing business in the Philippines, the
payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT
under Section 102(a) can avoid paying the VAT by simply stipulating payment in foreign
currency inwardly remitted by the recipient of services. In this case, the payer-recipient of
respondent’s services is the Consortium which is a joint-venture doing business in the
Philippines. While the Consortium’s principal members are non-resident foreign corporations,
the Consortium itself is doing business in the Philippines. Respondent, as subcontractor of the
Consortium, operates and maintains NAPOCOR’s power barges in the Philippines. NAPOCOR
pays the Consortium, through its non-resident partners, partly in foreign currency outwardly
remitted. In turn, the Consortium pays respondent also in foreign currency inwardly
remitted and accounted for in accordance with BSP rules. This payment scheme does not entitle
respondent to 0% VAT.
THE COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. ACESITE
(PHILIPPINES) HOTEL CORPORATION, respondent.
Facts: Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along
United Nations Avenue in Manila. It leases 6,768.53 square meters of the hotel's
premises to the Philippine Amusement and Gaming Corporation [hereafter, PAGCOR]
for casino operations. It also caters food and beverages to PAGCOR's casino patrons
through the hotel's restaurant outlets. For the period January (sic) 96 to April 1997,
Acesite incurred VAT amounting to P30,152,892.02 from its rental income and sale of
food and beverages to PAGCOR during said period. Acesite tried to shift the said taxes
to PAGCOR by incorporating it in the amount assessed to PAGCOR but the latter
refused to pay the taxes on account of its tax exempt status.
Thus, PAGCOR paid the amount due to Acesite minus the P30,152,892.02 VAT while
the latter paid the VAT to the Commissioner of Internal Revenue [hereafter, CIR] as it
feared the legal consequences of non-payment of the tax. However, Acesite belatedly
arrived at the conclusion that its transaction with PAGCOR was subject to zero rate as
it was rendered to a tax-exempt entity. On 21 May 1998, Acesite filed an administrative
claim for refund with the CIR but the latter failed to resolve the same. Thus on 29 May
1998, Acesite filed a petition with the Court of Tax Appeals [hereafter, CTA] which
was decided in this wise:
“As earlier stated, Petitioner is subject to zero percent tax pursuant to Section 102
(b)(3) [now 106(A)(C)] insofar as its gross income from rentals and sales to PAGCOR,
a tax exempt entity by virtue of a special law. Accordingly, the amounts of
P21,413,026.78 and P8,739,865.24, representing the 10% EVAT on its sales of food
and services and gross rentals, respectively from PAGCOR shall, as a matter of course,
be refunded to the petitioner for having been inadvertently remitted to the respondent.
Thus, taking into consideration the prescribed portion of Petitioner's claim for refund
of P98,743.40, and considering further the principle of 'solutio indebiti'which requires
the return of what has been delivered through mistake, Respondent must refund to the
Petitioner the amount of P30,054,148.64. WHEREFORE, in view of all the foregoing,
the instant Petition for Review is partially GRANTED. The Respondent is hereby
ORDERED to REFUND to the petitioner the amount of THIRTY MILLION FIFTY
FOUR THOUSAND ONE HUNDRED FORTY EIGHT PESOS AND SIXTY FOUR
CENTAVOS (P30,054,148.64) immediately.” The CA affirmed the decision in toto.
Issues: (1) whether PAGCOR's tax exemption privilege includes the indirect tax of
VAT to entitle Acesite to zero percent (0%) VAT rate; and (2) whether the zero percent
(0%) VAT rate under then Section 102 (b) (3) of the Tax Code (now Section 108 (B)
(3) of the Tax Code of 1997) legally applies to Acesite.
Held: In resolving the first issue on whether PAGCOR's tax exemption privilege includes the
indirect tax of VAT to entitle Acesite to zero percent (0%) VAT rate, we answer in the affirmative.
We will however discuss both issues together.
PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an exemption from
the payment of taxes. Section 13 of P.D. 1869 pertinently provides:
Sec. 13. Exemptions. —
xxx xxx xxx
(2) Income and other taxes. — (a) Franchise Holder: No tax of any kind
or form, income or otherwise, as well as fees, charges or levies of
whatever nature, whether National or Local, shall be assessed and
collected under this Franchise from the Corporation; nor shall any form
of tax or charge attach in any way to the earnings of the
Corporation, except a Franchise Tax of five (5%) percent of the gross
revenue or earnings derived by the Corporation from its operation under
this Franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or
assessments of any kind, nature or description, levied, established or
collected by any municipal, provincial, or national government
authority. DScTaC
xxx xxx xxx
 (b) Others: The exemptions herein granted for earnings derived from the
operations conducted under the franchise specifically from the payment
of any tax, income or otherwise, as well as any form of charges, fees or
levies, shall inure to the benefit of and extend to corporation(s),
association(s), agency(ies), or individual(s) with whom the Corporation
or operator has any contractual relationship in connection with the
operations of the casino(s) authorized to be conducted under this
Franchise and to those receiving compensation or other remuneration
from the Corporation or operator as a result of essential facilities
furnished and/or technical services rendered to the Corporation or
operator. (Emphasis supplied.)
Petitioner contends that the above tax exemption refers only to PAGCOR's direct tax liability and
not to indirect taxes, like the VAT.
We disagree.
A close scrutiny of the above provisos clearly gives PAGCOR a blanket exemption to taxes with
no distinction on whether the taxes are direct or indirect. We are one with the CA ruling that
PAGCOR is also exempt from indirect taxes, like VAT, as follows:
Under the above provision [Section 13 (2) (b) of P.D. 1869], the term
"Corporation" or operator refers to PAGCOR. Although the law does not
specifically mention PAGCOR's exemption from indirect
taxes, PAGCOR is undoubtedly exempt from such taxes because the law
exempts from taxes persons or entities contracting with PAGCOR in
casino operations. Although, differently worded, the provision clearly
exempts PAGCOR from indirect taxes. In fact, it goes one step further by
granting tax exempt status to persons dealing with PAGCOR in casino
operations. The unmistakable conclusion is that PAGCOR is not liable
for the P30,152,892.02 VAT and neither is Acesite as the latter is
effectively subject to zero percent rate under Sec. 108 B (3). R.A. 8424.
(Emphasis supplied.)
Indeed, by extending the exemption to entities or individuals dealing with PAGCOR, the
legislature clearly granted exemption also from indirect taxes. It must be noted that the indirect
tax of VAT, as in the instant case, can be shifted or passed to the buyer, transferee, or lessee of
the goods, properties, or services subject to VAT. Thus, by extending the tax exemption to entities
or individuals dealing with PAGCOR in casino operations, it is exempting PAGCOR from being
liable to indirect taxes.
The manner of charging VAT does not make PAGCOR liable to said tax
It is true that VAT can either be incorporated in the value of the goods, properties, or services
sold or leased, in which case it is computed as 1/11 of such value, or charged as an additional
10% to the value. Verily, the seller or lessor has the option to follow either way in charging its
clients and customer. In the instant case, Acesite followed the latter method, that is, charging an
additional 10% of the gross sales and rentals. Be that as it may, the use of either method, and in
particular, the first method, does not denigrate the fact that PAGCOR is exempt from an indirect
tax, like VAT.
VAT exemption extends to Acesite
Thus, while it was proper for PAGCOR not to pay the 10% VAT charged by Acesite, the latter is
not liable for the payment of it as it is exempt in this particular transaction by operation of law to
pay the indirect tax. Such exemption falls within the former Section 102 (b) (3) of the 1977 Tax
Code,as amended (now Sec. 108 [b] [5] of R.A. 8424), which provides:
Section 102. Value-added tax on sale of services — (a) Rate and base of
tax — There shall be levied, assessed and collected, a value-added tax
equivalent to 10% of gross receipts derived by any person engaged in the
sale of services . . . ; Provided, that the following services performed in
the Philippines by VAT-registered persons shall be subject to
0%. aEIcHA
xxx xxx xxx
(b) Transactions subject to zero percent (0%) rated. —
xxx xxx xxx
(3) Services rendered to persons or entities whose exemption under
special laws or international agreements to which the Philippines is a
signatory effectively subjects the supply of such services to zero (0%)
rate (emphasis supplied).
The rationale for the exemption from indirect taxes provided for in P.D.
1869 and the extension of such exemption to entities or individuals
dealing with PAGCOR in casino operations are best elucidated from the
1987 case of Commissioner of Internal Revenue v. John Gotamco & Sons,
Inc., 5 where the absolute tax exemption of the World Health
Organization (WHO) upon an international agreement was upheld. We
held in said case that the exemption of contractee WHO should be
implemented to mean that the entity or person exempt is the contractor
itself who constructed the building owned by contractee WHO, and such
does not violate the rule that tax exemptions are personal because
the manifest intention of the agreement is to exempt the contractor so that
no contractor's tax may be shifted to the contractee WHO. Thus, the
proviso in P.D. 1869, extending the exemption to entities or individuals
dealing with PAGCOR in casino operations, is clearly to proscribe any
indirect tax, like VAT, that may be shifted to PAGCOR.
Acesite paid VAT by mistake
Considering the foregoing discussion, there are undoubtedly erroneous payments of the VAT
pertaining to the effectively zero-rate transactions between Acesite and PAGCOR. Verily, Acesite
has clearly shown that it paid the subject taxes under a mistake of fact, that is, when it was not
aware that the transactions it had with PAGCOR were zero-rated at the time it made the payments.
In UST Cooperative Store v. City of Manila, 6 we explained that "there is erroneous payment of
taxes when a taxpayer pays under a mistake of fact, as for the instance in a case where he is not
aware of an existing exemption in his favor at the time the payment was made." 7 Such payment
is held to be not voluntary and, therefore, can be recovered or refunded. 8
Moreover, it must be noted that aside from not raising the issue of Acesite's compliance with
pertinent Revenue Regulations on exemptions during the proceedings in the CTA, it cannot be
gainsaid that Acesite should have done so as it paid the VAT under a mistake of fact. Hence,
petitioner's argument on this point is utterly tenuous.
Solutio indebiti applies to the Government
Tax refunds are based on the principle of quasi-contract or solutio indebiti and the pertinent laws
governing this principle are found in Arts. 2142 and 2154 of the Civil Code, which provide, thus:
Art. 2142. Certain lawful, voluntary, and unilateral acts give rise to the
juridical relation of quasi-contract to the end that no one shall be unjustly
enriched or benefited at the expense of another.
Art. 2154. If something is received when there is no right to demand it,
and it was unduly delivered through mistake, the obligation to return it
arises. aSADIC
When money is paid to another under the influence of a mistake of fact, that is to say, on the
mistaken supposition of the existence of a specific fact, where it would not have been known that
the fact was otherwise, it may be recovered. The ground upon which the right of recovery rests is
that money paid through misapprehension of facts belongs in equity and in good conscience to
the person who paid it. 9
The Government comes within the scope of solutio indebiti principle as elucidated
in Commissioner of Internal Revenue v. Fireman's Fund Insurance Company, where we held that:
"Enshrined in the basic legal principles is the time-honored doctrine that no person shall unjustly
enrich himself at the expense of another. It goes without saying that the Government is not
exempted from the application of this doctrine." 10
Action for refund strictly construed; Acesite discharged the burden of proof
Since an action for a tax refund partakes of the nature of an exemption, which cannot be allowed
unless granted in the most explicit and categorical language, it is strictly construed against the
claimant who must discharge such burden convincingly. 11 In the instant case, respondent
Acesite had discharged this burden as found by the CTA and the CA. Indeed, the records show
that Acesite proved its actual VAT payments subject to refund, as attested to by an independent
Certified Public Accountant who was duly commissioned by the CTA. On the other hand,
petitioner never disputed nor contested respondent's testimonial and documentary evidence. In
fact, petitioner never presented any evidence on its behalf.
One final word. The BIR must release the refund to respondent without any unreasonable delay.
Indeed, fair dealing is expected by our taxpayers from the BIR and this duty demands that the
BIR should refund without any unreasonable delay what it has erroneously collected.
CIR VS MAGSAYSAY LINES
Facts: Pursuant to a government program of privatization, The NDC decided to sell in one lot its
NMC shares and five (5) of its ships, which are 3,700 DWT Tween-Decker, "Kloeckner" type
vessels. The vessels were constructed for the NDC between 1981 and 1984, then initially leased
to Luzon Stevedoring Company, also its wholly-owned subsidiary. Subsequently, the vessels
were transferred and leased, on a bareboat basis, to the NMC. The NMC shares and the vessels
were offered for public bidding. Among the stipulated terms and conditions for the public auction
was that the winning bidder was to pay "a value added tax of 10% on the value of the vessels."
On 3 June 1988, private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy the
shares and the vessels for P168,000,000.00. The bid was made by Magsaysay Lines, purportedly
for a new company still to be formed composed of itself and was approved by the Committee on
Privatization, and a Notice of Award dated 1 July 1988 was issued to Magsaysay Lines who in
turn was assessed of VAT through VAT Ruling No. 568-88 dated 14 December 1988 from the
BIR, holding that the sale of the vessels was subject to the 10% VAT. The ruling cited the fact
that NDC was a VAT-registered enterprise, and thus its "transactions incident to its normal VAT
registered activity of leasing out personal property including sale of its own assets that are
movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT].
CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary course
of NDC’s business, and was thus not subject to VAT, which under Section 99 of the Tax Code,
was applied only to sales in the course of trade or business. The CTA further held that the sale of
the vessels could not be "deemed sale," and thus subject to VAT, as the transaction did not fall
under the enumeration of transactions deemed sale as listed either in Section 100(b) of the Tax
Code, or Section 4 of R.R. No. 5-87. Finally, the CTA ruled that any case of doubt should be
resolved in favor of private respondents since Section 99 of the Tax Code which implemented
VAT is not an exemption provision, but a classification provision which warranted the resolution
of doubts in favor of the taxpayer. Hence CIR appealed the CTA Decision.
Issue: Whether the sale by the National Development Company (NDC) of five (5) of its vessels
to the private respondents is subject to value-added tax (VAT) under the National Internal
Revenue Code of 1986 (Tax Code) then prevailing at the time of the sale. The facts are culled
primarily from the ruling of the CTA.
Held: NOT SUBJECT TO VAT. VAT is ultimately a tax on consumption, even though it is
assessed on many levels of transactions on the basis of a fixed percentage. It is the end user of
consumer goods or services which ultimately shoulders the tax, as the liability therefrom is passed
on to the end users by the providers of these goods or services who in turn may credit their own
VAT liability (or input VAT) from the VAT payments they receive from the final consumer (or
output VAT). The final purchase by the end consumer represents the final link in a production
chain that itself involves several transactions and several acts of consumption. The VAT system
assures fiscal adequacy through the collection of taxes on every level of consumption, yet
assuages the manufacturers or providers of goods and services by enabling them to pass on their
respective VAT liabilities to the next link of the chain until finally the end consumer shoulders
the entire tax liability.
Yet VAT is not a singular-minded tax on every transactional level. Its assessment bears direct
relevance to the taxpayer’s role or link in the production chain. Hence, as affirmed by Section 99
of the Tax Code and its subsequent incarnations, the tax is levied only on the sale, barter or
exchange of goods or services by persons who engage in such activities, in the course of trade or
business. These transactions outside the course of trade or business may invariably contribute to
the production chain, but they do so only as a matter of accident or incident. As the sales of goods
or services do not occur within the course of trade or business, the providers of such goods or
services would hardly, if at all, have the opportunity to appropriately credit any VAT liability as
against their own accumulated VAT collections since the accumulation of output VAT arises in
the first place only through the ordinary course of trade or business.
That the sale of the vessels was not in the ordinary course of trade or business of NDC was
appreciated by both the CTA and the Court of Appeals, the latter doing so even in its first decision
which it eventually reconsidered. We cite with approval the CTA’s explanation on this point: In
Imperial v. Collector of Internal Revenue, G.R. No. L-7924, September 30, 1955 (97 Phil. 992),
the term "carrying on business" does not mean the performance of a single disconnected act, but
means conducting, prosecuting and continuing business by performing progressively all the acts
normally incident thereof; while "doing business" conveys the idea of business being done, not
from time to time, but all the time. "Course of business" is what is usually done in the management
of trade or business .
Court explained that "course of business" or "doing business" connotes regularity of activity. In
the instant case, the sale was an isolated transaction. The sale which was involuntary and made
pursuant to the declared policy of Government for privatization could no longer be repeated or
carried on with regularity. It should be emphasized that the normal VAT-registered activity of
NDC is leasing personal property.
This finding is confirmed by the Revised Charter of the NDC which bears no indication that the
NDC was created for the primary purpose of selling real property. The conclusion that the sale
was not in the course of trade or business, which the CIR does not dispute before this Court,
should have definitively settled the matter. Any sale, barter or exchange of goods or services not
in the course of trade or business is not subject to VAT. Accordingly, the Court rules that given
the undisputed finding that the transaction in question was not made in the course of trade or
business of the seller, NDC that is, the sale is not subject to VAT pursuant to Section 99 of the
Tax Code, no matter how the said sale may hew to those transactions deemed sale as defined
under Section 100. Petition Denied.
CIR VS MIGRANT PAGBILAO CORP
Facts: Migrant Pagbilao Corporation (MPC) is a corporation engaged in the business of
power generation and distribution. It accumulated input taxes in the amount of 39,330,500.85
from April 1, 1996 to December 31, 1996. MPC claims that it paid these input taxes to the
suppliers of capital goods and services for the construction and development of power plants.
MPC applied for tax credit/refund on the unutilized VAT paid on capital goods. Without
waiting for the BIR Commissioner to answer, MPC filed a petition for review to toll the
running of the2-year prescriptive period for claiming a refund under the law. The BIR in its
answer denied MPC’s application citing that MPC’s claim for refund is still being investigated
before the BIR, that the action is premature, and that tax credit laws are construed against
MPC. Upon investigation, the Revenue Officer recommended for the approval of the tax
credit but it reduced the amount from39,330,500.85 to 28,745,502.40, as duly proven by
valid invoices or official receipts. The CTA ruled that indeed, MPC is entitled to tax credit
but the amount is reduced in line with the Revenue Officer’s findings. The BIR filed a motion for
reconsideration that was subsequently denied. On appeal, the BIR raised that MPC being an
electric utility is subject to franchise tax and not VAT and since itis VAT exempt, it can’t claim
tax refund. The CA denied BIR’s appeal upholding that it is not allowed to change its theory on
appeal.
Issues:
1. Whether the BIR is allowed to change its theory on appeal.
2. Whether Input VAT on capital goods and services is allowed.
Ruling:
1. The SC prohibited the BIR from changing its theory on the case and raising anew issue on
appeal. As a rule, a party is never allowed to change its theory or raise a totally new issue on
appeal. On exceptional cases, the rules may be relaxed allowing new issues on appeal but it is
only done for good and sufficient causes in order to pave way for justice. The BIR has not shown
any good or sufficient cause for relaxing the rules.
2. Input VAT on capital goods and services may be claimed as tax refund. The BIR is erroneous
in stating that a VAT exempt or zero rated VAT payer is not allowed to claim tax credits. Pertinent
provisions of the Tax Code allow that Input VAT on capital goods be claimed as tax credit. Sec
106 (b) of the Tax Code of1986 as amended by RA 7716 expressly states that “A VAT- registered
person may apply for the issued of a tax credit certificate or refund of input taxes paid on capital
goods imported or locally purchased, to the extent that such input taxes have not been applied
against output taxes.”
SILICON PHILS (FORMERLY INTEL PHILS MANU INC.) VS CIR
Facts: Petitioner Silicon Philippines, Inc., a Philippine corporation engaged in the business of
designing, developing, manufacturing and exporting advance and large-scale integrated circuit
components or "IC’s.", is registered with the Bureau of Internal Revenue (BIR) as a Value Added
Tax (VAT) taxpayer. Petitioner filed with the respondent Commissioner of Internal Revenue
(CIR) an application for credit/refund of unutilized input VAT for 1998 in the amount of
P31,902,507.50.The CIR denied this application. On appeal to the Court of Tax Appeals
(CTA)Division, petitioner’s claim for refund of unutilized input VAT on capital goods was
granted. However, the CTA Division reduced the amount which petitioner claimed from
P15,170,082.00 to P9,898,867.00 .With regard to petitioner’s claim for credit/refund of input
VAT attributable to its zero-rated export sales, the CTA Division denied the same. Upon denial
of its motion for reconsideration, petitioner elevated the case to the CTA En Banc. The CTA En
Banc denied petitioner’s claim for credit/ refund of input VAT attributable to its zero-rated sales
due to its failure to show that it secured an Authorization-to-Print (ATP) invoices from the BIR
and to indicate the same in its export sales invoices; and failure to print the word "zero-rated" in
its export sales invoices. It also ruled that the items being claimed as capital goods (training
materials, office supplies, posters, banners, t-shirts, books and the like) purchased by petitioner
were not duly proven to have been used, directly or indirectly in the production or sale of taxable
goods or services. As such, they cannot be considered as capital goods, and so the
reduction decided by the CTA Division was upheld.
Issues:
1. Whether or not petitioner can claim credit/refund of input VAT attributable to its zero-rated
sales.
2. Whether or not the petitioner can claim input VAT paid on capital goods.
Ruling:
1. No. In a claim for credit/refund of input VAT attributable to zero-rated sales, Section112 (A)
of the NIRC lays down four requisites: (1) the taxpayer must be VAT-registered; (2) the taxpayer
must be engaged in sales which are zero-rated or effectively zero-rated; (3) the claim must be
filed within two years after the close of the taxable quarter when such sales were made; and (4)
the creditable input tax due or paid must be attributable to such sales, except the transitional input
tax, to the extent that such input tax has not been applied against the output tax. Under Section
112(A) of the NIRC, a claimant must be engaged in sales which are zero-rated or effectively zero-
rated. To prove this, duly registered invoices or receipts evidencing zero-rated sales must be
presented. However, since the ATP is not indicated in the invoices or receipts, the only way to
verify whether the invoices or receipts are duly registered is by requiring the claimant to present
its ATP from the BIR. Without this proof, the invoices or receipts would have no probative value
for the purpose of refund. In the case of Intel, we emphasized that “It is not specifically required
that the BIR authority to print be reflected or indicated therein. Indeed, what is important with
respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and
that invoices or receipts are duly registered.” The non-presentation of the ATP and the failure to
indicate the word "zero-rated" in the invoices or receipts are fatal to a claim for credit/refund of
input VAT on zero-rated sales. The failure to indicate the ATP in the sales invoices or receipts,
on the other hand, is not. In this case, petitioner failed to present its ATP and to print the word
"zero-rated" on its export sales invoices. Thus, the CTA ruled correctly.
2. No. To claim a refund of input VAT on capital goods, Section 112 (B) of the NIRC requires
that: (1) The claimant must be a VAT registered person; (2) The input taxes claimed must have
been paid on capital goods; (3) The input taxes must not have been applied against any output tax
liability; and (4) The administrative claim for refund must have been filed within two years after
the close of the taxable quarter when the importation or purchase was made. Section 4.106-1(b)of
RR No. 7-95 defines capital goods as “goods or properties with estimated useful life greater that
one year and which are treated as depreciable assets under Section 29 (f), used directly or
indirectly in the production or sale of taxable goods or services.” Based on this definition, the
Supreme Court affirmed the findings of the CTA that training materials, office supplies, posters,
banners, T-shirts, books, and the other similar items reflected in petitioner’s Summary of
Importation of Goods are not capital goods. The reduction in the refundable input VAT on capital
goods from P15,170,082.00 to P9,898,867.00 is proper.
ATLAS CONSOLIDATED MINING AND DEVELOPMENT CORPORATION VS CIR
FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and
sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its
purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and
1992. BIR did not immediately act on the matter prompting the petitioner to file a petition for
review before the CTA. The latter denied the claims on the grounds that for zero-rating to apply,
70% of the company's sales must consists of exports, that the same were not filed within the 2-
year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April
20, 1994), and that petitioner failed to submit substantial evidence to support its claim for
refund/credit.
The petitioner, on the other hand, contends that CTA failed to consider the following: sales to
PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period
should be counted from the date of filing of the last adjustment return which was April 15, 1993,
and not on every end of the applicable quarters; and that the certification of the independent CPA
attesting to the correctness of the contents of the summary of suppliers’ invoices or receipts
examined, evaluated and audited by said CPA should substantiate its claims.
ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications
for refund/credit of input VAT?
HELD: No. Although the Court agreed with the petitioner corporation that the two-year
prescriptive period for the filing of claims for refund/credit of input VAT must be counted from
the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the
EPZA are taxed as exports because these export processing zones are to be managed as a separate
customs territory from the rest of the Philippines, and thus, for tax purposes, are effectively
considered as foreign territory, it still denies the claims of petitioner corporation for refund of its
input VAT on its purchases of capital goods and effectively zero-rated sales during the period
claimed for not being established and substantiated by appropriate and sufficient evidence.
Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign
authority, and should be construed in strictissimi juris against the person or entity claiming the
exemption. The taxpayer who claims for exemption must justify his claim by the clearest grant
of organic or statute law and should not be permitted to stand on vague implications.
*** OTHER VERSION***
ATLAS CONSOLIDATED VS. CIR
Facts: Atlas Consolidated is a zero-rated VAT person for being an exporter of copper
concentrates. On January 1994, Atlas filed its VAT return for the fourth quarter of 1993, showing
a total input tax and an excess VAT credit. Then, on January 1996, Atlas filed for a tax refund or
tax credit certificate with CIR. However, the CTA denied Atlas claim for refund due to Atlas’
failure to comply with the documentary requirements prescribed under Sec. 16 of RR No. 5-87,
as amended by RR No. 3-88. CTA denied Atlas’ MR stating that Atlas has failed to substantiate
its claim that it has not applied its alleged excess in put taxes to any of its subsequent quarter’s
output tax liability. The CA affirmed CTA’s ruling.
ISSUE: What are the documents required to claim for VAT input refund? W/N Atlas is entitled
to claim to a tax refund.
Ruling: When claiming tax refund/credit, the VAT-registered taxpayer must be able to establish
that it does not have refundable or creditable input VAT, and the same has not been applied against
its output VAT liabilities – information which are supposed to be reflected in the taxpayer’s VAT
returns. Thus, an application for tax refund/credit must be accompanied by copies of the
taxpayer’s VAT return/s for the taxable quarter/s concerned.
The formal offer of evidence of Atlas failed to include photocopy of its export documents, as
required. Without the export documents, the purchase invoice/receipts submitted by Atlas as proof
of its input taxes cannot be verified as being directly attributable to the goods so exported. Atlas
claim for credit or refund of input taxes cannot be granted due to its failure to show convincingly
that the same has not been applied to any of its output tax liability as provided under Sec. 106(a)
of the Tax Code.
National Internal Revenue Code; value-added tax; claim for credit or refund of input value-added
tax; documentary requirements. When claiming tax refund or credit, the value-added taxpayer
must be able to establish that it does have refundable or creditable input value-added tax (VAT),
and the same has not been applied against its output VAT liabilities- information which are
supposed to be reflected in the taxpayer’s VAT returns. Thus, an application for tax refund or
credit must be accompanied by copies of the taxpayer’s VAT return or returns for taxable quarter
or quarters concerned. Atlas Consolidated Mining and Development Corporation vs
Commissioner of Internal Revenue, G.R. No. 159471, January 26, 2011.
In the recent case of Mirant Pagbilao Corporation vs. CIR (G.R. No. 172129, September 12,
2008), the Supreme Court had ruled that the claim for refund of unutilized input VAT payments
must be filedwithin two (2) years from the close of the taxable quarter when the relevant sales
were made. Said
ruling, however, should not be made to apply to the present case but should be applied
prospectively pursuant to and consistent with the numerous rulings of the Supreme Court, given
that petitioner Kepco's claim involves unutilized input taxes for the 3rd quarter of 2000. Hence,
the prescriptive period applicable in the instant case would still be the period enunciated in the
case of Atlas Consolidated Mining and Development Corporation vs. CIR (G.R. Nos. 141104 &
148763, June 8, 2007), where it was held that the counting of the two-year prescriptive period is
reckoned from the filing of the quarterly VAT returns.
PANASONIC COMMUNICATIONS IMAGING CORP. VS CIR
Facts: Petitioner Panasonic Communications Imaging Corporation of the Philippines
produces and exports plain paper copiers and their sub-assemblies, parts, and components. It is a
registered value-added tax (VAT) enterprise. From1998 to 1999, petitioner generated export
sales where it paid input VAT of P9,368,482.40 believing that its sales are zero-rated sales.
Claiming that the input VAT it paid remained unutilized. Panasonic filed with the Bureau of
Internal Revenue (BIR) two separate applications for refund or tax credit of what it paid. When
the BIR did not act on the same, Panasonic filed a petition for review with the Court of Tax
Appeals (CTA). The CTA First Division denied the petition stating that while petitioner’s
export sales were subject to 0% VAT under the NIRC, the same did not qualify for zero-rating
because the word "zero-rated" was not printed on its export invoices. This omission
violates the invoicing requirements of Section 4.108-1 of Revenue Regulations (RR) 7-95. The
motion for reconsideration was denied. On appeal, the CTA en banc upheld the First Division’s
decision.
Issue: Whether or not the words "zero-rated" must appear in the sales invoice so that a claim for
refund of unutilized input VAT on zero-rated sales will be proper.
Ruling: Yes. Zero-rated transactions generally refer to the export sale of goods and services.
When applied to the tax base or the selling price of the goods or services sold, such zero rate
results in no tax chargeable against the foreign buyer or customer. But, although the seller in such
transactions charges no output tax, he can claim a refund of the VAT that his suppliers
charged him. The seller thus enjoys automatic zero rating, which allows him to
recover the input taxes he paid relating to the export sales, making him internationally
competitive. For the effective zero rating of such transactions, however, the taxpayer has to be
VAT-registered and must comply with invoicing requirements. Interpreting these
requirements, respondent CIR ruled that under Revenue Memorandum Circular(RMC) 42-2003,
the taxpayer’s failure to comply with invoicing requirements will result in the disallowance of his
claim for refund. If the claim for refund is based on the existence of zero-rated sales
by the taxpayer but it fails to comply with the invoicing requirements in the issuance of sales
invoices, its claim for tax credit/refund of VAT on its purchases shall be denied considering that
the invoice it is issuing to its customers does not depict its being a VAT-registered taxpayer
whose sales are classified as zero-rated sales. Nonetheless, this treatment is without prejudice
to the right of the taxpayer to charge the input taxes to the appropriate expense account or asset
accounts subject to depreciation, whichever is applicable. Moreover, the case shall be
referred by the processing office to the concerned BIR office for verification of other tax liabilities
of the taxpayer.
J.R.A. PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE
Doctrine:
– The absence of the word “zero rated” on the invoices/receipts is fatal to a claim for credit/refund
of input VAT.
– Stare decisis et non quieta movere. Courts are bound by prior decisions. Thus, once a case has
been decided one way, courts have no choice but to resolve subsequent cases involving the same
issue in the same manner.
Facts: Petitioner J.R.A. Philippines, Inc., a domestic corporation, is engaged in the manufacture
and wholesale export of jackets, pants, trousers, overalls, shirts, polo shirts, ladies' wear, dresses
and other wearing apparel. It is registered with the Bureau of Internal Revenue (BIR) as a VAT
taxpayer and as an Ecozone Export Enterprise with the Philippine Economic Zone Authority
(PEZA).
On separate dates, petitioner filed with the Revenue District Office (RDO) No. 54 of the BIR,
Trece Martires City, applications for tax credit/refund of unutilized input VAT on its zero-rated
sales for the taxable quarters of 2000 in the total amount of P8,228,276.34, broken down as
follows:
1st quarter P2,369,060.97
2nd quarter 2,528,126.02
3rd quarter 1,918,015.38
4th quarter 1,413,073.97 7
The claim for credit/refund, however, remained unacted by the respondent. Hence, petitioner was
constrained to file a petition before the CTA.
Proceedings before the Second Division of the Court of Tax Appeals
On April 16, 2002, petitioner filed a Petition for Review 8 with the CTA for the refund/credit of
the same input VAT which was docketed as CTA Case No. 6454 and raffled to the Second
Division of the CTA.
In his Answer, respondent interposed the following special and affirmative defenses, to wit:
4. Petitioner's alleged claim for refund is subject to administrative
routinary investigation/examination by the Bureau;
 5. Being allegedly registered with the Philippine Economic Zone
Authority as an export enterprise, petitioner's business is not subject to
VAT pursuant to Section 24 of R.A. No. 7916 in relation to Section 109
(q) of the Tax Code. Hence, it is not entitled to tax credit of input taxes
pursuant to Section 4.103-1 of Revenue Regulations No. 7-95;
6. The amount of P8,228,276.34 being claimed by petitioner as alleged
unutilized VAT input taxes for the year 2000 was not properly
documented;
7. In an action for refund, the burden of proof is on the taxpayer to
establish its right to refund, and failure to [do so] is fatal to the claim for
refund/credit;
8. Petitioner must show that it has complied with the provisions of Section
204 (c) and 229 of the Tax Code on the prescriptive period for claiming
tax refund/credit;
9. Claims for refund are construed strictly against the claimant for the
same partake the nature of exemption from taxation. 10
After trial, the Second Division of the CTA rendered a Decision 11 denying petitioner's claim for
refund/credit of input VAT attributable to its zero-rated sales due to the failure of petitioner to
indicate its Taxpayer's Identification Number-VAT (TIN-V) and the word "zero-rated" on its
invoices. Aggrieved by the Decision, petitioner filed a Motion for Reconsideration 14 to which
respondent filed an Opposition. 15 Petitioner, in turn, tendered a Reply. 16 The Second Division
of the CTA, however, stood firm on its Decision and denied petitioner's Motion for lack of merit
in a Resolution 17 dated October 5, 2005. This prompted petitioner to elevate the matter to the
CTA En Banc. 18 aTcIEH
Ruling of the CTA En Banc
On January 15, 2007, the CTA En Banc denied the petition, reiterating that failure to comply with
invoicing requirements results in the denial of a claim for refund. Presiding Justice Ernesto D.
Acosta (Presiding Justice Acosta) concurred with the findings of the majority that there was
failure on the part of petitioner to comply with the invoicing requirements; 21 he dissented,
however, to the outright denial of petitioner's claim since there are other pieces of evidence
proving petitioner's transactions and VAT status. Petitioner sought reconsideration of the
Decision but the CTA En Banc denied the same in a Resolution. dated March 16, 2007. Presiding
Justice Acosta maintained his dissent.
Issue: Whether or not the failure to print the word “zero-rated” on the invoices/receipts is fatal to
a claim for credit/ refund of input VAT on zero-rated sales
Held: Yes. The absence of the word “zero rated” on the invoices/receipts is fatal to a claim for
credit/refund of input VAT. This has been squarely resolved in Panasonic Communications
Imaging Corporation of the Philippines (formerly Matsushita Business Machine Corporation of
the Philippines) v. Commissioner of Internal Revenue (G.R. No. 178090, 612 SCRA 28, February
8, 2010). In that case, the claim for tax credit/refund was denied for non-compliance with Section
4.108-1 of Revenue Regulations No. 7-95, which requires the word “zero rated” to be printed on
the invoices/receipts covering zero-rated sales.
From the abovementioned decision, the Court ruled that the appearance of the word “zero-rated”
on the face of invoices covering zero-rated sales prevents buyers from falsely claiming input VAT
from their purchases when no VAT was actually paid. If, absent such word, a successful claim
for input VAT is made, the government would be refunding money it did not collect. Stare decisis
et non quieta movere. Courts are bound by prior decisions. Thus, once a case has been decided
one way, courts have no choice but to resolve subsequent cases involving the same issue in the
same manner [Agencia Exquisite of Bohol, Incorporated v. Commissioner of Internal Revenue,
G.R. Nos. 150141, 157359 and 158644, February 12, 2009, 578 SCRA 539, 550].
MINDANAO II GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF INTERNAL
REVENUE; MINDANAO I GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF
INTERNAL REVENUE
DOCTRINE: SUMMARY OF RULES ON PRESCRIPTIVE PERIODS INVOLVING VAT
(1) An administrative claim must be filed with the CIR within two years after the close of the
taxable quarter when the zero-rated or effectively zero-rated sales were made.
(2) The CIR has 120 days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit
certificate. The 120-day period may extend beyond the two-year period from the filing of the
administrative claim if the claim is filed in the later part of the two-year period. If the 120-day
period expires without any decision from the CIR, then the administrative claim may be
considered denied by inaction
(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s
decision denying the administrative claim, or from the expiration of the 120-day period without
any action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance
on 10 December 2003 up to its reversal by this Court in Aichi on 6 October 2010, as an exception
to the mandatory and jurisdictional 120+30 day periods.
FACTS: Mindanao I and II (Mindanao) are value-added taxpayers, and Block Power Production
Facilities accredited by the Department of Energy. They had a Build-Operate-Transfer contract
with the Philippine National Oil Corporation–Energy Development Company (PNOC-EDC),
whereby Mindanao converts steam supplied to it by PNOC-EDC into electricity, and then delivers
the electricity to the National Power Corporation (NPC) in behalf of PNOC-EDC. The Electric
Power Industry Reform Act of 2000 (EPIRA, RA 9136), amended the Tax Reform Act of 1997
(RA 8424), when it decreed that sales of power by generation companies shall be subjected to a
zero rate of VAT. Pursuant to EPIRA, Mindanao I and II filed their claims for the issuance of tax
credit certificates on unutilized or excess input taxes from their sales of generated power and
delivery of electric capacity and energy to NPC. The CTA En Banc denied Mindanao II’s claims
for refund tax credit for the first and second quarters of 2003, and Mindanao I’s claims for
refund/tax credit for the first, second, third, and fourth quarters of 2003, for being filed out of
time.
CTA (En Banc): Mindanao II’s judicial claims were filed beyond the period allowed in Sec.
112(A), by which the reckoning of the two-year prescriptive period for filing the application for
refund or credit of input VAT attributable to zero-rated sales or effectively zero-rated sales shall
be counted from the close of the taxable quarter when the sales were made (regardless of whether
the tax was actually paid), according to CIR v. Mirant Pagbilao Corporation (Mirant). Also, the
sale of the fully-depreciated Nissan Patrol is incidental to Mindanao II’s VAT zero-rated
transactions and is VATable pursuant to Sec. 105.
Mindanao I’s claims for the first, second, third and fourth quarters of 2003 were filed out of time.
Section 229 is inapplicable in light of Mirant. Moreover, the procedure prescribed under Section
112(C) should be followed first before the CTA En Banc can act on Mindanao I’s claim.
Mindanao I and II went up to the Supreme Court arguing that their claims were timely filed
pursuant to the case of Atlas, which was then the controlling ruling at the time of the filing. The
Mirant case, which uses the close of the taxable quarter when the sales were made as the reckoning
date in counting the two-year prescriptive period, cannot be applied retroactively to their
prejudice.
[1] ISSUE: Whether the reckoning date for counting the two-year prescriptive period in Section
112 should be counted from the end of the taxable quarter when the sales were made (Mirant) or
the date of filing the return (Atlas)?
HELD: Neither Atlas nor Mirant applies, because when Mindanao II and Mindanao I filed their
respective administrative and judicial claims in 2005, neither case had been promulgated. Atlas
was promulgated on 8 June 2007, Mirant on 12 September 2008. Besides, Atlas merely stated
that the two-year prescriptive period should be counted from the date of payment of the output
VAT, not from the close of the taxable quarter when the sales involving the input VAT were
made. The Atlas doctrine did not interpret, expressly or impliedly, the 120+30 day periods.
Prescriptive Period for the Filing of Administrative Claims
Section 112(A) of the 1997 Tax Code was the applicable law at the time of filing of the claims in
issue, therefore the claims needed to have been filed within two (2) years after the close of the
taxable quarter when the sales were made. Mindanao I and II’s administrative claims for the first
quarter of 2003 had prescribed, but their claims for the second, third and fourth quarters of 2003
were filed on time.
Prescriptive Period for the Filing of Judicial Claims
In determining whether the claims for the second, third and fourth quarters of 2003 had been
properly appealed, there is still see no need to refer to either Atlas or Mirant, or even to Sec. 229.
The second paragraph of Sect. 112(C) is clear that the taxpayer can appeal to the CTA “within
thirty (30) days from the receipt of the decision denying the claim or after the expiration of the
one hundred twenty day-period.”
The 120+30 day periods are mandatory and jurisdictional. The taxpayer cannot simply file a
petition with the CTA without waiting for the Commissioner’s decision within the 120-day
period, because otherwise there would be no “decision” or “deemed a denial” decision for the
CTA to review. Moreover, Sec. 112(C) expressly grants a 30-day period to appeal to the CTA,
and this period need not necessarily fall within the two-year prescriptive period, as long as the
administrative claim is filed within such time. The said prescriptive period does not refer to the
filing of the judicial claim with the CTA, but to the administrative claim with the Commissioner.
San Roque: Recognition of BIR Ruling No. DA-489-03
BIR Ruling No. DA-489-03 provided that the “taxpayer-claimant need not wait for the lapse of
the 120-day period before it could seek judicial relief with the CTA.” In the consolidated cases of
CIR v. San Roque, however, the Supreme Court En Banc held that the taxpayer cannot simply
file a petition with the CTA without waiting for the Commissioner’s decision within the 120-day
jurisdictional period. Notwithstanding, the Court also held in San Roque that BIR Ruling No.
DA-489-03 constitutes equitable estoppel in favor of taxpayers. Being a general interpretative
rule, it can be relied on by all taxpayers from the time of its issuance on 10 December 2003 up to
its reversal by the Court in Commissioner of Internal Revenue v. Aichi Forging Company of Asia,
Inc. (Aichi) on 6 October 2010, where this Court held that the 120+30 day periods are mandatory
and jurisdictional.”
Mindanao II filed its administrative claims for the second, third, and fourth quarters of 2003
on 13 April 2005. Counting 120 days after filing of the administrative claim (11 August
2005) and 30 days after the CIR’s denial by inaction, the last day for filing a judicial claim
with the CTA for the second, third, and fourth quarters of 2003 was on 12 September 2005.
However, the judicial claim could not be filed earlier than 11 August 2005, which was the
expiration of the 120-day period for the Commissioner to act.
Mindanao II filed its judicial claim for the second quarter before the expiration of the 120-
day period; it was thus prematurely filed. However, pursuant to San Roque, the claim
qualifies under the exception to the strict application of the 120+30 day periods. Its judicial
claims for the third quarter and fourth quarter of 2003 were filed on time.
Mindanao I filed its administrative claims for the second, third, and fourth quarters of 2003
on 4 April 2005. Counting 120 days after filing of the administrative claim with the CIR (2
August 2005) and 30 days after the CIR’s denial by inaction, the last day for filing a judicial
claim was on 1 September 2005. However, the judicial claim cannot be filed earlier than 2
August 2005, which is the expiration of the 120-day period for the Commissioner to act on
the claim. Mindanao I prematurely filed its judicial claim for the second quarter of 2003 but
claim qualifies under the exception in San Roque. Its judicial claims for the third and fourth
quarters of 2003, however, were filed after the prescriptive period.
[2] ISSUE: Whether the sale of the fully-depreciated Nissan Patrol is a one-time transaction not
incidental to the VAT zero-rated operation of Mindanao II, thus not VATable?
HELD: Mindanao II asserts that the sale of a fully depreciated Nissan Patrol is not an incidental
transaction in the course of its business but an isolated transaction that should not have been
subject to 10% VAT. It does not follow that an isolated transaction cannot be an incidental
transaction for purposes of VAT liability. Indeed, a reading of Section 105 would show that a
transaction “in the course of trade or business” includes “transactions incidental thereto.” In the
course of its business, Mindanao II bought and eventually sold a Nissan Patrol. Prior to the sale,
the Nissan Patrol was part of Mindanao II’s property, plant, and equipment. Therefore, the sale
of the Nissan Patrol is an incidental transaction made in the course of Mindanao II’s business
which should be liable for VAT.

FORT BONIFACIO VS CIR (2014)- NO DIGEST
LEONARDO-DE CASTRO, J p:
The Court has consolidated these three petitions as they involve the same parties, similar facts
and common questions of law. This is not the first time that Fort Bonifacio Development
Corporation (FBDC) has come to this Court about these issues against the very same respondents,
and the Court En Banc has resolved them in two separate, recent cases 1 that are applicable here
for reasons to be discussed below.
G.R. No. 175707 is an appeal by certiorari pursuant to Rule 45 of the 1997 Rules of Civil
Procedure from (a) the Decision 2 dated April 22, 2003 of the Court of Appeals in CA-G.R. SP
No. 61516 dismissing FBDC's Petition for Review with regard to the Decision of the Court of
Tax Appeals (CTA) dated October 13, 2000 in CTA Case No. 5885, and from (b) the Court of
Appeals Resolution 3 dated November 30, 2006 denying its Motion for Reconsideration.
G.R. No. 180035 is likewise an appeal by certiorari pursuant to Rule 45 from (a) the Court of
Appeals Decision 4 dated April 30, 2007 in CA-G.R. SP No. 76540 denyingFBDC's Petition for
Review with respect to the CTA Resolution 5 dated March 28, 2003 in CTA Case No. 6021, and
from (b) the Court of Appeals Resolution 6 dated October 8, 2007 denying its Motion for
Reconsideration.
The CTA Resolution reconsidered and reversed its earlier Decision 7 dated January 30, 2002
ordering respondents in CTA Case No. 6021 to refund or issue a tax credit certificate in favor of
petitioner in the amount of P77,151,020.46, representing "VAT erroneously paid by or illegally
collected from petitioner for the first quarter of 1998, and instead denied petitioner's Claim for
Refund therefor." 8
G.R. No. 181092 is also an appeal by certiorari pursuant to Rule 45 from the Court of
Appeals Decision 9 dated December 28, 2007 in CA-G.R. SP No. 61158 dismissingFBDC's
petition for review with respect to the CTA Decision 10 dated September 29, 2000 in CTA Case
No. 5694. The aforesaid CTA Decision, which the Court of Appeals affirmed, denied petitioner's
Claim for Refund in the amount of P269,340,469.45, representing "VAT erroneously paid by or
illegally collected from petitioner for the fourth quarter of 1996." 11
The facts are not in dispute.
Petitioner FBDC (petitioner) is a domestic corporation duly registered and existing under
Philippine laws. Its issued and outstanding capital stock is owned in part by the Bases Conversion
Development Authority, a wholly-owned government corporation created by Republic Act No.
7227 for the purpose of "accelerating the conversion of military reservations into alternative
productive uses and raising funds through the sale of portions of said military reservations in order
to promote the economic and social development of the country in general." 12 The remaining
fifty-five per cent (55%) is owned by Bonifacio Land Corporation, a consortium of private
domestic corporations. 13
Respondent Commissioner of Internal Revenue is the head of the Bureau of Internal Revenue
(BIR). Respondent Revenue District Officer, Revenue District No. 44, Taguig and Pateros, BIR,
is the chief of the aforesaid District Office.
The parties entered into a Stipulation of Facts, Documents, and Issue 14 before the CTA for each
case. It was established before the CTA that petitioner is engaged in the development and sale of
real property. It is the owner of, and is developing and selling, parcels of land within a "newtown"
development area known as the Fort Bonifacio Global City (the Global City), located within the
former military camp known as Fort Bonifacio, Taguig, Metro Manila. 15 The National
Government, by virtue ofRepublic Act No. 7227 16 and Executive Order No. 40, 17 was the one
that conveyed to petitioner these parcels of land on February 8, 1995. IDaCcS
In May 1996, petitioner commenced developing the Global City, and since October 1996, had
been selling lots to interested buyers. 18 At the time of acquisition, value-added tax (VAT) was
not yet imposed on the sale of real properties. Republic Act No. 7716 (the Expanded Value-
Added Tax [E-VAT] Law), 19 which took effect on January 1, 1996, restructured the VAT system
by further amending pertinent provisions of the National Internal Revenue Code (NIRC). Section
100 of the old NIRC was so amended by including "real properties" in the definition of the term
"goods or properties," thereby subjecting the sale of "real properties" to VAT. The provision, as
amended, reads:
SEC. 100. Value-Added Tax on Sale of Goods or Properties. — (a) Rate
and Base of Tax. — There shall be levied, assessed and collected on every
sale, barter or exchange of goods or properties, a value-added tax
equivalent to 10% of the gross selling price or gross value in money of
the goods or properties sold, bartered or exchanged, such tax to be paid
by the seller or transferor.
(1) The term "goods or properties" shall mean all tangible and
intangible objects which are capable of pecuniary
estimation and shall include:
(A) Real properties held primarily for sale to
customers or held for lease in the
ordinary course of trade or business[.]
While prior to Republic Act No. 7716, real estate transactions were not subject to VAT, they
became subject to VAT upon the effectivity of said law. Thus, the sale of the parcels of land by
petitioner became subject to a 10% VAT, and this was later increased to 12%, pursuant
to Republic Act No. 9337. 20 Petitioner afterwards became a VAT-registered taxpayer.
On September 19, 1996, in accordance with Revenue Regulations No. 7-95 (Consolidated VAT
Regulations), petitioner submitted to respondent BIR, Revenue District No. 44, Taguig and
Pateros, an inventory list of its properties as of February 29, 1996. The total book value of
petitioner's land inventory amounted to P71,227,503,200.00. 21
On the basis of Section 105 of the NIRC,22 petitioner claims a transitional or presumptive input
tax credit of 8% of P71,227,503,200.00, the total value of the real properties listed in its inventory,
or a total input tax credit of P5,698,200,256.00. 23 After the value of the real properties was
reduced due to a reconveyance by petitioner to BCDA of a parcel of land, petitioner claims that
it is entitled to input tax credit in the reduced amount of P4,250,475,000.48. 24
What petitioner seeks to be refunded are the actual VAT payments made by it in cash, which it
claims were either erroneously paid by or illegally collected from it. 25Each Claim for Refund is
based on petitioner's position that it is entitled to a transitional input tax credit under Section 105
of the old NIRC, which more than offsets the aforesaid VAT payments.
G.R. No. 175707
Petitioner's VAT returns filed with the BIR show that for the second quarter of 1997, petitioner
received the total amount of P5,014,755,287.40 from its sales and lease of lots, on which the
output VAT payable was P501,475,528.74. 26 The VAT returns likewise show that petitioner
made cash payments totaling P486,355,846.78 and utilized its input tax credit of P15,119,681.96
on purchases of goods and services. 27
On February 11, 1999, petitioner filed with the BIR a claim for refund of the amount of
P486,355,846.78 which it paid in cash as VAT for the second quarter of 1997. 28
On May 21, 1999, petitioner filed with the CTA a petition for review 29 by way of appeal,
docketed as CTA Case No. 5885, from the alleged inaction by respondents of petitioner's claim
for refund with the BIR. On October 1, 1999, the parties submitted to the CTA a Stipulation of
Facts, Documents and Issue. 30 On October 13, 2000, the CTA issued its Decision 31 in CTA
Case No. 5885 denying petitioner's claim for refund for lack of merit.
On November 23, 2000, petitioner filed with the Court of Appeals a Petition for Review of the
aforesaid CTA Decision, which was docketed as CA-G.R. SP No. 61516. On April 22, 2003, the
CA issued its Decision 32 dismissing the Petition for Review. On November 30, 2006, the Court
of Appeals issued its Resolution 33 denying petitioner's Motion for Reconsideration.
On December 21, 2006, this Petition for Review was filed.
Petitioner submitted its Memorandum 34 on November 7, 2008 while respondents filed their
"Comment" 35 on May 4, 2009. 36
On December 2, 2009, petitioner submitted a Supplement 37 to its Memorandum dated
November 6, 2008, stating that the said case is intimately related to the cases of "Fort Bonifacio
Development Corporation v. Commissioner of Internal Revenue, G.R. No. 158885, and Fort
Bonifacio Development Corporation v. Commissioner of Internal Revenue," G.R. No. 170680,
which were already decided by this Court, and which involve the same parties and similar facts
and issues. 38
Except for the amounts of tax refund being claimed and the periods covered for each claim, the
facts in this case and in the other two consolidated cases below are the same. The parties entered
into similar Stipulations in the other two cases consolidated here. 39
G.R. No. 180035
We quote relevant portions of the parties' Stipulation of Facts, Documents and Issue in CTA Case
No. 6021 40 below: HEDaTA
1.11. Per VAT returns filed by petitioner with the BIR, for the second
quarter of 1998, petitioner derived the total amount of P903,427,264.20
from its sales and lease of lots, on which the output VAT payable to the
Bureau of Internal Revenue was P90,342,726.42.
1.12. The VAT returns filed by petitioner likewise show that to pay said
amount of P90,342,726.42 due to the BIR, petitioner made cash payments
totalling P77,151,020.46 and utilized its regular input tax credit of
P39,878,959.37 on purchases of goods and services.
1.13. On November 22, 1999, petitioner filed with the BIR a claim for
refund of the amount of P77,151,020.46 which it paid as value-added tax
for the first quarter of 1998.
1.14. Earlier, on October 8, 1998 and November 17, 1998, February 11,
1999, May 11, 1999, and September 10, 1999, based on similar grounds,
petitioner filed with the BIR claims for refund of the amounts of
P269,340,469.45, P359,652,009.47, P486,355,846.78, P347,741,695.74,
and P15,036,891.26, representing value-added taxes paid by it on
proceeds derived from its sales and lease of lots for the quarters ended
December 31, 1996, March 31, 1997, June 30, 1997, September 30, 1997,
and December 31, 1997, respectively. After deducting these amounts of
P269,340,469.45, P359,652,009.47, P486,355,846.78, P347,741,695.74,
and P15,036,891.26 from the total amount of P5,698,200,256.00 claimed
by petitioner as input tax credit, the remaining input tax credit more than
sufficiently covers the amount of P77,151,020.46 subject of petitioner's
claim for refund of November 22, 1999.
1.15. As of the date of the Petition, no action had been taken by
respondents on petitioner's claim for refund of November 22,
1999. 41 (Emphases ours.)
The petition in G.R. No. 180035 "seeks to correct the unauthorized limitation of the term 'real
properties' to 'improvements thereon' by Revenue Regulations 7-95 and the error of the Court of
Tax Appeals and Court of Appeals in sustaining the aforesaid Regulations." 42 This theory of
petitioner is the same for all three cases now before us.
On March 14, 2013, petitioner filed a Motion for Consolidation 43 of G.R. No. 180035 with G.R.
No. 175707.
Petitioner submitted its Memorandum 44 on September 15, 2009 while respondents filed theirs
on September 22, 2009. 45
G.R. No. 181092
The facts summarized below are found in the parties' Stipulation of Facts, Documents and Issue
in CTA Case No. 5694: 46
1.09. Per VAT returns filed by petitioner with the BIR, for the fourth
quarter of 1996, petitioner derived the total amount
of P3,498,888,713.60 from its sales and lease of lots, on which the output
VAT payable to the Bureau of Internal Revenue was P318,080,792.14.
1.10. The VAT returns filed by petitioner likewise show that to pay said
amount of P318,080,792.14 due to the BIR, petitioner made cash
payments totalling P269,340,469.45 and utilized (a) part of the total
transitional/presumptive input tax credit of P5,698,200,256.00 being
claimed by it to the extent of P28,413,783.00; and (b) its regular input tax
credit of P20,326,539.69 on purchases of goods and services.
 1.11. On October 8, 1998 petitioner filed with the BIR a claim for refund
of the amounts of P269,340,469.45, which it paid as value-added tax.
1.12. As of the date of the Petition, no action had been taken by
respondents on petitioner's claim for refund. 47 (Emphases ours.)
Petitioner submitted its Memorandum 48 on January 18, 2010 while respondents filed theirs on
October 14, 2010. 49
On March 14, 2013, petitioner filed a Motion for Consolidation 50 of G.R. No. 181092 with G.R.
No. 175707.
On January 23, 2014, petitioner filed a Motion to Resolve 51 these consolidated cases, alleging
that the parties had already filed their respective memoranda; and, more importantly, that the
principal issue in these cases, whether petitioner is entitled to the 8% transitional input tax granted
in Section 105 (now Section 111 [A]) of the NIRCbased on the value of its inventory of land, and
as a consequence, to a refund of the amounts it paid as VAT for the periods in question, had
already been resolved by the Supreme Court En Banc in its Decision dated April 2, 2009 in G.R.
Nos. 158885 and 170680, as well as its Decision dated September 4, 2012 in G.R. No. 173425.
Petitioner further alleges that said decided cases involve the same parties, facts, and issues as the
cases now before this Court. 52
THEORY OF PETITIONER
Petitioner claims that "the 10% value-added tax is based on the gross selling price or gross value
in money of the 'goods' sold, bartered or exchanged." 53 Petitioner likewise claims that by
definition, the term "goods" was limited to "movable, tangible objects which is appropriable or
transferable" and that said term did not originally include "real property." 54 It was previously
defined as follows under Revenue Regulations No. 5-87:
(p) "Goods" means any movable, tangible objects which is appropriable
or transferrable.
Republic Act No. 7716 (E-VAT Law, January 1, 1996) expanded the coverage of
the original VAT Law (Executive Order No. 273), specifically Section 100 of the old NIRC.
According to petitioner, while under Executive Order No. 273, the term "goods" did not
include real properties, Republic Act No. 7716, in amending Section 100, explicitly included
in the term "goods" "real properties held primarily for sale to customers or held for lease in
the ordinary course of trade or business." Consequently, the sale, barter, or exchange of real
properties was made subject to a VAT equivalent to 10% (later increased to 12%, pursuant
to Republic Act No. 9337) of the gross selling price of real properties. HAEDCT
Among the new provisions included by Executive Order No. 273 in the NIRC was the following:
SEC. 105. Transitional Input Tax Credits. — A person who becomes
liable to value-added tax or any person who elects to be a VAT-registered
person shall, subject to the filing of an inventory as prescribed by
regulations, be allowed input tax on his beginning inventory of goods,
materials and supplies equivalent to 8% of the value of such inventory or
the actual value-added tax paid on such goods, materials and supplies,
whichever is higher, which shall be creditable against the output tax.
According to petitioner, the E-VAT Law, Republic Act No. 7716, did not amend Section 105.
Thus, Section 105, as quoted above, remained effective even after the enactment of Republic Act
No. 7716.
Previously, or on December 9, 1995, the Secretary of Finance and the Commissioner of Internal
Revenue issued Revenue Regulations No. 7-95, which included the following provisions:
SECTION 4.100-1. Value-added tax on sale of goods or properties.
— VAT is imposed and collected on every sale, barter or exchange or
transactions "deemed sale" of taxable goods or properties at the rate of
10% of the gross selling price.
"Gross selling price" means the total amount of money or its equivalent
which the purchaser pays or is obligated to pay to the seller in
consideration of the sale, barter or exchange of the goods or properties,
excluding the value-added tax. The excise tax, if any, on such goods or
properties shall form part of the gross selling price. In the case of sale,
barter or exchange of real property subject to VAT, gross selling price
shall mean the consideration stated in the sales document or the zonal
value whichever is higher. Provided however, in the absence of zonal
value, gross selling price refers to the market value shown in the latest
declaration or the consideration whichever is higher.
"Taxable sale" refers to the sale, barter, exchange and/or lease of goods
or properties, including transactions "deemed sale" and the performance
of service for a consideration, all of which are subject to tax under
Sections 100 and 102 of the Code.
Any person otherwise required to register for VAT purposes who fails to
register shall also be liable to VAT on his sale of taxable goods or
properties as defined in the preceding paragraph. The sale of goods
subject to excise tax is also subject to VAT, except manufactured
petroleum products (other than lubricating oil, processed gas, grease, wax
and petrolatum).
"Goods or properties" refer to all tangible and intangible objects which
are capable of pecuniary estimation and shall include:
1. Real properties held primarily for sale to customers or held
for lease in the ordinary course of trade or business.
xxx xxx xxx
SECTION 4.104-1. Credits for input tax. —
"Input tax" means the value-added tax due from or paid by a VAT-
registered person on importation of goods or local purchases of goods or
services, including lease or use of property, from another VAT-registered
person in the course of his trade or business. It shall also include the
transitional or presumptive input tax determined inaccordance with
Section 105 of the Code.
xxx xxx xxx
SECTION 4.105-1. Transitional input tax on beginning inventories. —
Taxpayers who became VAT-registered persons upon effectivity of RA
No. 7716 who have exceeded the minimum turnover of P500,000.00 or
who voluntarily register even if their turnover does not exceed
P500,000.00 shall be entitled to a presumptive input tax on the inventory
on hand as of December 31, 1995 on the following; (a) goods purchased
for sale in their present condition; (b) materials purchased for further
processing, but which have not yet undergone processing; (c) goods
which have been manufactured by the taxpayer; (d) goods in process and
supplies, all of which are for sale or for use in the course of the taxpayer's
trade or business as a VAT-registered person.
However, in the case of real estate dealers, the basis of the presumptive
input tax shall be the improvements, such as buildings, roads, drainage
systems, and other similar structures, constructed on or after effectivity
of E.O. 273 (January 1, 1988).
The transitional input tax shall be 8% of the value of the inventory or
actual VAT paid, whichever is higher, which amount may be allowed as
tax credit against the output tax of the VAT-registered person.
The value allowed for income tax purposes on inventories shall be the
basis for the computation of the 8% excluding goods that are exempt from
VAT under SECTION 103. Only VAT-registered persons shall be
entitled to presumptive input tax credits. HIAcCD
xxx xxx xxx
TRANSITORY PROVISIONS
(a) Presumptive Input Tax Credits —
(i) For goods, materials or supplies not for sale but purchased
for use in business in their present condition, which
are not intended for further processing and are on
hand as of December 31, 1995, a presumptive input
tax equivalent to 8% of the value of the goods or
properties shall be allowed.
(ii) For goods or properties purchased with the object of resale
in their present condition, the same presumptive
input tax equivalent to 8% of the value of the goods
unused as of December 31, 1995 shall be allowed,
which amount may also be credited against the
output tax of a VAT-registered person.
(iii) For real estate dealers, the presumptive input tax of 8% of
the book value of improvements constructed on or
after January 1, 1988 (the effectivity of E.O. 273)
shall be allowed.
For purposes of sub-paragraphs (i), (ii) and (iii) above, an inventory as of
December 31, 1995 of such goods or properties and improvements
showing the quantity, description, and amount should be filed with the
RDO not later than January 31, 1996. (Emphases supplied.)
Petitioner argues that Section 4.100-1 of Revenue Regulations No. 7-95 explicitly limited the
term "goods" as regards real properties to "improvements, such as buildings, roads, drainage
systems, and other similar structures," thereby excluding the real property itself from the coverage
of the term "goods" as it is used in Section 105 of the NIRC. This has brought about, as a
consequence, the issues involved in the instant case.
Petitioner claims that the "Court of Appeals erred in not holding that Revenue Regulations No. 6-
97 has effectively repealed or repudiated Revenue Regulations No. 7-95 insofar as the latter
limited the transitional/presumptive input tax credit which may be claimed under Section 105 of
the NIRC to the 'improvements' on real properties."55 Petitioner argues that the provision in
Section 4.105-1 of Revenue Regulations No. 7-95 stating that in the case of real estate dealers,
the basis of the input tax credit shall be the improvements, has been deleted by Revenue
Regulations No. 6-97, dated January 2, 1997, which amended Revenue Regulations No. 7-
95. Revenue Regulations No. 6-97 was issued to implement Republic Act No. 8241 (the law
amending Republic Act No. 7716, the E-VAT Law), which took effect on January 1, 1997.
Petitioner notes that Section 4.105-1 of Revenue Regulations No. 6-97 is but a reenactment of
Section 4.105-1 of Revenue Regulations No. 7-95, with the only difference being that the
following paragraph in Revenue Regulations No. 7-95 was deleted:
However, in the case of real estate dealers, the basis of the presumptive
input tax shall be the improvements, such as buildings, roads, drainage
systems, and other similar structures, constructed on or after the
effectivity of E.O. 273 (January 1, 1988).
Petitioner calls this an express repeal, and with the deletion of the above paragraph, what stands
and should be applied "is the statutory definition in Section 100 of theNIRC of the term 'goods'
in Section 105 thereof." 56
Petitioner contends that the relevant provision now states that "[t]he transitional input tax credit
shall be eight percent (8%) of the value of the beginning inventory . . . on such goods, materials
and supplies." It no longer limits the allowable transitional input tax credit to "improvements" on
the real properties. The amendment recognizes that the basis of the 8% input tax credit should not
be confined to the value of the improvements. Petitioner further contends that the Commissioner
of Internal Revenue has in fact corrected the mistake in Revenue Regulations No. 7-95. 57
Petitioner argues that Revenue Regulations No. 6-97, being beneficial to the taxpayer, should be
given a retroactive application. 58 Petitioner states that the transactions involved in these
consolidated cases took place after Revenue Regulations No. 6-97 took effect, under the
provisions of which the transitional input tax credit with regard to real properties would be based
on the value of the land inventory and not limited to the value of the improvements.
Petitioner assigns another error: the Court of Appeals erred in holding that Revenue Regulations
No. 7-95 is a valid implementation of the NIRC and in according it great respect, and should have
held that the same is invalid for being contrary to the provisions of Section 105 of the NIRC. 59
Petitioner contends that Revenue Regulations No. 7-95 is not valid for being contrary to the
express provisions of Section 105 of the NIRC,and in fact amends the same, for it limited the
scope of Section 105 "to less than what the law provides." 60 Petitioner elaborates:
[Revenue Regulations No. 7-95] illegally constricted the provisions of the
aforesaid section. It delimited the coverage of Section 105 and practically
amended it in violation of the fundamental principle that administrative
regulations are subordinate to the law. Based on the numerous authorities
cited above, Section 4.105-1 and the Transitory Provisions of Revenue
Regulations No. 7-95 are invalid and ineffective insofar as they limit the
input tax credit to 8% of the value of the "improvements" on land, for
being contrary to the express provisions of Section 105, in relation to
Section 100, of the NIRC,and the Court of Appeals should have so
held. 61 THDIaC
Petitioner likewise raises the following arguments:
• The rule that the construction given by the administrative agency
charged with the enforcement of the law should be accorded
great weight by the courts, does not apply here. 62
• . . . Section 4.105-1 of Revenue Regulations No. 7-95 neither exclude[s]
nor prohibit[s] that the 8% input tax credit may also [be] based
on the taxpayer's inventory of land. 63
• The issuance of Revenue Regulations No. 7-95 by the [BIR], which
changed the statutory definition of "goods" with regard to the
application of Section 105 of theNIRC,and the declaration of
validity of said regulations by the Court of Appeals and Court
of Tax Appeals, was in violation of the fundamental principle
of separation of powers. 64
xxx xxx xxx
Insofar, therefore, as Revenue Regulation[s] No. 7-95 limited the scope
of the term "goods" under Section 105, to "improvements" on real
properties, contrary to the definition of "goods" in Section 100, [RR] No.
7-95 decreed "what the law shall be", now "how the law may be
enforced", and is, consequently, of no effect because it constitutes undue
delegation of legislative power.
xxx xxx xxx
[T]he transgression by the BIR and the CTA and CA of the basic principle
of separation of powers, including the fundamental rule of non-delegation
of legislative power, is clear. 65
Furthermore, petitioner claims that:
SINCE THE PROVISIONS OF SECTION 105 OF THE [NIRC] IN
RELATION TO SECTION 100 THEREOF, ARE CLEAR, THERE
WAS NO BASIS AND NECESSITY FOR THE BUREAU OF
INTERNAL REVENUE AND THE COURT OF APPEALS AND THE
COURT OF TAX APPEALS TO INTERPRET AND CONSTRUE THE
SAME. 66
PETITIONER IS CLEARLY ENTITLED TO THE
TRANSITIONAL/PRESUMPTIVE INPUT TAX CREDIT GRANTED
IN SECTION 105 OF THE NIRC AND HENCE TO A REFUND OF
THE VALUE-ADDED TAX PAID BY IT FOR THE SECOND
QUARTER OF 1997. 67
Petitioner insists that there was no basis and necessity for the BIR, the CTA, and the Court of
Appeals to interpret and construe Sections 100 and 105 of the NIRCbecause "where the law
speaks in clear and categorical language, or the terms of the statute are clear and unambiguous
and free from doubt, there is no room for interpretation or construction and no interpretation or
construction is called for; there is only room for application." 68 Petitioner asserts that legislative
intent is determined primarily from the language of the statute; legislative intent has to be
discovered from the four corners of the law; and thus, where no ambiguity appears, it may be
presumed conclusively that the clear and explicit terms of a statute express the legislative
intention. 69
So looking at the cases now before us, petitioner avers that the Court of Appeals, the CTA, and
the BIR did not merely interpret and construe Section 105, and that they virtually amended the
said section, for it is allegedly clear from Section 105 of the old NIRC, in relation to Section 100,
that "legislative intent is to the effect that the taxpayer is entitled to the input tax credit based on
the value of the beginning inventory of land, not merely on the improvements thereon, and
irrespective of any prior payment of sales tax or VAT." 70
THEORY OF RESPONDENTS
Petitioner's claims for refund were consistently denied in the three cases now before us. Even if
in one case, G.R. No. 180035, petitioner succeeded in getting a favorable decision from the CTA,
the grant of refund or tax credit was subsequently reversed on respondents' Motion for
Reconsideration, and such denial of petitioner's claim was affirmed by the Court of Appeals.
Respondents' reasons for denying petitioner's claims are summarized in their Comment in G.R.
No. 175707, and we quote:
REASONS WHY PETITION SHOULD BE
DENIED OR DISMISSED
1. The 8% input tax credit provided for in Section 105 of the NIRC,in
relation to Section 100 thereof, is based on the value of the
improvements on the land.
2. The taxpayer is entitled to the input tax credit provided for in Section
105 of the NIRC only if it has previously paid VAT or sales
taxes on its inventory of land.
3. Section 4.105-1 of Revenue Regulations No. 7-95 of the BIR is valid,
effective and has the force and effect of law, which
implemented Section 105 of the NIRC. 71
In respondents' Comment 72 dated November 3, 2008 in G.R. No. 180035, they averred that
petitioner's claim for the 8% transitional/presumptive input tax is "inconsistent with the purpose
and intent of the law in granting such tax refund or tax credit." 73 Respondents raise the following
arguments:
1. The transitional input tax provided under Section 105 in relation to
Section 100 of the Tax Code,as amended by EO No.
273 effective January 1, 1988, is subject to certain conditions
which petitioner failed to meet. 74
2. The claim for petitioner for transitional input tax is in the nature of a
tax exemption which should be strictly construed against it. 75
3. Revenue Regulations No. 7-95 is valid and consistent with provisions
of the NIRC. 76 TaHIDS
Moreover, respondents contend that:
"[P]etitioner is not legally entitled to any transitional input tax credit,
whether it be the 8% presumptive input tax credit or any actual input tax
credit in respect of its inventory of land brought into the VAT regime
beginning January 1, 1996, in view of the following:
1. VAT free acquisition of the raw land. — petitioner purchased and
acquired, from the Government, the aforesaid raw land under
a VAT-free sale transaction. The Government, as a vendor,
was tax-exempt and accordingly did not pass on any VAT or
sales tax as part of the price paid therefor by the petitioner.
2. No transitory input tax on inventory of land is allowed. Section 105 of
the Code, as amended by Republic Act No. 7716, and as
implemented by Section 4.105-1 of Revenue Regulations No.
7-95, expressly provides that no transitional input tax credit
shall be allowed to real estate dealers in respect of their
beginning inventory of land brought into the VAT regime
beginning January 1, 1996 (supra). Likewise, the Transitory
Provisions [(a) (iii)] of Revenue Regulations No. 7-95
categorically states that "for real estate dealers, the
presumptive input tax of 8% of the book value of
improvements constructed on or after January 1, 1998
(effectivity of E.O. 273) shall be allowed." For purposes of
subparagraphs (i), (ii) and (iii) above, an inventory as of
December 31, 1995 of such goods or properties and
improvements showing the quantity, description, and amount
should be filed with the RDO not later than January 31, 1996.
It is admitted that petitioner filed its inventory listing of real
properties on September 19, 1996 or almost nine (9) months
late in contravention [of] the requirements in Revenue
Regulations No. 7-95." 77
Respondents, quoting the Civil Code,78 argue that Section 4.105-1 of Revenue Regulations No.
7-95 has the force and effect of a law since it is not contrary to any law orthe Constitution.
Respondents add that "[w]hen the administrative agency promulgates rules and regulations, it
makes a new law with the force and effect of a valid law . . . ." 79
ISSUES
The main issue before us now is whether or not petitioner is entitled to a refund of the amounts
of: 1) P486,355,846.78 in G.R. No. 175707, 2) P77,151,020.46 for G.R. No. 180035, and 3)
P269,340,469.45 in G.R. No. 181092, which it paid as value-added tax, or to a tax credit for said
amounts.
To resolve the issue stated above, it is also necessary to determine:
• Whether the transitional/presumptive input tax credit under Section 105
of the NIRC may be claimed only on the "improvements" on
real properties;
• Whether there must have been previous payment of sales tax or value-
added tax by petitioner on its land before it may claim the input
tax credit granted by Section 105 of the NIRC;
• Whether Revenue Regulations No. 7-95 is a valid implementation of
Section 105 of the NIRC;and
• Whether the issuance of Revenue Regulations No. 7-95 by the BIR, and
declaration of validity of said Regulations by the Court of Tax
Appeals and the Court of Appeals, was in violation of the
fundamental principle of separation of powers.
THE RULINGS BELOW
A. G.R. No. 175707
1. CTA Case No. 5885 Decision (October 13, 2000)
The CTA traced the history of "transitional input tax credit" from the original VAT Law of 1988
(Executive Order No. 273) up to the Tax Reform Act of 1997 and looked into Section 105 of
the Tax Code.According to the CTA, the BIR issued Revenue Regulations No. 5-87, specifically
Section 26 (b), 80 to implement the provisions of Section 105. The CTA concluded from these
provisions that "the purpose of granting transitional input tax credit to be utilized as payment for
output VAT is primarily to give recognition to the sales tax component of inventories which
would qualify as input tax credit had such goods been acquired during the effectivity of the VAT
Law of 1988." 81 The CTA stated that the purpose of transitional input tax credit remained the
same even after the amendments introduced by the E-VAT Law. 82 The CTA held that "the
rationale in granting the transitional input tax credit also serves as its condition for its availment
as a benefit" 83 and that "[i]nherent in the law is the condition of prior payment of VAT or sales
taxes." 84 The CTA excluded petitioner from availing of the transitional input tax credit provided
by law, reasoning that "to base the 8% transitional input tax on the book value of the land is to
negate the purpose of the law in granting such benefit. It would be tantamount to giving an
undeserved bonus to real estate dealers similarly situated as petitioner which the Government
cannot afford to provide." 85 Furthermore, the CTA held that respondent was correct in basing
the 8% transitional input tax credit on the value of the improvements on the land, citing Section
4.105-1 of Revenue Regulations No. 7-95, which the CTA claims is consistent and in harmony
with the law it seeks to implement. Thus, the CTA denied petitioner's claim for
refund. 86 aAcDSC
2. CA-G.R. No. 61516 Decision (April 22, 2003)
The Court of Appeals affirmed the CTA and ruled that petitioner is not entitled to refund or tax
credit in the amount of P486,355,846.78 and stated that "Revenue Regulations No. 7-95 is a valid
implementation of the NIRC." 87 According to the Court of Appeals:
"[P]etitioner acquired the contested property from the National
Government under a VAT-free transaction. The Government, as a vendor
was outside the operation of the VAT and ergo, could not possibly have
passed on any VAT or sales tax as part of the purchase price to the
petitioner as vendee." 88
. . . [T]he grant of transitional input tax credit indeed presupposes that the
manufacturers, producers and importers should have previously paid
sales taxes on their inventories. They were given the benefit of
transitional input tax credits, precisely, to make up for the previously paid
sales taxes which were now abolished by the VAT Law. It bears stressing
that the VAT Law took the place of privilege taxes, percentage taxes and
sales taxes on original or subsequent sale of articles. These taxes were
substituted by the VAT at the constant rate of 0% or 10%. 89
3. CA-G.R. No. 61516 Resolution (November 30, 2006)
Upon petitioner's Motion for Reconsideration, the Court of Appeals affirmed its decision, but we
find the following statement by the appellate court worthy of note:
We concede that the inventory restrictions under Revenue Regulations
No. 7-95 limiting the coverage of the inventory only to acquisition cost
of the materials used in building "improvements" has already been
deleted by Revenue Regulations 6-97. This notwithstanding, we are
poised to sustain our earlier ruling as regards the refund presently
claimed. 90
B. G.R. No. 180035
1. CTA Case No. 6021 Decision (January 30, 2002)
The CTA sustained petitioner's position and held that respondent erred in basing the transitional
input tax credit of real estate dealers on the value of the improvements. 91 The CTA ratiocinated
as follows:
This Court, in upholding the position taken by the petitioner, is convinced
that Section 105 of the Tax Code is clear in itself. Explicit therefrom is
the fact that a taxpayer shall be allowed a transitional/presumptive input
tax credit based on the value of its beginning inventory of goods which is
defined in Section 100 as to encompass even real property. . . . . 92
The CTA went on to point out inconsistencies it had found between the transitory provisions of
Revenue Regulations No. 7-95 and the law it sought to implement, in the following manner:
Notice that letter (a)(ii) of the . . . transitory provisions 93 states that
goods or properties purchased with the object of resale in their present
condition comes with the corresponding 8% presumptive input tax of
the value of the goods, which amount may also be credited against the
output tax of a VAT-registered person. It must be remembered that
Section 100 as amended by Republic Act No. 7716 extends the term
"goods or properties" to real properties held primarily for sale to
customers or held for lease in the ordinary course of trade or business.
This provision alone entitles Petitioner to the 8% presumptive input tax
of the value of the land (goods or properties) sold. However in letter
(a)(iii) of the same Transitory Provisions, Respondent apparently
changed his (sic) course when it declared that real estate dealers are only
entitled to the 8% of the value of the improvements. This glaring
inconsistency between the two provisions prove that Revenue
Regulations No. 7-95 was not a result of an intensive study and analysis
and may have been haphazardly formulated. 94
The CTA held that the implementing regulation, which provides that the 8% transitional input tax
shall be based on the improvements only of the real properties, is neither valid nor
effective. 95 The CTA also sustained petitioner's argument that Revenue Regulations No. 7-95
provides no specific date as to when the inventory list should be submitted. The relevant portion
of the CTA decision reads:
The only requirement is that the presumptive input tax shall be supported
by an inventory of goods as shown in a detailed list to be submitted to the
BIR. Moreover, the requirement of filing an inventory of goods not later
than January 31, 1996 in the transitory provision of the same regulation
refers to the recognition of presumptive input tax on goods or properties
on hand as of December 31, 1995 of taxpayers already liable to VAT as
of that date.
Clearly, Petitioner is entitled to the presumptive input tax in the amount
of P5,698,200,256.00, computed as follows:
Book Value of Inventory . . . P71,227,503,200.00
Multiply by Presumptive
Input Tax rate 8%
––––––––––––––––
Available Presumptive Input Tax P5,698,200,256.00
===============
The failure of the Petitioner to consider the presumptive input tax in the
computation of its output tax liability for the 1st quarter of 1998 results
to overpayment of the VAT for the same period.
To prove the fact of overpayment, Petitioner presented the original
Monthly VAT Declaration for the month of January 1998 showing the
 amount of P77,151,020.46 as the cash component of the value-added
taxes paid (Exhibits E-14 & E-14-A) which is the subject matter of the
instant claim for refund. TCAScE
In Petitioner's amended quarterly VAT return for the 1st quarter of 1998
(Exhibit D-1), Petitioner deducted the amount of P77,151,020.46 from
the total available input tax to show that the amount being claimed would
no longer be available as input tax credit.
In conclusion, the Petitioner has satisfactorily proven its entitlement to
the refund of value-added taxes paid for the first quarter of taxable year
1998.
WHEREFORE, in view of the foregoing, the Petition for Review
is GRANTED. Respondents are hereby ORDERED to REFUND or issue
a TAX CREDIT CERTIFICATE in favor of the Petitioner the total
amount of P77,151,020.46 representing the erroneously paid value-added
tax for the first quarter of 1998. 96
2. CTA Case No. 6021 Resolution (March 28, 2003)
The CTA reversed its earlier ruling upon respondents' motion for reconsideration and thus denied
petitioner's claim for refund. The CTA reasoned and concluded as follows:
The vortex of the controversy in the instant case actually involves the
question of whether or not Section 4.105-1 of Revenue Regulations No.
7-95, issued by the Secretary of Finance upon recommendation of the
Commissioner of Internal Revenue, is valid and consistent with and not
violative of Section 105 of the Tax Code,in relation to Section 100
(a)(1)(A).
xxx xxx xxx
We agree with the position taken by the respondents that Revenue
Regulations No. 7-95 is not contrary to the basic law which it seeks to
implement. As clearly worded, Section 105 of the Tax Code provides that
a person who becomes liable to value-added tax or any person who elects
to be a VAT-registered person shall be allowed 8% transitional input tax
subject to the filing of an inventory as prescribed by regulations.
Section 105, which requires the filing of an inventory for the grant of the
transitional input tax, is couched in a manner where there is a need for an
implementing rule or regulation to carry its intendment. True to its
wordings, the BIR issued Revenue Regulations No. 7-95 (specifically
Section 4.105-1) which succinctly mentioned that the basis of the
presumptive input tax shall be the improvements in case of real estate
dealers. 97
xxx xxx xxx
WHEREFORE, in view of the foregoing, the instant Motion for
Reconsideration filed by respondents is hereby GRANTED.
Accordingly, petitioner's claim for refund of the alleged overpaid Value-
Added Tax in the amount of P77,151,020.46 covering the first quarter of
1998 is hereby DENIED for lack of merit. 98
3. CA-G.R. SP No. 76540 Decision (April 30, 2007)
The Court of Appeals affirmed the CTA's Resolution denying petitioner's claim for refund, and
we quote portions of the discussion from the Court of Appeals decision below:
To Our mind, the key to resolving the jugular issue of this controversy
involves a deeper analysis on how the much-contested transitional input
tax credit has been encrypted in the country's value-added tax (VAT)
system.
xxx xxx xxx
. . . [T]he Commissioner of Internal Revenue promulgated Revenue
Regulations No. 7-95 which laid down, among others, the basis of the
transitional input tax credit for real estate dealers: 99
xxx xxx xxx
The Regulation unmistakably allows credit for transitional input tax of
any person who becomes liable to VAT or who elects to be a VAT-
registered person. More particularly, real estate dealers who were
beforehand not subject to VAT are allowed a tax credit to cushion the
staggering effect of the newly imposed 10% output VAT liability
under RA No. 7716.
Bearing in mind the purpose of the transitional input tax credit under the
VAT system, We find it incongruous to grant petitioner's claim for tax
refund. We take note of the fact that petitioner acquired the Global City
lots from the National Government. The transaction was not subject to
any sales or business tax. Since the seller did not pass on any tax liability
to petitioner, the latter may not claim tax credit. Clearly then, petitioner
cannot simply demand that it is entitled to the transitional input tax credit.
xxx xxx xxx
Another point. Section 105 of the National Internal Revenue Code,as
amended by EO No. 273, explicitly provides that the transitional input tax
credit shall be based on "the beginning inventory of goods, materials and
supplies or the actual value-added tax paid on such goods, materials and
supplies, whichever is higher." Note that the law did not simply say —
the transitional input tax credit shall be 8% of the beginning inventory of
goods, materials and supplies.
Instead, lawmakers went on to say that the creditable input tax shall
be whichever is higher between the value of the inventory and the actual
VAT paid. Necessarily then, a comparison of these two figures would
have to be made. This strengthens Our view that previous payment of the
VAT is indispensable to determine the actual value of the input tax
 creditable against the output tax. So too, this is in consonance with the
present tax credit method adopted in this jurisdiction whereby an entity
can credit against or subtract from the VAT charged on its sales or outputs
the VAT paid on its purchases, inputs and imports. HSAcaE
We proceed to traverse another argument raised in this
controversy. Petitioner insists that the term "goods" which was one of the
bases in computing the transitional input tax credit must be construed so
as to include real properties held primarily for sale to customers.
Petitioner posits that respondent Commissioner practically rewrote the
law when it issued Revenue Regulations No. 7-95 which limited the basis
of the 8% transitional input tax credit to the value of improvements alone.
Petitioner is clearly mistaken.
The term "goods" has been defined to mean any movable or tangible
objects which are appreciable or tangible. More specifically, the word
"goods" is always used to designate wares, commodities, and personal
chattels; and does not include chattels real. "Real property" on the other
hand, refers to land, and generally whatever is erected or growing upon
or affixed to land. It is therefore quite absurd to equate "goods" as being
synonymous to "properties". The vast difference between the terms
"goods" and "real properties" is so obvious that petitioner's assertion must
be struck down for being utterly baseless and specious.
Along this line, We uphold the validity of Revenue Regulations No. 7-
95. The authority of the Secretary of Finance, in conjunction with the
Commissioner of Internal Revenue, to promulgate all needful rules and
regulations for the effective enforcement of internal revenue laws cannot
be controverted. Neither can it be disputed that such rules and regulations,
as well as administrative opinions and rulings, ordinarily should deserve
weight and respect by the courts. Much more fundamental than either of
the above, however, is that all such issuances must not override, but must
remain consistent and in harmony with, the law they seek to apply and
implement. Administrative rules and regulations are intended to carry out,
neither to supplant nor to modify, the law. Revenue Regulations No. 7-95
is clearly not inconsistent with the prevailing statute insofar as the
provision on transitional input tax credit is concerned. 100
4. CA-G.R. SP No. 76540 Resolution (October 8, 2007)
In this Resolution, the Court of Appeals denied petitioner's Motion for Reconsideration of its
Decision dated April 30, 2007.
C. G.R. No. 181092
1. CTA Case No. 5694 Decision (September 29, 2000)
The CTA ruled that petitioner is not automatically entitled to the 8% transitional input tax allowed
under Section 105 of the Tax Code based solely on its inventory of real properties, and cited the
rule on uniformity in taxation duly enshrined in the Constitution. 101 According to the CTA:
As defined under the above Section 104 of the Tax Code,an "input tax"
means the VAT paid by a VAT-registered person in the course of his trade
or business on importation of goods or services from a VAT-registered
person; and that such tax shall include the transitional input
tax determined in accordance with Section 105 of the Tax
Code, supra. 102
Applying the rule on statutory construction that particular words, clauses
and phrases should not be studied as detached and isolated expressions,
but the whole and every part of the statute must be considered in fixing
the meaning of any of its parts in order to produce a harmonious whole,
the phrase "transitional input tax" found in Section 105 should be
understood to encompass goods, materials and supplies which are subject
to VAT, in line with the context of "input tax" as defined in Section 104,
most especially that the latter includes, and immediately precedes, the
former under its statutory meaning. Petitioner's contention that the 8%
transitional input tax is statutorily presumed to the extent that its real
properties which have not been subjected to VAT are entitled thereto,
would directly contradict "input tax" as defined in Section 104 and would
invariably cause disharmony. 103
The CTA held that the 8% transitional input tax should not be viewed as an outright grant or
presumption without need of prior taxes having been paid. Expounding on this, the CTA said:
The simple instance in the aforesaid paragraphs of requiring the tax on
the materials, supplies or goods comprising the inventory to be currently
unutilized as deferred sales tax credit before the 8% presumptive input
tax can be enjoyed readily leads to the inevitable conclusion that such 8%
tax cannot be just granted to any VAT liable person if he has no priorly
paid creditable sales taxes. Legislative intent thus clearly points to priorly
paid taxes on goods, materials and supplies before a VAT-registered
person can avail of the 8% presumptive input tax. 104
Anent the applicability to petitioner's case of the requirement under Article VI, Section 28, par. 1
of the Constitution that the rule of taxation shall be uniform and equitable, the CTA held thus:
Granting arguendo that Petitioner is statutorily presumed to be entitled to
the 8% transitional input tax as provided in Section 105, even without
having previously paid any tax on its inventory of goods, Petitioner would
be placed at a more advantageous position than a similar VAT-registered
person who also becomes liable to VAT but who has actually paid VAT
on his purchases of goods, materials and supplies. This is evident from
the alternative modes of acquiring the proper amount of transitional input
tax under Section 105, supra. One is by getting the equivalent amount of
8% tax based on the beginning inventory of goods, materials and supplies
and the other is by the actual VAT paid on such goods, materials and
supplies, whichever is higher.
As it is supposed to work, the transitional input tax should answer for the
10% output VAT liability that a VAT-registered person will incur once
 he starts business operations. While a VAT-registered person who is
allowed a transitional input tax based on his actual payment of 10% VAT
on his purchases can utilize the same to pay for his output VAT liability,
a similar VAT-registered person like herein Petitioner, when allowed the
alternative 8% transitional input tax, can offset his output VAT liability
equally through such 8% tax even without having paid any previous tax.
This obvious inequity that may arise could not have been the intention
and purpose of the lawmakers in granting the transitional input tax credit.
. . . 105 HaECDI
Evidently, Petitioner is not similarly situated both as to privileges and
liabilities to that of a VAT-registered person who has paid actual 10%
input VAT on his purchases of goods, materials and supplies. The latter
person will not earn anything from his transitional input tax which, to
emphasize, has been paid by him because the same will just offset his
10% output VAT liability. On the other hand, herein Petitioner will
earn gratis the amount equivalent to 10% output VAT it has passed on to
buyers for the simple reason that it has never previously paid any input
tax on its goods. Its gain will be facilitated by herein claim for refund if
ever granted. This is the reason why we do not see any incongruity in
Section 4.105-1 of Revenue Regulations No. 7-95 as it relates to Section
105 of the 1996 Tax Code,contrary to the contention of Petitioner.
Section 4.105-1 (supra), which bases the transitional input tax credit on
the value of the improvements, is consistent with the purpose of the law .
. . . 106
2. CA-G.R. SP No. 61158 Decision (December 28, 2007)
The Court of Appeals affirmed the CTA's denial of petitioner's claim for refund and upheld the
validity of the questioned Revenue Regulation issued by respondent Commissioner of Internal
Revenue, reasoning as follows:
Sec. 105 of the NIRC,as amended, provides that the allowance for the 8%
input tax on the beginning inventory of a VAT-covered entity is "subject
to the filing of an inventory as prescribed by regulations." This means that
the legislature left to the BIR the determination of what will constitute the
beginning inventory of goods, materials and supplies which will, in turn,
serve as the basis for computing the 8% input tax.
While the power to tax cannot be delegated to executive agencies, details
as to the enforcement and administration of an exercise of such power
may be left to them, including the power to determine the existence of
facts on which its operation depends . . . . Hence, there is no gainsaying
that the CIR and the Secretary of Finance, in limiting the application of
the input tax of real estate dealers to improvements constructed on or after
January 1, 1988, merely exercised their delegated authority under Sec.
105, id., to promulgate rules and regulations defining what should be
included in the beginning inventory of a VAT-registered entity.
xxx xxx xxx
In the instant case, We find that, contrary to petitioner's attacks against its
validity, the limitation on the beginning inventory of real estate dealers
contained in Sec. 4.105-1 of RR No. 7-95 is reasonable and consistent
with the nature of the input VAT. . . . .
Based on the foregoing antecedents, it is clear why the second paragraph
of Sec. 4.105-1 of RR No. 7-95 limits the transitional input taxes of real
estate dealers to the value of improvements constructed on or after
January 1, 1988. Since the sale of the land was not subject to VAT or
other sales taxes prior to the effectivity of Rep. Act No. 7716, real estate
dealers at that time had no input taxes to speak of. With this in mind, the
CIR correctly limited the application of the 8% transitional input tax to
improvements on real estate dealers constructed on or after January 1,
1988 when the VAT was initially implemented. This is, as it should be,
for to grant petitioner a refund or credit for input taxes it never paid would
be tantamount to unjust enrichment.
As petitioner itself observes, the input tax credit provided for by Sec. 105
of the NIRC is a mechanism used to grant some relief from burdensome
taxes. It follows, therefore, that not having been burdened by VAT or any
other sales tax on its inventory of land prior to the effectivity of Rep. Act
No. 7716, petitioner is not entitled to the relief afforded by Sec.
105, id. 107
The Court of Appeals ruled that petitioner is not similarly situated as those business entities which
previously paid taxes on their inputs, and stressed that "a tax refund or credit . . . is in the nature
of a tax exemption which must be construed strictissimi juris against the taxpayer . . . ." 108
THIS COURT'S RULING
As previously stated, the issues here have already been passed upon and resolved by this Court En
Banc twice, in decisions that have reached finality, and we are bound by the doctrine of stare
decisis to apply those decisions to these consolidated cases, for they involve the same facts, issues,
and even parties.
Thus, we find for the petitioner.
DISCUSSION
The errors assigned by petitioner to the Court of Appeals and the arguments offered by
respondents to support the denial of petitioner's claim for tax refund have already been dealt with
thoroughly by the Court En Banc in Fort Bonifacio Development Corporation v. Commissioner
of Internal Revenue, G.R. Nos. 158885 and170680 (Decision — April 2, 2009; Resolution —
October 2, 2009); and Fort Bonifacio Development Corporation v. Commissioner of Internal
Revenue, G.R. No. 173425(Decision — September 4, 2012; Resolution — January 22, 2013).
The Court En Banc decided on the following issues in G.R. Nos. 158885 and 170680:
1. In determining the 10% value-added tax in Section 100 of the [Old
NIRC] on the sale of real properties by real estate dealers, is
the 8% transitional input tax credit in Section 105 applied only
 to the improvements on the real property or is it applied on the
value of the entire real property? ASDCaI
2. Are Section 4.105.1 and paragraph (a)(III) of the Transitory Provisions
of Revenue Regulations No. 7-95 valid in limiting the 8%
transitional input tax to the improvements on the real property?
Subsequently, in G.R. No. 173425, the Court resolved issues that are identical to the ones raised
here by petitioner, 109 thus:
3.05.a. Whether Revenue Regulations No. 6-97 effectively repealed or
repudiated Revenue Regulations No. 7-95 insofar as the latter
limited the transitional/presumptive input tax credit which may
be claimed under Section 105 of the National Internal Revenue
Code to the "improvements" on real properties.
3.05.b. Whether Revenue Regulations No. 7-95 is a valid implementation
of Section 105 of the National Internal Revenue Code.
3.05.c. Whether the issuance of Revenue Regulations No. 7-95 by the
Bureau of Internal Revenue, and declaration of validity of said
Regulations by the Court of Tax Appeals and Court of
Appeals, [were] in violation of the fundamental principle of
separation of powers.
3.05.d. Whether there is basis and necessity to interpret and construe the
provisions of Section 105 of the National Internal Revenue
Code.
3.05.e. Whether there must have been previous payment of business tax
[sales tax or value-added tax] 110 by petitioner on its land
before it may claim the input tax credit granted by Section 105
of the National Internal Revenue Code.
3.05.f. Whether the Court of Appeals and Court of Tax Appeals merely
speculated on the purpose of the transitional/presumptive input
tax provided for in Section 105 of the National Internal
Revenue Code.
3.05.g. Whether the economic and social objectives in the acquisition of
the subject property by petitioner from the Government should
be taken into consideration. 111
The Court's pronouncements in the decided cases regarding these issues are discussed below. The
doctrine of stare decisis et non quieta movere, which means "to abide by, or adhere to, decided
cases," 112 compels us to apply the rulings by the Court to these consolidated cases before us.
Under the doctrine of stare decisis, "when this Court has once laid down a principle of law as
applicable to a certain state of facts, it will adhere to that principle, and apply it to all future cases,
where facts are substantially the same; regardless of whether the parties and property are the
same." 113 This is to provide stability in judicial decisions, as held by the Court in a previous
case:
Stand by the decisions and disturb not what is settled. Stare
decisis simply means that for the sake of certainty, a conclusion reached
in one case should be applied to those that follow if the facts are
substantially the same, even though the parties may be different. It
proceeds from the first principle of justice that, absent any powerful
countervailing considerations, like cases ought to be decided alike. 114
More importantly, we cannot depart from the legal precedents as laid down by the Court En
Banc. It is provided in the Constitution that "no doctrine or principle of law laid down by the court
in a decision rendered en banc or in division may be modified or reversed except by the court
sitting en banc." 115
What is left for this Court to do is to reiterate the rulings in the aforesaid legal precedents and
apply them to these consolidated cases.
As regards the main issue, the Court conclusively held that petitioner is entitled to the 8%
transitional input tax on its beginning inventory of land, which is granted in Section 105 (now
Section 111 [A]) of the NIRC,and granted the refund of the amounts petitioner had paid as output
VAT for the different tax periods in question. 116
Whether the transitional/presumptive
input tax credit under Section 105 of the
NIRC may be claimed only on the
"improvements" on real properties.
The Court held in the earlier consolidated decision, G.R. Nos. 158885 and 170680, as follows:
On its face, there is nothing in Section 105 of the Old NIRC that prohibits
the inclusion of real properties, together with the improvements thereon,
in the beginning inventory of goods, materials and supplies, based on
which inventory the transitional input tax credit is computed. It can be
conceded that when it was drafted Section 105 could not have possibly
contemplated concerns specific to real properties, as real estate
transactions were not originally subject to VAT. At the same time, when
transactions on real properties were finally made subject to VAT
beginning with Rep. Act No. 7716, no corresponding amendment was
adopted as regards Section 105 to provide for a differentiated treatment
in the application of the transitional input tax credit with respect to real
properties or real estate dealers.
It was Section 100 of the Old NIRC, as amended by Rep. Act No. 7716,
which made real estate transactions subject to VAT for the first time. Prior
to the amendment, Section 100 had imposed the VAT "on every sale,
barter or exchange of goods", without however specifying the kind of
properties that fall within or under the generic class "goods" subject to
the tax. cSEaDA
Rep. Act No. 7716, which significantly is also known as the Expanded
Value-Added Tax (EVAT) law, expanded the coverage of the VAT by
amending Section 100 of the Old NIRC in several respects, some of
which we will enumerate. First, it made every sale, barter or exchange of
 "goods or properties" subject to VAT. Second, it generally defined "goods (A) Transitional Input Tax Credits. — A person who becomes liable to
or properties" as "all tangible and intangible objects which are capable of value-added tax or any person who elects to be a VAT-registered person
pecuniary estimation." Third, it included a non-exclusive enumeration of shall, subject to the filing of an inventory according to rules and
various objects that fall under the class "goods or properties" subject to regulations prescribed by the Secretary of [F]inance, upon
VAT, including "[r]eal properties held primarily for sale to customers or recommendation of the Commissioner, be allowed input tax on his
held for lease in the ordinary course of trade or business." beginning inventory of goods, materials and supplies equivalent for 8%
of the value of such inventory or the actual value-added tax paid on such
From these amendments to Section 100, is there any differentiated VAT goods, materials and supplies, whichever is higher, which shall be
treatment on real properties or real estate dealers that would justify the creditable against the output tax. 119
suggested limitations on the application of the transitional input tax on
them? We see none. In G.R. Nos. 158885 and 170680, the Court asked, "If the plain text of Republic Act No.
7716 fails to supply any apparent justification for limiting the beginning inventory of real estate
Rep. Act No. 7716 clarifies that it is the real properties "held primarily dealers only to the improvements on their properties, how then were the Commissioner of Internal
for sale to customers or held for lease in the ordinary course of trade or Revenue and the courts a quo able to justify such a view?" 120 The Court then answered this
business" that are subject to the VAT, and not when the real estate question in this manner:
transactions are engaged in by persons who do not sell or lease properties
in the ordinary course of trade or business. It is clear that those regularly IV.
engaged in the real estate business are accorded the same treatment as the
merchants of other goods or properties available in the market. In the The fact alone that the denial of FBDC's claims is in accord with Section
same way that a milliner considers hats as his goods and a rancher 4.105-1 of RR 7-95 does not, of course, put this inquiry to rest. If Section
considers cattle as his goods, a real estate dealer holds real property, 4.105-1 is itself incongruent to Rep. Act No. 7716, the incongruence
whether or not it contains improvements, as his goods. 117 (Citations cannot by itself justify the denial of the claims. We need to inquire into
omitted, emphasis added.) the rationale behind Section 4.105-1, as well as the question whether the
interpretation of the law embodied therein is validated by the law itself.
xxx xxx xxx
xxx xxx xxx
Under Section 105, the beginning inventory of "goods" forms part of the
valuation of the transitional input tax credit. Goods, as commonly It is correct, as pointed out by the CTA, that upon the shift from sales
understood in the business sense, refers to the product which the VAT- taxes to VAT in 1987 newly-VAT registered people would have been
registered person offers for sale to the public. With respect to real estate prejudiced by the inability to credit against the output VAT their
dealers, it is the real properties themselves which constitute their "goods". payments by way of sales tax on their existing stocks in trade. Yet that
Such real properties are the operating assets of the real estate dealer. inequity was precisely addressed by a transitory provision inE.O. No.
273 found in Section 25 thereof. The provision authorized VAT-
Section 4.100-1 of RR No. 7-95 itself includes in its enumeration of registered persons to invoke a "presumptive input tax equivalent to 8% of
"goods or properties" such "real properties held primarily for sale to the value of the inventory as of December 31, 1987 of materials and
customers or held for lease in the ordinary course of trade or business." supplies which are not for sale, the tax on which was not taken up or
Said definition was taken from the very statutory language of Section 100 claimed as deferred sales tax credit," and a similar presumptive input tax
of the Old NIRC. By limiting the definition of goods to "improvements" equivalent to 8% of the value of the inventory as of December 31, 1987
in Section 4.105-1, the BIR not only contravened the definition of of goods for sale, the tax on which was not taken up or claimed as deferred
"goods" as provided in the Old NIRC, but also the definition which the sales tax credit. 121 (Emphasis ours.) THADEI
same revenue regulation itself has provided. 118 (Emphasis added.)
Whether there must have been previous
The Court then emphasized in its Resolution in G.R. No. 158885 and G.R. No. 170680 that payment of sales tax or value-added tax
Section 105 of the old NIRC, on the transitional input tax credit, remained intact despite the by petitioner on its land before petitioner
enactment of Republic Act No. 7716. Section 105 was amended by Republic Act No. 8424, and may claim the input tax credit granted by
the provisions on the transitional input tax credit are now embodied in Section 111 (A) of the new Section 105 (now Section 111 [A]) of the
NIRC,which reads: NIRC.

Section 111. Transitional/Presumptive Input Tax Credits. — The Court discussed this matter lengthily in its Decision in G.R. Nos. 158885 and 170680, and
we quote:
 Section 25 of E.O. No. 273 perfectly remedies the problem assumed by
the CTA as the basis for the introduction of transitional input tax credit in
1987. If the core purpose of the tax credit is only, as hinted by the CTA,
to allow for some mode of accreditation of previously-paid sales taxes,
then Section 25 alone would have sufficed. Yet E.O. No. 273 amended
the Old NIRC itself by providing for the transitional input tax credit under
Section 105, thereby assuring that the tax credit would endure long after
the last goods made subject to sales tax have been consumed.
If indeed the transitional input tax credit is integrally related to previously
paid sales taxes, the purported causal link between those two would have
been nonetheless extinguished long ago. Yet Congress has reenacted the
transitional input tax credit several times; that fact simply belies the
absence of any relationship between such tax credit and the long-
abolished sales taxes. Obviously then, the purpose behind the transitional
input tax credit is not confined to the transition from sales tax to VAT.
. . . Section 105 states that the transitional input tax credits become
available either to (1) a person who becomes liable to VAT; or (2) any
person who elects to be VAT-registered. The clear language of the law
entitles new trades or businesses to avail of the tax credit once they
become VAT-registered. The transitional input tax credit, whether under
the Old NIRC or the New NIRC,may be claimed by a newly-VAT
registered person such as when a business as it commences operations.
. . . [I]t is not always true that the acquisition of such goods, materials and
supplies entail the payment of taxes on the part of the new business. In
fact, this could occur as a matter of course by virtue of the operation of
various provisions of the NIRC,and not only on account of a specially
legislated exemption.
xxx xxx xxx
The interpretation proffered by the CTA would exclude goods and
properties which are acquired through sale not in the ordinary course of
trade or business, donation or through succession, from the beginning
inventory on which the transitional input tax credit is based. This prospect
all but highlights the ultimate absurdity of the respondents' position.
Again, nothing in the Old NIRC (or even the New NIRC) speaks of such
a possibility or qualifies the previous payment of VAT or any other taxes
on the goods, materials and supplies as a pre-requisite for inclusion in the
beginning inventory.
It is apparent that the transitional input tax credit operates to benefit newly
VAT-registered persons, whether or not they previously paid taxes in the
acquisition of their beginning inventory of foods, materials and
supplies. During that period of transition from non-VAT to VAT status,
the transitional input tax credit serves to alleviate the impact of the VAT
on the taxpayer. At the very beginning, the VAT-registered taxpayer is
obliged to remit a significant portion of the income it derived from its
sales as output VAT. The transitional input tax credit mitigates this initial
diminution of the taxpayer's income by affording the opportunity to offset
the losses incurred through the remittance of the output VAT at a stage
when the person is yet unable to credit input VAT payments.
There is another point that weighs against the CTA's interpretation. Under
Section 105 of the Old NIRC, the rate of the transitional input tax credit
is "8% of the value of such inventory or the actual value-added tax paid
on such goods, materials and supplies, whichever is higher." If indeed the
transitional input tax credit is premised on the previous payment of VAT,
then it does not make sense to afford the taxpayer the benefit of such
credit based on "8% of the value of such inventory" should the same prove
higher than the actual VAT paid. This intent that the CTA alluded to
could have been implemented with ease had the legislature shared such
intent by providing the actual VAT paid as the sole basis for the rate of
the transitional input tax credit.
The CTA harped on the circumstance that FBDC was excused from
paying any tax on the purchase of its properties from the national
government, even claiming that to allow the transitional input tax credit
is "tantamount to giving an undeserved bonus to real estate dealers
similarly situated as [FBDC] which the Government cannot afford to
provide." Yet the tax laws in question, and all tax laws in general, are
designed to enforce uniform tax treatment to persons or classes of persons
who share minimum legislated standards. The common standard for the
application of the transitional input tax credit, as enacted by E.O. No.
273 and all subsequent tax laws which reinforced or reintegrated the tax
credit, is simply that the taxpayer in question has become liable to VAT
or has elected to be a VAT-registered person. E.O. No. 273 and the
subsequent tax laws are all decidedly neutral and accommodating in
ascertaining who should be entitled to the tax credit, and it behooves the
CIR and the CTA to adopt a similarly judicious
perspective. 122 (Citations omitted, emphases ours.)
The Court En Banc in its Resolution in G.R. No. 173425 likewise discussed the question of prior
payment of taxes as a prerequisite before a taxpayer could avail of the transitional input tax credit.
The Court found that petitioner is entitled to the 8% transitional input tax credit, and clearly said
that the fact that petitioner acquired the Global City property under a tax-free transaction makes
no difference as prior payment of taxes is not a prerequisite. 123 We quote pertinent portions of
the resolution below: AaEcDS
This argument has long been settled. 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. Section 105 of the old National Internal Revenue
Code (NIRC)clearly provides that for a taxpayer to avail of the 8%
transitional input tax credit, all that is required from the taxpayer is to file
a beginning inventory with the Bureau of Internal Revenue (BIR). It was
 never mentioned in Section 105 that prior payment of taxes is a
requirement. . . . .
xxx xxx xxx
Second. Since the law (Section 105 of the NIRC) does not provide for
prior payment of taxes, to require it now would be tantamount to judicial
legislation which, to state the obvious, is not allowed.
Third. A transitional input tax credit is not a tax refund per se but a tax
credit. Logically, prior payment of taxes is not required before a taxpayer
could avail of transitional input tax credit. As we have declared in our
September 4, 2012 Decision, "[t]ax credit is not synonymous to tax
refund. Tax refund is defined as the money that a taxpayer overpaid and
is thus returned by the taxing authority. Tax credit, on the other hand, is
an amount subtracted directly from one's total tax liability. It is any
amount given to a taxpayer as a subsidy, a refund, or an incentive to
encourage investment."
Fourth. The issue of whether prior payment of taxes is necessary to avail
of transitional input tax credit is no longer novel. It has long been settled
by jurisprudence. . . . .
Fifth. Moreover, in Commissioner of Internal Revenue v. Central Luzon
Drug Corp., this Court had already declared that prior payment of taxes
is not required in order to avail of a tax credit. . . . 124 (Citations omitted,
emphases ours.)
The Court has thus categorically ruled that prior payment of taxes is not required for a taxpayer
to avail of the 8% transitional input tax credit provided in Section 105 of the old NIRC and that
petitioner is entitled to it, despite the fact that petitioner acquired the Global City property under
a tax-free transaction. 125 The Court En Banc held:
Contrary to the view of the CTA and the CA, there is nothing in the
abovequoted provision to indicate that prior payment of taxes is necessary
for the availment of the 8% transitional input tax credit. Obviously, all
that is required is for the taxpayer to file a beginning inventory with the
BIR.
To require prior payment of taxes . . . is not only tantamount to judicial
legislation but would also render nugatory the provision in Section 105
of the old NIRC that the transitional input tax credit shall be "8% of the
value of [the beginning] inventory or the actual [VAT] paid on such
goods, materials and supplies, whichever is higher" because the actual
VAT (now 12%) paid on the goods, materials, and supplies would always
be higher than the 8% (now 2%) of the beginning inventory which,
following the view of Justice Carpio, would have to exclude all goods,
materials, and supplies where no taxes were paid. Clearly, limiting the
value of the beginning inventory only to goods, materials, and supplies,
where prior taxes were paid, was not the intention of the law. Otherwise,
it would have specifically stated that the beginning inventory excludes
goods, materials, and supplies where no taxes were paid. 126
Whether Revenue Regulations No. 7-95 is
a valid implementation of Section 105 of
the NIRC.
In the April 2, 2009 Decision in G.R. Nos. 158885 and 170680, the Court struck down Section
4.105-1 of Revenue Regulations No. 7-95 for being in conflict with the law. 127 The decision
reads in part as follows:
[There] is no logic that coheres with either E.O. No. 273 or Rep. Act No.
7716 which supports the restriction imposed on real estate brokers and
their ability to claim the transitional input tax credit based on the value of
their real properties. In addition, the very idea of excluding the real
properties itself from the beginning inventory simply runs counter to what
the transitional input tax credit seeks to accomplish for persons engaged
in the sale of goods, whether or not such "goods" take the form of real
properties or more mundane commodities.
Under Section 105, the beginning inventory of "goods" forms part of the
valuation of the transitional input tax credit. Goods, as commonly
understood in the business sense, refers to the product which the VAT-
registered person offers for sale to the public. With respect to real estate
dealers, it is the real properties themselves which constitute their "goods".
Such real properties are the operating assets of the real estate dealer.
Section 4.100-1 of RR No. 7-95 itself includes in its enumeration of
"goods or properties" such "real properties held primarily for sale to
customers or held for lease in the ordinary course of trade or business."
Said definition was taken from the very statutory language of Section 100
of the Old NIRC. By limiting the definition of goods to "improvements"
in Section 4.105-1, the BIR not only contravened the definition of
"goods" as provided in the Old NIRC, but also the definition which the
same revenue regulation itself has provided. IEAHca
The Court of Tax Appeals claimed that under Section 105 of the Old
NIRC the basis for the inventory of goods, materials and supplies upon
which the transitional input VAT would be based "shall be left to
regulation by the appropriate administrative authority". This is based on
the phrase "filing of an inventory as prescribed by regulations" found in
Section 105. Nonetheless, Section 105 does include the particular
properties to be included in the inventory, namely goods, materials and
supplies. It is questionable whether the CIR has the power to actually
redefine the concept of "goods", as she did when she excluded real
properties from the class of goods which real estate companies in the
business of selling real properties may include in their inventory. The
authority to prescribe regulations can pertain to more technical matters,
such as how to appraise the value of the inventory or what papers need to
be filed to properly itemize the contents of such inventory. But such
 authority cannot go as far as to amend Section 105 itself, which the While administrative agencies, such as the Bureau of Internal Revenue,
Commissioner had unfortunately accomplished in this case. may issue regulations to implement statutes, they are without authority to
limit the scope of the statute to less than what it provides, or extend or
It is of course axiomatic that a rule or regulation must bear upon, and be expand the statute beyond its terms, or in any way modify explicit
consistent with, the provisions of the enabling statute if such rule or provisions of the law. Indeed, a quasi-judicial body or an administrative
regulation is to be valid. In case of conflict between a statute and an agency for that matter cannot amend an act of Congress. Hence, in case
administrative order, the former must prevail. Indeed, the CIR has no of a discrepancy between the basic law and an interpretative or
power to limit the meaning and coverage of the term "goods" in Section administrative ruling, the basic law prevails.
105 of the Old NIRC absent statutory authority or basis to make and
justify such limitation. A contrary conclusion would mean the CIR could To recapitulate, RR 7-95, insofar as it restricts the definition of "goods"
very well moot the law or arrogate legislative authority unto himself by as basis of transitional input tax credit under Section 105 is a nullity.
retaining sole discretion to provide the definition and scope of the term
"goods." 128 (Emphasis added.) As we see it then, the 8% transitional input tax credit should not be limited
to the value of the improvements on the real properties but should include
Furthermore, in G.R. No. 173425, the Court held: the value of the real properties as well. 129 (Citations omitted, emphasis
ours.)
Section 4.105-1 of RR 7-95 is
inconsistent with Section 105 Whether the issuance of Revenue
of the old NIRC Regulations No. 7-95 by the BIR, and
declaration of validity of said Regulations
As regards Section 4.105-1 of RR 7-95 which limited the 8% transitional by the CTA and the Court of Appeals,
input tax credit to the value of the improvements on the land, the same was in violation of the fundamental
contravenes the provision of Section 105 of the old NIRC, in relation to principle of separation of powers.
Section 100 of the same Code, as amended by RA 7716, which defines
"goods or properties," to wit: In the Resolution dated October 2, 2009 in G.R. Nos. 158885 and 170680 the Court denied the
respondents' Motion for Reconsideration with finality and held:
xxx xxx xxx
[The April 2, 2009 Decision] held that the CIR had no power to limit the
In fact, in our Resolution dated October 2, 2009, in the related case meaning and coverage of the term "goods" in Section 105 of the Old
of Fort Bonifacio, we ruled that Section 4.105-1 of RR 7-95, insofar as it NIRC sans statutory authority or basis and justification to make such
limits the transitional input tax credit to the value of the improvement of limitation. This it did when it restricted the application of Section 105 in
the real properties, is a nullity. Pertinent portions of the Resolution read: the case of real estate dealers only to improvements on the real property
belonging to their beginning inventory. aETADI
As mandated by Article 7 of the Civil Code,an administrative
rule or regulation cannot contravene the law on which it is xxx xxx xxx
based. RR 7-95 is inconsistent with Section 105 insofar as the
definition of the term "goods" is concerned. This is a legislative The statutory definition of the term "goods or properties" leaves no room
act beyond the authority of the CIR and the Secretary of for doubt. It states:
Finance. The rules and regulations that administrative agencies
"Sec. 100. Value-added tax on sale of goods or properties. —
promulgate, which are the product of a delegated legislative
(a) Rate and base of tax. — . . .
power to create new and additional legal provisions that have
the effect of law, should be within the scope of the statutory (1) The term 'goods or properties' shall mean all tangible and
authority granted by the legislature to the objects and purposes intangible objects which are capable of pecuniary estimation
of the law, and should not be in contradiction to, but in and shall include:
conformity with, the standards prescribed by law.
(A) Real properties held primarily for sale to
To be valid, an administrative rule or regulation must conform, customers or held for lease in the
not contradict, the provisions of the enabling law. An ordinary course of trade or business; . . .
implementing rule or regulation cannot modify, expand, or ."
subtract from the law it is intended to implement. Any rule that
is not consistent with the statute itself is null and void.
 The amendatory provision of Section 105 of the NIRC,as introduced
by RA 7716, states:
"Sec. 105. Transitional Input [T]ax Credits. — A person who
becomes liable to value-added tax or any person who elects to
be a VAT-registered person shall, subject to the filing of an
inventory as prescribed by regulations, be allowed input tax on
his beginning inventory of goods, materials and supplies
equivalent to 8% of the value of such inventory or the actual
value-added tax paid on such goods, materials and supplies,
whichever is higher, which shall be creditable against the
output tax."
The term "goods or properties" by the unambiguous terms of Section 100
includes "real properties held primarily for sale to c[u]st[o]mers or held
for lease in the ordinary course of business." Having been defined in
Section 100 of the NIRC,the term "goods" as used in Section 105 of the
same code could not have a different meaning. This has been explained
in the Decision dated April 2, 2009, thus:
xxx xxx xxx
Section 4.105-1 of RR 7-95 restricted the definition of "goods," viz.:
"However, in the case of real estate dealers, the basis of the
presumptive input tax shall be the improvements, such as
buildings, roads, drainage systems, and other similar
structures, constructed on or after the effectivity of EO
273 (January 1, 1988)."
As mandated by Article 7 of the Civil Code,an administrative rule or
regulation cannot contravene the law on which it is based. RR 7-95 is
inconsistent with Section 105 insofar as the definition of the
term "goods" is concerned. This is a legislative act beyond the authority
of the CIR and the Secretary of Finance. The rules and regulations that
administrative agencies promulgate, which are the product of a delegated
legislative power to create new and additional legal provisions that have
the effect of law, should be within the scope of the statutory authority
granted by the legislature to the objects and purposes of the law, and
should not be in contradiction to, but in conformity with, the standards
prescribed by law.
To be valid, an administrative rule or regulation must conform, not
contradict, the provisions of the enabling law. An implementing rule or
regulation cannot modify, expand, or subtract from the law it is intended
to implement. Any rule that is not consistent with the statute itself is null
and void.
While administrative agencies, such as the Bureau of Internal Revenue,
may issue regulations to implement statutes, they are without authority to
limit the scope of the statute to less than what it provides, or extend or
expand the statute beyond its terms, or in any way modify explicit
provisions of the law. Indeed, a quasi-judicial body or an administrative
agency for that matter cannot amend an act of Congress. Hence, in case
of a discrepancy between the basic law and an interpretative or
administrative ruling, the basic law prevails.
To recapitulate, RR 7-95, insofar as it restricts the definition
of "goods" as basis of transitional input tax credit under Section 105 is a
nullity.
On January 1, 1997, RR 6-97 was issued by the Commissioner of Internal
Revenue. RR 6-97 was basically a reiteration of the same Section 4.105-
1 of RR 7-95, except that the RR 6-97 deleted the following paragraph:
"However in the case of real estate dealers, the basis of the
presumptive input tax shall be the improvements, such as
buildings, roads, drainage systems, and other similar
structures, constructed on or after the effectivity of E.O.
273 (January 1, 1988)."
It is clear, therefore, that under RR 6-97, the allowable transitional input
tax credit is not limited to improvements on real properties. The particular
provision of RR 7-95 has effectively been repealed by RR 6-97 which is
now in consonance with Section 100 of the NIRC,insofar as the definition
of real properties as goods is concerned. The failure to add a specific
repealing clause would not necessarily indicate that there was no intent to
repeal RR 7-95. The fact that the aforequoted paragraph was deleted
created an irreconcilable inconsistency and repugnancy between the
provisions of RR 6-97 and RR 7-95.
xxx xxx xxx
As pointed out in Our Decision of April 2, 2009, to give Section 105 a
restrictive construction that transitional input tax credit applies only when
taxes were previously paid on the properties in the beginning inventory
and there is a law imposing the tax which is presumed to have been paid,
is to impose conditions or requisites to the application of the transitional
tax input credit which are not found in the law. The courts must not read
into the law what is not there. To do so will violate the principle of
separation of powers which prohibits this Court from engaging in judicial
legislation. 130 (Emphases added.)
As the Court En Banc held in G.R. No. 173425, the issues in this case are not novel. These same
issues have been squarely ruled upon by this Court in the earlier decided cases that have attained
finality. 131 ITHADC
It is now this Court's duty to apply the previous rulings to the present case. Once a case has been
decided one way, any other case involving exactly the same point at issue, as in the present case,
should be decided in the same manner. 132
Thus, we find that petitioner is entitled to a refund of the amounts of: 1) P486,355,846.78 in G.R.
No. 175707, 2) P77,151,020.46 in G.R. No. 180035, and 3) P269,340,469.45 in G.R. No. 181092,
which petitioner paid as value-added tax, or to a tax credit for said amounts.

WHEREFORE, in view of the foregoing, the consolidated petitions are hereby GRANTED. The
following are REVERSED and SET ASIDE:

1) Under G.R. No. 175707, the Decision dated April 22, 2003 of the
Court of Appeals in CA-G.R. SP No. 61516 and its
subsequent Resolution dated November 30, 2006;

2) Under G.R. No. 180035, the Decision dated April 30, 2007 of the
Court of Appeals in CA-G.R. SP No. 76540 and its
subsequent Resolution dated October 8, 2007; and

3) Under G.R. No. 181092, the Decision dated December 28, 2007 of the
Court of Appeals in CA-G.R. SP No. 61158.

Respondent Commissioner of Internal Revenue is ordered to REFUND, OR, IN THE

ALTERNATIVE, TO ISSUE A TAX CREDIT CERTIFICATE to petitioner Fort Bonifacio
Development Corporation, the following amounts:
1) P486,355,846.78 paid as output value-added tax for the second quarter
of 1997 (G.R. No. 175707);

2) P77,151,020.46 paid as output value-added tax for the first quarter of

1998 (G.R. No. 180035); and

3) P269,340,469.45 paid as output value-added tax for the fourth quarter

of 1996 (G.R. No. 181092).

SO ORDERED.