The minority shareholders of Philippine Racing Club Inc. are calling on the Malaysian-backed faction in the PRCI board to ?return to shareholders? about P400 million in PRCI funds used to purchase listed firm JTH Davies.

In a statement, lawyer Brigido Dulay said the money used to buy JTH Davies ?is practically money down the drain since the purpose for which JTH was bought at an excessive price no longer exists.?

Dulay claimed the group had attempted to transfer the ownership of PRCI?s Sta. Ana racetrack to JTH Davies in exchange for company shares through a swap arrangement The plan was aborted after the government, through the Department of Finance, ruled that the transaction was not entitled to exemption from the value-added tax.

The majority shareholders? group, Dulay said, had sought VAT exemption, claiming that the Sta. Ana property was a ?capital asset.?

The Bureau of Internal Revenue revoked the VAT exemption it earlier granted, saying the racetrack ?is a property that is used in business.? BIR regulations state that the sale of such property ?shall be subject to VAT being a transaction incidental to the taxpayers? main business.?

This means the transfer of the racetrack to JTH Davies would be slapped P458 million in VAT.

PRCI Filipino shareholders led by the Puyat family earlier opposed the JTH Davies purchase and the share-swap plan, alleging that the deals were done without transparency.

In the meantime, the PRCI management said the decision on whether to return the money to PRCI shareholders would be up to the board.

?Whether the cancellation (of the share-swap deal) has a bearing at all on PRCI?s share holdings in JTH is a matter for the PRCI board to decide,? PRCI said in a statement sent to the Inquirer.

It said that at the time of the acquisition of 98 percent of JTH by PRCI in 2006, the listed firm had a net worth of P426 million composed mainly of cash and virtually no liability.

PRCI later sold 12.9 million of its JTH shares bringing down PRCI?s stake in the company to about 68 percent. This generated P23.5 million for PRCI.

PRCI also said its disengagement from the property?for?share swap was a decision that arose from the revocation by the BIR of the previous tax exemption status accorded the transaction.