PAL gets P302-M tax refund on jet fuel imports

The Court of Tax Appeals has granted a P302.01-million tax refund to the Philippine Airlines, Inc. on excise taxes paid on the importation of jet fuel from August to October 2008.

In a 40-page decision dated July 17, the CTA Third Division said PAL was able to comply with the requisites to avail of the tax exemption under its franchise charter, Presidential Decree No. 1590.

Section 13 of the Marcosian law allows PAL to pay a basic corporate income tax “in lieu of all other taxes,” subject to the following conditions: the supplies are used for its own operations and should not be “locally available in reasonable quantity, quality or price.”

PAL cited the certifications issued by the Civil Aviation Authority of the Philippines, as well as the Department of Energy’s figures showing only 6,050 MB (thousand barrels) is locally available, less than the flag carrier’s demand of 8,850 MB.

“As the Jet A-1 fuel petitioner imported was not locally available in reasonable quantity, this gives rise for petitioner’s entitlement to the tax exemption because it is sufficient for petitioner to be able to prove even just one qualification,” the decision read.

A court-commissioned independent certified public accountant also concluded that imported jet fuel is consistently cheaper than fuel purchased from Petron Corp. or Pilipinas Shell Petroleum Corp.

The CTA, however, only cited the presidential decree and did not rule on the issue of the validity of the Bureau of Internal Revenue Ruling No. 001-2003.

The Jan. 29, 2003 ruling served as the basis for the revenue agency to impose excise taxes on PAL’s fuel importations. The ruling cited the DoE’s Dec. 20, 2002 certification that aviation fuel is locally available in reasonable quantity, quality and price, which meant PAL could no longer meet the second condition for the tax exemption.

But, PAL claimed the BIR ruling was invalid because the DoE certification was “arbitrary” for failing to elaborate on the basis of its issuance. The flag carrier also argued the DoE certification was declared null and void by the Pasay City Regional Trial Court on Feb. 27, 2014.

Associate Justice Ma. Belen M. Ringpis-Liban penned the CTA decision, with the concurrence of Associate Justices Lovell R. Bautista and Esperanza R. Fabon-Victorino. JE