MANILA, Philippines—The Supreme Court has ordered the Bureau of Internal Revenue to return about P360 million to property developer Fort Bonifacio Development Corp. (FBDC), which claimed it overpaid the government in value-added taxes (VAT) from the 1997 purchase of sale of lots at Global City.
Voting 9-5, the Court en banc granted the petition by FBDC through lawyer Estelito Mendoza, which sought to reverse the July 2006 decision of the Court of Appeals and the October 2000 resolution of the Court of Tax Appeals which both denied FBDC’s claim for tax refund.
“Respondent Commissioner of Internal Revenue is ordered to refund the petitioner FBDC the amount of P359,652,009.47 paid as output VAT for the first quarter of 1997 in light of the transitional input tax credit available to petitioner for the said quarter, or in the alternative, to issue a tax credit certificate to such amount,” the Court said in a 17-page decision penned by Justice Mariano del Castillo.
The national government sold the Global City land in Taguig City for P71,227,503,200 to FBDC, 45-percent of which owned by the state-run Bases Conversion Development Authority, and the remaining owned by the Bonifacio Land Corp., a private consortium of Ayala Land Inc. and the Evergreen Holdings Inc.
The majority of the justices validated FBDC’s contention that it was entitled to recover the amount erroneously paid as output VAT since its transitional input tax credit of P5,698,200,256 billion was more than sufficient to cover its out VAT liability.
The high court overruled the CA and CTA’s interpretation that the New Internal Revenue Code requires prior payment of taxes before the eight-percent transition input tax credit may be availed of.
Prior payment
“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 tax code that the transitional input tax credit shall be ‘eight-percent of the value [of the beginning] inventory or actual [VAT] paid on such goods, materials and supplies, whichever is higher’ because the actual VAT (now 12-percent) paid on goods, materials and supplies would always be higher than the eight-percent (now two-percent) of the beginning inventory,” the majority justice ruled.
“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,” they added.
Prior payment of taxes, the Supreme Court further said, is not a prerequisite to avail of the transitional input tax credit because it is not a tax refund per se but a tax credit, which is defined as an amount subtracted directly from one’s total tax liability.
Dissenting opinion
Concurring with Del Castillo were Associate Justices Presbitero Velasco Jr., Teresita Leonardo-de Castro, Diosdado Peralta, Lucas Bersamin, Martin Villarama Jr., Jose Portugal Perez, Jose Catral Mendoza, and Roberto Abad. Abad wrote a separate concurring opinion.
Senior Associate Justice Antonio Carpio wrote a dissenting opinion. He was joined by Chief Justice Ma. Lourdes Sereno and Justices Arturo Brion, Bienvenido Reyes and Estela Perlas-Bernabe.
In his dissenting opinion, Carpio said FBDC cannot claim a refund or credit of tax that was never paid because the law never imposed the tax in the first place.