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Abakada

Guro

v.

Ermita

(G.R.

No.

168056,

July

5,

2005)

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. 9337s 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 persons 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 constitutional bounds. The Motions for
Reconsideration are hereby DENIED WITH FINALITY. 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 Corporations (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 VATregistered 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
taxpayers 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 VATregistered 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 zerorated 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
the extent that such
business. If it is also
refundable shall only
taxable operations.

on capital goods shall be allowed only to


capital goods are used in VAT taxable
used in exempt operations, the input tax
be the ratable portion corresponding to

"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 latters 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, reenforced. "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 formers 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,respondents refund is in order.
WHEREFORE,
the
Petition
is
hereby DENIED,
and
the
assailed
Decision AFFIRMED. No pronouncement as to costs.
CONTEX CORPORATION, petitioner,
INTERNAL REVENUE, respondent.

vs.HON.

COMMISSIONER

OF

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
Contexs 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 individuals 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 firms 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 Contexs

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, Contexs 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 petitioners 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 Contexs 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 petitioners 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.

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.

ISSUE: Whether COMASERCO was engaged in the sale of services, and thus liable to
pay VAT thereon.

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.

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

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.

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 PEZAregistered 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.

Issue: W/N Intel is not entitled to a tax refund/credit for failure to comply with the
invoicing requirements?

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 (sellers 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 BIRs 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

a.

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 VATregistered; (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, Intels 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 statement that the seller is a VAT-registered entity followed by its TIN-V;

b.
c.
d.
e.
f.
g.

h.

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;
date of the transaction;
quantity of merchandise;
unit cost;
description of merchandise or nature of service;
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
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 largescale 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 VATregistered 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 respondents 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
MINDANAO INC

AND

WAIN

SCANDINAVIAN

CONTRACTOR

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 (BWSCDenmark), 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 NAPOCORs two power barges. The Consortium appointed BWSCDenmark as its coordination manager. BWSC-Denmark established Burmeister
(respondent) which subcontracted the actual operation and maintenance of NAPOCORs
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 Consortiums 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 VATfree who then filed a claim for a tax credit certificate for the erroneously paid output VAT
in 1996.

10

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
respondents 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 respondents 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 respondents services is the
Consortium which is a joint-venture doing business in the Philippines. While
the
Consortiums 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 NAPOCORs 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.

11

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:

12

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 VATregistered 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

13

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 NDCs 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 taxpayers 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 CTAs
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

14

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

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

Issues:

Facts: Petitioner Silicon Philippines, Inc., a Philippine corporation engaged in the


business of designing, developing, manufacturing and exporting advance and largescale integrated circuit components or "ICs.", 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, petitioners 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 petitioners claim for credit/refund of input VAT attributable to its zerorated 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 petitioners 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.

1. Whether the BIR is allowed to change its theory on appeal.

Issues:

2. Whether Input VAT on capital goods and services is allowed.

1. Whether or not petitioner can claim credit/refund of input VAT attributable to its zerorated sales.

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 MPCs
application citing that MPCs 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 Officers
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 cant claim tax refund. The CA denied BIRs
appeal upholding that it is not allowed to change its theory on appeal.

Ruling:

15

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 VATregistered; (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 "zerorated" 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 petitioners
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

16

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 quarters output tax liability. The CA affirmed
CTAs 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 taxpayers VAT returns. Thus, an application for tax refund/credit must be
accompanied by copies of the taxpayers 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 taxpayers VAT returns.
Thus, an application for tax refund or credit must be accompanied by copies of the
taxpayers 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 petitioners 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 Divisions 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 taxpayers
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

17

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

18

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 zerorated 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
CIRs 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-OperateTransfer contract with the Philippine National Oil CorporationEnergy Development
Company (PNOC-EDC), whereby Mindanao converts steam supplied to it by PNOCEDC 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 IIs
claims for refund tax credit for the first and second quarters of 2003, and Mindanao Is
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 IIs 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 IIs VAT zero-rated transactions and is VATable pursuant to Sec.
105.
Mindanao Is 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 Is claim.

19

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 IIs
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 Commissioners 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
Commissioners 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 CIRs 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 CIRs 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

20

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
IIs property, plant, and equipment. Therefore, the sale of the Nissan Patrol is an
incidental transaction made in the course of Mindanao IIs 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

21

gross value in money of the goods or properties sold, bartered or


exchanged, such tax to be paid by the seller or transferor.

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

(1) The term "goods or properties" shall mean all


tangible and intangible objects which are
capable of pecuniary estimation and shall
include:

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.

(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 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

22

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

23

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

24

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 VATregistered 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. 795 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,

25

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


held. 61 THDIaC

Court

of

Appeals

should

have

so

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

26

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
DENIED OR DISMISSED

SHOULD

BE

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

27

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. 795." 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

28

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%

29

30

31

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 muchcontested 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

32

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 valueadded 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)

33

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

34

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

35

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
input
tax
credit
under
NIRC may
be
claimed
"improvements" on real properties.

Section
only

transitional/presumptive
105
of
the
on
the

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

36

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 or properties" as "all tangible
and intangible objects which are capable of pecuniary
estimation." Third, it included a non-exclusive enumeration of
various objects that fall under the class "goods or properties"
subject to VAT, including "[r]eal properties held primarily for sale
to customers or held for lease in the ordinary course of trade or
business."
From these amendments to Section 100, is there any
differentiated VAT treatment on real properties or real estate
dealers that would justify the suggested limitations on the
application of the transitional input tax on them? We see none.
Rep. Act No. 7716 clarifies that it is the real properties "held
primarily for sale to customers or held for lease in the ordinary
course of trade or business" that are subject to the VAT, and not
when the real estate 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 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 same way
that a milliner considers hats as his goods and a rancher considers
cattle as his goods, a real estate dealer holds real property,

whether or not it contains improvements,


goods. 117 (Citations omitted, emphasis added.)

as

his

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 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. 118 (Emphasis added.)
The Court then emphasized in its Resolution in G.R. No. 158885 and G.R. No.
170680 that Section 105 of the old NIRC, on the transitional input tax credit, remained
intact despite the enactment of Republic Act No. 7716. Section 105 was amended
by Republic Act No. 8424, and the provisions on the transitional input tax credit are now
embodied in Section 111 (A) of the new NIRC,which reads:
Section 111. Transitional/Presumptive Input Tax Credits.
(A) Transitional Input Tax Credits. A person who becomes
liable to value-added tax or any person who elects to be a VATregistered person shall, subject to the filing of an
inventory according to rules and regulations prescribed by the
Secretary of [F]inance, upon recommendation of the
Commissioner, be allowed input tax on his 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 goods, materials and supplies, whichever is higher, which
shall be creditable against the output tax. 119
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

37

estate dealers only to the improvements on their properties, how then were the
Commissioner of Internal Revenue and the courts a quo able to justify such a
view?" 120 The Court then answered this question in this manner:
IV.
The fact alone that the denial of FBDC's claims is in accord with
Section 4.105-1 of RR 7-95 does not, of course, put this inquiry
to rest. If Section 4.105-1 is itself incongruent to Rep. Act No.
7716, the incongruence cannot by itself justify the denial of the
claims. We need to inquire into 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
It is correct, as pointed out by the CTA, that upon the shift from
sales taxes to VAT in 1987 newly-VAT registered people would
have been prejudiced by the inability to credit against the output
VAT their payments by way of sales tax on their existing stocks in
trade. Yet that inequity was precisely addressed by a transitory
provision inE.O. No. 273 found in Section 25 thereof. The
provision authorized VAT-registered persons to invoke a
"presumptive input tax equivalent to 8% of the value of the
inventory as of December 31, 1987 of materials and supplies
which are not for sale, the tax on which was not taken up or
claimed as deferred sales tax credit," and a similar presumptive
input tax equivalent to 8% of the value of the inventory as of
December 31, 1987 of goods for sale, the tax on which was not
taken up or claimed as deferred sales tax credit. 121 (Emphasis
ours.) THADEI
Whether
there
must
have
been
previous
payment
of
sales
tax
or
value-added
tax
by
petitioner
on
its
land
before
petitioner
may
claim
the
input
tax
credit
granted
by
Section
105
(now
Section
111
[A])
of
the
NIRC.
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,

38

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

39

taxpayer as a subsidy, a refund, or an incentive to encourage


investment."

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:

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.

Revenue
Regulations
implementation
of

No.
Section

7-95
105

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

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
a
valid
the NIRC.

[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.

is
of

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

40

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 Commissioner had
unfortunately accomplished in this case.
It is of course axiomatic that a rule or regulation must bear upon,
and be consistent with, the provisions of the enabling statute if
such rule or regulation is to be valid. In case of conflict between a
statute and an administrative order, the former must prevail.
Indeed, the CIR has no power to limit the meaning and coverage
of the term "goods" in Section 105 of the Old NIRC absent
statutory authority or basis to make and justify such limitation. A
contrary conclusion would mean the CIR could very well moot
the law or arrogate legislative authority unto himself by retaining
sole discretion to provide the definition and scope of the term
"goods." 128 (Emphasis added.)
Furthermore, in G.R. No. 173425, the Court held:
Section
4.105-1
of
inconsistent
with
of the old NIRC

RR
7-95
Section

is
105

As regards Section 4.105-1 of RR 7-95 which limited the 8%


transitional input tax credit to the value of the improvements on
the land, the same contravenes the provision of Section 105 of
the old NIRC, in relation to Section 100 of the same Code, as
amended by RA 7716, which defines "goods or properties," to
wit:
xxx xxx xxx
In fact, in our Resolution dated October 2, 2009, in the related
case of Fort Bonifacio, we ruled that Section 4.105-1 of RR 7-95,
insofar as it limits the transitional input tax credit to the value of
the improvement of the real properties, is a nullity. Pertinent
portions of the Resolution read:
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 quasijudicial 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.
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 the value of the real properties as
well. 129 (Citations omitted, emphasis ours.)
Whether
Regulations
declaration
by
the

the
No.
of
CTA

issuance
7-95
by
validity
of
and
the

of
the

BIR,
said

Court

of

Revenue
and
Regulations
Appeals,

41

was
in
violation
principle of separation of powers.

of

the

fundamental

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:
[The April 2, 2009 Decision] 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. aETADI
xxx xxx xxx
The statutory definition of the term "goods or properties" leaves
no room for doubt. It states:
"Sec. 100. Value-added tax on sale of goods or
properties. (a) Rate and base of tax. . . .
(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; . . . ."
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-

42

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
hereby GRANTED. The following are REVERSED and SET ASIDE:

petitions

are

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.

43

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