TAX.8.3. Magsaysay Lines, et al. v.

Commissioner

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. The vessels were constructed for the NDC 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." Private respondent Magsaysay Lines, Inc., offered to buy the shares and
the vessels.

A Notice of Award was issued to Magsaysay Lines who in turn was assessed of VAT through VAT Ruling No. 568-88 dated 14
December 1988 from the BIR, holding that the sale of the vessels was subject to the 10% VAT. The ruling cited the fact that NDC
was a VAT-registered enterprise, and thus its "transactions incident to its normal VAT registered activity of leasing out personal
property including sale of its own assets that are movable, tangible objects which are appropriable or transferable are subject to the
10% [VAT]. CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary course of NDC’s business,
and was thus not subject to VAT, which under Section 99 of the Tax Code, was applied only to sales in the course of trade or business.
The CTA further held that the sale of the vessels could not be "deemed sale," and thus subject to VAT, as the transaction did not fall
under the enumeration of transactions deemed sale as listed either in Section 100(b) of the Tax Code, or Section 4 of R.R. No. 5-87.

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

RULING: Not subject to VAT. Since NDC is a VAT-registered person on its sale of services, its transactions incident to the normal
VAT-registered activity of leasing out personal property, including sale of its own assets (vessels) that are movable, tangible objects,
which are appropriable or transferable are subject to the 10% value added tax. This finds support in VAT Ruling No. 395-88 which
stated that NDC operates like a holding company with various interests/ investments in other companies operating for profit; its
functions are purely proprietary. It is registered as a VAT person engaging in leasing personal property and it does not pay the 3%
common carrier’s tax. The terms of the bidding provide that a value added tax of 10% (now 12%) on the value of the vessels shall be
paid by the winning bidder.

TAX.8.4. St. Luke’s Medical Center v. CTA and Commissioner

RULING: The sale of drugs and other pharmaceutical items to in-patients of the hospital is a VAT-exempt transaction within the
meaning of Section 109 (1) of the Tax Code. The maintenance and operation of the pharmacy or drugstore by a hospital is a necessary
and essential (hospital) service or facility rendered by any hospital for its patients.

TAX.8.5. Commissioner v. Burmeister and Wain Scandinavian Contractor Mindanao

FACTS: Burmeister is a domestic corporation. A foreign consortium was formed between BWSC-Denmark, Mitsui Engineering and
Shipbuilding, and Mitsui and Co. It entered into a contract with NAPOCOR for the operation & maintenance of two power barges.
BWSC-Denmark established Burmeister which subcontracted the actual operation and maintenance of NAPOCOR’s two power
barges as well as the performance of other duties and acts which necessarily have to be done in the Philippines. NAPOCOR paid
capacity and energy fees to the Consortium in a mixture of currencies (Mark, Yen, and Peso). The Consortium pays Burmeister in
foreign currency inwardly remitted to the Philippines through the banking system. In order to ascertain the tax implications of the
above transactions, Burmeister sought a ruling from the BIR. It declared 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. Burmeister then chose to
register as a VAT Tax payer. Burmeister seasonably filed its quarterly Value-Added Tax Returns reflecting, among others, a total
zero-rated sales of P147,317,189.62 with VAT input taxes of P3,361,174.14. Later, Burmeister availed of the Voluntary Assessment
Program (VAP) of the BIR and subjected its sale of services to the Consortium to the 10% VAT in the total amount of P103,558,338.11
In 1999, Burmeister secured a ruling from the VAT committee saying that the services of Burmeister is really VAT-Free. Burmeister
filed a claim for the issuance of a tax credit certificate with BIR. Burmeister believed that it erroneously paid the output VAT for
1996 due to its availment of the Voluntary Assessment Program (VAP) of the BIR. CTA and CA ruled in favor of Burmeister.

ISSUE: Whether or not Burmeister is entitled to a tax credit?

RULING: Petition denied. Not because Burmeister is subject to 0% vat but because on the non-retroactivity of the prejudicial
revocation - of BIR Ruling No. 023-9517 and VAT Ruling No. 003-99,18 which held that respondent’s services are subject to 0%
VAT and which respondent invoked in applying for refund of the output VAT.