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    21 Fort Vs CIR Digest

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    21 Fort Vs CIR Digest

    Uploaded by

    Hiroshi Carlos
    33 views3 pages
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    21 Fort vs CIR Digest

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    33 views3 pages

    21 Fort Vs CIR Digest

    Uploaded by

    Hiroshi Carlos
    f

    Copyright:

    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 3

    FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,

    vs.
    COMMISSIONER OF INTERNAL REVENUE and REVENUE
    DISTRICT OFFICER, REVENUE DISTRICT NO. 44, TAGUIG and
    PATEROS, BUREAU OF INTERNAL REVENUE, Respondents.

    FACTs:

    Petitioner Fort Bonifacio Development Corporation (FBDC)


    is a duly registered domestic corporation engaged in the
    development and sale of real property.3 The Bases Conversion
    Development Authority (BCDA), a wholly owned government
    corporation created under Republic Act (RA) No. 7227,4 owns
    45% of petitioner’s issued and outstanding capital stock; while
    the Bonifacio Land Corporation, a consortium of private
    domestic corporations, owns the remaining 55%.

    On February 8, 1995, by virtue of RA 7227 and Executive


    Order No. 40, dated December 8, 1992, petitioner purchased
    from the national government a portion of the Fort Bonifacio
    reservation, now known as the Fort Bonifacio Global City
    (Global City).7

    On October 12, 2000, the CTA denied petitioner’s claim for


    refund. According to the CTA, "the benefit of transitional input
    tax credit comes with the condition that business taxes should
    have been paid first."19 In this case, since petitioner acquired
    the Global City property under a VAT-free sale transaction, it
    cannot avail of the transitional input tax credit.
    On July 7, 2006, the CA affirmed the decision of the CTA. The
    CA agreed that petitioner is not entitled to the 8% transitional
    input tax credit since it did not pay any VAT when it purchased
    the Global City property.24 The CA opined that transitional input
    tax credit is allowed only when business taxes have been paid
    and passed-on as part of the purchase price. In arriving at this
    conclusion, the CA relied heavily on the historical background
    of transitional input tax credit. As to the validity of RR 7-95,
    which limited the 8% transitional input tax to the value of the
    improvements on the land, the CA said that it is entitled to
    great weight as it was issued pursuant to Section 245 of the old
    NIRC.

    Realizing that its transitional input tax credit was not


    applied in computing its output VAT for the first quarter of
    1997, petitioner on November 17, 1998 filed with the BIR a
    claim for refund of the amount of P 359,652,009.47
    erroneously paid as output VAT for the said period.

    Issues:

    whether petitioner is entitled to a refund of P 359,652,009.47


    erroneously paid as output VAT .

    RULING:
    Prior payment of taxes is not required to avail of the
    transitional input tax credit because it is not a tax refund per se
    but a tax credit. Tax 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 taxpayer as a subsidy, a
    refund, or an incentive to encourage investment. Thus, unlike a
    tax refund, prior payment of taxes is not a prerequisite to avail
    of a tax credit. In fact, in Commissioner of Internal Revenue v.
    Central Luzon Drug Corp. Declared that prior payment of taxes
    is not required in order to avail of a tax credit.

    In this case, since petitioner is entitled to a transitional input


    tax credit of P 5,698,200,256, which is more than sufficient to
    cover its output VAT liability for the first quarter of 1997, a
    refund of the amount of P 359,652,009.47 erroneously paid as
    output VAT for the said quarter is in order.

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