Supreme Court reverses Court of Appeals in Global City tax issue

BAGUIO CITY , Philippines  – The High Tribunal reversed yesterday the Appellate Court’s decision favoring the Bureau of Internal Revenue in its bid to collect a transitional input tax credit from the Fort Bonifacio Development Corp. (FBDC) amounting to P28,413,783 for the acquisition and development of Global City in Taguig.

The Supreme Court voted 7-5 for FBDC in an en banc session with Chief Justice Reynato Puno inhibiting himself while Justice Antonio Eduardo Nachura opted not to take part in the decision-making.

Principally penned by Justice Dante Tinga and concurred by Justices Renato Corona, Minita Nazario, Presbitero Velasco, Teresita de Castro and Diosdado Peralta, the SC voted against the collection of taxes by the BIR when FBDC purchased parcels of land within Global City on Feb. 8, 1995 from the National Government.

The FBDC had filed for a refund but the Court of Appeals gave weight to the BIR’s claim that no such tax had been paid, and so the corporation could not claim a refund for a P269.3-million transitional input tax.

The appellate court junked the FBDC petition in a decision penned by Associate Justice Edgardo Cruz of the CA’s Ninth Division and affirmed the Sept. 29, 2000, decision of the Court of Tax Appeals also denying for the same reason FBDC’s claim for a refund.

The appellate court dismissed the FBDC’s contention that the tax court erred in holding that Section 4.105-1 of Revenue Regulation 7-95, which provides that an eight-percent input tax should be based solely on the improvements on the land, is not contrary to the provisions of the National Internal Revenue Code (NIRC).

But the SC ruled otherwise and directed the BIR to refund FBDC P347,741,695.74 for its output VAT for the third quarter of 1997 or issue a tax credit corresponding to such amount.