Title
Supreme Court
Bonifacio Water Corp. vs. Commissioner of Internal Revenue
Case
G.R. No. 175142
Decision Date
Jul 22, 2013
A domestic water corporation sought a VAT refund for capital goods purchases but was denied due to non-compliance with invoicing requirements, improper classification of expenses, and lack of judicial admissions. The Supreme Court upheld the denial, emphasizing strict adherence to tax regulations.

Case Digest (G.R. No. 214882)
Expanded Legal Reasoning Model

Facts:

  • Background of the Petitioner
    • Petitioner is a domestic corporation engaged in the collection, purification, and distribution of water.
    • It is registered with the Bureau of Internal Revenue (BIR) as a value-added tax (VAT) taxpayer, bearing VAT Registration/Taxpayer Identification No. 201-403-657-000.
  • VAT Returns and Declarations
    • Petitioner filed its quarterly VAT returns covering:
      • 4th Quarter of 1999
      • 1st, 2nd, 3rd, and 4th Quarters of 2000
    • The returns disclosed various amounts including:
      • Taxable sales, output VAT, input VAT, carried-over input VAT, and domestic purchases input VAT.
      • Computation of total available input VAT and excess input VAT based on quarterly figures.
  • Claim on Input VAT for Capital Goods
    • The petitioner claimed that among its input VAT, there was an amount attributable to purchases of capital goods totaling P65,642,814.65.
    • These purchases were related to payments made to contractors for:
      • Construction of a Sewage Treatment Plant
      • Construction of a Water and Waste System
      • Installation of a Water Treatment Plant
    • The breakdown was provided by quarter:
      • 4th Quarter 1999 – P11,607,748.20
      • 1st Quarter 2000 – P18,281,682.96
      • 2nd Quarter 2000 – P14,884,531.96
      • 3rd Quarter 2000 – P21,705,122.19
      • 4th Quarter 2000 – (P836,270.66)
      • Totalling P65,642,814.65
  • Filing of Refund Claim and Subsequent Proceedings
    • On January 22, 2002, petitioner filed an administrative claim for refund or issuance of a tax credit certificate amounting to P65,642,814.65.
    • A day later, the petitioner also filed its Petition for Review with the Court of Tax Appeals (CTA) to toll the two-year prescriptive period.
  • Decisions of the Court of Tax Appeals
    • CTA Second Division Decision (March 29, 2005):
      • Partially granted the refund claim by awarding a refund of P40,875,208.64 after disallowing certain input VAT items on the ground that:
        • Some purchases (e.g., rental, management fees, and direct overhead) were not capital goods.
ii. Official receipts issued under the name “Bonifacio GDE Water Corporation” were disallowed due to lack of SEC approval.
  • CTA Second Division Resolution (August 23, 2005):
    • Increased the refundable amount to P45,446,280.55 by adding additional input VAT relating to construction in progress and correcting a double recording issue.
  • CTA En Banc Decision (June 26, 2006) and Resolution (October 19, 2006):
    • Affirmed the decisions of the Second Division in toto.
    • Dismissed the petitioner’s petition for review, sustaining the partial denial of the refund claim.
  • Petitioner’s Grounds in the Petition for Review
    • Argued that:
      • The CTA En Banc erred in allowing the partial denial by holding that the petitioner’s invoices were non-compliant with administrative regulations.
      • The strict evidentiary standard applied in a civil refund claim was inappropriate, as a preponderance of evidence should suffice.
      • The proper definition of capital goods should include certain services and expenditures incurred in construction and installation.
      • Informal judicial admissions by a subordinate BIR official should have been given weight.
  • Respondent’s Arguments
    • Asserted that the issues raised are purely factual and not reviewable under Rule 45 of the Rules of Court.
    • Emphasized that the petitioner failed to meet the strict documentary requirements, particularly regarding:
      • The unauthorized use of the name “Bonifacio GDE Water Corporation”, which was never SEC approved.
      • The critical need for official receipts to be issued in the taxpayer’s registered name, as required by revenue regulations.
    • Supported the proper imposition of strict rules of evidence in cases involving tax refunds and tax credits, due to their nature as tax exemptions derogatory to the exercise of sovereign authority.

Issues:

  • Whether the CTA En Banc erred in not granting the petitioner’s full claim for refund or the issuance of a tax credit certificate amounting to P65,642,814.65.
    • Does non-compliance with the invoicing requirements under the 1997 NIRC (such as the unauthorized issuance of receipts under “Bonifacio GDE Water Corporation”) justify the disallowance of the entire refund claim?
    • Should certain purchases and related expenditures, including services incidental to the construction of capital assets, be considered part of capital goods for the purpose of claiming input VAT refund?
    • Was the imposition of a strict evidentiary standard—despite the contention that civil cases may be adjudicated on a preponderance of the evidence—appropriately applied by the CTA En Banc?

Ruling:

  • (Subscriber-Only)

Ratio:

  • (Subscriber-Only)

Doctrine:

  • (Subscriber-Only)
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