Case Digest (G.R. No. 158885)
Facts:
In Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue (G.R. Nos. 158885 & 170680, April 2, 2009), petitioner Fort Bonifacio Development Corporation (FBDC), a joint government-private entity, acquired in February 1995 from the national government a large tract of land in the former Fort Bonifacio military reservation (now Fort Bonifacio Global City) under a tax-exempt sale. FBDC developed and sold lots therefrom beginning October 1996. On January 1, 1996, Republic Act No. 7716 (E-VAT Law) imposed 10% value-added tax (“VAT”) on sales of real properties and provided under Section 105 of the National Internal Revenue Code (as amended) an 8% transitional input tax credit on beginning inventories. FBDC filed a VAT registration, submitted an inventory of its land (book value ₱71,227,503,200) and claimed a transitional credit of ₱5,698,200,256. For Q4 1996, it applied ₱28,413,783 of that credit against output VAT. The Bureau of Internal Revenue disallowed the lanCase Digest (G.R. No. 158885)
Facts:
- Acquisition and Development
- On 8 February 1995, Fort Bonifacio Development Corporation (FBDC) acquired from the national government the former Fort Bonifacio military reservation (now “Global City”) under a VAT-free sale.
- Beginning October 1996, FBDC developed the land and sold lots to buyers, including two parcels sold to Metro Pacific Corporation.
- VAT Registration and Input Tax Claims
- Republic Act No. 7716 (effective 1 January 1996) first imposed 10% VAT on real property sales and left intact Section 105 (transitional input tax credit) of the old NIRC.
- FBDC registered as a VAT taxpayer and filed an inventory (book value ₱71.2 billion) to claim an 8% transitional input tax credit (₱5.698 billion).
- For Q4 1996, FBDC’s output VAT was ₱318.08 million; it paid ₱269.34 million in cash, used ₱28.41 million transitional input credit, and ₱20.33 million regular input credit.
- Administrative Proceedings and Appeals
- The BIR disallowed the ₱28.41 million transitional input tax on the ground that Revenue Regulation No. 7-95 (Sec. 4.105-1) limits real-estate dealers’ input credit to improvements on land; it assessed a deficiency VAT of ₱45.19 million plus penalties.
- FBDC’s protest was denied; the Court of Tax Appeals (CTA) in August 2000 upheld the assessment; the Court of Appeals (CA) in November 2002 affirmed but removed penalties (G.R. No. 158885).
- Separately, for Q3 1997 FBDC paid ₱347.74 million VAT and filed for refund on the same input credit; the CTA in October 2000 and the CA in October 2003 denied its claim (G.R. No. 170680).
- FBDC petitioned the Supreme Court, which consolidated the two cases.
Issues:
- Whether Section 105’s transitional input tax credit applies to the entire beginning inventory of real properties (land plus improvements) or only to improvements.
- Whether RR 7-95 Sec. 4.105-1 and its transitory provisions validly restrict the 8% input tax credit for real-estate dealers to improvements.
- Whether the BIR may redefine the statutory term “goods or properties” by regulation to exclude land.
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)