G.R. No. 164155 - Fort Bonifacio Development Corp. vs. Commissioner of Internal Revenue

In 1992, Congress enacted Republic Act (R.A.) 7227 creating the Bases Conversion Development Authority (BCDA) to raise funds by selling military camps in Metro Manila.
On February 3, 1995, BCDA established Fort Bonifacio Development Corporation (FBDC) as a wholly-owned subsidiary for developing a 440-hectare area in Fort Bonifacio, Taguig City.

On February 7, 1995, the Republic of the Philippines transferred by land grant to FBDC, through Special Patent 3596, 214 hectares of Fort Bonifacio land.
FBDC issued a Promissory Note for over P71.2 billion in favor of the Republic.
The Republic assigned the promissory note to BCDA, which in turn assigned it back to FBDC as full payment for FBDC’s authorized capital stock subscription.
On February 8, 1995, the Republic executed a Deed of Absolute Sale with Quitclaim in favor of FBDC covering the same land for the same amount.
On February 19, 1995, the Register of Deeds issued Original Certificate of Title (OCT) SP-001 in favor of FBDC, replacing Special Patent 3596.

On February 24, 1995, Congress enacted R.A. 7917, exempting from all forms of taxes the proceeds of the Government sale of the Fort Bonifacio land.
BCDA later sold 55% of its shares in FBDC to private investors, retaining 45%.

On September 15, 1998, the Commissioner of Internal Revenue issued a Letter of Authority to examine FBDC’s books for 1995.
On December 10, 1999, the Commissioner issued a Final Assessment Notice for deficiency documentary stamp tax (DST) amounting to P1,068,412,560.00 based on the Republic’s 1995 sale to FBDC.
FBDC protested the assessment, invoking the R.A. 7917 tax exemption in a January 6, 2000 letter.
After no response from the Commissioner within 180 days, FBDC filed a petition for review with the Court of Tax Appeals (CTA).
On March 5, 2003, CTA denied FBDC’s petition, affirming the DST assessment, distinguishing the Special Patent (tax exempt) from the Deed of Absolute Sale (not tax exempt).
The Commissioner moved for partial reconsideration to impose a 25% surcharge and 20% delinquency interest. The CTA imposed only the 20% delinquency interest on March 5, 2003 resolution.
FBDC appealed to the Court of Appeals (CA), contesting both the DST liability and the delinquency interest.
The CA affirmed the CTA decisions on June 11, 2004 and November 27, 2006, upholding both the tax assessment and the interest imposition.

During the pendency of the petitions before the Supreme Court, on December 17, 2004, FBDC manifested that the DST assessment was paid by BCDA through a Special Allotment Release Order from the Department of Budget and Management (DBM), charged to the Military Camps Sale Proceeds Fund.
The Commissioner claimed the payment was illegal, arguing it breached the tax exemption scope of R.A. 7917 since BCDA paid on behalf of FBDC, a private corporation.

Whether the Court of Appeals erred in ruling that FBDC is liable for the payment of DST and the 20% delinquency interest on the Deed of Absolute Sale of the 214-hectare Fort Bonifacio land.

Whether the case has become moot and academic due to the payment of the DST assessment by BCDA.