Case Summary (G.R. No. 173425)
Petitioner
Fort Bonifacio Development Corporation (FBDC), a domestic corporation owned 45% by the BCDA and 55% by private consortia, engaged in development and sale of real property.
Respondents
Commissioner of Internal Revenue and Revenue District Officer, Revenue District No. 44, Taguig and Pateros, Bureau of Internal Revenue.
Key Dates
• February 8, 1995 – Government sells Fort Bonifacio lands to FBDC.
• January 1, 1996 – R.A. 7716 expands VAT to real properties held for sale or lease.
• September 19, 1996 – FBDC files inventory with BIR, claims transitional input tax credit.
• First quarter 1997 – FBDC pays output VAT of P359,652,009.47.
• November 17, 1998 – FBDC files refund claim for overpaid VAT.
• October 12, 2000 – CTA denies refund.
• July 7, 2006 – CA affirms CTA.
• Petition for review filed under Rule 45.
Applicable Law
• Section 100, old National Internal Revenue Code (NIRC) as amended by R.A. 7716 – VAT on real properties.
• Section 105, old NIRC – Transitional input tax credit of 8% of beginning inventory or actual VAT paid, whichever is higher.
• Revenue Regulations (RR) No. 7-95 – Implements Section 105, limits presumptive credit for real estate dealers to improvements post-January 1, 1988.
• 1987 Philippine Constitution – Basis for taxation and appropriation issues.
Factual Antecedents
FBDC acquired the Fort Bonifacio land VAT-free from the Government in 1995. After R.A. 7716 took effect, FBDC submitted an inventory valued at P71.2 billion, claimed P5.7 billion in transitional input tax credit, sold lots in 1996–1997, and paid output VAT totaling P359.7 million, partly by cash and partly by earlier input credits.
Procedural History
- BIR inaction prompted FBDC to file a petition for review with the CTA in February 1999.
- CTA denied the refund, ruling:
– Transitional credit requires prior payment of business taxes.
– RR 7-95 validly limits input credit to improvements constructed since 1988. - FBDC appealed to the CA under Rule 43; the CA affirmed.
- FBDC elevated the case to this Court via Rule 45 petition.
Issues Presented
- Whether RR 6-97 repealed RR 7-95’s limitation of input credit to improvements.
- Whether RR 7-95 validly implements Section 105.
- Whether issuing or upholding RR 7-95 violates separation of powers.
- Whether interpretation or construction of Section 105 is necessary.
- Whether prior payment of business tax on land is a prerequisite for Section 105 credit.
- Whether lower courts speculated on the purpose of transitional input tax.
- Whether petitioner’s public-private acquisition objectives affect credit entitlement.
Petitioner’s Arguments
• Section 105 contains no requirement of prior tax payment to claim the 8% credit; filing of beginning inventory suffices.
• RR 7-95’s restriction to improvements contradicts Section 105 and Section 100 as amended by R.A. 7716.
• Treating the credit as a refund of prior tax payment is incorrect; it is a tax credit incentive.
Respondents’ Arguments
• Transitional credit inherently presupposes prior business-tax payment on acquisition.
• RR 7-95 validly limits credit to improvements, as authorized by Section 245 of the old NIRC.
Court’s Ruling
• Prior payment of VAT is not required to avail of the 8% transitional input tax credit under Section 105; only the filing of a beginning inventory is mandated.
• A tax credit incentive differs from a refund of
Case Syllabus (G.R. No. 173425)
Factual Antecedents
- Fort Bonifacio Development Corporation (FBDC) is a registered domestic corporation engaged in real‐property development and sale.
- Bases Conversion and Development Authority (BCDA), a government-created corporation under RA 7227, owns 45% of FBDC; a private consortium owns the remaining 55%.
- On February 8, 1995, under RA 7227 and EO 40, FBDC purchased a portion of Fort Bonifacio from the national government (now Fort Bonifacio Global City).
- On January 1, 1996, RA 7716 amended the National Internal Revenue Code (NIRC), extending VAT coverage to real properties held for sale or lease.
- September 19, 1996: FBDC filed an inventory of its real properties (book value ₱71,227,503,200.10) and claimed an 8% transitional input tax credit (₱5,698,200,256) under Section 105 of the old NIRC.
- October 1996: FBDC commenced lot sales in Global City.
- First quarter 1997 sales and leases generated ₱3,685,356,539.50; output VAT due was ₱368,535,653.95.
- FBDC paid ₱359,652,009.47 in cash and credited ₱8,883,644.48 of unutilized input tax.
- November 17, 1998: FBDC filed a BIR claim for refund of ₱359,652,009.47, asserting erroneous payment of output VAT.
Procedural History
- February 24, 1999: FBDC elevated its refund claim to the Court of Tax Appeals (CTA) after CIR’s inaction, via Petition for Review.
- October 12, 2000: CTA denied the claim, holding that:
- Transitional input tax credit is conditional on prior payment of business taxes.
- Sale being VAT-free precluded any input tax credit.
- Under RR 7-95, the 8% credit applies only to improvements on land (post-1988), not to total book value.
- July 7, 2006: Court of Appeals (CA) in CA-G.R. SP No. 61436 dismissed FBDC’s petition, affirming CTA:
- FBDC paid no VAT on acquisition, so no creditable input tax.
- Transitional credit allowed only if taxes were paid and passed on as part of purchase price.
- RR 7-95 validly limits the credit base to improvements under Section 245 of the old NIRC.
- September 4, 2012: Supreme Court EN BANC granted FBDC’s petition under Rule 45, reversing CA and CTA.
Issues Presented
- Whether RR 6-97 repealed or repudiated RR 7-95 insofar as limiting transitional/presumptive input tax to improvements on real properties.
- Whether RR 7-95 is a valid implementation of Section 105 of the old NIRC.
- Whether RR 7-95, and its judicial affirmations, violate the separation of powers.
- Wheth