Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 158885 October 2, 2009 FORT BONIFACIO DE E!

OPMENT CORPORATION Petitioner, vs. COMMISSIONER OF INTERNA! RE ENUE, REGIONA! DIRECTOR, RE ENUE REGION NO. 8, "#$ C%IEF, ASSESSMENT DI ISION, RE ENUE REGION NO. 8, BIR, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 1&0'80 FORT BONIFACIO DE E!OPMENT CORPORATION Petitioner, vs. COMMISSIONER OF INTERNA! RE ENUE, RE ENUE DISTRICT OFFICER, RE ENUE DISTRICT NO. ((, TAGUIG "#$ PATEROS, BUREAU OF INTERNA! RE ENUE. Respondents. RES !EONARDO)DE CASTRO, J.: Before us is respondents% Motion for Reconsideration of our &ecision dated April ', '(() *hich +ranted the consolidated petitions of petitioner ,ort Bonifacio &evelop-ent Corporation, the dispositive portion of *hich reads. /0ERE, RE, the petitions are 1RAN#E&. #he assailed decisions of the Court of #ax Appeals and the Court of Appeals are RE2ERSE& and SE# AS$&E. Respondents are hereb3 456 restrained fro- collectin+ fro- petitioner the a-ount of P'7,859,:79.(( representin+ the transitional input tax credit due it for the fourth ;uarter of 5))<= and 4'6 directed to refund to petitioner the a-ount of P98:,:85,<)>.:8 paid as output 2A# for the third ;uarter of 5)): in li+ht of the persistin+ transitional input tax credit available to petitioner for the said ;uarter, or to issue a tax credit correspondin+ to such a-ount. No pronounce-ent as to costs. #he Motion for Reconsideration raises the follo*in+ ar+u-ents. $ SEC#$ N 5(( , #0E !& NA#$ NA! $N#ERNA! RE2EN"E C &E 4 !& N$RC6, AS AMEN&E& B? REP"B!$C AC# 4R.A.6 N . ::5<, C "!& N # 0A2E S"PP!$E& #0E &$S#$NC#$ N BE#/EEN #0E #REA#MEN# , REA! PR PER#$ES R REA! ES#A#E &EA!ERS N #0E NE 0AN&, AN& #0E #REA#MEN# , #RANSAC#$ NS $N2 !2$N1 #0ER C MMERC$A! 1 &S N #0E #0ER 0AN&, AS SA$& &$S#$NC#$ N $S , "N& $N SEC#$ N 5(> AN&, S"BSE@"EN#!?, RE2EN"E RE1"!A#$ NS N . :-)> /0$C0 &E,$NES #0E $NP"# #AA CRE&$#AB!E # A REA! ES#A#E &EA!ER /0 BEC MES S"BBEC# # 2A# , R #0E ,$RS# #$ME. $$ SEC#$ N 8.5(>.5 AN& PARA1RAP0 4A6 4$$$6 , #0E #RANS$# R? PR 2$S$ NS , RE2EN"E RE1"!A#$ NS N . :-)> 2A!$&!? !$M$# #0E 7C #RANS$#$ NA! $NP"# #AA # #0E $MPR 2EMEN#S N REA! PR PER#$ES. $$$ RE2EN"E RE1"!A#$ NS N . <-): &$& N # REPEA! RE2EN"E RE1"!A#$ NS N . :)>. !"#$ N

#he instant -otion for reconsideration lacDs -erit. #he first 2A# la*, found in Executive rder 4E 6 No. ':9 E5)7:F, tooD effect on Banuar3 5, 5)77. $t a-ended several provisions of the National $nternal Revenue Code of 5)7< 4 ld N$RC6. E ':9 liDe*ise acco--odated the potential burdens of the shift to the 2A# s3ste- b3 allo*in+ ne*l3 2A#-re+istered persons to avail of a transitional input tax credit as provided for in Section 5(> of the ld N$RC. Section 5(> as a-ended b3 E ':9 reads. Sec. 5(>. #ransitional $nput #ax Credits. G A person *ho beco-es liable to value-added tax or an3 person *ho elects to be a 2A#-re+istered person shall, subHect to the filin+ of an inventor3 as prescribed b3 re+ulations, be allo*ed input tax on his be+innin+ inventor3 of +oods, -aterials and supplies e;uivalent to 7C of the value of such inventor3 or the actual value-added tax paid on such +oods, -aterials and supplies, *hichever is hi+her, *hich shall be creditable a+ainst the output tax. RA ::5< tooD effect on Banuar3 5, 5))<. $t a-ended Section 5(( of the ld N$RC b3 i-posin+ for the first ti-e value-added-tax on sale of real properties. #he a-end-ent reads. Sec. 5((. 2alue-added-tax on sale of +oods or properties. G 4a6 Rate and base of tax. G #here shall be levied, assessed and collected on ever3 sale, barter or exchan+e of +oods or properties, a value-added tax e;uivalent to 5(C of the +ross sellin+ price or +ross value in -one3 of the +oods, or properties sold, bartered or exchan+ed, such tax to be paid b3 the seller or transferor.
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456 #he ter- I+oods or propertiesI shall -ean all tan+ible and intan+ible obHects *hich are capable of pecuniar3 esti-ation and shall include. 4A6 Real properties held pri-aril3 for sale to custo-ers or held for lease in the ordinar3 course of trade or business= xxx #he provisions of Section 5(> of the N$RC, on the transitional input tax credit, re-ain intact despite the enact-ent of RA ::5<. Section 5(> ho*ever *as a-ended *ith the passa+e of the ne* National $nternal Revenue Code of 5)): 4Ne* N$RC6, also officiall3 Dno*n as Republic Act 4RA6 78'8. #he provisions on the transitional input tax credit are no* e-bodied in Section 5554A6 of the Ne* N$RC, *hich reads. Section 555. Transitional/Presumptive Input Tax Credits. J 4A6 Transitional Input Tax Credits. - A person *ho beco-es liable to value-added tax or an3 person *ho elects to be a 2A#-re+istered person shall, subHect to the filin+ of an inventor3 accordin+ to rules and re+ulations prescribed b3 the Secretar3 of finance, upon reco--endation of the Co--issioner, be allo*ed input tax on his be+innin+ inventor3 of +oods, -aterials and supplies e;uivalent for 7C of the value of such inventor3 or the actual value-added tax paid on such +oods, -aterials and supplies, *hichever is hi+her, *hich shall be creditable a+ainst the output tax. EE-phasis ours.F #he Co--issioner of $nternal Revenue 4C$R6 disallo*ed ,ort Bonifacio &evelop-ent Corporation%s 4,B&C6 presu-ptive input tax credit arisin+ fro- the land inventor3 on the basis of Revenue Re+ulation :)> 4RR :-)>6 and Revenue Me-orandu- Circular 9-)< 4RMC 9-)<6. Specificall3, Section 8.5(>-5 of RR :)> provides. Sec. 8.5(>-5. #ransitional input tax on be+innin+ inventories. J #axpa3ers *ho beca-e 2A#-re+istered persons upon effectivit3 of RA No. ::5< *ho have exceeded the -ini-u- turnover of P>((,(((.(( or *ho voluntaril3 re+ister even if their turnover does not exceed P>((,(((.(( shall be entitled to a presu-ptive input tax on the inventor3 on hand as of &ece-ber 95, 5))> on the follo*in+. 4a6 +oods purchased for resale in their present condition= 4b6 -aterials purchased for further processin+, but *hich have not 3et under+one processin+= 4c6 +oods *hich have been -anufactured b3 the taxpa3er= 4d6 +oods in process and supplies, all of *hich are for sale or for use in the course of the taxpa3er%s trade or business as a 2A#re+istered person. 0o*ever, in the case of real estate dealers, the basis of the presu-ptive input tax shall be the i-prove-ents, such as buildin+s, roads, draina+e s3ste-s, and other si-ilar structures, constructed on or after the effectivit3 of E ':9 4Banuar3 5, 5)776. #he transitional input tax shall be 7C of the value of the inventor3 or actual 2A# paid, *hichever is hi+her, *hich a-ount -a3 be allo*ed as tax credit a+ainst the output tax of the 2A#-re+istered person.

$n the April ', '(() &ecision sou+ht to be reconsidered, the Court strucD do*n Section 8.5(>-5 of RR :-)> for bein+ in conflict *ith the la*. $t held that the C$R had no po*er to li-it the -eanin+ and covera+e of the ter- K+oodsK in Section 5(> of the ld N$RC sans statutor3 authorit3 or basis and Hustification to -aDe such li-itation. #his it did *hen it restricted the application of Section 5(> in the case of real estate dealers onl3 to i-prove-ents on the real propert3 belon+in+ to their be+innin+ inventor3. A la* -ust not be read in truncated parts= its provisions -ust be read in relation to the *hole la*. $t is the cardinal rule in statutor3 construction that a statute%s clauses and phrases -ust not be taDen as detached and isolated expressions, but the *hole and ever3 part thereof -ust be considered in fixin+ the -eanin+ of an3 of its parts in order to produce a har-onious *hole. Ever3 part of the statute -ust be interpreted *ith reference to the context, i.e., that ever3 part of the statute -ust be considered to+ether *ith other parts of the statute and Dept subservient to the +eneral intent of the *hole enact-ent. 5 $n construin+ a statute, courts have to taDe the thou+ht conve3ed b3 the statute as a *hole= construe the constituent parts to+ether= ascertain the le+islative intent fro- the *hole act= consider each and ever3 provision thereof in the li+ht of the +eneral purpose of the statute= and endeavor to -aDe ever3 part effective, har-onious and sensible.' #he statutor3 definition of the ter- K+oods or propertiesK leaves no roo- for doubt. $t states. Sec. 5((. 2alue-added tax on sale of +oods or properties. J 4a6 Rate and base of tax. J xxx. 456 #he ter- L+oods or properties% shall -ean all tan+ible and intan+ible obHects *hich are capable of pecuniar3 esti-ation and shall include. 4A6 Real properties held pri-aril3 for sale to custo-ers or held for lease in the ordinar3 course of trade or business= xxx. #he a-endator3 provision of Section 5(> of the N$RC, as introduced b3 RA ::5<, states. Sec. 5(>. #ransitional $nput tax Credits. J A person *ho beco-es liable to value-added tax or an3 person *ho elects to be a 2A#-re+istered person shall, subHect to the filin+ of an inventor3 as prescribed b3 re+ulations, be allo*ed input tax on his be+innin+ inventor3 of +oods, -aterials and supplies e;uivalent to 7C of the value of such inventor3 or the actual value-added tax paid on such +oods, -aterials and supplies, *hichever is hi+her, *hich shall be creditable a+ainst the output tax. #he ter- K+oods or propertiesK b3 the una-bi+uous ter-s of Section 5(( includes Kreal properties held pri-aril3 for sale to costu-ers or held for lease in the ordinar3 course of business.K 0avin+ been defined in Section 5(( of the N$RC, the ter- K+oodsK as used in Section 5(> of the sa-e code could not have a different -eanin+. #his has been explained in the &ecision dated April ', '((), thus. "nder Section 5(>, the be+innin+ inventor3 of K+oodsK for-s part of the valuation of the transitional input tax credit. 1oods, as co--onl3 understood in the business sense, refers to the product *hich the 2A#re+istered person offers for sale to the public. /ith respect to real estate dealers, it is the real properties the-selves *hich constitute their K+oods.K Such real properties are the operatin+ assets of the real estate dealer. Section 8.5((-5 of RR No. :-)> itself includes in its enu-eration of K+oods or propertiesK such Kreal properties held pri-aril3 for sale to custo-ers or held for lease in the ordinar3 course of trade or business.K Said definition *as taDen fro- the ver3 statutor3 lan+ua+e of Section 5(( of the ld N$RC. B3 li-itin+ the definition of +oods to Ki-prove-entsK in Section 8.5(>-5, the B$R not onl3 contravened the definition of K+oodsK as provided in the ld N$RC, but also the definition *hich the sa-e revenue re+ulation itself has provided. Section 8.5(>-5 of RR :-)> restricted the definition of K+oodsK, viM. 0o*ever, in the case of real estate dealers, the basis of the presu-ptive input tax shall be the i-prove-ents, such as buildin+s, roads, draina+e s3ste-s, and other si-ilar structures, constructed on or after the effectivit3 of E ':9 4Banuar3 5, 5)776. As -andated b3 Article : of the Civil Code, 9 an ad-inistrative rule or re+ulation cannot contravene the la* on *hich it is based. RR :-)> is inconsistent *ith Section 5(> insofar as the definition of the ter- K+oodsK is concerned. #his is a le+islative act be3ond the authorit3 of the C$R and the Secretar3 of ,inance. #he

rules and re+ulations that ad-inistrative a+encies pro-ul+ate, *hich are the product of a dele+ated le+islative po*er to create ne* and additional le+al provisions that have the effect of la*, should be *ithin the scope of the statutor3 authorit3 +ranted b3 the le+islature to the obHects and purposes of the la*, and should not be in contradiction to, but in confor-it3 *ith, the standards prescribed b3 la*. #o be valid, an ad-inistrative rule or re+ulation -ust confor-, not contradict, the provisions of the enablin+ la*. An i-ple-entin+ rule or re+ulation cannot -odif3, expand, or subtract fro- the la* it is intended to i-ple-ent. An3 rule that is not consistent *ith the statute itself is null and void. 8 /hile ad-inistrative a+encies, such as the Bureau of $nternal Revenue, -a3 issue re+ulations to i-ple-ent statutes, the3 are *ithout authorit3 to li-it the scope of the statute to less than *hat it provides, or extend or expand the statute be3ond its ter-s, or in an3 *a3 -odif3 explicit provisions of the la*. $ndeed, a ;uasi-Hudicial bod3 or an ad-inistrative a+enc3 for that -atter cannot a-end an act of Con+ress. 0ence, in case of a discrepanc3 bet*een the basic la* and an interpretative or ad-inistrative rulin+, the basic la* prevails.> #o recapitulate, RR :-)>, insofar as it restricts the definition of K+oodsK as basis of transitional input tax credit under Section 5(> is a nullit3. n Banuar3 5, 5)):, RR <-): *as issued b3 the Co--issioner of $nternal Revenue. RR <-): *as basicall3 a reiteration of the sa-e Section 8.5(>-5 of RR :-)>, except that the RR <-): deleted the follo*in+ para+raph. 0o*ever, in the case of real estate dealers, the basis of the presu-ptive input tax shall be the i-prove-ents, such as buildin+s, roads, draina+e s3ste-s, and other si-ilar structures, constructed on or after the effectivit3 of E. . ':9 4Banuar3 5, 5)776. $t is clear, therefore, that under RR <-):, the allo*able transitional input tax credit is not li-ited to i-prove-ents on real properties. #he particular provision of RR :-)> has effectivel3 been repealed b3 RR <-): *hich is no* in consonance *ith Section 5(( of the N$RC, insofar as the definition of real properties as +oods is concerned. #he failure to add a specific repealin+ clause *ould not necessaril3 indicate that there *as no intent to repeal RR :-)>. #he fact that the afore;uoted para+raph *as deleted created an irreconcilable inconsistenc3 and repu+nanc3 bet*een the provisions of RR <-): and RR :-)>. /e no* address the points raised in the dissentin+ opinion of the 0onorable Bustice Antonio #. Carpio. At the outset, it -ust be stressed that ,B&C sou+ht the refund of the total a-ount of P98:,:85,<)>.:8 *hich it had itself paid in cash to the B$R. $t is ar+ued that the transitional input tax credit applies onl3 *hen taxes *ere previousl3 paid on the properties in the be+innin+ inventor3 and that there should be a la* i-posin+ the tax presu-ed to have been paid. #he thesis is anchored on the ar+u-ent that *ithout an3 2A# or other input business tax i-posed b3 la* on the real properties at the ti-e of the sale, the 7C transitional input tax cannot be presu-ed to have been paid. #he lan+ua+e of Section 5(> is explicit. $t precludes readin+ into the la* that the transitional input tax credit is li-ited to the a-ount of 2A# previousl3 paid. /hen the aforesaid section speaDs of Kei+ht percent 47C6 of the value of such inventor3K follo*ed b3 the clause Kor the actual value-added tax paid on such +oods, -aterials and supplies,K the i-plication is clear that under the first clause, Kei+ht percent 47C6 of the value of such inventor3,K the la* does not conte-plate the pa3-ent of an3 prior tax on such inventor3. #his is distin+uished fro- the second clause, Kthe actual value-added tax paid on the +oods, -aterials and suppliesK *here actual pa3-ent of 2A# on the +oods, -aterials and supplies is assu-ed. 0ad the intention of the la* been to li-it the a-ount to the actual 2A# paid, there *ould have been no need to explicitl3 allo* a clai- based on 7C of the value of such inventor3. #he contention that the 7C transitional input tax credit in Section 5(> presu-es that a previous tax *as paid, *hether or not it *as actuall3 paid, re;uires a transaction *here a tax has been i-posed b3 la*, is utterl3 *ithout basis in la*. #he rationale behind the provisions of Section 5(> *as aptl3 elucidated in the &ecision sou+ht to be reconsidered, thus. $t is apparent that the transitional input tax credit operates to benefit ne*l3 2A#-re+istered persons, *hether or not the3 previousl3 paid taxes in the ac;uisition of their be+innin+ inventor3 of +oods, -aterials and supplies. &urin+ that period of transition fro- non-2A# to 2A# status, the transitional input tax credit serves

to alleviate the i-pact of the 2A# on the taxpa3er. At the ver3 be+innin+, the 2A#-re+istered taxpa3er is obli+ed to re-it a si+nificant portion of the inco-e it derived fro- its sales as output 2A#. #he transitional input tax credit -iti+ates this initial di-inution of the taxpa3er%s inco-e b3 affordin+ the opportunit3 to offset the losses incurred throu+h the re-ittance of the output 2A# at a sta+e *hen the person is 3et unable to credit input 2A# pa3-ents. As pointed out in ur &ecision of April ', '((), to +ive Section 5(> a restrictive construction that transitional input tax credit applies onl3 *hen taxes *ere previousl3 paid on the properties in the be+innin+ inventor3 and there is a la* i-posin+ the tax *hich is presu-ed to have been paid, is to i-pose conditions or re;uisites to the application of the transitional tax input credit *hich are not found in the la*. #he courts -ust not read into the la* *hat is not there. #o do so *ill violate the principle of separation of po*ers *hich prohibits this Court fro- en+a+in+ in Hudicial le+islation.< /0ERE, RE, pre-ises considered, the Motion for Reconsideration is &EN$E& /$#0 ,$NA!$#? for lacD of -erit. S R&ERE&. TERESITA *. !EONARDO)DE CASTRO Associate Bustice /E C NC"R. RE+NATO S. PUNO Chief Bustice 4 n official leave6 !EONARDO A. ,UISUMBINGN Associate Bustice ANTONIO T. CARPIO Associate Bustice CONC%ITA CARPIO MORA!ES Associate Bustice PRESBITERO *. E!ASCO, *R. Associate Bustice 4 n leave6 ARTURO D. BRIONNN Associate Bustice DIOSDADO M. PERA!TA Associate Bustice ROBERTO A. ABAD Associate Bustice C E R#$ , $ CA#$ N Pursuant to Section 59, Article 2$$$ of the Constitution, $ certif3 that the conclusions in the above decision had been reached in consultation before the case *as assi+ned to the *riter of the opinion of the Court. RE+NATO S. PUNO Chief Bustice CONSUE!O +NARES)SANTIAGO Associate Bustice RENATO C. CORONA Associate Bustice MINITA . C%ICO)NA-ARIO Associate Bustice ANTONIO EDUARDO B. NAC%URA Associate Bustice !UCAS P. BERSAMIN Associate Bustice MARIANO C. DE! CASTI!!O Associate Bustice

Foot#ote.
N NN

n official leave.

n sicD leave.
5 #he Civil Service Co--ission v. Boson, 1.R. No. 5>8<:8, Ma3 ':, '((8, 8') SCRA ::9,:7<.

' Republic v. Re3es, No. !- ''>>(, Ma3 5), 5)<<, 5: SCRA 5:(,5:9. 9 Art. :. xxx

Ad-inistrative or executive acts, orders and re+ulations shall be valid onl3 *hen the3 are not contrar3 to the la*s or the constitution.
8 ,rancel Realt3 Corporation v. S3cip, 1.R. No. 5>8<78, Septe-ber 7, '((>, 8<) SCRA 8'8, 89<. > Sun+a v. Co--ission on Elections, 1.R. No. 5'><'), March '>, 5))7, '77 SCRA :7, 7:. < Ala+ad 4Partido n+ Maralitan+-!un+sod6 v. Co--ission on Elections, 1.R. No. 59<:)>,

ctober <, '(((,

98' SCRA '88, ')5

#he !a*phil ProHect - Arellano !a* ,oundation

DISSENTING OPINION CARPIO, J.: $ vote to +rant the -otion for reconsideration filed b3 the Co--issioner of $nternal Revenue. T/e $ec0.0o# $"te$ 2 A1r02 2009 3r"#t. to 1et0t0o#er " t"4 cre$0t or re56#$ o5 P7(&,&(1,'95.&( 8/e# 1et0t0o#er #e9er 0# 5"ct 1"0$ " .0#32e ce#t"9o o5 t"4 to t/e B6re"6 o5 I#ter#"2 Re9e#6e. A t"4 cre$0t or t"4 re56#$ re:60re. t/"t " 1re90o6. t"4 8". 1"0$ b; t/e t"41";er. T/ere c"# be #o t"4 cre$0t or re56#$ 05 #o 1r0or t"4 8". 1"0$. I# t/0. c".e, t/e $ec0.0o# $"te$ 2 A1r02 2009 3r"#t. to 1et0t0o#er /6#$re$. o5 <0220o#. 0# t"4 cre$0t or re56#$ 80t/o6t t/e t"41";er e9er /"90#3 1"0$ "#; 1re90o6. t"4 to t/e 3o9er#<e#t. =/o 8022 be"r t/0. b6r$e# o5 t"4 cre$0t or re56#$> It 0. "22 t"41";er. 0# t/0. co6#tr; e4ce1t, o5 co6r.e, 1et0t0o#er. =/"t <"?e. 1et0t0o#er .o 1r0902e3e$> #he Constitution -andates that Kthe rule of taxation shall be unifor- and e;uitable.K 5 #here is certainl3 neither unifor-it3 nor e;uit3 if this Court +rants petitioner a P98:,:85,<)>.:8 tax credit or refund *hen all other taxpa3ers seeDin+ a tax credit or refund -ust first sho* prior pa3-ent of a tax, or at least the existence of a la* i-posin+ the tax for *hich a credit or refund is sou+ht. #he transitional input tax credit *as placed in the tax la* to pave the s-ooth transition fro- the non-2A# to the 2A# s3ste-. #his input 2A# *orDs b3 deductin+ previousl3 paid taxes fro- the output 2A# liabilit3 in subse;uent transactions involvin+ the sa-e product. #he ter- KtransitionalK *as placed to distin+uish this fro- an ordinar3 input tax. $n 5))>, *hen petitioner bou+ht the 1lobal Cit3 land fro- the national +overn-ent, the sale *as under a tax-free transaction and *ithout an3 2A# co-ponent. Bein+ tax-exe-pt, the national +overn-ent did not pass on an3 previous input business tax, *hether in the for- of sales tax or 2A#, to petitioner as part of the purchase price.
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T/e 8@ tr"#.0t0o#"2 0#16t t"4 cre$0t 0# Sect0o# 105 1re.6<e. t/"t " 1re90o6. t"4 8". 1"0$, 8/et/er or #ot 0t 8". "ct6"22; 1"0$. S6c/ 1re.6<1t0o# "..6<e. t/e e40.te#ce o5 " 2"8 0<1o.0#3 t/e t"4 1re.6<e$ to /"9e bee# 1"0$. T/0. c"# be 0#5erre$ 5ro< t/e 1ro90.0o# t/"t " t"41";er 0. A"22o8e$ 0#16t t"4 o# /0. be30##0#3 0#9e#tor; 444 e:609"2e#t to 8@ 444, or t/e "ct6"2 9"26e)"$$e$ t"4 1"0$ 444, 8/0c/e9er 0. /03/er.A T/e tr"#.0t0o#"2 0#16t t"4 re:60re. " tr"#."ct0o# 8/ere " t"4 /". bee# 0<1o.e$ b; 2"8. Ot/er80.e, t/e 1re.6<1t0o# t/"t t/e t"4 /". bee# 1"0$ 8022 /"9e #o b".0.. =0t/o6t "#; AT or ot/er 0#16t b6.0#e.. t"4 0<1o.e$ b; 2"8 o# re"2 1ro1ert0e. "t t/e t0<e o5 t/e ."2e 0# t/e 1re.e#t c".e, t/e 8@ tr"#.0t0o#"2 0#16t t"4 c"##ot be 1re.6<e$ to /"9e bee# 1"0$. Also, even before real estate dealers beca-e subHect to 2A# under RA ::5<, i-prove-ents on the land *ere alread3 subHect to 2A#. 0o*ever, since the land itself *as not subHect to 2A# or to an3 input tax prior to RA ::5<, the land then could not be considered part of the be+innin+ inventor3 under Section 5(>. #hus, the 7C transitional input tax should appl3 onl3 to i-prove-ents on land and not on the land itself. #o repeat, at the ti-e of the sale b3 the +overn-ent of the 1lobal Cit3 land in 5))>, there *as no 2A# on the sale of land. $n addition, the +overn-ent, as seller, *as not subHect to 2A#. Even if the sale transaction happens toda3 *ith the 2A# on real properties alread3 in existence, and petitioner subse;uentl3 resells the land, petitioner *ill still not be entitled to an3 input tax credit. #his is because the sale b3 the national +overn-ent of +overn-ent-o*ned land is not subHect to 2A#. ' Petitioner cannot no* clai- an3 input tax credit if it bu3s the sa-e land toda3, and resells the sa-e the follo*in+ da3. #hus, if a real estate dealer liDe petitioner cannot clai- an input tax toda3 on its purchase of +overn-ent land, *hen 2A# on real properties is alread3 in effect, then all the -ore petitioner cannot clai- an3 input tax for its 5))> purchase of +overn-ent land *hen the E-2A# la* *as still inexistent and petitioner had not 3et been subHected to 2A#. Accordin+l3, $ vote to 1RAN# the Motion for Reconsideration. ANTONIO T. CARPIO Associate Bustice Foot#ote.

5Section '7, Article 2$, Constitution. '"nder Section 5(> of the present N$RC, the person liable for the pa3-ent of value-added tax is

Kan3 person *ho, in the course of trade or business, sells +oods or properties.K $n Section '' of the sa-e statute, the ter- KpersonK is defined as an individual, a trust, estate, or corporation. #he national +overn-ent does not fall under an3 of the enu-erated entities. $t is neither an individual or a corporation *hich co-es under the purvie* of the la*. Neither can it be said that the national +overn-ent, in sellin+ the 1lobal Cit3 land, is en+a+ed in Ktrade or business.K #he phrase Kin the course of trade or businessK as defined in Section 5(>, -eans the re+ular conduct or pursuit of a co--ercial or an econo-ic activit3. $n this case, the obHective of RA )'': is to use the proceeds fro- the sale of portions of ,ort Bonifacio to finance -ilitar3-related activities and provide housin+ loan assistance. Accordin+l3, the national +overn-ent, as the seller *ith these policies in -ind, does not fall under the definition Ken+a+ed in the re+ular conduct or pursuit of an econo-ic activit3.K #hus, not bein+ expressl3 included in the tax la* as one liable for value-added tax, the national +overn-ent is exe-pt therefro-.

FORT BONIFACIO DEVELOPMENT CORPORATION VS. COMMISSIONER OF INTERNAL REVENUE- TRANSITIONAL INPUT VALUE ADDED TAX

FACTS: Petitioner was a rea estate !e"e o#er t$at %o&'$t (ro) t$e nationa 'o"ern)ent a #ar*e o( an! t$at &se! to %e t$e Fort Boni(a*io )i itar+ reser"ation. At t$e ti)e o( t$e sai! sa e t$ere was as +et no VAT i)#ose! so Petitioner !i! not #a+ an+ VAT on its #&r*$ase. S&%se,&ent +- Petitioner so ! two #ar*e s o( an! to Metro Pa*i(i* Cor#. In re#ortin' t$e sai! sa e (or VAT #&r#oses .%e*a&se t$e VAT $a! a rea!+ %een i)#ose! in t$e interi)/- Petitioner * ai)e! transitiona in#&t VAT *orres#on!in' to its in"entor+ o( an!. T$e BIR !isa owe! t$e * ai) o( #res&)#ti"e in#&t VAT an! t$ere%+ assesse! Petitioner (or !e(i*ien*+ VAT.

ISSUE: Is Petitioner entit e! to * ai) t$e transitiona in#&t VAT on its sa e o( rea #ro#erties 'i"en its nat&re as a rea estate !ea er an! i( so .i/ is t$e transitiona in#&t VAT a## ie! on + to t$e i)#ro"e)ents on t$e rea #ro#ert+ or is it a## ie! on t$e "a &e o( t$e entire rea #ro#ert+ an! .ii/ s$o& ! t$ere $a"e %een a #re"io&s ta0 #a+)ent (or t$e transitiona in#&t VAT to %e *re!ita% e1

2ELD:

3ES. Petitioner is entit e! to * ai) transitiona in#&t VAT %ase! on t$e "a &e o( not on + t$e i)#ro"e)ents %&t on t$e "a &e o( t$e entire rea #ro#ert+ an! re'ar! ess o( w$et$er t$ere was in (a*t a*t&a #a+)ent on t$e #&r*$ase o( t$e rea #ro#ert+ or not.

T$e a)en!)ents to t$e VAT aw !o not s$ow an+ intention to )a4e t$ose in t$e rea estate %&siness s&%5e*t to a !i((erent treat)ent (ro) t$ose en'a'e! in t$e sa e o( ot$er 'oo!s or #ro#erties or in an+ ot$er *o))er*ia tra!e or %&siness. On t$e s*o#e o( t$e %asis (or !eter)inin' t$e a"ai a% e transitiona in#&t VAT- t$e CIR $as no #ower to i)it t$e )eanin' an! *o"era'e o( t$e ter) 6'oo!s6 in Se*tion 789 o( t$e Ta0 Co!e wit$o&t stat&tor+ a&t$orit+ or %asis. T$e transitiona in#&t ta0 *re!it o#erates to %ene(it new + VAT-re'istere! #ersons- w$et$er or not t$e+ #re"io&s + #ai! ta0es in t$e a*,&isition o( t$eir %e'innin' in"entor+ o( 'oo!s- )ateria s an! s&## ies.