December 2009 Philippine Supreme Court Decisions on Tax Law

Here are selected December 2009 rulings of the Supreme Court of the Philippines on tax law:

National Internal Revenue Code

Tax refund;  nature.   It is settled that tax refunds are in the nature of tax exemptions.  Laws granting exemptions are construed strictissimi juris against the taxpayer and liberally in favor of the taxing authority.  Where the taxpayer claims a refund, the CTA as a court of record is required to conduct a formal trial (trial de novo) to prove every minute aspect of the claim.  Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 179356, December 14, 2009.

VAT; input VAT  on capital goods. For petitioner’s purchases of domestic goods and services to be considered as “capital goods or properties,” three requisites must concur. First, the useful life of goods or properties must exceed one year; second, said goods or properties are treated as depreciable assets under Section 34 (f) and; third, the goods or properties must be used directly or indirectly in the production or sale of taxable goods and services.

From petitioner’s evidence, the account vouchers specifically indicate that the disallowed purchases were recorded under inventory accounts, instead of depreciable accounts. That petitioner failed to indicate under its fixed assets or depreciable assets account, goods and services allegedly purchased pursuant to the rehabilitation and maintenance of Malaya Power Plant Complex, militates against its claim for refund. As correctly found by the CTA, the goods or properties must be recorded and treated as depreciable assets under Section 34 (F) of the NIRC. Kepco Philippines Corporation vs. Commissioner of Internal Revenue, G.R. No. 179356, December 14, 2009.

Local Government Code and special laws

Real property tax; liability of GSIS. Pursuant to Sec. 33 of PD 1146, GSIS enjoyed tax exemption from real estate taxes, among other tax burdens, until January 1, 1992 when the LGC took effect and withdrew exemptions from payment of real estate taxes privileges granted under PD 1146.  RA 8291 restored in 1997 the tax exempt status of GSIS by reenacting under its Sec. 39 what was once Sec. 33 of P.D. 1146.  If any real estate tax is due to the City of Manila, it is only for the interim period, or from 1992 to 1996, to be precise. Government Service Insurance System vs. City Treasurer and City Assessor of the City of Manila, G.R. No. 186242, December 23, 2009.

Real property tax;  exemption. The real property tax exemption the property of the Republic or its instrumentality carries ceases only if, as stated in Sec. 234(a) of the LGC of 1991, “beneficial use thereof has been granted, for a consideration or otherwise, to a taxable person.” GSIS, as a government instrumentality, is not a taxable juridical person under Sec. 133(o) of the LGC. GSIS, however, lost in a sense that status with respect to the Katigbak property when it contracted its beneficial use to MHC, doubtless a taxable person. Thus, the real estate tax assessment of PhP 54,826,599.37 covering 1992 to 2002 over the subject Katigbak property is valid insofar as said tax delinquency is concerned as assessed over said property.

As a matter of law and contract, MHC stands liable to pay the realty taxes due on the Katigbak property.  Government Service Insurance System vs. City Treasurer and City Assessor of the City of Manila, G.R. No. 186242, December 23, 2009.

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