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CIR v. BASES CONVERSION

FACTS:

The case involves a petition for review filed by the Commissioner of Internal Revenue (CIR) challenging the decision of the Court of Tax Appeals (CTA) En Banc on the claim for tax refund of the Bases Conversion and Development Authority (BCDA).

BCDA owned four real properties in Bonifacio Global City. It entered into a contract with a joint venture called the "Net Group" for the sale of the properties. The purchase price was Php2,032,749,327.96, and the "Net Group" committed to withhold Php101,637,466.40 as Creditable Tax Withheld at source (CWT) pending BCDA's presentation of a certification of tax exemption.

BCDA requested the certification from the CIR but did not receive a response. Despite the lack of certification, BCDA and the "Net Group" executed Deeds of Absolute Sale on July 31, 2008. The "Net Group" deducted the CWT amount and remitted it to the BIR. BCDA, however, claimed that it was exempt from taxes and fees under its charter, RA 7227.

BCDA wrote to the BIR for a refund of the CWT amount, but the BIR did not respond. BCDA then sought relief from the CTA for the refund of the amount.

The CTA First Division ruled in favor of BCDA, ordering the CIR to refund the CWT amount to BCDA. The CTA En Banc affirmed this decision, stating that although BCDA is not among the exempt corporations listed in the NIRC, the sale of the properties is specifically exempted under RA 7227. The NIRC, being a general law, does not supersede or amend the special law. Additionally, Section 32(B) (7) (b) of the NIRC exempts income derived from any public utility, which includes BCDA in this case.

The case involves the tax exemption of the Bases Conversion and Development Authority (BCDA), a government-owned and controlled corporation, from the creditable withholding tax (CWT) imposed on its income from the sale of certain properties. The BCDA claimed a refund of the CWT it paid on the basis that it is exempt from such tax. The Court of Tax Appeals (CTA) ruled in favor of the BCDA, holding that the sale proceeds of the subject properties are excluded from the BCDA's gross income under the National Internal Revenue Code (NIRC) and that the CWT system does not apply to the National Government and its instrumentalities. The CTA En Banc further upheld the tax-exempt provision in the BCDA's Charter. The petitioner, the Commissioner of Internal Revenue, argues that the BCDA is not exempt from CWT and that even assuming it is, the BCDA failed to comply with the requirements for tax refund. The core issue in the case is whether the BCDA is exempt from CWT.

ISSUES:

  1. Is the BCDA exempt from Creditable Withholding Tax (CWT) on the sale of its Global City properties?

  2. Whether the sale proceeds of certain properties in Fort Bonifacio and Villamor Air Base are deemed appropriated by Congress to the respective recipients and for the specified purposes.

  3. Whether the proceeds of the sale are exempt from all forms of taxes and fees.

  4. Whether Section 6, paragraph 5 of RA No. 9337 impliedly repealed RA No. 6395.

  5. Whether the standard procedural and documentary requirements for tax refund applicable to GOCCs apply to BCDA in relation to the properties and sale proceeds specified under Section 8 of RA 7227, as amended.

RULING:

  1. The BCDA is exempt from Creditable Withholding Tax (CWT) on the sale of its Global City properties. Section 8 of RA 7227, as amended by RA 7917, declares that the sales proceeds of certain military camps, including the Global City properties, shall be deemed appropriated for specific purposes. This provision signifies that such sales are not subject to any taxes or fees.

  2. Yes, the sale proceeds of certain properties in Fort Bonifacio and Villamor Air Base are deemed appropriated by Congress to the respective recipients and for the specified purposes. The provisions of law provide clear and categorical language, leaving no room for interpretation.

  3. Yes, the proceeds of the sale are exempt from all forms of taxes and fees. The provision of law explicitly states that the proceeds shall not be diminished by any item or circumstance, including all forms of taxes and fees.

  4. Section 6, paragraph 5 of RA No. 9337 did not impliedly repeal RA No. 6395. The two laws do not cover the same subject matter and are not irreconcilably inconsistent or incompatible with each other.

  5. The standard procedural and documentary requirements for tax refund applicable to GOCCs do not apply to BCDA in relation to the properties and sale proceeds specified under Section 8 of RA 7227, as amended. The sale proceeds of specific properties exempted by law from all taxes and fees are not considered income and therefore, not taxable.

PRINCIPLES:

  • When the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room for application.

  • A special law cannot be impliedly repealed by a subsequently enacted general law in the absence of any express provision in the latter law to that effect.

  • Implied repeal by irreconcilable inconsistency occurs when two statutes cover the same subject matter, are clearly inconsistent or incompatible with each other, and one law cannot be enforced without nullifying the other.

  • Between a general law and a special law, the latter prevails. A special law reveals legislative intent more clearly than a general law does. Special laws are deemed exceptions to general laws.

  • Funds that are specifically appropriated for specific purposes and designated beneficiaries may be exempt from certain fees and taxes.