Third. Contrary to the Dissent, Section 112 of the Tax Code does not prohibit cash refund or tax credit of transitional input tax in the case of zero-rated or effectively zerorated VAT registered taxpayers, who do not have any output VAT. The phrase "except transitional input tax" in Section 112 of the Tax Code was inserted to distinguish creditable input tax from transitional input tax credit. Transitional input tax credits are input taxes on a taxpayer's beginning inventory of goods, materials, and supplies equivalent to 8% (then 2%) or the actual VAT paid on such goods, materials and supplies, whichever is higher. It may only be availed of once by first-time VAT taxpayers. Creditable input taxes, on the other hand, are input taxes of VAT taxpayers in the course of their trade or business, which should be applied within two years after the close of the taxable quarter when the sales were made.

Fourth. As regards Section 110, while the law only provides for a tax credit, a taxpayer who erroneously or excessively pays his output tax is still entitled to recover the payments he made either as a tax credit or a tax refund. In this case, since petitioner still has available transitional input tax credit,

it filed a claim for refund to recover the output VAT it erroneously or excessively paid for the 1st quarter of 1997. Thus, there is no reason for denying its claim for tax refund/credit.

Fifth. Significantly, the dispositive portion of our September 4, 2012 Decision 15 directed the respondent Commissioner of Internal Revenue (CIR) to either refund the amount paid as output VAT for the 1st quarter of 1997 or to issue a tax credit certificate. We did not outrightly direct the cash refund of the amount claimed, thus:

WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated July 7, 2006 of the Court of Appeals in CA-G.R. SP No. 61436 is REVERSED and SET ASIDE. Respondent Commissioner of Internal Revenue is ordered to refund to petitioner Fort Bonifacio Development Corporation the amount of P359,652,009.47 paid as output VAT for the first quarter of 1997 in light of the transitional input tax credit available to petitioner for the said quarter, or in the alternative, to issue a tax credit certificate corresponding to such amount.

SO ORDERED.16

Sixth. Notably, in the earlier case of Fort Bonifacio, we likewise directed the respondent to either refund or issue a tax credit certificate. It bears emphasis that this Decision already became final and executory and entry of judgment was made in due course. The dispositive portion of our Decision in said case reads:

WHEREFORE, the petitions are GRANTED. The assailed decisions of the Court of Tax Appeals and the Court of Appeals are REVERSED and SET ASIDE. Respondents are hereby (1) restrained from collecting from petitioner the amount of P28,413,783.00 representing the transitional input tax credit due it for the fourth quarter of 1996; and (2) directed to refund to petitioner the amount of P347,741,695.74 paid as output VAT for the third quarter of 1997 in light of the persisting transitional input tax credit available to petitioner for the said quarter, or to issue a tax credit corresponding to such amount. No pronouncement as to costs. 17

15 Rollo, pp. 763-779. 16 Id. at 777-778.

17 Fort Bonifacio Development Corporation v. Commissioner of Internal Revenuel, supra note 9, Clearly, the CIR has the option to return the amount claimed either in the form of tax credit or refund.

Fourth argument. "[T]he cash refund, not being supported by any prior actual tax payment, is unconstitutional since public funds will be used to pay for the refund which is for the exclusive benefit of petitioner, a private entity."18

Otherwise stated, it is argued that the refund or issuance of tax credit certificate violates the mandate in Section 4(2) of the Government Auditing Code of the Philippines that "Government funds or property shall be spent or used solely for public purposes."

Again, this is inaccurate. On the contrary, the grant of a refund or issuance of tax credit certificate in this case would not contravene the above provision. The refund or tax credit would not be unconstitutional because it is precisely pursuant to Section 105 of the old NIRC which allows refund/ tax credit.

Final Note

As earlier mentioned, the issues in this case are not novel. These same issues had been squarely ruled upon by this Court in the earlier Fort Bonifacio case. This earlier Fort Bonifacio case already attained finality and entry of judgment was already

made in due course. To reverse our Decision in this case would logically affect our Decision in the earlier Fort Bonifacio case. Once again, this Court will become an easy target for charges of "flip-flopping."

Accordingly, the Motion for Reconsideration is DENIED with FINALITY, the basic issues presented having been passed upon and no substantial argument having been adduced to warrant

18 Dissenting Opinion, pp. 1-2.

the

reconsideration sought. No further pleadings or motions shall be entertained in this case. Let entry of final judgment be made in due course.

SO ORDERED.

Velasco, Jr., Leonardo-De Castro, Peralta, Bersamin, Abad, Villarama, Jr., Perez, Mendoza, and Reyes, JJ., concur

Sereno, Perlas-Bernabe, and Leonen, JJ., joined the dissent of Justice Carpio

Brion, J., on official leave

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Resolution had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

(Sgd.) MARIA LOURDES P. A. SERENO Chief Justice

DISSENTING OPINION

CARPIO, J.:

I vote to grant the motion for reconsideration filed by the Commissioner of Internal Revenue.

The Decision dated 4 September 2012 grants to petitioner a cash refund of P359,652,009.47.1 This cash refund is supposed to be reimbursement for excess

1

The dispositive portion of the 4 September 2012 Decision states:

"WHEREFORE, the petition is hereby GRANTED. The assailed Decision dated July 7, 2006 of the Court of Appeals in CA-G.R. SP No. 61436 is REVERSED and SET ASIDE. Respondent Commissioner of Internal Revenue is ordered to refund to petitioner Fort Bonifacio Development Corporation the amount of P359,652,009.47 paid as output VAT for the first quarter of 1997 in light of the transitional input tax credit available to petitioner for the said quarter, or in the alternative, to issue a tax credit certificate corresponding to such amount."

I base my argument on four grounds: first, petitioner is not entitled to any refund of input VAT since the sale by the National Government of the Global City land to petitioner was not subject to any input VAT; second, the Tax Code does not allow any cash refund of input VAT, only a tax credit; third, even for zero-rated or effectively zero-rated VAT-registered taxpayers, the Tax Code does not allow any cash refund or credit of transitional input tax; and fourth, the cash refund, not being supported by any prior actual tax payment, is unconstitutional since public funds will be used to pay for the refund which is for the exclusive benefit of petitioner, a private entity.

Petitioner has no input VAT

In the present case, the law never imposed an input VAT on the sale of the Global City land by the National Government to petitioner. Not a single centavo of input VAT was paid, by anyone in the sale of the Global City land since (1) the National Government is not subject to any tax, including VAT, when the law authorizes it to sell government property like the Global City land; and (2) in 1995, the old VAT law did not yet impose VAT on the sale of land and thus no VAT on the sale of the Global City land could have been paid by

anyone.

Thus, since petitioner does not have any input VAT from its purchase of the Global City land, it cannot ask for refund or credit of any input VAT from the same transaction.

imposing the VAT.

Thus, the 8% transitional input tax credit in Section 105 assumes that a previous tax was paid, which in turn assumes there was a law imposing the tax. Since there was still no VAT on the sale of land at the time, indisputably there could not have been any actual tax payment of input VAT on the sale of the Global City land. Without a law imposing VAT on the sale of the Global City land, there is no possibility of an actual or even assumed tax payment of input VAT on such sale. Hence, there can be no refund or credit of input VAT for no input VAT was, or could have been, paid.

No cash refund of input VAT, only tax credit

(B) Excess Output or Input Tax - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the

succeeding quarter or quarters: Provided, however, that any input tax attributable to zerorated sales by a VAT-registered person may at its option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. (Emphasis supplied)

Thus, any excess input tax can only be

A tax refund or credit of input VAT assumes a tax was previously paid, or in the case of the transitional input tax, that the tax is assumed to have been paid, whether actually paid or not. In either case, there must be a law imposing the input VAT. This can be inferred from the provision in Section 105 that a taxpayer is "allowed input tax on his beginning inventory... equivalent to 8%..., or the actual value-added tax paid..., whichever is higher." The phrase "actual

quarters." Unlike a tax refund or credit under Section 229 of the Tax Code, the input tax under the VAT system is not an erroneously, illegally or improperly collected tax but a correctly collected tax. Being a correctly collected tax, the taxpayer has no right to refund or credit unless expressly allowed by law. Section 110(B) does not allow a cash refund, but merely a credit of the input VAT against output VAT, and any excess of the input VAT can only be carried over to succeeding quarters until totally credited or used up. To repeat, the Tax Code does

Moreover, such refund or credit without prior tax payment is an expenditure of public funds without an appropriation law. This violates Section 29(1), Article VI of the Constitution, which mandates that "No money shall be paid out of the Treasury except in pursuance of an appropriation made by law." Without any previous tax payment as source, a tax refund or credit will be paid out of the general funds of the government, a payment that requires an appropriation law. The Tax Code, particularly its provisions on the VAT, is a revenue measure, not an appropriation law.

In sum, the grant of cash refund in the amount of P359,652,009.47 to petitioner is not authorized by law based on four grounds: first,

petitioner is not entitled to any refund or credit of input VAT since the sale by the National Government of the Global City land to petitioner was not subject to any input VAT; second, the Tax Code does not allow a cash refund of excess input VAT, only a tax credit; third, even for zero-rated or effectively zerorated VAT-registered taxpayers, the Tax Code does not allow any cash refund or credit of transitional input tax; and fourth, the cash refund, not being supported by any prior actual tax payment, is unconstitutional since public funds will be used to pay for the refund which is for the exclusive benefit of petitioner, a private entity.

Accordingly, I vote to GRANT the motion for reconsideration.