CTA trashes BIR on taxability of BCDA deals

The Court of Tax Appeals (CTA) has affirmed the tax-exempt status of the Bases Conversion and Development Authority (BCDA) in the sale of properties made pursuant to its mandate under its charter to develop former military bases.

In the case of BCDA v. Commissioner of Internal Revenue, the CTA held that the BCDA’s transactions regarding the sale of parcels of land in former military bases are exempt from tax.

However, since the refund being claimed by the BCDA in the case, amounting to P23.7 million, may have already been included in the creditable taxes reported in the BCDA’s income for the year 2011, the refund prayed for was not granted.

But the CTA affirmed that the tax-exempt status of the BCDA in transactions involving the sale of real estate, citing the express provision in the BCDA’s charter, which provides for its tax exemption in transactions made pursuant to its purpose as a government-owned and -controlled corporation (GOCC).

“However, Section 8 of Republic Act [RA] 7227, as amended by RA 7917, specifically states that the proceeds from any sale of portions of Metro Manila military camps shall be exempt from all forms of taxes and fees. After all, to hold petitioner liable for payment of tax would diminish the proceeds of the sale, which shall be used for capitalization of petitioner as provided for under Section 8 of RA 7227,” the CTA decision said.

In affirming the tax-exempt status of the BCDA, the CTA overruled the argument by the Bureau of Internal Revenue that the tax exemption of the BCDA had already been revoked by the Tax Code, which enumerates the four GOCCs that are exempt from income tax.

The Tax Code, as amended, enumerates the four GOCCs as the Government Service Insurance System, Social Security System, Philippine Health Insurance Corp. and the Philippine Charity Sweepstakes Office.

The CTA said that the BCDA, which is not in the list of GOCCs that are exempt from income taxes, is, indeed, liable for income tax, but the tax exemption of the BCDA on the sale of parcels of land in former military bases subsists by virtue of its charter.

“By its very terms, proceeds of the sale of the BCDA of portions of camps located in Metro Manila are exempt from all forms of taxes. To tax the proceeds of the sale would be to tax an appropriation made by law, a power that the commissioner of Internal Revenue does not have.

The sale is in the nature of an obligation imposed by law in order to fulfill a public purpose,” the CTA decision said.

source:  Business Mirror