G.R. No.

173425               September 4, 2012

FORT BONIFACIO DEVELOPMENT CORPORATION, Petitioner,

vs.
COMMISSIONER OF INTERNAL REVENUE and REVENUE DISTRICT OFFICER, REVENUE
DISTRICT NO. 44, TAGUIG and PATEROS, BUREAU OF INTERNAL REVENUE, Respondents.

DEL CASTILLO, J.:

FACTS:

Petitioner was a real estate developer that bought from the national government a parcel of land that used
to be the Fort Bonifacio military reservation. At the time of the said sale there was as yet no VAT imposed
to real properties held primarily for sale so Petitioner did not pay any VAT on its purchase. Subsequently,
Petitioner sold two parcels of land to Metro Pacific Corp. In reporting the said sale for VAT purposes,
because the VAT had already been imposed in the interim, Petitioner claimed transitional input VAT
corresponding to its inventory of land. The BIR disallowed the claim of presumptive input VAT and
thereby assessed Petitioner for deficiency VAT.

Respondents maintain that petitioner is not entitled to a transitional input tax credit because no taxes
were paid in the acquisition of the property. 

Relevant Section 105 of the NIRC reads:

SEC. 105. Transitional input tax credits. – A person who becomes liable to value-added tax or
any person who elects to be a VAT-registered person shall, subject to the filing of an inventory as
prescribed by regulations, be allowed input tax on his beginning inventory of goods, materials and
supplies equivalent to 8% of the value of such inventory or the actual value-added tax paid on
such goods, materials and supplies, whichever is higher, which shall be creditable against the
output tax. (Emphasis supplied.)

ISSUE: Is Petitioner entitled to claim the transitional input VAT on its sale of real properties given its
nature as a real estate dealer applied on the value of the entire real property.

RULING: YES. Petitioner is entitled to claim transitional input VAT based on the value of the entire real
property. The provision on transitional input tax credit was enacted to benefit first time VAT taxpayers by
mitigating the impact of VAT on the taxpayer.

Obviously then, the purpose behind the transitional input tax credit is not confined to the transition from
sales tax to VAT. Further, amendments to the VAT law do not show any intention to make those in the
real estate business subject to a different treatment from those engaged in the sale of other goods or
properties or in any other commercial trade or business.

Petition is GRANTED.