FORT BONIFACIO DEV CORP V.

CIR

FACTS: Petitioner was a real estate developer that bought from the
government a parcel of land that used to be the Fort Bonifacio military
reservation. At the time of the said sale there was yet no VAT imposed so
Petitioner did not pay any VAR on its purchase. Subsequently, Petitioner
sold 2 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 BR disallowed the claim of presumptive input VAT and thereby
assessed Petitioner for deficiency VAT.

ISSUE: Is Petitioner ntitled to claim the transitional input VAT on its sale of real
properties given its nature as a real estate dealer and if so (i) is the transitional
input VAT applied only to the improvements on the real property or is it applied on
the value of the entire real property and (ii) should there have been a previous tax
payment for the transitional input VAT to be creditable?

HELD: YES. Petitioner is entitled to claim transitional input VAT based on the value
of not only the improvements but on the value of the entire real property and
regardless of whether there was in fact actual payment on the purchase of the real
property or not.

The 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. On the scope of the basis for
determining the available transitional input VAT, the CIR has no power to limit the
meaning and coverage of the term "goods" in Section 105 of the Tax Code without
statutory authority or basis. The transitional input tax credit operates to benefit
newly VAT-registered persons, whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods, materials and supplies.