SC affirms tax court ruling: BIR must refund PAL P4.5M in over payments

The Bureau of Internal Revenue will have to return more than P4.5 million in tax refund in favor of flag carrier Philippine Airlines (PAL), especially now that the Supreme Court has ruled on the matter.

 

The Supreme Court Third Division, in a nine-page decision penned by Associate Justice Presbitero Velasco, upheld the Court of Tax Appeals in its decisions on December 9, 2013 and on May 2, 2014 that favored the tax refund claim of PAL.

 

In February and March 2007, PAL paid a total of more than P4.5 million in excise taxes for imported cigarettes and alcoholic drinks as commissary supplies and for international flights.

 

PAL then filed with the BIR several administrative claims to refund the excise tax which the airline insisted it erroneously paid. In the absence of a positive action from the BIR, the flag carrier elevated its plea to the Court of Tax Appeals.

 

On June 22, 2012, the CTA Second Division ruled in favor of PAL by citing Presidential Decree No. 1590 which exempts PAL from paying taxes, including excise taxes, other than the basic corporate tax or franchise tax that it is paying. The CTA en banc affirmed the ruling in December 2013, and denied a plea of reconsideration.

 

This prompted the BIR to elevate the matter to the SC. In its ruling however, the high tribunal said the bureau's petition lacked merit to counter the CTA decisions.

 

The high tribunal said PD 1590 – or the PAL franchise that specifies its tax privileges – has not been revoked by the National Internal Revenue Code of 1997, as amended. The SC said the manner to effectively repeal or modify the PAL franchise "has not been demonstrated."

 

"PAL has presented in context a clear statutory basis for its refund claim of excise tax, a claim predicated on a statutory grant of exemption from that forced exaction. It thus behooves the government to refund what it erroneously collected," the SC ruled.

 

The SC borrowed a quote from its ruling in the Commissioner of Revenue vs. Fortune Tobacco Corp: "If the state expects taxpayers to observe fairness and honesty in paying their taxes, it must hold itself against the same standard in refunding erroneous exactions and payment of such taxes." – Mark Merueñas/VS, GMA News