G.R. No. 219927 , October 3, 2018
Board of Investments, Petitioner, vs. SR Metals, Inc., Respondent.

FACTS

This case involves a dissenting opinion by Justice Leonen concerning the withdrawal of SR Metals, Inc.’s (SRMI) Income Tax Holiday (ITH) incentive by the Board of Investments (BOI). SRMI, an existing mining enterprise, applied for registration as a “new producer” of beneficiated nickel ore under the 2007 Investments Priorities Plan. The BOI initially rejected the application, suggesting SRMI file as an “expanding” producer instead. SRMI successfully sought reconsideration by committing to establish a new project involving substantial capital investment, specifically the construction of a new beneficiation plant and the purchase of new equipment, as repeatedly stated in its Project Feasibility Report and supporting documents. The BOI subsequently approved the application and granted the ITH incentive.
However, the BOI later revoked the ITH after finding that SRMI failed to construct the promised beneficiation plant. SRMI appealed to the Court of Appeals, which ruled in its favor, finding the BOI’s withdrawal unsupported by substantial evidence. The BOI then elevated the matter to the Supreme Court. The majority decision, as referenced in the dissent, sided with the Court of Appeals, reversing the BOI’s withdrawal on the grounds that SRMI had complied with the necessary requirements.

ISSUE

Whether the Board of Investments gravely abused its discretion in withdrawing SR Metals, Inc.’s Income Tax Holiday incentive for failure to construct a beneficiation plant.

RULING

Justice Leonen, in dissent, argued that the BOI’s withdrawal of the ITH was proper and should be upheld. The legal logic centers on the doctrine of primary jurisdiction and the respect accorded to administrative agency expertise. The BOI, as the specialized body created to implement investment laws and policies, possesses technical competence in determining compliance with the conditions for fiscal incentives. Its factual findings, including whether a registered enterprise has fulfilled its commitments, are generally accorded respect and finality.
The dissent emphasized that SRMI’s qualification as a “new producer” under the relevant rules was expressly contingent on establishing a “new facility” defined as a new physical structure and equipment which would constitute a distinct line of business. SRMI’s own application documents, particularly its Feasibility Report, unequivocally committed to constructing a beneficiation plant valued at millions of pesos. This commitment was the pivotal factor that convinced the BOI to classify the project as “new” rather than a mere expansion. By failing to build this plant, SRMI did not meet the essential condition for its registered status and the concomitant ITH privilege. The BOI’s interpretation of its own rules and its consequent finding of non-compliance were therefore reasonable and deserved deference. The dissent concluded that the BOI acted within its jurisdiction in withdrawing the incentive, as SRMI’s failure to install the promised physical structure disqualified it from the ITH benefit intended for genuinely new projects.