GR 226556; (July, 2019) (Digest)
G.R. No. 226556 , July 3, 2019
POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, Petitioner vs. COMMISSIONER OF INTERNAL REVENUE, Respondent
FACTS
Petitioner PSALM, a government-owned corporation created under the EPIRA (RA 9136), is mandated to manage the privatization of NPC assets to liquidate its obligations. For the taxable year 2008, the BIR issued a Final Assessment Notice holding PSALM liable for deficiency VAT amounting to over Php 10 billion, inclusive of increments. The assessment was based on PSALM’s proceeds from the sale of generating assets (Masinloc, Ambuklao-Binga, and Pantabangan plants), lease of the Naga Complex, and collection of income and receivables, which the BIR considered as transactions subject to VAT.
PSALM protested, arguing that its privatization activities are part of its original statutory mandate and thus not subject to VAT, relying on a prior BIR Ruling. The CIR denied the protest, asserting that the sale of electricity and the real properties are subject to VAT under RA 9337. PSALM subsequently filed a petition for review before the Court of Tax Appeals (CTA).
ISSUE
Whether the proceeds from PSALM’s sale of generating assets and related transactions are subject to Value-Added Tax.
RULING
Yes, PSALM is liable for deficiency VAT. The Supreme Court affirmed the decisions of the CTA En Banc and the CTA Third Division. The legal logic centers on the application of RA 9337, which amended the National Internal Revenue Code. While PSALM’s creation under EPIRA defines its corporate purpose, its specific transactions—the sale of power generation assets, lease of properties, and collection of income—constitute “sale of goods or properties” and “lease of properties” in the course of trade or business as defined under Section 106 of the Tax Code.
The Court held that RA 9337, which explicitly placed the sale of power generation assets under the VAT system, superseded the previous BIR Ruling (No. 020-2002) upon which PSALM relied for its claimed exemption. The law subjects “all kinds of goods and properties” to VAT, and the generating assets sold by PSALM fall squarely within this classification. The Court emphasized that the VAT is a tax on transactions, not on the entity, and PSALM’s conduct of such taxable transactions renders it liable, notwithstanding its governmental function of privatization. The liability was computed on the output tax from the sales, less allowable input tax credits, plus statutory interest.