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CIR v. Acesite Hotel Corporation
CIR v. Acesite Hotel Corporation
Guide Questions:
Facts:
Acesite is the owner and operator of the Holiday Inn Manila Pavilion Hotel along United Nations
Avenue in Manila. It incurred VAT liability amounting to P30,152,892.02 from its rental income and sale
of food and beverages to PAGCOR. Acesite tried to shift the burden to PAGCOR, but the latter refused.
Acesite paid the corresponding VAT out of fear of the legal consequences of non-payment of
tax. However, Acesite belatedly realized that the transaction with PAGCOR was subject to zero rate as it
was rendered to a tax-exempt entity. Acesite filed an administrative claim for refund with the
Commission of Internal Revenue (CIR). The CIR did not act on the same, thus it was appealed to the
Court of Tax Appeals. The CTA and the Court of Appeals (CA) granted the refund. The CA decided in this
wise:
“Upon appeal by petitioner, the CA affirmed in toto the decision of the CTA holding that
PAGCOR was not only exempt from direct taxes but was also exempt from indirect taxes like the
VAT and consequently, the transactions between respondent Acesite and PAGCOR were
"effectively zero- rated" because they involved the rendition of services to an entity exempt from
indirect taxes. Thus, the CA affirmed the CTA’s determination by ruling that respondent Acesite was
entitled to a refund of PhP 30,054,148.64 from petitioner.”
A Petition for Review on Certiorari was filed by the CIR questioning the decision of the CA.
Issues:
1. Whether PAGCOR’s tax exemption privilege includes the indirect tax of VAT to entitle Acesite
to zero percent (0%) VAT rate;
2. Whether the zero percent (0%) VAT rate under then Section 102 (b)(3) of the Tax Code (now
Section 108 (B)(3) of the Tax Code of 1997) legally applies to Acesite.
Held:
The Supreme Court held that Acesite is not liable for the payment of VAT as it is exempt in this
particular transaction by operation of law to pay the indirect tax.
The Court states that Sec. 108 [b] [3] of the Tax Code provides that services rendered to persons
or entities whose exemption under special laws or international agreements to which the Philippines is a
signatory effectively subjects the supply of such services to zero (0%) rate. In other words, such
provision provides for an exemption from VAT.
In this case, it is undisputed that P.D. 1869, the charter creating PAGCOR, grants the latter an
exemption from the payment of taxes. A close scrutiny of the charter clearly gives PAGCOR a blanket
exemption to taxes with no distinction on whether the taxes are direct or indirect. Thus, the exemption
can be extended to entities or individuals dealing with PAGCOR in casino operations, the charter clearly
is exempting PAGCOR from being liable to indirect taxes. Such exemption, also extends to Acesite.
It is worth noting that since an action for a tax refund partakes of the nature of an exemption,
which cannot be allowed unless granted in the most explicit and categorical language, it is strictly
construed against the claimant who must discharge such burden convincingly. In the instant case,
respondent Acesite had discharged this burden as found by the CTA and the CA. Indeed, the records
show that Acesite proved it is a VAT-registered, and that it actually made VAT payments that are subject
to refund, as attested to by an independent Certified Public Accountant who was duly commissioned by
the CTA. On the other hand, petitioner never disputed nor contested respondent’s testimonial and
documentary evidence. In fact, petitioner never presented any evidence on its behalf.