Commissioner of Internal Revenue vs. Bases Conversion and Development Authority

Proceeds from the sale of specific properties authorized under Section 8 of RA 7227, as amended by RA 7917, are exempt from all forms of taxes and fees, including creditable withholding tax, because they constitute public funds deemed appropriated by Congress for specific governmental purposes rather than income of the Bases Conversion and Development Authority. Consequently, a special law granting tax exemption to a government instrumentality prevails over the general taxation provisions of the National Internal Revenue Code, and standard procedural requirements for tax refunds do not apply to such exempt appropriated funds.

The Bases Conversion and Development Authority (BCDA), created under Republic Act No. 7227, owned four contiguous lots collectively known as the "Expanded Big Delta Lots" in Bonifacio Global City, Taguig City. Pursuant to its charter, BCDA entered into a contract to sell these properties to the "Net Group," an unincorporated joint venture. The sale generated proceeds of over two billion pesos, which BCDA claimed were exempt from taxation under its charter.

• Nature of the Transaction: Respondent BCDA, owner of four real properties totaling 12,036 square meters (the "Expanded Big Delta Lots") in Bonifacio Global City, Taguig City, entered into a contract to sell with the "Net Group," an unincorporated joint venture composed of four corporations. The total purchase price was Php2,032,749,327.96.
• Withholding of Tax: The Net Group committed not to remit the CWT of Php101,637,466.40 to the Bureau of Internal Revenue (BIR) to give BCDA time to present a certification of tax exemption on or before June 9, 2008. BCDA sought the certification from petitioner CIR on May 28, 2008, but received no response.
• Execution of Sale: On July 31, 2008, BCDA and the Net Group executed Deeds of Absolute Sale. In view of BCDA's failure to present the certification, the Net Group deducted the CWT amount, issued corresponding certificates of creditable tax withheld at source (BIR Form No. 2307), and remitted the amount to BIR Regional District Office No. 44.
• Claim for Refund: On March 9, 2009, BCDA wrote the BIR requesting a refund of the withheld amount, but petitioner again failed to respond. On July 29, 2010, BCDA filed a petition with the CTA for refund, claiming exemption under Section 8 of RA 7227, as amended by RA 7917.
• Lower Court Findings: The CTA First Division and En Banc found that while BCDA is not among the exempt corporations listed under Section 27(C) of the NIRC, RA 7227 as amended specifically exempts the proceeds from the sale of the subject properties from all taxes and fees. The tribunals ruled that the NIRC, being a general law, did not impliedly repeal the special law (RA 7227), and that the sale proceeds were excluded from gross income pursuant to Section 32 of the NIRC and Revenue Regulations No. 2-98.

• Implied Repeal by NIRC: Petitioner CIR argued that RA 7227, as amended by RA 7917, was supplanted by Section 27(C) of the NIRC, which imposes income tax on government-owned or controlled corporations (GOCCs) except those specifically enumerated. The NIRC being a later law (enacted 1997, effective 1998) prevails over the earlier special law.
• Procedural Deficiencies: Respondent failed to comply with Section 10 of Revenue Regulation No. 6-85, which requires that the income taxed must be shown to have been included in gross income and that the fact of withholding be established. Petitioner cited Commissioner of Internal Revenue v. Far East Bank and Trust Company to argue that failure to present Certificates of Creditable Tax Withheld at source is fatal to the claim.
• Insufficient Evidence: BCDA's Annual Income Tax Return, Deeds of Absolute Sale, BIR payment forms, and Certificates of Creditable Withholding Tax do not sufficiently establish that the income from the sale was part of gross income.
• Waiver of Refund Right: Respondent carried over its 2008 excess credit to the following taxable year; thus, the option for refund was no longer available, as the "carry over" provision precludes simultaneous claims for refund.

• Special Law Exemption: Section 8 of RA 7227, as amended by RA 7917, explicitly provides that proceeds from the sale of government lands and other properties are exempt from all forms of taxes and fees. Paragraph (d) of Section 8 commands that the sale proceeds shall not be diminished, signifying non-subjection to taxes.
• Nature of Proceeds as Public Funds: Administrative Order No. 236 declared that proceeds from the sale of government lands pursuant to RA 7227 are government funds to be remitted to the National Treasury and accrue to the General Fund, automatically appropriated for beneficiary-agencies identified under RA 7917.
• Special Law Prevails: RA 7227 is a special law that was not deemed superseded by the NIRC, a general law. Respondent cited Lichauco & Company, Inc. v. Apostol, Fajardo v. Villafuerte, De Villa v. Court of Appeals, and Commissioner of Internal Revenue v. Court of Tax Appeals to support the principle that a general law cannot impliedly repeal a special law.
• Exclusion from Gross Income: The income from the sale was not included in the 2008 Income Tax Return because the sale was excluded from gross income per Section 8 of RA 7227. The sale proceeds are in the nature of a special appropriation, and their use for other purposes would violate both RA 7227 and the Constitution.

• Tax Exemption Under Special Law: Whether Section 8 of RA 7227, as amended by RA 7917, exempts the BCDA from creditable withholding tax on proceeds from the sale of its Global City properties.
• Implied Repeal by General Law: Whether Section 27(C) of the NIRC, as amended, impliedly repealed the tax exemption granted to BCDA under its charter.
• Procedural Requirements for Refund: Whether the standard procedural and documentary requirements for tax refund apply to BCDA vis-à-vis the properties and sale proceeds specified under Section 8 of RA 7227.

• Tax Exemption Under Special Law: Section 8 of RA 7227, as amended by RA 7917, expressly exempts proceeds from the sale of specified Metro Manila military camp properties from "all forms of taxes and fees." The provision is two-pronged: first, it deems the proceeds appropriated by Congress for specific purposes and beneficiaries; second, it enjoins that the proceeds shall not be diminished by taxes or fees. The exemption is clear and categorical, leaving no room for interpretation.
• No Implied Repeal: Section 27(C) of the NIRC is a general law governing taxation of GOCCs, while Section 8 of RA 7227 is a special law specifically governing BCDA's disposition of enumerated properties and their sale proceeds. A general law cannot impliedly repeal a special law absent express provision or irreconcilable conflict. No irreconcilable inconsistency exists: Section 27 presupposes funds are taxable income, while Section 8 of RA 7227 treats the proceeds as appropriated public funds, not income. The special law reveals legislative intent more clearly and constitutes an exception to the general law.
• Exemption from Procedural Requirements: Standard procedural and documentary requirements for tax refund applicable to GOCCs in general do not apply to BCDA regarding the properties and sale proceeds under Section 8 of RA 7227. There is no income to speak of; only sale proceeds that the legislature exempted from all taxes and fees as public funds subject to specific appropriation.

• Special Law vs. General Law — A special law prevails over a general law on the same subject matter. A general law cannot impliedly repeal a special law in the absence of an express provision to that effect. The special law must be interpreted as an exception to the general law, as it reveals legislative intent more clearly.
• Implied Repeal — Implied repeal by irreconcilable inconsistency requires that: (1) the two statutes cover the same subject matter; (2) they are clearly inconsistent and incompatible that they cannot be reconciled; and (3) both cannot be given effect simultaneously. Alternatively, implied repeal occurs when the later act covers the whole subject of the earlier one and is clearly intended as a substitute.
• Tax Exemption of Government Instrumentalities — Proceeds from the sale of specific properties authorized under a special law, which are deemed appropriated by Congress for specific governmental purposes, constitute public funds rather than corporate income. As such, they are exempt from taxation including creditable withholding tax, and standard procedural requirements for tax refunds do not apply because there is no taxable income to recover.

• "The provisions of law to the contrary notwithstanding, the proceeds of the sale thereof shall not be diminished and, therefore, exempt from all forms of taxes and fees." — Section 8 of RA 7227, as amended by RA 7917, cited as the statutory basis for the exemption.
• "Section 8 is two (2) pronged. The first commands that the sale proceeds of certain properties in Fort Bonifacio and Villamor (Nicholas) Air Base are deemed appropriated by Congress to each of the aforenamed recipients and for the respective purposes specified therein. Consequently, the sale proceeds are not BCDA income but public funds subject to the distribution scheme and purposes provided in the law itself."
• "It is a fundamental rule in statutory construction that a special law cannot be repealed or modified by a subsequently enacted general law in the absence of any express provision in the latter law to that effect."
• "In light of the foregoing considerations, therefore, the standard procedural and documentary requirements for tax refund applicable to GOCCs in general do not apply to BCDA vis-a-vis the properties and the sale proceeds specified under Section 8 of RA 7227, as amended. To repeat, there is no income to speak of here; only the sale proceeds of specific properties which the legislature itself exempts from all taxes and fees."

• Commissioner of Internal Revenue v. Semirara Mining Corporation, G.R. No. 202534, December 8, 2018 — Controlling precedent establishing that a general law (RA 9337 amending NIRC) cannot impliedly repeal a special law (PD 972) absent express provision; cited to support the principle that special laws prevail over general laws.
• Bloomberry Resorts and Hotels, Inc. v. Bureau of Internal Revenue, 792 Phil. 751 (2016) — Followed for the principle that when the law speaks in clear and categorical language, there is no occasion for interpretation, only application; also cited regarding tax exemptions under special charters (PAGCOR Charter).
• Lichauco & Company, Inc. v. Apostol, 44 Phil. 138 (1922) — Cited by respondent and noted by the Court regarding the principle that special laws prevail over general laws.
• Commissioner of Internal Revenue v. Far East Bank and Trust Company, 629 Phil. 405 (2010) — Cited by petitioner regarding procedural requirements for tax refund; distinguished or not applied because of the special nature of BCDA's exemption.
• Mandanas v. Ochoa, G.R. Nos. 199802 & 208488, April 10, 2019 — Cited for the principle that the special law should be deemed an exception to the general law.

• Section 8, Republic Act No. 7227, as amended by Republic Act No. 7917 (Bases Conversion and Development Act of 1992) — Provides the funding scheme for the BCDA, specifically exempting proceeds from the sale of specified Metro Manila military camp properties from all forms of taxes and fees; deemed appropriated for specific governmental purposes.
• Section 27(C), National Internal Revenue Code of 1997, as amended — General provision imposing income tax on government-owned or controlled corporations, agencies, or instrumentalities, except GSIS, SSS, PHIC, LWDs, and PCSO.
• Section 32(B)(7)(b), National Internal Revenue Code of 1997 — Excludes from gross income income derived from public utilities or essential governmental functions accruing to the Government.
• Section 2.57.5, Revenue Regulations No. 2-98 — Provides that withholding of creditable tax shall not apply to income payments made to the National Government and its instrumentalities.
• Book VI, Chapter 5, Section 32, Administrative Code of 1987 — Directs that monies appropriated for functions and projects shall be available solely for the specific purposes for which appropriated.

Peralta, C.J. (Chairperson-First Division), Caguioa, J. Reyes, Jr., and Lopez, JJ.