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    PSALM V CIR

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    Genesis Leal
    The Supreme Court ruled that the sale of two hydroelectric power plants by PSALM to private entities is not subject to VAT for two reasons: 1) PSALM is not a successor-in-interest to NPC and has a different mandate, and 2) even if it was a successor, the sale cannot be considered "in the course of trade or business" but was done to fulfill its mandate to privatize NPC assets under EPIRA. The Court therefore granted PSALM's petition.

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    PSALM V CIR

    Uploaded by

    Genesis Leal
    88 views2 pages
    The Supreme Court ruled that the sale of two hydroelectric power plants by PSALM to private entities is not subject to VAT for two reasons: 1) PSALM is not a successor-in-interest to NPC and has a different mandate, and 2) even if it was a successor, the sale cannot be considered "in the course of trade or business" but was done to fulfill its mandate to privatize NPC assets under EPIRA. The Court therefore granted PSALM's petition.

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    The Supreme Court ruled that the sale of two hydroelectric power plants by PSALM to private entities is not subject to VAT for two reasons: 1) PSALM is not a successor-in-interest to NPC and has a different mandate, and 2) even if it was a successor, the sale cannot be considered "in the course of trade or business" but was done to fulfill its mandate to privatize NPC assets under EPIRA. The Court therefore granted PSALM's petition.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    88 views2 pages

    PSALM V CIR

    Uploaded by

    Genesis Leal
    The Supreme Court ruled that the sale of two hydroelectric power plants by PSALM to private entities is not subject to VAT for two reasons: 1) PSALM is not a successor-in-interest to NPC and has a different mandate, and 2) even if it was a successor, the sale cannot be considered "in the course of trade or business" but was done to fulfill its mandate to privatize NPC assets under EPIRA. The Court therefore granted PSALM's petition.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    PSALM CORP. v.

    COMMISSIONER OF INTERNAL REVENUE (2017)


    Carpio, J. | VAT – incidental transactions
    Facts
     Petitioner Power Sector Assets and Liabilities Management Corporation (PSALM)
    is a GOCC created under RA 9136, also known as the Electric Power Industry
    Reform Act of 2001 (EPIRA). Section 50 of RA 9136 states that the principal
    purpose of PSALM is to manage the orderly sale, disposition and privatization of
    the National Power Corporation generation assets, real estate and other
    disposable assets, and Independent Power Producer contracts with the objective
    of liquidating all NPC financial obligations and stranded contract costs in an
    optional manner.
     First Gen Hydropower Corporation with its $126 Million bid and SN Aboitiz Power
    Corporation with its $530 Million bid were the winning bidders for the Pantabangan-
    Masiway Plant and Magat Plant, respectively.
     NPC received letter from BIR demanding immediate payment of P3,813,080,472
    deficiency value-added tax for the sale of the Pantabangan-Masiway Plant and
    Magat Plant. NPC indorsed BIR’s letter to PSALM.
     The BIR, NPC and PSALM executed a Memorandum of Agreement. In compliance
    with the MOA, PSALM remitted under protest to the BIR the amount of
    P3,813,080,472, representing the total basic VAT due. PSALM filed with the
    Department of Justice (DOJ) a petition for the adjudication of the dispute with the
    BIR to resolve the issue of whether the sale of the power plants should be subject
    to VAT. The DOJ ruled in favor of PSALM.
     The DOJ denied BIR’s Motion for Reconsideration. The BIR Commissioner filed
    with the Court of Appeals a petition for certiorari. The Court of Appeals dismissed
    the petition. Upon motion for reconsideration, the Court of Appeals reinstated the
    petition. PSALM paid under protest to the BIR and moved for reconsideration,
    which the Court of Appeals denied. Hence, this petition.
    Issue, Held
    Whether the sale of the Pantabangan-Masiway and Magat Power Plants by petitioner
    PSALM to private entities is subject to VAT – NO
    Ratio
     Under R.A. No. 9337, the VAT exemption of NPC has been repealed. Crucially,
    however, PSALM is not a successor-in-interest of NPC.
    o Under its charter, NPC is mandated to undertake the development of
    hydroelectric generation of power and the production of electricity from
    nuclear, geothermal and other sources, as well as the transmission of
    electric power on a nationwide basis. With the passage of the EPIRA law,
    which restructured the electric power industry into generation, transmission

    Page 1 of 2
    distribution, supply sectors, the NPC is now primarily mandated to perform
    missionary electrification function through the Small Power Utilities Group
    (SPUG) and is responsible for providing power generation and associated
    power delivery systems in areas that are not connected to the transmission
    system.
    o Meanwhile, under EPIRA, PSALM is mandated to sell the assets of NPC
    and assume its liabilities. NPC is retained but will perform missionary
    electrification. Clearly, they have different functions.
     Assuming that PSALM is a successor-in-interest of NPC, the sale of the two
    hydroelectric plants cannot be considered “in the course of trade or business”
    under Sec. 105 of the NIRC.
    o The function of PSALM is limited to selling the assets of NPC. It is for the
    purpose of privatizing NPC assets to liquidate the financial obligation of
    NPC. Hence, the sale of the power plants was an exercise of governmental
    function mandated by EPIRA.
    o PSALM is not a mere trustee of NPC’s power assets. Sec. 49 of EPIRA
    vested ownership to PSALM. As owner of the assets, PSALM sold them
    pursuant to the mandate of EPIRA.
     The sale of power plants is not an incidental transaction subject to VAT. Precisely,
    the law mandates PSALM to sell those assets.
    GRANTED.

    Page 2 of 2

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