Tax court affirms Air Philippines’ P74-M refund

THE Court of Tax Appeals affirmed the P73.8-million tax refund granted to Air Philippines Corp. representing the excise tax it paid for the importation of the aviation fuel.

In a 22-page decision, the court, sitting en banc, denied the petition of the Bureau of Internal Revenue (BIR) which sought to reverse the ruling of the court’s special third division which ruled in favor of the corporation.

The court said Air Philippines complied with the requirements for tax refund.

“Thus, in view of respondent’s compliance with all the requirements to be entitled to refund of excise taxes on imported Jet A-1 aviation fuel, the Court in Division in the assailed Amended Decision had correctly ordered petitioner to refund to respondent the aggregate amount of P73,769,349.40, representing specific taxes paid under protest corresponding to its importation of Jet A-1 aviation fuel for its domestic flight operations covering the period of January to July 2007,” the court ruled.

The court said the certifications from the Air Transportation Office (ATO) presented by Air Philippines to prove that the Jet A-1 aviation fuel was not locally available in reasonable quantity, quality or price during the time of importation must be given weight as it had the means to know the facts, considering its mandated functions.

It also said that Air Philippines proved that the imported fuel was used for its domestic flight operations with the Authority to Release Imported Goods (ATRIG), based on records of the case.

The court said it is precluded from entertaining the issue on the actual use of imported aviation fuel, which was only raised by the bureau on its motion for reconsideration on the court division’s decision in November 2018.

The BIR argued that the corporation’s additional evidence should not have been considered by the court’s division as the Department of Energy is mandated to monitor supply and demand of fuel and not the ATO, nor the Civil Aviation Authority of the Philippines.

The bureau also claimed that ATRIGs alone are insufficient to prove that the aviation fuel was used for its transport and non-transport operations.

Air Philippines, on the other hand, said that it had established that the imported fuel was used for its transport operations as it presented witnesses and documentary evidence.

The court’s third division in November 2018 issued an amended decision, granting Air Philippines the refund. It affirmed the decision in a resolution in April 2019, denying the appeal of the BIR and the Bureau of Customs.

In the 2018 ruling, the court’s special third division said the corporation established that it is entitled to refund the erroneously collected excise tax it paid.

The court said that for the corporation to avail of the exemption under its franchise, it must prove that it paid its basic income or franchise tax, whichever is lower, the imported materials should be used for transport and non-transport operations, and these were not locally available in reasonable quantity, quality, or price. — Vann Marlo M. Villegas