SC rules PSALM’s sale of power assets not subject to VAT

THE Supreme Court (SC) ruled the Power Sector Asset and Liabilities Management Corp. (PSALM) is not liable to pay P9.57 billion in value-added taxes (VAT) assessed by the Bureau of Internal Revenue (BIR) on the sale of its power generating assets.

In a 16-page decision dated July 3, the court’s second division granted PSALM’s petition for review and reversed the Court of Tax Appeals (CTA) decision.

The CTA Third Division found PSALM liable to pay P9.57 billion as deficiency VAT for the sale of the generating assets Masinloc, Ambuklao-Bingao and Pantabangan power plants in 2008.

The CTA ruled that the sale of generating assets of PSALM fall under “all kinds of goods and properties” that are subject to VAT under the Tax Code.

In reversing the tax appellate court’s decision, the SC cited a previous decision involving a similar issue which said the sale of generating assets is not subject to VAT as it is the mandate of PSALM under Electric Power Industry Reform Act (EPIRA) of 2001 to privatize the assets of National Power Corp.

“The sale of the power plants is not in pursuit of a commercial or economic activity but a governmental function mandated by law to privatize NPC generation assets,” the High Court ruled.

“The sale of the power plants is clearly not the same as the sale of electricity by generation companies, transmission, and distribution companies, which is subject to VAT under Section 108 of the NIRC. Thus, we do not find any merit in the arguments raised by the CIR (Commissioner of Internal Revenue),” it added.

Under the EPIRA, PSALM is directed to operate and maintain the assets of NPC and manage its liabilities.

The decision was penned by Associate Justice Antonio T. Carpio and concurred in by Associate Justices Estela M. Perlas-Bernabe, Alfredo Benjamin S. Caguioa, Jose C. Reyes, Jr. and Amy C. Lazaro-Javier. — Vann Marlo M. Villegas