Beruflich Dokumente
Kultur Dokumente
13. Power Sector Assets and Liabilities Management v Commissioner of Internal Revenue
GR No. 198146 – August 8, 2017
Facts:
PSALM) is a government-owned and controlled corporation created under RA 9136, also
known as the Electric Power Industry Reform Act of 2001 (EPIRA). The principal purpose of
PSALM is to manage the orderly sale, disposition, and privatization of the National Power
Corporation (NPC) generation assets, real estate and other disposable assets, and
Independent Power Producer (IPP) contracts with the objective of liquidating all NPC
financial obligations and stranded contract costs in an optimal manner.
PSALM conducted public biddings for the privatization of two of its Power Plants. Later, the
NPC received a letter from the Bureau of Internal Revenue (BIR) demanding immediate
payment of the deficiency value-added tax (VAT) for the sale of said Power Plants.
In compliance with the MOA, PSALM remitted under protest to the BIR. Subsequently,
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.
Issue:
Whether or not the sale of the Power Plants are subject to tax.
Held:
The sale of the power plants was an exercise of a governmental function mandated by law
for the primary purpose of privatizing NPC assets in accordance with the guidelines
imposed by the EPIRA law.
In the case of Commissioner of Internal Revenue v. Magsaysay Lines, Inc. (Magsaysay),
the Court ruled that the sale of the vessels of the National Development Company (NDC) to
Magsaysay Lines, Inc. is not subject to VAT since it was not in the course of trade or
business, as it was involuntary and made pursuant to the government's policy of
privatization.
Similarly, the sale of the power plants in this case is not subject to VAT since the sale was
made pursuant to PSALM' s mandate to privatize NPC assets, and was not undertaken in
the course of trade or business. In selling the power plants, PSALM was merely exercising
a governmental function for which it was created under the EPIRA law.