G.R. No. 146984 July 28, 2006
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
MAGSAYSAY LINES, INC., BALIWAG NAVIGATION, INC., FIM LIMITED OF THE MARDEN GROUP (HK) and NATIONAL DEVELOPMENT COMPANY, respondents.
FACTS:
NDC decided to sell to private enterprise all of its shares in its wholly-owned subsidiary the National Marine Corporation (NMC). The NDC decided to sell in one lot its NMC shares and five (5) of its ships. Private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy the shares and the vessels thus they executed a contract of sale.
Private respondents through counsel received VAT Ruling No. 568-88 dated 14 December 1988 from the BIR, holding that the sale of the vessels was subject to the 10% VAT. The ruling cited the fact that NDC was a VAT-registered enterprise, and thus its "transactions incident to its normal VAT registered activity of leasing out personal property including sale of its own assets that are movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT]."
NDC decided to sell to private enterprise all of its shares in its wholly-owned subsidiary the National Marine Corporation (NMC). The NDC decided to sell in one lot its NMC shares and five (5) of its ships. Private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy the shares and the vessels thus they executed a contract of sale.
Private respondents through counsel received VAT Ruling No. 568-88 dated 14 December 1988 from the BIR, holding that the sale of the vessels was subject to the 10% VAT. The ruling cited the fact that NDC was a VAT-registered enterprise, and thus its "transactions incident to its normal VAT registered activity of leasing out personal property including sale of its own assets that are movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT]."
ISSUE:
Whether the sale by the National Development Company (NDC) of five (5) of its vessels to the private respondents is subject to value-added tax (VAT) under the National Internal Revenue Code of 1986 (Tax Code) then prevailing at the time of the sale.
RULING:
No, CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary course of NDC’s business, and was thus not subject to VAT, which under Section 99 of the Tax Code, was applied only to sales in the course of trade or business.
"doing business" conveys the idea of business being done, not from time to time, but all the time.
"Course of business" is what is usually done.
What is clear therefore, "course of business" or "doing business" connotes regularity of activity. In the instant case, the sale was an isolated transaction.
No, CTA ruled that the sale of a vessel was an "isolated transaction," not done in the ordinary course of NDC’s business, and was thus not subject to VAT, which under Section 99 of the Tax Code, was applied only to sales in the course of trade or business.
"doing business" conveys the idea of business being done, not from time to time, but all the time.
"Course of business" is what is usually done.
What is clear therefore, "course of business" or "doing business" connotes regularity of activity. In the instant case, the sale was an isolated transaction.
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