Congress enacts a law granting grade school and high school students a 10% discount on all school-prescribed textbooks purchased from any bookstore. The law allows bookstores to claim in full the discount as a tax credit.
1. If in a taxable year a bookstore has no tax due on which to apply the tax credits, can the bookstore claim from the BIR a tax refund in lieu of tax credit? Explain. 2.5%
2. Can the BIR require the bookstores to deduct the amount of the discount from their gross income? Explain. 2.5%
3. If a bookstore closes its business due to losses without being able to recoup the discount, can it claim reimbursement of the discount from the government on the ground that without such reimbursement, the law constitutes taking of private property for public use without just compensation? Explain. 5%
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1 comment:
1. No, the bookstore cannot claim from the BIR a tax refund
in lieu of tax credit. There is nothing in the law that grants a
refund when the bookstore has no tax liability against which
the tax credit can be used (CIR v. Central Luzon Drug, G.R.
No 159647, April 15, 2005). A tax credit is in the nature of a
tax exemption and in case of doubt, the doubt should be
resolved in strictissimi juris against the claimant.
2. No. Tax credit which reduces the tax liability is different
from a tax deduction which merely reduces the tax base.
Since the law allowed the bookstores to claim in full the
discount as a tax credit, the BIR is not allowed to expand or
contract the legislative mandate (CIR v. Bicolandia Drug
Corp., G.R. No. 148083, July 21, 2006; CIR v. Central
Luzon Drug Corp., G.R. No. 159647, April 15, 2005).
3. A bookstore, closing its business due to losses, cannot claim
reimbursement of the discount from the government. If the
business continues to operate at a loss and no other taxes are
due, thus compelling it to close shop, the credit can never be
applied and will be lost altogether (CIR v. Central Luzon
Drug, G.R. No. 159647, April 15, 2005). The grant of the
discount to the taxpayer is a mere privilege and can be
revoked anytime.
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