CIR vs.

Central Luzon Drug Corporation

Facts:
R is a domestic corporation operating under the name and style "Mercury Drug".
On 1996, R granted 20% sales discount to qualified senior citizens in their
purchases of medicines pursuant to RA 7432. Sales discount totaled to 904, 769. 00
pesos.
On April 15, 1997, R filed an annual ITR for taxable year of 1996 declaring that it
incurred net losses from its operations.
R filed a claim for tax refund/credit with P from the 20% discount however the
latter denied the claim. CTA ordered P to issue tax credit certificate in favor of R. CA
affirmed in toto.
Issue:
WON R can claim 20% sales discount as tax credit instead of deduction from
gross income or gross sales.
Held:
R can claim 20% sales discount as tax credit. The 20% sales discount being
privilege discount under the law shall be treated as a reduction from any tax liability.
The privilege enjoyed by senior citizens does not come directly from the state, but
rather from the private establishment. Accordingly tax credit granted to these
establishments can be deemed as their just compensation for private property taken by
the state for public use.