Mercury Drug Corporation vs.

CIR
GR. No. 164050. July 20, 2011
Perez. J.:
FACTS: Pursuant to RA No. 7432, Mercury Drug Corporation, a retailer of pharmaceuticals products, granted a 20% discount to
qualified senior citizen on their purchase of medicines. For the taxable year April to December 1993 and January to December
1994 sales discount totaled to P3,719,287.68 and P35,500.44 respectively, which petitioner claimed as deduction from its gross
income. Realizing that the law allows tax credit for sales discount granted to senior citizen, petitioner claims refund with CIR for
the said years. When CIR failed to act upon the petitioner's claim, the latter filed a petition for review with CTA. The petitioner
was partially favored declaring that the 20% sales discount should be treated as tax credit rather than mere deduction from gross
income and must be based on actual cost of the medicine and not on the whole amount of the 20% discount. Petitioner moved for
reconsideration where CTA modified its earlier decision increasing creditable tax. Unsatisfied, petitioner elevated the case to CA,
contending that actual discount granted to the senior citizen rather than acquisition cost of the item availed by the citizen should
be the basis of tax credit. CA, however, affirmed the decision of CTA and and denied motion for reconsideration. Hence, this
present petition.
ISSUE: Whether or not 20% should be based on actual discount granted to the citizen or acquisition cost of the item availed by the
citizen.
HELD: Supreme court granted the petition.
RATIO: This bears a strikingly similar set of facts and issues on the recent case of ME. Holding Corporation where the court ruled
that tax credit should be equivalent to actual 20% sales discount granted to qualified citizen.it is worth noting that RA No. 7432
had undergone two (2) amendments and most recently in 2010 by RA No. 9994. The 20% sales discount granted by the
establishment to qualified senior citizen is now treated as tax deduction and not tax credit.