TAX LAW REVIEW RULING:
CASE DIGESTS 1. Yes. Pursuant to Section 112 (A) of the 1997 Tax Code, it is only the
LAW 4-A
(2 ND
Semester, A.Y. 2019-2020)
1. CIR vs. MINDANAO II GEOTHERMAL PARTNERSHIP
GR No. 191498, January 15, 2014
FACTS:
Mindanao II is a registered taxpayer whose sales to NAPOCOR are all zero-
rated pursuant to the EPIRA Law. On Oct 6 2005, it filed with the BIR an
application for the refund or credit of accumulated unutilized creditable input
taxes for the second, third, and fourth taxable quarters of the taxable year
2004. The administrative claim was not acted upon until Feb 3 2006, or 120
days after Oct 6 2005. Believing that a judicial claim must be filed within the 2-
year prescriptive period provided under Sec 112 (A) and that it must be
reckoned from the date of filing of its VAT returns, Mindanao filed on July 26
2006 a petition for review before the CTA claiming inaction on the part of the
CIR.
On Aug 12 2008, the CTA Division granted Mindanao II’s claim for refund/credit
and held that its judicial claim was timely filed within the 2-year prescriptive
period. The CIR opposed the rulings claiming that prescription had already set
in when Mindanao II filed its judicial claim beyond the 30-day period fixed in
Section 112 (C).
CTA En Banc's Contentions
ISSUES:
1. Whether the administrative claim for refund/credit of Mindanao II was
timely filed
2. Whether the judicial claim for refund/credit Mindanao II was timely filed
administrative claim which is to be filed within the two-year prescriptive period,
and the two-year prescriptive period begins to run from the close of the taxable
quarter when the sales were made. Here, Mindanao II filed its claim for
refund/credit for the second, third, and fourth quarters of 2004 on Oct 6 2005.
Such date is well within the two-year prescriptive period which runs from June
30 2004 (2nd Quarter), Sept 30 2004 (3rd Quarter) and Dec 31 2004 (4th
Quarter).
The Atlas and Mirant rulings are simply not applicable in this case because
Mindanao II’s application for refund/credit on Oct 6 2005 was filed before their
promulgation. The Atlas ruling is held to be applicable only on cases filed from
June 8 2007, the date of its promulgation, and up to Sept 12 2008, the date
when the Mirant case was promulgated.
In Atlas, the court laid down a rule that the 2-year prescriptive period is
reckoned from the date of filing of the return and payment of taxes. In Mirant,
such rule was abandoned. Following the verba legis doctrine, Mirant held that
in administrative claims for refund/credit of unutilized input VAT, the 2-year
prescriptive period begins to run from the close of taxable quarter when the
relevant sales were made. This rule, which is obviously consistent with the
plain wordings of Section 112 (A), was also affirmed in the recent case of San
Roque.
2. No. Under Section 112 (C), the judicial claim must be filed by the taxpayer
within 30 days after the 120-day waiting period if its administrative claim was
not acted upon by CIR. Here, Mindanao II filed its application for refund on Oct
6 2005. When it was not acted upon, it filed a judicial claim but only on July 21
2006, or 138 days after the lapse of the 30-day period on 5 March 2006. Its
petition for review before the CTA was therefore filed late.
Contrary to the erroneous contentions of the CTA En Banc, the correct
interpretation of Section 112, as held in San Roque, is that the 30-day period
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applies not only to instances of actual denial by the CIR of the claim for refund
or tax credit, but to cases of inaction by the CIR as well. Also, following the
verba legis doctrine, the 30-day period to appeal is both mandatory and
jurisdictional. Section 112 (C) is clear, plain and unequivocal in expressly
providing that the taxpayer has a 30-day period to appeal the decision or
inaction of the Commissioner.
Summary of Rules on Prescriptive Periods for Claiming Refund or Credit
of Input Tax
Two-Year Prescriptive Period
1. It is only the administrative claim that must be filed within the two-year
prescriptive period. (Aichi)
2. The proper reckoning date for the two-year prescriptive period is the
close of the taxable quarter when the relevant sales were made. (San
Roque)
3. The only other rule is the Atlas ruling, which applied only from 8 June
2007 to12 September 2008. Atlas states that the two-year prescriptive
period for filing a claim for tax refund or credit of unutilized input VAT
payments should be counted from the date of filing of the VAT return
and payment of the tax. (San Roque)
120 + 30 Day Period
1. The taxpayer can file an appeal in one of two ways:
(1) file the judicial claim within thirty days after the Commissioner denies
the claim within the 120-day period, or
(2) file the judicial claim within thirty days from the expiration of the 120-
day period if the Commissioner does not act within the 120-day
period.
2. The 30-day period always applies, whether there is a denial or inaction
on the part of the CIR.
3. As a general rule, the 30-day period to appeal is both mandatory and
jurisdictional. (Aichi and San Roque)
4. As an exception to the general rule, premature filing is allowed only if
filed between 10 December 2003 and 5 October 2010, when BIR Ruling
No. DA-489-03 was still in force. (San Roque)
5. Late filing is absolutely prohibited, even during the time when BIR
Ruling No. DA-489-03 was in force. (San Roque)
2. CIR vs. IRONCON BUILDERS AND DEVELOPMENT CORP.
G.R. No. 180042, February 8, 2010
FACTS:
Respondent Ironcon Builders and Development Corporation (Ironcon)
sought the refund by the Bureau of Internal Revenue (BIR) of its income tax
overpayment and excess creditable VAT. The Commissioner continued not to
act on its claims which made Ironcon to bring it up to CTA for review. CTA 2 nd
Division held that taxpayers have the option to either carry over the excess
credit or ask for a refund, as regards with the overpayment. Apparently, the
respondent filed two income tax returns for the year 2000, an original and an
amended one. Although Ironcon’s amended return indicated a preference for
“refund” of the overpaid tax, the CTA ruled that respondent’s original choice is
regarded as irrevocable, pursuant to Sec.76 of R.A. No. 8424, and moreover
found out that Ironcon actually carried over the credit from the overpayment
and applied it to the tax due for 2001, and hence, denied Ironcon’s claim for
the refund.
As to the claim for VAT refund, CTA found that by the end of 2000,
respondent had excess tax credit carried over from 1999, an allowable input
tax and a 6% creditable VAT, withheld and remitted by its clients, which are
deductible from Ironcon’s total output VAT liability of P20+M. The CTA ruled
that respondent had no more output VAT against which the excess creditable
VAT withheld may be applied or credited, the VAT withheld had been
excessively paid. Because Ironcon did not present its VAT returns for the
succeeding quarters of 2001, 2 nd Division denied the refund. Upon MfR of
respondent, now attaching the required VAT returns, CTA then granted the
application having found that Ironcon sufficiently proved that its excess
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creditable VAT withheld was not carried over or applied to any input VAT for
2001. CIR filed its own MfR for the amended decision, which CTA denied, and
CTA en banc denied.
Petitioner CIR’s main contention is that, since these amounts were
withheld in accordance with what the law provides, they cannot be regarded
as erroneously or illegally collected as contemplated in Sections 204(C) and
229 of the NIRC.Petitioner CIR also points out that since the NIRC does not
specifically grant taxpayers the option to refund excess creditable VAT
withheld, it follows that such refund cannot be allowed. Excess creditable VAT
withheld is much unlike excess income taxes withheld.
ISSUE:
Whether or not creditable VAT withheld from a taxpayer in excess of its
output VAT liability may be the subject of a tax refund in place of a tax credit.
RULING:
YES.
In the latter case, Sections 76 and 58(D) of the NIRC specifically make
the option to seek a refund available to the taxpayer. The CIR submits thus
that the only option available to taxpayers in case of excess creditable VAT
withheld is to apply the excess credits to succeeding quarters. But the amounts
involved in this case are creditable withholding taxes, not final taxes subject to
withholding. As the CTA correctly points out, taxes withheld on certain
payments under the creditable withholding tax system are but intended to
approximate the tax due from the payee. The withheld taxes remitted to the
BIR are treated as deposits or advances on the actual tax liability of the
taxpayer, subject to adjustment at the proper time when the actual tax liability
can be fully and finally determined.
Even if the law does not expressly state that Ironcon’s excess creditable
VAT withheld is refundable, it may be the subject of a claim for refund as an
erroneously collected tax under Sections 204(C) and 229. Even if the law does
not expressly state that Ironcon’s excess creditable VAT withheld is
refundable, it may be the subject of a claim for refund as an erroneously
collected tax under Sections 204(C) and 229. The rule is that before a refund
may be granted, respondent Ironcon must show that it had not used the
creditable amount or carried it over to succeeding taxable quarters.
Substantial justice dictates that the government should not keep money
that does not belong to it at the expense of citizens. Since he ought to know
the tax records of all taxpayers, petitioner CIR could have easily disproved the
claimant’s allegations. That he chose not to amounts to a waiver of that
right. Also, the CIR failed in this case to make a timely objection to or comment
on respondent Ironcon’s offer of the documents in question despite an
opportunity to do so.11 Taking all these circumstances together, it was
sufficiently proved that Ironcon’s excess creditable VAT withheld was not
carried over to succeeding taxable quarters.
3. CIR v. AICHI FORGING COMPANY (2010)
GR No. 184823 October 6, 2010
Lessons Applicable: Legal Period: 1 year = 12 months, Exhaust
Administrative Claim Before Judicial Claim, Lex Posterioni Derogati Priori
Laws Applicable:
FACTS:
Page 3 of 20
 Aichi forging, a VAT entity filed a claim for refund of input VAT for its zero-
rated sales with the Dept. of Finance One-Stop Inter-Agency Tax Credit and
Duty Drawback Center on Sept 30, 2004. On the same date, it filed a Petition
for Review with the CTA. CTA partially granted the refund by reducing the
leaseless claims. CIR filed a Motion for Reconsideration insisting that they
were filed beyond the prescriptive period in accordance to Art. 13 that: 1 year
= 365 days and that filing an administrative claim is a condition precedent
before a judicial claim can be filed with the CTA.
CTA and CTA En Banc denied petition.
ISSUES:
1. W/N the claim was filed with the prescriptive period of 2 year provided
under Sec. 112 (A) NIRC
2. W/N filing an administrative claim is a condition precedent to a judicial
claim for refund.
RULING:
1. Yes. Sec. 204 (c) and 229 are applied only in instances of erroneous
payment and illegal collection. Sec. 112 (A) of NIRC applies here. Sec. 31
Chapter VIII Book I of the Administrative Code of 1987 being the more recent
law governing legal period applies making 1 year = 12 months. The principle
of Lex Posterioni Derogati Priori applies. Thus, since it is filed on exactly
Sept. 30, 2004, filing is timely.
2. Yes. Sec. 112 (D) of the NIRC clearly provides that the CIR has 120 days
from date of the submission of the complete documents in support of the
application within which to grant or deny the claim. In case of full or partial
denial by the CIR, the recourse is to appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the 120-day period
the CIR fails to act on the application for tax refund, the remedy is to appeal
the inaction of the CIR to the CTA within 30 days.
4. CIR VS. AICHI, GR No. 183421, OCTOBER 22, 2014
FACTS:
Aichi Forging Company of Asia, Inc. is engaged in the business of
manufacturing, producing, and processing all kinds of steel and steel by-
products, such as closed impression die steel forging, and all automotive steel
parts.
On March 29, 2005, Respondent filed with the BIR an application for tax
credit/refund amounting to ₱5,057,120.95 representing the former’s paid input
value-added taxes (VAT) for the first quarter of taxable year 2003. Respondent
claimed that it was entitled to a refund/credit of the input VAT paid on its
purchases of goods, services, capital goods, and on its importation of goods
other than capital goods that were attributable to zero-rated sales in the total
amount of ₱149,174,477.94.
On March 31, 2005, respondent filed a Petition with the CTA. After trial, the
CTA First Division rendered a Decision on 13 August 2007. It partly granted
the Petition and ordered the refund to respondent of the reduced amount of
4,138,397.57. That amount represented the input VAT respondent paid on its
purchases of goods, services, capital goods, and on its importation of goods
other than capital goods.
On appeal, the CTA En Banc affirmed the CTA First Division after finding no
reversible error. Respondent was found to have complied with all the requisites
for claiming a refund under Section 112 (A) of the National Internal Revenue
Code (NIRC) of 1997.
Page 4 of 20

ISSUE:
Whether or not the judicial claim filed by the Respondent before the CTA was
prematurely filed
RULING:
No, Respondent's filing of the judicial claim barely two days after the
administrative claim is not prematurely filed.
Section 112(A) provides for a two-year prescriptive period after the close of the
taxable quarter when the sales were made, within which a VAT registered
person whose sales are zero-rated or effectively zero-rated may apply for the
issuance of a tax credit certificate or refund of creditable input tax. The Court
clarified that the two-year period refers to the filing of an administrative claim
with the BIR.
In this case, respondent’s sales to PEZA−registered entities amounted to
₱149,075,454.37 for the period January 1, 2003 to March 31, 2003.
Accordingly, respondent was not liable to pay any output VAT thereon, and the
unutilized input VAT incurred by and attributable to it may be the proper subject
of a claim for a refund. Therefore, considering that respondent was claiming
the refund of input VAT incurred for the first quarter of 2003, it had until March
31, 2005 − or the close of the taxable quarter when the zero-rated sales were
made − within which to file its administrative claim for a refund. On this note,
we find that petitioners had complied with the two-year prescriptive period
when it filed its claim on March 29, 2005 before the BIR.
In accordance with Section 112(D) of the NIRC of 1997, petitioner had one
hundred twenty (120) days from the date of submission of complete documents
in support of the application within which to decide on the administrative claim.
Considering tha tthe burden to prove entitlement to a tax refund is on the
taxpayer, and absent any evidence to the contrary, it is presumed that in order
to discharge its burden, respondent attached to its application6 filed on 29
March 2005 complete supporting documents necessary to prove its entitlement
to a refund. Thus, the 120-day period for the CIR to act on the administrative
claim commenced on that date.
We agree with petitioner that the judicial claim was prematurely filed on
March 31, 2005, since respondent failed to observe the mandatory 120-
day waiting period to give the CIR an opportunity to act on the
administrative claim. However, the Court ruled that BIR Ruling No. DA-
489-03 allowed the premature filing of a judicial claim, which means non-
exhaustion of the 120-day period for the Commissioner to act on an
administrative claim.
The old rule that the taxpayer may file the judicial claim, without waiting for the
Commissioner’s decision if the two-year prescriptive period is about to expire,
cannot apply because that rule was adopted before the enactment of the 30-
day period. The 30-day period was adopted precisely to do away with the old
rule, so that under the VAT System the taxpayer will always have 30 days to
file the judicial claim even if the Commissioner acts only on the 120th day, or
does not act at all during the 120-day period. With the 30-day period always
available to the taxpayer, the taxpayer can no longer file a judicial claim for
refund or credit of input VAT without waiting for the Commissioner to decide
until the expiration of the 120-day period.
Notwithstanding a strict construction of any claim for tax exemption or refund,
the Court recognized that BIR Ruling No. DA-489-03 constitutes equitable
estoppel in favor of taxpayers. BIR Ruling No. DA-489-03 expressly states that
the "taxpayer-claimant need not wait for the lapse of the 120-day period before
it could seek judicial relief with the CTA by way of Petition for Review.
Page 5 of 20
5. AICHI FORGING COMPANY OF ASIA, INC., vs. COURT OF APPEALS-
EN BANC AND COMMISSIONER OF INTERNAL REVENUE
G.R. NO. 193625
FACTS:
AICHI is a domestic corporation duly organized and existing under the
laws of the Philippines. On 26 September 2002, AICHI filed with the BIR District
Office in San Pedro, Laguna, a written claim for refund and/or tax credit of its
unutilized input VAT credits for the third and fourth quarters of 2000 and the
four taxable quarters of 2001. AICHI sought the tax refund/credit of input VAT
for the said taxable quarters in the total sum of P18,030,547.77[6] representing
VAT payments on importation of capital goods and domestic purchases of
goods and services. As respondent CIR failed to act on the refund claim, and
in order to toll the running of the prescriptive period provided under Sections
229 and 112 (D) of the National Internal Revenue Code (Tax Code), AICHI
filed, on 30 September 2002, a Petition for Review before the CTA Division.
ISSUES:
1) Whether AICHI availed of the correct remedy
2) Whether AICHI can still question the CTA Division ruling
RULING:
1) The CTA had no jurisdiction over the judicial claim. AICHI's judicial
claim was filed prematurely and, thus, without cause of action. Generally, the
120-day waiting period is both mandatory and jurisdictional. In a long line of
cases, the Court had interpreted the 120-day period as both mandatory and
jurisdictional such that the taxpayer is forced to await the expiration of the
period before initiating an appeal before the CTA. This must be so because
prior to the expiration of the period, the CIR still has the statutory authority to
render a decision. If there is no decision and the period has not yet expired,
there is no reason to complain of in the meantime.
The first test case regarding the mandatory and jurisdictional nature of
the 120+30-day waiting periods provided in Section 112 (D) of the 1997 Tax
Code is CIR v. Aichi Forging Company of Asia, Inc. (Aichi), G.R. No. 184823,
6 October 2010.In that landmark case, the Court rejected as without legal basis
the assertion of the respondent taxpayer that the non- observance of the 120-
day period is not fatal to the filing of a judicial claim as long as both the
administrative and the judicial claims are filed within the two-year prescriptive
period. The Court explained that Section 112 (D) contemplated two scenarios:
(1) a decision is made before the expiration of the 120-day period; and (2) no
decision after such 120-day period. In either instance, the appeal with the CTA
can only be made within 30 days after the decision or inaction. Emphatically,
Aichi announced that the 120-day period is crucial in filing an appeal with the
CTA. The exception: Judicial claims filed from 10 December 2003 up to 6
October 2010.
Here, it is not disputed that AICHI had timely filed its administrative
claim for refund or tax credit before the BIR. The records show that the claim
for refund/tax credit of input taxes covering the six separate taxable periods
from the 3rd Quarter of 2000 up to the 4 th Quarter of 2001 was made on 26
September 2002. Both the CTA Division and CTA En Banc correctly ruled that
it fell within the 2-year statute of limitations. However, its judicial claim was filed
a mere four days later on 30 September 2002, or before the window period
when the taxpayers need not observe the 120-day mandatory and jurisdictional
period. Consequently, the general rule applies.
2) The petitioner adopted the wrong remedy in assailing the decision of
the CTA En Banc. What the petitioner should have done to question the
decision of the CTA En Banc was to file before this Court a petition for review
Page 6 of 20
under Rule 45 of the same Rules of Court. This is in conformity with Section
11 of R.A. No. 9282.
6. COMMISSIONER OF INTERNAL REVENUE vs. TEAM SUAL
CORPORATION (formerly MIRANT SUAL CORPORATION),
G.R. No. 205055 July 18, 2014
FACTS:
TSC is a value-added tax (VAT) payer duly registered with the Bureau of
Internal Revenue (BIR). It is principally engaged in the business of electric
power generation and the sale of electric power to National Power Corporation
(NPC) under a Build-Operate-Transfer (BOT) Scheme.
On December 19, 2003, TSC applied for the VAT zero-rating of its sale of
electric power to NPC for the taxable year 2004. TSC’s application was
subsequently approved by the BIR.
On April 26, 2004, July 26, 2004, October 25, 2004 and January 25, 2005, TSC
filed its quarterly VAT returns for the four quarters of 2004 with the BIR, through
the Electronic Filing and Payment Scheme (EFPS). On July 3, 2004 and on
August 3, 2005, TSC filed its amended quarterly VAT returns for the first and
fourth quarters of 2004, respectively.
On December 21, 2005, TSC filed an administrative claim for refund of its input
VAT, which it incurred for the four quarters of 2004.
On April 24, 2006, due to the BIR’s inaction, TSC filed a petition for review with
the Court of Tax Appeals (CTA). TSC prayed for the refund or issuance of tax
credit certificate for its alleged unutilized input VAT for year 2004.
The CTA Special First Division ruled that TSC’s sale of electric power to NPC
was effectively zero-rated. The CTA Special First Division found that TSC
complied with the five requirements to be entitled to a refund or issuance of tax
credit certificate on its input VAT. The CTA Special First Division found that
TSC is entitled to a refund or issuance of tax credit certificate in the amount of
₱78,009,891.56. The CTA Special First Division likewise ruled that both the
administrative and the judicial claims of TSC were filed within the two-year
prescriptive period.
On May 19 2010, the CTA Special First Division granted the motion for partial
new trial filed by TSC and allowed it to present in evidence the correct official
receipts supporting the ₱2,430,229,567.30 zero-rated sales made to NPC. In
an Amended Decision dated 5 April 2011, the CTA Special First Division found
that TSC is entitled to a modified amount of ₱96,846,234.31 input VAT.
Thus, the Commissioner of Internal Revenue (CIR) filed a petition for review
with the CTA En Banc.
In a Decision dated July 27, 2012, the CTA EB found that TSC submitted the
relevant documents applicable to its claim. According to the CTA EB, the
submitted documents constituted compliance with the requirements of
Revenue Memorandum Order No. (RMO) 53-98. Thus, the CTA EB ruled that
the judicial claim was not prematurely filed. The CTA EB denied the motion for
reconsideration filed by the CIR for lack of merit. Hence, this petition for review.
ISSUES:
1. Whether or not THE CTA En Banc gravely erred in denying due course
to CIR’s petition for review in CTA and in affirming the decision of its
special first division that TSC is entitled to a refund or tax credit
certificate in the amount of ₱96,846,234.31 because it was able to
submit the legally required documents in its application for refund.
2. Whether or not TSC failed to submit the complete documents
enumerated in RMO 53-98 which as a result, the 120-day period given
for CIR to decide allegedly did not commence.
RULING
No.
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Under Section 112(C) of the NIRC, the CIR has 120 days to decide the
taxpayer’s claim from the date of submission of complete documents in support
of the application filed in accordance with Section 112(A) of the NIRC. In Intel
Technology vs. Commissioner of Internal Revenue, it was ruled that once the
taxpayer has established by sufficient evidence that it is entitled to a refund or
issuance of a tax credit certificate, in accordance with the requirements of
Section 112(A) of the NIRC, its claim should be granted.
In Atlas Consolidated Mining vs. Commissioner of Internal Revenue, it was
held that applications for refund or credit of input tax with the BIR must comply
with the appropriate revenue regulations. Thus, applications must be in
accordance with Section 2 of Revenue Regulations No. 3-88 (RR 3-88),
amending Section 16 of Revenue Regulations No. 5-87.
In all cases, the amount of refund or tax credit that may be granted shall be
limited to the amount of the value-added tax (VAT) paid directly and entirely
attributable to the zero-rated transaction during the period covered by the
application for credit or refund.
In the present case, the CTA Special First Division found that TSC complied
with the requirements of Section 112(A) of the NIRC and granted its claim for
refund or credit of ₱78,009,891.56 input VAT. Upon a partial new trial, the CTA
Special First Division increased the amount to ₱96,846,234.31. Upon appeal,
the CTA EB concluded that TSC submitted the relevant documents to
substantiate its claim for refund or credit of input tax.
The above-mentioned findings of fact of the CTA Special First Division shall be
adopted, as affirmed by the CTA EB. Whether TSC complied with the
substantiation requirements of Section 112 of the NIRC and RR 3-88 is a
question of fact, which could only be answered after reviewing, examining,
evaluating, or weighing all over again the probative value of the evidence
before the CTA, which the Supreme Court does not have reason to do in the
present petition for review on certiorari. The findings of fact of the CTA are not
to be disturbed unless clearly shown to be unsupported by substantial
evidence. Since by the very nature of its functions, the CTA has developed an
expertise on this subject, the Court will not set aside lightly the conclusions
reached by them, unless there has been an abuse or improvident exercise of
authority.
2. No. The CIR’s reliance on RMO 53-98 is misplaced. There is nothing in
Section 112 of the NIRC, RR 3-88 or RMO 53-98 itself that requires submission
of the complete documents enumerated in RMO 53-98 for a grant of a refund
or credit of input VAT. The subject of RMO 53-98 states that it is a "Checklist
of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities
x x x." In this case, TSC was applying for a grant of refund or credit of its input
tax. There was no allegation of an audit being conducted by the CIR. Even
assuming that RMO 53-98 applies, it specifically states that some documents
are required to be submitted by the taxpayer "if applicable."
Moreover, if TSC indeed failed to submit the complete documents in support
of its application, the CIR could have informed TSC of its failure, consistent
with Revenue Memorandum Circular No. (RMC) 42-03. However, the CIR did
not inform TSC of the document it failed to submit, even up to the present
petition. The CIR likewise raised the issue of TSC’s alleged failure to submit
the complete documents only in its motion for reconsideration of the CTA
Special First Division.
Under Section 112(C) of the NIRC, in case of failure on the part of the CIR to
act on the application, the taxpayer affected may, within 30 days after the
expiration of the 120-day period, appeal the unacted claim with the CTA. The
charter of the CTA also expressly provides that if the Commissioner fails to
decide within "a specific period" required by law, such "inaction shall be
deemed a denial" of the application for tax refund or credit. In Commissioner
of Internal Revenue v. San Roque Power Corporation, we emphasized that
compliance with the 120-day waiting period is mandatory and jurisdictional. In
this case, when TSC filed its administrative claim on December 21, 2005, the
CIR had a period of 120 days, or until April 20, 2006, to act on the claim.
However, the CIR failed to act on TSC's claim within this 120-day period. Thus,
TSC filed its petition for review with the CTA on April 24, 2006 or within 30 days
after the expiration of the 120-day period. Accordingly, there is no merit in the
CIR' s argument that the judicial claim was prematurely filed.
Page 8 of 20
7. CBK POWER COMPANY, LTD vs. CIR
GR Nos. 198729-30
(Zero-Rate VAT, Tax Credit, Solutio Indebiti)
Doctrines:
1. Services rendered to NPC by a VAT-registered entity are effectivey zero-
rated.
2. Claims for refund or credit of zero-rated sales for VAT-registered persons
must be filed within 2 years.
3. The period of 120 days is a prerequisite for the commencement of the 30-
day period to appeal to the CTA.
4. Solutio indebiti inapplicable when there is a binding and legal obligation to
pay.
FACTS:
Petitioner operated, maintained, and managed Kalayaan II pumped-
storage hydroelectric power plant, the new Caliraya Spillway, Caliraya,
Botocan; and the Kalayaan I hydroelectric power plants and their related
facilities located in the Province of Laguna. On December 29, 2004, petitioner
filed an Application for VAT Zero-Rate with the Bureau of Internal Revenue
(BIR), in accordance with Section 108 (B) (3) of the National Internal Revenue
Code (NIRC) of 1997, as amended. BIR approved the application. Thus,
petitioner’s sale of electricity to the NPC from 1 January 2005 to 31 October
2005 was declared to be entitled to the benefit of effectively zero-rated value
added tax (VAT).
Petitioner filed its administrative claims for the issuance of tax credit
certificates for its alleged unutilized input taxes on its purchase of capital goods
and alleged unutilized input taxes on its local purchases and/or importation of
goods and services, other than capital goods, pursuant to Section 112 (A) and
(B) of the NIRC of 1997, as amended, with BIR Revenue District Office (RDO)
No. 55 of Laguna, which covered the first 3 quarters of 2005. Petitioner alleged
that the Commissioner of Internal Revenue (CIR) did not act on the claim,
hence the petition for review with the CTA on April 18, 2007.
ISSUES:
1.Whether the prescriptive period as provided in Section 112 of the NIRC
applies?
2.Whether petitioner’s sales to NPC are effectively zero-rated?
3.Whether the administrative claims were filed within the prescriptive period?
4.Whether the judicial claim was filed within the prescriptive period?
RULING:
1. Whether the prescriptive period as provided in Section 112 of the NIRC
applies? Yes.
2.Whether petitioner’s sales to NPC are effectively zero-rated? Yes. The NPC
is an entity with a special charter, which categorically exempts it from the
payment of any tax, whether direct or indirect, including VAT. Thus, services
rendered to NPC by a VAT-registered entity are effectively zero-rated. In fact,
the BIR itself approved the application for zero-rating on 29 December 2004,
filed by petitioner for its sales to NPC covering January to October 2005. As a
consequence, petitioner claims for the refund of the alleged excess input tax
attributable to its effectively zero-rated sales to NPC.
3.Whether the administrative claims were filed within the prescriptive period?
Yes. Section 112 (A) provides that after the close of the taxable quarter when
the sales were made, there is a two-year prescriptive period within which a
VAT-registered person whose sales are zero-rated or effectively zero-rated
may apply for the issuance of a tax credit certificate or refund of creditable input
tax.
Page 9 of 20
Section 112 (A) is clear that for VAT-registered persons whose sales are zero-
rated or effectively zero-rated, a claim for the refund or credit of creditable input
tax that is due or paid, and that is attributable to zero-rated or effectively zero-
rated sales, must be filed within two years after the close of the taxable quarter
when such sales were made.
The reckoning frame would always be the end of the quarter when the pertinent
sale or transactions were made, regardless of when the input VAT was paid.
Pursuant to Section 112 (A), petitioner’s administrative claims were filed well
within the two-year period.
4. Whether the judicial claim was filed within the prescriptive period?
No. Section 112 (D) further provides that the CIR has to decide on an
administrative claim within one hundred (120) days from the date of submission
of complete documents in support thereof. Thereafter, the taxpayer affected by
the CIR’s decision or inaction may appeal to the CTA within 30 days from the
receipt of the decision or from the expiration of the 120-day period within which
claim has not been acted upon.
Considering further that the 30-day period to appeal to the CTA is dependent
of the 120-day period, compliance with both periods is jurisdictional. The period
of 120 days is a prerequisite for the commencement of the 30-day period to
appeal to the CTA. Taxpayer-claimant need not wait for the lapse fo the 120-
day period before it could seek judicial relief with the CTA by way of Petition
for Review. Although petitioner did not file its judicial claim with the CTA prior
to the expiration of the 120-day waiting period, it failed to observe the 30-day
prescriptive period to appeal to the CTA counted from the lapse of the 120-day
period. For failure of the petitioner to comply with the 120+30 day mandatory and
jurisdictional period, petitioner lost its right to claim a refund or credit of its alleged
excess input tax.
8. WESTERN MINDANAO POWER CORPORATION vs. COMMISSIONER
OF INTERNAL REVENUE
G.R. No. 181136 June 13, 2012
FACTS:
WMPC is a domestic corporation engaged in the production and sale of
electricity. It is registered with the BIR as a VAT taxpayer. Petitioner alleges
that it sells electricity solely to the National Power Corporation (NPC), which is
in turn exempt from the payment of all forms of taxes, duties, fees and imposts,
pursuant to Section 132 of R.A. No. 6395 (An Act Revising the Charter of the
NPC). In view thereof and pursuant to Section 108(B) (3) of the NIRC,
petitioner’s power generation services to NPC is zero-rated.
On 20 June 2000 and 13 June 2001, WMPC filed with the CIR applications for
a tax credit certificate of its input VAT covering the taxable 3rd and 4th quarters
of 1999 and all the taxable quarters of 2000. Noting that the CIR was not acting
on its application, and fearing that its claim would soon be barred by
prescription, WMPC on 28 September 2001 filed with the CTA in Division a
Petition for Review seeking refund/tax credit certificates.
The CIR filed its Comment on the CTA Petition, arguing that WMPC was not
entitled to the latter’s claim for a tax refund in view of its failure to comply with
the invoicing requirements under Section 113 of the NIRC in relation to Section
4.108-1 of RR 7-95, which provides: SECTION 4.108-1. Invoicing
Requirements — All VAT-registered persons shall, for every sale or lease of
goods or properties or services, issue duly registered receipts or sales or
commercial invoices which must show: (1) the name, TIN and address of seller;
(2) date of transaction; (3) quantity, unit cost and description of merchandise
or nature of service; (4) the name, TIN, business style, if any, and address of
the VAT-registered purchaser, customer or client; (5) the word "zero rated"
Page 10 of 20
imprinted on the invoice covering zero-rated sales; and (6) the invoice value or
consideration.
Only VAT-registered persons are required to print their TIN followed by the
word "VAT" in their invoice or receipts and this shall be considered as a "VAT
Invoice." All purchases covered by invoices other than "VAT" Invoice" shall not
give rise to any input tax. If the taxable person is also engaged in exempt
operations, he should issue separate invoices or receipts for the taxable and
exempt operations. A "VAT Invoice" shall be issued only for sales of goods,
properties or services subject to VAT imposed in Sections 100 and 102 of the
Code. The invoice or receipt shall be prepared at least in duplicate, the original
to be given to the buyer and the duplicate to be retained by the seller as part
of his accounting records. (Underscoring supplied.)
WMPC countered that the invoicing and accounting requirements laid down in
RR 7-95 were merely "compliance requirements," which were not
indispensable to establish the claim for refund of excess and unutilized input
VAT. Also, Section 113 of the NIRC prevailing at the time the sales transactions
were made did not expressly state that failure to comply with all the invoicing
requirements would result in the disallowance of a tax credit refund. The
express requirement – that "the term ‘zero-rated sale’ shall be written or printed
prominently" on the VAT invoice or official receipt for sales subject to zero
percent (0%) VAT – appeared in Section 113 of the NIRC only after it was
amended by Section 11 of R.A. 9337. This amendment cannot be applied
retroactively, considering that it took effect only on 1 July 2005, or long after
petitioner filed its claim for a tax refund, and considering further that the RR 7-
95 is punitive in nature. Further, since there was no statutory requirement for
imprinting the phrase "zero-rated" on official receipts prior to 1 July 2005, the
RR 7-95 constituted undue expansion of the scope of the legislation it sought
to implement.
The CTA Second Division dismissed the Petition. It held that while petitioner
submitted in evidence its Quarterly VAT Returns for the periods applied for,
"the same do not reflect any zero-rated or effectively zero-rated sales allegedly
incurred during said periods. The spaces provided for such amounts were left
blank, which only shows that there existed no zero-rated or effectively zero-
rated sales for the 3rd and 4th quarters of 1999 and the four quarters of 2000."
Moreover, it found that petitioner’s VAT Invoices and Official Receipts did not
contain on their face the phrase "zero-rated," contrary to Section 4.108-1 of RR
7-95. Petitioner moved for reconsideration, but the motion was denied by the
CTA in Division.
WMPC appealed to the CTA En Banc, which dismissed the appeal and
affirmed the CTA ruling. The CTA En Banc held that the receipts and evidence
presented by petitioner failed to fully substantiate the existence of the latter’s
effectively zero-rated sales to NPC for the 3rd and 4th quarters of taxable year
1999 and the four quarters of taxable year 2000. WMPC filed a Motion for
Reconsideration, which was denied by the CTA En Banc. Hence, the present
Petition.
(CTA Presiding Justice Ernesto Acosta filed a Concurring and Dissenting
Opinion. Justice Acosta disagreed with the majority’s view regarding the
supposed mandatory requirement of imprinting the term "zero-rated" on official
receipts or invoices. He opined that Section 113 in relation to Section 23712 of
the NIRC does not require the imprinting of the phrase "zero-rated" on an
invoice or official receipt for the document to be considered valid for the
purpose of claiming a refund or an issuance of a tax credit certificate. Hence,
the absence of the term "zero-rated" in an invoice or official receipt does not
affect its admissibility or competency as evidence in support of a refund claim.
Also, assuming that stamping the term "zero-rated" on an invoice or official
receipt is a requirement of the current NIRC, the denial of a refund claim is not
the imposable penalty for failure to comply with that requirement. Nevertheless,
Justice Acosta agreed with the "decision to deny the claim due to petitioner’s
Page 11 of 20
failure to prove the input taxes it paid on its domestic purchases of goods and
services during the period involved.")
ISSUE:
Whether the CTA En Banc seriously erred in dismissing the claim of petitioner
for a refund or tax credit on input tax on the ground that the latter’s Official
Receipts do not contain the phrase "zero-rated"
RULING:
We deny the Petition. Being a derogation of the sovereign authority, a statute
granting tax exemption is strictly construed against the person or entity
claiming the exemption. When based on such statute, a claim for tax refund
partakes of the nature of an exemption. Hence, the same rule of strict
interpretation against the taxpayer-claimant applies to the claim.
In the present case, petitioner’s claim for a refund or tax credit of input VAT is
anchored on Section 112(A) of the NIRC, viz: Section 112. Refunds or Tax
Credits of Input Tax. - (A) Zero-rated or Effectively Zero-rated Sales. - any VAT-
registered person, whose sales are zero-rated or effectively zero-rated may,
within two (2) years after the close of the taxable quarter when the sales were
made, apply for the issuance of a tax credit certificate or refund of creditable
input tax due or paid attributable to such sales, except transitional input tax, to
the extent that such input tax has not been applied against output tax:
Provided, however, That in the case of zero-rated sales under Section
106(A)(2)(a)(1), (2) and (B) and Section 108 (B)(1) and (2), the acceptable
foreign currency exchange proceeds thereof had been duly accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP): Provided, further, That where the taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in taxable or exempt sale of goods of
properties or services, and the amount of creditable input tax due or paid
cannot be directly and entirely attributed to any one of the transactions, it shall
be allocated proportionately on the basis of the volume of sales. Thus, a
taxpayer engaged in zero-rated or effectively zero-rated sale may apply for the
issuance of a tax credit certificate, or refund of creditable input tax due or paid,
attributable to the sale.
In a claim for tax refund or tax credit, the applicant must prove not only
entitlement to the grant of the claim under substantive law. It must also show
satisfaction of all the documentary and evidentiary requirements for an
administrative claim for a refund or tax credit. Hence, the mere fact that
petitioner’s application for zero-rating has been approved by the CIR does not,
by itself, justify the grant of a refund or tax credit. The taxpayer claiming the
refund must further comply with the invoicing and accounting requirements
mandated by the NIRC, as well as by revenue regulations implementing them.
Under the NIRC, a creditable input tax should be evidenced by a VAT invoice
or official receipt, which may only be considered as such when it complies with
the requirements of RR 7-95, particularly Section 4.108-1. This section
requires that "(i)f the sale is subject to zero percent (0%) value-added tax, the
term ‘zero-rated sale’ shall be written or printed prominently on the invoice or
receipt."
We are not persuaded by petitioner’s argument that RR 7-95 constitutes undue
expansion of the scope of the legislation it seeks to implement on the ground
that the statutory requirement for imprinting the phrase "zero-rated" on VAT
official receipts appears only in Republic Act No. 9337. This law took effect on
1 July 2005, or long after petitioner had filed its claim for a refund. RR 7-95,
which took effect on 1 January 1996, proceeds from the rule-making authority
granted to the Secretary of Finance by the NIRC for the efficient enforcement
of the same Tax Code and its amendments. In Panasonic Communications
Imaging Corporation of the Philippines v. CIR, the court ruled that this provision
is "reasonable and is in accord with the efficient collection of VAT from the
covered sales of goods and services." Moreover, we have held in Kepco
Philippines Corporation v. CIR that the subsequent incorporation of Section
Page 12 of 20
4.108-1 of RR 7-95 in Section 113 (B) (2) (c) of R.A. 9337 actually confirmed
the validity of the imprinting requirement on VAT invoices or official receipts –
a case falling under the principle of legislative approval of administrative
interpretation by reenactment.
In fact, this Court has consistently held as fatal the failure to print the word
"zero-rated" on the VAT invoices or official receipts in claims for a refund or
credit of input VAT on zero-rated sales, even if the claims were made prior to
the effectivity of R.A. 9337. Clearly then, the present Petition must be denied.
In addition, it is notable that the CTA Second Division and the CTA En Banc
found that petitioner failed to sufficiently substantiate the existence of its
effectively zero-rated sales to NPC for the 3rd and 4th quarters of taxable year
1999, as well as all four quarters of taxable year 2000. It must also be noted
that the CTA is a highly specialized court dedicated exclusively to the study
and consideration of revenue-related problems, in which it has necessarily
developed an expertise. Hence, its factual findings, when supported by
substantial evidence, will not be disturbed on appeal. We find no sufficient
reason to exempt the present case from this general rule. WHEREFORE, the
petition is denied.
9. CIR v. SAN ROQUE POWER CORPORATION, GR No. 187485, 2013-02-
12
FACTS:
San Roque Power Corporation entered into a Power Purchase Agreement with
the National Power Corporation to develop hydro-potential of the Lower Agno
River and generate additional power and energy for the Luzon Power Grid, by
building the San Roque Multi-Purpose Project located in San Manuel,
Pangasinan.
On the construction and development of the San Roque Multi-Purpose Project
which comprises of the dam, spillway and power plant, [San Roque] allegedly
incurred, excess input VAT... which it declared in its Quarterly VAT Returns...
filed for the same year. [San Roque] duly filed with the BIR separate claims for
refund, in the total amount of P559,709,337.54, representing unutilized input
taxes as declared in its VAT returns for taxable year 2001.
On March 28, 2003, San Roque filed amended Quarterly VAT Returns for the
year 2001 since it increased its unutilized input VAT
CIR's inaction on the subject claims led to the filing by San Roque of the
Petition for Review with the Court [of Tax Appeals] in Division on April 10, 2003.
ISSUE:
The Court of Tax Appeals En Banc erred in holding that San Roque's claim for
refund was not prematurely filed.
RULING:
On 10 April 2003, a mere 13 days after it filed its amended administrative claim
with the Commissioner on 28 March 2003, San Roque filed a Petition for
Review with the CTA. First, San Roque did not wait for the 120-day period to
lapse before filing its judicial claim; Second, San Roque filed its judicial claim
more than four (4) years before the Atlas doctrine, which was promulgated by
the Court on 8 June 2007.
Clearly, San Roque failed to comply with the 120-day waiting period, the time
expressly given by law to the Commissioner to decide whether to grant or deny
San Roque's application for tax refund or credit.
The compliance with the 120-day waiting period is mandatory and
jurisdictional.
Failure to comply with the 120-day waiting period violates a mandatory
provision of law. It violates the doctrine of exhaustion of administrative
remedies and renders the petition premature and thus without a cause of
action, with the effect that the CTA does not acquire jurisdiction over the
taxpayer's petition.
Page 13 of 20
San Roque's failure to comply with the 120-day mandatory period renders its
petition for review with the CTA void.
This Court cannot brush aside the grave issue of the mandatory and
jurisdictional nature of the 120-day period just because
Commissioner does not question the entitlement of San Roque to the refund.
The mere fact that a taxpayer has undisputed excess input VAT, or that the tax
was admittedly illegally, erroneously or excessively collected from him, does
not entitle him as a matter of right to a tax refund or credit. Strict compliance
with the mandatory and jurisdictional conditions... prescribed by law to claim
such tax refund or credit is essential and necessary for such claim to prosper.
Well-settled is the rule that tax refunds or credits, just like tax exemptions, are
strictly construed against the taxpayer. The burden is on the taxpayer to show
that he has strictly complied with the conditions for the grant of the tax refund
or credit.
This Court cannot disregard mandatory and jurisdictional conditions mandated
by law simply because the Commissioner chose not to contest the numerical
correctness of the claim for tax refund or credit of the taxpayer.
Non-compliance with mandatory periods, non-observance of... prescriptive
periods, and non-adherence to exhaustion of administrative remedies bar a
taxpayer's claim for tax refund or credit, whether or not the Commissioner
questions the numerical correctness of the claim of the taxpayer.
This law is clear, plain, and unequivocal. Following the well-settled verba legis
doctrine, this law should be applied exactly as worded since it is clear, plain,
and unequivocal.
The taxpayer may, if he wishes, appeal the decision of the Commissioner... to
the CTA within 30 days from receipt of the Commissioner's decision, or if the
Commissioner does not act on the taxpayer's claim within the 120-day period,
the taxpayer may appeal to the CTA within 30 days from the expiration of the
120-day period.
TAGANITO MINING CORPORATION VS CIR (2013)
G.R. No. 196113 is a petition for review assailing the Decision promulgated on
8 December 2010 as well as the Resolution promulgated on 14 March 2011 by
the CTA En Banc. In its Decision, the CTA En Banc reversed the 8 January
2010 Decision as well as the 7 April 2010 Resolution of the CTA Second
Division and granted the CIR’s petition for review in CTA Case No. 7574. The
CTA En Banc dismissed, for having been prematurely filed, Taganito Mining
Corporation’s (Taganito) judicial claim for P8,365,664.38 tax refund or credit.
FACTS: Petitioner, Taganito Mining Corporation, is a corporation duly
organized and existing under Philippine laws, organized for the purpose of
mining, etc. It is a VAT-registered entity and likewise, is registered with the
Board of Investments (BOI) as an exporter of beneficiated nickel silicate and
chromite ores.
In the year 2005, Taganito reported zero-rated sales amounting to
P1,446,854,034.68; input VAT on its domestic purchases and importations of
goods (other than capital goods) and services amounting to P2,314,730.43;
and input VAT on its domestic purchases and importations of capital goods
amounting to P6,050,933.95.
In 2006, filed with the CIR a letter claiming a tax credit/refund of its suppose
input VAT amounting to 8 million for the period covering Jan 2004-Dec 2005.
On the same date, [Taganito] likewise filed an Application for Tax
Credits/Refunds for the period covering January 1, 2005 to December 31, 2005
for the same amount.
On November 29, 2006, [Taganito] sent again another letter dated November
29, 2004 to [the CIR], to correct the period of the above claim for tax
credit/refund in the said amount of ₱8,365,664.38 as actually referring to the
period covering January 1, 2005 to December 31, 2005.
As the statutory period within which to file a claim for refund for said input VAT
is about to lapse without action on the part of the [CIR], [Taganito] filed the
instant Petition for Review on February 17, 2007.
The CIR interposes the following defenses, among others:
xxxx
Page 14 of 20
7. Proof of compliance with the prescribed checklist of requirements to be
submitted involving claim for VAT refund pursuant to Revenue Memorandum
Order No. 53-98, otherwise there would be no sufficient compliance with the
filing of administrative claim for refund, the administrative claim thereof being
mere proforma, which is a condition sine qua non prior to the filing of judicial
claim in accordance with the provision of Section 229 of the 1997 Tax Code.
Further, Section 112 (D) of the Tax Code, as amended, requires the
submission of complete documents in support of the application filed with the
BIR before the 120-day audit period shall apply, and before the taxpayer could
avail of judicial remedies as provided for in the law. Hence, [Taganito’s] failure
to submit proof of compliance with the above-stated requirements warrants
immediate dismissal of the petition for review.
Xxxxx
9. In an action for refund/credit, the burden of proof is on the taxpayer to
establish its right to refund, and failure to sustain the burden is fatal to the claim
for refund/credit.
10. Claims for refund are construed strictly against the claimant for the same
partake the nature of exemption from taxation and as such, they are looked
upon with disfavor.
Section 112. Refunds or Tax Credits of Input Tax. –
xxx xxx xxx
(D) Period within which refund or Tax Credit of Input Taxes shall be Made. – In
proper cases, the Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred (120) days from the
date of submission of complete documents in support of the application filed in
accordance with Subsections (A) and (B) hereof.
In cases of full or partial denial for tax refund or tax credit, or the failure on the
part of the Commissioner to act on the application within the period prescribed
above, the taxpayer affected may, within thirty (30) days from the receipt of the
decision denying the claim or after the expiration of the one hundred twenty
dayperiod, appeal the decision or the unacted claim with the Court of Tax
Appeals. (Emphasis supplied.)
CTA Division partially granted Taganito’s claim.
Upon appeal to the CTA En Banc, the CTA EB granted the CIR’s petition for
review and reversed and set aside the challenged decision and resolution.
The CTA EB found that Taganito filed its administrative claim on 14 November
2006, which was well within the period prescribed under Section 112(A) and
(B) of the 1997 Tax Code. However, the CTA EB found that Taganito’s judicial
claim was prematurely filed. Taganito filed its Petition for Review before the
CTA Second Division on 14 February 2007. The judicial claim was filed after
the lapse of only 92 days from the filing of its administrative claim before the
CIR, in violation of the 120-day period prescribed in Section 112(D) of the 1997
Tax Code.
HELD: National Internal Revenue Code; value added tax; 120-day period given
by law to the Commissioner of Internal Revenue to grant or deny application
for tax refund or credit mandatory and jurisdictional. Failure to comply with the
120-day waiting period violates a mandatory provision of law. It violates the
doctrine of exhaustion of administrative remedies and renders the petition
premature and thus without a cause of action, with the effect that the Court of
Tax Appeals (CTA) does not acquire jurisdiction over the taxpayer’s petition.
The charter of the CTA expressly provides that its jurisdiction is to review on
appeal “decisions of the Commissioner of Internal Revenue (CIR) in cases
involving xxx refunds of internal revenue taxes.” When a taxpayer prematurely
files a judicial claim for tax refund or credit with the CTA without waiting for the
decision of the CIR, there is no “decision” of the CIR to review and thus the
CTA as a court of special jurisdiction has no jurisdiction over the appeal. The
charter of the CTA also expressly provides that if the CIR fails to decide within
“a specific period” required by law, such inaction shall be deemed a denial” of
the application for a tax refund or credit. It is the CIR’s decision or inaction
“deemed a denial,” that the taxpayer can take to the CTA for review. Without a
decision or an “inaction xxx deemed a denial” of the CIR, the CTA has no
jurisdiction over a petition for review.
Page 15 of 20
10. FORT BONIFACIO DEVELOPMENT CORPORATION vs. CIR, ET. AL.
G.R. No. 173425 September 4, 2012
FACTS:
Fort Bonifacio, by virtue of RA 7227 and E.O. No. 40 purchased from
the national government a portion of the Fort Bonifacio reservation, now known
as the Fort Bonifacio Global City (Global City).
In October 1996, petitioner started selling Global City lots to interested
buyers. For the first quarter of 1997, petitioner generated a total amount of ₱
3,685,356,539.50 from its sales and lease of lots, on which the output VAT
payable was ₱368,535,653.95. Petitioner paid the output VAT by making cash
payments to the BIR totalling ₱359,652,009.47 and crediting its unutilized input
tax credit on purchases of goods and services of ₱ 8,883,644.48.
Realizing that its transitional input tax credit was not applied in
computing its output VAT for the first quarter of 1997, petitioner filed with the
BIR a claim for refund of the amount of ₱ 359,652,009.47 erroneously paid as
output VAT for the said period.
Petitioner claims that it is entitled to recover the amount of
₱359,652,009.47 erroneously paid as output VAT for the first quarter of 1997
since its transitional input tax credit of ₱ 5,698,200,256 is more than sufficient
to cover its output VAT liability for the said period.
Respondents, on the other hand, maintain that petitioner is not entitled
to a transitional input tax credit because no taxes were paid in the acquisition
of the Global City property. Respondents assert that prior payment of taxes is
inherent in the nature of a transitional input tax.
The CTA ruled against the petitioner which was affirmed by the CA.
Hence, this petition.
ISSUES:
1. Whether prior payment of taxes is required to avail transitional input tax
credit.
2. Whether petitioner is entitled to the refund of ₱ 359,652,009.47 erroneously
paid as output VAT for the first quarter of 1997.
RULING:
1. No. Prior payment of taxes is not required for a taxpayer to avail of the 8%
transitional input tax credit.
Section 105 of the old NIRC reads:
SEC. 105. Transitional input tax credits. – A person who becomes liable
to value-added tax or any person who elects to be a VAT-registered
person shall, subject to the filing of an inventory as prescribed by
regulations, be allowed input tax on his beginning inventory of goods,
materials and supplies equivalent to 8% of the value of such inventory
or the actual value-added tax paid on such goods, materials and
supplies, whichever is higher, which shall be creditable against the
output tax. (Emphasis supplied.)
Contrary to the view of the CTA and the CA, there is nothing in the
above-quoted provision to indicate that prior payment of taxes is necessary for
the availment of the 8% transitional input tax credit. Obviously, all that is
required is for the taxpayer to file a beginning inventory with the BIR.
If the intent of the law were to limit the input tax to cases where actual
VAT was paid, it could have simply said that the tax base shall be the actual
value-added tax paid. Moreover, prior payment of taxes is not required to avail
of the transitional input tax credit because it is not a tax refund per se but a tax
credit. Tax credit is not synonymous to tax refund. Tax refund is defined as the
money that a taxpayer overpaid and is thus returned by the taxing authority.
Tax credit, on the other hand, is an amount subtracted directly from one’s total
tax liability. It is any amount given to a taxpayer as a subsidy, a refund, or an
incentive to encourage investment. Thus, unlike a tax refund, prior payment of
taxes is not a prerequisite to avail of a tax credit.
2. Yes. Petitioner is entitled to a refund of the amount erroneously paid as
output VAT.
In this case, when petitioner realized that its transitional input tax credit
was not applied in computing its output VAT for the 1st quarter of 1997, it filed
a claim for refund to recover the output VAT it erroneously or excessively paid
Page 16 of 20
for the 1st quarter of 1997. In filing a claim for tax refund, petitioner is simply
applying its transitional input tax credit against the output VAT it has paid.
Hence, it is merely availing of the tax credit incentive given by law to first time
VAT taxpayers.
It is apparent that the transitional input tax credit operates to benefit
newly VAT-registered persons, whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods, materials and supplies.
During that period of transition from non-VAT to VAT status, the transitional
input tax credit serves to alleviate the impact of the VAT on the taxpayer. At
the very beginning, the VAT-registered taxpayer is obliged to remit a significant
portion of the income it derived from its sales as output VAT. The transitional
input tax credit mitigates this initial diminution of the taxpayer's income by
affording the opportunity to offset the losses incurred through the remittance of
the output VAT at a stage when the person is yet unable to credit input VAT
payments.
11. CIR vs. FAR EAST BANK & TRUST COMPANY (NOW BANK OF THE
PHILIPPINE ISLANDS)
G.R. No. 173854, March 15, 2010
FACTS:
On April 10, 1995, respondent Far East Bank filed Corporate Annual Income
Tax Returns for the taxable year ending December 31, 1994 (1994 Annual
ITR). Said ITR reflected a refundable income tax, which was carried over and
applied against respondent's income tax liability for the taxable year ending
December 31, 1995.
On April 15, 1996, respondent filed its 1995 Annual ITR. Because of the carry-
over of refundable income tax from 1994, respondent’s 1995 ITR showed an
overpaid income tax amounting to over Php17M. Consequently, respondent
filed a claim for refund of said overpaid tax.
The CIR did not act on the matter, compelling respondent to file a petition for
review before the CTA. During trial, petitioner CIR did not present any
evidence.
The CTA denied respondent's claim for refund on the ground that respondent
failed to show that the income derived from rentals and sale of real property
from which the taxes were withheld were reflected in its 1994 Annual ITR. On
appeal, the CA reversed the Decision of the CTA. Hence, this present
recourse.
ISSUE:
Whether respondent has proven its entitlement to the refund.
RULING:
No. Entitlement to a tax refund is for the taxpayer to prove and not for the
government to disprove.
A taxpayer claiming for a tax credit or refund of creditable withholding tax must
comply with the following requisites:
1) The claim must be filed with the CIR within the two-year period from the date
of payment of the tax;
2) It must be shown on the return that the income received was declared as
part of the gross income; and
3) The fact of withholding must be established by a copy of a statement duly
issued by the payor to the payee showing the amount paid and the amount of
the tax withheld.
The two-year period requirement is based on Section 229 of the NIRC of 1997
which provides that:
SECTION 229. Recovery of Tax Erroneously or Illegally Collected. --
No suit or proceeding shall be maintained in any court for the recovery
of any national internal revenue tax hereafter alleged to have been
erroneously or illegally assessed or collected, or of any penalty claimed
to have been collected without authority, or of any sum alleged to have
been excessive or in any manner wrongfully collected, until a claim for
Page 17 of 20
 refund or credit has been duly filed with the Commissioner; but such
suit or proceeding may be maintained, whether or not such tax, penalty,
or sum has been paid under protest or duress.
In any case, no such suit or proceeding shall be filed after the expiration
of two (2) years from the date of payment of the tax or penalty
regardless of any supervening cause that may arise after payment:
Provided, however, That the Commissioner may, even without a written
claim therefor, refund or credit any tax, where on the face of the return
upon which payment was made, such payment appears clearly to have
been erroneously paid.
While the second and third requirements are found under Section 10 of
Revenue Regulation No. 6-85, as amended, which reads:
Section 10. Claims for tax credit or refund. -- Claims for tax credit or
refund of income tax deducted and withheld on income payments shall
be given due course only when it is shown on the return that the income
payment received was declared as part of the gross income and the
fact of withholding is established by a copy of the statement duly issued
by the payer to the payee (BIR Form No. 1743.1) showing the amount
paid and the amount of tax withheld therefrom.
There is no dispute that respondent complied with the first requirement.
However, as to the second and third requirements, the CTA and the CA arrived
at different factual findings. But it is the CTA’s findings that are based on the
evidence and in accordance with the applicable law and jurisprudence.
To establish the fact of withholding, respondent submitted Certificates of
Creditable Tax Withheld at Source and Monthly Remittance Returns of Income
Taxes Withheld, which pertain to rentals and sales of real property,
respectively. However, a perusal of respondent's 1994 Annual ITR shows that
the gross income was derived solely from sales of services. In fact, the
phrase "NOT APPLICABLE" was printed on the schedules pertaining to rent,
sale of real property, and trust income. Thus, based on the entries in the return,
the income derived from rentals and sales of real property upon which the
creditable taxes were withheld were not included in respondent's gross
income as reflected in its return. Since no income was reported, it follows
that no tax was withheld. It is incumbent upon the taxpayer to reflect in his
return the income upon which any creditable tax is required to be withheld at
the source.
Moreover, the fact that the CIR failed to present any evidence or to refute the
evidence presented by respondent does not ipso facto entitle the respondent
to a tax refund. It is not the duty of the government to disprove a taxpayer's
claim for refund. Rather, the burden of establishing the factual basis of a claim
for a refund rests on the taxpayer.
And while the CIR has the power to make an examination of the returns and to
assess the correct amount of tax, his failure to exercise such powers does not
create a presumption in favor of the correctness of the returns. The taxpayer
must still present substantial evidence to prove his claim for refund. There is
no automatic grant of a tax refund. Since tax refunds partake of the nature of
tax exemptions, which are construed strictissimi juris against the taxpayer,
evidence in support of a claim must likewise be strictissimi scrutinized and duly
proven.
12. CHEVRON PHILIPPINES INC. vs. COMMISSIONER OF INTERNAL
REVENUE
G.R. No. 210836 September 1, 2015
FACTS:
Chevron sold and delivered petroleum products to CDC in the period from
August 2007 to December 2007. Chevron did not pass on to CDC the excise
taxes paid on the importation of the petroleum products sold to CDC in taxable
year 2007, hence, on June 26, 2009, it filed an administrative claim for tax
refund or issuance of tax credit certificate.
Considering that respondent Commissioner of Internal Revenue (CIR) did not
act on the administrative claim for tax refund or tax credit, Chevron elevated its
claim to the CTA by petition for review. The CTA First Division denied
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Chevron’s judicial claim for tax refund or tax credit and later on also denied
Chevron’s Motion for Reconsideration.
In due course, Chevron appealed to the CTA En Banc which, in the
decision affirmed the ruling of the CTA First Division, stating that there was
nothing in Section 135(c) of the NIRC that explicitly exempted Chevron as the
seller of the imported petroleum products from the payment of the excise taxes;
and holding that because it did not fall under any of the categories exempted
from paying excise tax, Chevron was not entitled to the tax refund or tax credit.
Accordingly, petitioner is not entitled to any refund or issuance of tax credit
certificate on excise taxes paid on its importation of petroleum products sold to
CDC pursuant to the doctrine laid down by the Supreme Court in the case of
Commissioner of Internal Revenue v. Pilipinas Shell Petroleum Corporation
(Shell case).
Chevron sought reconsideration, but the CTA En Banc denied its motion.
Chevron appealed to the Court, but the Court (Second Division) denied the
petition for review on certiorari.
Hence, this Motion for Reconsideration.
ISSUE:
Whether or not Chevron was entitled to the tax refund or the tax credit for the
excise taxes paid on the importation of petroleum products that it had sold to
CDC in 2007.
RULING:
Yes. Chevron’s Motion for Reconsideration is meritorious.
Pilipinas Shell concerns the manufacturer’s entitlement to refund or credit of
the excise taxes paid on the petroleum products sold to international carriers
exempt from excise taxes under Section 135(a) of the NIRC. However, the
issue raised here is whether the importer (i.e., Chevron) was entitled to the
refund or credit of the excise taxes it paid on petroleum products sold to CDC,
a tax-exempt entity under Section 135(c) of the NIRC.
Notwithstanding that the claims for refund or credit of excise taxes were
premised on different subsections of Section 135 of the NIRC, the basic tax
principle applicable was the same in both cases – that excise tax is a tax on
property; hence, the exemption from the excise tax expressly granted under
Section 135 of the NIRC must be construed in favor of the petroleum products
on which the excise tax was initially imposed. Accordingly, the excise taxes
that Chevron paid on its importation of petroleum products subsequently
sold to CDC were illegal and erroneous, and should be credited or refunded
to Chevron in accordance with Section 204 of the NIRC.
We explain.
Under Section 129 of the NIRC, as amended, excise taxes are imposed on two
kinds of goods, namely: (a) goods manufactured or produced in the Philippines
for domestic sales or consumption or for any other disposition; and (b) things
imported. Undoubtedly, the excise tax imposed under Section 129 of the NIRC
is a tax on property.
With respect to imported things, Section 131 of the NIRC declares that excise
taxes on imported things shall be paid by the owner or importer to the Customs
officers, conformably with the regulations of the Department of Finance and
before the release of such articles from the customs house, unless the
imported things are exempt from excise taxes and the person found to be in
possession of the same is other than those legally entitled to such tax
exemption. For this purpose, the statutory taxpayer is the importer of the things
subject to excise tax. Chevron, being the statutory taxpayer, paid the excise
taxes on its importation of the petroleum products.
Pursuant to Section 135(c), supra, petroleum products sold to entities that are
by law exempt from direct and indirect taxes are exempt from excise tax. The
phrase which are by law exempt from direct and indirect taxes describes the
entities to whom the petroleum products must be sold in order to render the
exemption operative. Section 135(c) should thus be construed as an
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exemption in favor of the petroleum products on which the excise tax was
levied in the first place. The exemption cannot be granted to the buyers – that
is, the entities that are by law exempt from direct and indirect taxes –
because they are not under any legal duty to pay the excise tax.
Inasmuch as its liability for the payment of the excise taxes accrued
immediately upon importation and prior to the removal of the petroleum
products from the customs house, Chevron was bound to pay, and actually
paid such taxes. But the status of the petroleum products as exempt from the
excise taxes would be confirmed only upon their sale to CDC in 2007 (or, for
that matter, to any of the other entities or agencies listed in Section 135 of the
NIRC). Before then, Chevron did not have any legal basis to claim the tax
refund or the tax credit as to the petroleum products.
The general rule applies here because Chevron did not pass on to CDC the
excise taxes paid on the importation of the petroleum products, the latter being
exempt from indirect taxes by virtue of Section 24 of Republic Act No. 7916, in
relation to Section 15 of Republic Act No. 9400, not because Section 135(c) of
the NIRC exempted CDC from the payment of excise tax. Accordingly,
conformably with Section 204(C) of the NIRC, supra, and pertinent
jurisprudence, Chevron was entitled to the refund or credit of the excise taxes
erroneously paid on the importation of the petroleum products sold to CDC.

Consequently, the payment of the excise taxes by Chevron upon its

importation of petroleum products was deemed illegal and erroneous upon the
sale of the petroleum products to CDC. Section 204(C) of the NIRC explicitly
allowed Chevron as the statutory taxpayer to claim the refund or the credit of
the excise taxes thereby paid.

It is noteworthy that excise taxes are considered as a kind of indirect tax, the
liability for the payment of which may fall on a person other than whoever
actually bears the burden of the tax. Simply put, the statutory taxpayer may
shift the economic burden of the excise tax payment to another – usually the
buyer.

In cases involving excise tax exemptions on petroleum products under Section

135 of the NIRC, the Court has consistently held that it is the statutory taxpayer,
not the party who only bears the economic burden, who is entitled to claim the
tax refund or tax credit. But the Court has also made clear that this rule does
not apply where the law grants the party to whom the economic burden of the
tax is shifted by virtue of an exemption from both direct and indirect taxes. In
which case, such party must be allowed to claim the tax refund or tax credit
even if it is not considered as the statutory taxpayer under the law.

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