1. COMMISSIONER OF INTERNAL REVENUE , Petitioner vs. UNIVATION MOTOR PHILIPPINES, INC.

(formerly NISSAN MOTOR PHILIPPINES, INC.), Respondent

G.R. No. 231581, SECOND DIVISION, April 10, 2019, REYES, J. J.,:

FACTS:

Univation Motor Philippines, Inc. (respondent) filed its amended Annual Income Tax Return (ITR) for 2010
showing a total gross income of ₱117,084,174.00 and an overpayment of income taxes amounting to
₱26,103,898.52. Respondent opted to claim its overpayment of income tax through the issuance of a tax
credit certificate. Respondent filed its administrative claim with the Bureau of Internal Revenue (BIR)
explaining that the overpayment of ₱26,103,898.52 consists of prior year's excess credits in the amount of
₱15,576,837.00 less Minimum Corporate Income Tax amounting to ₱2,341,683.48 and creditable withholding
taxes accumulated in the amount of ₱12,868,745.00. Respondent filed its Application for Tax Credit in the
amount of ₱12,868,745.00. Since the BIR has not yet acted upon respondent's administrative claim, petitioner
filed a Petition for Review with the CTA.

CIR raised the following special and affirmative defenses: (a) respondent's claim for refund is tainted with
procedural infirmity due to petitioner's failure to submit complete documents in support of its administrative
claim for refund; (b) petitioner miserably failed to exhaust administrative remedies before elevating the case
to this Court; and (c) claims for refund are construed strictly against the taxpayer and in favor of the
government.

The CTA First Division rendered a Decision which partially granted respondent's Petition for Review and
ordered petitioner CIR to issue a tax credit certificate in the amount of P12,729,617.90. Finding respondent's
documentary evidence as sufficient, the CTA En Banc issued the now appealed Decision dated December 22,
2016 affirming the Decision of the CTA First Division.

ISSUES:

1. Whether the CTA has prematurely assumed jurisdiction on respondent's judicial claim for tax refund
or credit without waiting for the decision of petitioner. (NO)

2. Whether the CTA En Banc erred in granting respondent's claim for refund despite its failure to
substantiate its claim by sufficient documentary proof (NO).

RULING:

1. Sections 204 and 229 of the National Internal Revenue Code (NIRC) provide for the refund of
erroneously or illegally collected taxes. Section 204 applies to administrative claims for refund, while
Section 229 to judicial claims for refund.[10] Thus:

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes.
— The Commissioner may —

xxxx
 (c) Credit or refund taxes erroneously or illegally received or penalties imposed without
authority, refund the value of internal revenue stamps when they are returned in good
condition by the purchaser, and, in his discretion, redeem or change unused stamps that
have been rendered unfit for use and refund their value upon proof of destruction. No credit
or refund of taxes or penalties shall be allowed unless the taxpayer files in writing with the
Commissioner a claim for credit or refund within two (2) years after the payment of the tax
or penalty: Provided, however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.

Section 229 of the 1997 NIRC provides:

Sec. 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, of any sum alleged to have been excessively or in
any manner wrongfully collected without authority, or of any sum alleged to have been
excessively or in any manner wrongfully collected, until a claim for 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.

The two-year period in filing a claim for tax refund is crucial. While the law provides that the two-year period
is counted from the date of payment of the tax, jurisprudence, however, clarified that the two-year
prescriptive period to claim a refund actually commences to run, at the earliest, on the date of the filing of the
adjusted final tax return because this is where the figures of the gross receipts and deductions have been
audited and adjusted, reflective of the results of the operations of a business enterprise. "Thus, it is only when
the Adjustment Return covering the whole year is filed that the taxpayer would know whether a tax is still
due or a refund can be claimed based on the adjusted and audited figures."

In the instant case, the' two-year period to file a claim for refund is reckoned from April 15, 2011, the date
respondent filed its Final Adjustment Return. Since respondent filed its administrative claim on March 12,
2012 and its judicial claim on April 12, 2013, therefore, both of respondent's administrative and judicial claim
for refund were filed on time or within the two-year prescriptive period provided by law. Under the
circumstances, if respondent awaited for the commissioner to act on its administrative claim (before resort to
the Court), chances are, the two-year prescriptive period will lapse effectively resulting to the loss of
respondent's right to seek judicial recourse and worse, its right to recover the taxes it erroneously paid to the
government. Hence, respondent's immediate resort to the Court is justified.
Contrary to petitioner CIR's assertion, there was no violation of the doctrine of exhaustion of administrative
remedies. The law only requires that an administrative claim be priorly filed. That is, to give the BIR at the
administrative level an opportunity to act on said claim. In other words, for as long as the administrative
claim and the judicial claim were filed within the two-year prescriptive period, then there was exhaustion of
the administrative remedies.

At any rate, Section 7 of Republic Act No. 9282, amending Republic Act No. 1125, provides that the CTA has
exclusive appellate jurisdiction over tax refund claims in case the Commissioner fails to act on them. This
means that while the Commissioner has the right to hear a refund claim first, if he or she fails to act on it, it
will be treated as a denial of the refund, and the CTA is the only entity that may review this ruling.
Respondent need not wait for the Commissioner to act on its administrative claim for refund.

2. Respondent's failure to submit the complete documents at the administrative level did not render its
petition for review with the CTA dismissible for lack of jurisdiction. At this point, it is necessary to
determine the grounds relied upon by a taxpayer in filing its judicial claim with the CTA. The case of
Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue is instructive, thus:

A distinction must, thus, be made between administrative cases appealed due to inaction and
those dismissed at the administrative level due to the failure of the taxpayer to submit
supporting documents. If an administrative claim was dismissed by the CIR due to the
taxpayer's failure to submit complete documents despite notice/request, then the judicial
claim before the CTA would be dismissible, not for lack of jurisdiction, but for the taxpayer's
failure to substantiate the claim at the administrative level. When a judicial claim for refund
or tax credit in the CTA is an appeal of an unsuccessful administrative claim, the taxpayer has
to convince the CTA that the CIR had no reason to deny its claim. It, thus, becomes
imperative for the taxpayer to show the CTA that not only is he entitled under substantive
law to his claim for refund or tax credit, but also that he satisfied all the documentary and
evidentiary requirements for an administrative claim. It is, thus, crucial for a taxpayer in a
judicial claim for refund or tax credit to show that its administrative claim should have been
granted in the first place. Consequently, a taxpayer cannot cure its failure to submit a
document requested by the BIR at the administrative level by filing the said document before
the CTA.

In this case, it was the inaction of petitioner CIR which prompted respondent to seek judicial recourse with
the CTA. Petitioner CIR did not send any written notice to respondent informing it that the documents it
submitted were incomplete or at least require respondent to submit additional documents. As a matter of
fact, petitioner CIR did not even render a Decision denying respondent's administrative claim on the ground
that it had failed to submit all the required documents.

Considering that the administrative claim was never acted upon, there was no decision for the CTA to review
on appeal per se. However, this does not preclude the CTA from considering evidence that was not presented
in the administrative claim with the BIR.

Jurisprudence laid down the basic requirements in order for a taxpayer to claim tax credit or refund of
creditable withholding tax, thus: (1) The claim must be filed with the CIR within the two-year period from the
date of payment of the tax, as prescribed under Section 229 of the NIRC of 1997; (2) The fact of withholding is
established by a copy of a statement duly issued by the payor to the payee showing the amount paid and the
amount of tax withheld; and (3) It must be shown on the return of the recipient that the income received was
declared as part of the gross income.31 The second and third requirements are found under Section 2.58.3(B)
of Revenue Regulation No. 2-98,32 as amended, which reads:

Section 2.58.3. Claim for tax credit or refund. — (B) Claims for tax credit or refund of any creditable
income tax which was deducted and withheld on income payment shall be given due course only
when it is shown that the income payments has been declared as part of the gross income and the
fact of withholding is established by a copy of the withholding tax statement duly issued by the payor
to the payee showing the amount paid and the amount of tax withheld therefrom.

Petitioner CIR insisted on the absence of the second and third requirements. It argued that respondent failed
to prove the fact of withholding, showing the amount paid and the amount of tax withheld and that the
income it received was declared as part of the gross income. In this case, respondent was able to establish
through the documentary evidence it submitted compliance with the second and third requisites. To prove its
compliance with the second requisite, petitioner [now respondent] presented Schedule/Summary of
Creditable Taxes Withheld for the year 2010 and the related Certificates of Creditable Taxes Withheld at
Source (BIR form No. 2307) duly issued to it by various withholding agents for the year 2010, reflecting
creditable withholding taxes in the total amount of ₱12,868,745.87.

Anent the third requisite, the court was able to trace the income payments related to the substantiated CWT
of ₱12,868,745.87 (save for the amount of ₱139,127.97 CWT) to petitioner's General Ledger (GL) for CY 2010,
2009, 2008 and 2006 and noted that the same were reported in petitioner's Annual ITRs for the years 2010,
2009, 2008 and 2006.

The CTA En Banc correctly appreciated the explanation of the independent CPA (ICPA) why the income
payments from which the CWT amounting to P12,729,617.90 were withheld, were declared in its returns
covering the years 2006, 2008, 2009 and 2010. In gist, the ICPA suggests that there were delays in collection
of certain income payments to respondent. Again, we reiterate the well-established doctrine that as a matter
of practice and principle, we will not set aside the conclusion reached by an agency, like the CTA x x x. By the
very nature of its function, it has dedicated itself to the study and consideration of tax problems and has
necessarily developed an expertise on the subject, unless there has been an abuse or improvident exercise of
authority on its part.

DISPOSITIVE PORTION:

WHEREFORE, the instant Petition is DENIED. The December 22, 2016 Decision and the April 27, 2017
Resolution of the Court of Tax Appeals En Banc, respectively sustaining the findings of the CTA 1st Division
and denying petitioner CIR's Motion for Reconsideration, in CTA EB No. 1333, are AFFIRMED. Accordingly,
the Commissioner of the Bureau of Internal Revenue is DIRECTED to issue a Tax Credit Certificate in favor of
Univation Motor Philippines, Inc. in the amount of ₱12,729,617.90 representing its unutilized or excess
creditable withholding tax for the taxable year 2010.

SO ORDERED.
2. Misnet, Inc. vs. CIR, GR No. 210604, June 3, 2019

MISNET, INC., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.

G.R. No. 210604, June 3, 2019, SECOND DIVISION, J.C. REYES JR., J:

FACTS: On November 29, 2006, petitioner Misnet received a Preliminary Assessment Notice (PAN)
from respondent Commissioner of Internal Revenue (CIR) stating that after examination, there was
an alleged deficiency in taxes for taxable year 2003 amounting to P11,329,803.61, representing the
expanded withholding tax (EWT) and final withholding VAT. Misnet filed a letter-protest on the PAN.

Thereafter, on January 23, 2007, Misnet received a Formal Assessment Notice (FAN) which states that
its tax deficiency for the year 2003 amounted to P11,580,749.31, inclusive of P25,000.00
Compromise Penalty. On February 9, 2007, Misnet paid the amount of P2,152.41 for certain
undisputed assessments and administratively protested the FAN by filing a request for
reconsideration. After the documents were verified, Revenue Officer Josephine Paralejas (RO
Paralejas) reiterated the previous assessment of Misnet’s deficiency taxes for taxable year 2003 in
the amount of P11,580,749.31. On June 1, 2007, Misnet sent a letter to RO Paralejas reiterating its
protest to the PAN and the FAN. The CIR again wrote a letter to petitioner informing it that it found
additional deficiency taxes due.

On March 28, 2011, Misnet received an Amended Assessment Notice reflecting an amended deficiency
EWT after reinvestigation, and it also received a Final Decision on Disputed Assessment (FDDA)
stating that after reinvestigation, there was still due the amount of P14,564,323.34, representing
deficiency taxes.

Misnet filed a letter-reply to the CIR, and the CIR replied stating that the letter-reply had no legal
effect since Misnet should have appealed the final decision of the CIR to the Court of Tax Appeals
(CTA) within thirty (30) days from the date of receipt of the said Decision, otherwise, the assessment
became final, executory and demandable.

Misnet then filed a Petition for Relief from Judgment with CIR, arguing that it was not able to file its
proper appeal of the FDDA due to its mistake and excusable negligence as it was not assisted by
counsel. In return, Misnet received a Preliminary Correction Letter, which is deemed a denial of its
Petition for Relief.

Misnet then filed a Petition for Review with the CTA. The CIR filed a Motion to Dismiss the petition on
the ground of lack of jurisdiction — arguing that the assessment against Misnet has become final,
executory and demandable for its failure to file an appeal within the prescribed period of thirty (30)
days. The CIR’s motion to dismiss was granted. Misnet filed a Motion for Reconsideration but this was
also denied.
Aggrieved, Misnet filed a Petition for Review with the CTA en banc, which was denied on the ground
of lack of jurisdiction as the lapse of the statutory period to appeal rendered the subject deficiency
taxes final, executory and demandable. Misnet filed a Motion for Reconsideration but the said Motion
was also denied.

Misnet contends that the CTA en banc should have taken into consideration that the filing of the
Petition for Relief from Judgment has stopped the running of the period to appeal. Further, it insists
that all of these incidents constitute excusable delay that justified its belated filing of an appeal with
the CTA.

ISSUE: Whether the CTA en banc correctly dismissed Misnet’s Petition for Review on the ground of
lack of jurisdiction.

RULING: NO. When Misnet sent a letter-reply to the Regional Director of the CIR, it was actually
protesting both the Amended Assessment Notice and the FDDA. The Amended Assessment Notice
reflects the amended deficiency EWT of Misnet after reinvestigation, while the FDDA reflects the
Final Decision on: (a) its deficiency EWT; (b) Final Withholding of VAT; and (c) Compromise Penalty.
Since the deficiency EWT is a mere component of the aggregate tax due as reflected in the FDDA, then
the FDDA cannot be considered as the final decision of the CIR as one of its components — the
amended deficiency EWT — is still under protest.

Misnet was correct when it protested with the Regional Director the deficiency EWT as per the
Amended Assessment Notice sent by the BIR. However, instead of resolving the protest, the Regional
Director informed Misnet that it was an improper remedy, which is ruling totally inconsistent with
the statement reflected in the Amended Assessment Notice, which states that protest must be filed
with the CIR or the Regional Director within 30 days from receipt thereof. Apparently, the Regional
Director has hastily presumed that Misnet was already protesting the FDDA, which incidentally was
received by petitioner on the same date as that of the Amended Assessment Notice.

With Misnet’s pending protest with the Regional Director on the amended EWT, then technically
speaking, there was yet no final decision that was issued by the CIR that is appealable to the CTA. It is
still incumbent for the Regional Director to act upon the protest on the amended EWT — whether to
grant or to deny it. Only when the CIR settled (deny/grant) the protest on the deficiency EWT
could there be a final decision on Misnet’s liabilities. And only when there is a final decision of
the CIR, would the prescriptive period to appeal with the CTA begin to run.

Hence, Misnet’s belated filing of an appeal with the CTA is not without strong, compelling reason. It
can be said that Misnet was merely exhausting all administrative remedies available before seeking
recourse to the judicial courts. While the rule is that a taxpayer has 30 days to appeal to the CTA from
the final decision of the CIR, the said rule could not be applied if the Assessment Notice itself clearly
states that the taxpayer must file a protest with the CIR or the Regional Director within 30 days from
receipt of the Assessment Notice. Under the circumstances obtaining in this case, we opted not to
apply the statutory period within which to appeal with the CTA considering that no final decision yet
was issued by the CIR on Misnet’s protest. The subsequent appeal taken by petitioner is from the
inaction of the CIR on its protest.

It bears to stress that the perfection of an appeal within the statutory period is a jurisdictional
requirement and failure to do so renders the questioned decision or decree final and
executory and no longer subject to review. Nonetheless, this Court has on several occasions
relaxed this strict requirement. We have on several instances allowed the filing of an appeal
outside the period prescribed by law in the interest of justice, and in the exercise of its equity
jurisdiction.

If Misnet’s right to appeal would be curtailed by the mere expediency of holding that it had belatedly
filed its appeal, then this Court as the final arbiter of justice would be deserting its avowed objective,
that is to dispense justice based on the merits of the case and not on a mere technicality.

DISPOSITIVE PORTION:

WHEREFORE, the instant petition is GRANTED. The case is REMANDED to the Court of Tax Appeals
1st Division which is DIRECTED to reinstate petitioner's Petition for Review (appeal), in CTA Case No.
8313 and to resolve the same on the merits with reasonable dispatch.

3. PSALM, Corp. vs. CIR, GR No. 226556, July 3, 2019

POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT CORPORATION, PETITIONER, v.

COMMISSIONER OF INTERNAL REVENUE, RESPONDENT.
G.R. No. 226556, July 03, 2019, CARPIO, J

FACTS:

PSALM, a government-owned and controlled corporation created under Republic Act No. (RA) 9136 or the Electric
Power Industry Reform Act of 2001 (EPIRA) is mandated to manage the orderly sale, disposition, and privatization of the
National Power Corporation (NPC) generation assets, real estate and other disposable assets, and Independent Power Producer
contracts with the objective of liquidating all NPC financial obligations and stranded contract costs in an optimal manner.

The BIR issued a Final Assessment Notice (FAN) covered by Assessment No. VT-08-00072 alleging that PSALM is
liable to pay a deficiency VAT amounting to P10,103,158,715.06, inclusive of penalties and interests. PSALM filed its
administrative protest against the FAN, alleging that the privatization of NPC assets is an original mandate of PSALM and not
subject to VAT.

Respondent CIR issued its Final Decision on Disputed Assessment, which denied PSALM's protest for lack of factual and
legal bases. The CIR held that the sale of electricity is subject to VAT under RA 9337 and the real properties sold by PSALM are
regarded as real properties used in trade or business.

PSALM filed a petition for review before the CTA.

The CTA partially granted PSALM's petition, allowing PSALM to claim input tax credits, and holding that PSALM is not liable
to pay the compromise penalty of P50,000.00. However, it ruled that PSALM is liable to pay the deficiency VAT, because the
enactment of RA 9337 superseded BIR Ruling No. 020-2002, on which PSALM relied for its VAT exemption. The CTA
Third Division found that the sale of generating assets of PSALM - the Masinloc, Ambuklao-Binga and Pantabangan
power plants - fall under "all kinds of goods and properties" subject to VAT.

The CTA En Banc affirmed the decision of the CTA Third Division and held that PSALM is subject to VAT for:
1. its sale of generating assets
2. lease of Naga Complex, and
3. collection of income and receivables,

Because these were done in the course of trade or business, and RA 9337 placed the electric power industry under the
VAT system.

In a Dissenting Opinion, Justice Del Rosario opined that the assessment issued by the CIR against PSALM should be cancelled,
insofar as it relates to the proceeds from sales of generating assets and from collection of income and receivables, because:
(1) PSALM relied in good faith on BIR Ruling No. 020-02 declaring that the disposition or sale of assets as a consequence of
PSALM's mandate is not subject to VAT; and
(2) the collection of receivables is not in the nature of sale, barter, exchange, lease of goods or properties, performance of service,
and importation of goods, so as to fall under a transaction subject to VAT under Section 105 of the NIRC.

However, Justice Del Rosario opined that the lease of Naga Complex should be excluded from the coverage of BIR Ruling No.
020-02 absent any showing that the property involved is among those transferred from NPC to PSALM. Also, he opined that the
deficiency interest may not be imposed on the deficiency VAT assessed against PSALM, because deficiency interest may be
imposed only on income tax, donor's tax and estate tax, under the NIRC.

ISSUES:

1. Whether PSALM’s privitization activities are subject to VAT (NO)

2. Whether PSALM is liable for deficiency vat for transactions incidental to its privatization activities (NO)
3. Whether PSALM is liable for deficiency VAT for receivables not arising from sale of goods or services (NO)

RULING:
1. The issue of whether the sale of power plants by PSALM is subject to VAT and the arguments of both parties in this case have
been passed upon and settled in G.R. No. 198146 (Power Sector Assets and Liabilities Management Corporation v.
Commissioner on Internal Revenue), where the Court ruled that:
Privatization of assets by PSALM is not subject to VAT
Pursuant to Section 105 in relation to Section 106, both of the Tax Code of 1997, a value-added tax
equivalent to ten percent (10%) of the gross selling price or gross value in money of the goods, is collected
from any person, who, in the course of trade or business, sells, barters, exchanges, leases goods or properties,
which tax shall be paid by the seller or transferor.
The phrase "in the course of trade or business" means the regular conduct or pursuit of a commercial
activity, including transactions incidental thereto.
Since the disposition or sale of the assets is a consequence of PSALM's mandate to ensure the orderly sale or
disposition of the property and thereafter to liquidate the outstanding loans and obligations of NPC, utilizing
the proceeds from sales and other property contributed to it, including the proceeds from the Universal
Charge, and not conducted in pursuit of any commercial or profitable activity, including transactions
incidental thereto, the same will be considered an isolated transaction, which will therefore not be subject to
VAT. (BIR Ruling No. 113-98 dated July 23, 1998)
On the other hand, the CIR argues that the previous exemption of NPC from VAT under Section 13 of Republic Act
No. 6395 (RA 6395) was expressly repealed by Section 24 of RA 9337. As a consequence, the CIR posits that the
VAT exemption accorded to PSALM under BIR Ruling No. 020-02 is also deemed revoked since PSALM is a
successor-in-interest of NPC. Furthermore, the CIR avers that prior to the sale, NPC still owned the power plants and
not PSALM, which is just considered as the trustee of the NPC properties. Thus, the sale made by NPC or its
successors-in-interest of its power plants should be subject to the 10% VAT beginning 1 November 2005 and 12%
VAT beginning 1 February 2007.
We do not agree with the CIR's position, which is anchored on the wrong premise that PSALM is a successor-in-
interest of NPC. PSALM is not a successor-in-interest of NPC. Under its charter, NPC is mandated to "undertake
the development of hydroelectric generation of power and the production of electricity from nuclear, geothermal and
other sources, as well as the transmission of electric power on a nationwide basis."
With the passage of the EPIRA law which restructured the electric power industry into generation, transmission,
distribution, and supply sectors, the NPC is now primarily mandated to perform missionary electrification function
 through the Small Power Utilities Group (SPUG) and is responsible for providing power generation and associated
power delivery systems in areas that are not connected to the transmission system.
On the other hand, PSALM, a government-owned and -controlled corporation, was created under the EPIRA law to
manage the orderly sale and privatization of NPC's assets with the objective of liquidating all of NPC's financial
obligations in an optimal manner.
NPC and PSALM have different functions. Since PSALM is not a successor-in-interest of NPC, the repeal by
RA 9337 of NPC's VAT exemption does not affect PSALM.
In any event, even if PSALM is deemed a successor-in-interest of NPC, still the sale of the power plants is not "in the
course of trade or business" as contemplated under Section 105 of the NIRC, and thus, not subject to VAT. The
sale of the power plants is not in pursuit of a commercial or economic activity but a governmental function
mandated by law to privatize NPC generation assets. PSALM was created primarily to liquidate all NPC financial
obligations and stranded contract costs in an optimal manner.
Thus, it is very clear that the sale of the power plants was an exercise of a governmental function mandated by
law for the primary purpose of privatizing NPC assets in accordance with the guidelines imposed by the EPIRA
law.
Similarly from the case of CIR v. Magsaysay Lines, Inc, the sale of the power plants in this case is not subject to
VAT since the sale was made pursuant to PSALM's mandate to privatize NPC's assets, and was not undertaken
in the course of trade or business. In selling the power plants, PSALM was merely exercising a governmental
function for which it was created under the EPIRA law.

Applying this ruling involving the same parties and similar issues, the sale of the generating assets - the Masinloc, Ambuklao-
Binga and Pantabangan power plants - in the present case is likewise not subject to VAT, since the sale was pursuant to the
mandate of PSALM under the EPIRA to privatize NPC assets. The sale of the power plants is not in pursuit of a
commercial or economic activity but a governmental function mandated by law to privatize NPC generation assets. The
sale of the power plants is clearly not the same as the sale of electricity by generation companies, transmission, and distribution
companies, which is subject to VAT under Section 108 of the NIRC.
PSALM is also not liable to pay:
1. VAT on the lease of Naga Complex;
2. collection of income from participation fee
[Link] visit fee
4. plant CDs
5. photocopying charges and data room access fee and
6. collection of receivables from employees for the excess utilization of allowed mobile phone services
7. inventory variance receivable from custodian
8. refund from a successor-generation company of the insurance premiums paid by PSALM and
9. interest received from mandatory dollar deposit.

Under the EPIRA, PSALM, as the conservator of NPC assets, operates and maintains NPC assets and manages its liabilities in
trust for the national government, until the NPC assets could be sold or disposed of. Thus, during its corporate life, PSALM has
powers relating to the management of its personnel and leasing of its properties as may be necessary to discharge its
mandate.

Since the lease of Naga Complex and collection of income and receivables are within PSALM's powers necessary to discharge its
mandate under the law and likewise undertaken in the exercise of PSALM's governmental function, we do not find these
activities subject to VAT. To reiterate, VAT is ultimately a tax on consumption, and it is levied only on the sale, barter or
exchange of goods or services by persons who engage in such activities, in the course of trade or business.

Accordingly, the CTA Third Division and CTA EB erred in finding PSALM liable for deficiency VAT in the amount of
P9,566,062,571.44.

2 &3. Since PSALM has no VAT liability in this case, there is no necessity to rule upon the issue of deficiency interest and
delinquency interest.
WHEREFORE, we GRANT the petition. The Decision of the Court of Tax Appeals in CTA Case No. 8475, dated 2 December
2014, which found petitioner Power Sector Assets and Liabilities Management Corporation liable to pay the amount of
P9,566,062,571.44 as deficiency value-added tax for the taxable year 2008, inclusive of the deficiency interest and delinquency
interest, is REVERSED and SET ASIDE. Assessment No. VT-08-00072 is hereby ordered CANCELLED.

4. UP vs. City Treasurer of Quezon City, GR No. 214044, June 19, 2019

UNIVERSITY OF THE PHILIPPINES, petitioner, v. CITY TREASURER OF QUEZON CITY, respondent.

G.R. No. 214044 June 19, 2019 Carpio, J.

FACTS:

The petitioner University of the Philippines is the registered owner of a parcel of land covered by TCT No. RT-
107530 (192689), with an area of 985,597 square meters and located along Commonwealth Avenue, Diliman,
Quezon City. UP entered into a contract of lease with Ayala Land, Inc. (ALI) over a portion of the subject land
containing an area of 380, 630 square meters on 27 October 2006. The leased property is now known as the
UP-Ayala Technohub.

In a Notice of Assessment addressed to ALI dated 23 August 2012, ALI was informed that the subject property
has been "reclassified and assessed for taxation purposes with an assessed value of P499,500,000.00 effective
2009."

n a letter to UP President Pascual dated 22 August 2012, the City Assessor of Quezon City informed UP that
the aforementioned Notice of Assessment was served upon ALI as the entity liable for the real property tax on
the subject property pursuant to Section 205(d) and Section 234(a) of the Local Government Code.

In a Statement of Delinquency dated 05 December 2012, addressed to the UP-North Property Holdings, Inc.,
the City Treasurer demanded the payment of real property tax amounting to P78,970,950.00 for the years
2009-2011 and the first three quarters of 2012.

In another letter dated 09 September 2013, the City Assessor of Quezon City furnished UP a copy of the letter
of the Bureau of Local Government Finance (BLGF) of the Department of Finance (DOF) dated 01 August
2013, which opined that ALI is the party legally accountable for the real property taxes on the subject
property. It was further stated that the City Assessor's Office "will be sending the official Notice of Assessment
and the corresponding Tax Declaration for the subject property under the name of [ALI]. . ."

In another Statement of Delinquency dated 24 September 2013, the City Treasurer again demanded the
payment of real property tax in the updated amount of P102,747,150.00 for the years 2009-2012 and the first
three quarters of 2013.

For the first time and without a prior Notice of Assessment, a Statement of Delinquency dated 27 May 2014
addressed to UP was issued by the City Treasurer demanding the payment of real property tax amounting to
P106,992,990.00 for the years 2009 to 2013 and the first quarter of 2014.

In his letter to the City Treasurer of Quezon City dated 13 June 2014, UP President Pascual requested the
postponement of any proceeding related to the Statement of Delinquency. He explained that UP, as the
National University, has been granted tax exemptions under RA No. 9500, otherwise known as the UP Charter
of 2008. The grant is exceedingly extensive that it provided the University the exemption from all taxes and
duties vis-a-vis all revenues and assets used for educational purposes or in support thereof.

Moreover, in the letter of the BLGF dated 01 August 2013, addressed to Mayor Herbert Bautista, the former
opined on the issue as to which party shall be accountable for the unpaid real estate taxes due on the 37
hectares of land owned by UP and being leased out to ALI, the same property which is the subject of the
Statement of Delinquency dated 27 May 2014. The BLGF concluded that "ALI, being the lessee, is the legally
accountable party to the unpaid real property taxes on the government-owned UP Property." The foregoing
opinion of the BLGF confirms that the University is exempt from real estate taxes, an absolute right that the
University enjoys under RA No. 9500.

On 22 July 2014, UP received the Final Notice of Delinquency dated 11 July 2014 from the Office of the City
Treasurer demanding the payment of real property tax on the subject property in the updated amount of
P117,182,700.00 for the years 2009-2013 and the first three quarters of 2014.

UP filed the present case within 60 days from receipt of the 11 July 2014 Final Notice of Delinquency.

Several resolutions were issued by the Court requiring the City Treasurer to file a Comment until Ms. Ruby
Rosa G. Guevara, Acting Asst. City Treasurer, finally filed an Urgent Motion for Extension of Time with
Manifestation alleging that herein respondent sought for the legal assistance of Atty. Christian B. Valencia,
City Legal Officer of the Local Government Unit, Quezon City, to prepare and file Comment to the instant
Petition for Certiorari and Prohibition. However, there was no prepared Comment by the City Legal Officer
and that Ms. Guevara is still looking for a counsel to help her in the preparation and filing of a Comment.

On 29 September 2016, Ms. Guevarra, as Officer in Charge of the City Treasurer's Office, filed her Comment,
stating, among others, that here must be a full-blown trial to be conducted by a trial court for the
determination of the true facts whether to annul the said Statement of Delinquency dated 27 May 2014 and
the Final Notice of Delinquency dated 11 July 2014. However, the Court is not a trier of facts. Furthermore,
the respondent is not the real party-in-interest and the petitioner filed the Instant petition without filing the
appropriate motion to give respondent the opportunity to correct its alleged error. Most importantly,
petitioner is not exempted from paying real property tax for its real property leased to ALI pursuant to the
mandate of Section 205(d) and Section 234(a) of RA No. 7160, otherwise known as "The Local Government
Code of 1991”.

UP, through the OSG, then filed its Reply on 20 February 2017 where it addressed Ms. Guevarra's questions
regarding the propriety of the remedy and the taxability of UP based on Republic Act No. 9500 and on Section
133(o) of the Local Government Code.

ISSUE: Whether the petitioner is liable for real property tax imposed on the subject property leased to ALI.
(YES)

RULING:

The property subject of this case refers only to the parcel of land covered by TCT No. RT-107350 (192689).
The improvements on this parcel of land that were introduced by ALI are not covered by the present case.
UP is a chartered academic institution with specific legislated tax exemptions. These tax exemptions come
from the Local Government Code, as well as from its legislative charter, Republic Act No. 9500.

One source of UP's exemption from tax comes from its character as a government instrumentality. Section
133(o) of the Local Government Code states that, unless otherwise provided by the Code, the exercise of
taxing powers of the local government units shall not extend to levy of taxes, fees or charges of any kind on
government instrumentalities.

However, a combined reading of Sections 205 and 234 of the Local Government Code also provides for
removal of the exemption to government instrumentalities when beneficial use of a real property owned by a
government instrumentality is granted to a taxable person. Stated differently, when beneficial use of a real
property owned by a government instrumentality is granted to a taxable person, then the taxable person is
not exempted from paying real property tax on such property. This is the doctrine used by the City Assessor
and the City Treasurer in the present set of facts. The City Assessor and the City Treasurer concluded that ALI
is liable for the real property tax on the land that it leased from UP.

Republic Act No. 9500, however, gave a specific tax exemption to UP which covers the land subject of the
present case. The City Assessor and the City Treasurer overlooked this specific exemption awarded to UP by
Republic Act No. 9500. The legislative authority given to UP by Republic Act No. 9500 is the point where the
present case differs from our ruling in National Power Corporation v. Province of Quezon (NPC case) which the
BLGF-DOF cited in its letter addressed to Mayor Bautista.

Republic Act No. 9500, which took effect in 2008, was not yet enacted when UP and ALI entered into their
lease contract in 2006. However, Republic Act No. 9500 was already operative when the City Treasurer issued
the Statement of Delinquency and Final Notice of Delinquency to UP in 2014. Republic Act No. 9500 was also
operative when the City Assessor issued a Notice of Assessment to ALI in 2012, a Statement of Delinquency to
UP North Property Holdings, Inc. in 2012, and a Statement of Delinquency to UP North Property Holdings, Inc.
in 2013.

The enactment and passage of Republic Act No. 9500 in 2008 superseded Sections 205(d) and 234(a) of the
Local Government Code. Before the passage of Republic Act No. 9500, there was a need to determine who had
beneficial use of UP's property before the property may be subjected to real property tax. After the passage of
Republic Act No. 9500, there is a need to determine whether UP's property is used for educational purposes
or m support thereof before the property may be subjected to real property tax.

The Contract of Lease between UP and ALI shows that there is an intent to develop "a prestigious and
dynamic science and technology park, where research and technology-based collaborative projects between
technology and the academe thrive, thereby becoming a catalyst for the development of the information
technology and information technology-enabled service." The development of the subject land is clearly for an
educational purpose, or at the very least, in support of an educational purpose.

UP President Pascual pointed out to City Treasurer Villanueva that Republic Act No. 9500 granted extensive
tax exemptions to UP. More specifically, Section 25(a) of Republic Act No. 9500, previously quoted above,
provided that all of UP's "revenues and assets used for educational purposes or in support thereof shall be
exempt from all taxes and duties." Republic Act No. 9500 bases UP's tax exemption upon compliance with the
condition that UP's revenues and assets must be used for educational purposes or in support thereof. There is
no longer any need to determine the tax status of the possessor or of the beneficial user to further ascertain
whether UP's revenue or asset is exempt from tax.

Considering that the subject land and the revenue derived from the lease thereof are used by UP for
educational purposes and in support of its educational purposes, UP should not be assessed, and should not
be made liable for real property tax on the land subject of this case. Under Republic Act No. 9500, this tax
exemption, however, applies only to "assets of the University of the Philippines," referring to assets owned by
UP. Under the Contract of Lease between UP and ALI, all improvement on the leased land "shall be owned by,
and shall be for the account of the LESSEE [ALI]" during the term of the lease. The improvements are not
"assets" owned by UP; and thus, UP's tax exemption under Republic Act No. 9500 does not extend to these
improvements during the term of the lease.

WHEREFORE, the petition is GRANTED. We DECLARE the University of the Philippines EXEMPT from real
property tax imposed by the City Treasurer of Quezon City on the parcel of land covered by TCT No. RT-
107350 (192689), which is currently leased to Ayala Land, Inc. Accordingly, we declare VOID the Statement of
Delinquency dated 27 May 2014 as well as the Final Notice of Delinquency dated 11 July 2014 issued by the
City Treasurer of Quezon City to the University of the Philippines in connection with the parcel of land
covered by TCT No. RT-107350 (192689). Furthermore, the City Treasurer of Quezon City is permanently
restrained from levying on or selling at public auction the parcel of land covered by TCT No. RT-107350
(192689) to satisfy the payment of the real property tax delinquency.

SO ORDERED.

5.

City Treasurer of Manila vs. Phil. Beverage Partners, Inc. Substituted by Coca-Cola Bottlers
Philippines, GR No. 233556, Sept. 11, 2019

FACTS:

The City Treasurer of Manila (petitioner) issued a Statement of Account (SOA) under Bill No. 012007-33025
to Philippine Beverage Partners, Inc. (respondent). The SOA showed that respondent is liable to pay
petitioner local business taxes and regulatory fees for the first quarter of 2007 in the total amount of
P2,930,239.82. Respondent protested the assessment through a letter dated January 19, 2007, arguing that
Tax Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), have been declared null
and void. Respondent also argued that the collection of local business tax under Section 21 of the RCM in
addition to Section 14 of the same code constitutes double taxation. Thereafter, respondent made a formal
tender of payment to the City of Manila on January 22, 2007, for local business tax and regulatory fees for the
first quarter of 2007 in the amount of P506,080.89. On February 2, 2007, petitioner issued a letter to
respondent denying the latter's protest which respondent received on February 6, 2007.

On February 13, 2007, respondent paid the total amount of P2,930,239.82 stated in the SOA. Then, on March
2, 2007, respondent filed a written claim for refund of erroneously/illegally collected tax with petitioner in
the amount of P2,424,158.93. Further, respondent filed a Complaint for the Revision of SOA (Preliminary
Assessment) and for Refund or Credit of LBT Erroneously/Illegally Collected with the Regional Trial Court,
Manila, Branch 47 (RTC) on March 8, 2007.
RTC Ruling: ordered the refund of the overpayment made by respondent.

The CTA Second Division Ruling: the CTA Second Division affirmed the RTC ruling.

The CTA En Banc Ruling: Affirmed the CTA Second Division Ruling.

Petitioner argues that respondent should have appealed the denial of its protest instead of instituting an
action for refund; and that based on the 2006 Audited Financial Statement of respondent, the latter has
underpayments in its business tax payments for 2006 and 2007, thus, the same should be offset against
respondent's claim for refund.

ISSUES:

1. Whether a taxpayer who protested an assessment may later on institute a judicial action for refund.

2. Whether the alleged deficiency taxes of respondent may be used to offset its claim for refund.

RULING:

1. YES. The case of City of Manila v. Cosmos Bottling Corporation finds application. It must be noted that
Cosmos and the present case involve the same taxing authority (City of Manila), the same taxing period (first
quarter of 2007) and Cosmos, like respondent in the case at bar, was assessed with the tax on manufacturers
under Section 14 and the tax on other businesses under Section 21 of the RCM. The Court has settled in
Cosmos that a taxpayer facing an assessment issued by the local treasurer may protest it and alternatively:
(1) appeal the assessment in court, or (2) pay the tax, and thereafter, seek a refund.

Clearly, when a taxpayer is assessed a deficiency local tax, fee or charge, he may protest it under Section 195
even without making payment of such assessed tax, fee or charge. This is because the law on local
government taxation, save in the case of real property tax, does not expressly require "payment under
protest" as a procedure prior to instituting the appropriate proceeding in court. This implies that the success
of a judicial action questioning the validity or correctness of the assessment is not necessarily hinged on the
previous payment of the tax under protest.

Needless to say, there is nothing to prevent the taxpayer from paying the tax under protest or simultaneous to
a protest. There are compelling reasons why a taxpayer would prefer to pay while maintaining a protest
against the assessment. For instance, a taxpayer who is engaged in business would be hard-pressed to secure
a business permit unless he pays an assessment for business tax and/or regulatory fees. Also, a taxpayer may
pay the assessment in order to avoid further penalties, or save his properties from levy and distraint
proceedings.

Simply put, there are two conditions that must be satisfied in order to successfully prosecute an action for
refund in case the taxpayer had received an assessment. One, pay the tax and administratively assail within
60 days the assessment before the local treasurer, whether in a letter-protest or in a claim for refund. Two,
bring an action in court within thirty (30) days from decision or inaction by the local treasurer, whether such
action is denominated as an appeal from assessment and/or claim for refund of erroneously or illegally
collected tax.

In this case, after respondent received the assessment on January 17, 2007, it protested such assessment on
January 19, 2007. After payment of the assessed taxes and charges, respondent wrote petitioner another
letter asking for the refund and reiterating the grounds raised in the protest letter. Then, on February 6, 2007,
respondent received the letter denying its protest.

Thus, on March 8, 2007, or exactly thirty (30) days from its receipt of the denial, respondent brought the
action before the RTC of Manila. Hence, respondent was justified in filing a claim for refund after timely
protesting and paying the assessment.

2. NO. Section 195 of the LGC provides that "When the local treasurer or his duly authorized representative
finds that correct taxes, fees, or charges have not been paid, he shall issue a notice of assessment stating the
nature of the tax, fee, or charge, the amount of deficiency, the surcharges, interests and penalties." Thus,
suffice it to say that the issuance of a notice of assessment is mandatory before the local treasurer may collect
deficiency taxes from the taxpayer. The notice of assessment is not only a requirement of due process but it
also stands as the first instance the taxpayer is officially made aware of the pending tax liability. The local
treasurer cannot simply collect deficiency taxes for a different taxing period by raising it as a defense
in an action for refund of erroneously or illegally collected taxes.

To reiterate, respondent, after it had protested and paid the assessed tax, is permitted by law to seek a refund
having fully satisfied the twin conditions for prosecuting an action for refund before the court.

Consequently, the CTA did not commit a reversible error when it allowed the refund in favor of the
respondent.

6. COMMISSIONER OF INTERNAL REVENUE, petitioner, v. PHILIPPINE NATIONAL BANK,

respondent.
G.R. No. 212699, SECOND DIVISION, March 13, 2019, J. REYES, JR., J.

FACTS:

On April 17, 2006, PNB electronically filed its Annual Income Tax Return (ITR) for taxable year
2005. The following day, it manually filed the same with the required attachments thereto. Through
letters with attachments, PNB filed its claim for refund or issuance of tax credit certificate of its
excess CWT in the amount of P74,598,430.47.

Due to the CIR's inaction to the said claim, PNB filed a petition for review for its claim before the
CTA.

The CTA Third Division rendered a Decision, finding PNB's evidence to be insufficient to support its
claim for refund or the issuance of a tax credit certificate. Specifically, the CTA Third Division
pointed out that the presentation of PNB's Annual ITR for 2006 is not enough to prove that it did
not carry over the claimed excess or unutilized CWT to the subsequent quarters of 2006, ruling that
the presentation of the succeeding Quarterly ITRs is vital to its claim for refund.
PNB then appealed to the CTA En Banc, raising the sole issue of whether or not the presentation of
the 2006 Quarterly ITRs is indispensable to PNB's claim for refund of its excess or unutilized CWT
for 2005. By a vote of 4-4-1, the CTA denied the appeal.

Undaunted, PNB filed a Motion for Reconsideration . On February 4, 2014, the CTA En Banc
rendered the assailed Amended Decision, granting PNB's motion for reconsideration. The CTA En
Banc ruled that there is nothing in our tax laws that requires the presentation of the Quarterly ITRs
for succeeding years to establish entitlement to the refund of excess or unutilized CWT.

Further, this time, the CTA En Banc recognized that the Supreme Court had, in several occasions,
already passed upon this issue, wherein the Court ruled that the presentation of ITRs for the
succeeding taxable years is not an essential requisite in proving a claim for refund of excess or
unutilized CWT. The Court elucidated that the presentation or non-presentation of the said
document is not fatal to the refund claim as it is the duty of the CIR to verify whether or not the
taxpayer carried over its excess CWT to the succeeding year.

The CTA En Banc also found that PNB complied with all the requisites for the filing of such claim. In
all, the CTA held that PNB was able to sufficiently prove its claim for refund, albeit for the reduced
amount of P74,026,451.67. alLaw1ibrary

ISSUE:

Ultimately, the issue here is whether or not the PNB proved its entitlement to the refund. Of crucial
importance for the resolution thereof, however, is whether the presentation of the Quarterly ITRs
of the succeeding quarters of a taxable year is indispensable for such claim.

RULING:

The instant petition presents no novel issue. In the more recent case of Winebrenner & Iñigo
Insurance Brokers, Inc. v. Commissioner of Internal Revenue, consistent with the settled
jurisprudence on the matter, the Court specifically ruled that the presentation of the claimant's
quarterly returns is not a requirement to prove entitlement to the refund. Notably, said case applies
squarely to the instant petition and we find no good reason to deviate from its tenets as it remains
to be a good law.

The CTA correctly ruled that there is nothing under the NIRC that requires the submission of the
Quarterly ITRs of the succeeding taxable year in a claim for refund. Even the BIR's own regulations
do not provide for such requirement. Section 76 of the NIRC provides:

SEC. 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a final
adjustment return covering the total taxable income for the preceding calendar or fiscal year.
If the sum of the quarterly tax payments made during the said taxable year is not equal to the total
tax due on the entire taxable income of that year, the corporation shall either:
 (A) Pay the balance of tax still due; or
(B) Carry-over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.

In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid, the excess amount shown on its final adjustment return may be carried over and
credited against the estimated quarterly income tax liabilities for the taxable quarters of the
succeeding taxable years.

Once the option to carry-over and apply the excess quarterly income tax against income tax due for
the taxable quarters of the succeeding taxable years has been made, such option shall be considered
irrevocable for that taxable period and no application for cash refund or issuance of a tax credit
certificate shall be allowed therefor.

Relatively, as implemented by the applicable rules and regulations, and as interpreted in a vast
array of decisions, a taxpayer who seeks a refund of excess and unutilized CWT must:
1) File the claim with the CIR within the two-year period from the date of payment of the
tax;
2) Show on the return that the income received was declared as part of the gross income;
and
3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the
payee showing the amount paid and the amount of tax withheld.

Verily, as consistently held by this Court, once the claimant has successfully established that its
claim was filed within the two-year prescriptive period; that the income related to the claimed CWT
formed part of the return during the taxable year when the refund is claimed for; and the fact of
withholding of said taxes, it shall be deemed to be entitled to its claimed CWT refund. If the CIR, as
the one mandated to examine and decide matters of taxes and refunds, finds otherwise, it is then
incumbent upon it to prove the propriety of denying the claim before the court. Specifically, if the
BIR asserts that the claimant is not entitled to the refund as the claimed CWT were already carried
over to the succeeding taxable quarters, it is up to the BIR to prove such assertion.

It bears stressing that the power to decide matters concerning refunds of internal revenue taxes,
among others, is vested in the CIR. It has the duty to ascertain the veracity of such claims and
should not just wait and hope for the burden to fall on the claimant when the issue reaches the
court. The CTA's jurisdiction is appellate, meaning it merely has the authority to review the CIR's
decisions on such matters. In the exercise of its authority to review, the CTA cannot dictate what
particular evidence the parties must present to prove their respective cases. The means of
ascertainment of a fact is best left to the party that alleges the same. The court's power is limited
only to the appreciation of that means pursuant to the prevailing rules of evidence ..
Thus, this Court finds no basis to rule for the indispensability presenting the Quarterly ITRs
for a CWT refund or tax credit claim.
At this juncture, it is imperative to focus the disquisition on the fact that PNB proffered its Annual
ITR for 2006 to prove that it did not carry over its 2005 CWT to 2006. This Court is confounded by
the CIR's submission that said ITR is not enough to fully ascertain that there was no carry over.
In Winebrenner, the Court explained that an Annual ITR contains the total taxable income earned
for the four quarters of the taxable year, as well as deductions and tax credits previously reported
or carried over in the Quarterly ITRs for the subject period. The Annual ITR or Final Adjustment
Return for the taxable year subsequent to the year when the CWT forms part, perforce, can
sufficiently reveal whether a carry over to the succeeding quarters was made even if the claimant
has previously chosen the option of refund of, or tax credit for the claimed CWT. The Court, in the
said case, proceeded to explain in detail, viz.:cralawred

It must be remembered that taxes computed in the quarterly returns are mere
estimates. It is the annual ITR which shows the aggregate amounts of income,
deductions, and credits for all quarters of the taxable year. It is the final adjustment
return which shows whether a corporation incurred a loss or gained a profit during
the taxable quarter. Thus, the presentation of the annual ITR would suffice in proving
that prior year's excess credits were not utilized for the taxable year in order to make
a final determination of the total tax due.

Thus, despite PNB's failure to present at the onset its Quarterly ITRs for 2006, its Annual ITR for
2006 is apt and sufficient to show that no CWT carry over was made in 2006.

Besides, even if a contrary ruling would be issued by this Court in the case at bar, PNB cannot be
prejudiced for relying on the prevailing rule that presentation of succeeding ITRs is not necessary.
Besides, resolving this issue would necessitate a re-examination of evidence on record, which is not
within the purview of a review under Rule 45 of the Rules of Court. Further, it is well settled that
factual findings of the CTA when supported by substantial evidence, will not be disturbed on
appeal. Due to the nature of its functions, the tax court dedicates itself to the study and
consideration of tax problems and necessarily develops expertise thereon. Unless there has been an
abuse of discretion on its part, the Court accords the highest respect to the factual findings of the
CTA.

In all, having established that PNB complied with the minimum statutory requirements above-
enumerated, and that the submission of its Quarterly ITRs are not indispensable to its claim, we
find no reversible error on the part of the CTA En Banc in ruling that PNB is entitled to the claimed
refund or tax credit.
 7. COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. SAN MIGUEL CORPORATION, respondent.

GR no. 180910. November 11, 2019. Hernando, J.

FACTS:

On January 1, 1997, Republic Act No. 8240 too effect, adopting a specific tax system instead of the ad valorem
tax system imposed on, among others, fermented liquor. As a result, fermented liquors were specifically
subjected to excise taxes in accordance to the schedules stated in Section 140 of RA 8240:

SEC. 140. Fermented Liquor- There shall be levied, assessed and collected an excise tax on beer, large beer,
ale, porter and other fermented liquors except tuba, basi, tapuy and similar domestic fermented liquors in
accordance with the following schedule:

(a) If the net retail price (excluding the excise tax and value-added tax) per liter of volume
capacity is less than P14.50, the tax shall be P6.15 per liter.

XXXXXX

The excise tax from any brand of fermented liquor within the next three (3) years from the
effectivity of Republic Act No. 8240 shall not be lower than the tax which was due from each brand
on October 1, 1996.

The rates of excise tax on fermented liquor under paragraphs (a) (b) and (c) hereof shall be
increased by 12% on January 1, 2000.

Prior to January 1, 1997 or the effectivity of RA 8240, SMC has been paying ad valorem tax on Red
Horse at the rate of P7.07 per liter. On December 16, 1999, the Secretary of Finance, upon the
recommendation of the Commissioner of Internal Revenue, issued RR 17-99 to implement the 12% increase
on excise tax on fermented liquors by January 1, 2000. Under the said revenue regulation there was a clause
which provided “provided, however, that the new specific tax rate for any existing brand of cigars,
cigarettes packed by machine, distilled spirits, wines and fermented liquors shall not be lower than the
excise tax that is actually being paid prior to January 1, 2000.”

Contending that RR 17-99 did not conform to the letter and intent of RA 8240, SMC filed on January
10, 2003, a letter with the BIR to claim refund or credit of the alleged excess excise taxes it paid on its Red
Horse beer product from January 11, 2001 to December 31, 2002 in the amount of P94,494.801.96. Said
amount represented the difference between applying the rates of P7.07 per liter (the rate specific tax SMC
was paying beginning January 1, 1997, which was equal to the rate of ad valorem tax rate it had been paying
prior to the effectivity of RA 8240 on January 1, 1997), and P6.89 per liter (the new specific tax rate imposed
under Section 145 of RA 8424 otherwise known as the Tax reform Act of 1997 which took effect on January 1,
2000.)

Without waiting for the CIR to act on its administrative claim for tax refund or credit, SMC filed a
Petition for Review before the CTA. SMC challenged Section 1 of RA 17-99 which provided that “ fermented
liquors shall not be lower than the excise tax that is actually being paid prior to January 1, 2000.”
According to SMC, Section 1 of RR 17-99 extended without basis the three year transitory period under RA
8240; and the specific tax rates on fermented liquors prescribed by Section 143, pars a to c of the Tax Reform
Act of 1997 should already apply beginning January 1, 2000.

The CTA First Division rendered a decision on March 15, 2006 emphasizing that the CTA First
Division already declared RR 17-99 invalid in Fortune Tobacco Corp v. CIR which was subsequently affirmed
by the Court of Appeals. Although the SMC was able to present evidence in support of its total claim for tax
refund or credit, without the CIR presenting any controverting evidence, the CTA First Division disallowed
the claim of SMC for P6,404,270.40 because it was barred by prescription. The CTA approved SMC’s claim for
tax refund or credit for its excess tax payments from March 1, 2001 to December 31, 2002 in the amount of
P88,090,531.56. The CTA denied the motions for reconsideration filed by both parties.

The CTA en banc affirmed the ruling of the CTA First Division that the claim of SMC for overpayment
made on January 11 to 31, 2001 and February 1 to 23, 2001 was already barred by prescription based on
Section 229 and Section 130 of the Tax Reform Act of 1997. Moreover, the CTA en banc affirmed the ruling of
the CTA First Division that RR 17-99 is invalid as Section 1 thereof increases the tax rate fixed by RA 8240
which is already beyond the authority of the BIR to issue interpretative rules; and that SMC is entitled to a
refund of the overpaid excise taxes which have not yet prescribed. CIR filed MR but it was denied. Hence this
Petition for Review on Certiorari. SMC similarly filed its Petition for Review on Certiorari before the Court

ISSUES:

1. Whether or not the CTA EN BANC correctly construed and applied the proviso in Section 1 of RR 17-
99 when it ruled it is illegal and contrary to Section 143 of the NIRC. (YES)

2. Whether or not the CTA EN BANC correctly granted SMC’s application for refund of the amount of
P88,090,531.56 representing excess of the excise tax payments made for the period of March 1, 2001 to
December 21, 2002. (YES)

3. Whether or not the SMC is entitled to the full amount of its claim for tax refund/credit of excess taxes
paid from January 11, 2001 to December 31, 2002. (NO)

RULING:

I.

It is already settled that the qualifying provision under Section 1 of RR 17-99 that the new specific tax
rate for the taxable products shall not be lower than the excise tax paid prior to January 1, 2000 was
an unauthorized administrative legislation and was violative of the provisions of the Tax Reform Act
of 1997.

CIR vs. Fortune Tobacco Corporation already addressed and settled the issue of the validity of RR 17-
99. The court in that case declared the qualification in RR 17-99 as unauthorized administrative legislation
reasoning that by adding the qualification that the tax due after the 12% increase becomes effective shall not
be lower than the tax actually paid prior to January 1, 2000, RR 17-99 effectively imposes a tax which is
higher amount between the ad valorem tax being paid at the end of the 3 year transition period and the
specific tax under paragraph c, sub paragraphs 1-4 as increased by 12%--a situation not supported by the
plain wording of Section 145 of the Tax Code.
 As correctly contended by SMC, the decision in the Fortune Tobacco case applies to the present case
and the disputed provision of RR 17-99—imposing the added qualification that the new specific tax rate for
any existing brand of the taxable product shall not be lower than the excise tax that is actually being paid
prior to January 1, 2000—is similarly not supported by Section 143 of the Tax Reform Act of 1997.

In any case, the court already settled in CIR vs SMC which involved the same parties herein and the similar
claim for refund of SMC for excess excise tax payments on its Red Horse beer product from May 22 to
December 31, 2004, that:

Section 143 of the Tax Reform Act of 1997 is clear and unambiguous. It provides for two periods: the
first is the 3-year transition period beginning January 1, 1997, the date when R.A. No. 8240 took
effect, until December 31, 1999; and the second is the period thereafter. During the 3-year transition
period, Section 143 provides that “the excise tax from any brand of fermented liquor…shall not be
lower than the tax which was due from each brand on October 1, 1996.” After the transitory period,
Section 143 provides that the excise tax rate shall be the figures provided under paragraphs (a), (b)
and (c) of Section 143 but increased by 12%, without regard to whether such rate is lower or higher
than the tax rate that is actually being paid prior to January 1, 2000 and therefore, without regard to
whether the revenue collection starting January 1, 2000 may turn out to be lower than that collected
prior to said date.

Revenue Regulations No. 17-99, however, created a new tax rate when it added in the last
paragraph of Section 1 thereof, the qualification that the tax due after the 12% increase
becomes effective “shall not be lower than the tax actually paid prior to January 1, 2000.” As
there is nothing in Section 143 of the Tax Reform Act of 1997 which clothes the BIR with the
power or authority to rule that the new specific tax rate should not be lower than the excise
tax that is actually being paid prior to January 1, 2000, such interpretation is clearly an invalid
exercise of the power of the Secretary of Finance to interpret tax laws and to promulgate rules
and regulations necessary for the effective enforcement of the Tax Reform Act of 1997.

Irrefragably, SMC is entitled to its claim for the refund or credit of its excess excise tax payments
collected by BIR on the basis of the invalid provision under Section 1 of RR 17-99.

II.

The claim for refund/ credit of excess excise tax payments of SMC from January 11 to February 28,
2001 is disallowed on the grounds of prescription and insufficient evidence.

Section 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. – The
Commissioner may –

Xxxxx

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority,
refund the value of internal revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused stamps that have been rendered unfit for
use and refund their value upon proof of destruction. No credit or refund of taxes or penalties shall
be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund
 within two (2) years after the payment of the tax or penalty: Provided, however, That a return filed
showing an overpayment shall be considered as a written claim for credit or refund.

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, of any sum alleged to have been excessively or in any manner wrongfully
collected without authority, or of any sum alleged to have been excessively or in any manner
wrongfully collected, until a claim for 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.

The aforequoted provisions are clear: within 2 years from the date of payment of tax, the claimant
must first file an administrative claim with the CIR before its judicial claim with the courts of law. Both claims
must be filed within a two-year reglementary period. Timeliness of the filing of the claim is mandatory and
jurisdictiona, and thus the Court cannot take cognizance of a judicial claim for refund filed either prematurely
or out of time. It is worthy to stress that as for the judicial claim, tax law even explicitly provides that it be
filed within two years from payment of the tax regardless of any supervening cause that may arise after
payment.

For excise tax on domestic products in general, the return is filed and the excise tax is paid by the
manufacturer or producer before removal of the products from the place of production. Hence, the date of
payment of excise tax on domestic products depends on the date of actual removal of the taxable domestic
products from the place of production.

SMC filed its administrative claim on January 10, 2003 through a letter to the BIR and its judicial
claim through a Petition for Review filed with the CTA First Division on February 24, 2003. Counting back
from February 24, 2003, the CTA First Division determined that the reckoning date for the two year
prescriptive period for this particular judicial claim of SMC was February 24, 2001 and accordingly declared
that the claim of SMs for excess excise tax paid prior to said date had already prescribed. This conclusion of
the CTA First Division, as affirmed by the CTA En Banc, is in full accord with the provisions of the Tax Reform
Act of 1997 and so the court will not disturb the same.

The argument of SMC that the principle of solution indebiti applies to the Government and that under
Article 1145 of the Civil Code, actions upon quasi-contract must be filed within 6 years, is without merit. In
the case of CIR vs Meralco, the court addressed the issue of which prescriptive period shall apply to a claim
for tax refund of erroneously paid tax on interest income, whether the 2 year prescriptive period under
Section 229 of the Tax Reform Act of 1997 or the 6 year prescriptive period for actions based on solution
indebiti under Article 1145 of the Civil Code. The court therein ruled that it should be the 2 year prescriptive
period which must apply because it is mandatory regardless of any supervening cause that may arise after
payment and categorically declared that solution indebiti was inapplicable.
WHEREFORE, the Petitions are DENIED

8. De La Salles University – College of St. Benilde, Inc. vs. CIR, GR No. 202792, February 27, 2019

LA SALLIAN EDUCATIONAL INNOVATORS FOUNDATION (DE LA SALLE UNIVERSITY-COLLEGE OF ST.

BENILDE) INC. v. COMMISIONER OF INTERNAL REVENUE

G.R. No. 202792, February 27, 2019, A. REYES, JR. J.

FACTS:

Petitioner La Sallian Educational Innovators Foundation, Inc. (Foundation for brevity) is a non -stock, non-
profit domestic corporation duly organized and existing under the laws of the Philippines.

Respondent CIR issued two (2) Assessment Notices, for fiscal year ending May 31, 2002. The notices have
demand letters against petitioner for deficiency income tax. The alleged deficiency income tax is in the
amount of P122,414,521.70, inclusive of interest

Notably, petitioner Foundation executed an Agreement Form with the Bureau of Internal Revenue (BIR) on
April 21, 2006, and paid the deficiency VAT liability of P601,487.70 on May 9, 2006.

Respondent alleged that the petitioner Foundation has already lost its tax-exempt status, malting it liable to
deficiency income tax. On the other hand, petitioner Foundation consistently argued that it enjoys a tax-
exempt status from all taxes as a non-stock, non-profit educational institution as expressly provided under
Paragraph 4, Section 4, Article XIV of the 1987 Constitution

Moreover, petitioner Foundation denied the respondent's allegations that it engaged in disproportionate
profit-earning activities contrary to its educational purpose. Contrary to the allegations, it explained that the
sum of P643,279,148.00 is not profit, but merely the gross receipts from school-year 2002.

CTA Division promulgated a Decision ruling in favor of petitioner Foundation, and cancelling Assessment
Notice.

Respondent filed a petition for review before the CTA En Banc dated December 21, 2010 against the
resolution denying its Motion for Reconsideration

The CTA En Banc promulgated a Decision that reversed and set aside the decision of the CTA division.
Aggrieved, petitioner Foundation filed its MR, but it was likewise denied by the CTA En Banc. Hence, this
petition for review on certiorari

ISSUE: Whether or not petitioner foundation has lost its tax-exempt status under the 1987 Constitution (NO)

RULING:

NO. Petitioner foundation has not lost its tax-exempt status under the 1987 Constitution.
No less than the 1987 Constitution expressly exempt all revenues and assets of non-stock, non-profit
educational institutions from taxes provided that they are actually, directly and exclusively used for
educational purposes, to wit: Paragraph 3, Section 4, Article XIV of the 1987 Constitution

Section 4.(1) The State recognizes the complementary roles of public and private institutions in the
educational system and shall exercise reasonable supervision and regulation of all educational
institutions.

(3) All revenues and assets of non-stock, non-profit educational institutions used actually,
directly, and exclusively for educational purposes shall be exempt from taxes and duties.

This constitutional exemption is reiterated in Section 30 (H) of the 1997 Tax Code, as amended, which
provides as follows:

Sec. 30. Exemptions from Tax on Corporations. - The following organizations shall not be taxed under
this Title in respect to income received by them as such:

(H) A non-stock and non-profit educational institution.

Clearly, non-stock, non-profit educational institutions are not required to pay taxes on all their revenues and
assets if they are used actually, directly and exclusively for educational purposes.

According to the BIR, petitioner Foundation has failed to comply with the constitutional requirements for
being a profit-oriented educational institution. Hence, it is no longer a tax-exempt entity, and is subject to a
10% income tax rate as a taxable proprietary educational institution. The Court disagrees.

Petitioner Foundation has presented adequate legal and factual basis to prove that it remains as a tax exempt
entity under Article XIV, Section 4, Paragraph 3 of the 1987 Constitution.

Based on jurisprudence and tax rulings, a taxpayer shall be granted with this tax exemption after proving
that: (1) it falls under the classification of non-stock, non-profit educational institution; and (2) the
income it seeks to be exempted from taxation is used actually, directly and exclusively for educational
purposes.

Petitioner Foundation has fulfilled both of the abovementioned requirements. For the first requirement, there
is no contest as both the parties have stipulated that petitioner Foundation is a non-stock, non-profit
educational institution.

Nonetheless, the Petitioner Foundation's primary and secondary purposes in its Amended Articles of
Incorporation clearly provide that it is a non-stock, non-profit educational entity, to wit:

SECOND: That the purposes and objectives for which such corporation is incorporated are:

That the primary purpose for which said corporation is formed is to establish a school that will offer
elementary, secondary, collegiate and post graduate courses of study, as well as technical, vocational
and special courses under one campus

AND IN THE FURTHERANCE OF THE FOREGOING, the institution shall:

 8. Any profits derived from activities and undertakings described in paragraph 2, 3, 5 and 6
immediately preceding shall not inure to any of the members, trustees or officers but shall be
used exclusively for the maintenance of the Corporation.

Moreover, petitioner Foundation has no capital divided into shares. No part of its income can be distributed
as dividends to its members, trustees and officers. he members of the Board of Trustees do not receive any
compensation for the performance of their duties, including attendance in meetings.

It is also important to mention that in BIR Ruling No. 176-88 dated August 23, 1988, the BIR already
declared that petitioner Foundation is a non-stock, non-profit educational institution that is exempt from
certain taxes.

As pointed out by respondent, petitioner Foundation did not secure a new BIR Ruling on its claim for
exemption after the Tax Code has been amended. However, this Court finds such fact insignificant. The
application for a new BIR Ruling is unnecessary considering that the BIR Ruling was never revoked, and the
primary purpose of petitioner Foundation remained the same. Notably, respondent also failed to mention any
legal basis that will require petitioner Foundation to secure a new BIR Ruling to confirm its tax exempt status.

Furthermore, the respondent claimed that petitioner Foundation is not a non-profit educational institution
anymore due to its alleged enormous profits. Respondent accused it of operating contrary to the nature of a
non-profit educational institution by generating massive profits in the amount of P643,000,000.00 from
tuition fees, and having cash worth P775,000,000 in its bank. However, these allegations were completely
unsupported by facts and evidence.

In several cases, this Court has ruled that a non-profit institution will not be considered profit driven simply
because of generating profits. The reason behind this was explained by this Court in its earlier ruling in Jesus
Sacred Heart College v. Collector of Internal Revenue, to wit:

…every responsible organization must be so run as to, at least insure its existence by
operating within the limits of its own resources, especially its regular income. In other words,
it should always strive, whenever possible, to have a surplus.

Furthermore, a simple reading of the Constitution would show that Article XIV, Section 4 (3) does not
require that the revenues and income must have also been earned from educational activities or
activities related to the purposes of an educational institution. The phrase "all revenues" is unqualified
by any reference to the source of revenues. Thus, so long as the revenues and income are used actually,
directly and exclusively for educational purposes, then said revenues and income shall be exempt
from taxes and duties.

In the instant case, petitioner Foundation firmly and adequately argued that none of its income inured to the
benefit of any officer or entity. Instead, its income has been actually, exclusively and directly used for
performing its purpose as an educational institution. Undoubtedly, petitioner Foundation has also proven
this second requisite.

Thus, the tax exempt status of petitioner Foundation under the 1987 Constitution is clear.

WHEREFORE, premises considered, the petition is GRANTED. The assailed Decision dated April 19, 2012 and
Resolution promulgated on July 17, 2012 of the Court of Tax Appeals En Banc in C.T.A. EB Case No. 703 are
ANULLED and SET ASIDE. Assessment Notice No. 33-FY 05-31-02 for fiscal year ending May 31, 2002 against
petitioner La Sallian Educational Innovators Foundation (De La Salle University-College of St. Benilde), Inc.
for deficiency income tax in the amount of ONE HUNDRED TWENTY-TWO MILLION FOUR HUNDRED
FOURTEEN THOUSAND FIVE HUNDRED TENTY-ONE PESOS & 70/100 (P122,414,521.70) is hereby
CANCELLED.

SO ORDERED.

9. CIR vs. CTA and Petron Corp., February 14, 2018

COMMISSIONER OF INTERNAL REVENUE v. COURT OF TAX APPEALS AND PETRON CORPORATION

G.R. No. 207843, February 14, 2018, PERLAS-BERNABE, J.

FACTS:

Petitioner Commissioner of Internal Revenue (CIR) issued a Letter interpreting Section 148(e) of the National
Internal Revenue Code7 (NIRC) and thereby, opining that "alkylate, which is a product of distillation similar
to naphtha, is subject to tax." The Commissioner of Customs (COC) issued Customs Memorandum Circular
(CMC) No. 164-2012. Not long after, and in compliance with CMC No. 164-2012, the Collector of Customs
assessed excise tax on Petron's importation of alkylate.

Petron filed a petition for review before the CTA. The CTA issued the first assailed Resolution, reversing its
initial dismissal of Petron's petition for review and giving due course thereto.

CIR filed a motion for reconsideration which the CTA denied. CIR elevated the matter to the Court through a
petition for certiorari, alleging that the CTA had no jurisdiction to take cognizance of a case involving the
CIR's exercise of interpretative or quasi legislative functions and that there was yet no final decision by the
COC that was properly appealable to the CTA.

The Court upheld the CIR's position that the CTA could not take cognizance of the case because the latter's
jurisdiction to resolve tax disputes excluded the power to rule on the constitutionality or validity of a law,
rule or regulation and that, in any case, it was premature to elevate a customs collector's assessment without
a prior protest and an appeal to the COC.

ISSUE:

Whether or not the Court's Decision, which ordered the dismissal of Petron's petition for review before the
CTA on the grounds of lack of jurisdiction and prematurity, should be reconsidered.

RULING:

Petron insists that the CTA has jurisdiction to pass upon the validity of the CIR's interpretative ruling on
alkylate, arguing that the CTA may rule on the validity of a revenue regulation, ruling, issuance or other
matters arising under the NIRC and other tax laws administered by the Bureau of Internal Revenue (BIR). As
basis, Petron cites for the first time in its motion for reconsideration the Court's ruling in The Philippine
American Life and General Insurance Company v. The Secretary of Finance and the Commissioner of Internal
Revenue (Philamlife). The Court in Philamlife held that:
 Admittedly, there is no provision of law that expressly provides where exactly the ruling of the
Secretary of Finance under the adverted NIRC provision is appealable to. However, We find that Sec.
7(a)(l) of RA 1125, as amended, addresses the seeming gap in the law as it vests the CTA, albeit
impliedly, with jurisdiction over the CA petition as "other matters" arising under the NIRC or other
laws administered by the BIR. As stated:

Sec. 7. Jurisdiction. - The CTA shall exercise:

a. Exclusive appellate jurisdiction to review by appeal, as herein provided:

1. Decisions of the Commissioner of Internal Revenue in cases involving disputed

assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation
thereto, or other matters arising under the National Internal Revenue or other laws
administered by the Bureau of Internal Revenue. Xxx

Even though the provision suggests that it only covers rulings of the Commissioner, We hold that it is,
nonetheless, sufficient enough to include appeals from the Secretary's review under Sec. 4 of the
NIRC.

Corollary to this disposition, however, the Court's Third Division extended its discussion on the issue
regarding the CTA's jurisdiction over the rulings of the CIR, viz.:

Evidently, City of Manila can be considered as a departure from Ursal in that in spite of there being
no express grant in law, the CTA is deemed granted with powers Of certiorari by implication.
Moreover, City of Manila diametrically opposes British American Tobacco to the effect that it is now
within the power of the CTA, through its power of certiorari, to rule on the validity of a particular
administrative rule or regulation so long as it is within its appellate jurisdiction. Hence, it can now
rule not only on the propriety of an assessment or tax treatment of a certain transaction, but also on
the validity of the revenue regulation or revenue memorandum circular on which the said
assessment is based.

The apparent conflicting jurisprudence on the matter involving the Court's 2008 En Banc ruling in British
American Tobacco and the Court's Third Division Ruling in Philamlife has been seemingly settled in the 2016
En Banc case of Banco De Oro v. Republic of the Philippines26(Banco De Oro) wherein it was opined that:

Section 7 of Republic Act No. 1125, as amended, is explicit that, except for local taxes, appeals from
the decisions of quasi-judicial agencies (Commissioner of Internal Revenue, Commissioner of
Customs, Secretary of Finance, Central Board of Assessment Appeals, Secretary of Trade and
Industry) on tax-related problems must be brought exclusively to the Court of Tax Appeals.

In other words, within the judicial system, the law intends the Court of Tax Appeals to have
exclusive jurisdiction to resolve all tax problems. Petitions for writs of certiorari against the acts
and omissions of the said quasi-judicial agencies should thus be filed before the Court of Tax Appeals.

Republic Act No. 9282, a special and later law than Batas Pambansa Blg. 129 provides an exception to
the original jurisdiction of the Regional Trial Courts over actions questioning the constitutionality or
validity of tax laws or regulations. Except for local tax cases, actions directly challenging the
constitutionality or validity of a tax law or regulation or administrative issuance may be filed directly
before the Court of Tax Appeals.
 Furthermore, with respect to administrative issuances (revenue orders, revenue memorandum
circulars, or rulings), these are issued by the Commissioner under its power to make rulings or
opinions in connection with the implementation of the provisions of internal revenue laws. Tax
rulings, on the other hand, are official positions of the Bureau on inquiries of taxpayers who request
clarification on certain provisions of the National Internal Revenue Code, other tax laws, or their
implementing regulations. Hence, the determination of the validity of these issuances clearly
falls within the exclusive appellate jurisdiction of the Court of Tax Appeals under Section 7(l)
of Republic Act No. 1125, as amended, subject to prior review by the Secretary of Finance, as
required under Republic Act No. 8424. (Emphases supplied)

The En Banc ruling in Banco De Oro has since not been overturned and thus, stands as the prevailing
jurisprudence on the matter. Accordingly, the Court is prompted to reconsider its ruling in this case with
respect to the issue of jurisdiction.

However, the Court had also dismissed Petron's petition for review before the CTA onthe ground of
prematurity. Unlike in Philamlife where the petition for review was filed before the Secretary of Finance,
Petron in this case directly elevated for review to the CTA the customs collector's computation or assessment,
which is not a proper subject of appeal.

Nevertheless, Petron has presently manifested that it had already complied with the protest procedure
prescribed under the N1RC, and later on, filed an administrative claim for refund and/or tax credit with the
BIR on November 21, 2013. Records are bereft of any showing that the CIR had already acted on its claim and
hence, Petron filed before the CTA a Supplemental Petition for Review to include a claim for refund and/or
tax credit of the excise tax that was levied on its alkylate importation. The CTA then gave due course to the
petition and, as per Petron's manifestation, the parties have already been undergoing trial. Consequently,
considering that the CTA had taken cognizance of Petron's claim for judicial refund of tax which, under
Section 7(a)(l) of RA 1125, is within its jurisdiction, the Court finds that these supervening circumstances
have already mooted the issue of prematurity. Thus, in conjunction with the Banco De Oro ruling that the CTA
has jurisdiction to resolve all tax matters(which includes the validity of the CIR's interpretation and
consequent imposition of excise tax on alkylate), the Court finds it proper to reconsider its decision.

WHEREFORE, the motion for reconsideration is GRANTED. Respondent Petron Corporation's petition for
review docketed as CTA Case No. 8544 is hereby DECLARED to be within the jurisdiction of the Court of Tax
Appeals, which is DIRECTED to resolve the case with dispatch.

10. University Physicians Services Inc. - Mgmt. Inc. vs. CIR, GR No. 205955, March 7, 2018

UNIVERSITY PHYSICIANS SERVICES INC. - MANAGEMENT, INC. vs. COMMISSIONER OF INTERNAL

REVENUE
G.R. No. 205955. March 7, 2018. Third Division. Martires, J.

FACTS: On April 16, 2007, petitioner filed its Annual Income Tax Return (ITR) for the year ended December
31, 2006 with the Revenue District No. 34 of the Revenue Region No. 6 of the Bureau of Internal Revenue
(BIR), reflecting an income tax overpayment of 5,159,341.00.
Subsequently, on November 14, 2007, petitioner filed an Annual ITR for the short period fiscal year ended
March 31, '.W07, reflecting the income tax overpayment of 5.159.341 from the previous period as "Prior
Year’s Excess Credit". On the same date, petitioner filed an amended Annual ITR for the short period fiscal
year ended March 31, 2007, reflecting the removal of the amount of the instant claim in the ''Prior Year's
Excess Credit". Thus, the amount thereof was changed from ₱5, 159,341 to ₱2,231,507.

On October 10, 2008, petitioner filed with the respondent's office, a claim for refund and/or issuance of a Tax
Credit Certificate (TCC) in the amount of ₱2,927.834.00, representing the alleged excess and unutilized
creditable withholding taxes for 2006. In view of the fact that respondent has not acted upon the foregoing
claim for refund/tax credit, petitioner filed with a Petition for Review on April l4, 2009 before the Court in
Division.

The CTA Division denied the petition for review on the ground that UPSI-MI effectively exercised the carry-
over option under Section 76 of the National Internal Revenue Code (NIRC) of 1997.

On motion for reconsideration, UPSI-MI argued that the irrevocability rule under Section 76 of the NIRC is not
applicable for the reason that it did not carry over to the succeeding taxable period the 2006 excess income
tax credit. UPSI-MI added that the subject excess tax credits were inadvertently included in its original 2007
ITR, and such mistake was rectified in the amended 2007 ITR. Thus, UPSI-MI insisted that what should
control is its election of the option "To be issued a Tax Credit Certificate" in its 2006 ITR.

The CTA Division ruled that the amendment of the 2007 ITR cannot undo UPSI-MI's actual exercise of the
carry-over option in the original 2007 ITR, for to do so would be against the irrevocability rule. On appeal,
the CTA En Banc ruled that UPSI-MI is barred by Section 76 of the NIRC from claiming a refund of its excess
tax credits for the taxable year 2006. The barring effect applies after UPSI-MI carried over its excess tax
credits to the succeeding quarters of 2007, even if such carry-over was allegedly done inadvertently. The
court emphasized that the prevailing law and jurisprudence admit of no exception or qualification to the
irrevocability rule.

ISSUE:

Whether or not UPSI-MI may still be entitled to the refund of its 2006 excess tax credits in the amount of
₱2,927,834.00 when it thereafter filed its income tax return (for the short period ending 31 March 2007)
indicating the option of carry-over. (NO)

RULING:

NO, UPSI-MI is not entitled to the refund of its 2006 excess tax credits.

SECTION 76. Final Adjustment Return. - Every corporation liable to tax under Section 27 shall file a
final adjustment return covering the total taxable income for the preceding calendar or fiscal year. If
the sum of the quarterly tax payments made during the said taxable year is not equal to the total tax
due on the entire taxable income of that year, the corporation shall either:
(A) Pay the balance of tax still due; or
(B) Carry over the excess credit; or
(C) Be credited or refunded with the excess amount paid, as the case may be.
 In case the corporation is entitled to a tax credit or refund of the excess estimated quarterly income
taxes paid, the excess amount shown on its final adjustment return may be carried over and credited
against the estimated quarterly income tax liabilities for the taxable quarters of the succeeding
taxable years. Once the option to carry-over and apply the excess quarterly income tax against
income tax due for the taxable quarters of the succeeding taxable years has been made, such option
shall be considered irrevocable for that taxable period and no application for cash refund or
issuance of a tax credit certificate shall be allowed therefor.

Under the cited law, there are two options available to the corporation whenever it overpays its income
tax for the taxable year: (1) to carry over and apply the overpayment as tax credit against the estimated
quarterly income tax liabilities of the succeeding taxable years (also known as automatic tax credit) until fully
utilized (meaning, there is no prescriptive period); and (2) to apply for a cash refund or issuance of a tax
credit certificate within the prescribed period. Such overpayment of income tax is usually occasioned by the
over-withholding of taxes on the income payments to the corporate taxpayer.

The irrevocability rule is provided in the last sentence of Section 76. A perfunctory reading of the law
unmistakably discloses that the irrevocable option referred to is the carry-over option only. There
appears nothing therein from which to infer that the other choice, i.e., cash refund or tax credit
certificate, is also irrevocable. In other words, the law does not prevent a taxpayer who originally opted for
a refund or tax credit certificate from shifting to the carry-over of the excess creditable taxes to the taxable
quarters of the succeeding taxable years. However, in case the taxpayer decides to shift its option to
carryover, it may no longer revert to its original choice due to the irrevocability rule. As Section 76
unequivocally provides, once the option to carry over has been made, it shall be irrevocable. Furthermore, the
provision seems to suggest that there are no qualifications or conditions attached to the rule on
irrevocability.

Aside from the uncompromising last sentence of Section 76, Section 228 of the NIRC recognizes such freedom
of a taxpayer to change its option from refund to carry-over. This law affords the government a remedy in
case a taxpayer, who had previously claimed a refund or tax credit certificate (TCC) of excess creditable
withholding tax, subsequently applies such amount as automatic tax credit.

SEC. 228. Protesting of Assessment. - When the Commissioner or his duly authorized
representative finds that proper taxes should be assessed, he shall first notify the taxpayer of his
findings: Provided, however, That a pre-assessment notice shall not be required in the following
cases:
(a) When the finding for any deficiency tax is the result of mathematical error in the
computation of the tax as appearing on the face of the return; or
(b) When a discrepancy has been determined between the tax withheld and the amount
actually remitted by the withholding agent; or
(c) When a taxpayer who opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have carried over and
automatically applied the same amount claimed against the estimated tax liabilities
for the taxable quarter or quarters of the succeeding taxable year; or
(d) When the excise tax due on exciseable articles has not been paid; or
(e) When the article locally purchased or imported by an exempt person, such as, but
not limited to, vehicles, capital equipment, machineries and spare parts, has been
sold, traded or transferred to non-exempt persons.
 The taxpayers shall be informed in writing of the law and the facts on which the assessment is made;
otherwise, the assessment shall be void. x x x

The provision contemplates three scenarios:

(1) Deficiency in the payment or remittance of tax to the government (paragraphs [a], [b] and [d]);
(2) Overclaim of refund or tax credit (paragraph [ c ]); and
(3) Unwarranted claim of tax exemption (paragraph [e]).

In each case, the government is deprived of the rightful amount of tax due it. The law assures recovery of the
amount through the issuance of an assessment against the erring taxpayer. However, the usual two-stage
process in making an assessment is not strictly followed. Accordingly, the government may immediately
proceed to the issuance of a final assessment notice (FAN), thus dispensing with the preliminary assessment
(PAN), for the reason that the discrepancy or deficiency is so glaring or reasonably within the taxpayer's
knowledge such that a preliminary notice to the taxpayer, through the issuance of a PAN, would be a
superfluity.

Pertinently, paragraph (c) contemplates a double recovery by the taxpayer of an overpaid income tax that
arose from an over-withholding of creditable taxes. The refundable amount is the excess and unutilized
creditable withholding tax.

This paragraph envisages that the taxpayer had previously asked for and successfully recovered from the BIR
its excess creditable withholding tax through refund or tax credit certificate; it could not be viewed any other
way. If the government had already granted the refund, but the taxpayer is determined to have automatically
applied the excess creditable withholding tax against its estimated quarterly tax liabilities in the succeeding
taxable year(s), the taxpayer would undeservedly recover twice the same amount of excess creditable
withholding tax. There appears, therefore, no other viable remedial recourse on the part of the government
except to assess the taxpayer for the double recovery. In this instance, and in accordance with the above rule,
the government can right away issue a FAN.

If, on the other hand, an administrative claim for refund or issuance of TCC is still pending but the taxpayer
had in the meantime automatically carried over the excess creditable tax, it would appear not only wholly
unjustified but also tantamount to adopting an unsound policy if the government should resort to the remedy
of assessment.

First, on the premise that the carry-over is to be sustained, there should be no more reason for the
government to make an assessment for the sum (equivalent to the excess creditable withholding tax) that has
been justifiably returned already to the taxpayer (through automatic tax credit) and for which the
government has no right to retain in the first place. In this instance, all that the government needs to do is to
deny the refund claim.

Second, on the premise that the carry-over is to be disallowed due to the pending application for refund, it
would be more complicated and circuitous if the government were to grant first the refund claim and then
later assess the taxpayer for the claim of automatic tax credit that was previously disallowed. Such procedure
is highly inefficient and expensive on the part of the government due to the costs entailed by an assessment. It
unduly hampers, instead of eases, tax administration and unnecessarily exhausts the government's time and
resources. It defeats, rather than promotes, administrative feasibility. Such could not have been intended by
our lawmakers. Congress is deemed to have enacted a valid, sensible, and just law.

Thus, in order to place a sensible meaning to paragraph (c) of Section 228, it should be interpreted as
contemplating only that situation when an application for refund or tax credit certificate had already been
previously granted. Issuing an assessment against the taxpayer who benefited twice because of the
application of automatic tax credit is a wholly acceptable remedy for the government.

Going back to the case wherein the application for refund or tax credit is still pending before the BIR, but the
taxpayer had in the meantime automatically carried over its excess creditable tax in the taxable quarters of
the succeeding taxable year(s), the only judicious course of action that the BIR may take is to deny the
pending claim for refund. To insist on giving due course to the refund claim only because it was the first
option taken, and consequently disallowing the automatic tax credit, is to encourage inefficiency or to
suppress administrative feasibility, as previously explained. Otherwise put, imbuing upon the choice of
refund or tax credit certificate the character of irrevocability would bring about an irrational situation that
Congress did not intend to remedy by means of an assessment through the issuance of a FAN without a prior
PAN, as provided in paragraph (c) of Section 228. It should be remembered that Congress' declared national
policy in passing the NIRC of 1997 is to rationalize the internal revenue tax system of the Philippines,
including tax administration.

The foregoing simply shows that the lawmakers never intended to make the choice of refund or tax credit
certificate irrevocable. Sections 76 and 228, paragraph (c), unmistakably evince such intention.

Applying the foregoing precepts to the given case, UPSI-MI is barred from recovering its excess creditable tax
through refund or TCC. It is undisputed that despite its initial option to refund its 2006 excess creditable tax,
UPSI-MI subsequently indicated in its 2007 short-period FAR that it carried over the 2006 excess creditable
tax and applied the same against its 2007 income tax due. The CTA was correct in considering UPSI-MI to
have constructively chosen the option of carry-over, for which reason, the irrevocability rule forbade it to
revert to its initial choice. It does not matter that UPSI-Ml had not actually benefited from the carry-over on
the ground that it did not have a tax due in its 2007 short period. Neither may it insist that the insertion of the
carry-over in the 2007 FAR was by mere mistake or inadvertence. As we previously laid down, the
irrevocability rule admits of no qualifications or conditions.

In sum, the petitioner is clearly mistaken in its view that the irrevocability rule also applies to the option of
refund or tax credit certificate. In view of the court's finding that it constructively chose the option of can-y-
over, it is already barred from recovering its 2006 excess creditable tax through refund or TCC even if it was
its initial choice. However, the petitioner remains entitled to the benefit of carry-over and thus may apply the
2006 overpaid income tax as tax credit in succeeding taxable years until fully exhausted. This is because,
unlike the remedy of refund or tax credit certificate, the option of carry-over under Section 76 is not subject
to any prescriptive period.

DISPOSITIVE PORTION:
WHEREFORE, the petition is DENIED for lack of merit. The 8 February 2013 Decision of the Court of Tax
Appeals in CTA-EB Case No. 828 is hereby AFFIRMED.
11. MACARIO LIM GAW, JR., Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

G.R. No. 222837, July 23, 2018

FACTS

Petitioner acquired six (6) parcels of land. To finance its acquisition, petitioner applied for, and was granted a
Short Term Loan (STL) Facility from Banco De Oro (BDO) in the amount of P2,021,154,060.00. 4

From April to June 2008, petitioner acquired four (4) more parcels of land. Again, petitioner applied for and
was granted an STL Facility from BDO

Petitioner entered into an Agreement to Sell 6 with Azure Corporation for the sale and transfer of real
properties to a joint venture company, which at the time was still to be formed and incorporated. Then on
July 11, 2008, petitioner conveyed the 10 parcels of land to Eagle I Landholdings, Inc. (Eagle I), the joint
venture company referred to in the Agreement to Sell.7

In compliance with Revenue Memorandum Order No. 15-2003, 8 petitioner requested the Bureau of Internal
Revenue (BIR)-Revenue District Office (RDO) No. 52 for the respective computations of the tax liabilities due
on the sale of the 10 parcels of land to Eagle IIn accordance with the One Time Transactions (ONETT)
Computation sheets, petitioner paid Capital Gains Tax amounting to P505,177,213.81 10 and Documentary
Stamp Tax amounting to P330,390.00.11

On July 23, 2008, the BIR-RDO No. 52 issued the corresponding Certificates Authorizing Registration and Tax
Clearance Certificates.

Two years later, Commissioner of Internal Revenue (respondent) opined that petitioner was not liable for the
6% capital gains tax but for the 32% regular income tax and 12% value added tax, on the theory that the
properties petitioner sold were ordinary assets and not capital assets.

Thus, on August 25, 2010, respondent issued a Letter of Authority 14 to commence investigation on
petitioner's tax account. The DOJ then filed two criminal informations for tax evasion against petitioner

At the time the Informations were filed, the respondent has not issued a final decision on the deficiency
assessment against petitioner. Halfway through the trial, the respondent issued a Final Decision on Disputed
Assessment (FDDA)19 against petitioner, assessing him of deficiency income tax and VAT covering taxable
years 2007 and 2008.

With respect to the deficiency assessment against petitioner for the year 2007, petitioner filed a petition for
review with the CTA, docketed as CTA Case No. 8502. The clerk of court of the CTA assessed petitioner for
filing fees which the latter promptly paid.20

However, with respect to the deficiency assessment against petitioner for the year 2008, the same involves
the same tax liabilities being recovered in the pending criminal cases. Thus, petitioner was confused as to
whether he has to separately file an appeal with the CTA and pay the corresponding filing fees considering
that the civil action for recovery of the civil liability for taxes and penalties was deemed instituted in the
criminal case.21
Thus, petitioner filed before the CTA a motion to clarify as to whether petitioner has to file a separate petition
to question the deficiency assessment for the year 2008. 22

The CTA issued a Resolution23 granting petitioner's motion and held that the recovery of the civil liabilities for
the taxable year 2008 was deemed instituted with the consolidated criminal cases

ISSUE

1. Whether the civil action filed by the petitioner to question the FDDA is deemed instituted with the criminal
case for tax evasion

2. Whether or not petitioner is liable for the assessed tax deficiencies.

HELD

1. No. Rule 9, Section 11 of A.M. No. 05-11-07-CTA,43 otherwise known as the Revised Rules of the Court of
Tax Appeals (RRCTA), states that:

SEC. 11. Inclusion of civil action in criminal action. – In cases within the jurisdiction of the Court, the criminal
action and the corresponding civil action for the recovery of civil liability for taxes and penalties shall be deemed
jointly instituted in the same proceeding. The filing of the criminal action shall necessarily carry with it the filing
of the civil action. No right to reserve the filing of such civil action separately from the criminal action shall be
allowed or recognized.

Petitioner claimed that by virtue of the above provision, the civil aspect of the criminal case, which is the
Petition for Review Ad Cautelam, is deemed instituted upon the filing of the criminal action. Thus, the CTA had
long acquired jurisdiction over the civil aspect of the consolidated criminal cases. Therefore, the CTA erred in
dismissing the case.

We do not agree.

Rule 111, Section 1(a)44 of the Rules of Court provides that what is deemed instituted with the criminal action
is only the action to recover civil liability arising from the crime. 45 Civil liability arising from a different source
of obligation, such as when the obligation is created by law, such civil liability is not deemed instituted with
the criminal action.

It is well-settled that the taxpayer's obligation to pay the tax is an obligation that is created by law and does
not arise from the offense of tax evasion, as such, the same is not deemed instituted in the criminal case.

2. Here, petitioner insists that the 10 parcels of idle land he sold on July 11, 2008 in a single transaction to
Eagle I are capital assets. Thus, the said parcels of land are properly subject to capital gains tax and
documentary stamp tax and not to the regular income tax and value-added tax. The CIR, on the other hand
argues that the 10 parcels of land sold by petitioner are ordinary assets, hence should be subject to income
tax and value-added tax. The CIR reasoned that the sole purpose of petitioner in acquiring the said lots was
for the latter to make a profit. Further, the buying and selling of the said lots all occurred within the period of
eight months and it involved sale transactions with a ready buyer. 62

Section 39(A)(1) of the National Internal Revenue Code (NIRC) provides that:

(1) Capital Assets. - the term 'capital assets' means property held by the taxpayer (whether or not connected
with his trade or business), but does not include stock in trade of the taxpayer or other property of a kind
which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year,
or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business, or property used in the trade or business, of a character which is subject to the allowance for
depreciation provided in Subsection (F) of Section 34; or real property used in trade or business of the
taxpayer.

The distinction between capital asset and ordinary asset was further defined in Section 2(a) and (b) Revenue
Regulations No. 7-2003,63 thus:

a. Capital assets shall refer to all real properties held by a taxpayer, whether or not connected with his trade
or business, and which are not included among the real properties considered as ordinary assets under Sec.
39(A)(1) of the Code.

b. Ordinary assets shall refer to all real properties specifically excluded from the definition of capital assets
under Sec. 39(A)(1) of the Code, namely:

1. Stock in trade of a taxpayer or other real property of a kind which would properly be included in the
inventory of the taxpayer if on hand at the close of the taxable year; or

2. Real property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or
business; or

3. Real property used in trade or business (i.e., buildings and/or improvements) of a character which is
subject to the allowance for depreciation provided for under Sec. 34(F) of the Code; or

4. Real property used in trade or business of the taxpayer.

The statutory definition of capital assets is negative in nature. Thus, if the property or asset is not among the
exceptions, it is a capital asset; conversely, assets falling within the exceptions are ordinary assets. 64

To determine as to whether the transaction between petitioner and Eagle I is an isolated transaction or
whether the 10 parcels of land sold by petitioner is classified as capital assets or ordinary assets should
properly be resolved by the CTA. Thus, it would be more prudent for Us to remand the case to CTA for the
latter to conduct a full-blown trial where both parties are given the chance to present evidence of their claim.
Well-settled is the rule that this Court is not a trier of facts.

WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The Decision dated December 22, 2014 and
Resolution dated February 2, 2016 of the Court of Tax Appeals En Banc in CTA EB Criminal Case No. 026 are
REVERSED and SET ASIDE. The case is REMANDED to the Court of Tax Appeals First Division to conduct
futher proceedings in CTA Case No. 8503 and to ORDER the Clerk of Court to assess the correct docket fees.
Petitioner Mariano Lim Gaw, Jr., is likewise ORDERED to pay the correct docket fees within ten (10) days
from the receipt of the correct assessment of the Clerk of Court.

12. Metropolitan Bank & Trust Co. vs. CIR, 808 Phil 575 (2017)

METROPOLITAN BANK & TRUST COMPANY, PETITIONER, VS. THE COMMISSIONER OF INTERNAL
REVENUE, RESPONDENT.

G.R. No. 182582*, April 17, 2017, FIRST DIVISION, PERLAS-BERNABE, J.

Facts:

Solidbank Corporation (Solidbank) entered into an agreement with Luzon Hydro Corporation (LHC), whereby
the former extended to the latter a foreign currency denominated loan in the principal amount of
US$123,780,000.00 (Agreement). Pursuant to the Agreement, LHC is bound to shoulder all the corresponding
internal revenue taxes required by law to be deducted or withheld on the said loan, as well as the filing of tax
returns and remittance of the taxes withheld to the Bureau of Internal Revenue (BIR). Later on, Metrobank
acquired Solidbank, and consequently, assumed the latter's rights and obligations under the aforesaid
Agreement.

According to Metrobank, it mistakenly remitted the final tax withheld to the BIR as well when they were
inadvertently included in its own Monthly Remittance Returns of Final Income Taxes Withheld for the
months of March 2001 and October 2001. Thus, on December 27, 2002, it filed a letter to the BIR requesting
for the refund thereof. Thereafter and in view of respondent the Commissioner of Internal Revenue's (CIR)
inaction, Metrobank filed its judicial claim for refund via a petition for review filed before the CTA on
September 10, 2003.

The CTA Division denied Metrobank's claims for refund for lack of merit. 1t ruled that Metrobank's claim
relative to the March 2001 final tax was filed beyond the two (2)-year prescriptive period. It pointed out that
since Metrobank remitted such payment on April 25, 2001, the latter only had until April 25, 2003 to file its
administrative and judicial claim for refunds. In this regard, while Metrobank filed its administrative claim
well within the aforesaid period, or on December 27, 2002, the judicial claim was filed only on September
10, 2003. Hence, the right to claim for such refund has prescribed.

The CTA En Banc affirmed the CTA Division's ruling. It held that since Metrobank's March 2001 final tax is in
the nature of a final withholding tax, the two (2)-year prescriptive period was correctly reckoned by the CTA
Division from the time the same was paid on April 25, 2001. As such, Metrobank's claim for refund had
already prescribed as it only filed its judicial claim on September 10, 2003.

Issue:

Whether or not the CTA En Banc correctly held that Metrobank's claim for refund relative to its March 2001
final tax had already prescribed. (Yes)

Ruling:
A claimant for refund must first file an administrative claim for refund before the CIR, prior to filing a judicial
claim before the CTA. Notably, both the administrative and judicial claims for refund should be filed
within the two (2)-year prescriptive period indicated therein, and that the claimant is allowed to file
the latter even without waiting for the resolution of the former in order to prevent the forfeiture of its
claim through prescription. In this regard, case law states that "the primary purpose of filing an
administrative claim [is] to serve as a notice of warning to the CIR that court action would follow unless the
tax or penalty alleged to have been collected erroneously or illegally is refunded.

In this case, Metrobank insists that the filing of its administrative and judicial claims on December 27, 2002
and September 10, 2003, respectively, were well-within the two (2)-year prescriptive period. Citing ACCRA
Investments Corporation v. Court of Appeals CIR v. TMX Sales, Inc., CIR v. Philippine American Life Insurance, Co.,
and CIR v. CDCP Mining Corporation, Metrobank contends that the aforesaid prescriptive period should be
reckoned not from April 25, 2001 when it remitted the tax to the BIR, but rather, from the time it filed its
Final Adjustment Return or Annual Income Tax Return for the taxable year of 2001, or in April 2002, as it was
only at that time when its right to a refund was ascertained.

Metrobank's contention cannot be sustained.

As correctly pointed out by the CIR, the cases cited by Metrobank involved corporate income taxes, in which
the corporate taxpayer is required to file and pay income tax on a quarterly basis, with such payments being
subject to an adjustment at the end of the taxable year. since quarterly income tax payments are treated as
mere "advance payments" of the annual corporate income tax, there may arise certain situations where such
"advance payments" would cover more than said corporate taxpayer's entire income tax liability for a specific
taxable year. Thus, it is only logical to reckon the two (2)-year prescriptive period from the time the Final
Adjustment Return or the Annual Income Tax Return was filed, since it is only at that time that it would be
possible to determine whether the corporate taxpayer had paid an amount exceeding its annual income tax
liability.

On the other hand, the tax involved in this case is a ten percent (10%) final withholding tax on Metrobank's
interest income on its foreign currency denominated loan extended to LHC. Final withholding taxes are
considered as full and final payment of the income tax due, and thus, are not subject to any adjustments. Thus,
the two (2)-year prescriptive period commences to run from the time the refund is ascertained, i.e., the date
such tax was paid, and not upon the discovery by the taxpayer of the erroneous or excessive payment of
taxes.

In the case at bar, it is undisputed that Metrobank's final withholding tax liability in March 2001 was remitted
to the BIR on April 25, 2001. As such, it only had until April 25, 2003 to file its administrative and judicial
claims for refund. However, while Metrobank's administrative claim was filed on December 27, 2002, its
corresponding judicial claim was only filed on September 10, 2003. Therefore, Metrobank's claim for refund
had clearly prescribed.

WHEREFORE, the petition is DENIED. The Decision dated April 21, 2008 of the Court of Tax Appeals En Banc
in C.T.A. EB No. 340 is hereby AFFIRMED.

SO ORDERED.

13. CIR vs. St. Lukes Medical Center, 805 Phil 607 (2017)

COMMISSIONER OF INTERNAL REVENUE, Petitioner vs. ST. LUKE’S MEDICAL CENTER, INC., Respondent
 G.R. No. 203514 February 13, 2017 DEL CASTILLO, J.:

FACTS: Reespondent St. Luke’s Medical Center, Inc. (SLMC) received from the Large Taxpayers Service-
Documents Processing and Quality Assurance Division of the Bureau of Internal Revenue (BIR) Audit
Results/Assessment assessing respondent SLMC deficiency income tax under Section 27(B) of the 1997
National Internal Revenue Code (NIRC), as amended, for taxable year 2005 in the amount of ₱78,617,434.54
and for taxable year 2006 in the amount of ₱57,119,867.33. Consequently, SLMC filed with petitioner
Commissioner of Internal Revenue (CIR) an administrative protest 8 assailing the assessments. SLMC claimed
that as a non-stock, non-profit charitable and social welfare organization under Section 30(E) and (G) 9 of the
1997 NIRC, as amended, it is exempt from paying income tax.

SLMC received petitioner CIR's Final Decision on the Disputed Assessment dated increasing the deficiency
income for the taxable year 2005 tax to ₱82,419,522.21 and for the taxable year 2006 to ₱60,259,885.94.
Aggrieved, SLMC elevated the matter to the CTA via a Petition for Review. The CTA Division rendered a
Decision finding SLMC not liable for deficiency income tax under Section 27(B) of the 1997 NIRC, as amended,
since it is exempt from paying income tax under Section 30(E) and (G) of the same Code. CIR moved for
reconsideration but the CTA Division denied the same prompting CIR to file a Petition for Review before the
CTA En Banc. The CTA En Banc affirmed the cancellation and setting aside of the Audit Results/Assessment
Notices issued against SLMC. It denied CIR's Motion for Reconsideration. Hence, this petition.

Meanwhile, on September 26, 2012, the Court rendered a Decision in G.R. Nos. 195909 and 195960, entitled
Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc., finding SLMC not entitled to the tax
exemption under Section 30(E) and (G) of the NIRC of 1997 as it does not operate exclusively for charitable or
social welfare purposes insofar as its revenues from paying patients are concerned.
Considering the foregoing, SLMC then filed a Manifestation and Motion informing the Court that it paid the
BIR the amount of basic taxes due for taxable years 1998, 2000-2002, and 2004-2007, as evidenced by the
payment confirmation, and that it did not pay any surcharge, interest, and compromise penalty in accordance
with the above-mentioned Decision of the Court. In view of the payment it made, SLMC moved for the
dismissal of the instant case on the ground of mootness. Thereafter, the parties submitted their respective
memorandum.

CIR argues that under the doctrine of stare decisis SLMC is subject to 10% income tax under Section 27(B) of
the 1997 NIRC.29 It likewise asserts that SLMC is liable to pay compromise penalty pursuant to Section 248(A)
of the 1997 NIRC for failing to file its quarterly income tax returns. SLMC, on the other hand, begs the
indulgence of the Court to revisit its ruling in G.R. Nos. 195909 and 195960 (Commissioner of Internal
Revenue v. St. Luke's Medical Center, Inc.) positing that earning a profit by a charitable, benevolent hospital or
educational institution does not result in the withdrawal of its tax exempt privilege. 34 SLMC further claims
that the income it derives from operating a hospital is not income from "activities conducted for profit."

ISSUE: Whether or not the SLMC is liable for income tax under Sec 27 B of the 1997 NIRC in so far as its
revenue from paying patients are concerned. (YES)

RULING: YES. SLMC is liable for income tax under Section 27(B) of the 1997 NIRC insofar as its revenues
from paying patients are concerned. Said issue has been settled in G.R. Nos. 195909 and 195960
(Commissioner of Internal Revenue v. St. Luke's Medical Center, Inc.), where the Court ruled that:

Section 27(B) of the NIRC does not remove the income tax exemption of proprietary non-profit
hospitals under Section 30(E) and (G). Section 27(B) on one hand, and Section 30(E) and (G) on the
 other hand, can be construed together without the removal of such tax exemption. The effect of the
introduction of Section 27(B) is to subject the taxable income of two specific institutions, namely,
proprietary non-profit educational institutions and proprietary non-profit hospitals, among the
institutions covered by Section 30, to the 10% preferential rate under Section 27(B) instead of the
ordinary 30% corporate rate under the last paragraph of Section 30 in relation to Section 27(A)(l).

Section 27(B) of the NIRC imposes a 10% preferential tax rate on the income of (1) proprietary non-profit
educational institutions and (2) proprietary non-profit hospitals. The only qualifications for hospitals are that
they must be proprietary and non-profit. 'Proprietary' means private, following the definition of a
'proprietary educational institution' as 'any private school maintained and administered by private
individuals or groups' with a government permit. 'Non-profit' means no net income or asset accrues to or
benefits any member or specific person, with all the net income or asset devoted to the institution's purposes
and all its activities conducted not for profit.

'Non-profit' does not necessarily mean 'charitable. The Court defined 'charity' in Lung Center of the
Philippines v. Quezon City as 'a gift, to be applied consistently with existing laws, for the benefit of an indefinite
number of persons, either by bringing their minds and hearts under the influence of education or religion, by
assisting them to establish themselves in life or [by] otherwise lessening the burden of government. An
organization may be considered as non-profit if it does not distribute any part of its income to stockholders or
members. However, despite its being a tax exempt institution, any income such institution earns from
activities conducted for profit is taxable, as expressly provided in the last paragraph of Section 30.

To be a charitable institution, however, an organization must meet the substantive test of charity in Lung
Center. Charity is essentially a gift to an indefinite number of persons which lessens the burden of
government. In other words, charitable institutions provide for free goods and services to the public which
would otherwise fall on the shoulders of government. Thus, as a matter of efficiency, the government forgoes
taxes which should have been spent to address public needs, because certain private entities already assume
a part of the burden. The loss of taxes by the government is compensated by its relief from doing public works
which would have been funded by appropriations from the Treasury.

Charitable institutions, however, are not ipso facto entitled to a tax exemption. The requirements for a tax
exemption are strictly construed against the taxpayer because an exemption restricts the collection of taxes
necessary for the existence of the government.

As a general principle, a charitable institution does not lose its character as such and its exemption from taxes
simply because it derives income from paying patients, whether outpatient, or confined in the hospital, or
receives subsidies from the government, so long as the money received is devoted or used altogether to the
charitable object which it is intended to achieve; and no money inures to the private benefit of the persons
managing or operating the institution.

For real property taxes, the incidental generation of income is permissible because the test of exemption is
the use of the property. The Constitution provides that '[c]haritable institutions, churches and personages or
convents appurtenant thereto, mosques, non-profit cemeteries, and all lands, buildings, and improvements,
actually, directly, and exclusively used for religious, charitable, or educational purposes shall be exempt from
taxation.' The test requires that the institution use property in a certain way, i.e., for a charitable purpose.
Thus, the Court held that the Lung Center of the Philippines did not lose its charitable character when it used
a portion of its lot for commercial purposes. The effect of failing to meet the use requirement is simply to
remove from the tax exemption that portion of the property not devoted to charity.
The Constitution exempts charitable institutions only from real property taxes. In the NIRC, Congress decided
to extend the exemption to income taxes. However, the way Congress crafted Section 30(E) of the NIRC is
materially different from Section 28(3), Article VI of the Constitution. Section 30(E) of the NIRC defines the
corporation or association that is exempt from income tax. On the other hand, Section 28(3), Article VI of the
Constitution does not define a charitable institution, but requires that the institution 'actually, directly and
exclusively' use the property for a charitable purpose.

Section 30(E) of the NIRC provides that a charitable institution must be:
(1) A non-stock corporation or association;
(2) Organized exclusively for charitable purposes;
(3) Operated exclusively for charitable purposes; and
(4) No part of its net income or asset shall belong to or inure to the benefit of any member, organizer,
officer or any specific person.

Thus, both the organization and operations of the charitable institution must be devoted 'exclusively' for
charitable purposes. The organization of the institution refers to its corporate form, as shown by its articles of
incorporation, by-laws and other constitutive documents. Section 30(E) of the NIRC specifically requires that
the corporation or association be non-stock, which is defined by the Corporation Code as 'one where no part
of its income is distributable as dividends to its members, trustees, or officers' and that any profit 'obtained as
an incident to its operations shall, whenever necessary or proper, be used for the furtherance of the purpose
or purposes for which the corporation was organized. However, under Lung Center, any profit by a charitable
institution must not only be plowed back 'whenever necessary or proper,' but must be 'devoted or used
altogether to the charitable object which it is intended to achieve.
The operations of the charitable institution generally refer to its regular activities. Section 30(E) of the NIRC
requires that these operations be exclusive to charity. There is also a specific requirement that 'no part of
[the] net income or asset shall belong to or inure to the benefit of any member, organizer, officer or any
specific person.' The use of lands, buildings and improvements of the institution is but a part of its operations.
There is no dispute that St. Luke's is organized as a non-stock and non-profit charitable institution. However,
this does not automatically exempt St. Luke's from paying taxes. Even if St. Luke's meets the test of charity, a
charitable institution is not ipso facto tax exempt. To be exempt from real property taxes, Section 28(3),
Article VI of the Constitution requires that a charitable institution use the property 'actually, directly and
exclusively' for charitable purposes. To be exempt from income taxes, Section 30(E) of the NIRC requires that
a charitable institution must be 'organized and operated exclusively' for charitable purposes. Likewise, to be
exempt from income taxes, Section 30(G) of the NIRC requires that the institution be 'operated exclusively'
for social welfare.

However, the last paragraph of Section 30 of the NIRC qualifies the words 'organized and operated
exclusively' by providing that:

Notwithstanding the provisions in the preceding paragraphs, the income of whatever kind and
character of the foregoing organizations from any of their properties, real or personal, or from any of
their activities conducted for profit regardless of the disposition made of such income, shall be
subject to tax imposed under this Code.

In short, the last paragraph of Section 30 provides that if a tax exempt charitable institution conducts 'any'
activity for profit, such activity is not tax exempt even as its not-for-profit activities remain tax exempt. This
paragraph qualifies the requirements in Section 30(E) that the non-stock corporation or association must be
organized and operated exclusively for charitable purposes. It likewise qualifies the requirement in Section
30(G) that the civic organization must be 'operated exclusively' for the promotion of social welfare.

Thus, even if the charitable institution must be 'organized and operated exclusively' for charitable purposes,
it is nevertheless allowed to engage in 'activities conducted for profit' without losing its tax exempt status for
its not-for-profit activities. The only consequence is that the 'income of whatever kind and character' of a
charitable institution 'from any of its activities conducted for profit, regardless of the disposition made of
such income, shall be subject to tax.' Prior to the introduction of Section 27(B), the tax rate on such income
from for-profit activities was the ordinary corporate rate under Section 27(A). With the introduction of
Section 27(B), the tax rate is now 10%..

In 1998, St. Luke's had total revenues of ₱l,730,367,965 from services to paying patients. It cannot be
disputed that a hospital which receives approximately ₱l.73 billion from paying patients is not an institution
'operated exclusively' for charitable purposes. Clearly, revenues from paying patients are income received
from 'activities conducted for profit.' Indeed, St. Luke's admits that it derived profits from its paying patients.

In Lung Center, this Court declared: '[e]xclusive' is defined as possessed and enjoyed to the exclusion of
others; debarred from participation or enjoyment; and 'exclusively' is defined, 'in a manner to exclude; as
enjoying a privilege exclusively.' The words 'dominant use' or 'principal use' cannot be substituted for the
words 'used exclusively' without doing violence to the Constitution and thelaw. Solely is synonymous with
exclusively.

The Court cannot expand the meaning of the words 'operated exclusively' without violating the NIRC.
Services to paying patients are activities conducted for profit. They cannot be considered any other way. The
₱l.73 billion total revenues from paying patients is not even incidental to St. Luke's charity expenditure of
₱2l8,187,498 for non-paying patients.

St. Luke's claims that its charity expenditure of ₱218,187,498 is 65.20% of its operating income in 1998.
However, if a part of the remaining 34.80% of the operating income is reinvested in property, equipment or
facilities used for services to paying and non-paying patients, then it cannot be said that the income is
'devoted or used altogether to the charitable object which it is intended to achieve.' The income is plowed
back to the corporation not entirely for charitable purposes, but for profit as well. In any case, the last
paragraph of Section 30 of the NIRC expressly qualifies that income from activities for profit is taxable
'regardless of the disposition made of such income.

The Court finds that St. Luke's is a corporation that is not 'operated exclusively' for charitable or social
welfare purposes insofar as its revenues from paying patients are concerned. This ruling is based not only on
a strict interpretation of a provision granting tax exemption, but also on the clear and plain text of Section
30(E) and (G). Section 30(E) and (G) of the NIRC requires that an institution be 'operated exclusively' for
charitable or social welfare purposes to be completely exempt from income tax. An institution under Section
30(E) or (G) does not lose its tax exemption if it earns income from its for-profit activities. Such income from
for-profit activities, under the last paragraph of Section 30, is merely subject to income tax, previously at the
ordinary corporate rate but now at the preferential 10% rate pursuant to Section 27(B).

A tax exemption is effectively a social subsidy granted by the State because an exempt institution is spared
from sharing in the expenses of government and yet benefits from them. Tax exemptions for charitable
institutions should therefore be lin1ited to institutions beneficial to the public and those which improve
social welfare. A profit-making entity should not be allowed to exploit this subsidy to the detriment of the
government and other taxpayers.

St. Luke's fails to meet the requirements under Section 30(E) and (G) of the NIRC to be completely tax exempt
from all its income. However, it remains a proprietary non-profit hospital under Section 27(B) of the NIRC as
long as it does not distribute any of its profits to its members and such profits are reinvested pursuant to its
corporate purposes. St. Luke's, as a proprietary non-profit hospital, is entitled to the preferential tax rate of
10% on its net income from its for-profit activities.

St. Luke's is therefore liable for deficiency income tax in 1998 under Section 27(B) of the NIRC. However, St.
Luke's has good reasons to rely on the letter dated 6 June 1990 by the BIR, which opined that St. Luke's is 'a
corporation for purely charitable and social welfare purposes' and thus exempt from income tax.

A careful review of the pleadings reveals that there is no countervailing consideration for the Court to revisit
its aforequoted ruling in G.R. Nos. 195909 and 195960 (Commissioner of Internal Revenue v. St. Luke's Medical
Center, Inc.). Thus, under the doctrine of stare decisis, which states that "[o]nce a case has been decided in one
way, any other case involving exactly the same point at issue x x x should be decided in the same manner,"
the Court finds that SLMC is subject to 10% income tax insofar as its revenues from paying patients are
concerned.

To be clear, for an institution to be completely exempt from income tax, Section 30(E) and (G) of the 1997
NIRC requires said institution to operate exclusively for charitable or social welfare purpose. But in case an
exempt institution under Section 30(E) or (G) of the said Code earns income from its for-profit activities, it
will not lose its tax exemption. However, its income from for-profit activities will be subject to income tax at
the preferential 10% rate pursuant to Section 27(B) thereof.
However, in view of the payment of the basic taxes made by SLMC on April 30, 2013, the instant Petition has
become moot. While the Court agrees with the CIR that the payment confirmation from the BIR presented by
SLMC is not a competent proof of payment as it does not indicate the specific taxable period the said payment
covers, the Court finds that the Certification issued by the Large Taxpayers Service of the BIR dated May 27,
2013, and the letter from the BIR dated November 26, 2013 with attached Certification of Payment and
application for abatement are sufficient to prove payment especially since CIR never questioned the
authenticity of these documents. In fine, the Court resolves to dismiss the instant Petition as the same has
been rendered moot by the payment made by SLMC of the basic taxes for the taxable years 2005 and 2006, in
the amounts of ₱49,919,496.40 and ₱4 l,525,608.40, respectively.
WHEREFORE, the Petition is hereby DISMISSED. SO ORDERED.
Prepared by: Nicole Romero

14. WINEBRENNER & IÑIGO INSURANCE BROKERS, INC., Petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, Respondent.

G.R. No. 206526, SECOND DIVISION, January 28, 2015, MENDOZA, J.:

FACTS:
On April 15, 2004, petitioner filed its Annual Income Tax Return for CY 2003. About two years thereafter,
petitioner applied for the administrative tax credit/refund claiming entitlement to the refund of its excess or
unutilized CWT for CY 2003. There being no action taken on the said claim, a petition for review was filed by
petitioner before the CTA on April 11, 2006. On April 13, 2010, CTA Division partially granted petitioner’s
claim for refund of excess and unutilized CWT for CY 2003 in the reduced amount of ₱2,737,903.34 in its
April 13, 2010 Decision (original decision).

Petitioner filed a Motion for Partial Reconsideration with Leave to Submit Supplemental Evidence. It prayed
that an amended decision be issued granting the entirety of its claim for refund, or in the alternative, that it be
allowed to submit and offer relevant documents as supplemental evidence.

Respondent Commissioner of Internal Revenue (CIR) also moved for reconsideration, praying for the denial
of the entire amount of refund because petitioner failed to present the quarterly Income Tax Returns (ITRs)
for CY 2004. To the CIR, the presentation of the 2004 quarterly ITRs was indispensable in proving petitioner’s
entitlement to the claimed amount because it would prove that no carry-over of unutilized and excess CWT
for the four (4) quarters of CY 2003 to the succeeding four (4) quarters of CY 2004 was made. In the absence
of said ITRs, no refund could be granted.

On July 27, 2011, the CTA-Division reversed itself. In an Amended Decision, it denied the entire claim of
petitioner. It reasoned out that petitioner should have presented as evidence its first, second and third
quarterly ITRs for the year 2004 to prove that the unutilized CWT being claimed had not been carried over to
the succeeding quarters. The CTA-En Banc affirmed the Amended Decision of the CTA-Division. It stated that
before a cash refund or an issuance of tax credit certificate for unutilized excess tax credits could be granted,
it was essential for petitioner to establish and prove, by presenting the quarterly ITRs of the succeeding years,
that the excess CWT was not carried over to the succeeding taxable quarters considering that the option to
carry over in the succeeding taxable quarters could not be modified in the final adjustment returns
(FAR).Because petitioner did not present the first, second and third quarterly ITRs for CY 2004, despite
having offered and submitted the Annual ITR/FAR for the same year, the CTA-En Banc stated that the
petitioner failed to discharge its burden, hence, no refund could be granted.

ISSUE:

Whether the submission and presentation of the quarterly ITRs of the succeeding quarters of a taxable year is
indispensable in a claim for refund. (NO)

RULING:

The Court recognizes, as it always has, that the burden of proof to establish entitlement to refund is on the
claimant taxpayer. Being in the nature of a claim for exemption, refund is construed in strictissimi juris
against the entity claiming the refund and in favor of the taxing power. This is the reason why a claimant must
positively show compliance with the statutory requirements provided for under the NIRC in order to
successfully pursue one’s claim. As implemented by the applicable rules and regulations and as interpreted in
a vast array of decisions, a taxpayer who seeks a refund of excess and unutilized CWT must:

1) File the claim with the CIR within the two year period from the date of payment of the tax;
 2) Show on the return that the income received was declared as part of the gross income; and

3) Establish the fact of withholding by a copy of a statement duly issued by the payor to the payee
showing the amount paid and the amount of tax withheld.

The Court finds for the petitioner.

There is no question that those who claim must not only prove its entitlement to the excess credits, but
likewise must prove that no carry-over has been made in cases where refund is sought.

In this case, the fact of having carried over petitioner’s 2003 excess credits to succeeding taxable year is in
issue. According to the CTA-En Banc and the CIR, the only evidence that can sufficiently show that carrying
over has been made is to present the quarterly ITRs.

The Court however cannot agree.

Proving that no carry-over has been made does not absolutely require the presentation of the quarterly ITRs.

What Section 76 requires, just like in all civil cases, is to prove the prima facie entitlement to a claim,
including the fact of not having carried over the excess credits to the subsequent quarters or taxable year. It
does not say that to prove such a fact, succeeding quarterly ITRs are absolutely needed.

This simply underscores the rule that any document, other than quarterly ITRs may be used to establish that
indeed the non-carry over clause has been complied with, provided that such is competent, relevant and part
of the records. The Court is thus not prepared to make a pronouncement as to the indispensability of the
quarterly ITRs in a claim for refund for no court can limit a party to the means of proving a fact for as long as
they are consistent with the rules of evidence and fair play. The means of ascertainment of a fact is best left to
the party that alleges the same. The Court’s power is limited only to the appreciation of that means pursuant
to the prevailing rules of evidence. To stress, what the NIRC merely requires is to sufficiently prove the
existence of the non-carry over of excess CWT in a claim for refund.

The implementing rules similarly support this conclusion, particularly Section 2.58.3 of Revenue Regulation
No. 2-98 thereof. There, it provides as follows:

SECTION 2.58.3. Claim for Tax Credit or Refund.

(A) The amount of creditable tax withheld shall be allowed as a tax credit against the income tax
liability of the payee in the quarter of the taxable year in which income was earned or received.

(B) Claims for tax credit or refund of any creditable income tax which was deducted and withheld on
income payments shall be given due course only when it is shown that the income payment has been
declared as part of the gross income and the fact of withholding is established by a copy of the
withholding tax statement duly issued by the payer to the payee showing the amount paid and the
amount of tax withheld therefrom.

Evident from the above is the absence of any categorical pronouncement of requiring the presentation of the
succeeding quarterly ITRs in order to prove the fact of non-carrying over. To say the least, the Court rules that
as to the means of proving it, It has no power to unduly restrict it.
In this case, it confounds the Court why the CTA did not recognize and discuss in detail the sufficiency of the
annual ITR for 2004, which was submitted by the petitioner.

Indeed, an annual ITR contains the total taxable income earned for the four (4) quarters of a taxable year, as
well as deductions and tax credits previously reported or carried over in the quarterly income tax returns for
the subject period.

It goes without saying that the annual ITR (including any other proof that may be sufficient to the Court)can
sufficiently reveal whether carry over has been made in subsequent quarters even if the petitioner has chosen
the option of tax credit or refund in the immediately 2003 annual ITR. Section 76 of the NIRC requires a
corporation to file a Final Adjustment Return (or Annual ITR) covering the total taxable income for the
preceding calendar or fiscal year. The total taxable income contains the combined income for the four
quarters of the taxable year, as well as the deductions and excess tax credits carried over in the quarterly
income tax returns for the same period.

If the excess tax credits of the preceding year were deducted, whether in whole or in part, from the estimated
income tax liabilities of any of the taxable quarters of the succeeding taxable year, the total amount of the tax
credits deducted for the entire taxable year should appear in the Annual ITR under the item "Prior Year’s
Excess Credits." Otherwise, or if the tax credits were carried over to the succeeding quarters and the
corporation did not report it in the annual ITR, there would be a discrepancy in the amounts of combined
income and tax credits carried over for all quarters and the corporation would end up shouldering a bigger
tax payable. It must be remembered that taxes computed in the quarterly returns are mere estimates. It is the
annual ITR which shows the aggregate amounts of income, deductions, and credits for all quarters of the
taxable year. It is the final adjustment return which shows whether a corporation incurred a loss or gained a
profit during the taxable quarter. Thus, the presentation of the annual ITR would suffice in proving that prior
year’s excess credits were not utilized for the taxable year in order to make a final determination of the total
tax due.

In this case, petitioner reported an overpayment in the amount of ₱7,194,213.00 in its annual ITR for the year
ended December 2003. For the overpayment, petitioner chose the option "To be issued a Tax Credit
Certificate." In its Annual ITR for the year ended December 2004, petitioner did not report the Creditable Tax
Withheld for the 4th quarter of 2003 in the amount of ₱4,073,954.00 as prior year’s excess credits.

Verily, the absence of any amount written in the Prior Year excess Credit – Tax Withheld portion of
petitioner’s 2004 annual ITR clearly shows that no prior excess credits were carried over in the first four
quarters of 2004. And since petitioner was able to sufficiently prove that excess tax credits in 2003 were not
carried over to taxable year 2004 by leaving the item "Prior Year’s Excess Credits" as blank in its 2004 annual
ITR, then petitioner is entitled to a refund. Unfortunately, the CTA, in denying entirely the claim, merely relied
on the absence of the quarterly ITRs despite being able to verify the truthfulness of the declaration that no
carry over was indeed effected by simply looking at the 2004 annual ITR.

It must be emphasized that once the requirements laid down by the NIRC have been met, a claimant should be
considered successful in discharging its burden of proving its right to refund. Thereafter, the burden of going
forward with the evidence, as distinct from the general burden of proof, shifts to the opposing party, that is,
the CIR. It is then the turn of the CIR to disprove the claim by presenting contrary evidence which could
include the pertinent ITRs easily obtainable from its own files.

The CIR must then be reminded that in Philam, the CIR’s "failure to present[the quarterly ITRs and AFR] to
support its contention against the grant of a tax refund to [a claimant] is certainly fatal." Commissioner of
Internal Revenue v. PERF Realty Corporation reinforces this with a sweeping statement holding that the
verification process is not incumbent on PERF[or any claimant for that matter]; [but] is the duty of the CIR to
verify whether xxx excess income taxes [have been carried over].

And should there be a possibility that a claimant may have violated the irrevocability rule and thereafter
claim twice from its credits, no one is to be blamed but the CIR for not discharging its burden of evidence to
destroy a claimant’s right to a refund. At any rate, a claimant who defrauds the government cannot escape
liability be it criminal or civil in nature.

Verily, with the petitioner having complied with the requirements for refund, and without the CIR showing
contrary evidence other than its bare assertion of the absence of the quarterly ITRs, copies of which are easily
verifiable by its very own records, the burden of proof of establishing the propriety of the claim for refund has
been sufficiently discharged. Hence, the grant of refund is proper.

The Court does not, and cannot, however, grant the entire claimed amount as it finds no error in the original
decision of the CTA Division granting refund to the reduced amount of ₱2,737,903.34. This finding of fact is
given respect, if not finality, as the CTA, which by the very nature of its functions of dedicating itself
exclusively to the consideration of the tax problems has necessarily developed an expertise on the subject. It
being the case, the Court partly grants this petition to the extent of reinstating the April 23, 2010 original
decision of the CTA Division.

DISPOSITIVE PORTION:

WHEREFORE, the Court partly grants the petition. The March 22, 2013 Decision of the Court of Tax Appeals
En Banc is REVERSED. The April 13, 2010 Decision of the Court of Tax Appeals Special First Division is
REINSTATED. Respondent Commissioner of Internal Revenue is ordered to REFUND to petitioner the amount
of ₱2,737,903.34 as excess creditable withholding tax paid for taxable year 2003.

SO ORDERED.

15. Pilipinas Total Gas Inc., vs. CIR, 774 Phil.473 (2015)

16. CIR vs. MERALCO, 735 Phil. 547 (2014)

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. MANILA ELECTRIC COMPANY (MERALCO),

Respondent.
G.R. No. 181459, June 9, 2014, PERALTA, J.
FACTS:

On July 6, 1998, Respondent MERALCO obtained two loan agreements from Norddeutsche Landesbank Girozentrale
(NORD/LB) Singapore Branch. Under the foregoing loan agreements, the income received by NORD/LB, by way of
respondent MERALCO’s interest payments, shall be paid in full without deductions, as respondent MERALCO shall bear the
obligation of paying/remitting to the BIR the corresponding ten percent (10%) final withholding tax. Pursuant thereto,
respondent MERALCO paid/remitted to the Bureau of Internal Revenue (BIR) the said withholding tax on its interest payments
to NORD/LB Singapore Branch, covering the period from January 1999 to September 2003 in the aggregate sum of
₱264,120,181.44.

Sometime in 2001, respondent MERALCO discovered that NORD/LB Singapore Branch is a foreign government-owned
financing institution of Germany. Thus, on December 20, 2001, respondent MERALCO filed a request for a BIR Ruling
with petitioner Commissioner of Internal Revenue (CIR) with regard to the tax exempt status of NORD/LB Singapore Branch, in
accordance with Section 32(B)(7)(a) of the 1997 National Internal Revenue Code (Tax Code).

On October 7, 2003, the BIR issued Ruling No. DA-342-2003 declaring that the interest payments made to NORD/LB
Singapore Branch are exempt from the ten percent (10%) final withholding tax, since it is a financing institution owned and
controlled by the foreign government of Germany.

Consequently, on July 13, 2004, relying on the aforesaid BIR Ruling, respondent MERALCO filed with petitioner a claim for
tax refund or issuance of tax credit certificate in the aggregate amount of ₱264,120,181.44, representing the erroneously
paid or overpaid final withholding tax on interest payments made to NORD/LB Singapore Branch.

On November 5, 2004, petitioner denied its claim for tax refund on the basis that the same had already prescribed under Section
204 of the Tax Code, which gives a taxpayer/claimant a period of two (2) years from the date of payment of tax to file a claim for
refund before the BIR.

Aggrieved, respondent MERALCO filed a Petition for Review with the Court of Tax Appeals (CTA). The CTA partially granted
the claim, refunding the amount of 39,359,254.79 covering the period of December 2002 to September 2003 but denied the claim
of 224,270,926.65 covering the period of January 1999 to July 2002 on the ground of prescription.

ISSUE:

Whether or not respondent MERALCO is entitled to a tax refund/credit relative to its payment of final withholding taxes
on interest payments made to NORD/LB from January 1999 to July 2002 (NO)

RULING:

The claim for tax refund in the aggregate amount of Thirty-Nine Million Three Hundred Fifty-Nine Thousand Two Hundred
Fifty-Four Pesos and Seventy-Nine Centavos (₱39,359,254.79) pertaining to the period from January 1999 to July2002 must fail
since the same has already prescribed under Section 229 of the Tax Code, to wit:

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, of any
sum alleged to have been excessively or in any manner wrongfully collected without
authority, or of any sum alleged to have been excessively or in any manner wrongfully
collected, until a claim for 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.

As can be gleaned from the foregoing, the prescriptive period provided is mandatory regardless of any supervening cause
that may arise after payment. It should be pointed out further that while the prescriptive period of two (2) years
commences to run from the time that the refund is ascertained, the propriety thereof is determined by law (in this case,
from the date of payment of tax), and not upon the discovery by the taxpayer of the erroneous or excessive payment of
taxes.

The issuance by the BIR of the Ruling declaring the tax-exempt status of NORD/LB, if at all, is merely confirmatory in nature.
As aptly held by the CTA-First Division, there is no basis that the subject exemption was provided and ascertained only
through BIR Ruling No. DA-342-2003, since said ruling is not the operative act from which an entitlement of refund is
determined. In other words, the BIR is tasked only to confirm what is provided under the Tax Code on the matter of tax
exemptions as well as the period within which to file a claim for refund.

In this regard, petitioner is misguided when it relied upon the six (6)-year prescriptive period for initiating an action on the
ground of quasi contract or solutio indebiti under Article 1145 of the New Civil Code. There is solutio indebiti where:
(1) payment is made when there exists no binding relation between the payor, who has no duty to pay, and the person who
received the payment; and
(2) the payment is made through mistake, and not through liberality or some other cause.

Here, there is a binding relation between petitioner as the taxing authority in this jurisdiction and respondent
MERALCO which is bound under the law to act as a withholding agent of NORD/LB Singapore Branch, the taxpayer.
Hence, the first element of solutio indebitiis lacking. Moreover, such legal precept is inapplicable to the present case since
the Tax Code, a special law, explicitly provides for a mandatory period for claiming a refund for taxes erroneously paid.
Tax refunds are based on the general premise that taxes have either been erroneously or excessively paid. Though the Tax Code
recognizes the right of taxpayers to request the return of such excess/erroneous payments from the government, they must do so
within a prescribed period. Further, "a taxpayer must prove not only his entitlement to a refund, but also his compliance
with the procedural due process as non-observance of the prescriptive periods within which to file the administrative and
the judicial claims would result in the denial of his claim."

In the case at bar, respondent MERALCO had ample opportunity to verify on the tax-exempt status of NORD/LB for purposes of
claiming tax refund. Even assuming that respondent MERALCO could not have emphatically known the status of NORD/LB, its
supposition of the same was already confirmed by the BIR Ruling which was issued on October 7, 2003. Nevertheless, it only
filed its claim for tax refund on July 13, 2004, or ten (10) months from the issuance of the aforesaid Ruling.

We agree with the CTA-First Division, therefore, that respondent MERALCO's claim for refund in the amount of Two Hundred
Twenty-Four Million Seven Hundred Sixty Thousand Nine Hundred Twenty-Six Pesos and Sixty-Five Centavos
(₱224,760,926.65) representing erroneously paid and remitted final income taxes for the period January 1999 to July 2002 should
be denied on the ground of prescription.

WHEREFORE, the petition is DENIED. The October 15, 2007 Decision and January 9, 2008 Resolution of the Court of Tax
Appeals in C.T.A. EB No. 262 are hereby AFFIRMED.
SO ORDERED.

17. CIR vs. AICHI Forging Company of Asia, Inc., GR No. 184823 (2010)

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. AICHI FORGING COMPANY OF ASIA, INC.,
Respondent.
G.R. No. 184823 October 6, 2010 Del Castillo, J.

FACTS:
Respondent Aichi Forging Company of Asia, Inc., a corporation duly organized and existing under the laws of
the Republic of the Philippines, is engaged in the manufacturing, producing, and processing of steel and its by-
products. It is registered with the BIR as a VAT entity and its products, "close impression die steel forgings"
and "tool and dies," are registered with the Board of Investments (BOI) as a pioneer status.

On September 30, 2004, respondent filed a claim for refund/credit of input VAT for the period July 1, 2002 to
September 30, 2002 in the total amount of ₱3,891,123.82 with the petitioner CIR, through the DOF One-Stop
Shop Inter-Agency Tax Credit and Duty Drawback Center.

On even date, respondent filed a Petition for Review with the CTA for the refund/credit of the same input
VAT. The case was docketed as CTA Case No. 7065 and was raffled to the Second Division of the CTA.

In the Petition for Review, respondent alleged that for the period July 1, 2002 to September 30, 2002, it
generated and recorded zero-rated sales in the amount of ₱131,791,399.00, which was paid pursuant to
Section 106(A) (2) (a) (1), (2) and (3) of the NIRC); that for the said period, it incurred and paid input VAT
amounting to ₱3,912,088.14 from purchases and importation attributable to its zero-rated sales; and that in
its application for refund/credit filed with the DOF One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center, it only claimed the amount of ₱3,891,123.82.

In response, petitioner filed his Answer and thereafter, the trial ensued. On January 4, 2008, the Second
Division of the CTA rendered a Decision partially granting respondent’s claim for refund/credit.

Dissatisfied, the petitioner filed a Motion for Partial Reconsideration, insisting that the administrative and the
judicial claims were filed beyond the two-year period to claim a tax refund/credit provided for under Sections
112(A) and 229 of the NIRC. He reasoned that since the year 2004 was a leap year, the filing of the claim for
tax refund/credit on September 30, 2004 was beyond the two-year period, which expired on September 29,
2004. He cited as basis Article 13 of the Civil Code, which provides that when the law speaks of a year, it is
equivalent to 365 days. In addition, petitioner argued that the simultaneous filing of the administrative and
the judicial claims contravenes Sections 112 and 229 of the NIRC. According to the petitioner, a prior filing of
an administrative claim is a "condition precedent" before a judicial claim can be filed. He explained that the
rationale of such requirement rests not only on the doctrine of exhaustion of administrative remedies but also
on the fact that the CTA is an appellate body which exercises the power of judicial review over administrative
actions of the BIR.

The Second Division of the CTA, however, denied petitioner’s Motion for Partial Reconsideration for lack of
merit. Petitioner thus elevated the matter to the CTA En Banc via a Petition for Review, which, however,
affirmed the Second Division’s Decision allowing the partial tax refund/credit in favor of respondent.
However, as to the reckoning point for counting the two-year period, the CTA En Banc ruled that the
administrative and judicial claims for refund filed on September 30, 2004 were filed on time because AICHI
has until October 20, 2004 within which to file its claim for refund.

Petitioner sought reconsideration but the CTA En Banc denied his Motion for Reconsideration. Hence, the
instant petition.

ISSUE: Whether respondent’s judicial and administrative claims for tax refund/credit were filed within the
two-year prescriptive period provided in Sections 112(A) and 229 of the NIRC. (YES)
RULING:

The pivotal question of when to reckon the running of the two-year prescriptive period has already been
resolved in CIR v. Mirant Pagbilao Corporation, where we ruled that Section 112(A) of the NIRC is the
applicable provision in determining the start of the two-year period for claiming a refund/credit of
unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions
apply only to instances of erroneous payment or illegal collection of internal revenue taxes."

The CTA En Banc erroneously applied Sections 114(A) and 229 of the NIRC in computing the two-year
prescriptive period for claiming refund/credit of unutilized input VAT. To be clear, Section 112 of the NIRC is
the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned
from the close of the taxable quarter when the sales were made.

The administrative claim was timely filed.

In CIR v. Primetown Property Group, Inc., we said that as between the Civil Code, which provides that a year is
equivalent to 365 days, and the Administrative Code of 1987, which states that a year is composed of 12
calendar months, it is the latter that must prevail following the legal maxim, Lex posteriori derogat priori.

Applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1,
2002 to September 30, 2002 expired on September 30, 2004. Hence, respondent’s administrative claim was
timely filed.

The filing of the judicial claim was premature.

However, notwithstanding the timely filing of the administrative claim, we are constrained to deny
respondent’s claim for tax refund/credit for having been filed in violation of Section 112(D) of the NIRC,
which clearly provides that the CIR has "120 days, from the date of the submission of the complete documents
in support of the application [for tax refund/credit]," within which to grant or deny the claim. In case of full or
partial denial by the CIR, the taxpayer’s recourse is to file an 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/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the CTA premature.

Respondent’s assertion 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
period52 has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent’s view. Subsection (A) of the said provision
states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two
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." The phrase "within two (2)
years x x x apply for the issuance of a tax credit certificate or refund" refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA. This is apparent in the first paragraph of subsection
(D) of the same provision, which states that the CIR has "120 days from the submission of complete
documents in support of the application filed in accordance with Subsections (A) and (B)" within which to
decide on the claim.

In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction of
the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is
issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day
period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it
then, the 120-day period is crucial in filing an appeal with the CTA.

In fine, the premature filing of respondent’s claim for refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by the CTA.

WHEREFORE, the Petition is hereby GRANTED. The assailed July 30, 2008 Decision and the October 6, 2008
Resolution of the Court of Tax Appeals are hereby REVERSED and SET ASIDE. The Court of Tax Appeals
Second Division is DIRECTED to dismiss CTA Case No. 7065 for having been prematurely filed.

SO ORDERED.

18.

CIR vs. Visayas Geothermal Power Company, Inc., GR No. 181276 (2013)

FACTS:

Respondent VGPCI incurred input value added tax of P20,213,044.50 on its domestic purchase of goods and
services and importation of goods used in its business for the third and fourth quarter of 2001 and for the
entire year of 2002. Due to the enactment of Republic Act (R.A.) No. 9136, which became effective on June 26,
2001, VGPCI’s sales of generated power became zero-rated and were no longer subject to VAT at 10%.

On June 26, 2003, VGPCI filed before the BIR a claim for refund of unutilized input VAT payment in the third
quarter of 2001. On December 18, 2003, another claim was filed for the last quarter of 2001 and the four
quarters of 2002. For failure of the BIR to act upon said claims, VGPCI filed separate petitions for review
before the CTA on September 30, 2003 and December 19, 2003, praying for a refund on the issuance of a tax
credit certificate covering the period from July to September 2001 andfor the period from October 2001 to
December 2002, CTA Case Nos. 6790 and 6838, respectively.

ISSUE:

Whether VGPCI failed to observe the proper prescriptive period required by law for the filing of an appeal
before the CTA because it filed its petition before the end of the 120-day period granted to the CIR to decide
its claim for refund under Section 112(D) of the National Internal Revenue Code (NIRC).

RULING:
The answer must be qualified:

YES, to CTA Case No. 6790. NO, to CTA Case No. 6838.

The rules for the filing of a claim for refund or tax credit of unutilized input credit VAT are as follows:

1. The taxpayer has two (2) years after the close of the taxable quarter when the relevant sales were made
within which to file an administrative claim before the CIR for a refund of the creditable input tax or the
issuance of a tax credit certificate, regardless of when the input VAT was paid, according to Section 112(A) of
the NIRC and Mirant.

2. The CIR is given 120 days, from the date of the submission of the complete documents in support of the
application for tax refund or tax credit, to act on the said application.

3. If the CIR fully or partially denies the application or fails to act on the same within the required 120-day
period, the taxpayer is allowed to appeal the decision or inaction of the CIR to the CTA. For this reason, the
taxpayer has 30 days from his receipt of the decision of the CIR or from the lapse of the 120-day period,
within which to file a petition for review with the CTA. In no case shall a petition for review be filed with the
CTA before the expiration of the 120-day period. The judicial claim need not be filed within the two-year
prescriptive period referred to in Section 112(A), which only pertains to administrative claims.

4. The two-year period referred to in Section 229 of the NLRC does not apply to appeals filed before the CTA,
in relation to claims for refund or issuance of tax credits made pursuant to Section 112. Consequently, an
appeal may be maintained with the CTA for so long as it observes the abovementioned period for filing the
appeal.

5. Following San Roque, the 120+30 day period is mandatory and jurisdictional from January 1, 1998 (the
effectivity of the 1997 Tax Code). However, from December 10, 2003 (the date BIR Ruling No. DA 489-03 was
issued) until October 6, 2010 (the promulgation of Aichi), judicial claims need not follow the 120+30 day
period. Thereafter, Aichi shall be the controlling rule for all claims filed with the CTA and the 120+30 day
period must be observed.

Applying the abovementioned rules to the case at bench, the judicial claim filed on September 30, 2003 (CTA
Case No. 6790) was prematurely filed and cannot be taken cognizance of because respondent failed to wait
for the requisite 120 days after the filing of its claim for refund with the BIR before elevating the case to the
CTA. However, the judicial claim filed on December 19, 2003 (CTA Case No. 6838), which was made after the
issuance of BIR Ruling DA-480-03, can be considered by the CTA despite its hasty filing only one day after the
application for refund was first lodged with the BIR.

DISPOSITIVE PORTION:

WHEREFORE, the petition is partly GRANTED. The November 20, 2007 Decision and the January 9, 2008
Resolution of the Court of Tax Appeals En Banc are hereby REVERSED and SET ASIDE and the claim for
refund with respect to CTA Case No. 6790 is DENIED. However, the claim pertaining to CTA Case No. 6838 is
remanded to the CTA for the proper determination of the refundable amount due respondent.
19. CIR vs. San Roque Power Corporation GR No. 187485 (2013),

20. Taganito Mining Corporation vs. CIR; GR No. 196113 (2013)

TAGANITO MINING CORPORATION, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

G.R. No. 196113. February 12, 2013. CARPIO, J.

FACTS:

Petitioner, Taganito Mining Corporation, is a corporation duly organized and existing under and by virtue of
the laws of the Philippines. It is duly registered with the Securities and Exchange Commission and is a VAT-
registered entity, with Certificate of Registration (BIR Form No. 2303) No. OCN 8RC0000017494. Likewise,
Taganito is registered with the Board of Investments (BOI) as an exporter of beneficiated nickel silicate and
chromite ores, with BOI Certificate of Registration No. EP-88-306.

Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue vested with
authority to exercise the functions of the said office, including inter alia, the power to decide refunds of
internal revenue taxes, fees and other charges, penalties imposed in relation thereto, or other matters arising
under the National Internal Revenue Code (NIRC) or other laws administered by Bureau of Internal Revenue
(BIR) under Section 4 of the NIRC.

Taganito filed all its Monthly VAT Declarations and Quarterly Vat Returns for the period January 1, 2005 to
December 31, 2005. As can be gleaned from its amended Quarterly VAT Returns, [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.

On November 14, 2006, Taganito filed with the CIR, through BIR’s Large Taxpayers Audit and Investigation
Division II (LTAID II), a letter dated November 13, 2006 claiming a tax credit/refund of its supposed input
VAT amounting to ₱8,365,664.38 for the period covering January 1, 2004 to December 31, 2004. 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. In his
Answer filed on March 28, 2007, [the CIR] interposes the following defenses: Taganito’s alleged claim for
refund is subject to administrative investigation/examination by the Bureau of Internal Revenue (BIR); The
amount of ₱8,365,664.38 being claimed by [Taganito] as alleged unutilized input VAT on domestic purchases
of goods and services and on importation of capital goods for the period January 1, 2005 to December 31,
2005 is not properly documented; Taganito] must prove that it has complied with the provisions of Sections
112 (A) and (D) and 229 of the National Internal Revenue Code of 1997 (1997 Tax Code) on the prescriptive
period for claiming tax refund/credit; 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.
Taganito must prove that it has complied with the invoicing requirements mentioned in Sections 110 and 113
of the 1997 Tax Code, as amended, in relation to provisions of Revenue Regulations No. 7-95. 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 (Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466 cited in
Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670); and 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.

SPECIAL AND AFFIRMATIVE DEFENSES

The Court of Tax Appeals has no jurisdiction to entertain the instant petition for review for failure on the part
of [Taganito] to comply with the provision of Section 112 (D) of the 1997 Tax Code which provides, thus:

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.

As stated, [Taganito] filed the administrative claim for refund with the Bureau of Internal Revenue on
November 14, 2006. Subsequently on February 14, 2007, the instant petition was filed. Obviously the 120
days given to the Commissioner to decide on the claim has not yet lapsed when the petition was filed. The
petition was prematurely filed, hence it must be dismissed for lack of jurisdiction.

The CTA Second Division partially granted Taganito’s claim. In its Decision dated 8 January 2010, the CTA
Second Division found that Taganito complied with the requirements of Section 112(A) of RA 8424, as
amended, to be entitled to a tax refund or credit of input VAT attributable to zero-rated or effectively zero-
rated sales.

The Commissioner filed a Motion for Partial Reconsideration on 29 January 2010. Taganito, in turn, filed a
Comment/Opposition on the Motion for Partial Reconsideration on 15 February 2010. In a Resolution dated
7 April 2010, the CTA Second Division denied the CIR’s motion. The CTA Second Division ruled that the
legislature did not intend that Section 112 (Refunds or Tax Credits of Input Tax) should be read in isolation
from Section 229 (Recovery of Tax Erroneously or Illegally Collected) or vice versa. The CTA Second Division
applied the mandatory statute of limitations in seeking judicial recourse prescribed under Section 229 to
claims for refund or tax credit under Section 112.

In its 8 December 2010 Decision, the CTA EB granted the CIR’s petition for review and reversed and set aside
the challenged decision and resolution. The CTA EB declared that Section 112(A) and (B) of the 1997 Tax
Code both set forth the reckoning of the two-year prescriptive period for filing a claim for tax refund or credit
over input VAT to be the close of the taxable quarter when the sales were made. The CTA EB also relied on
this Court’s rulings in the cases of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.
(Aichi)30 and Commisioner of Internal Revenue v. Mirant Pagbilao Corporation (Mirant). 31 Both Aichi and Mirant
ruled that the two-year prescriptive period to file a refund for input VAT arising from zero-rated sales should
be reckoned from the close of the taxable quarter when the sales were made. Aichi further emphasized that
the failure to await the decision of the Commissioner or the lapse of 120-day period prescribed in Section
112(D) amounts to a premature filing.

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.

Taganito filed its Motion for Reconsideration on 29 December 2010. The Commissioner filed an Opposition
on 26 January 2011. The CTA EB denied for lack of merit Taganito’s motion in a Resolution 36 dated 14 March
2011. The CTA EB did not see any justifiable reason to depart from this Court’s rulings in Aichi and Mirant.

ISSUES:

I. Whether or not the Court of Tax Appeals En Banc committed serious error and acted with grave abuse of
discretion tantamount to lack or excess of jurisdiction in erroneously applying the Aichi doctrine in violation
of [Taganito’s] right to due process.

II. Whether or not The Court of Tax Appeals committed serious error and acted with grave abuse of discretion
amounting to lack or excess of jurisdiction in erroneously interpreting the provisions of Section 112 (D).

RULING:

Section 105:

Persons Liable. — Any person who, in the course of trade or business, sells, barters, exchanges,
leases goods or properties, renders services, and any person who imports goods shall be subject to
the value-added tax (VAT) imposed in Sections 106 to 108 of this Code.
The value-added tax is an indirect tax and the amount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties or services. This rule shall likewise apply to
existing contracts of sale or lease of goods, properties or services at the time of the effectivity of
Republic Act No. 7716.

xxxx

Section 110(B):

Sec. 110. Tax Credits. —

(B) Excess Output or Input Tax. — If at the end of any taxable quarter the output tax exceeds the input
tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the
excess shall be carried over to the succeeding quarter or quarters: [Provided, That the input tax
inclusive of input VAT carried over from the previous quarter that may be credited in every quarter
shall not exceed seventy percent (70%) of the output VAT:] 43 Provided, however, That any input tax
attributable to zero-rated sales by a VAT-registered person may at his option be refunded or
credited against other internal revenue taxes, subject to the provisions of Section 112.

Section 112:44

Sec. 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 or 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.

(B) Capital Goods.- A VAT — registered person may apply for the issuance of a tax credit certificate or
refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input
taxes have not been applied against output taxes. The application may be made only within two (2)
years after the close of the taxable quarter when the importation or purchase was made.

(C) Cancellation of VAT Registration. — A person whose registration has been cancelled due to
retirement from or cessation of business, or due to changes in or cessation of status under Section
106(C) of this Code may, within two (2) years from the date of cancellation, apply for the issuance of a
tax credit certificate for any unused input tax which may be used in payment of his other internal
revenue taxes

(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 twenty (120) days from the date of submission of complete documents in support of
the application filed in accordance with Subsection (A) and (B) hereof.

In case of full or partial denial of the claim 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 day-period, appeal the decision or the unacted claim with the Court of Tax
Appeals.

(E) Manner of Giving Refund. — Refunds shall be made upon warrants drawn by the Commissioner or
by his duly authorized representative without the necessity of being countersigned by the Chairman,
Commission on Audit, the provisions of the Administrative Code of 1987 to the contrary
notwithstanding: Provided, that refunds under this paragraph shall be subject to post audit by the
Commission on Audit.

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 excessively or in any manner wrongfully collected, until a claim for
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.

I. Application of the 120+30 Day Periods

Like San Roque case , Taganito also filed its petition for review with the CTA without waiting for the 120-day
period to lapse. Also, like San Roque, Taganito filed its judicial claim before the promulgation of the Atlas
doctrine. Taganito filed a Petition for Review on 14 February 2007 with the CTA. This is almost four months
before the adoption of the Atlas doctrine on 8 June 2007. Taganito is similarly situated as San Roque - both
cannot claim being misled, misguided, or confused by the Atlas doctrine.

However, Taganito can invoke BIR Ruling No. DA-489-03 dated 10 December 2003, which expressly ruled
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." Taganito filed its judicial claim after the
issuance of BIR Ruling No. DA-489-03 but before the adoption of the Aichi doctrine. Thus, as will be explained
later, Taganito is deemed to have filed its judicial claim with the CTA on time.

II. Prescriptive Periods under Section 112(A) and (C)

There are three compelling reasons why the 30-day period need not necessarily fall within the two-year
prescriptive period, as long as the administrative claim is filed within the two-year prescriptive period.

First, Section 112(A) clearly, plainly, and unequivocally provides that the taxpayer "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 the creditable input tax due or paid to such sales." In short, the law states that the
taxpayer may apply with the Commissioner for a refund or credit "within two (2) years," which means at
anytime within two years. Thus, the application for refund or credit may be filed by the taxpayer with the
Commissioner on the last day of the two-year prescriptive period and it will still strictly comply with the law.
The twoyear prescriptive period is a grace period in favor of the taxpayer and he can avail of the full period
before his right to apply for a tax refund or credit is barred by prescription.

Second, Section 112(C) provides that the Commissioner shall decide the application for refund or credit
"within one hundred twenty (120) days from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A)." The reference in Section 112(C) of the submission of
documents "in support of the application filed in accordance with Subsection A" means that the application in
Section 112(A) is the administrative claim that the Commissioner must decide within the 120-day period. In
short, the two-year prescriptive period in Section 112(A) refers to the period within which the taxpayer can
file an administrative claim for tax refund or credit. Stated otherwise, the two-year prescriptive period
does not refer to the filing of the judicial claim with the CTA but to the filing of the administrative
claim with the Commissioner. As held in Aichi, the "phrase ‘within two years x x x apply for the issuance of a
tax credit or refund’ refers to applications for refund/credit with the CIR and not to appeals made to
the CTA."

Third, if the 30-day period, or any part of it, is required to fall within the two-year prescriptive period
(equivalent to 730 days), then the taxpayer must file his administrative claim for refund or credit within the
first 610 days of the two-year prescriptive period. Otherwise, the filing of the administrative claim
beyond the first 610 days will result in the appeal to the CTA being filed beyond the two-year
prescriptive period. Thus, if the taxpayer files his administrative claim on the 611th day, the Commissioner,
with his 120-day period, will have until the 731st day to decide the claim. If the Commissioner decides only
on the 731st day, or does not decide at all, the taxpayer can no longer file his judicial claim with the CTA
because the two-year prescriptive period (equivalent to 730 days) has lapsed. The 30-day period granted by
law to the taxpayer to file an appeal before the CTA becomes utterly useless, even if the taxpayer complied
with the law by filing his administrative claim within the two-year prescriptive period.

The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that is
not found in the law. It results in truncating 120 days from the 730 days that the law grants the taxpayer for
filing his administrative claim with the Commissioner. This Court cannot interpret a law to defeat, wholly or
even partly, a remedy that the law expressly grants in clear, plain, and unequivocal language.

Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The
taxpayer can file his administrative claim for refund or credit at anytime within the two-year prescriptive
period. If he files his claim on the last day of the two-year prescriptive period, his claim is still filed on time.
The Commissioner will have 120 days from such filing to decide the claim. If the Commissioner decides the
claim on the 120th day, or does not decide it on that day, the taxpayer still has 30 days to file his judicial claim
with the CTA. This is not only the plain meaning but also the only logical interpretation of Section 112(A) and
(C).
 III. "Excess" Input VAT and "Excessively" Collected Tax

The input VAT is not "excessively" collected as understood under Section 229 because at the time the input
VAT is collected the amount paid is correct and proper. The input VAT is a tax liability of, and legally paid
by, a VAT-registered seller61 of goods, properties or services used as input by another VAT-registered person
in the sale of his own goods, properties, or services. This tax liability is true even if the seller passes on the
input VAT to the buyer as part of the purchase price. The second VAT-registered person, who is not legally
liable for the input VAT, is the one who applies the input VAT as credit for his own output VAT. 62 If the input
VAT is in fact "excessively" collected as understood under Section 229, then it is the first VAT-registered
person - the taxpayer who is legally liable and who is deemed to have legally paid for the input VAT - who can
ask for a tax refund or credit under Section 229 as an ordinary refund or credit outside of the VAT System. In
such event, the second VAT-registered taxpayer will have no input VAT to offset against his own output VAT.

In a claim for refund or credit of "excess" input VAT under Section 110(B) and Section 112(A), the input VAT
is not "excessively" collected as understood under Section 229. At the time of payment of the input VAT the
amount paid is the correct and proper amount. Under the VAT System, there is no claim or issue that the
input VAT is "excessively" collected, that is, that the input VAT paid is more than what is legally due. The
person legally liable for the input VAT cannot claim that he overpaid the input VAT by the mere existence of
an "excess" input VAT. The term "excess" input VAT simply means that the input VAT available as credit
exceeds the output VAT, not that the input VAT is excessively collected because it is more than what is legally
due. Thus, the taxpayer who legally paid the input VAT cannot claim for refund or credit of the input VAT as
"excessively" collected under Section 229.

Under Section 229, the prescriptive period for filing a judicial claim for refund is two years from the date of
payment of the tax "erroneously, x x x illegally, x x x excessively or in any manner wrongfully collected." The
prescriptive period is reckoned from the date the person liable for the tax pays the tax. Thus, if the input VAT
is in fact "excessively" collected, that is, the person liable for the tax actually pays more than what is legally
due, the taxpayer must file a judicial claim for refund within two years from his date of payment. Only the
person legally liable to pay the tax can file the judicial claim for refund. The person to whom the tax is
passed on as part of the purchase price has no personality to file the judicial claim under Section
229.63

Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for "excess" input
VAT is two years from the close of the taxable quarter when the sale was made by the person legally liable to
pay the output VAT. This prescriptive period has no relation to the date of payment of the "excess" input
VAT. The "excess" input VAT may have been paid for more than two years but this does not bar the filing of a
judicial claim for "excess" VAT under Section 112(A), which has a different reckoning period from Section
229. Moreover, the person claiming the refund or credit of the input VAT is not the person who legally paid
the input VAT. Such person seeking the VAT refund or credit does not claim that the input VAT was
"excessively" collected from him, or that he paid an input VAT that is more than what is legally due. He is not
the taxpayer who legally paid the input VAT.

Under Section 110(B), a taxpayer can apply his input VAT only against his output VAT. The only exception is
when the taxpayer is expressly "zero-rated or effectively zero-rated" under the law, like companies
generating power through renewable sources of energy. 64 Thus, a non zero-rated VAT-registered taxpayer
who has no output VAT because he has no sales cannot claim a tax refund or credit of his unused input VAT
under the VAT System. Even if the taxpayer has sales but his input VAT exceeds his output VAT, he cannot
seek a tax refund or credit of his "excess" input VAT under the VAT System. He can only carry-over and
apply his "excess" input VAT against his future output VAT. If such "excess" input VAT is an "excessively"
collected tax, the taxpayer should be able to seek a refund or credit for such "excess" input VAT whether or
not he has output VAT. The VAT System does not allow such refund or credit. Such "excess" input VAT is not
an "excessively" collected tax under Section 229. The "excess" input VAT is a correctly and properly collected
tax. However, such "excess" input VAT can be applied against the output VAT because the VAT is a tax
imposed only on the value added by the taxpayer. If the input VAT is in fact "excessively" collected under
Section 229, then it is the person legally liable to pay the input VAT, not the person to whom the tax was
passed on as part of the purchase price and claiming credit for the input VAT under the VAT System, who can
file the judicial claim under Section 229.

From the plain text of Section 229, it is clear that what can be refunded or credited is a tax that is
"erroneously, x x x illegally, x x x excessively or in any manner wrongfully collected." In short, there must be
a wrongful payment because what is paid, or part of it, is not legally due. As the Court held in Mirant, Section
229 should "apply only to instances of erroneous payment or illegal collection of internal revenue
taxes." Erroneous or wrongful payment includes excessive payment because they all refer to payment of
taxes not legally due. Under the VAT System, there is no claim or issue that the "excess" input VAT is
"excessively or in any manner wrongfully collected." In fact, if the "excess" input VAT is an "excessively"
collected tax under Section 229, then the taxpayer claiming to apply such "excessively" collected input VAT to
offset his output VAT may have no legal basis to make such offsetting. The person legally liable to pay the
input VAT can claim a refund or credit for such "excessively" collected tax, and thus there will no longer be
any "excess" input VAT. This will upend the present VAT System as we know it.

IV. Effectivity and Scope of the Atlas , Mirant and Aichi Doctrines

The Atlas doctrine, which held that claims for refund or credit of input VAT must comply with the two-year
prescriptive period under Section 229, should be effective only from its promulgation on 8 June 2007
until its abandonment on 12 September 2008 in Mirant. The Atlas doctrine was limited to the reckoning
of the two-year prescriptive period from the date of payment of the output VAT. Prior to the Atlas doctrine,
the two-year prescriptive period for claiming refund or credit of input VAT should be governed by Section
112(A) following the verba legis rule. The Mirant ruling, which abandoned the Atlas doctrine, adopted the
verba legis rule, thus applying Section 112(A) in computing the two-year prescriptive period in claiming
refund or credit of input VAT.

The Atlas doctrine has no relevance to the 120+30 day periods under Section 112(C) because the application
of the 120+30 day periods was not in issue in Atlas. The application of the 120+30 day periods was first
raised in Aichi, which adopted the verba legis rule in holding that the 120+30 day periods are mandatory and
jurisdictional. The language of Section 112(C) is plain, clear, and unambiguous. When Section 112(C) states
that "the Commissioner shall grant a refund or issue the tax credit within one hundred twenty (120) days
from the date of submission of complete documents," the law clearly gives the Commissioner 120 days within
which to decide the taxpayer’s claim. Resort to the courts prior to the expiration of the 120-day period is a
patent violation of the doctrine of exhaustion of administrative remedies, a ground for dismissing the judicial
suit due to prematurity. Philippine jurisprudence is awash with cases affirming and reiterating the doctrine of
exhaustion of administrative remedies.65 Such doctrine is basic and elementary.

When Section 112(C) states that "the taxpayer affected may, within thirty (30) days from receipt of the
decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision
or the unacted claim with the Court of Tax Appeals," the law does not make the 120+30 day periods optional
just because the law uses the word "may." The word "may" simply means that the taxpayer may or may not
appeal the decision of the Commissioner within 30 days from receipt of the decision, or within 30 days from
the expiration of the 120-day period. Certainly, by no stretch of the imagination can the word "may" be
construed as making the 120+30 day periods optional, allowing the taxpayer to file a judicial claim one day
after filing the administrative claim with the Commissioner.

The old rule66 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.

WHEREFORE, the Court hereby GRANTS the petition of Taganito Mining Corporation in G.R. No. 196113 for a
tax refund or credit of P8,365,664.38.

21. Philex Mining Corporation vs. CIR, GR No. 197156 (2013)

CIR v. SAN ROQUE POWER CORPORATION

TAGANITO MINING CORPORATION v. CIR

PHILEX MINING CORPORATION v. CIR

G.R. No. 187485, G.R. No. 196113, G.R. No. 197156, October 08, 2013, CARPIO, J.

FACTS:

This case is a consolidated decision resolving the MR and Supplemental MR filed by the private companies
and CIR questioning the 12 February 2013 Decision of the SC.

To understand the resolution, one must note the previous SC Decision and Sec. 112 (D) of the 199 Tax Code:

Section 112. Refunds or Tax Credits of Input Tax.

(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 twenty (120) days from the date of submission of compete documents in
support of the application filed in accordance with Subsections (A) and (B) hereof.
 In case of full or partial denial of the claim 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 day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals.-

The SC Decision:

At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory
periods were already in the law. Section 112(D) expressly grants the Commissioner 120 days
within which to decide the taxpayer’s claim. The law is clear, plain, and unequivocal: “x x x the
Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within
one hundred twenty (120) days from the date of submission of complete documents.” Following the
verba legis doctrine, this law must be applied exactly as worded since it is clear, plain, and
unequivocal.

The taxpayer cannot simply file a petition with the CTA without waiting for the
Commissioner’s decision within the 120-day mandatory and jurisdictional period. The CTA
will have no jurisdiction because there will be no “decision” or “deemed a denial” decision of
the Commissioner for the CTA to review.

In San Roque’s case, it filed its petition with the CTA a mere 13 days after it filed its administrative
claim with the Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day
period, and it cannot blame anyone but itself.

Section 112(D) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision
or inaction of the Commissioner

To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly
against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT
System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict
compliance with the 120+30 day periods is necessary for such a claim to prosper

Note that at the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory
periods were already in the law. Now, San Roque prays that the rule established in our 12 February 2013
Decision be given only a prospective effect, arguing that “the manner by which the BIR and the CTA actually
treated the 120 + 30 day periods constitutes an operative fact the effects and consequences of which cannot
be erased or undone.”

ISSUE: Whether or not BIR and the CTA actually treated the 120 + 30 day periods constitutes an operative
fact.

RULING: NO. BIR and the CTA did not treat the 120 + 30 day periods as an operative fact.

The general rule is that a void law or administrative act cannot be the source of legal rights or duties. Article 7
of the Civil Code enunciates this general rule, as well as its exception: “Laws are repealed only by subsequent
ones, and their violation or non-observance shall not be excused by disuse, or custom or practice to the
contrary. When the courts declared a law to be inconsistent with the Constitution, the former shall be void
and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when
they are not contrary to the laws or the Constitution.”

The doctrine of operative fact is an exception to the general rule, such that a judicial declaration of
invalidity may not necessarily obliterate all the effects and consequences of a void act prior to such
declaration.

In the case of Serrano de Agbayani v. Philippine National Bank,

It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be
reckoned with. This is merely to reflect awareness that precisely because the judiciary is the
governmental organ which has the final say on whether or not a legislative or executive
measure is valid, a period of time may have elapsed before it can exercise the power of judicial
review that may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such
adjudication.

Clearly, for the operative fact doctrine to apply, there must be a “legislative or executive measure,”
meaning a law or executive issuance, that is invalidated by the court.

To justify the application of the doctrine of operative fact as an exemption, San Roque asserts that “the BIR
and the CTA in actual practice did not observe and did not require refund seekers to comply with the
120+30 day periods.” This is glaring error because an administrative practice is neither a law nor an
executive issuance. Moreover, in the present case, there is even no such administrative practice by the
BIR as claimed by San Roque. San Roque’s argument must, therefore, fail.

The doctrine of operative fact is in fact incorporated in Section 246 of the Tax Code, which provides:

SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of the
rules and regulations promulgated in accordance with the preceding Sections or any of the
rulings or circulars promulgated by the Commissioner shall not be given retroactive
application if the revocation, modification or reversal will be prejudicial to the taxpayers,
except in the following cases:

(a) Where the taxpayer deliberately misstates or omits material facts from his return or any
document required of him by the Bureau of Internal Revenue

(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different
from the facts on which the ruling is based; or

(c) Where the taxpayer acted in bad faith.

Under Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time the
rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given
retroactive effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule or
ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere
administrative practice, not formalized into a rule or ruling, will not suffice because such a mere
administrative practice may not be uniformly and consistently applied. An administrative practice, if
not formalized as a rule or ruling, will not be known to the general public and can be availed of only
by those with informal contacts with the government agency.

WHEREFORE, we DENY with FINALITY the Motions for Reconsideration filed by San Roque Power
Corporation in G.R. No. 187485,and the Commissioner of Internal Revenue in G.R. No. 196113.

SO ORDERED.

22. Mindanao II Geothermal Partnership vs. CIR, GR No. 193301/194637 (2013)

MINDANAO II GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 193301, March 11, 2013

x-----------------------x

MINDANAO I GEOTHERMAL PARTNERSHIP vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 194637, CARPIO, J.

FACTS:

G.R. No. 193301

Mindanao II allegedly entered into a Built (sic)-Operate-Transfer (BOT) contract with the Philippine National
Oil Corporation – Energy Development Company (PNOC-EDC) for finance, engineering, supply, installation,
testing, commissioning, operation, and maintenance of a 48.25 megawatt geothermal power plant, provided
that PNOC-EDC shall supply and deliver steam to Mindanao II at no cost. Mindanao II alleges that its sale of
generated power and delivery of electric capacity and energy of Mindanao II to NPC for and in behalf of
PNOC-EDC is its only revenue generating activity which is in the ambit of VAT zero-rated sales under the
EPIRA Law. Hence, the amendment of the NIRC of 1997 modified the VAT rate applicable to sales of generated
power by generation companies from ten (10%) percent to zero (0%) percent. Mindanao II alleges that it can
use its accumulated input tax credits to offset its output tax liability. Considering, however that its only
revenue-generating activity is VAT zero rated under RA No. 9136, Mindanao II’s input tax credits remain
unutilized. Thus, on the belief that its sales qualify for VAT zero-rating, Mindanao II adopted the VAT zero
rating of the EPIRA in computing for its VAT payable when it filed its Quarterly VAT Returns. Considering that
it has accumulated unutilized creditable input taxes from its only income-generating activity, Mindanao II
filed an application for refund and/or issuance of tax credit certificate with the BIR’s Revenue District Office
at Kidapawan City on April 13, 2005 for the four quarters of 2003. To date (September 22, 2008), the
application for refund by Mindanao II remains unacted upon by the CIR.

The CTA First Division found that Mindanao II satisfied the twin requirements for VAT zero rating under
EPIRA: (1) it is a generation company, and (2) it derived sales from power generation. The CTA First Division
also stated that Mindanao II complied with five requirements to be entitled to a refund.

The CTA First Division found that Mindanao II is entitled to a refund in the modified amount of ₱7,703,957.79,
after disallowing ₱522,059.91 from input VAT16 and deducting ₱18,181.82 from Mindanao II’s sale of a fully
depreciated ₱200,000.00 Nissan Patrol. The input taxes amounting to ₱522,059.91 were disallowed for
failure to meet invoicing requirements, while the input VAT on the sale of the Nissan Patrol was reduced by
₱18,1 81.82 because the output VAT for the sale was not included in the VAT declarations.

Mindanao II filed a motion for partial reconsideration. The CIR also filed a motion for partial reconsideration.
It argued that the judicial claims for the first and second quarters of 2003 were filed beyond the period
allowed by law, as stated in Section 112(A) of the 1997 Tax Code. The CIR further stated that Section 229 is a
general provision, and governs cases not covered by Section 112(A). The CIR countered the CTA First
Division’s 22 September 2008 decision by citing this Court’s ruling in Commisioner of Internal Revenue v.
Mirant Pagbilao Corporation (Mirant), which stated that unutilized input VAT payments must be claimed
within two years reckoned from the close of the taxable quarter when the relevant sales were made
regardless of whether said tax was paid.

The CTA First Division denied Mindanao II’s motion for partial reconsideration, found the CIR’s motion for
partial reconsideration partly meritorious, and rendered an Amended Decision 20 on 26 June 2009. The CTA
First Division stated that the claim for refund or credit with the BIR and the subsequent appeal to the CTA
must be filed within the two-year period prescribed under Section 229. The two-year prescriptive period in
Section 229 was denominated as a mandatory statute of limitations. Therefore, Mindanao II’s claims for
refund for the first and second quarters of 2003 had already prescribed.

The CTA En Banc rendered its Decision23 in CTA EB No. 513 and denied Mindanao II’s petition. The CTA En
Banc issued a Resolution on 28 July 2010 denying for lack of merit Mindanao II’s Motion for Reconsideration.

G.R. No. 194637

Mindanao I entered into a contract of Build-Operate-Transfer (BOT) with the Philippine National Oil
Corporation – Energy Development Corporation (PNOC-EDC) for the finance, design, construction, testing,
commissioning, operation, maintenance and repair of a 47-megawatt geothermal power plant. On June 26,
2001, Republic Act (R.A.) No. 9136 took effect, and the relevant provisions of the National Internal Revenue
Code (NIRC) of 1997 were deemed modified. R.A. No. 9136, also known as the "Electric Power Industry
Reform Act of 2001 (EPIRA), was enacted by Congress to ordain reforms in the electric power industry,
highlighting, among others, the importance of ensuring the reliability, security and affordability of the supply
of electric power to end users. The amendment of the NIRC of 1997 modified the VAT rate applicable to sales
of generated power by generation companies from ten (10%) percent to zero percent (0%). Thus, Mindanao I
adopted the VAT zero-rating of the EPIRA in computing for its VAT payable when it filed its VAT Returns, on
the belief that its sales qualify for VAT zero-rating. Mindanao I reported its unutilized or excess creditable
input taxes in its Quarterly VAT Returns for the first, second, third, and fourth quarters of taxable year 2003,
which were subsequently amended and filed with the BIR.

Alleging inaction on the part of CIR, Mindanao I elevated its claims before this Court. However, on October 10,
2005, Mindanao I received a copy of the letter dated September 30, 2003 (sic) of the BIR denying its
application for tax credit/refund.

The dispositive portion of the CTA Second Division’s 24 October 2008 Decision reads:

WHEREFORE, premises considered, the consolidated Petitions for Review are hereby PARTIALLY GRANTED.
Accordingly, the CIR is hereby ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in favor of Mindanao I in the
reduced amount of TEN MILLION FIVE HUNDRED TWENTY THREE THOUSAND ONE HUNDRED SEVENTY
SEVEN PESOS AND 53/100 (₱10,523,177.53) representing Mindanao I’s unutilized input VAT for the four
quarters of the taxable year 2003.
Mindanao I filed a motion for partial reconsideration with motion for Clarification. The CIR also filed a motion
for partial reconsideration. The CTA Second Division denied the CIR’s motion, and cited Atlas33 as the basis
for ruling that it is more practical and reasonable to count the two-year prescriptive period for filing a claim
for refund or credit of input VAT on zero-rated sales from the date of filing of the return and payment of the
tax due.

The CTA En Banc found no new matters which have not yet been considered and passed upon by the CTA
Second Division in its assailed decision and resolution.

Both the CIR and Mindanao I filed Motions for Reconsideration of the CTA En Banc’s 31 May 2010 Decision. In
an Amended Decision promulgated on 24 November 2010, the CTA En Banc agreed with the CIR’s claim that
Section 229 of the NIRC of 1997 is inapplicable in light of this Court’s ruling in Mirant. The CTA En Banc also
ruled that the procedure prescribed under Section 112(D) now 112(C)37 of the 1997 Tax Code should be
followed first before the CTA En Banc can act on Mindanao I’s claim. The CTA En Banc reconsidered its 31
May 2010 Decision in light of this Court’s ruling in Commissioner of Internal Revenue v. Aichi Forging
Company of Asia, Inc.

ISSUES:

Mindanao II raised the following grounds in its Petition for Review:

1. Whether the Honorable Court of Tax Appeals erred in holding that the claim of Mindanao II for the 1st and
2nd quarters of year 2003 has already prescribed pursuant to the Mirant case.

2. Whether the Honorable Court of Tax Appeals erred in interpreting Section 105 of the 1997 Tax Code, as
amended in that the sale of the fully depreciated Nissan Patrol is a one-time transaction and is not incidental
to the VAT zero-rated operation of Mindanao II.

3. Whether the Honorable Court of Tax Appeals erred in denying the amount disallowed by the Independent
Certified Public Accountant as Mindanao II substantially complied with the requisites of the 1997 Tax Code,
as amended, for refund/tax credit.

4. Whether the doctrine of strictissimi juris on tax exemptions should be relaxed in the present case.

G.R. No. 194637

1. Whether he administrative claim and judicial claim in CTA Case No. 7228 were timely filed pursuant to the
case of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue,
which was then the controlling ruling at the time of filing.

2. Whether the recent ruling of this Honorable Court in Commissioner of Internal Revenue vs. Aichi Forging
Company of Asia, Inc., cannot be applied retroactively to Mindanao I in the present case.

In a Resolution dated 14 December 2011, this Court resolved to consolidate G.R. Nos. 193301 and 194637 to
avoid conflicting rulings in related cases.

RULING:

Determination of Prescriptive Period

The pertinent sections of the 1997 Tax Code, the law applicable at the time of Mindanao II’s and Mindanao I’s
administrative and judicial claims, provide:

SEC. 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 or 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.

When Mindanao II and Mindanao I filed their respective administrative and judicial claims in 2005, neither
Atlas nor Mirant has been promulgated. Atlas was promulgated on 8 June 2007, while Mirant was
promulgated on 12 September 2008. It is therefore misleading to state that Atlas was the controlling doctrine
at the time of filing of the claims. The 1997 Tax Code, which took effect on 1 January 1998, was the applicable
law at the time of filing of the claims in issue. As this Court explained in the recent consolidated cases of
Commissioner of Internal Revenue v. San Roque Power Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and Philex Mining Corporation v. Commissioner of Internal Revenue (San
Roque):

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. It is
indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional. The waiting
period, originally fixed at 60 days only, was part of the provisions of the first VAT law, Executive Order No.
273, which took effect on 1 January 1988. The waiting period was extended to 120 days effective 1 January
1998 under RA 8424 or the Tax Reform Act of 1997. Thus, the waiting period has been in our statute books
for more than fifteen (15) years before San Roque filed its judicial claim.

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.
Philippine jurisprudence is replete with cases upholding and reiterating these doctrinal principles.

The charter of the CTA expressly provides that its jurisdiction is to review on appeal "decisions of the
Commissioner of Internal Revenue in cases involving x x x 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 Commissioner, there is no "decision" of the Commissioner 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 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. It is the Commissioner’s decision, or
inaction "deemed a denial," that the taxpayer can take to the CTA for review. Without a decision or an
"inaction x x x deemed a denial" of the Commissioner, the CTA has no jurisdiction over a petition for review.
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.

San Roque cannot also claim being misled, misguided or confused by the Atlas doctrine because San Roque
filed its petition for review with the CTA more than four years before Atlas was promulgated. The Atlas
doctrine did not exist at the time San Roque failed to comply with the 120- day period. Thus, San Roque
cannot invoke the Atlas doctrine as an excuse for its failure to wait for the 120-day period to lapse. In any
event, the Atlas doctrine merely stated that the two-year prescriptive period should be counted from the date
of payment of the output VAT, not from the close of the taxable quarter when the sales involving the input
VAT were made. The Atlas doctrine does not interpret, expressly or impliedly, the 120+30 day periods.

Prescriptive Period for the Filing of Administrative Claims

In determining whether the administrative claims of Mindanao I and Mindanao II for 2003 have prescribed,
we see no need to rely on either Atlas or Mirant. Section 112(A) of the 1997 Tax Code is clear: "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 x x x."

We rule on Mindanao I and II’s administrative claims for the first, second, third, and fourth quarters of 2003
as follows:

(1) The last day for filing an application for tax refund or credit with the CIR for the first quarter of
2003 was on 31 March 2005. Mindanao II filed its administrative claim before the CIR on 13 April
2005, while Mindanao I filed its administrative claim before the CIR on 4 April 2005. Both claims
have prescribed, pursuant to Section 112(A) of the 1997 Tax Code.

(2) The last day for filing an application for tax refund or credit with the CIR for the second quarter of
2003 was on 30 June 2005. Mindanao II filed its administrative claim before the CIR on 13 April
2005, while Mindanao I filed its administrative claim before the CIR on 4 April 2005. Both claims
were filed on time, pursuant to Section 112(A) of the 1997 Tax Code.

(3) The last day for filing an application for tax refund or credit with the CIR for the third quarter of
2003 was on 30 September 2005. Mindanao II filed its administrative claim before the CIR on 13
April 2005, while Mindanao I filed its administrative claim before the CIR on 4 April 2005. Both
claims were filed on time, pursuant to Section 112(A) of the 1997 Tax Code.

(4) The last day for filing an application for tax refund or credit with the CIR for the fourth quarter of
2003 was on 2 January 2006. Mindanao II filed its administrative claim before the CIR on 13 April
2005, while Mindanao I filed its administrative claim before the CIR on 4 April 2005. Both claims
were filed on time, pursuant to Section 112(A) of the 1997 Tax Code.

Prescriptive Period for the Filing of Judicial Claims

In determining whether the claims for the second, third and fourth quarters of 2003 have been properly
appealed, we still see no need to refer to either Atlas or Mirant, or even to Section 229 of the 1997 Tax Code.
The second paragraph of Section 112(C) of the 1997 Tax Code is clear: "In case of full or partial denial of the
claim 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 day-period, appeal the decision
or the unacted claim with the Court of Tax Appeals."

The mandatory and jurisdictional nature of the 120+30 day periods was explained in San Roque:

At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were
already in the law. Section 112(C) expressly grants the Commissioner 120 days within which to decide the
taxpayer’s claim. The law is clear, plain, and unequivocal: "x x x the Commissioner shall grant a refund or
issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date
of submission of complete documents." Following the verba legis doctrine, this law must be applied exactly as
worded since it is clear, plain, and unequivocal. The taxpayer cannot simply file a petition with the CTA
without waiting for the Commissioner’s decision within the 120-day mandatory and jurisdictional period. The
CTA will have no jurisdiction because there will be no "decision" or "deemed a denial" decision of the
Commissioner for the CTA to review. In San Roque’s case, it filed its petition with the CTA a mere 13 days
after it filed its administrative claim with the Commissioner. Indisputably, San Roque knowingly violated the
mandatory 120-day period, and it cannot blame anyone but itself.

Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or
inaction of the Commissioner.

The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that is
not found in the law. It results in truncating 120 days from the 730 days that the law grants the taxpayer for
filing his administrative claim with the Commissioner. This Court cannot interpret a law to defeat, wholly or
even partly, a remedy that the law expressly grants in clear, plain, and unequivocal language.

We rule on Mindanao I and II’s judicial claims for the second, third, and fourth quarters of 2003 as follows:

G.R. No. 193301

Mindanao II filed its administrative claims for the second, third, and fourth quarters of 2003 on 13 April 2005.
Counting 120 days after filing of the administrative claim with the CIR (11 August 2005) and 30 days after the
CIR’s denial by inaction, the last day for filing a judicial claim with the CTA for the second, third, and fourth
quarters of 2003 was on 12 September 2005. However, the judicial claim cannot be filed earlier than 11
August 2005, which is the expiration of the 120-day period for the Commissioner to act on the claim.

(1) Mindanao II filed its judicial claim for the second quarter of 2003 before the CTA on 7 July 2005,
before the expiration of the 120-day period. Pursuant to Section 112(C) of the 1997 Tax Code,
Mindanao II’s judicial claim for the second quarter of 2003 was prematurely filed. However, pursuant
to San Roque’s recognition of the effect of BIR Ruling No. DA-489-03, we rule that Mindanao II’s
judicial claim for the second quarter of 2003 qualifies under the exception to the strict application of
the 120+30 day periods.
 (2) Mindanao II filed its judicial claim for the third quarter of 2003 before the CTA on 9 September
2005. Mindanao II’s judicial claim for the third quarter of 2003 was thus filed on time, pursuant to
Section 112(C) of the 1997 Tax Code.

(3) Mindanao II filed its judicial claim for the fourth quarter of 2003 before the CTA on 9 September
2005. Mindanao II’s judicial claim for the fourth quarter of 2003 was thus filed on time, pursuant to
Section 112(C) of the 1997 Tax Code.

G.R. No. 194637

Mindanao I filed its administrative claims for the second, third, and fourth quarters of 2003 on 4 April 2005.
Counting 120 days after filing of the administrative claim with the CIR (2 August 2005) and 30 days after the
CIR’s denial by inaction, the last day for filing a judicial claim with the CTA for the second, third, and fourth
quarters of 2003 was on 1 September 2005. However, the judicial claim cannot be filed earlier than 2 August
2005, which is the expiration of the 120-day period for the Commissioner to act on the claim.

(1) Mindanao I filed its judicial claim for the second quarter of 2003 before the CTA on 7 July 2005,
before the expiration of the 120-day period. Pursuant to Section 112(C) of the 1997 Tax Code,
Mindanao I’s judicial claim for the second quarter of 2003 was prematurely filed. However, pursuant
to San Roque’s recognition of the effect of BIR Ruling No. DA-489-03, we rule that Mindanao I’s
judicial claim for the second quarter of 2003 qualifies under the exception to the strict application of
the 120+30 day periods.

(2) Mindanao I filed its judicial claim for the third quarter of 2003 before the CTA on 9 September
2005. Mindanao I’s judicial claim for the third quarter of 2003 was thus filed after the prescriptive
period, pursuant to Section 112(C) of the 1997 Tax Code.

(3) Mindanao I filed its judicial claim for the fourth quarter of 2003 before the CTA on 9 September
2005. Mindanao I’s judicial claim for the fourth quarter of 2003 was thus filed after the prescriptive
period, pursuant to Section 112(C) of the 1997 Tax Code.

San Roque: Recognition of BIR Ruling No. DA-489-03

In the consolidated cases of San Roque, the Court En Banc examined and ruled on the different claims for tax
refund or credit of three different companies. In San Roque, we reiterated that "following the verba legis
doctrine, Section 112(C) must be applied exactly as worded since it is clear, plain, and unequivocal. The
taxpayer cannot simply file a petition with the CTA without waiting for the Commissioner’s decision within
the 120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no
‘decision’ or ‘deemed a denial decision’ of the Commissioner for the CTA to review." Notwithstanding a strict
construction of any claim for tax exemption or refund, the Court in San Roque 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."

Thus, the only issue is whether BIR Ruling No. DA-489-03 is a general interpretative rule applicable to all
taxpayers or a specific ruling applicable only to a particular taxpayer.

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a
particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is, the
One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance. This government
agency is also the addressee, or the entity responded to, in BIR Ruling No. DA-489-03.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers can rely on BIR Ruling
No. DA-489-03 from the time of its issuance on 10 December 2003 up to its reversal by this Court in Aichi on
6 October 2010, where this Court held that the 120+30 day periods are mandatory and jurisdictional.

Summary of Rules on Prescriptive Periods Involving VAT

We summarize the rules on the determination of the prescriptive period for filing a tax refund or credit of
unutilized input VAT as provided in Section 112 of the 1997 Tax Code, as follows:

(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter
when the zero-rated or effectively zero-rated sales were made.

(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative
claim within which to decide whether to grant a refund or issue a tax credit certificate. The 120-day period
may extend beyond the two-year period from the filing of the administrative claim if the claim is filed in the
later part of the two-year period. If the 120-day period expires without any decision from the CIR, then the
administrative claim may be considered to be denied by inaction.

(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision denying
the administrative claim or from the expiration of the 120-day period without any action from the CIR.

(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10
December 2003 up to its reversal by this Court in Aichi on 6 October 2010, as an exception to the mandatory
and jurisdictional 120+30 day periods.

"Incidental" Transaction

Mindanao II’s sale of the Nissan Patrol is said to be an isolated transaction. 1â wphi1 However, it does not
follow that an isolated transaction cannot be an incidental transaction for purposes of VAT liability. Indeed, a
reading of Section 105 of the 1997 Tax Code would show that a transaction "in the course of trade or
business" includes "transactions incidental thereto."

Mindanao II’s business is to convert the steam supplied to it by PNOC-EDC into electricity and to deliver the
electricity to NPC. In the course of its business, Mindanao II bought and eventually sold a Nissan Patrol. Prior
to the sale, the Nissan Patrol was part of Mindanao II’s property, plant, and equipment. Therefore, the sale of
the Nissan Patrol is an incidental transaction made in the course of Mindanao II’s business which should be
liable for VAT.

Substantiation Requirements

We are constrained to state that Mindanao II’s compliance with the substantiation requirements is a finding
of fact. The CTA En Banc evaluated the records of the case and found that the transactions in question are
purchases for services and that Mindanao II failed to comply with the substantiation requirements. We affirm
the CTA En Banc’s finding of fact, which in turn affirmed the finding of the CTA First Division. We see no
reason to overturn their findings.
WHEREFORE, we PARTIALLY GRANT the petitions. The Decision of the Court of Tax Appeals En Bane in CT A
EB No. 513 promulgated on 10 March 2010, as well as the Resolution promulgated on 28 July 2010, and the
Decision of the Court of Tax Appeals En Bane in CTA EB Nos. 476 and 483 promulgated on 31 May 2010, as
well as the Amended Decision promulgated on 24 November 2010, are AFFIRMED with MODIFICATION.

For G.R. No. 193301, the claim of Mindanao II Geothermal Partnership for the first quarter of 2003 is DENIED
while its claims for the second, third, and fourth quarters of 2003 are GRANTED. For G.R. No. 19463 7, the
claims of Mindanao I Geothermal Partnership for the first, third, and fourth quarters of 2003 are DENIED
while its claim for the second quarter of 2003 is GRANTED.

SO ORDERED.

23. NIPPON Express (Phils.) Corporation vs. CIR, GR No. 196907 (2013)

NIPPON EXPRESS (PHILIPPINES) CORPORATION vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 196907. March 13, 2013. Third Division. Mendoza, J.

FACTS:
On April 24, 2003, petitioner Nippon Express Corporation filed an administrative claim for refund of
₱20,345,824.29 representing excess input tax attributable to its effectively zero-rated sales in 2001. Pending
review by the BIR, on April 25, 2003, petitioner filed a petition for review with the CTA, requesting for
the issuance of a tax credit certificate in the amount of ₱20,345,824.29.

In its Amended Decision, the CTA First Division held that while the administrative application for refund was
made within the two-year prescriptive period, petitioner’s immediate recourse to the court was a premature
invocation of the court’s jurisdiction due to the non-observance of the procedure in Section 112(D) of the
National Internal Revenue Code (NIRC) providing that an appeal may be made with the CTA within 30 days
from the receipt of the decision of the CIR denying the claim or after the expiration of the 120-day period
without action on the part of the CIR. Considering, however, that the CIR did not register his objection when
he filed his Answer, he is deemed to have waived his objection thereto.

When the case was elevated to the CTA En Banc, the court held that the 120-day period under Section 112(D)
of the NIRC, which granted the CIR the opportunity to act on the claim for refund, was jurisdictional in nature
such that petitioner’s failure to observe the said period before resorting to judicial action warranted the
dismissal of its petition for review for having been prematurely filed, in accordance with the ruling in
Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc.

ISSUE:
Whether or not the CTA has no jurisdiction to entertain the instant case. (YES)

RULING:

YES, the CTA has no jurisdiction to entertain the instant case.

Sec. 112. Refunds or Tax Credits of Input Tax

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 twenty (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 case of full or partial denial of the claim 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 day-period, appeal the decision or the unacted claim with the Court of Tax
Appeals.

A simple reading of the abovequoted provision reveals that the taxpayer may appeal the denial or the
inaction of the CIR only within thirty (30) days from receipt of the decision denying the claim or the
expiration of the 120-day period given to the CIR to decide the claim . Because the law is categorical in its
language, there is no need for further interpretation by the courts and non-compliance with the provision
cannot be justified.

The 120+30-day period is indeed mandatory and jurisdictional, as recently ruled in Commissioner of
Internal Revenue v. San Roque Power Corporation. Thus, failure to observe the said period before filing a
judicial claim with the CTA would not only make such petition premature, but would also result in the
non-acquisition by the CTA of jurisdiction to hear the said case. Because the 120+30 day period is
jurisdictional, the issue of whether petitioner complied with the said time frame may be broached at any
stage, even on appeal. Well-settled is the rule that the question of jurisdiction over the subject matter can be
raised at any time during the proceedings.

Jurisdiction cannot be waived because it is conferred by law and is not dependent on the consent or objection
or the acts or omissions of the parties or any one of them. Consequently, the fact that the CIR failed to
immediately express its objection to the premature filing of the petition for review before the CTA is of no
moment.

Pursuant to the ruling of the Court in San Roque, the 120+30-day period is mandatory and jurisdictional from
the time of the effectivity of Republic Act (R.A.) No. 8424 or the Tax Reform Act of 1997. The Court, however,
took into consideration the issuance by the BIR of Ruling No. DA-489-03, which expressly stated that the
taxpayer need not wait for the lapse of the 120-day period before seeking judicial relief. Because taxpayers
cannot be faulted for relying on this declaration by the BIR, the Court deemed it reasonable to allow taxpayers
to file its judicial claim even before the expiration of the 120-day period. This exception is to be observed
from the issuance of the said ruling on December 10, 2003 up until its reversal by Aichi on October 6, 2010. In
the landmark case of Aichi, this Court made a definitive statement that the failure of a taxpayer to wait for the
decision of the CIR or the lapse of the 120-day period will render the tiling of the judicial claim with the CTA
premature. As a consequence, its promulgation once again made it clear to the taxpayers that the 120+ 30-
day period must be observed.

As laid down in San Roque, judicial claims filed from January 1, 1998 until the present should strictly
adhere to the 120+ 30-day period referred to in Section 112 of the NIRC. The only exception is the
period from December 10, 2003 until October 6, 2010, during which, judicial claims may be tiled even
before the expiration of the 120-day period granted to the CIR to decide on the claim for refund.

Based on the foregoing discussion and the ruling in San Roque, the petition must fail because the judicial
claim of petitioner was filed on April 25, 2003, only one day after it submitted its administrative claim to the
CIR. Petitioner failed to wait for the lapse of the requisite 120-day period or the denial of its claim by the CIR
before elevating the case to the CT A by a petition for review. As its judicial claim was filed during which strict
compliance with the 120+ 30-day period was required, the Court cannot but declare that the filing of the
petition for review with the CT A was premature and that the CTA had no jurisdiction to hear the case.

DISPOSITIVE PORTION:
WHEREFORE, the petition is DENIED. SO ORDERED.

24. REPUBLIC OF THE PHILIPPINES represented by the Commissioner of Internal Revenue, Petitioner,
vs. GST PHILIPPINES, INC., Respondent.

G.R. No. 190872 October 17, 2013

FACTS

GST is a corporation duly organized and existing under the laws of the Philippines, and primarily engaged in
4
the business of manufacturing, processing, selling, and dealing in all kinds of iron, steel or other metals. It is
a duly registered VAT enterprise. which deals with companies registered with (1) the Board of Investments
6
(BOI) pursuant to Executive Order No. (EO) 226, whose manufactured products are 100% exported to
7
foreign countries; and (2) the Philippine Economic Zone Authority (PEZA). Sales made by a VAT-registered
8
person to a PEZA-registered entity are considered exports to a foreign country subject to a zero rate.
During the taxable years 2004 and 2005, GST filed Quarterly VAT Returns showing its zero-rated sales
Claiming unutilized excess input VAT in the total amount of ₱32,722,109.68 attributable to the foregoing
zero-rated sales,10 GST filed before the Bureau of Internal Revenue (BIR) separate claims for refund on the
following dates:11

Period Date of Filing of

Administrative Claim

For Refund

1st Quarter of year 2004 June 9, 2004

2nd Quarter of year 2004 August 12, 2004

3rd Quarter of year 2004 February 18, 2005

4th Quarter of year 2004 February 18, 2005

1st Quarter of year 2005 May 11, 2005

 2nd Quarter of year 2005 November 18, 2005

3rd Quarter of year 2005 November 18, 2005

For failure of the CIR to act on its administrative claims, GST filed a petition for review before the CTA on
March 17, 2006. After due proceedings, the CTA First Division rendered a Decision 12 on January 27, 2009
granting GST’s claims for refund but at the reduced amount of ₱27,369,114.36. The CIR was also ordered to
issue the corresponding tax credit certificate.13

The CIR moved for reconsideration, which was denied 14 by the CTA First Division for lack of merit, thus,
prompting the elevation of the case to the CTA En Banc via a petition for review. 15

The CIR raised therein the failure of GST to substantiate its entitlement to a refund, 16 and argued that the
judicial appeal to the CTA was filed beyond the reglementary periods prescribed in Section 112 of RA 8424 17
(Tax Code).18

On October 30, 2009, the CTA En Banc affirmed19 the Decision of the CTA First Division

ISSUE

Whether GST’s action for refund has complied with the prescriptive periods under the Tax Code.

HELD

The Petition is partly granted. Refund or tax credit of unutilized excess input VAT has been allowed as early
as in the Original VAT Law – EO 273. 22 This was later amended by RA 771623 and RA 8424, and further
amended by RA 933724 which took effect on November 1, 2005. 25 Since GST’s claims for refund covered the
periods before the effectivity of RA 9337, the old provision on VAT refund, specifically Section 112, as
amended by RA 8424, shall apply.26 It reads:

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: x x x. (Emphasis supplied)

(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 twenty (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 case of full or partial denial of the claim 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 day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Emphasis
supplied)

The CIR, adopting the dissenting opinion27 of CTA Presiding Justice Ernesto D. Acosta to the CTA En Banc
Decision dated October 30, 2009, maintains that the two-year prescriptive period under Section 112 (A) of
the Tax Code reckoned from the close of the taxable quarter involved is limited only to the filing of an
administrative – not judicial – claim. 28 In turn, under paragraph (D) of the same Section, the CIR has 120 days
to decide on the claim counted from the date of the submission of complete documents and not from the mere
filing of the administrative claim. The taxpayer then has 30 days from receipt of the adverse decision, or from
the expiration of the 120-day period without the CIR acting upon the claim, to institute his judicial claim
before the CTA.29

Thus, in the present case, the claims filed for the four quarters of taxable year 2004, as well as the first
quarter of taxable year 2005, had already prescribed. While those of the second and third quarters of taxable
year 2005 were prematurely filed, as summarized in the table presented by Justice Acosta, to wit:

Applying the above discourse in the case at bar, a table is prepared for easy reference:

Filing of 120th day 30th day Section 112 Filing of the Petition before Remarks
Section 112 (D), (D), 2nd par., NIRC of the First Division of this
Administrative NIRC of 1997 Court

Claim 1997

June 9, 2004 October 7, 2004 November 6, 2004 March 17, 2006 Prescribe
d

August 12, December 10, January 9, 2005 March 17, 2006 Prescribe
2004 2004 d

February 18, June 18, 2005 July 18, 2005 March 17, 2006 Prescribe
2005 d

May 11, 2005 September 8, October 8, 2005 March 17, 2006 Prescribe
2005 d

November 18, March 18, 2006 April 17, 2006 March 17, 2006 Prescribe
2005 d

Based on the above, the filing of the Petition for Review before the First Division has already prescribed with
respect to the administrative claim filed on June 9, 2004; August 12, 2004; February 18, 2005; and May 11,
2005 for being filed beyond the 30th day provided under the second paragraph of Section 112 (D) of the NIRC
of 1997. The petition is therefore dismissible for being out of time.
Anent the administrative claim filed on November 18, 2005, the filing of the petition before the First Division
is premature for failure of respondent to wait for the 120-day period to expire. It failed to exhaust the
available administrative remedies. Hence, the instant petition is likewise dismissible for lack of cause of
action.

The 120+30 day periods are mandatory and jurisdictional.

The Court had already clarified in the case of CIR v. Aichi Forging Company of Asia, Inc. (Aichi), 34 promulgated
on October 6, 2010, that the two-year prescriptive period applies only to administrative claims and not to
judicial claims. Morever, it was ruled that the 120-day and 30-day periods are not merely directory but
mandatory. Accordingly, the judicial claim of Aichi, which was simultaneously filed with its administrative
claim, was found to be premature. The Court held:

In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) [now Section
112 (C)] of the NIRC, which already provides for a specific period within which a taxpayer should appeal the
decision or inaction of the CIR.

The second paragraph of Section 112(D) [now Section 112 (C)] of the NIRC envisions two scenarios: (1) when
a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after
the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA.
As we see it then, the 120-day period is crucial in filing an appeal with the CTA. 35 (Emphasis supplied)

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 tax credit of unutilized excess input VAT
without waiting for the Commissioner to decide until the expiration of the 120-day period. 36 Failure to comply
with the 120-day waiting period 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.

As may be observed from the Court's application of the 120+30 day periods to GST's claims, the 120-day
period is uniformly reckoned from the date of the filing of the administrative claims. The CIR insists, 44
however, that the filing of the administrative claim was not necessarily the same time when the complete
supporting documents were submitted to the Commissioner.

The Court agrees. However, this issue is not determinative of the resolution of this case for failure of the CIR
to show that GST further submitted supporting documents subsequent to the filing of its administrative
claims. Thus, the reckoning date of the 120-day period commenced simultaneously 45 with the filing of the
administrative claims when GST was presumed to have attached the relevant documents to support its
applications for refund or tax credit.

As a final note, it is incumbent on the Court to emphasize that tax refunds partake of the nature of tax
exemptions which are a derogation of the power of taxation of the State. Consequently, they are construed
strictly against a taxpayer and liberally in favor of the State. 46 Thus, as emphasized in Aichi, a taxpayer must
prove not only its entitlement to a refund but also its compliance with prescribed procedures.

WHEREFORE, the petition is PARTLY GRANTED. The Decision dated October 30, 2009 of the Court of Tax
Appeals En Banc in C.T.A. EB No. 484, affirming the Decision dated January 27, 2009 of the CTA First Division
in C.T.A. Case No. 7419, is AFFIRMED with MODIFICATION. The claims of respondent GST Philippines, Inc. for
refund or tax credit for unutilized excess input VAT for the four quarters of taxable year 2004, as well as the
first quarter of taxable year 2005 are hereby DENIED for being filed beyond the prescriptive period, while the
claims for refund for the second and third quarters of taxable year 2005 are GRANTED. Accordingly, the
Commissioner of Internal Revenue is ordered to refund or, in the alternative, to issue a tax credit certificate to
respondent GST Philippines, Inc. corresponding only to the amount representing unutilized excess input VAT
for the second and third quarters of taxable year 2005 out of the total amount of ₱27,369,114.36 awarded by
the CTA.

25. Applied Food Ingredients Company, Inc. vs. CIR, GR No. 184266 (2013)

APPLIED FOOD INGREDIENTS COMPANY, INC., PETITIONER, VS. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT.

G.R. No. 184266, November 11, 2013, FIRST DIVISION, SERENO, C.J.

Facts:

Petitioner is registered with the Regional District Office (RDO) No. 43 of the BIR in Pasig City (BIR-Pasig) as,
among others, a Value-Added Tax (VAT) taxpayer engaged in the importation and exportation business, as a
pure buy-sell trader. Petitioner alleged that from September 1998 to December 31, 2000, it paid an aggregate
sum of input taxes of P9,528,565.85 for its importation of food ingredients, as reported in its Quarterly Vat
Return. It further alleged that the accumulated input taxes of P9,528,565.85 for the period of September 1,
1998 to December 31, 2000 have not been applied against any output tax.

On March 26, 2002 and June 28, 2002, petitioner filed two separate applications for the issuance of tax credit
certificates in the amounts of P5,385,208.32 and P4,143,357.53, respectively. On July 24, 2002, in view of
respondent's inaction, petitioner elevated the case before this Court by way of a Petition for Review, docketed
as C.T.A. Case No. 6513.

CTA First Division denied petitioner's claim for failure to comply with the invoicing requirements prescribed
under Section 113 in relation to Section 237 of the National Internal Revenue Code (NIRC) of 1997 and
Section 4.108-1 of Revenue Regulations No. 7-95. On appeal, the CTA En Banc likewise denied the claim of
petitioner on the same ground.

Issue:

Whether or not the petitioner is not entitled to the issuance of tax credit certificate or refund for failure to
comply with the mandatory requirement of 120+30 days. (Yes)

Ruling:
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.

In this case, petitioner claims that from April 2000 to December 2000 it had zero-rated sales to which it
attributed the accumulated input taxes it had incurred from September 1998 to December 2000.

Applying Section 112(A), petitioner had until 30 June 2002, 30 September 2002 and 31 December 2002 - or
the close of the taxable quarter when the zero-rated sales were made - within which to file its administrative
claim for refund. Thus, we find sufficient compliance with the two-year prescriptive period when petitioner
filed its claim on 26 March 2002 and 28 June 2002 covering its zero-rated sales for the period April to
September 2000 and October to December 2000, respectively.

The Commissioner of Internal Revenue (CIR) 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.

Counting 120 days from 26 March 2002, the CIR had until 24 July 2002 within which to decide on the claim of
petitioner for an input VAT refund attributable to the its zero-rated sales for the period April to September
2000. On the other hand, the CIR had until 26 October 2002 within which to decide on petitioner's claim for
refund filed on 28 June 2002, or for the period covering October to December 2000.

Records, however, show that the judicial claim of petitioner was filed on 24 July 2002. Petitioner
clearly failed to observe the mandatory 120-day waiting period. Consequently, the premature filing of
its claim for refund/credit of input VAT before the CTA warranted a dismissal, inasmuch as no
jurisdiction was acquired by the CTA.

In San Roque, this Court, held thus: "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. Philippine jurisprudence is replete with cases
upholding and reiterating these doctrinal principles."

Considering further that the 30-day period to appeal to the CTA is dependent on the 120-day period, both
periods are hereby rendered jurisdictional. Failure to observe 120 days prior to the filing of a judicial claim is
not a mere non-exhaustion of administrative remedies, but is likewise considered jurisdictional. The period
of 120 days is a prerequisite for the commencement of the 30-day period to appeal to the CTA. In both
instances, whether the CIR renders a decision (which must be made within 120 days) or there was inaction,
the period of 120 days is material.

WHEREFORE, premises considered, the instant Petition is DENIED.

SO ORDERED.

26. CIR vs. Dash Engineering Phils., Inc. GR No. 184145 (2013)
 COMMISSIONER OF INTERNAL REVENUE, Petitioner vs. DASH ENGINEERING PHILIPPINES, INC.,
Respondent.

G.R. No. 184145 December 11, 2013 MENDOZA, J.:

FACTS: Respondent Dash Engineering Philippines, Inc. (DEPJ) is a corporation duly registered with the
Securities and Exchange Commission, authorized to do business in the Philippines and listed with the
Philippine Economic Zone Authority as an ecozone IT export enterprise. It is also a VAT-registered entity
engaged in the export sales of computer-aided engineering and design. 4

Respondent filed its monthly and quarterly value-added tax (VAT) returns for the period from January 1,
2003 to June 30, 2003. On August 9, 2004, it filed a claim for tax credit or refund representing unutilized
input VAT attributable to its zero-rated sales. Because petitioner Commissioner of Internal Revenue (CIR)
failed to act upon the said claim, respondent was compelled to file a petition for review with the CTA on May
5, 2005.

The Second Division of the CTA rendered its Decision partially granting respondent’s claim for refund or
issuance of a tax credit certificate in the reduced amount. On the matter of the timeliness of the filing of the
judicial claim, the Tax Court found that respondent’s claims for refund for the first and second quarters of
2003 were filed within the two-year prescriptive period which is counted from the date of filing of the return
and payment of the tax due. As such, its filing of a petition for review with the CTA on April 26, 2005 was
within the prescriptive period. Petitioner moved for reconsideration but the same was denied. Aggrieved,
petitioner elevated the case to the CTA En Banc, where it argued that respondent failed to show that the
claimed input VAT payments were directly attributable to its zero-rated sales. Petitioner also averred that the
petition for review was filed out of time.

The CTA En Banc upheld the decision of the CTA Second Division, ruling that the judicial claim was filed on
time because the use of the word "may" in Section 112(D) (now subparagraph C) of the National Internal
Revenue Code (NIRC) indicates that judicial recourse within thirty (30) days after the lapse of the 120-day
period is only directory and permissive and not mandatory and jurisdictional, as long as the petition was filed
within the two-year prescriptive period. The Tax Court further reiterated that the two-year prescriptive
period applies to both the administrative and judicial claims. Petitioner’s motion for reconsideration was
denied. Hence, this petition.

ISSUE: Whether or not the respondent’s judicial claim was filed within the prescriptive period under
the Tax Code. (NO)

RULING: The petition is meritorious. Sec. 229 is inapplicable; two-year period in Sec. 112 refers only to
administrative claims.

Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected taxes:

This Court has previously made a pronouncement as to the inapplicability of Section 229 of the NIRC to
claims for excess input VAT. In the recently decided case of Commissioner of Internal Revenue v. San Roque
Power Corporation,21 the Court made a lengthy disquisition on the nature of excess input VAT, clarifying that
"input VAT is not ‘excessively’ collected as understood under Section 229 because at the time the input
VAT is collected the amount paid is correct and proper." Hence, respondent cannot advance its
position by referring to Section 229 because Section 112 is the more specific and appropriate
provision of law for claims for excess input VAT.
Section 112(A) also provides for a two-year period for filing a claim for refund, to wit:

Sec. 112. Refunds or Tax Credits of Input Tax: (A) Zero-rated or Effectively Zero-rated Sales. – Any
VATregistered person, whose sales are zero-rated or effectively zerorated 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

As explained in San Roque, however, the two-year prescriptive period referred to in Section 112(A) applies
only to the filing of administrative claims with the CIR and not to the filing of judicial claims with the
CTA. In other words, for as long as the administrative claim is filed with the CIR within the two-year
prescriptive period, the 30-day period given to the taxpayer to file a judicial claim with the CTA need
not fall in the same two-year period.

120+30 day period under Sec. 112 is mandatory and jurisdictional

Section 112(D) (now subparagraph C) of the NIRC provides that:

(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 twenty (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 case of full or partial denial of the claim 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 day-period, appeal the decision or the unacted claim with
the Court of Tax Appeals.

Petitioner is entirely correct in its assertion that compliance with the periods provided for in the
abovequoted provision is indeed mandatory and jurisdictional, as affirmed in this Court’s ruling in San
Roque, where the Court En Banc settled the controversy surrounding the application of the 120+30-day
period provided for in Section 112 of the NIRC and reiterated the Aichi doctrine that the 120+30-day
period is mandatory and jurisdictional. Nonetheless, the Court took into account the issuance by the
Bureau of Internal Revenue (BIR) of BIR Ruling No. DA-489-03 which misled taxpayers by explicity
stating that taxpayers may file a petition for review with the CTA even before the expiration of the
120-day period given to the CIR to decide the administrative claim for refund. Even though observance
of the periods in Section 112 is compulsory and failure to do so will deprive the CTA of jurisdiction to hear the
case, such a strict application will be made from the effectivity of the Tax Reform Act of 1997 on January 1,
1998 until the present, except for the period from December 10, 2003 (the issuance of the erroneous
BIR ruling) to October 6, 2010 (the promulgation of Aichi), during which taxpayers need not wait for the
lapse of the 120+30- day period before filing their judicial claim for refund.

Therefore, in accordance with San Roque, respondent's judicial claim for refund must be denied for having
been filed late. Although respondent filed its administrative claim with the BIR on August 9, 2004 before the
expiration of the two-year period in Section l 12(A), it undoubtedly failed to comply with the 120+ 30-day
period in Section l l 2(D) (now subparagraph C) which requires that upon the inaction of the CIR for 120 days
after the submission of the documents in support of the claim, the taxpayer has to file its judicial claim within
30 days after the lapse of the said period. The 120 days granted to the CIR to decide the case ended on
December 7, 2004. Thus, DEPI had 30 days therefrom, or until January 6, 2005, to file a petition for
review with the CTA. Unfortunately, DEPI only sought judicial relief on May 5, 2005 when it belatedly
filed its petition to the CT A, despite having had ample time to file the same, almost four months after
the period allowed by law. As a consequence of DEPI's late filing, the CTA did not properly acquire
jurisdiction over the claim.

WHEREFORE, the petition is GRANTED. The July 17, 2008 Decision and the August 12, 2008 Resolution of
the CTA En Banc in C.T.A. EB No. 357 (C.T.A. Case No. 7243) are hereby REVERSED and SET ASIDE.
Respondent DEPI's judicial claim for refund or tax credit through its petition for review before the CTA is
DENIED. SO ORDERED.

Prepared by: Nicole Romero

27. COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. SILICON PHILIPPINES, INC. (formerly INTEL
PHILIPPINES MANUFACTURING, INC.), Respondents.

G.R. No. 169778, SECOND DIVISION, March 12, 2014, PEREZ, J.:

FACTS:

Respondent filed with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the
Department of Finance (DOF) an application for Tax Credit/Refund of VAT paid for the second quarter of
1998 in the aggregate amount of P29,559,050.44, representing its alleged unutilized input tax.

Thereafter, since no final action has been taken by petitioner on respondent’s administrative claim for refund,
respondent filed a Petition for Review before the Court of Tax Appeals (CTA). The CTA partially granted
respondent’s Petition and ordered petitioner to issue a tax credit certificate in favor of the former in the
reduced amount of P8,179,049.00 representing input VAT on importation of capital goods. The CTA denied
respondent’s claim for refund of input VAT on domestic purchases of goods and services attributable to zero-
rated sales on the ground that the export sales invoices presented in support thereto do not have Bureau of
Internal Revenue (BIR) permit to print, while the sales invoices do not show that the sale was "zero-rated," all
in violation of Sections 113 and 238 of the National Internal Revenue Code (NIRC) of 1997, as amended, and
Section 4.108-1 of Revenue Regulations (RR) No. 7- 95. It also held that said claim be partially denied
considering that only the amount of P8,179,049.00 have been validly supported by documentary evidence
such as suppliers’ invoices, official receipts, import declarations, import remittances and airway bills,
showing the actual payment of VAT on the importation of capital goods. The CTA likewise made a factual
finding that both the administrative and judicial claims of respondent were timely filed within the two-year
prescriptive period required by the NIRC of 1997, as amended, reckoned from the date of filing the original
quarterly VAT Return for the second quarter of taxable year 1998, or on 27 July 1998.

The Court of Appeals found that respondent’s failure to secure a BIR authority or permit to print invoices or
receipts does not completely destroy the integrity of its export sales invoices in support of its claim for
refund, since the BIR permit to print is not among those required to be stated in the sales invoices or receipts
to be issued by a taxpayer pursuant to Sections 113 and 237 of the NIRC of 1997, as amended. In addition, the
BIR permit to print was only mentioned under Section 238 of the same code, which merely stated that the
securement of the BIR authority to print by all persons engaged in business is necessary before a printer can
print receipts or sales or commercial invoices issued in the course of one’s business. Moreover, it was the CA’s
ruling that the omission to reflect the word "zero-rated" in its invoices is not fatal to respondent’s case
considering that the absence of the word "zero-rated" in the invoices, although truly helpful in facilitating the
determination of whether the sales are subject to the normal rate of ten percent (10%) tax or the preferential
rate at zero percent, does not necessarily mean that the sales are not in fact "zero-rated." Sections 113 and
237 of the NIRC of 1997, as amended, are silent on the requisite of printing the word "zero-rated" in the
invoices.

Accordingly, upon its findings of compliance with Section 112(A) of the NIRC of 1997, as amended, the CA
reversed and set-aside the CTA decision dated 26 May 2003, and granted respondent’s claim for tax
refund/credit in the total amount of P21,338,910.44.

ISSUE:

Whether or not respondent is entitled to its claim for refund or issuance of a tax credit certificate in its favor
in the amount of P21,338,910.44 representing its unutilized creditable input taxes for the period covering 1
April 1998 to 30 June 1998 (second quarter), pursuant to the applicable provisions of the NIRC of 1997, as
amended. (NO)

RULING:

Records of this case reveal that the CTA made a factual finding that both the administrative and judicial claims
of respondent were timely filed within the two-year prescriptive period required by the NIRC of 1997, as
amended, reckoned from the date of filing the original quarterly VAT Return for the second quarter of taxable
year 1998, or on 27 July 1998. This was the CTA’s legal basis why it took cognizance of the appeal, tried the
case on the merits, and rendered its judgment. Likewise, the same finding was affirmed and adopted by the
CA. However, upon an assiduous review of the said factual findings, applicable provisions of the NIRC of 1997,
as amended, and existing jurisprudential pronouncements, this Court finds it apropos to determine whether
or not the CTA indeed properly acquired jurisdiction over respondent’s instant claim taking into
consideration the timeliness of the filing of its judicial claim as provided under Section 112 of the NIRC of
1997, as amended. Simply put, a negative finding as to the timeliness of respondent’s judicial claim, once
properly considered, would definitely result in a different conclusion, being jurisdictional in nature.

Although the parties have not raised the issue of jurisdiction, nevertheless, this Court may motu proprio
determine whether or not the CTA has jurisdiction over respondent’s judicial claim for refund taking into
consideration, the factual and legal allegations contained in the pleadings filed by both parties and found by
the court a quo.

Section 11 of Republic Act (RA) No. 1125, which was thereafter amended by RA No. 9282, states that:

Section 11. Who may appeal; effect of appeal. – Any person, association or corporation adversely
affected by a decision or ruling of the Collector of Internal Revenue, the Collector of Customs or any
provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals
within thirty days after the receipt of such decision or ruling.

Pertinent to the instant case, it is worth mentioning that Section 112 of the NIRC of 1997, as amended, was
already the applicable law at the time that respondent filed its administrative and judicial claims, which
categorically provides as follows:

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: x x x

xxxx

(D)27 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 twenty (120) days from the date of submission of
complete documents in support of the application filed in accordance with
Subsections (A) hereof.

In case of full or partial denial of the claim 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- day period,
appeal the decision or the unacted claim with the Court of Tax Appeals.

Based on the foregoing provisions, prior to seeking judicial recourse before the CTA, a VAT-registered person
may apply for the issuance of a tax credit certificate or refund of creditable input tax attributable to zero-
rated or effectively zero-rated sales within two (2) years after the close of taxable quarter when the sales or
purchases were made.

Additionally, further reading of the provisions of Section 112 shows that under paragraph (D) thereof, the
Commissioner of Internal Revenue is given a 120-day period, from submission of complete documents in
support of the administrative claim within which to act on claims for refund/applications for issuance of
the tax credit certificate. Upon denial of the claim or application, or upon expiration of the 120-day period,
the taxpayer only has 30 days within which to appeal said adverse decision or unacted claim before
the CTA.

A taxpayer-claimant only had a limited period of thirty (30) days from the expiration of the 120-day period of
inaction of the Commissioner of Internal Revenue to file its judicial claim with this Court. Failure to do so, the
judicial claim shall prescribe or be considered as filed out of time.

Applying the foregoing discussion in the case at bench, although respondent has indeed complied with the
required two-year period within which to file a refund/tax credit claim with the BIR by filing its
administrative claim on 6 May 1999 (within the period from the close of the subject second quarter of taxable
year 1998 when the relevant sales or purchases were made), it appears however, that respondent’s
corresponding judicial claim filed with the CTA on 30 June 2000 was filed beyond the 30- day period. Such
non-compliance with the said mandatory period of thirty (30) days is fatal to its refund claim on the ground
of prescription.

We summarize the rules on the determination of the prescriptive period for filing a tax refund or credit of
unutilized input VAT as provided in Section 112 of the 1997 Tax Code, as follows:
 (1)An administrative claim must be filed with the CIR within two years after the close of the taxable
quarter when the zero-rated or effectively zero-rated sales were made.

(2)The CIR has 120 days from the date of submission of complete documents in support of the
administrative claim within which to decide whether to grant a refund or issue a tax credit certificate.
The 120-day period may extend beyond the two-year period from the filing of the administrative
claim if the claim is filed in the later part of the two- year period. If the 120-day period expires
without any decision from the CIR, then the administrative claim may be considered to be denied by
inaction.

(3)A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s
decision denying the administrative claim or from the expiration of the 120-day period
without any action from the CIR.

(4)All taxpayers, however, can rely on BIR Ruling No. DA- 489-03 from the time of its issuance on 10
December 2003 up to its reversal by this Court in Aichi on 6 October 2010, as an exception to the
mandatory and jurisdictional 120+30 day periods.

To recapitulate, the mandatory rule is that a judicial claim must be filed with the CTA within thirty (30) days
from the receipt of the Commissioner’s decision denying the administrative claim or from the expiration of
the 120-day period without any action from the Commissioner. Otherwise, said judicial claim shall be
considered as filed out of time.

As regards the prints on the supporting receipts or invoices, it is worth mentioning that the High Court
already ruled on the significance of imprinting the word "zero-rated" for zero-rated sales covered by its
receipts or invoices, pursuant to Section 4.108-1 of Revenue Regulations No. 7-95.

The absence or non- printing of the word "zero-rated" in respondent’s invoices is fatal to its claim for the
refund and/or tax credit representing its unutilized input VAT attributable to its zero-rated sales. On the
other hand, while this Court considers the importance of imprinting the word "zero-rated" in said invoices,
the same does not apply to the phrase "BIR authority to print." There is no law or BIR rule or regulation
requiring the taxpayer-claimant's authority from the BIR to print its sales invoices (BIR authority to print) to
be reflected or indicated therein.

All told, the CTA has no jurisdiction over respondent's judicial appeal considering that its Petition for Review
was filed beyond the mandatory 30-day period pursuant to Section 112(D) of the NIRC of 1997, as amended.
Consequently, respondent's instant claim for refund must be denied.

DISPOSITIVE PORTION:

WHEREFORE, the petition is GRANTED. Accordingly, the 16 September 2005 Decision of the Court of Appeals
in CA-G.R. SP No. 80886 is hereby REVERSED and SET ASIDE. The Petition for Review filed before the Court of
Tax Appeals docketed as CTA Case No. 6129 is DISMISSED for lack of jurisdiction. No costs.

SO ORDERED.

28. Procter & Gamble Asia Pte Ltd., vs. CIR, GR No. 202071 (2014)

PROCTER & GAMBLE ASIA PTE LTD., petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, respondent.
 G.R. No. 202071, February 19, 2014, FIRST DIVISION, SERENO, C.J.

FACTS: Procter & Gamble Asia (P&G) filed administrative claims (AC1 and AC2) with the Bureau of
Internal Revenue (BIR) for the refund or credit of the input VAT attributable to the former's zero-
rated sales covering the periods July 1 – September 30, 2004 and October 1 – December 31, 2004,
respectively. Subsequently, it again filed judicial claims (JC1 and JC 2) for the aforementioned refund
or credit of its input VAT. The Commissioner of Internal Revenue (CIR) basically argued that P&G
failed to substantiate its claims for refund or credit.

The CTA First Division rendered a Decision dismissing the judicial claims for having been
prematurely filed. It ruled that P&G had failed to observe the mandatory 120-day waiting period to
allow the CIR to decide on the administrative claim. P&G’s Motion for Reconsideration was also
denied. It therefore filed a Petition for Review before the CTA En Banc. The latter, however, issued the
assailed Decision affirming the ruling of the CTA First Division. P&G’s Motion for Reconsideration was
also denied.

P&G filed this Petition for Certiorari arguing mainly that the 120-day waiting period, reckoned from
the filing of the administrative claim for the refund or credit of unutilized input VAT before the filing
of the judicial claim, is not jurisdictional. According to P&G, the premature filing of its judicial claims
was a mere failure to exhaust administrative remedies, amounting to a lack of cause of action. CIR
counters that the 120-day period to file judicial claims for a refund or tax credit is mandatory and
jurisdictional. Failure to comply with the waiting period violates the doctrine of exhaustion of
administrative remedies, rendering the judicial claim premature. Thus, the CTA does not acquire
jurisdiction over the judicial claim.

ISSUE: Whether the taxpayer is entitled to its claim for refund or tax credit.

RULING: YES. In the case of San Roque the Court recognized the validity of BIR Ruling No. DA-489-03.
The ruling 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." Taxpayers
could rely on the ruling from its issuance on December 10, 2003 up to its reversal on October 6, 2010,
when CIR v. Aichi Forging Company of Asia, Inc. was promulgated.

The judicial claims in the instant petition were filed on October 2 and December 29, 2006, well within
the ruling's period of validity. P&G is in a position to "claim the benefit of BIR Ruling No. DA-489-03,
which shields the filing of its judicial claim from the vice of prematurity."

DISPOSITIVE PORTION:

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Tax Appeals En
Banc in CTA EB No. 746 are REVERSED and SET ASIDE. This case is hereby REMANDED to the CTA
First Division for further proceedings and a determination of whether the claims of petitioner for
refund or tax credit of unutilized input value-added tax are valid.
29. CIR vs. Toledo Power, Inc., GR No. 183880 (2014)

G.R. No. 183880 January 20, 2014

COMMISSIONER OF INTERNAL REVENUE, Petitioner, vs. TOLEDO POWER, INC., Respondent.
G.R. No. 183880, January 20, 2014, PERALTA, J.

FACTS:

Toledo Power, Inc. (TPI) is registered with the BIR as a VAT tax payer in accordance with Section 236 of the NIRC.

On October 25, 2001, TPI filed with BIR its quarterly VAT return for the third quarter of 2001. However, an amended Quarterly
VAT Return for the same quarter of 2001 was filed on November 22, 2001 showing unutilized input VAT credits of P5,909,588.
96.

On January 25, 2002, TPI again filed with the BIR its Quarterly VAT Return for the fourth quarter of 2001 alleging therein that it
had an excess input VAT credits of P3,219,781,31 which remained unutilized against output VAT liability in said period or even
in the subsequent quarters.

On September 30, 2003, TPI filed an administrative claim for refund the unutilized input VAT for the third and fourth quarter of
2001.

On October 24, 2003, by reason of CIR’s inaction, Toledo filed a Petition for Review for the refund or issuance of a tax
credit certificate for the 3rd quarter of 2001. On January 22, 2004, filed another Petition for Review for the refund or
issuance of tax credit certificate for the fourth quarter of 2001.

Acting on the petition, CTA Division issued a Decision partially granting Toledo’s refund claim or issuance of tax credit
certificate. The CIR filed a Motion for Reconsideration against the Decision, but was denied.

On appeal to the CTA En Banc, the CIR argued that TPI failed to comply with the invoicing requirements to prove entitlement to
the refund or issuance of tax credit certificate. In addition, he challenged the jurisdiction of the CTA First Division to entertain
respondent’s petition for review for failure on its part to comply with the provisions of Section 112 (C) of the Tax Code.

ISSUES:

(1) whether TPI complied with the 120+30 day rule under Section 112 (C) of the Tax Code (NO)

(2) whether TPI sufficiently complied with the invoicing requirements under the Tax Code (YES)

RULING:
1. It must be emphasized that to validly claim a refund or tax credit of input tax, compliance with the 120+30 day rule under
Section 112 of the Tax Code is mandatory.

Section 112 decrees that a VAT-registered person, whose sales are zero-rated or effectively zero-rated, may apply for the
issuance of a tax credit or refund creditable input tax due or paid attributable to such sales within two years after the
close of the taxable quarter when the sales were made. From the date of submission of complete documents in support of its
application, the CIR has 120 days to decide whether or not to grant the claim for refund or issuance of tax credit
certificate. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the CIR to act on
the application within the given period, the taxpayer may, within 30 days from receipt of the decision denying the claim or after
the expiration of the 120-day period, appeal with the CTA the decision or inaction of the CIR.

In a nutshell, the rules on the determination of the prescriptive period for filing a tax refund or credit of unutilized input VAT, as
provided in Section 112 of the Tax Code, are as follows:chanRoblesVirtualawlibrary

(1) An administrative claim must be filed with the CIR within two years after the close of the taxable quarter when the
zero-rated or effectively zero-rated sales were made.

(2) The CIR has 120 days from the date of submission of complete documents in support of the administrative claim
within which to decide whether to grant a refund or issue a tax credit certificate. The 120-day period may extend
beyond the two-year period from the filing of the administrative claim if the claim is filed in the later part of the two-
year period. If the 120-day period expires without any decision from the CIR, then the administrative claim may be
considered to be denied by inaction.

(3) A judicial claim must be filed with the CTA within 30 days from the receipt of the CIR’s decision denying the
administrative claim or from the expiration of the 120-day period without any action from the CIR.

(4) All taxpayers, however, can rely on BIR Ruling No. DA-489-03 from the time of its issuance on 10 December 2003
up to its reversal by this Court in Aichi on 6 October 2010, as an exception to the mandatory and jurisdictional
120+30 day periods.10

Here, TPI filed its third and fourth quarterly VAT returns for 2001 on October 25, 2001 and January 25, 2002,
respectively. It then filed an administrative claim for refund of its unutilized input VAT for the third and fourth quarters of 2001
on September 30, 2003. Thus, the CIR had 120 days or until January 28, 2004, after the submission of TPI’s administrative claim
and complete documents in support of its application, within which to decide on its claim. Then, it is only after the expiration of
the 120-day period, if there is inaction on the part of the CIR, where TPI may elevate its claim with the CTA within 30 days.

In the present case, however, it appears that TPI’s judicial claims for refund of its unutilized input VAT covering the
third and fourth quarters of 2001 were prematurely filed on October 24, 2003 and January 22, 2004, respectively.

However, although TPI’s judicial claim for the fourth quarter of 2001 has been filed prematurely, the most recent
pronouncements of the Court provide for a window wherein the same may be entertained.

As held in the San Roque ponencia, strict compliance with the 120+30 day mandatory and jurisdictional periods is not
necessary when the judicial claims are filed between December 10, 2003 (issuance of BIR Ruling No. DA-489-03 which states
that the taxpayer need not wait for the 120-day period to expire before it could seek judicial relief) to October 6, 2010
(promulgation of the Aichi doctrine).

Clearly, therefore, TPI’s refund claim of unutilized input VAT for the third quarter of 2001 was denied for being prematurely
filed with the CTA, while its refund claim of unutilized input VAT for the fourth quarter of 2001 may be entertained since
it falls within the exception provided in the Court’s most recent rulings.

2.

Section 113 (A), in relation to Section 237 of the Tax Code, provides:chanRoblesVirtualawlibrary
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -

(A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the
information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer’s identification number
(TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such
amount includes value-added tax.

xxxx

SEC. 237. - Issuance of Receipts or Sales of Commercial Invoices. - All persons subject to an internal revenue tax shall, for each
sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered
receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and
description of merchandise or nature of service: Provided, however, That in the case of sales, receipts or transfers in the amount
of One hundred pesos (P100.00) or more, or regardless of the amount, where the sale or transfer is made by a person liable to
value-added tax to another person also liable to value-added tax; or where the receipt is issued to cover payment made as rentals,
commissions, compensations or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and
address of the purchaser, customer or client: Provided, further,That where the purchaser is a VAT-registered person, in addition
to the information herein required, the invoice or receipts shall further show the Taxpayer Identification Number (TIN) of the
purchaser.

Section 4.108-1 of Revenue Regulations No. 7-95 states:chanRoblesVirtualawlibrary

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:chanRoblesVirtualawlibrary
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” imprinted on the invoice covering zero-rated sales; and
6. the invoice value or consideration.11

In the present case, we agree with the CTA’s findings that the words “zero-rated” appeared on the VAT invoices/official
receipts presented by the TPI in support of its refund claim. Although the same was merely stamped and not pre-printed, the
same is sufficient compliance with the law, since the imprinting of the word “zero-rated” was required merely to
distinguish sales subject to 10% VAT, those that are subject to 0% VAT (zero-rated) and exempt sales, to enable the
Bureau of Internal Revenue to properly implement and enforce the other VAT provisions of the Tax Code.

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The Commissioner of Internal Revenue
is hereby ORDERED to refund or issue tax credit certificate in favor of Toledo Power, Inc. only for the fourth quarter of 2001.
This case is hereby REMANDED to the Court of Tax Appeals for the proper computation of the refundable amount representing
unutilized input VAT for the fourth quarter of 2001.
SO ORDERED.

30. CBK Power Company Limited vs. CIR, GR No. 198729-30 (2014)

CBK POWER COMPANY LIMITED, Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.
G.R. No. 198729-30 January 15, 2004 Sereno, CJ.

FACTS:

Petitioner is engaged, among others, in the operation, maintenance, and management of the 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 29 December 2004, petitioner filed an Application for VAT Zero-Rate with the BIR in accordance with
Section 108(B)(3) of the NIRC of 1997, as amended. The application was duly approved by the BIR. 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 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 Sections 112(A) and (B) of the NIRC
of 1997, as amended, with BIR Revenue District Office (RDO) No. 55 of Laguna, as follows:
Period Covered Date of Filing

1st Quarter of 2005 30-Jun-05

2nd Quarter of 2005 15-Sep-05

3rd Quarter of 2005 28-Oct-05

Alleging inaction of the Commissioner of Internal Revenue (CIR), petitioner filed a Petition for Review with
the CTA on 18 April 2007.

The CTA Special Second Division rendered a Decision on 3 March 2010 stating that petitioner had until the
following dates within which to file both administrative and judicial claims:

Taxable Quarter
Last Day to File Claim for Refund
2005 Close of the Quarter

1st Quarter 31-Mar-05 31-Mar-07

2nd Quarter 30-Jun-05 30-Jun-07

Erd Quarter 30-Sep-05 30-Sep-07

Accordingly, petitioner timely filed its administrative claims for the three quarters of 2005. However,
considering that the judicial claim was filed on 18 April 2007, the CTA Division denied the claim for the first
quarter of 2005 for having been filed out of time.

After an evaluation of petitioner’s claim for the second and third quarters of 2005, the court a quo partly
granted the claim and ordered the issuance of a tax credit certificate in favor of petitioner in the reduced
amount of ₱27,170,123.36.

The parties filed their respective Motions for Partial Reconsideration, which were both denied by the CTA
Division.

On appeal, the CTA En Banc ruled that petitioner’s judicial claim for the first, second, and third quarters of
2005 were belatedly filed. The CTA Special Second Division Decision and Resolution were reversed and set
aside, and the Petition for Review filed in CTA Case No. 7621 was dismissed. Petitioner’s Motion for
Reconsideration was likewise denied for lack of merit.

Hence, this petition.

ISSUE: Whether the prescriptive period as provided in Sec. 112 of the NIRC applies. (YES)

RULING:

The pertinent provision of the NIRC at the time when petitioner filed its claim for refund provides:

SEC. 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 or
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.

xxxx

(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 twenty (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 case of full or partial denial of the claim 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 day-period, appeal the decision or the unacted claim with the Court of Tax Appeals.
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.

Our VAT Law provides for a mechanism that would allow VAT-registered persons to recover the excess input
taxes over the output taxes they had paid in relation to their sales. For the refund or credit of excess or
unutilized input tax, Section 112 is the governing law. Given the distinctive nature of creditable input tax, the
law under Section 112 (A) provides for a different reckoning point for the two-year prescriptive period,
specifically for the refund or credit of that tax only.

We agree with petitioner that Mirant was not yet in existence when their administrative claim was filed in
2005; thus, it should not retroactively be applied to the instant case.

However, the fact remains that Section 112 is the controlling provision for the refund or credit of input tax
during the time that petitioner filed its claim with which they ought to comply. It must be emphasized that the
Court merely clarified in Mirant that Sections 204 and 229, which prescribed a different starting point for the
two-year prescriptive limit for filing a claim for a refund or credit of excess input tax, were not applicable.
Input tax is neither an erroneously paid nor an illegally collected internal revenue tax.

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
from the close of the taxable quarter when the effectively zero-rated sales were made, to wit:

Period Covered Close of the taxable Last Day to File Date of Filing
Quarter Administrative Claim

1st Quarter 2005 31-Mar-05 31-Mar-07 30-Jun-05

2nd Quarter 2005 30-Jun-05 30-Jun-07 15-Sep-05

3rd Quarter 2005 30-Sep-05 30-Sep-07 28-Oct-05

Section 112(D) further provides that the CIR has to decide on an administrative claim within one hundred
twenty (120) days from the date of submission of complete documents in support thereof.

Bearing in mind that the burden to prove entitlement to a tax refund is on the taxpayer, it is presumed that in
order to discharge its burden, petitioner had attached complete supporting documents necessary to prove its
entitlement to a refund in its application, absent any evidence to the contrary.

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 the claim has not been
acted upon.

Considering further that the 30-day period to appeal to the CTA is dependent on 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.
It must be emphasized that this is not a case of premature filing of a judicial claim. 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 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 VAT.

WHEREFORE, premises considered, the instant Petition is DENIED.

SO ORDERED.