CIR VS MAGSAYSAY LINES, GR.

146984, July 28, 2006

FACTS:
Pursuant to a government program of privatization, NDC decided to sell to private
enterprise all of its shares in its wholly-owned subsidiary the National Marine Corporation
(NMC). The NDC decided to sell in one lot its NMC shares and five vessels. The NMC shares
and the vessels were offered for public bidding. Among the stipulated terms and conditions for
the public auction was that the winning bidder was to pay a value added tax of 10% on the
value of the vessels. Private respondent Magsaysay Lines, Inc. (Magsaysay Lines) offered to buy
the shares and the vessels for P168,000,000.00. The bid was made by Magsaysay Lines,
purportedly for a new company still to be formed composed of itself, Baliwag Navigation, Inc.,
and FIM Limited of the Marden Group based in Hongkong. The bid was approved by the
Committee on Privatization, and a Notice of Award was issued to Magsaysay Lines.
Later, the implementing Contract of Sale was executed between NDC, on one hand, and
Magsaysay Lines, Baliwag Navigation, and FIM Limited, on the other. Paragraph 11.02 of the
contract stipulated that [v]alue-added tax, if any, shall be for the account of the
PURCHASER. By this time, a formal request for a ruling on whether or not the sale of the
vessels was subject to VAT had already been filed with the Bureau of Internal Revenue (BIR) by
a the law firm presumably in behalf of private respondents.
After sometime, private respondents through counsel received VAT Ruling from the BIR,
holding that the sale of the vessels was subject to the 10% VAT. The ruling cited the fact that
NDC was a VAT-registered enterprise, and thus its transactions incident to its normal VAT
registered activity of leasing out personal property including sale of its own assets that are
movable, tangible objects which are appropriable or transferable are subject to the 10% [VAT].
Private respondents filed an Appeal and Petition for Refund with the CTA. The
Commissioner of Internal Revenue (CIR) opposed the petition. Among others, the CIR squarely
defended the VAT rulings holding the sale of the vessels liable for VAT, especially citing Section
3 of Revenue Regulation No. 5-87 (R.R. No. 5-87), which provided that [VAT] is imposed on
any sale or transactions deemed sale of taxable goods (including capital goods, irrespective of
the date of acquisition). The CIR argued that the sale of the vessels were among those
transactions deemed sale, as enumerated in Section 4 of R.R. No. 5-87. It seems that the CIR
particularly emphasized Section 4(E)(i) of the Regulation, which classified change of ownership
of business as a circumstance that gave rise to a transaction deemed sale.
The CTA ruled that the sale of a vessel was an isolated transaction, not done in the
ordinary course of NDCs business, and was thus not subject to VAT, which under Section 99 of
the Tax Code, was applied only to sales in the course of trade or business. The CTA further held
that the sale of the vessels could not be deemed sale, and thus subject to VAT, as the
transaction did not fall under the enumeration of transactions deemed sale as listed either in
Section 100(b) of the Tax Code, or Section 4 of R.R. No. 5-87. Finally, the CTA ruled that any
case of doubt should be resolved in favor of private respondents since Section 99 of the Tax
Code which implemented VAT is not an exemption provision, but a classification provision
which warranted the resolution of doubts in favor of the taxpayer.
ISSUE: Wheter or not the transaction is subject to vat
RULING:

No. As affirmed by Section 99 of the Tax Code and its subsequent incarnations, the tax 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. In this case, that the sale of the vessels was not in
the ordinary course of trade or business of NDC was appreciated by both the CTA and the Court
of Appeals. We cite with approval the CTAs explanation on this point:
In Imperial v. Collector of Internal Revenue, G.R. No. L-7924,
September 30, 1955 (97 Phil. 992), the term carrying on business does not
mean the performance of a single disconnected act, but means conducting,
prosecuting and continuing business by performing progressively all the acts
normally incident thereof; while doing business conveys the idea of business
being done, not from time to time, but all the time. [J. Aranas, UPDATED
NATIONAL INTERNAL REVENUE CODE (WITH ANNOTATIONS), p. 608-9
(1988)]. Course of business is what is usually done in the management of trade
or business. [Idmi v. Weeks & Russel, 99 So. 761, 764, 135 Miss. 65, cited in
Words & Phrases, Vol. 10, (1984)].
What is clear therefore, based on the aforecited jurisprudence, is that
course of business or doing business connotes regularity of activity. In the
instant case, the sale was an isolated transaction. The sale which was
involuntary and made pursuant to the declared policy of Government for
privatization could no longer be repeated or carried on with regularity. It
should be emphasized that the normal VAT-registered activity of NDC is
leasing personal property.
This finding is confirmed by the Revised Charter of the NDC which bears no indication
that the NDC was created for the primary purpose of selling real property.
The conclusion that the sale was not in the course of trade or business, which the CIR
does not dispute before this Court, should have definitively settled the matter. Any sale, barter or
exchange of goods or services not in the course of trade or business is not subject to VAT.
Section 100 of the Tax Code, which is implemented by Section 4(E)(i) of R.R. No. 5-87
now relied upon by the CIR, is captioned Value-added tax on sale of goods, and it expressly
states that [t]here shall be levied, assessed and collected on every sale, barter or exchange
of goods, a value added tax x x x. Section 100 should be read in light of Section 99, which
lays down the general rule on which persons are liable for VAT in the first place and on
what transaction if at all. It may even be noted that Section 99 is the very first provision in
Title IV of the Tax Code, the Title that covers VAT in the law. Before any portion of Section
100, or the rest of the law for that matter, may be applied in order to subject a transaction
to VAT, it must first be satisfied that the taxpayer and transaction involved is liable for VAT
in the first place under Section 99.
It would have been a different matter if Section 100 purported to define the phrase
in the course of trade or business as expressed in Section 99. If that were so, reference to
Section 100 would have been necessary as a means of ascertaining whether the sale of the

vessels was in the course of trade or business, and thus subject to VAT. But that is not
the case. What Section 100 and Section 4(E)(i) of R.R. No. 5-87 elaborate on is not the
meaning of in the course of trade or business, but instead the identification of the
transactions which may be deemed as sale. It would become necessary to ascertain whether
under those two provisions the transaction may be deemed a sale, only if it is settled that
the transaction occurred in the course of trade or business in the first place. If the
transaction transpired outside the course of trade or business, it would be irrelevant for the
purpose of determining VAT liability whether the transaction may be deemed sale, since it
anyway is not subject to VAT.
Accordingly, the Court rules that given the undisputed finding that the transaction in
question was not made in the course of trade or business of the seller, NDC that is, the sale is not
subject to VAT pursuant to Section 99 of the Tax Code, no matter how the said sale may hew to
those transactions deemed sale as defined under Section 100.
In any event, even if Section 100 or Section 4 of R.R. No. 5-87 were to find application in
this case, the Court finds the discussions offered on this point by the CTA and the Court of
Appeals (in its subsequent Resolution) essentially correct. Section 4 (E)(i) of R.R. No. 5-87 does
classify as among the transactions deemed sale those involving change of ownership of
business. However, Section 4(E) of R.R. No. 5-87, reflecting Section 100 of the Tax Code,
clarifies that such change of ownership is only an attending circumstance to
retirement from or cessation of business[, ] with respect to all goods on hand [as] of the date of
such retirement or cessation. Indeed, Section 4(E) of R.R. No. 5-87 expressly characterizes the
change of ownership of business as only a circumstance that attends those transactions
deemed sale, which are otherwise stated in the same section.
CIR VS MIRANT PAGBILAO CORPORATION (GR 172129, OCTOBER 19, 2011)
FACTS:
MPC is a domestic firm engaged in the generation of power which it sells to the National
Power Corporation (NPC). For the construction of the electrical and mechanical equipment
portion of its Pagbilao, Quezon plant, which appears to have been undertaken from 1993 to 1996,
MPC secured the services of Mitsubishi Corporation (Mitsubishi) of Japan. It was only on April
14, 1998 that MPC paid Mitsubishi the VAT component for the progress billings from April 1993
to September 1996, and for which Mitsubishi issued official receipt no. 0189. Pursuant to a VAT
ruling issued on May 13, 1999, the supoply of electricity by MPC to NPC shall be subjected to
zero percent vat.
MPC filed on December 20, 1999 an administrative claim for refund of unutilized input
VAT. It is the allegation of MPC that since its sales to NPC is subject to zero percent vat, then the
input vat must be refunded.
ISSUE:
a. Whether the 1998 receipt (receipt no. 0189.)can evidence paymnet of input vat
corresponding to a 1993 to 1996 transaction
b. Whether the claim for refund for vat of MPC was filled within the reglementary period
c.

SC RULING
a. The official receipt constitutes sufficient proof of payment of creditable input vat for the
progress billings from Mitsubishi for the period covering April 7, 1993 to September 6,
1996. As the cpourt notes, the law considers a duly executed VAT invoice or receipt as
sufficient eveidence to support a claim for input tax credit.
b. Claim for refund or tax credit filed out of time
The claim for refund or tax credit for the creditable input VAT payment made by MPC
embodied in OR No. 0189 was filed beyond the period provided by law for such claim. Sec.
112(A) of the NIRC pertinently reads:
(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.
The above proviso clearly provides in no uncertain terms that unutilized input VAT
payments not otherwise used for any internal revenue tax due the taxpayer must be claimed
within two years reckoned from the close of the taxable quarter when the relevant sales were
made pertaining to the input VAT regardless of whether said tax was paid or not. As the CA
aptly puts it, albeit it erroneously applied the aforequoted Sec. 112(A), [P]rescriptive period
commences from the close of the taxable quarter when the sales were made and not from the
time the input VAT was paid nor from the time the official receipt was issued. Thus, when a
zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer
only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The
reckoning frame would always be the end of the quarter when the pertinent sales or transaction
was made, regardless when the input VAT was paid. Be that as it may, and given that the last
creditable input VAT due for the period covering the progress billing of September 6, 1996 is the
third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input
VAT refund or tax credit for said quarter prescribed two years after September 30, 1996 or, to be
precise, on September 30, 1998. Consequently, MPCs claim for refund or tax credit filed
on December 10, 1999 had already prescribed.
Reckoning for prescriptive period under
Secs. 204(C) and 229 of the NIRC inapplicable
To be sure, MPC cannot avail itself of the provisions of either Sec. 204(C) or 229 of the NIRC
which, for the purpose of refund, prescribes a different starting point for the two-year
prescriptive limit for the filing of a claim therefor. Secs. 204(C) and 229 respectively provide:
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.
xxxx
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. (Emphasis ours.)
Notably, the above provisions also set a two-year prescriptive period, reckoned from date
of payment of the tax or penalty, for the filing of a claim of refund or tax credit. Notably too,
both provisions apply only to instances of erroneous payment or illegal collection of internal
revenue taxes.
MPCs creditable input VAT not erroneously paid
For perspective, under Sec. 105 of the NIRC, creditable input VAT is an indirect tax
which can be shifted or passed on to the buyer, transferee, or lessee of the goods, properties, or
services of the taxpayer. The fact that the subsequent sale or transaction involves a wholly-tax
exempt client, resulting in a zero-rated or effectively zero-rated transaction, does not, standing
alone, deprive the taxpayer of its right to a refund for any unutilized creditable input VAT, albeit
the erroneous, illegal, or wrongful payment angle does not enter the equation.
It is clear that Sec. 112(A) of the NIRC, providing a two-year prescriptive period
reckoned from the close of the taxable quarter when the relevant sales or transactions were made
pertaining to the creditable input VAT, applies to the instant case, and not to the other actions
which refer to erroneous payment of taxes.
CIR v. AICHI FORGING COMPANY OF ASIA, INC.
G.R. No. 184823 October 6, 2010

Doctrine:
The CIR has 120 days, from the date of the submission of the complete documents within
which to grant or deny the claim for refund/credit of input vat. In case of full or partial denial by
the CIR, the taxpayers 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.
A taxpayer is entitled to a refund either by authority of a statute expressly granting such right,
privilege, or incentive in his favor, or under the principle of solutio indebiti requiring the return
of taxes erroneously or illegally collected. In both cases, a taxpayer must prove not only his
entitlement to a refund but also his compliance with the procedural due process.
As between the Civil Code and the Administrative Code of 1987, it is the latter that must
prevail being the more recent law, following the legal maxim, Lex posteriori derogat priori.
The phrase within two (2) years x x x apply for the issuance of a tax credit certificate or
refund under Subsection (A) of Section 112 of the NIRC refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA.
Facts:
Petitioner filed a claim of refund/credit of input vat in relation to its zero-rated sales from
July 1, 2002 to September 30, 2002. The CTA 2nd Division partially granted respondents claim
for refund/credit.
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.
The CTA denied the MPR thus the case was elevated to the CTA En Banc for review. The
decision was affirmed. Thus the case was elevated to the Supreme Court.
Respondent contends that the non-observance of the 120-day period given to the CIR to
act on the claim for tax refund/credit in Section 112(D) is not fatal because what is important is
that both claims are filed within the two-year prescriptive period. In support thereof, respondent
cited Commissioner of Internal Revenue v. Victorias Milling Co., Inc. [130 Phil 12 (1968)]
where it was ruled that if the CIR takes time in deciding the claim, and the period of two years
is about to end, the suit or proceeding must be started in the CTA before the end of the two-year
period without awaiting the decision of the CIR.
Issues:
1. Whether or not the claim for refund was filed within the prescribed period

2. Whether or not the simultaneous filing of the administrative and the judicial claims
contravenes Section 229 of the NIRC, which requires the prior filing of an administrative claim,
and violates the doctrine of exhaustion of administrative remedies
Held:
1. Yes. As ruled in the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation
(G.R. No. 172129, September 12, 2008), the two-year period should be reckoned from the close
of the taxable quarter when the sales were made.
In Commissioner of Internal Revenue v. Primetown Property Group, Inc (G.R. No.
162155, August 28, 2007, 531 SCRA 436), 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 being the more
recent law, following the legal maxim, Lex posteriori derogat priori.
Thus, 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, respondents administrative claim was timely filed.
2. Yes. We find the filing of the judicial claim with the CTA premature.
Section 112(D) of the NIRC 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
taxpayers 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.
Subsection (A) of Section 112 of the NIRC 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.
The case of Commissioner of Internal Revenue v. Victorias Milling, Co., Inc. is
inapplicable as the tax provision involved in that case is Section 306, now Section 229 of the
NIRC. Section 229 does not apply to refunds/credits of input VAT.
The premature filing of respondents claim for refund/credit of input VAT before the CTA
warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.
SOUTHERN PHILIPPINES POWER CORPORATION v CIR, October 19, 2011
FACTS:
Petitioner Southern Philippines Power Corporation (SPP), a power company that
generates and sells electricity to the National Power Corporation (NPC), applied with the Bureau
of Internal Revenue (BIR) for zero-rating of its transactions under Section 108(B)(3) of the
National Internal Revenue Code (NIRC). The BIR approved the application for taxable years
1999 and 2000.

On June 20, 2000 SPP filed a claim with respondent Commissioner of Internal Revenue
(CIR) for a tax credit or refund for 1999. On July 13, 2001 SPP filed a second claim for tax
credit or refund for 2000. The amounts of the claim represented unutilized input VAT
attributable to SPPs zero-rated sale of electricity to NPC.
The claim was denied contending among aothers that the receipts do not bear the words
zero-rated in violation of RR 7-95.
The CTA En Banc also rejected SPPs contention that its sales invoices reflected the words
zero-rated, pointing out that it is on the official receipts that the law requires the printing of
such words. Moreover, SPP did not report in the corresponding quarterly VAT return the sales
subject of its zero-rated receipts.
ISSUE: Whether or not CTA is correct
RULING:
The following criteria governing claims for refund or tax credit under Section 112(A) of the
NIRC:
(1)
(2)
(3)
(4)
(5)
(6)
(7)

(8)

(9)

The taxpayer is VAT-registered;

The taxpayer is engaged in zero-rated or effectively zero-rated sales;
The input taxes are due or paid;
The input taxes are not transitional input taxes;
The input taxes have not been applied against output taxes during
and in the succeeding quarters;
The input taxes claimed are attributable to zero-rated or effectively
zero-rated sales;
For zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and
108(B)(1) and (2), the acceptable foreign currency exchange proceeds
have been duly accounted for in accordance with BSP rules and
regulations;
Where there are both zero-rated or effectively zero-rated sales and taxable
or exempt sales, and the input taxes cannot be directly and entirely
attributable to any of these sales, the input taxes shall be proportionately
allocated on the basis of sales volume; and
The claim is filed within two years after the close of the taxable
quarter when such sales were made.

While acknowledging that SPPs sale of electricity to NPC is a zero-rated transaction, the
CTA En Banc ruled that SPP failed to establish that it made zero-rated sales. True, SPP
submitted official receipts and sales invoices stamped with the words BIR VAT Zero-Rate
Application Number 419.2000 but the CTA En Banc held that these were not sufficient to prove
the fact of sale.
But NIRC Section 110 (A.1) provides that the input tax subject of tax refund is to be
evidenced by a VAT invoice or official receipt issued in accordance with Section 113. Section
113 has been amended by Republic Act (R.A.) 9337 but it is the unamended version that covers
the period when the transactions in this case took place. It reads:

Section 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 required
under Section 237, the following information shall be indicated in the invoice or
receipt:
(1)
A statement that the seller is a VAT-registered person, followed by
his taxpayers 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 the value-added tax.
The above does not distinguish between an invoice and a receipt when used as
evidence of a zero-rated transaction. Consequently, the CTA should have accepted either or
both of these documents as evidence of SPPs zero-rated transactions.
Section 237 of the NIRC also makes no distinction between receipts and invoices as
evidence of a commercial transaction:
SEC. 237. Issuance of Receipts or Sales or 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 receipt shall further show the
Taxpayer Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser,
customer or client at the time the transaction is effected, who, if engaged in
business or in the exercise of profession, shall keep and preserve the same in his
place of business for a period of three (3) years from the close of the taxable year
in which such invoice or receipt was issued, while the duplicate shall be kept and
preserved by the issuer, also in his place of business, for a like period.
Business forms like sales invoices are recognized in the commercial world as valid
between the parties and serve as memorials of their business transactions. And such documents
have probative value.

Three. The CTA also did not accept SPPs official receipts due to the absence of the
words zero-rated on it. The omission, said that court, made the receipts non-compliant with
RR 7-95, specifically Section 4.108.1. But Section 4.108.1 requires the printing of the words
zero-rated only on invoices, not on official receipts:
Section 4.108-1. Invoicing Requirements. All VAT-registered persons shall, for every
sale or lease of goods or properties or services, issue duly registered receipts or sales or
commercial invoices which must show:
1.
The name, TIN and address of seller;
2.
Date of transaction;
3.
Quantity, unit cost and description of merchandise or nature of
service;
4.
The name, TIN, business style, if any, and address of the VATregistered purchaser, customer or client;
5.
The word "zero-rated" imprinted on the invoice covering zerorated sales; and
6.
The invoice value or consideration.
Actually, it is R.A. 9337 that in 2005 required the printing of the words zero-rated
on receipts. But, since the receipts and invoices in this case cover sales made from 1999 to
2000, what applies is Section 4.108.1 above which refers only to invoices.
A claim for tax credit or refund, arising out of zero-rated transactions, is essentially based
on excess payment. In zero-rating a transaction, the purpose is not to benefit the person legally
liable to pay the tax, like SPP, but to relieve exempt entities like NPC which supplies electricity
to factories, offices, and homes, from having to shoulder the tax burden that ultimately would be
passed to the public.
Four. The Court finds that SPP failed to indicate its zero-rated sales in its VAT
returns. But this is not sufficient reason to deny it its claim for tax credit or refund when there
are other documents from which the CTA can determine the veracity of SPPs claim.
Of course, such failure if partaking of a criminal act under Section 255 of the NIRC could
warrant the criminal prosecution of the responsible person or persons. But the omission does not
furnish ground for the outright denial of the claim for tax credit or refund if such claim is in fact
justified.