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CIR v.

Aichi
G.R. No. 184823
Oct. 6, 2010
Del Castillo, J.
Commissioner
of
Internal
Revenue
petitioners
responden Aichi Forging Company of Asia, Inc.

Marin

ts
summary Summary of facts and ratio. Doctrine. Relationship to syllabus topic.

facts of the case

The respondent, Aichi Forging Company of Asia is a corporation duly organized and existing
under the laws of the Philippines and is engaged in the manufacturing, producing, and
processing of steel and its by-products. It is registered with the BIR as a VAT entity. On
September 30, 2004 the Aichi filed for a refund/credit of input VAT for the period of July 1, 2002
to September 30, 2002 in the amount of P3,891,123.82.
In response to such request for a refund/credit input, the CIR raised the following special and
affirmative defenses:
1. Aichis claim is subject to administrative investigation by the CIR
2. Aichi must claim that it paid the VAT input taxes for the period in question
3. Aichi must prove that its export sales are those contemplated by Secs. 106(A) (2) (a)
and 108(B) (1) of the Tax Code of 1997
4. Aichi must prove that the claim was filed within the two-year period under sec. 229 of
the tax code
5. Aichi bears the burden of proof as regards establishing his right to the refund and that
claims for refund are strictly construed against the claimant
CTA (second division) = granted a decision that partially granted Aichis claim for a refund/credit.
According to the CTA, in order for a taxable entity to avail of a refund/credit, the following must
be shown:
1. Taxpayer is engaged in sales which are zero-rated or effectively zero-rated
2. The taxpayer is VAT-registered
3. The claim must be filed within two years after the close of the taxable quarter when such
sales were made
4. The creditable input tax due or paid must be attributable to such sales to the extent that
such input tax has not been applied against the output tax
The CTA found that the three requirements had been complied with but that sum of the
documents submitted in compliance with the fourth requirement were baseless and had not been
satisfactorily substantiated. In summary, the CTA awarded a tax credit in the amount of
P3,239,119.25about 650k less than the amount initially claimed by Aichi.
The CIR appealed the decision of the CTAs second division and argued that the
administrative and judicial claims were filed beyond the two-year period for claiming a tax credit
because 2004 was a leap year (hence, there was an extra day). As a result, the filing of the claim
for the refund was a day late because under Art. 13 of the Civil Code, a year is composed of 365
days. Further, the CIR alleged that Aichis simultaneous filing of administrative and judicial claims
contravened the procedure laid dawn by secs. 112 and 229 of the NIRC. According to the CIR, the
prior filing of an administrative cliam is a condition precedent for the filing of a judicial claim.

CTA (en banc) = affirmed the second divisions ruling and allowed the partial refund. Further, it
held that the proper reckoning point for the two-year period within which a taxpayer may file for
a refund/tax credit begins from when the taxpayer pays the tax which is the subject claim of the
refund. As applied, Aichi filed its VAT return on October 20, 2002under the CTA en bancs
interpretation of NIRC provisions, Aichi had until October 20, 2004 to seek a refund. Being that
Aichi filed for a refund on September 30, 2004, then it was well within the period seeking the
same. Further, the CTA did not agree with the argument of the CIR that the previous filing of an
administrative claim (with the BIR) is a condition precedent for the filing of a judicial clam (with
the CTA)

issue

WON Aichi seasonably filed its request for a tax credit YES

ratio

CIRs arguments:
1. The filing of the claim was beyond the two-year period (remember its argument that 2004
was a leap year in conjunction with the Civil Code provision that provides that a year is
composed of 365 days)
2. CTA was mistaken in applying Sec. 114(A) of the NIRC for purposes of determining when
the reckoning period for the two-year window beginswhat should apply is sec 112(A)
because such provision specifically provides for the period within which a claim for tax
refund/credit should be made
3. The prior filing of an administrative claim is a condition precedent before the filing of a
judicial claim
Aichis arguments:
1. Entitled to a tax refund/credit because it substantially complied with the requirements
provided by law. The CTAs reckoning point as regards the two-year period is correct
because secs. 112(A) and 114(A) must be read together.
2. It actually filed the administrative claim first before the judicial claim and that the nonobservance of the 120-day period for the CIR to act upon its petition before filing a petition
before the CIR is not fatal because what is important is that both claims are filed within the
two-year period
3. Assuming that the period had already lapsed, it may still avail of a tax refund/credit on the
basis of equity
First, as regards what the proper reckoning point is for purposes of computing when the twoyear period expires, the Court held that a tax refund/claim must be filed within two years after
the close of the taxable quarter when the sales were made. As precedence, the Court cited its
ruling in CIR vs. Mirant Pagbilao Corporation wherein it ruled that sec. 112(A) is the applicable
provision for purposes of determining when the two-year period commences to run. The effect of
this to the present case is that Aichi it had to file for the refund by September 30, 2004 (or 29
under the theory of the CIR).
Having determined when the two-year period began to run, the Court proceeded to rule upon
WON the administrative claim was seasonably filed. The Court did not agree with the contention
of the CIR that Aichi was a day late because 2004 was a leap year and that under the Civil Code
a year is composed of 365 days. According to the Court, for purposes of legally computing a
year, the controlling law is the Admin Code of 1987 that states that a year is composed of 12
calendar months. Being the law that came later in time, it supersedes the older provisions on the
same subject matter (lex posteriori derogate priori). As applied to the case at bar, it became
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clear that Aichi filed its claim for a tax refund credit on the last day for doing so (period
commenced to run on September 30, 2002 and Aichi filed its claim on September 30, 2004).
Finally, the Court held that the filing of the judicial claim was premature because the 120-day
period given to the CIR to act upon the application had not yet expired when Aichi filed a petition
before the CTA. The previous filing of an administrative claim and the expiration of the 120- day
period without the CIR acting upon the claim must take place before a petition may be lodged
before the CTA.

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