AAP TAX MANAGEMENT ASSOCIATION OF THE PHILIPPINES, INC. esr 98 TMAP TAX UPDATES FOR MARCH 2015 (Prepared by Sapalo Velez Bundang & Bulilan) SUPREME COURT China Banking Corporation vs. Commissioner of Internal Revenue (G.R. No. 172509, February 4, 2015) This is about the prescription of the government's right to collect taxes under the 1977 Tax Code. China Banking Corporation (CBC) was engaged in the sale of foreign exchange to the BSP, known as SWAP transactions from 1982 to 1986, without filing any tax returns. On April 19, 1989, CBC received an assessment from the BIR for deficiency DST on sales of foreign bills of exchanges in the total amount of P11,383,165.50, inclusive of surcharge. On May 8, 1989, petitioner CBC sent a letter of protest to the BIR. On December 12, 2001, more than 12 years after the filing of protest, the CIR rendered the decision reiterating the deficiency DST assessment. On January 18, 2002, petitioner filed a petition for review with the CTA. The CIR’s Answer involved a demand for payment of the assessed DST. On February 23, 2005, the CTA denied the petition on the ground that the SWAP arrangement should be treated as telegraphic transfer subject to DST. A motion for reconsideration was timely filed, but was likewise denied. On August 5, 2005, petitioner appealed to the CTA En Banc, but the appeal was dismissed on December 1, 2005. Petitioner filed its Motion for Reconsideration on December 21, 2005 which, however, was denied on March 20, 2006. Thereafter, petitioner filed this petition under Rule 45 to the Supreme Court reiterating it arguments and invoking for the first time the argument of prescription. Ruling: The Supreme Court granted the petition on the ground that the right of the BIR to collect the assessed DST is barred by the statute of limitations. ‘The records show that petitioner received the assessment notice on April 19, 1989, which is the latest possible date that the BIR could have mailed it. The BIR had three years to collect from April 19, 1989 the assessed DST. However, no warrant of distraint or levy was served upon petitioner's properties nor a collection case filed by the BIR within the three-year period, Section 319(c) of the 1977 Tax Code, as amended by BP Big. 700 states that where an assessment of any internal revenue tax has been made, such tax may be collected by distraint or levy by proceeding in court within three (3) years from the assessment of the tax. The only attempt of the BIR to collect such assessment was through its Answer with demand to pay assessed DST filed before the CTA, which was made almost thirteen (13) years from date from which the prescriptive period is to be 1reckoned. Before the R.A. 9282, which took effect on April 23, 2004, the rule provided that the regular courts had jurisdiction over judicial actions for collection of internal revenue taxes and not the CTA, hence, the Answer filed by the BIR could not qualify as a collection case. COURT OF TAX APPEALS (EN BANC: Coca-cola Bottlers Philippines, Inc. vs. Commissioner of Internal Revenue, CTA EB No. 1044, February 12, 2015 Petitioner is a corporation engaged in the business of manufacturing and selling, at wholesale, beverages and is a VAT-registered taxpayer. Its accounting practice concerning purchases of services on credit consists of charging input tax in a temporary account upon receipt of the invoice. When petitioner pays for the account, the input tax is then transferred to Input Tax Service ‘Account, which is subsequently closed to Output Tax payable at the end of the quarter. Due to inadvertence, several purchases of service on credit with an input tax of P80,366,056.99 that had been paid in the second quarter of 2008 were not transferred to the Input Tax ~ Service Account and consequently not desiared in its quarterly VAT return. As a result of the issuance of Letter of Authority (LOA), petitioner could no longer amend its VAT returns when the error was discovered. Hence, on July 21, 2010, petitioner fied its application for tax refund in the amount of P80,366,056.99 representing over/erroneous payment of VAT arising ‘trom understatement input VAT. Thereafter, petitioner filed its judicial claim on July 23, 2010. The CTA in Division denied the petition for lack of merit Petitioner filed its motion for reconsideration, which was also denied. Hence, this petition, Ruling: The CTA En Banc denied the petition, affirming the resolution of the CTA Division. ‘The amount claimed by the petitioner should be denied on the ground that it was not reported in the petitioner's VAT return. Section 110 (A)(2) and (B) of the NIRC of 1997 provides the condition when input tax is creditable, and contemplates those input tax reported in the VAT returns. Thus, only input tax declared in the VAT return is considered for credit against the output tax on the same taxable year. Furthermore, if the substantiated input taxes were reported, petitioner would still not have enough input taxes to offset its output taxes for the same taxable period. Thus, petitioner would not have had erroneously paid output VAT, may be subject of a claim for refund under Section 229 of the NIRC, which states that a taxpayer may file for judicial claim for refund within two years from the date of payment of the tax, erroneously, illegally, excessively or in any manner wrongfully collected, Lastly, petitioner cannot claim its unutilized input tax for refund as Section 112 of the NIRC of 1997 provides only two instances when excess input tax may be claimed for refund, namely: (|) when it is attributable to zero-rates or effectively zero-rated sales, and (ii) upon cancellation of VAT registration due to retirement from or cessation of business. Considering the foregoing, petitioner is not entitled to the refund or issuance of tax credit certificate for its unutilized input tax.Commissioner of Internal Revenue vs. Philex Mining Corporation, CTA EB No. 1097, February 17, 2015 Respondent is a corporation engaged in the mining business, including exploration and operation of mine properties and the commercial production and marketing of mine products and is a VAT- registered entity. It has been approved for zero-rate effective April 12, 1998 Respondent filed its quarterly VAT return for first quarter of 2010 on April 26, 2010. It subsequently filed an amended retum on February 13, 2012, which reflected importation of goods with input VAT ‘of P26,422,709.98 and purchase of services with input VAT of P17,773,583.82. On March 16, 2012, pursuant to Section 4.112-1 of RR No. 16-2005, respondent filed it claim for refund in the amount of P44,196,293.60. Due to petitioner's inaction, respondent filed its petition for review with the CTA Division. ‘On September 18, 2012, petitioner filed a motion to dismiss claiming that the judicial claim for refund was filed beyond the two-year prescriptive period. In response, respondent arqued that the law applies also to administrative claim for refund, The CTA division denied petitioner's motion to dismiss for lack of merit On October 9, 2013, the CTA division partially granted respondent's claim for refund in the amount of P27,740,113.10. On October 22, 2013, petitioner filed a motion for partial reconsideration which was denied for lack of merit on November 26, 2013. Ruling: A perusal of the exhibits shows that the words “zero-rated" were printed on top of the respective invoices. There was only one exhibit that failed to show the words “zero-rated” on the face of the invoice. However, this amount was already deducted from the claim of respondents granted by the CTA Division. Petitioner argues that respondent's claim for refund includes transactions outside the period covered but failed to cite a single transaction. The CTA Division already found that the amount of P11,478,271.00 claimed for refund by respondents were already previously fled with the CTA and, hence, constitutes a double claim. Therefore, such amount was not grated by the CTA division. rly, undated VAT OR’s were disallowed because it cannot be ascertained whether the same pertain to the subject period of claim. The CTA Division also excluded the amount which does not have supporting Bureau of Customs or bank official receipts or machine-validated import entry and intemal revenue declarations and VAT official receipts. Therefore, petitioner's bare allegations unsubstantiated by evidence are not equivalent to proof, hence, there is no reason to disturb the findings of the CTA Division. Deutche Knowledge Services PTE. LTD. vs. Commissioner of Internal Revenue, CTA EB Case No. 1145, February 18, 2015 Petitioner is licensed to do business in the Philippines as a regional operating headquarters and is registered as a VAT taxpayer. In the 4th quarter of 2007, petitioner rendered services in the Philippines to persons engaged in business conducted outside the Philippines, the payments of Which were made in Euro and other acceptable foreign currencies with the BSP. On November 9, 2009, petitioner filed for credit/ refund of the unutilized/ excess input VAT attributable to the zero-rated sales for the said quarter in the total amount of P40,215,567.29.