PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
Atty. Pierre Martin D. Reyes
Note: This covers significant and relevant
Supreme Court jurisprudence on taxation law from
January 31, 2013 to March 31, 2014.
Possessors may reproduce and distribute this
supplement provided my name remains clearly
associated with my work and no alterations in the
form and content of this supplement are made. No
stamping is allowed.
---------------------------------------------------------
GENERAL PRINCIPLES
---------------------------------------------------------
Q. What is a tax amnesty?
A. A Tax amnesty refers to the articulation of the
absolute waiver by a sovereign of its right to
collect taxes and power to impose penalties on
persons or entities guilty of violating a tax law.
Tax amnesty aims to grant a general reprieve to
tax evaders who wish to come clean by giving
them an opportunity to straighten out their
records. (CS Garments, Inc. v.
Commissioner of Internal Revenue,
G.R. No. 182399, March 12, 2014)
Note: Amnesty taxpayers may immediately
enjoy the privileges and immunities under a Tax
Amnesty Law, provided they fulfill the
suspensive conditions imposed therein. (CS
Garments, Inc. v. Commissioner of
Internal Revenue, G.R. No. 182399,
March 12, 2014)
Q. ABC Petroleum sold XYZ Airlines
petroleum fuel. ABC Petroleum passed
on the related excise tax to XYZ
Airlines. Now, XYZ Airlines sought to
refund the said excise taxes on the basis
of the tax exemption privileges provided
for in its franchise. The CIR argues that
1!
XYZ Airlines has no personality to file
the subject tax refund claim because it is
not the statutory taxpayer. Does XYZ
Airlines have personality to file the
refund?
A. Yes. In Philippine Airlines v.
Commissioner of Internal Revenue,
G.R. No. 198759, July 1, 2013, the Supreme
Court held that the rule in the Silkair case does is
inapplicable to a case where the party to which
the economic burden is shifted is provided an
exemption from both direct and indirect taxes. In
Silkair, the Court held that the the proper party
to question, or seek a refund of, an indirect tax is
the statutory taxpayer, the person on whom the
tax is imposed by law and who paid the same
even if he shifts the burden thereof to another.
In this case, the Supreme Court held that the
abovementioned rule should not apply to
instances where the law clearly grants the party
to which the economic burden of the tax is
shifted an exemption from both direct and
indirect taxes. In which case, the latter must be
allowed to claim a tax refund even if it is not
considered as the statutory taxpayer under the
law.
The Court applied the Maceda case, where it
upheld the National Power Corporation’s
(NPC) claim for a tax refund since its own
charter specifically granted it an exemption from
both direct and indirect taxes.
The Supreme Court held that the propriety of a
tax refund claim is hinged on the kind of
exemption which forms its basis. If the law
confers an exemption from both direct or indirect
taxes, a claimant is entitled to a tax refund even if
it only bears the economic burden of the
applicable tax. On the other hand, if the
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
exemption conferred only applies to direct taxes,
then the statutory taxpayer is regarded as the
proper party to file the refund claim.
Q. ABC Petroleum sold to various
international airlines petroleum fuel.
ABC Petroleum is prohibited from
passing on the said excise taxes to the
international airlines as the latter are
exempt from excise tax under Section
135. Thus, ABC Petroleum sought to
refund the said excise taxes. The BIR
argues that pursuant to the Philippine
Acetylene case, a tax exemption being
enjoyed by the buyer cannot be the basis
of a claim for tax exemption by the
manufacturer or seller of the goods for
any tax due to it as the manufacturer or
seller. Can ABC Petroleum refund the
said excise taxes?
A. Yes. In Commissioner of Internal
Revenue v. Pilipinas Shell, G.R. No.
188497, February 19, 2014 , the Supreme
Court held that a petroleum company, as the
statutory taxpayer who is directly liable to pay the
excise tax on its petroleum products, is entitled
to a refund or credit of the excise taxes it paid for
petroleum products sold to international carriers,
the latter having been granted exemption from
the payment of said excise tax under Sec. 135 (a)
of the NIRC.
The Court maintained that Section 135 (a), in
fulfillment of international agreement and
practice to exempt aviation fuel from excise tax
and other impositions, prohibits the passing of
the excise tax to international carriers who buys
petroleum products from local
manufacturers/sellers such as respondent.
However, the Court agreed that there was a
need to reexamine the effect of denying the
domestic manufacturers/sellers’ claim for refund
of the excise taxes they already paid on petroleum
products sold to international carriers, and its
2!
serious implications on our Government’s
commitment to the goals and objectives of the
Chicago Convention.
Under the basic international law principle of
pacta sunt servanda, we have the duty to fulfill
our treaty obligations in good faith. This entails
harmonization of national legislation with treaty
provisions. In this case, Sec. 135(a) of the NIRC
embodies our compliance with our undertakings
under the Chicago Convention and various
bilateral air service agreements not to impose
excise tax on aviation fuel purchased by
international carriers from domestic
manufacturers or suppliers. Construction of the
tax exemption provision in question should give
primary consideration to its broad implications
on our commitment under international
agreements.
---------------------------------------------------------
INCOME TAX
---------------------------------------------------------
Q. XYZ Bank Philippines remitted to XYZ
Bank Germany an amount representing
the 15% branch profit remittance tax on
its regular banking unit net income to
XYZ Germany. Realizing that it made an
overpayment of BPRT, XYZ Philippines
filed with the BIR an administrative
claim for refund and at the same time
requested from the International Tax
Affairs Division (ITAD) a confirmation
of its entitlement to the preferential tax
rate of 10% under the RP-Germany Tax
Treaty. The BIR denied the claim on the
ground that the application for a tax
treaty relief was not filed with ITAD
prior to the payment by the former of its
BPRT and actual remittance of its
branch profits to DB Germany, or prior
to its availment of the preferential rate
of ten percent (10%) under the RP-
Germany Tax Treaty provision. The
CIR contends that the XYZ Philippines
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
violated the fifteen (15) day period
mandated under Section III paragraph
(2) of Revenue Memorandum Order
(RMO) No. 1-2000. Will the failure to
strictly comply with RMO No. 1-2000
deprive persons or corporations of the
benefit of a tax treaty?
A. No. In Deutsche Bank AG Manila v.
Commissioner of Internal Revenue,
G.R. No. 188550, August 19, 2013 , the
Supreme Court held that the noncompliance
with the 15-day period for prior application
should not operate to automatically divest
entitlement to the tax treaty relief especially in
claims for refund.
Our Constitution provides for adherence to the
general principles of international law as part of
the law of the land. The time-honored
international principle of pacta sunt servanda
demands the performance in good faith of treaty
obligations on the part of the states that enter
into the agreement. Every treaty in force is
binding upon the parties, and obligations under
the treaty must be performed by them in good
faith. More importantly, treaties have the force
and effect of law in this jurisdiction.
A state that has contracted valid international
obligations is bound to make in its legislations
those modifications that may be necessary to
ensure the fulfillment of the obligations
undertaken.” Thus, laws and issuances must
ensure that the reliefs granted under tax treaties
are accorded to the parties entitled thereto. The
BIR must not impose additional requirements
that would negate the availment of the reliefs
provided for under international agreements.
More so, when the RP-Germany Tax Treaty
does not provide for any pre-requisite for the
availment of the benefits under said agreement.
Likewise, it must be stressed that there is
nothing in RMO No. 1-2000 which would
3!
indicate a deprivation of entitlement to a tax
treaty relief for failure to comply with the 15-day
period. We recognize the clear intention of the
BIR in implementing RMO No. 1-2000, but the
CTA’s outright denial of a tax treaty relief for
failure to strictly comply with the prescribed
period is not in harmony with the objectives of
the contracting state to ensure that the benefits
granted under tax treaties are enjoyed by duly
entitled persons or corporations.
Bearing in mind the rationale of tax treaties, the
period of application for the availment of tax
treaty relief as required by RMO No. 1-2000
should not operate to divest entitlement to the
relief as it would constitute a violation of the duty
required by good faith in complying with a tax
treaty. The denial of the availment of tax relief for
the failure of a taxpayer to apply within the
prescribed period under the administrative
issuance would impair the value of the tax treaty.
At most, the application for a tax treaty relief
from the BIR should merely operate to confirm
the entitlement of the taxpayer to the relief.
The obligation to comply with a tax treaty must
take precedence over the objective of RMO No.
1-2000. Logically, noncompliance with tax
treaties has negative implications on
international relations, and unduly discourages
foreign investors. While the consequences
sought to be prevented by RMO No. 1-2000
involve an administrative procedure, these may
be remedied through other system management
processes, e.g., the imposition of a fine or penalty.
But we cannot totally deprive those who are
entitled to the benefit of a treaty for failure to
strictly comply with an administrative issuance
requiring prior application for tax treaty relief.
Q. What are the requirements for a claim
for refund of excess creditable
withholding tax?
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
A. A taxpayer claiming for a tax credit or refund of
creditable withholding tax must comply with the
following requisites:
1) The claim must be filed with the CIR within
the two-year period from the date of
payment of the tax;
2) It must be shown on the return of the
recipient that the income received was
declared as part of the gross income; and
3) 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.
(Commissioner of Internal Revenue v.
TeaM (Philippines) Operations
Corporation, G.R. No. 185728, October
16, 2013 )
---------------------------------------------------------
VALUE-ADDED TAX
---------------------------------------------------------
Q. What are the requirements for a claim
for VAT refund?
A. A claim for refund or tax credit for unutilized
input VAT may be allowed only if the following
requisites concur, namely:
1) The taxpayer is VAT-registered;
2) The taxpayer is engaged in zero-rated or
effectively zero-rated sales;
3) The input taxes are due or paid;
4) The input taxes are not transitional input
taxes;
5) The input taxes have not been applied against
output taxes during and in the succeeding
quarters;
6) The input taxes claimed are attributable to
zero-rated or effectively zero-rated sales;
7) 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
4!
proceeds have been duly accounted for in
accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas;
8) 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
9) The claim is filed within two years after the
close of the taxable quarter when such sales
were made
( Luzon Hydro Corporation v.
Commissioner of Internal Revenue,
G.R. No. 188260, November 13, 2013)
Q. ABC Hydro Corporation, is a renewable
power generation company. It filed a
claim for refund to cover its unutilized
input VAT corresponding to the four
quarters of taxable year 2001. It,
however, did not produce evidence
showing! that! it! had! zero3rated! sales! for! the!
four! quarters! of! taxable! year! 2001.! Should!
ABC’s!claim!be!denied?
A. Yes. In Luzon Hydro Corporation v.
Commissioner of Internal Revenue,
G.R. No. 188260, November 13, 2013 , the
Supreme Court held that petitioner did not
competently establish its claim for refund or tax
credit. The petitioner did not produce evidence
showing that it had zero-rated sales for the four
quarters of taxable year 2001. The petitioner did
not reflect any zero-rated sales from its power
generation in its four quarterly VAT returns,
which indicated that it had not made any sale of
electricity. Had there been zero-rated sales, it
would have reported them in the returns. Indeed,
it carried the burden not only that it was entitled
under the substantive law to the allowance of its
claim for refund or tax credit but also that it met
all the requirements for evidentiary
substantiation of its claim.
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
Although the petitioner has correctly contended
here that the sale of electricity by a power
generation company like it should be subject to
zero- rated VAT under Republic Act No. 9136,
its assertion that it need not prove its having
actually made zero-rated sales of electricity by
presenting the VAT official receipts and VAT
returns cannot be upheld.
Q. What are 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?
A. In Mindanao II Geothermal Partnership
v. Commissioner of Internal Revenue,
and Mindanao I Geothermal Partnership
v. Commissioner of Internal Revenue, 1
the Supreme Court provided the following rules
on prescriptive periods involving VAT:
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
!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
1
G.R. Nos. 193301 and 194637, March 11, 2013.
5!
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.
(See Commissioner of Internal Revenue v.
San Roque Power Corporation, G.R. No.
187485, Taganito Mining Corporation v.
Commissioner of Internal Revenue, G.R.
No. 196113, Philex Mining Corporation v.
Commissioner of Internal Revenue, G.R.
No. 197156, February 12, 2013 )
Otherwise presented, the Supreme Court in
Commissioner of Internal Revenue v.
Mindanao II Geothermal Partnership, G.R.
No. 191498, January 15, 2014 summarized the
rules as follows:
A. Two-Year Prescriptive Period
1) It is only the administrative claim that must
be filed within the two-year prescriptive
period. (Aichi)
2) The proper reckoning date for the two-year
prescriptive period is the close of the taxable
quarter when the relevant sales were made.
(San Roque)
3) The only other rule is the Atlas ruling, which
applied only from 8 June 2007 to 12
September 2008. Atlas states that the two-
year prescriptive period for filing a claim for
tax refund or credit of unutilized input VAT
payments should be counted from the date
of filing of the VAT return and payment of
the tax. (San Roque)
B. 120+30 Day Period
1) The taxpayer can file an appeal in one of two
ways: (1) file the judicial claim within thirty
days after the Commissioner denies the
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
claim within the 120-day period, or (2) file the
judicial claim within thirty days from the
expiration of the 120-day period if the
Commissioner does not act within the 120-
day period.
2) The 30-day period always applies, whether
there is a denial or inaction on the part of the
CIR.
3) As a general rule, the 30-day period to appeal
is both mandatory and jurisdictional. (Aichi
and San Roque)
4) As an exception to the general rule,
premature filing is allowed only if filed
between 10 December 2003 and 5 October
2010, when BIR Ruling No. DA-489-03 was
still in force. (San Roque)
5) Late filing is absolutely prohibited, even
during the time when BIR Ruling No. DA-
489-03 was in force. (San Roque)
A taxpayer can file his administrative claim for
refund or issuance of tax credit certificate
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 then 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. (Team Energy
Corporation v. Commissioner of
Internal Revenue, G.R. No. 190928,
January 13, 2014 )
(See Commissioner of Internal Revenue
v. Visayas Geothermal Power Company,
G.R. No. 181276, November 11, 2013 )
Q. What is the reckoning date of the two-
year prescriptive period to file the
administrative claim for refund?
A. The reckoning date is the close of the taxable
quarter when the relevant sales were made.
6!
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 (date of filing of return and payment of tax)
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.
(Commissioner of Internal Revenue v.
Mindanao II Geothermal Partnership,
G.R. No. 191498, January 15, 2014 )
Q. What is the distinction between an
‘excess input VAT” and an “excessively
collected” tax?
A. 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 seller 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.
In a claim for refund or credit of “excess” input
VAT under Section 110(B) and Section 112(A),
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
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.
Any suggestion that the “excess” input VAT
under the VAT System is an “excessively”
collected tax under Section 229 may lead
taxpayers to file a claim for refund or credit for
such “excess” input VAT under Section 229 as an
ordinary tax refund or credit outside of the VAT
System.
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.”
(Commissioner of Internal Revenue v. San
Roque Power Corporation, G.R. No.
7!
187485, Taganito Mining Corporation v.
Commissioner of Internal Revenue, G.R.
No. 196113, Philex Mining Corporation v.
Commissioner of Internal Revenue, G.R.
No. 197156, February 12, 2013 )
Q. What is the effect of failure to comply
with the 120-day waiting period in a
claim for refund of input taxes?
A. 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.
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.
(Commissioner of Internal Revenue v.
San Roque Power Corporation, G.R.
No. 187485, Taganito Mining
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, February 12, 2013 )
The 30-day period to appeal to the CTA is
dependent on the 120-day period and 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.
(CBK Power Limited v. Commissioner
of Internal Revenue, G.R. Nos. 198729-
30, January 15, 2014 )
2) Section
In Nippon Express (Philippines)
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196907,
March 13, 2013 , the petition failed 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 CTA 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 CTA was premature and that the CTA
had no jurisdiction to hear the case.
Q. Is the 30-day period within which to file
the judicial claim required to fall within
the 2-year prescriptive period?
A. The 30-day period need not necessarily fall within
the two-year prescriptive period for the following
reasons:
3) If the 30-day period, or any part of it, is
1) 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
8!
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 two- year
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.
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.”
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.
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
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.
(Commissioner of Internal Revenue v.
San Roque Power Corporation, G.R.
No. 187485, Taganito Mining
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, February 12, 2013 )
It is only the administrative claim that must be
filed within the two-year prescriptive period;
the judicial claim need not fall within the two-
year prescriptive period. (Commissioner of
Internal Revenue v. Mindanao II
9!
Geothermal Partnership, G.R. No.
191498, January 15, 2014 )
Q. ABC argues that the judicial claim is
seasonably filed so long as it is filed after
the 120-day waiting period but before the
lapse of the two-year prescriptive period
under Section 112(A). In other words, a
taxpayer may file an appeal with the
CTA after the expiration of the 120-day
period, in which case the 30-day period
does not apply. Is this contention
correct?
A. No. The! 303day! period! applies! not! only! to!
instances! of! actual! denial! by! the! CIR! of! the!
claim! for! refund! or! tax! credit,! but! to! cases! of!
inaction!by!the!CIR!as!well.
!
The taxpayer can file the appeal in one of two
ways: (1) file the judicial claim within thirty days
after the Commissioner denies the claim within
the 120-day period, or (2) file the judicial claim
within thirty days from the expiration of the 120-
day period if the Commissioner does not act
within the 120-day period.
(Commissioner of Internal Revenue v.
Mindanao II Geothermal Partnership,
G.R. No. 191498, January 15, 2014 )
Q. Should the 120+30 day period rule be
given only prospective effect given that
the manner by which the BIR and the
CTA actually treated the 120+30 day
period constitutes an operative fact?
A. No. The general rule is that a void law or
administrative act cannot be the source of legal
rights or duties.
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
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
such declaration
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. From the passage of
such law or promulgation of such executive
issuance until its invalidation by the court, the
effects of the law or executive issuance, when
relied upon by the public in good faith, may have
to be recognized as valid. In the present case,
however, there is no such law or executive
issuance that has been invalidated by the Court
except BIR Ruling No. DA-489-03.
The doctrine of operative fact was applied by the
Supreme Court when it recognized the
simultaneous filing during the period between 10
December 2003, when BIR Ruling No. DA-
489-03 was issued, and 6 October 2010, when
this Court promulgated Aichi declaring the
120+30 day periods mandatory and jurisdictional,
thus reversing BIR Ruling No. DA-489-03.
( Commissioner of Internal Revenue v.
San Roque Power Corporation, G.R.
No. 187485, Taganito Mining
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, October 8, 2013)
Note: Thus, in Procter & Gamble Asia PTE
Ltd. v. Commissioner of Internal Revenue,
G.R. No. 202071, February 19, 2014 , the
Petitioner was able to claim the benefit of BIR
Ruling No. DA-489-03 as the judicial claims were
filed on October 2, 2006 and December 29, 2006.
In Team Energy Corporation v.
Commissioner of Internal Revenue, G.R.
No. 197760, January 13, 2014 , petitioner filed
its judicial claim on April 18, 2007 or after the
issuance of BIR Ruling No. DA-489-03 on
10!
December 10, 2003 but before October 6, 2010, the
date when the Aichi case was promulgated. Thus,
even though petitioner's judicial claim was
prematurely filed without waiting for the expiration
of the 120-day mandatory period, the CTA may still
take cognizance of the instant case as it was filed
within the period exempted from the 120-30-day
mandatory period.
In Commissioner of Internal Revenue v.
Team Sual Corporation, G.R. No. 194105,
February 5, 2014 , Team Sual filed its judicial
claim for refund/tax credit of its unutilized input
VAT with the CTA on April 1, 2002 – more than a
year before the issuance of BIR Ruling No. DA-
489-03. Accordingly, Team Sual cannot benefit
from the declaration laid down in BIR Ruling No.
DA-489-03. As stressed by the Court in San Roque,
prior to the issuance of BIR Ruling No. DA-489-
03, the BIR held that the 120-day period was
mandatory and jurisdictional, which is the correct
interpretation of the law.
In Republic of the Philippines v. GST Philippines,
G.R. No. 190872, October 17, 2013, it was held that
GST can benefit from BIR Ruling No. DA-489-03
with respect to its claims for refund of unutilized
excess input VAT for the second and third quarters
of taxable year 2005 which were filed before the
CIR on November 18, 2005 but elevated to the
CTA on March 17, 2006 before the expiration of the
120-day period (March 18, 2006 being the 120th
day). BIR Ruling No. DA-489-03 effectively
shielded the filing of GST's judicial claim from the
vice of prematurity.
GST's claims, however, for the four quarters of
taxable year 2004 and the first quarter of taxable
year 2005 should be denied for late filing of the
petition for review before the CTA. GST filed its
VAT Return for the first quarter of 2004 on April
16, 2004. Reckoned from the close of the first
taxable quarter of 2004 on March 31, 2004, the
administrative claim filed on June 9, 2004 was well
within the required two-year prescriptive period
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
from the close of the taxable quarter, the last day of
filing being March 31, 2006. The CIR then had 120
days from June 9, 2004, or until October 7, 2004, to
decide the claim. Since the Commissioner did not
act on the claim within the said period, GST had 30
days from October 7, 2004, or until November 6,
2004, to file its judicial claim. However, GST filed
its petition for review before the CTA only on
March 17, 2006, or 496 days after the last day of
filing. In short, GST was late by one year and 131
days in filing its judicial claim.
For the second quarter of taxable year 2004, GST
filed its administrative claim on August 12, 2004.
The 120-day period from the filing of such claim
ended on December 10, 2004, and the 30th day
within which to file a judicial claim fell on January 9,
2005. However, GST filed its petition for review
before the CTA only on March 17, 2006, or 432 days
after the last day of filing. GST was late by one year
and 67 days in filing its judicial claim.
For the third and fourth quarters of taxable year
2004, GST filed its administrative claims on
February 18, 2005. The 120th day, or June 18, 2005,
lapsed without any action from the CIR. Thus,
GST had 30 days therefrom, or until July 18, 2005,
to file its judicial claim, but it did so only on March
17, 2006, or 242 days after the last day of filing. GST
was late by 242 days in filing its judicial claim.
In Applied Food Ingredients Company v.
Commissioner of Internal Revenue, G.R.
No. 184266, November 11, 2013 , the
Petitioner’s judicial claim was filed on 24 July 2002,
when the 120+30 day mandatory periods were
already in the law and BIR Ruling No. DA-489-03
had not yet been issued, Petitioner does not have an
excuse for not observing the 120+30 day period.
Failure of petitioner to observe the mandatory 120-
day period is fatal to its claim and rendered the
CTA devoid of jurisdiction over the judicial claim.
In Commissioner of Internal Revenue v. Dash
Engineering, G.R. No. 184145, December 11,
2013, the Supreme Court held that respondent's
11!
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 CTA,
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.
In Commissioner of Internal Revenue v.
Toledo Power Company, G.R. No. 183880,
January 20, 2014 Respondent’s judicial claims for
refund of its unutilized input VAT covering the
third and fourth quarters of 2001 were filed on
October 24, 2003 and January 22, 2004, respectively.
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, Respondent’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
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
provided in the Court’s most recent rulings.
Q. What is the effect non-compliance with
the documentary and evidentiary
requirements for a VAT refund claim?
A. No. In J.R.A Philippines v.
Commissioner of Internal Revenue , the
Supreme Court held that failure to comply with
the invoicing requirements provides sutt1cient
ground to deny a claim for tax refund or tax
credit. A claim for tax refund or tax credit, the
applicant must prove not only entitlement to the
claim but also compliance with all the
documentary and evidentiary requirements
therefor.
Q. ABC Corporation filed a claim for
refund of unutilized input taxes. The
BIR contends that ABC failed to comply
with the VAT invoicing requirements as
the words “zero-rated” was merely
stamped and not pre-printed. Is the
BIR’s contention correct?
A. No. In Commissioner of Internal Revenue
v. Toledo Power Company, G.R. No.
183880, January 20, 2014 , the Supreme
Court held that the words “zero-rated” appeared
on the VAT invoices/official receipts presented
by the Repondent 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 12% 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.
Q. ABC Corporation filed a claim for
refund of unutilized input taxes. ABC
Corporation changed its name to DEF
Corporation. Thus, the official receipts
12!
presented beared the name of DEF
Corporation instead of ABC
Corporation. The BIR contends that
ABC failed to comply with the VAT
invoicing requirements as the use of the
business name “DEF” by ABC was never
approved by the SEC. Is the BIR’s
contention correct?
A. Yes. In Bonifacio Water Corporation v.
The Commissioner of Internal Revenue,
G.R. No. 175142, July 22, 2013, , the
Supreme Court held that the change of
petitioner’s name to “Bonifacio GDE Water
Corporation,” being unauthorized and without
approval of the SEC, and the issuance of official
receipts under that name which were presented
to support petitioner’s claim for tax refund,
cannot be used to allow the grant of tax refund or
issuance of a tax credit certificate in petitioner’s
favor. The absence of official receipts issued in its
name is tantamount to non- compliance with the
substantiation requirements provided by law.
----------------------------------------------------------
JUDICIAL REMEDIES (CTA)
----------------------------------------------------------
Q. May the Supreme Court motu proprio
determine if the CTA has jurisdiction
over a claim for refund?
A. Yes. In Commissioner of Internal
Revenue v. Silicon Philippines, G.R.
No. 169778, March 12, 2014 , the Supreme
Court held that the! CTA! is! a! court! of! special!
jurisdiction.! As! such,! it! can! only! take!
cognizance! of! such! matters! as! are! clearly!
!
within! its! jurisdiction. However,! although! the!
parties! have! not! raised! the! issue! of!
jurisdiction,! nevertheless,! the! Supreme! court!
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!
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
!
contained! in! the! pleadings! filed! by! both!
parties!and!found!by!the!court!a quo.

*** Nothing else follows ***

GOOD LUCK ATENEAN BARRISTERS!

ATENEO 100%
ONE BIG FIGHT!

13!