Pursuant to an Exchange of Notes, Japan agreed to extend a loan of ¥40.

4B to the Philippines through

the then Overseas Economic Cooperation Fund (now JICA) for the implementation of the Calaca II Coal-
Fired Thermal Power Plant Project.
 Par. 5 (2) of the Exchange of Notes: PHL Govt, by itself or through its executing agency,
undertook to assume all taxes imposed by PHL on JPN contractors engaged in the Project.

Due to the need for additional funding, OECF and PHL Govt also executed another loan agreement for
¥5,5B.

The National Power Corporation (NPC), as the executing government agency, entered into a contract
with Mitsubishi Corporation for civil works for the Project.

PET completed the project and when it filed its Income Tax Return with BIR, it included in its income tax
due P44,288,712.00, representing income from the OECF-funded portion of the Project.
 PET filed with RESP CIR an administrative claim for refund of P 52.6M

CTA Division ordered RESP CIR to refund to PET the amount it erroneously paid as income tax, ruling
that based on the Exchange of Notes, PHL Govt, through the NPC as its executing agency, bound itself
to assume PET’s tax obligations.

 CTA En Banc reversed the CTA Division's ruling on the ground that there is no law exempting
MC because the Exchange of Notes is invalid as a treaty as it grants tax exemption without the
concurrence of Congress.

PET anchored its claim for refund on PHL Govt’s assumption all taxes, arguing that there is no violation of
the constitutional mandate against the grants of tax exemption without the concurrence of the majority of
the members of Congress because there is no tax exemption to speak of.

Whether or not Mitsubishi Corporation – Manila Branch is entitled to a refund. – YES

The BIR, itself, subsequently affirmed PET’s non-liability for taxes and entitlement to tax refunds by
issuing Revenue Memorandum Order No. 24-200547 addressed to specified BIR offices, which provides
that pursuant to the provisions of RMC No. 32-99 as amended by RMC No. 42-99, Japanese contractors
and nationals engaged in OECF funded projects in the Philippines shall not be required to shoulder the
fiscal levies or taxes associated with the project.

SC: Concerned Japanese contractors are entitled to claim for the refund of all taxes paid and shouldered
by them relative to the conduct of the Project.

ITC, the subject tax of P 52,612,812.00 was erroneously collected by RESP CIR given said obligation had
already been assumed by PHL Govt by virtue of its Exchange of Notes. Hence, PET is entitled to refund.

Whether or not the Bureau of Internal Revenue should be the authorized government agency where the
tax refund be claimed. – YES

Sections 204 and 229 of the NIRC provide that claims for refund of erroneously
collected taxes must be filed with the CIR. Even if RMC No. 42-99 has directed
PET to claim the refund from NPC, this cannot prevail over provisions of tax
laws. The specific statutory mandate cannot be overridden by averse interpretations made
through mere administrative issuances.
 Sect. 204 (C) of the NIRC (Authority of the Commissioner to Compromise, Abate, and
Refund or Credit Taxes) provides that CIR may “credit or refund taxes erroneously or illegally
received or penalties imposed without authority”; similarly, Sec. 229 (Recovery of Tax
Erroneously or Illegally Collected.) requires that “a claim for refund or credit has been duly
filed with the Commissioner” before a suit may be filed for the recovery of any national
internal revenue tax alleged to have been erroneously or illegally assessed or collected.