#12. CIR vs SM Prime Holdings Inc.

G.R. No. 183505    ;   February 26, 2010

FACTS:

In a number of CTA cases, the BIR sent SM Prime and First Asia a Preliminary Assessment Notice (PAN) for
VAT deficiency on cinema ticket sales for taxable year 2000 (SM), 1999 (First Asia), 2000 (First Asia), 2002
(First Asia), and 2003 (First Asia).

SM and First Asia filed for protest but the BIR just denied them and sent them a Letter of Demand subsequently.
All the PANs were subjected to a Petition for Review filed by SM and First Asia to the CTA.
The CTA First Division ruled that there should only be one business tax applicable to theater and movie houses,
the 30% amusement tax. Hence, the CIR is wrong in collecting VAT from the ticket sales.

CIR appealed the case to the CTA En Banc.

The CTA En Banc affirmed the ruling of the CTA First Division.
The CTA En Banc held that Section 108 of the NIRC actually sets forth an exhaustive enumeration of what
services are intended to be subject to VAT.

And since the showing or exhibition of motion pictures, films or movies by cinema operators or proprietors is not
among the enumerated activities contemplated in the phrase "sale or exchange of services," then gross receipts
derived by cinema/ theater operators or proprietors from admission tickets in showing motion pictures, film or
movie are not subject to VAT. It reiterated that the exhibition or showing of motion pictures, films, or movies is
instead subject to amusement tax under the LGC of 1991.

Petitioner argues that the enumeration of services subject to VAT in Section 108 of the NIRC is not exhaustive
because it covers all sales of services unless exempted by law. He claims that the CTA erred in applying the
rules on statutory construction and in using extrinsic aids in interpreting Section 108 because the provision is
clear and unambiguous. Thus, he maintains that the exhibition of movies by cinema operators or proprietors to
the paying public, being a sale of service, is subject to VAT.

Respondents, on the other hand, argue that a plain reading of Section 108 of the NIRC of 1997 shows that the
gross receipts of proprietors or operators of cinemas/theaters derived from public admission are not among the
services subject to VAT. Respondents insist that gross receipts from cinema/theater admission tickets were
never intended to be subject to any tax imposed by the national government. According to them, the absence of
gross receipts from cinema/theater admission tickets from the list of services which are subject to the national
amusement tax under Section 125 of the NIRC of 1997 reinforces this legislative intent.

ISSUE:

Whether or not the gross receipts derived by operators or proprietors of cinema/theater houses from admission
tickets are subject to VAT.

RULING:

NO!

When VAT was enacted, it replaced the tax on original and subsequent sales tax and percentage tax on certain
services. When the VAT law was implemented, it exempted persons subject to amusement tax under the NIRC
from the coverage of VAT. When the Local Tax Code was repealed by the Local Government Code of 1991, the
local government continued to impose amusement tax on admission tax on ticket sales. The following
amendments to the VAT law have been consistent that those subject to amusement tax is no liable under VAT.
Only lessors or distributors of cinematographic films are included in the coverage of VAT.
It can be seen from the foregoing that the legislative intent was not to impose VAT on persons already covered
by the amusement tax. To hold otherwise would impose an unreasonable burden on cinema/theater houses
operators and proprietors, who would be paying an additional 10% VAT on top of the 30% amusement tax.

Sec. 108 of the NIRC provides that, there shall be levied, assessed and collected, a VAT equivalent to 10% of
gross receipts derived from the sale or exchange of services, including the use or lease of properties.

The phrase “sale or exchange of services” means the performance of all kinds of services in the Philippines for
others for a fee, remuneration or consideration, including those…….lessors or distributors of cinematographic
films……..and similar services regardless of whether or not the performance thereof calls for the exercise or use
of the physical or mental faculties.

The phrase “sale or exchange of services” shall likewise include: (7) lease of motion picture films, films, tapes
and discs.

A reading of the foregoing provision clearly shows that the enumeration of the “sale or exchange of services”
subject to VAT is not exhaustive. The words, “including,” “similar services,” and “shall likewise include,” indicate
that the enumeration is by way of example only.

Among those included in the enumeration is the "lease of motion picture films, films, tapes and discs." This,
however, is not the same as the showing or exhibition of motion pictures or films. As pointed out by the CTA En
Banc:

"Exhibition" in Black’s Law Dictionary is defined as "To show or display.

To produce anything in public so that it may be taken into possession" (6th ed., p. 573). While the word "lease"
is defined as "a contract by which one owning such property grants to another the right to possess, use and
enjoy it on specified period of time in exchange for periodic payment of a stipulated price, referred to as rent
(Black’s Law Dictionary, 6th ed., p. 889).

Since the activity of showing motion pictures, films or movies by cinema/ theater operators or proprietors is not
included in the enumeration, it is incumbent upon the court to the determine whether such activity falls under the
phrase "similar services." The intent of the legislature must therefore be ascertained.

Moreover, contrary to the view of petitioner, respondents need not prove their entitlement to an exemption from
the coverage of VAT. The rule that tax exemptions should be construed strictly against the taxpayer
presupposes that the taxpayer is clearly subject to the tax being levied against him.61 The reason is obvious: it
is both illogical and impractical to determine who are exempted without first determining who are covered by the
provision.62 Thus, unless a statute imposes a tax clearly, expressly and unambiguously, what applies is the
equally well-settled rule that the imposition of a tax cannot be presumed.63 In fact, in case of doubt, tax laws
must be construed strictly against the government and in favor of the taxpayer.
 #13. CONCEPTION – CARRIE REALTY HOLDINGS, INC. VS CIR

Q.C. CTA CASE # 6137 FEB 17 20013

FACTS :

1. Petitioner is a corporation duly organized and existing under Philippine laws and its primary purpose is to
acquire and hold title to real property, to construct and operate facilities for the manufacture of heating,
ventilating and airconditioning equipment and to lease all or part of any such land and the building or other
structures thereon at any time .
2. On May 14, 1998, petitioner registered with the BIR RD 052 as a VAT taxpayer .

3. On May 26, 1998, petitioner purchased a parcel of land with an area of 50,000 sqm Carmel Village Square
Corporation (CVSC) in the amount of 150million plus 10% VAT in the amount of 15 million.

4. On November 25, 1999, petitioner simultaneously filed its Quarterly VAT Returns for the 2 nd , 3 rd, and
quarters of 1998 and for the I st, 2nd, and 3 rd quarters of 1999.

5. In its 1998 second quarterly VAT return, petitioner declared domestic purchases in the amount of
P150million and VAT input tax of P1million. Said input VAT was carried over to the succeeding quarters.

6. On January 19, 2000 petitioner filed its Quarterly Value-Added Tax Return for the 4th quarter of 1999. Again,
the return showed that petitioner carried-over its previous input VAT in the amount of PI 5 million.

7. Alleging that it does not expect any output VAT prior to the completion of the project from which its input VAT
may be offset, petitioner filed an administrative claim for the refund of its unutilized input VAT on March 10,
2000.

8. On April 24, 2000, petitioner filed its Quarterly VAT Return for the Ist quarter of 2000, declaring again in the
return that it carried over its previous input tax of of 15 million. It also declared that for the same period, it has
paid input tax on its domestic purchases in the amount of 8088.

9. On July 20, 2000, petitioner filed its Quarterly VAT Return for the 2nd quarter of taxable year 2000, showing
the amount of P 15,088,088 as input tax carried over from previous quarter (Exhibit P)

10. Finally, petitioner filed its Quarterly VAT Return for the 3 rd quarter of taxable year 2000, this time reflecting
zero amount in the items referring to the total sales/receipts/output tax , net creditable input tax, VAT payable
and tax payable.

11. Failing to obtain an affirmative response from the respondent and fearing that its claim would be barred by
the two-year prescriptive period within which to file a judicial claim for refund, petitioner filed a Petition for
Review with this court on June 26, 2000 through registered mail.

ISSUES :

1. WON petitioner has an unutilized VAT in the amount of P15Mmillion?

2. WON petitioner complied with the requirements necessary for the refund of alleged
unutilized input VAT ?

RULING :

1. YES. The court is convinced that indeed petitioner has an unutilized input VAT in the amount of PI 5,000,000.
The documentary evidence presented by petitioner are the Deed of Absolute Sale, VAT Official Receipt,
Certificate Authorizing Registration, Transfer Certificate of Title, its Quarterly VAT Returns for the 2nd, 3 rd, and
4th quarters of 1 998, all the Quarterly VAT Returns for 1999 and the Quarterly VAT Returns for the I st , 2nd
and 3 rd quarter of 2000 . These documents prove that petitioner purchased land worth P 165,000,000,
inclusive of 10% VAT, and that petitioner had accordingly declared such amount in its Quarterly ValueAdded
Tax Return for the 2nd quarter. Furthermore, it can be ascertained from the evidence that petitioner carried over
the unutilized input VAT from the 2nd quarter of 1998 to the 2nd quarter of the taxable year 2000 and remained
unutilized as there was no transaction recorded subject to the output VAT.

2. YES. It must be pointed out that petitioner's reliance on the provisions of Section 1 12(A) of the 1997 Tax
Code is misplaced since the transaction involved in this case is not zero-rated or effectively zerorated sale.
However, petitioner's claim for refund on the basis of Section 4 106-1 of Revenue Regulations 7-95 is proper.
In other words, a VAT registered taxpayer may apply for the issuance of tax credit certificate or refund of input
taxes on land provided that an input tax has been paid on the purchase of the land and the same has not been
applied to any output tax. The application must be made within two years after the close of the taxable quarter
when the purchase was made. In addition, the land purchased must be used in VAT taxable business .

Thus, on the basis of Section 112(B) of the 1997 Tax Code and Section 4.106-1 of Revenue Regulations No. 7-
95, petitioner may claim for the refund or issuance of a tax credit certificate of input taxes on land.

3. 106.1 (c) of Revenue Regulations No. 7-95, above-quoted, which are as follows:

1. That the applicant must be a VAT-registered person;

2. That there be a purchase of land;

3. That the purchase of land is substantiated by sufficient evidence;
4. That the input taxes have not been applied against the output taxes;
5. That the application for the refund of unutilized or excess creditable input VAT arising
from the purchase of land has been made within two years after the close of the
taxable quarter when the purchase was made;
6. That the land subject of the purchase was used by the applicant in his VAT taxable
business.

The SC rules that it complies on first 3 requirements, As to the 4th SC ruled petitioner has not applied its input
tax against the output taxes. While it is true that petitioner carried over its input tax for the 2nd taxable quarter
of 1998 to the succeeding quarters, records will show that it remained unutilized upto the 3rd taxable quarter
of 2000. No sales were recorded subject to VAT, the output VAT of which could have been credited against
the unutilized input
VAT

On the fifth requirement, we find both the administrative and the judicial claims for refund well within the two
(2)- year reglementary period. We find no merit in the contention of the respondent that petitioner's claim is
already barred by prescription since the Petition for Review was filed only on July 12, 2000

On the sixth requirement, the records reveal that petitioner purchased the land in fUrtherance of a VAT taxable
business, which is leasing the property. Petitioner's Articles of Incorporation states that the primary purpose of
the corporation is to acquire and hold title to real property, to construct and operate facilities for the manufacture
of heating, ventilating and airconditioning equipment and to lease all or part of any such land and the building or
other structures thereon at any time . Section 108(A) of the 1997 Tax Code provides that there shall be levied,
assessed and collected, a value-added tax equivalent to 10% of gross receipts derived from the sale or
exchange of services, including the use or lease of properties. Hence, the subsequent leasing of the property
by petitioner shall be subject to value-added tax subject to the other requirements of the law

3. On the final issue as to whether or not petitioner's claim for refund is substantiated by documentary
evidence, our answer is also affirmative. Revenue Audit Memorandum Order No. 1-99 provides that for
purposes of filing VAT credit or refund claims, purchases of goods or properties shall be evidenced by
a VAT
4. purchase invoice, while purchase of services shall evidenced by official receipts.
 #14. CONTEX CORPORATION vs.CIR

G.R. No. 151135  ; July 2, 2004.

FACTS :

Petitioner is a domestic corporation engaged in the business of manufacturing hospital textiles and garments
and other hospital supplies for export. Petitioner’s place of business is at the Subic Bay Freeport Zone (SBFZ). It
is duly registered with the Subic Bay Metropolitan Authority (SBMA) as a Subic Bay Freeport Enterprise,
pursuant to the provisions of Republic Act No. 7227.4 As an SBMA-registered firm, petitioner is exempt from all
local and national internal revenue taxes except for the preferential tax provided for in Section 12 (c)5 of Rep. Act
No. 7227. Petitioner also registered with the Bureau of Internal Revenue (BIR) as a non-VAT taxpayer under
Certificate of Registration RDO Control No. 95-180-000133.

From January 1, 1997 to December 31, 1998, petitioner purchased various supplies and materials necessary in
the conduct of its manufacturing business. The suppliers of these goods shifted unto petitioner the 10% VAT on
the purchased items, which led the petitioner to pay input taxes in the amounts of P539,411.88 and P504,057.49
for 1997 and 1998, respectively.6

Acting on the belief that it was exempt from all national and local taxes, including VAT, pursuant to Rep. Act No.
7227, petitioner filed two applications for tax refund or tax credit of the VAT it paid.

Mr. Edilberto Carlos, revenue district officer of BIR RDO No. 19, denied the first application letter, dated
December 29, 1998. Petitioner then wrote a 2nd letter addressed to then RD of BIR region 4, but there was no
response, hencepetition to the CTA. CTA prartially granted the refund and pay 683k representing erronouesly
paid VAT.

Respondent CIR then filed a petition, for review of the CTA decision by the Court of Appeals. Respondent CIR
maintained that the exemption of Contex Corp. under Rep. Act No. 7227 was limited only to direct taxes and not
to indirect taxes such as the input component of the VAT. The Commissioner pointed out that from its very
nature, the value-added tax is a burden passed on by a VAT registered person to the end users; hence, the
direct liability for the tax lies with the suppliers and not Contex.

CA reversed the decision of the CTA.

ISSUES :

1. WHETHER OR NOT THE EXEMPTION FROM ALL LOCAL AND NATIONAL INTERNAL REVENUE
TAXES PROVIDED IN REPUBLIC ACT NO. 7227 COVERS THE VALUE ADDED TAX PAID BY
PETITIONER, A SUBIC BAY FREEPORT ENTERPRISE ON ITS PURCHASES OF SUPPLIES AND
MATERIALS.

2. Whether or not the petitioner may claim a refund on the Input VAT erroneously passed on to it by its
suppliers.

RULING:

1. NO. SC ruled that while Rep. Act No. 7227 does grant tax exemptions, such grant is not all-encompassing
but is limited only to those taxes for which a SBFZ-registered business may be directly liable. Hence, SBFZ
locators are not relieved from the indirect taxes ,(in this case VAT), that may be shifted to them by a VAT-
registered seller.
Further, in indirect taxation, there is a need to distinguish between the liability for the tax and the burden of the
tax. As earlier pointed out, the amount of tax paid may be shifted or passed on by the seller to the buyer. What is
transferred in such instances is not the liability for the tax, but the tax burden. In adding or including the VAT due
to the selling price, the seller remains the person primarily and legally liable for the payment of the tax. What is
shifted only to the intermediate buyer and ultimately to the final purchaser is the burden of the tax.18 

Stated differently, a seller who is directly and legally liable for payment of an indirect tax, such as the VAT on
goods or services is not necessarily the person who ultimately bears the burden of the same tax. It is the final
purchaser or consumer of such goods or services who, although not directly and legally liable for the payment
thereof, ultimately bears the burden of the tax.19

The petitioner’s claim to VAT exemption in the instant case for its purchases of supplies and raw materials is
founded mainly on Section 12 (b) and (c) of Rep. Act No. 7227, which basically exempts them from all national
and local internal revenue taxes, including VAT and Section 4 (A)(a) of BIR Revenue Regulations No. 1-95.24

On this point, petitioner rightly claims that it is indeed VAT-Exempt and this fact is not controverted by the
respondent. In fact, petitioner is registered as a NON-VAT taxpayer per Certificate of Registration25 issued by the
BIR. As such, it is exempt from VAT on all its sales and importations of goods and services.

Petitioner’s claim, however, for exemption from VAT for its purchases of supplies and raw materials is
incongruous with its claim that it is VAT-Exempt, for only VAT-Registered entities can claim Input VAT
Credit/Refund.

2. NO. SC ruled that the petitioner can not claim a refund on the Input VAT erroneously passed on to it by its
suppliers.

While it is true that the petitioner should not have been liable for the VAT inadvertently passed on to it by its
supplier since such is a zero-rated sale on the part of the supplier, the petitioner is not the proper party to claim
such VAT refund.

It may not be amiss to re-emphasize that the petitioner is registered as a NON-VAT taxpayer and thus, is
exempt from VAT. As an exempt VAT taxpayer, it is not allowed any tax credit on VAT (input tax) previously
paid. In fine, even if we are to assume that exemption from the burden of VAT on petitioner’s purchases did
exist, petitioner is still not entitled to any tax credit or refund on the input tax previously paid as petitioner is an
exempt VAT taxpayer.

Rather, it is the petitioner’s suppliers who are the proper parties to claim the tax credit and accordingly refund
the petitioner of the VAT erroneously passed on to the latter.

Accordingly, VAT exemption under Rep. Act No. 7227 is limited to the VAT on which it is directly liable as a
seller and hence, it cannot claim any refund or exemption for any input VAT it paid, if any, on its purchases of
raw materials and supplies.
 #15ACCENTURE, INC. vs. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 190102 ; July 11, 2012

FACTS:

Petitioner Accenture, a VAT registered entity, is a corporation engaged in the business of providing
management consulting, business strategies development, and selling and/or licensing of software. The
monthly and quarterly VAT returns of Accenture show that, notwithstanding its application of the input VAT
credits earned from its zero-rated transactions against its output VAT liabilities, it still had excess or unutilized
input VAT credits in the amount of P37,038,269.18. The excess input VAT was not applied to any output VAT
that Accenture was liable for in the same quarter when the amount was earned—or to any of the succeeding
quarters. Instead, it was carried forward to petitioner’s 2nd Quarterly VAT Return for 2003.10

Thus, Accenture filed with the Department of Finance (DoF) an administrative claim for the refund or the
issuance of a Tax Credit Certificate (TCC). When the DoF did not act on the claim, Accenture filed a Petition for
Review with CTA praying for the issuance of a TCC in its favour.

The Division of the CTA ruled that since Accenture had failed to present evidence to prove that the foreign
clients to which the former rendered services did business outside the Philippines, it was not entitled to
refund. . Ruling that Accenture’s services would qualify for zero-rating under the 1997 National Internal
Revenue Code of the Philippines (Tax Code) only if the recipient of the services was doing business outside of
the Philippines.

On appeal before the CTA en banc, Accenture argued that because the case pertained to the third and
the fourth quarters of taxable year 2002, the applicable law was the 1997 Tax Code, and not R.A. 9337 and that
prior to the amendment introduced by (R.A.) 9337, there was no requirement that the services must be rendered
to a person engaged in business conducted outside the Philippines to qualify for zero-rating. Nevertheless, the
CTA en banc affirmed the decision of the division. Hence this present petition for review before the SC.

ISSUES:

1. Should the recipient of the services be "doing business outside the Philippines" for the transaction to be
zero-rated under Section 108(B)(2) of the 1997 Tax Code?
2. Has Accenture successfully proven that its clients are entities doing business outside the Philippines?
3. Is the Petitioner entitled to the refund of the amount of P35,178,884.21, representing the unutilized
input?

RULING :

1. YES. Recipient of services must be doing business outside the Philippines for the transactions to qualify as
zero-rated. Accenture anchors its refund claim on Section 112(A) of the 1997 Tax Code, which allows the refund
of unutilized input VAT earned from zero-rated or effectively zero-rated sales. The provision reads:

SEC. 112. Refunds or Tax Credits of Input Tax. –

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:
Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section
108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in
accordance with the rules and regulations of the BSP.

Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in
taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid
cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on
the basis of the volume of sales.

2. No. Accenture has failed to establish that the recipients of its services do business outside the Philippines.

In the CTA’s opinion, however, the documents presented by Accenture merely substantiate the existence of the
sales, receipt of foreign currency payments, and inward remittance of the proceeds of these sales duly
accounted for in accordance with BSP rules. Petitioner presented no evidence whatsoever that these clients
were doing business outside the Philippines.

Accenture insists, however, that it was able to establish that it had rendered services to foreign corporations
doing business outside the Philippines, unlike in Burmeister, which allegedly involved a foreign corporation doing
business in the Philippines.51

This can only be the logical interpretation of Section 102 (b) (2). If the provider and recipient of the "other
services" are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise,
those subject to the regular VAT under Section 102 (a) can avoid paying the VAT by simply stipulating payment
in foreign currency inwardly remitted by the recipient of services. To interpret Section 102 (b) (2) to apply to a
payer-recipient of services doing business in the Philippines is to make the payment of the regular VAT under
Section 102 (a) dependent on the generosity of the taxpayer. The provider of services can choose to pay the
regular VAT or avoid it by stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such
interpretation removes Section 102 (a) as a tax measure in the Tax Code, an interpretation this Court cannot
sanction. A tax is a mandatory exaction, not a voluntary contribution.

3. NO. We deny Accenture’s Petition for a tax refund. The evidence presented by Accenture may have
established that its clients are foreign. This fact does not automatically mean, however, that these clients were
doing business outside the Philippines. After all, the Sec 22 of the Tax Code itself has provisions for a foreign
corporation engaged in business within the Philippines and vice versa, to wit:

(H) The term "resident foreign corporation" applies to a foreign corporation engaged in trade or business within
the Philippines.

(I) The term ‘nonresident foreign corporation’ applies to a foreign corporation not engaged in trade or business
within the Philippines. (Emphasis in the original)

Consequently, to come within the purview of Section 108(B)(2), it is not enough that the recipient of the service
be proven to be a foreign corporation; rather, it must be specifically proven to be a nonresident foreign
corporation. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting"
business.

"In order that a foreign corporation may be regarded as doing business within a State, there must be continuity
of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not
one of a temporary character.A taxpayer claiming a tax credit or refund has the burden of proof to establish the
factual basis of that claim. Tax refunds, like tax exemptions, are construed strictly against the taxpayer.

Accenture failed to discharge this burden. It alleged and presented evidence to prove only that its clients were
foreign entities. However, as found by both the CTA Division and the CTA En Banc, no evidence was presented
by Accenture to prove the fact that the foreign clients to whom petitioner rendered its services were clients doing
business outside the Philippines.

#16 Maibarara Geothermal Inc. vs. CIR,

CTA Case Nos. 8871, 8937, 8999, and 9042, 02 August 2017

NO ZERO-RATED OR EFFECTIVELY ZERO-RATED SALES ON THE PART OF THE REFUND CLAIMANT,

INPUT VAT IS NOT REFUNDABLE, OR AT THE VERY LEAST, NOT YET REFUNDABLE.

FACTS :

Petitioner is engaged in the generation of the , collection and istribution of electricity. Its primary purpose to
explore, extract, exploit or otherwise obtain from the earth, store, hold, use, treat, reinject, prepare for market,
but, sell, distribute, exchange and transport geothermal steam and brine, and their products, compound and
derivaties.

In this case, are the consolidated cases filed by petitioner to seek VAT refund in the amount of 9,165,912 for
the year 2012. Petitioner alleges that that it incurred and paid INPUT VAT, on certain purchases of goods and
services relative to the development, construction and installation of its renewable energy.

Alleging that the respondent failed to act on the foregoing applications for refund on the 120 day period
provided by law, petitioner filed 4 petitions for review on 2014 seeking on the refund.

BIR counter-argues that the taxpayer is not entitled for refund considering that petitioner is not yet selling its
geothermal energy power.

BIR contends that :

1. All claims for refund are governed on the same rule : that the respondent has still to investigate and
ascertain the veracity of the claim.
2. That tax redund is stricylt construed against the tax payer
3. That it is imperative for the petitioner to prove its compliance with the requirements laid down by
NIRC 1997 to validly claim tax refund or credit to wit:
a. That the taxpayer is engaged in the zero rated or effecrively zero rated sales
b. Input taxes are due or paid
c. That input taxes claimed are attributable to zero rated or effectively zero rated sales.
d. That the input taxes have not been applied against output taxes during and in the successing
quarters ;
e. That the claim for refund is filed within the 2 year prescriptive period

ISSUE:

WON petitioner is entitled of the refund of the unutilized input of VAT of in the amount of 9,165,912?
RULING :

NO. It did not comply with the requirements of tax refund.

As to the 1st requisite, the petitioner submitted BIR certification , hence satisfied.

As to 2nd and 3rd requisite, the sale of fuel from renewable energy source or power generated is from
renewable energy sources or power such as geothermal energy is a transaction or activity subject to zero %
VAT pursuant to NIRC of 1997 as amended by RA 9513 otherwise known as Renewable Energy Act of
2008. Furthermore the petitioner reflected zero rated sales/receipts pertaining to its gross receipts from
sale of electricity.

As to 4th reqirement, while the SC finds that the petitioner is engaged in zero rated sale of electricity,
petitioner’s , petitioner’s purchase of of local supply of goods , properties and services needed for the
development, construction and installation of its plant facilities is zero rated pursuant to NIRC of 1997 as
amended by 9337 . SC ruled that in instances when the petitioner paid INPUT VAT, notwithstanding, it is
subject to VAT at ZERO % rate, petitioner’s recourse is not against the government , but against the seller,
who shifted to it the output vat. The SC cited the case of Toshiba reiterating that to allow petitioner to refund
or issuance of tax credit certificate of input vat on its domestic purchases of goods and services, when there
is no right to demand it against the government, since it would unduly enrich the petitioner at the expense of
the government.

In the instant case said the court, when the petitioner paid the VAT input notwithstanding that under the law, it
is subject ot vat at 0%, petitioner’s recourse is not against the government, but against the seller who shifted it
to the OUTPUT VAT.

As to the last requirement. The SC ruled that the petitioner’s present claims cover input taxes incurred in 1 st,
2nd, 3rd and 4th quarters of 2012, while the alleged relevant zero-rated sale was made on March 25, 2014
covered by the 1st taxable quarter of 2014 that closed on March 31, 2014. Counting 2 years from the said date,
petitioner had until MARCH 31, 2016 within which to file its administrative claim for refund were seasonably
filed within the 2 year prescriptive period, as shown below.

SC further ruled that under the law The Court stresses that tax credits and tax refunds just like tax exemptions
, are strictly construed against the tax payer. A refund is not a matter of right by the mere fact that the that a
taxpayer has an undisputed excess input vat or such tax was admitted illegally, erroneously, or excessively
collected.

Considering that that taxpayer failed to prove that it is entitled for refund , the input taxes pertaining to
purchases related to the development, construction and installation of its renewable energy facilities, the
instant claims for refund in the total of 9.1million allegedly representing unutilized input taxes attributable to
zero rated sales must necessarily fail.