MINDANAO GEOTHERMAL VS CIR
"
Facts: Mindanao II Geothermal Partnership sold its
fully depreciated Nissan Patrol, CIR said that the
sale is subject to VAT. Mindanao, in its defense,
asserted that the sale is not an incidental transaction
in the course of its business, hence, an isolated
transaction that should not have been subject to
VAT.
Issue: Whether or not an isolated transaction can be
an incidental transaction for purposes of VAT
liability.
Ruling: Ruling:
Section 105 of the 1997 Tax Code does not
support Mindanao II’s position:
SEC. 105. Persons Liable. Any person who, in the
course of trade or business, sells barters, exchanges,
leases goods or properties, renders services, and any
person who imports goods shall be subject to the
value-added tax (VAT) imposed in Sections 106 to
108 of this Code.
The phrase "in the course of trade or business"
means the regular conduct or pursuit of a
commercial or economic activity, including
transactions incidental thereto, by any person
regardless of whether or not the person engaged
therein is a nonstock, nonprofit private organization
(irrespective of the disposition of its net income and
whether or not it sells exclusively to members or
their guests), or government entity.
The rule of regularity, to the contrary
notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreign
persons shall be considered as being rendered in the
course of trade or business.
Mindanao II relies on Commissioner of Internal
Revenue v. Magsaysay Lines, Inc. (Magsaysay) and
Imperial v. Collector of Internal Revenue (Imperial)
to justify its position. Magsaysay, decided under the
NIRC of 1986, involved the sale of vessels of the
National Development Company (NDC) to
Magsaysay Lines, Inc. We ruled that the sale of
vessels was not in the course of NDC’s trade or
business as it was involuntary and made pursuant to
the Government’s policy for privatization.
Magsaysay, in quoting from the CTA’s decision,
imputed upon Imperial the definition of "carrying
on business." Imperial, however, is an unreported
case that merely stated that "‘to engage’ is to
embark in a business or to employ oneself therein."
Mindanao II’s sale of the Nissan Patrol is said to be
an isolated transaction. However, it does not follow
that an isolated transaction cannot be an incidental
transaction for purposes of VAT liability. Indeed, a
reading of Section 105 of the 1997 Tax Code would
show that a transaction "in the course of trade or
business" includes "transactions incidental thereto.
Mindanao II’s business is to convert the steam
supplied to it by PNOCEDC into electricity and to
deliver the electricity to NPC. In the course of its
business, Mindanao II bought and eventually sold a
Nissan Patrol. Prior to the sale, the Nissan Patrol
was part of Mindanao II’s property, plant, and
equipment. Therefore, the sale of the Nissan Patrol
is an incidental transaction made in the course of
Mindanao II’s business which should be liable for
VAT.
CIR VS CA and COMASERO
CIR vs. CA and Comaserco
G.R. No. 125355 March 30, 2000
Facts:
Commonwealth Management and Services
Corporation (COMASERCO) is a domestic
corporation. It is an affiliate of Philippine American
Life Insurance Co. (Philamlife). It was organized by
the latter to perform collection, consultative and
other technical services, including functioning as an
internal auditor, of Philamlife and its other
affiliates.
In 1992, the Bureau of Internal Revenue (BIR)
issued an assessment to private respondent
COMASERCO for deficiency value-added tax
(VAT) amounting to P351,851.00 for taxable year
1988. In the same year, COMASERCO filed with
the BIR, a letter-protest objecting to the latter’s
finding of deficiency VAT. Afterwards, the
Commissioner of Internal Revenue sent a collection
letter to COMASERCO demanding payment of the
deficiency VAT. The following month of the same
year, COMASERCO filed with the CTA a petition
for review contesting the Commissioner’s
assessment. COMASERCO asserted that: 1) it was
on a “no-profit, reimbursement-of-cost-only” basis;
2) it was not engaged in the business of providing
services to Philamlife and its affiliates; 3)
COMASERCO was established to ensure
operational orderliness and administrative
efficiency of Philamlife and its affiliates, not on the
sale of services; and 4) it even did not generate
profit but suffered a net loss in taxable year 1988.
Thus, it was not liable to pay VAT.
In 1995, the CTA rendered a decision in favor of
the Commissioner with slight modifications.
COMASERCO was liable to pay the amount of
P335,831.01. During the same year, COMASERCO
filed with the CA, a petition for review of the
decision of the CTA. The CA ruled in favor of the
respondent and based its decision in another tax
case involving the same parties where it was held
that COMASERCO was not liable to pay fixed and
contractor’s tax and it was not engaged in business
of providing services to Philamlife and its affiliates.
Hence, this petition was filed before the SC.
Issue:
Whether or not COMASERCO is engaged in the
sale of services, thus liable to pay VAT.
Held:
Yes. It is liable to pay VAT.
On May 28, 1994, Congress enacted Republic Act
No. 7716, the Expanded VAT Law (EVAT),
amending among other sections, Section 99 of the
Tax Code. On January 1, 1998, Republic Act 8424,
the National Internal Revenue Code of 1997, took
effect. The amended law provides that:
Sec. 105. Persons Liable. — Any person who, in the
course of trade or business, sells, barters,
exchanges, leases goods or properties, renders
services, and any person who imports goods shall
be subject to the value-added tax (VAT) imposed in
Sections 106 and 108 of this Code.
The value-added tax is an indirect tax and the
amount of tax may be shifted or passed on to the
buyer, transferee or lessee of the goods, properties
or services. This rule shall likewise apply to
existing sale or lease of goods, properties or
services at the time of the effectivity of Republic
Act No. 7716.
The phrase "in the course of trade or business"
means the regular conduct or pursuit of a
commercial or an economic activity, including
transactions incidental thereto, by any person
regardless of whether or not the person engaged
therein is a nonstock, nonprofit organization
(irrespective of the disposition of its net income and
whether or not it sells exclusively to members of
their guests), or government entity.
The rule of regularity, to the contrary
notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreign
persons shall be considered as being rendered in the
course of trade or business.
Contrary to COMASERCO’s contention, Sec. 105
of the Tax Code states that even a non-stock, non-
profit, organization or government entity, is liable
to pay VAT on the sale of goods or services. VAT
is a tax on transactions, imposed at every stage of
the distribution process on the sale, barter, exchange
of goods or property, and on the performance of
services, even in the absence of profit attributable
thereto. The term “in the course of trade or
business” requires the regular conduct or pursuit of
a commercial or an economic activity, regardless of
whether or not the entity is profit-oriented.
As long as the entity provides service for a fee,
remuneration or consideration, then the service
rendered is subject to VAT. Because taxes are the
lifeblood of the nation, statutes that allow
exemptions are construed strictly against the grantee
and liberally in favor of the government. Section
109 of the Tax Code enumerates the transactions
exempted from VAT. The services rendered by
COMASERCO do not fall within the exemptions. It
falls under Section 108 of the Tax Code in which it
defines the phrase “sale of services” as the
performance of all kinds of services for others for a
fee, remuneration or consideration.
CIR VS TOSHIBA
Facts: Toshiba was claiming a refund for the input
tax it paid on unutilized capital goods purchased.
However, the CIR said that it cannot because the
capital goods and services it purchased are
considered not used in VAT taxable business and
therefore, it is not entitled to refund of input taxes.
Toshiba, on the other hand, contended that it is
PEZA-registered and located within the ecozone
and therefore for, VAT-exempt entity.
Issue: Whether or not Toshiba is entitled to refund
for the input tax it paid on unutilized capital goods
purchased considering that it is registered with
PEZA and located within the ecozone.
Ruling: Yes. CIR failed to differentiate between
VAT-exempt transactions from VAT-exempt
entities. An exempt transactions are transactions
specifically listed in and expressly exempted from
VAT under the Tax Code without regard to the tax
status, VAT-exempt or not, of the taxpayer. An
exempt party, on the other hand, is a person or
entity granted VAT-exemption under the Tax Code,
special law or an international agreement to which
the Philippines is a signatory and by virtue of which
its taxable transactions become exempt from VAT.
Toshiba, a PEZA-registered and located within a
ecozone is a VAT-exempt entity because of Sec 8
of Ta 7916 which establishes the fiction that
ecozones are foreign territory. Therefore, a supplier
from the custom territory cannot pass on output
VAT to an ecozone enterprise, like Toshiba, since it
is exempt.
CIR VS BURMEISTER
FACTS:
A foreign consortium, parent company of
Burmeister, entered into an O&M contract with
NPC. The foreign entity then subcontracted the
actual O&M to Burmeister. NPC paid the foreign
consortium a mixture of currencies while the
consortium, in turn, paid Burmeister foreign
currency inwardly remitted into the Philippines.
BIR did not want to grant refund since the services
are “not destined for consumption abroad” (or the
destination principle).
ISSUE:
Are the receipts of Burmeister entitled to VAT zero-
rated status?
HELD:
PARTIALLY. Respondent is entitled to the refund
prayed for BUT ONLY for the period covered prior
to the filing of CIR’s Answer in the CTA.
The claim has no merit since the consortium, which
was the recipient of services rendered by
Burmeister, was deemed doing business within the
Philippines since its 15-year O&M with NPC can
not be interpreted as an isolated transaction.
In addition, the services referring to ‘processing,
manufacturing, repacking’ and ‘services other than
those in (1)’ of Sec. 102 both require (i) payment in
foreign currency; (ii) inward remittance; (iii)
accounted for by the BSP; AND (iv) that the service
recipient is doing business outside the Philippines.
The Court ruled that if this is not the case, taxpayers
can circumvent just by stipulating payment in
foreign currency.
The refund was partially allowed since Burmeister
secured a ruling from the BIR allowing zero-rating
of its sales to foreign consortium. However, the
ruling is only valid until the time that CIR filed its
Answer in the CTA which is deemed revocation of
the previously-issued ruling. The Court said the
revocation cannot retroact since none of the
instances in Section 246 (bad faith, omission of
facts, etc.) are present.
CIR VS SONY PHILIPPINES
FACTS:
Sony Philippines was ordered examined for “the
period 1997 and unverified prior years” as indicated
in the Letter of Authority. The audit yielded
assessments against Sony Philippines for deficiency
VAT and FWT, viz: (1) late remittance of Final
Withholding Tax on royalties for the period January
to March 1998 and (2) deficiency VAT on
reimbursable received by Sony Philippines from its
offshore affiliate, Sony International Singapore
(SIS).
ISSUES:
(1) Is Petitioner liable for deficiency Value Added
Tax?
HELD:
(1) NO. Sony Philippines did in fact incur
expenses supported by valid VAT invoices
when it paid for certain advertising costs.
This is sufficient to accord it the benefit of
input VAT credits and where the money
came from to satisfy said advertising
billings is another matter but does not alter
the VAT effect. In the same way, Sony
Philippines can not be deemed to have
received the reimbursable as a fee for a
VAT-taxable activity. The reimbursable
was couched as an aid for Sony Philippines
by SIS in view of the company’s “dire or
adverse economic conditions”. More
importantly, the absence of a sale, barter or
exchange of goods or properties supports
the non-VAT nature of the reimbursement.
This was distinguished from the
COMASERCO case where even if there
was similarly a reimbursement-on-cost
arrangement between affiliates, there was
in fact an underlying service. Here, the
advertising services were rendered in favor
of Sony Philippines not SIS.
CIR VS AMERICAN EXPRESS
Facts:
Respondent, a VAT taxpayer, is the
Philippine Branch of AMEX USA and was
tasked with servicing a unit of AMEX-
Hongkong Branch and facilitating the
collections of AMEX-HK receivables from
card members situated in the Philippines
and payment to service establishments in
the Philippines.
It filed with BIR a letter-request for the
refund of its 1997 excess input taxes, citing
as basis Section 110B of the 1997 Tax
Code, which held that “xxx Any input tax
attributable to the purchase of capital goods
or to zero-rated sales by a VAT-registered
person may at his option be refunded or
credited against other internal revenue
 taxes, subject to the provisions of Section
112.”
In addition, respondent relied on VAT
Ruling No. 080-89, which read, “In Reply,
please be informed that, as a VAT
registered entity whose service is paid for
in acceptable foreign currency which is
remitted inwardly to the Philippine and
accounted for in accordance with the rules
and regulations of the Central Bank of the
Philippines, your service income is
automatically zero rated xxx”
Issue:
W/N AMEX Phils is entitled to refund
Held:
Yes. Section 102 of the Tax Code provides
for the VAT on sale of services and use or
lease of properties. Section 102B
particularly provides for the services or
transactions subject to 0% rate:
(1) Processing, manufacturing or
repacking goods for other persons doing
business outside the Philippines which
goods are subsequently exported, where the
services are paid for in acceptable foreign
currency and accounted for in accordance
with the rules and regulations of the BSP;
(2) Services other than those mentioned in the
preceding subparagraph, e.g. those
rendered by hotels and other service
establishments, the consideration for which
is paid for in acceptable foreign currency
and accounted for in accordance with the
rules and regulations of the BSP
(3) In the present case, the facilitation of the
collection of receivables is different from
the utilization of consumption of the
outcome of such service. While the
facilitation is done in the Philippines, the
consumption is not. The services rendered
by respondent are performed upon its
sending to its foreign client the drafts and
bulls it has gathered from service
establishments here, and are therefore,
services also consumed in the Philippines.
Under the destination principle, such
service is subject to 10% VAT.
(4) However, the law clearly provides for an
exception to the destination principle; that
is 0% VAT rate for services that are
performed in the Philippines, “paid for in
acceptable foreign currency and accounted
for in accordance with the R&R of BSP.”
The respondent meets the following
requirements for exemption, and thus
should be zero-rated:
(1) Service be performed in the
Philippines
(2) The service fall under any of the
categories in Section 102B of the Tax Code
(3) It be paid in acceptable foreign currency
accounted for in accordance with BSP R&R.
DIAZ VS SECRETARY OF FINANCE
FACTS: Petitioners filed a petition for
declaratory relief assailing the validity of the
impending imposition of value added tax (VAT)
by the Bureau of Internal Revenue (BIR)
on the collections of tollway operators.
Petitioners claim that, since the VAT would
result in increased toll fees, they have an interest
as regular users of tollways in stopping the BIR
action.
Petitioners hold the view that Congress did not,
when it enacted the NIRC, intend to include toll
fees within the meaning of “sale of services”
that are subject to VAT; that a toll fee is a
“user’s tax,” not a sale of services; that to
impose VAT on toll fees would amount to a tax
on public service; and that, since VAT was
never factored into the formula for computing
toll fees, its imposition would violate the non-
impairment clause of the constitution.
On the other hand, the government avers that
the NIRC imposes VAT on all kinds of services
of franchise grantees, including tollway
operations. The government also argues that
petitioners have no right to invoke the non-
impairment of contracts clause since they
clearly have no personal interest in existing toll
operating agreements (TOAs) between the
government and tollway operators. At any rate,
the non-impairment clause cannot limit the
State’s sovereign taxing power which is
generally read into contracts.
ISSUE:
1. Whether or not the government is
unlawfully expanding VAT coverage by
including tollway operators and tollway
operations in the terms “franchise grantees” and
“sale of services” under Section 108 of the
NIRC?
2. Whether or not the imposition of VAT on
tollway operators would:
a. Amount to a tax on a tax and not a tax on
services?
b. Impair the tollway operator’s right to a
reasonable return of investment under their
TOA’s? and,
c. Not administratively feasible and cannot be
implemented?
RULING:
1. No. It is plain view that the law (Section 108
of the NIRC) imposes VAT on “all kinds of
services” rendered in the Philippines for a fee,
including those specified in the list. The
enumeration of the affected services is not
exclusive. By qualifying “services” with the
words “all kinds,” Congress has given the term
“services” an all-encompassing meaning.
The listing of specific services are intended to
illustrate how pervasive and broad is the VAT’s
reach rather than establish concrete limits to its
application. Thus, every activity that can be
imagined as a form of “service” rendered for a
fee should be deemed included unless some
provision of law especially
excludes it.
2. A) No. Tollway fees are not taxes.
VAT on tollway operations cannot be deemed a
tax on tax due to the nature of VAT as an
indirect tax. In indirect taxation, a distinction is
made between the liability for the tax and
burden of the tax. The seller who is liable for
the VAT may shift or pass on the amount of
VAT it paid on goods, properties or services to
the buyer. In such a case, what is transferred is
not the seller’s liability but merely the burden of
the VAT.
Consequently, VAT on tollway operations is not
really a tax on the tollway user, but on the
tollway operator. Under Section 105 of the
Code, VAT is imposed on any person who, in
the course of trade or business, sells or renders
services for a fee. In other words, the seller of
services, who in this case is the tollway
operator, is the person liable for VAT. The latter
merely shifts the burden of VAT to the tollway
user as part of the toll fees.
For this reason, VAT on tollway operations
cannot be a tax on tax even if toll fees were
deemed as a “user’s tax.” VAT is assessed
against the tollway operator’s gross receipts and
not necessarily on the toll fees.
B) Petitioners have no personality to invoke the
non-impairment of contract clause on behalf of
private investors in the tollway projects. She
will neither be prejudiced by nor be affected by
the alleged diminution in return of investments
that may result from the VAT imposition. She
has no interest at all in the profits to be earned
under the TOAs. The interest in and right to
recover investments solely belongs to the
private tollway investors.
Besides, her allegation that the private
investor’s rate of recovery will be adversely
affected by imposing VAT on tollway
operations is purely speculative.
C) No. Administrative feasibility is one of the
canons of a sound tax system. It simply means
that the tax system should be capable of being
effectively administered and enforced with the
least inconvenience to the taxpayer. Non-
observance of the canon, however, will not
render a tax imposition invalid “except to the
extent that specific constitutional or statutory
limitations are impaired.” Thus, even if the
imposition of VAT on tollway operations may
seem burdensome to implement, it is not
necessarily invalid unless some aspect of it is
shown to violate any law or the Constitution.
Here, it remains to be seen how the taxing
authority will actually implement the VAT on
tollway operations.
FORT BONIFACIO VS CIR
FACTS:
Petitioner was a real estate developer that bought
from the national government a parcel of land that
used to be the Fort Bonifacio military reservation.
At the time of the said sale there was as yet no VAT
imposed so Petitioner did not pay any VAT on its
purchase. Subsequently, Petitioner sold two parcels
of land to Metro Pacific Corp. In reporting the said
sale for VAT purposes (because the VAT had
already been imposed in the interim), Petitioner
claimed transitional input VAT corresponding to its
inventory of land. The BIR disallowed the claim of
presumptive input VAT and thereby assessed
Petitioner for deficiency VAT.
ISSUE:
Is Petitioner entitled to claim the transitional input
VAT on its sale of real properties given its nature as
a real estate dealer and if so (i) is the transitional
input VAT applied only to the improvements on the
real property or is it applied on the value of the
entire real property and (ii) should there have been a
previous tax payment for the transitional input VAT
to be creditable?

HELD:
YES. Petitioner is entitled to claim transitional input
VAT based on the value of not only the
improvements but on the value of the entire real
property and regardless of whether there was in fact
actual payment on the purchase of the real property
or not.
The amendments to the VAT law do not show any
intention to make those in the real estate business
subject to a different treatment from those engaged
in the sale of other goods or properties or in any
other commercial trade or business. On the scope of
the basis for determining the available transitional
input VAT, the CIR has no power to limit the
meaning and coverage of the term "goods" in
Section 105 of the Tax Code without statutory
authority or basis. The transitional input tax credit
operates to benefit newly VAT-registered persons,
whether or not they previously paid taxes in the
acquisition of their beginning inventory of goods,
materials and supplies.
CIR VS PHILIPPINE HEALTHCARE
FACTS:
On 1987, CIR issued VAT Ruling No. 231-88
stating that Philhealth, as a provider of medical
services, is exempt from the VAT coverage. When
RA 8424 or the new Tax Code was implemented it
adopted the provisions of VAT and E-VAT. On
1999, the BIR sent Philhealth an assessment notice
for deficiency VAT and documentary stamp taxes
for taxable years 1996 and 1997. After CIR did not
act on it, Philhealth filed a petition for review with
the CTA. The CTA withdrew the VAT assessment.
The CIR then filed an appeal with the CA which
was denied.
ISSUES:
Whether Philhealth is subject to VAT.
RULING:
YES. Section 103 of the NIRC exempts taxpayers
engaged in the performance of medical, dental,
hospital, and veterinary services from VAT. But, in
Philhealth's letter requesting of its VAT-exempt
status, it was held that it showed Philhealth provides
medical service only between their members and
their accredited hospitals, that it only provides for
the provision of pre-need health care services, it
contracts the services of medical practitioners and
establishments for their members in the delivery of
health services.
Thus, Philhealth does not fall under the exemptions
provided in Section 103, but merely arranges for
such, making Philhealth not VAT-exempt. YES.
Generally, the NIRC has no retroactive application
except when:
where the taxpayer deliberately misstates or omits
material facts from his return or in any document
required of him by the Bureau of Internal Revenue;
where the facts subsequently gathered by the
Bureau of Internal Revenue are materially different
from the facts on which the ruling is based, or
where the taxpayer acted in bad faith.
MEDICARD VS CIR
ACTS: MEDICARD is a health maintenance
organization (HMO) that provides prepaid health
and medical insurance coverage to its clients.
Individuals enrolled in its health care programs pay
an annual membership fee and are entitled to
various preventive, diagnostic and curative medical
services provided by duly licensed physicians,
specialists, and other professional technical staff
participating in the group practice health delivery
system at a hospital or clinic owned, operated or
accredited by it.
MEDICARD filed it first, second, and third
quarterly VAT Returns through Electronic Filing
and Payment System (EFPS) on April 20, July 25,
and October 25, 2006, respectively, and its fourth
quarterly VAT Return on January 25, 2007.
Upon finding some discrepancies between
MEDICARD’s Income Tax Returns (ITR) and VAT
Returns, the CIR issued a Letter Notice (LN) dated
September 20, 2007. Subsequently, the CIR also
issued a Preliminary Assessment Notice (PAN)
against MEDICARD for deficiency VAT.
MEDICARD received CIR’s FAN dated December
10, 2007 for allegedly deficiency VAT for taxable
year 2006 including penalties.
MEDICARD filed a protest arguing, among others,
that that the services it render is not limited merely
to arranging for the provision of medical and/or
hospitalization services but include actual and direct
rendition of medical and laboratory services. On
June 19, 2009, MEDICARD received CIR’s Final
Decision denying its protest. The petitioner
MEDICARD proceeded to file a petition for review
before the CTA.
The CTA Division held that the determination of
deficiency VAT is not limited to the issuance of
Letter of Authority (LOA) alone and that in lieu of
an LOA, an LN was issued to MEDICARD
informing it if the discrepancies between its ITRs
and VAT Returns and this procedure is authorized
under Revenue Memorandum Order (RMO) No.
30-2003 and 42-2003. Also, the amounts that
MEDICARD earmarked and eventually paid to
doctors, hospitals and clinics cannot be excluded
from the computation of its gross receipts because
the act of earmarking or allocation is by itself an act
of ownership and management over the funds by
MEDICARD which is beyond the contemplation of
RR No. 4-2007. Furthermore, MEDICARD’s
earnings from its clinics and laboratory facilities
cannot be excluded from its gross receipts because
the operation of these clinics and laboratory is
merely an incident to MEDICARD’s line of
business as an HMO.
ISSUES: Should the amounts that MEDICARD
earmarked and eventually paid to the medical
service providers still form part of its gross receipts
for VAT purposes?
RULING:
No. The VAT is a tax on the value added by the
performance of the service by the taxpayer. It is,
thus, this service and the value charged thereof by
the taxpayer that is taxable under the NLRC.
MICROSOFT VS PHILIPPINES
FACTS:
Microsoft renders marketing services to two
affiliated nonresident foreign corporations with
their services being paid for in foreign currency.
Microsoft filed a claim for refund for unutilized
input VAT but the CTA denied the same on the
basis that the official receipts issued did not bear the
imprinted word “zero-rated” on its face and are thus
not valid evidence of Microsoft’s sales.
ISSUE:
Is Microsoft entitled to a refund?
HELD:
NO. The regulations in effect when the sales were
made by Microsoft clearly indicate in the portion
outlining the “Invoicing Requirements” that the
word “zero-rated” must be imprinted in the invoice.
Without such, the invoice are not considered as
VAT invoices and thus could not give rise to any
input tax. The Court added that the reason for
enforcing this rule even if only based on regulation
is that it prevents buyers from falsely claiming input
VAT from their purchases when no VAT is actually
paid.
ROHM APOLLO VS CIR
FACTS: Rohm Apollo is in the business of
manufacturing semiconductor products, particularly
microchip transistors and tantalium capacitors.
Further, it is registered with the BIR as a value-
added taxpayer. Sometime in June 2000, prior to the
commencement of its operations, petitioner engaged
the services of Shimizu Philippine Contractors, Inc.
for the construction of a factory wherein petitioner
made initial payments. Petitioner treated the
payments as capital goods purchases and thus filed
with the BIR an administrative claim for the refund
or credit of accumulated unutilized creditable input
taxes on 11 December 2000. As the close of the
taxable quarter when the purchases were made was
30 September 2000, the administrative claim was
filed well within the two-year prescriptive period.
The CIR had a period of 120 days from the filing of
the application for a refund or credit on 11
December 2000, or until 10 April 2001, to act on
the claim. The waiting period, however, lapsed
without any action by the CIR on the claim. Instead
of filing a judicial claim within 30 days from the
lapse of the 120-day period on 10 April, or until 10
May 2001, Rohm Apollo filed a Petition for Review
with the CTA on 11 September 2002. On 27 May
2004, the CTA First Division rendered a Decision
denying the judicial claim for a refund or tax credit.
ISSUE: Whether the CTA acquired jurisdiction over
the claim for the refund or tax credit of unutilized
input VAT.
RULING: NO.
The judicial claim was filed out of time.
Section 112(D) of the 1997 Tax Code states the
time requirements for filing a judicial claim for the
refund or tax credit of input VAT. The legal
provision speaks of two periods: the period of 120
days, which serves as a waiting period to give time
for the CIR to act on the administrative claim for a
refund or credit; and the period of 30 days, which
refers to the period for filing a judicial claim with
the CTA. It is the 30-day period that is at issue in
this case.
The landmark case of Commissioner of Internal
Revenue v. San Roque Power Corporation has
interpreted Section 112 (D). The Court held that the
taxpayer can file an appeal in one of two ways: (1)
file the judicial claim within 30 days after the
Commissioner denies the claim within the 120-day
waiting period, or (2) file the judicial claim within
30 days from the expiration of the 120-day period if
the Commissioner does not act within that period.
In this case, the facts are not up for debate. Rohm
Apollo should then have treated the CIR’s inaction
as a denial of its claim. Petitioner would then have
had 30 days, or until 10 May 2001, to file a judicial
claim with the CTA. But Rohm Apollo filed a
Petition for Review with the CTA only on 11
September 2002. The judicial claim was thus filed
late.