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REPUBLIC OF THE PHILIPPINES

Court ofTax Appeals
QUEZON CITY

ENBANC

COMMISSIONER OF INTERNAL C. T.A. EB NO. 630

REVENUE, (C.T.A. CASE NO. 7506)
Petitioner,
Present:

ACOSTA, Presiding Justice,

CASTANEDA, JR.,
BAUTISTA,
UY,
-versus- CASANOVA,
PALANCA-ENRIQUEZ,
PABON-VICTORINO,
MINDARO-GRULLA, and
COTANGCO-MANALASTAS, JJ.

Promulgated:
MINDANAO I GEOTHERMAL
PARTNERSHIP,
Respondent. ~~h't

X ---------------------------------------------------------------------------------------- X

DECISION
PALANCA-ENRIQUEZ, J.:
A taxpayer is entitled to a refund either by authority of a statute

expressly granting such right, privilege, or incentive in his favor, or under

the principle of solutio indebiti requiring the return of taxes erroneously or

(JAU
CT A EB NO. 630 2
(C.T.A . CASE NO. 7506)
DECISION

illegally collected. In both cases, a taxpayer must prove not only his

entitlement to a refund, but also his compliance with the procedural due

process as non-observance of the prescriptive periods within which to file

the administrative and the judicial claims would result in the denial of his

claim. (Commissioner of Internal Revenue vs. Aichi forging Company of Asia, Inc., G.R.

No. 184823, Octob er 6, 2010).

THE CASE

This is a Petition for Review filed by the Commissioner of Internal

Revenue (hereafter "petitioner CIR") under Section 11 of RA 9282 (An Act

Expanding the Jurisdiction of the Court of Tax Appeals), as amended, in

relation to Rule 43 of the 1997 Rules of Civil Procedure, as amended,

praying for the reversal of the Decision dated May 12, 2009 and for partial

reversal of the Amended Decision dated April 30, 2010 rendered by the

Former First Division of this Court in C.T.A. Case No. 7506, the respective

dispositive portions of which read, as follows:

"WHEREFORE, petitioner's claim for issuance of

tax credit certificate is hereby PARTIALLY GRANTED.
Accordingly, respondent is hereby ORDERED TO ISSUE
A TAX CREDIT CERTIFICATE in favor of petitioner in
the reduced amount of P2,279,821.99, representing its

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CT A EB NO. 630 3
(C.T.A. CASE NO. 7506)
DECISION

excess and unutilized input VAT for the period covering

the third and fourth quarters of taxable year 2004.

SO ORDERED."

"WHEREFORE, premises considered, respondent's

Motion for Partial Reconsideration is hereby DENIED for
lack of merit; while petitioner's Motion for partial
Reconsideration is hereby PARTIALLY GRANTED. This
court's Decision dated May 12, 2009 is hereby
MODIFIED. Accordingly, respondent is hereby
ORDERED TO ISSUE A TAX CREDIT CERTIFICATE
in the amount of P5,278,036.06 in favor of petitioner,
representing its unutilized input VAT for the second, third,
and fourth quarters of taxable year 2004.

SO ORDERED.'

THE PARTIES

Petitioner is the duly appointed Commissioner of Internal Revenue,

with exclusive and original jurisdiction to interpret the provisions of RA

8424, as amended, and other tax laws, subject to review by the Secretary of

Finance, and to decide disputed assessments, refunds of internal revenue

taxes, fees and charges, penalties imposed in relation thereto, or other

matters arising under the Tax Code or other laws or portions thereof

administered by the Bureau of Internal Revenue, subject to the appellate

(j)Y
CTA EB NO. 630 4
(C .T.A. CASE NO. 7506)
DECISION

jurisdiction of the Court of Tax appeals; with office address at the 5/F, BIR

National Office Building, Agham Road, Diliman, Quezon City, where she

may be served with summons and other court processes.

On the other hand, respondent Mindanao I Geothermal Partnership

(hereafter "respondent Mindanao I") is a partnership duly registered with the

Securities and Exchange Commission, with principal address at 36 1h Floor,

Tower I, Enterprise Center, 6766 Ayala Avenue, Makati City.

THE FACTS

The antecedent facts, as found by the Former First Division, are as

follows:

"Petitioner entered into a Build-Operate-Transfer

contract with the Philippine National Oil Company-energy
Development Corporation (PNOC-EDC) for the finance,
design, construction, testing, commissioning, operation,
maintenance, and repair of a 4 7-megawatt geothermal power
plant, provided that PNOC-EDC shall supply and deliver steam
to petitioner at no cost. In tum, petitioner shall convert the
steam into electric capacity and energy for PNOC-EDC and
shall deliver the same to the National Power Corporation (NPC)
for and in behalf of PNOC-EDC. Its 47-megawatt geothermal
power plant project has been accredited by the Department of
Energy (DOE) as a Private Sector Generation Facility, pursuant
to the provision of the Executive Order No. 215 and evidenced
by Certificate of Accreditation No. 95-03-07. In order to
facilitate the operations and management of the said geothermal

{))JJ
CTA EB NO . 630 5
(C.T.A. CASE NO. 7506)
D E CISION

plant, it entered into an Operations and Maintenance Agreement

with Marubeni Energy Services Corporation (M~EC).

For the second to fourth quarters of taxable year 2004,

petitioner filed its Quarterly VAT Returns on the following
dates:

Quarter Date Filed Date Amended

Second July 22, 2004 June 22, 2005
T hird October 22, 2004 June 22, 2005
Fourth January 25 , 2005 June 22, 2005

On August 16, 2005 , petitioner filed a letter - request for

the issuance of a tax credit certificate with the BIR Large
Taxpayers Service arising from its excess and unutilized
creditable input taxes in the amount of P9,470,500.39,
accumulated from the first to fourth quarters of taxable year
2004. However, said application for issuance of tax credit
certificate remains unacted upon by respondent despite the
lapse of the one hundred twenty (120)-day period provided
under Section 112 (D) of the National Internal Revenue Code
(NIRC) of 1997, as amended.

On July 2 1, 2006, petitioner filed the instant Petition for

Review, praying for the issuance of tax credit certificate in the
amount of P6,199,278.90 instead of the amount of
P9,470,50.39, which covers merely the second to fourth
quarters of the taxable year 2004.

On September 18, 2006, respondent (now petitioner)

filed his Answer interposing the following counter-arguments:

' 4. Petitioner' s claim for refund is subject to

administrative investigation by the Bureau;

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CT A EB NO. 630 6
(C.I.A. CASE NO. 7506)
DECISION

5. Petitioner must prove that it paid the alleged VAT

input Taxes for the period in question;

6. Petitioner inust prove that the same alleged input VAT

was not utilized against any output VAT liability;

7. Petitioner must prove that its sales are VAT zero-rated

as contemplated under Section 112 (A) of the Tax Code
of 1997;

8. Petitioner must prove that the alleged VAT input taxes

for the period in question are attributable to its alleged
VAT zero-rated sales;

9. Petitioner must prove that the claim was filed within

the period prescribed by law;

10. In an action for refund, the burden of proof is on the

taxpayer to establish its right to refund, and failure to
sustain the burden is fatal to the claim for refund;

11. Claims for refund are construed strictly against the

claimant for the same partake the nature of exemption of
taxation."

After due proceedings, on May 12, 2009, the Fo1111,er First Division

rendered its decision in the terms earlier set forth.

On June 4, 2009, respondent Mindanao I filed a "Motion for Partial

Reconsideration" of the Decision dated May 12, 2009, while on June 5,

2009, the CIR filed her "Motion for Partial Reconsideration".

fy(JJ
CT A EB NO. 630 7
(C.T.A. CASE NO. 7506)
DECISION

On June 26, 2009, the Former First Division ordered respondent

Mindanao I to comment on CIR' S Motion for Partial Reconsideration;

afterwich, both motions shall be deemed submitted for resolution.

On July 6, 2009, respondent Mindanao I filed its

"Comment/Opposition (To Respondent's Motion for Partial

Reconsideration)".

On April 30, 2010, the Former First Division rendered an Amended

Decision denying CIR's "Motion for Partial Reconsideration" arid partially

granting respondent Mindanao I' s "Motion for Partial Reconsideration".

Accordingly, the CIR was ordered to issue a tax credit certificate in favor of

respondent Mindanao I in the amount of P5,278,036.06, representing its

unutilized input VAT for the second, third, and fourth quarters of taxable

year 2004.

On June 7, 2010, petitioner CIR filed the instant Petition for Review

before this Court En Bane, raising the sole issue of:

ISSUE

WHETHER OR NOT THE HONORABLE COURT ERRED

IN RULING THAT RESPONDENT IS ENTITLED TO
REFUND OR ISSUANCE OF A TAX CREDIT

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CTA EB NO. 630 8
(C.T.A. CASE NO. 7506)
DECISION

CERTIFICATE IN THE AMOUNT OF TWO MILLION TWO

HUNDRED SEVENTY NINE THOUSAND EIGHT
HUNDRED TWENTY ONE AND 99/100 PESOS
(P2,279,821.99) BECAUSE THE CLAIM WAS NOT FILED
IN ACCORDANCE WITH THE PROCEDURE
PRESCRIBED BYLAW.

Without necessarily giving due course to the Petition for Review, on

June 23, 2010, We ordered respondent Mindanao I to file its comment, not a

motion to dismiss, within ten (1 0) days from notice.

On July 8, 2010, respondent filed its "Comment [To Petitioner's

Petition for Review dated June 3, 2010]".

On July 29, 2010, the Court En Bane ordered both parties to file their

simultaneous memoranda, within thirty (30) days from notice; afterwhich

the petition shall be deemed submitted for decision.

On September 6, 2010, respondent Mindanao I filed its Memorandum,

while on September 7, 2010, petitioner CIR filed a "Manifestation" stating

that she is adopting her Petition for Review dated June 3, 2010 as her

Memorandum. On October 14, 2010, the petition was deemed submitted for

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decision.
CTA EB NO. 630 9
(C.T.A. CASE NO . 7506)
DECISION

Petitioner CIR's Arguments

Petitioner CIR alleges that on August 16, 2005, respondent Mindanao

I filed its administrative claim for refund in the amount of P6, 199,278.90,

representing alleged accumulated excess input taxes attributable to its

alleged VAT zero-rated revenue for the second to fourth quarters of 2004.

Said claim was not acted upon with finality by petitioner CIR, until the lapse

of the 120 days from August 16, 2005 or until December 14, 2005. Thus, on

July 21, 2006, respondent Mindanao I filed with this Court its judicial claim

for refund by way of a Petition for Review. However, pursuant to Section

112 (D) of the NIRC of 1997, as amended, respondent Mindanao I has 30

days from the expiration of the 120- day period to appeal to the CTA the

unacted claim for refund; and respondent had until January 13, 2006 to

appeal. Hence, the Petition for Review was filed on July 21 , 2006, way

beyond the period prescribed by law; thus, this Court cannot acquire

jurisdiction over the instant case.

Petitioner CIR fmiher alleges that respondent Mindanao I failed to

submit complete documents to substantiate its administrative claim for

refund, and the submission of complete documents in support of its

{9)JJ
CTA EB NO . 630 10
(C.T.A. CASE NO . 7506)
DECISION

application for refund is a requirement established by law and jurisprudence.

Hence, respondent's failure to comply with the duly mandated legal

requirements in such claim for refund/tax credit warranted the denial by

inaction of respondent's administrative claim.

Respondent Mindanao l's Counter-Arguments

Respondent Mindanao I counters that the judicial recourse within

thirty days after the lapse of the 120-day period is only directory and

permissive, and not mandatory nor jurisdictional, as long as said 30-day

period is within the two year prescriptive period; that its judicial claim for

refund filed on July 21, 2006 is within the two-year prescriptive period

prescribed by Section 229; thus, said judicial claim was filed on time.

Respondent Mindanao I further argues that it was able to submit

documents to substantiate its administrative claim for refund; that the BIR

had all the opportunity to examine respondent's books of accounts and other

accounting records; and it was able to satisfy the requirements necessary to

prove its claim for tax refund/credit.

THE COURT EN BANC'S RULING

The petition is meritorious.

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CT A EB NO. 630 11
(C.T.A. CASE NO. 7506)
DECISION

Section 112 of the NIRC of 1997, as amended, provides:

"SEC. 112. Refunds or Tax Credits of Input Tax.-

(A) 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)(l ), (2) and (B) and Section
108 (B)(l) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for
in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas (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 or 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; Provided, finally, That for a person making sales
that are zero-rated under Section 108 (B)(~), the input
taxes shall be allocated ratably between his zero-rated
and non-zero-rated sales.

XXX XXX

(C) Period within which Refund or Tax Credit of

Input Taxes shall be Made.- In proper cases, the
Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes within one hundred

OAt
CTA EB NO. 630 12
(C.T.A. CASE NO. 7506)
DECISION

twenty (120) days from the date of submission of

complete documents in support of the application filed in
accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund

or tax credit, or the failure on the part of the
Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within thirty
(30) days from receipt of the decision denying the claim
or after the expiration of the one hundred twenty day-
period, appeal the decision or the unacted claim with the
Court of Tax Appeals."

Pursuant to the above-quoted Section 112 (A), a taxpayer may apply a

claim for refund of unutilized input VAT payments not otherwise used for

any internal revenue tax due with the BIR, within two years reckoned from

the close of the taxable quarter when the relevant sales were made.

While the afore-quoted Section 112 (C) provides that the CIR has one

hundred twenty (120) days from the submission of supporting documents to

decide the claim for refund. In case of full or partial denial, or inaction of the

CIR, the taxpayer may file an appeal with the CTA, within 30 days from

receipt of the decision, or from the lapse of the 120-day period.

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CTA EB NO. 630 13
(C.T.A. CASE NO. 7506)
DECISION

In the recent case of Commissioner of Internal Revenue vs. Aichi

Forging Company of Asia, Inc., supra, the Supreme Court categorically

ruled:

"The filing of the judicial claim was premature

However, notwithstanding the timely filing of the

administrative claim, we are constrained to deny respondent'
claim for tax refund/credit for having been filed in violation of
Section 112(D) of the NIRC, which provides that:

SEC. 112. Refund or Tax Credits oflnput Tax.-

xxxx

(D) Period within which Refund or Tax Credit of

Input Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax credit
certificate for creditable input taxes 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) and (B) hereof.

In case of full or partial denial of the claim for tax

refund or tax credit, or the fai lure on the pati of the
Commissioner to act on the application within the period
prescribed above, the taxpayer affected may, within (30)
days from the receipt of the decision denying the claim or
after the expiration of the one hundred twenty day-period,
appeal the decision or the unacted claim with the Court of
Tax Appeals. (Emphasis supplied.)

Section 112(D) of the NIRC clearly provides that the CIR

has '120 days, from the date of the submission of the complete
documents in support of the application for tax refund/credit,'
within which to grant or deny the claim. In case of full or

riUD
.

CTA EB NO. 630 14

(C.I.A. CASE NO . 7506)
DECISION

partial denial by the CIR, the taxpayer's recourse is to file an

appeal before the CTA within 30 days from receipt of the
decision of the CIR. However, if after the 120-day period the
CIR fails to act on the application for refund/credit, the remedy
of the taxpayer is to appeal the inaction of the CIR to CTA
within 30 days.

In this case, the administrative and the judicial claims

were simultaneously filed on September 30, 2004. Obviously,
respondent did not wait for the decision of the CIR or the lapse
of the 120-day period. For this reason, we find the filing of the
judicial claim with the CTA premature.

Respondent's assertion that the non-observance of the

120-day period is not fatal to the filing of a judicial claim as
long as both the administrative and the judicial claims are filed
within the two-year prescriptive period has no legal basis.

There is nothing in Section 112 of the NIRC to support

respondent's view. Subsection (A) of the said provision states
that 'any VAT-registered person, whose sales are zero-rated or
effectively zero-rated may, within the two 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.' The phrase 'within
two (2) years xxx apply for the issuance of a tax credit
certificate or refund' refers to applications for refund/credit
filed with the CIR and not to appeals made to the CTA. This is
apparent in the first paragraph of subsection (D) of the same
provision, which states that the CIR has '120 days from the
submission of complete documents in support of the application
filed in accordance with Subsection (A) and (B)' within which
to decide on the claim.

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CTA EB NO. 630 15
(C.T.A. CASE NO . 7506)
DECISION

In fact, applying the two-year period to judicial claims

would render nugatory Section 112(D) of the NIRC, which
already provides for a specific period within which a taxpayer
should appeal the decision or inaction of the CIR. The second
paragraph of Section 112(D) of the NIRC envisions two
scenarios: (1) when a decision is issued by the CIR before the
lapse of the 120-day period; and (2) when no decision is made
after the 120-day period. In both instances, the taxpayer has 30
days within which to file an appeal with the CTA. As we see it
then, the 120-day period is crucial in filing an appeal with the
CTA.

With regard to Commissioner of Internal Revenue vs.

Victorias Milling, Co., Inc. (22 SCRA 12) relied upon by
respondent, we find the same inapplicable as the tax provision
involved in that case is Section 306, now Section 229 of the
NIRC. And as already discussed, Section 229 does not apply to
refunds/credits of input VAT, such as the instant case.

In fine, the premature filing of respondent's claim for

refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by the
CTA."

Pursuant to the above ruling, respondent Mindanao I's administrative

claim for refund for the second to fourth quarters of taxable year 2004 filed

on August 16, 2005, is well within the two year prescriptive period.

Furthermore, pursuant to Section 112 (C) of the same Code, the CIR

has 120 days from August 16, 2005 or until December 14, 2005 to decide

respondent Mindanao I's administrative claim for refund. In this case,

~
' .. ,,
'

CT A EB NO. 630 16
(C.T.A. CASE NO. 7506)
DECISION

respondent Mindanao I's claim was not acted upon by petitioner CIR; thus,

respondent Mindanao I has 30 days from December 14, 2005 or until

January 13, 2006 to appeal to the CTA the CIR's inaction on its claim for

refund.

Records show, however, that respondent Mindanao I filed its judicial

claim for refund by way of a petition for review before this Court in

Division on July 21; 2006 only, which is one hundred eighty nine (189) days

way beyond the 30-day prescribed period to appeal.

Evidently, the Petition for Review in C.T.A. Case No. 7506 was filed

189 days late, thus, no jurisdiction was acquired by the CTA in Division. We

have therefore, no alternative, but to dismiss the Petition for Review filed in

C.T.A. Case No. 7506.

WHEREFORE, premises considered, the instant petition is hereby

GRANTED. Accordingly, the Amended Decision dated April 30, 2010

rendered by the Former First Division of this Court in C.T.A. Case No. 7506

is hereby REVERSED and SET ASIDE, and another one is hereby entered

dismissing the Petition for Review filed in C.T.A. Case No. 7506 for having

been filed late.

(JAfJ
,,

CTA EB NO. 630 17

(C.T.A. CASE NO. 7506)
DECISION

SO ORDERED.

O~A~UEZ
Associate Justice

WE CONCUR:

t~ro. ~
ERNESTO D. ACOSTA
Presiding Justice

~· c~~Q.
.ftrANI'fO C. CASTANEDA,~R. -------vEt~uW~
Associate Justice Associate Justice

CAES~ANOVA
•

E~P.UY
Associate Justice Associate Justice

~ N.M~,G"'~
CIELITO N. MINDARO-GRULLA
Associate Justice

~r:-~---¥-
AMELIA R. COTANGcO-MANALASTAS
Associate Justice
I t

CTA EB NO . 630 18
(C.T.A. CASE NO. 7506)
DECISION

CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, it is hereby
certified that the above Decision has been reached in consultation with the
members of the Court En Bane before the case was assigned to the writer of
the opinion of the Court.

Q~ ~- D...-...rL-
ERNESTO D. ACOSTA
Presiding Justice