Mindanao Geothermal v. CIR

SUPREME COURT REPORTS ANNOTATED VOLUME 693 2019-04-11, 9:11 PM
G.R. No. 193301. March 11, 2013.*
MINDANAO II GEOTHERMAL PARTNERSHIP,

petitioner, vs. COMMISSIONER OF INTERNAL
REVENUE, respondent.
G.R. No. 194637. March 11, 2013.*

MINDANAO I GEOTHERMAL PARTNERSHIP, petitioner,
vs. COMMISSIONER OF INTERNAL REVENUE,
respondent.
Taxation; Value-Added Tax; Tax Credits; Tax Refunds; 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
_______________
* SECOND DIVISION.
50
50 SUPREME COURT REPORTS ANNOTATED
Mindanao II Geothermal Partnership vs. Commissioner of Internal

Revenue
such sales.·In determining whether the administrative claims

of Mindanao I and Mindanao II for 2003 have prescribed, we see no
need to rely on either Atlas or Mirant. Section 112(A) of the 1997
Tax Code is clear: „[A]ny 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
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creditable input tax due or paid attributable to such sales x x x.‰

Same; Same; Same; Same; 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 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.·In determining whether the
claims for the second, third and fourth quarters of 2003 have been
properly appealed, we still see no need to refer to either Atlas or
Mirant, or even to Section 229 of the 1997 Tax Code. The second
paragraph of Section 112(C) of the 1997 Tax Code is clear: „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 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.‰
Same; Court of Tax Appeals; The taxpayer cannot simply file a
petition with the Court of Tax Appeals without waiting for the
CommissionerÊs decision within the 120-day mandatory and
jurisdictional period.·In the consolidated cases of San Roque, the
Court En Banc examined and ruled on the different claims for tax
refund or credit of three different companies. In San Roque, we
reiterated that „[f]ollowing the verba legis doctrine, [Section 112(C)]
must be applied exactly as worded since it is clear, plain, and
unequivocal. The taxpayer cannot simply file a petition with the
CTA without waiting for the CommissionerÊs decision within the
120-day mandatory and jurisdictional period. The CTA will have no
jurisdiction because there will be no ÂdecisionÊ or Âdeemed a denial
decisionÊ of the Commissioner for the CTA to review.‰
51
VOL. 693, MARCH 11, 2013 51

Revenue
Same; Summary of the Rules on the Determination of the
Prescriptive Period for Filing a Tax Refund or Credit of Unutilized

Input Value Added Tax (VAT) as Provided in Section 112 of the 1997
Tax Code.·We summarize 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, as follows: (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 CIRÊs
decision denying the administrative claim or from the expiration of
the 120-day period 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.
Same; 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 IIÊs 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 IIÊs business is to convert the steam supplied to
it by PNOC-EDC 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 IIÊs property, plant, and equipment.
Therefore, the sale of the Nissan Patrol is an incidental transaction
made in the course of Mindanao IIÊs business which should be liable
for VAT.
52

Mindanao II Geothermal Partnership vs. Commissioner of
Internal Revenue
PETITIONS for review on certiorari of the decisions,

amended decision and resolution of the Court of Tax
Appeals En Banc.
The facts are stated in the opinion of the Court.
Villanueva, Caña & Associates Law Offices for
petitioner.
Claro B. Ortiz and Felix Paul R. Velasco III for
respondent.
CARPIO, J.:
The Cases
G.R. No. 193301 is a petition for review1 assailing the
Decision2 promulgated on 10 March 2010 as well as the
Resolution3 promulgated on 28 July 2010 by the Court of
Tax Appeals En Banc (CTA En Banc) in CTA EB No. 513.
The CTA
_______________
1 Under Rule 45 of the 1997 Rules of Civil Procedure.
2 Rollo (G.R. No. 193301), pp. 11-32. Penned by Associate Justice
Juanito C. Castaneda, Jr. with Associate Justices Erlinda P. Uy, Olga
Palanca Enriquez, Esperanza R. Fabon-Victorino, Cielito N. Mindaro-
Grulla and Amelia P. Cotangco-Manalastas, concurring. Presiding
Justice Ernesto D. Acosta and Associate Justice Lovell R. Bautista
penned Separate Concurring and Dissenting Opinions. Associate Justice
Caesar A. Casanova concurred with Associate Justice BautistaÊs Opinion.
3 Id., at pp. 47-54. Penned by Associate Justice Juanito C. Castañeda,
Jr., with Associate Justices Erlinda P. Uy, Olga Palanca-Enriquez,
Esperanza R. Fabon-Victorino, and Cielito N. Mindaro-Grulla,
concurring. Presiding Justice Ernesto D. Acosta and Associate Justice
Lovell R. Bautista penned Separate Concurring and Dissenting Opinions.
Associate Justice Caesar A. Casanova concurred with Associate Justice
BautistaÊs Opinion. Associate Justice Amelia R. Cotangco-Manalastas
was on leave.
53
VOL. 693, MARCH 11, 2013 53

Internal Revenue
En Banc affirmed the 22 September 2008 Decision4 as well

as the 26 June 2009 Amended Decision5 of the First
Division of the Court of Tax Appeals (CTA First Division) in
CTA Case Nos. 7227, 7287, and 7317. The CTA First
Division denied Mindanao II Geothermal PartnershipÊs
(Mindanao II) claims for refund or tax credit for the first
and second quarters of taxable year 2003 for being filed out
of time (CTA Case Nos. 7227 and 7287). The CTA First
Division, however, ordered the Commissioner of Internal
Revenue (CIR) to refund or credit to Mindanao II
unutilized input value-added tax (VAT) for the third and
fourth quarters of taxable year 2003 (CTA Case No. 7317).
G.R. No. 194637 is a petition for review6 assailing the
Decision7 promulgated on 31 May 2010 as well as the
Amended Decision8 promulgated on 24 November 2010 by
the CTA En
_______________
4 Id., at pp. 179-198. Penned by Associate Justice Caesar A. Casanova,
with Presiding Justice Ernesto D. Acosta and Associate Justice Lovell R.
Bautista, concurring.
with Associate Justice Lovell R. Bautista, concurring. Presiding Justice
Ernesto D. Acosta penned a Separate Concurring and Dissenting
Opinion.
6 Under Rule 45 of the 1997 Rules of Civil Procedure.
7 Rollo (G.R. No. 194637), pp. 14-26. Penned by Associate Justice
Caesar A. Casanova, with Associate Justices Lovell R. Bautista, Cielito
N. Mindaro-Grulla and Amelia C. Cotangco-Manalastas, concurring.
Associate Justice Olga Palanca-Enriquez penned a Separate Concurring
and Dissenting Opinion, with Associate Justices Juanito C. Castañeda,
Jr. and Erlinda P. Uy, concurring. Associate Justice Esperanza R. Fabon-
Victorino penned a Dissenting Opinion. Presiding Justice Ernesto D.
Acosta was on leave.
with Presiding Justice Ernesto D. Acosta, Associate Justices Juanito C.
Castañeda, Jr., Erlinda P. Uy, Olga Palanca-Enriquez, Esperanza R.
Fabon-Victorino, Cielito N. Mindaro-Grulla and Amelia C. Cotangco-
Manalastas, concurring. Associate Justice Lovell R. Bautista penned a
Separate Concurring and Dissenting Opinion.
54

Internal Revenue
Banc in CTA EB Nos. 476 and 483. In its Amended

Decision, the CTA En Banc reversed its 31 May 2010
Decision and granted the CIRÊs petition for review in CTA
Case No. 476. The CTA En Banc denied Mindanao I
Geothermal PartnershipÊs (Mindanao I) claims for refund
or tax credit for the first (CTA Case No. 7228), second (CTA
Case No. 7286), third, and fourth quarters (CTA Case No.
7318) of 2003.
Both Mindanao I and II are partnerships registered with
the Securities and Exchange Commission, value added
taxpayers registered with the Bureau of Internal Revenue
(BIR), and Block Power Production Facilities accredited by
the Department of Energy. Republic Act No. 9136, or the
Electric Power Industry Reform Act of 2000 (EPIRA),
effectively amended Republic Act No. 8424, or the Tax
Reform Act of 1997 (1997 Tax Code),9 when it decreed that
sales of power by generation companies shall be subjected
to a zero rate of VAT.10 Pursuant to EPIRA, Mindanao I and
II filed with the
_______________
9 The short title of Republic Act No. 8424 is Tax Reform Act of 1997. It
is also sometimes referred to as the National Internal Revenue Code
(NIRC) of 1997. In this ponencia, we refer to RA 8424 as 1997 Tax Code.
10 Section 6 of EPIRA provides:
Generation Sector.·Generation of electric power, a business affected
with public interest shall be competitive and open.
Upon the effectivity of this Act, any new generation company shall,
before it operates, secure from the Energy Regulatory Commission (ERC)
a certificate of compliance pursuant to the standards set forth in this Act,
as well as health, safety and environmental clearances from the
appropriate government agencies under existing laws.
Any law to the contrary notwithstanding, power generation shall not
be considered a public utility operation. For this purpose, any person or

entity engaged or which shall engage in power generation and supply of
electricity shall not be required to secure a national franchise.
55
VOL. 693, MARCH 11, 2013 55

Internal Revenue
CIR claims for refund or tax credit of accumulated

unutilized and/or excess input taxes due to VAT zero-rated
sales in 2003. Mindanao I and II filed their claims in 2005.
G.R. No. 193301
Mindanao II v. CIR
The Facts
G.R. No. 193301 covers three CTA First Division cases,
CTA Case Nos. 7227, 7287, and 7317, which were
consolidated as CTA EB No. 513. CTA Case Nos. 7227,
7287, and 7317 claim a tax refund or credit of Mindanao
IIÊs alleged excess or unutilized input taxes due to VAT
zero-rated sales. In CTA Case No. 7227, Mindanao II claims
a tax refund or credit of P3,160,984.69 for the first quarter
of 2003. In CTA Case No. 7287, Mindanao II claims a tax
refund or credit of P1,562,085.33 for the second quarter of
2003. In CTA Case No. 7317, Mindanao II claims a tax
refund or credit of P3,521,129.50 for the third and fourth
quarters of 2003.
The CTA First DivisionÊs narration of the pertinent facts
is as follows:
xxxx
_______________
Upon the implementation of retail competition and open access, the prices
charged by a generation company for the supply of electricity shall not be
subject to regulation by the ERC except as otherwise provided in this Act.
Pursuant to the objective of lowering electricity rates to end-users,
sales of generated power by generation companies shall be value
added tax zero-rated.
The ERC shall, in determining the existence of market power abuse or anti-
competitive behavior, require from generation companies the submission of
their financial statements. (Emphasis supplied)
56

Revenue
On March 11, 1997, [Mindanao II] allegedly entered into a Built

(sic)-Operate-Transfer (BOT) contract with the Philippine National
Oil Corporation·Energy Development Company (PNOC-EDC) for
finance, engineering, supply, installation, testing, commissioning,
operation, and maintenance of a 48.25 megawatt geothermal power
plant, provided that PNOC-EDC shall supply and deliver steam to
[Mindanao II] at no cost. In turn, [Mindanao II] 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.
[Mindanao II] alleges that its sale of generated power and
delivery of electric capacity and energy of [Mindanao II] to NPC for
and in behalf of PNOC-EDC is its only revenue-generating activity
which is in the ambit of VAT zero-rated sales under the EPIRA Law,
x x x.
xxxx
Hence, the amendment of the NIRC of 1997 modified the VAT
rate applicable to sales of generated power by generation companies
from ten (10%) percent to zero (0%) percent.
In the course of its operation, Mindanao II makes domestic
purchases of goods and services and accumulates therefrom
creditable input taxes. Pursuant to the provisions of the National
Internal Revenue Code (NIRC), [Mindanao II] alleges that it can
use its accumulated input tax credits to offset its output tax
liability. Considering, however that its only revenue-generating
activity is VAT zero-rated under RA No. 9136, [Mindanao IIÊs] input
tax credits remain unutilized.
Thus, on the belief that its sales qualify for VAT zero-rating,
[Mindanao II] adopted the VAT zero-rating of the EPIRA in
computing for its VAT payable when it filed its Quarterly VAT
Returns on the following dates:
CTA Period Date of Filing

Case Covered Original Amended Return
No. (2003) Return
7227 1st Quarter April 23, July 3, 2002 (sic), April 1,

2003 2004 & October 22, 2004
58

Internal Revenue
7287 2nd Quarter July 22, 2003 April 1, 2004

7317 3rd Quarter Oct. 27, 2003 April 1, 2004
7317 4th Quarter Jan. 26, 2004 April 1, 2004
Considering that it has accumulated unutilized creditable input

taxes from its only income-generating activity, [Mindanao II] filed
an application for refund and/or issuance of tax credit certificate
with the BIRÊs Revenue District Office at Kidapawan City on April
13, 2005 for the four quarters of 2003.
To date [(September 22, 2008)], the application for refund by
[Mindanao II] remains unacted upon by the [CIR]. Hence, these
three petitions filed on April 22, 2005 covering the 1st quarter of
2003; July 7, 2005 for the 2nd quarter of 2003; and September 9,
2005 for the 3rd and 4th quarters of 2003. At the instance of
[Mindanao II], these petitions were consolidated on March 15, 2006
as they involve the same parties and the same subject matter. The
only difference lies with the taxable periods involved in each
petition.11
The Court of Tax AppealsÊ Ruling: Division

In its 22 September 2008 Decision,12 the CTA First
Division found that Mindanao II satisfied the twin
requirements for VAT zero rating under EPIRA: (1) it is a
generation company, and (2) it derived sales from power
generation. The CTA First Division also stated that
Mindanao II complied with five requirements to be entitled
to a refund:
1. There must be zero-rated or effectively zero-rated sales;

2. That input taxes were incurred or paid;
3. That such input VAT payments are directly attributable to
zero-rated sales or effectively zero-rated sales;
4. That the input VAT payments were not applied against any
output VAT liability; and
_______________
11 Rollo (G.R. No. 193301), pp. 180-183.
12 Id., at pp. 179-198.
58

Revenue
5. That the claim for refund was filed within the two-year
prescriptive period.13
With respect to the fifth requirement, the CTA First

Division tabulated the dates of filing of Mindanao IIÊs
return as well as its administrative and judicial claims,
and concluded that Mindanao IIÊs administrative and
judicial claims were timely filed in compliance with this
CourtÊs ruling in Atlas Consolidated Mining and
Development Corporation v. Commissioner of Internal
Revenue (Atlas).14 The CTA First Division declared that the
two-year prescriptive period for filing a VAT refund claim
should not be counted from the close of the quarter but
from the date of the filing of the VAT return. As ruled in
Atlas, VAT liability or entitlement to a refund can only be
determined upon the filing of the quarterly VAT return.
CTA Period Date of Filing

Case Covered Original Amended Administrative Judicial
No. (2003) Return Return Claim Claim
7227 1st 23 April 1 April 13 April 2005 22
Quarter 2003 2004 April
2005
7287 2nd 22 July 1 April 13 April 2005 7 July
Quarter 2003 2004 2005
7317 3rd 25 Oct. 1 April 13 April 2005 9 Sept.
Quarter 2003 2004 2005
7317 4th 26 Jan. 1 April 13 April 2005 9 Sept.
Quarter 2004 2004 200515
Thus, counting from 23 April 2003, 22 July 2003, 25

October 2003, and 26 January 2004, when Mindanao II
filed its VAT returns, its administrative claim filed on 13
April 2005 and
_______________
13 Id., at p. 191.
14 G.R. Nos. 141104 and 148763, 8 June 2007, 524 SCRA 73.
15 See Rollo (G.R. No. 193301), pp. 192-193.
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VOL. 693, MARCH 11, 2013 59

Internal Revenue
judicial claims filed on 22 April 2005, 7 July 2005, and 9

September 2005 were timely filed in accordance with Atlas.
The CTA First Division found that Mindanao II is
entitled to a refund in the modified amount of
P7,703,957.79, after disallowing P522,059.91 from input
VAT16 and deducting P18,181.82 from Mindanao IIÊs sale of
a fully depreciated P200,000.00 Nissan Patrol. The input
taxes amounting to P522,059.91 were disallowed for failure
to meet invoicing requirements, while the input VAT on the
sale of the Nissan Patrol was reduced by P18,181.82
because the output VAT for the sale was not included in the
VAT declarations.
The dispositive portion of the CTA First DivisionÊs 22
September 2008 Decision reads:
WHEREFORE, the Petition for Review is hereby PARTIALLY

GRANTED. Accordingly, [the CIR] is hereby ORDERED to
REFUND or to ISSUE A TAX CREDIT CERTIFICATE in the
modified amount of SEVEN MILLION SEVEN HUNDRED THREE
THOUSAND NINE HUNDRED FIFTY SEVEN AND 79/100
PESOS (P7,703,957.79) representing its unutilized input VAT for
the four (4) quarters of the taxable year 2003.
SO ORDERED.17
_______________
16 The commissioned independent Certified Public Accountant found
the following:
Annex D.1: P2,090.16, discrepancy between the input VAT paid to and
acknowledged by the Government Service Insurance System and the
amount claimed by Mindanao II;
Annex D.2: P29,861.82, input VAT claims from Tokio Marine Malayan
and Citibank NA Manila which were supported by billing statements but

not by official receipts;
Annex D.3: P2,752.00, out-of-pocket expenses reimbursed to SGV &
Company not supported by valid invoices or official receipts; and
Annex D.4: P487,355.93, input VAT claims from purchases of services
supported by valid 2003 invoices but are paid in 2004.
17 Rollo (G.R. No. 193301), p. 198.
60

Internal Revenue
Mindanao II filed a motion for partial reconsideration.18

It stated that the sale of the fully depreciated Nissan
Patrol is a one-time transaction and is not incidental to its
VAT zero-rated operations. Moreover, the disallowed input
taxes substantially complied with the requirements for
refund or tax credit.
The CIR also filed a motion for partial reconsideration.
It argued that the judicial claims for the first and second
quarters of 2003 were filed beyond the period allowed by
law, as stated in Section 112(A) of the 1997 Tax Code. The
CIR further stated that Section 229 is a general provision,
and governs cases not covered by Section 112(A). The CIR
countered the CTA First DivisionÊs 22 September 2008
decision by citing this CourtÊs ruling in Commissioner of
Internal Revenue v. Mirant Pagbilao Corporation
(Mirant),19 which stated that unutilized input VAT
payments must be claimed within two years reckoned from
the close of the taxable quarter when the relevant sales
were made regardless of whether said tax was paid.
The CTA First Division denied Mindanao IIÊs motion for
partial reconsideration, found the CIRÊs motion for partial
reconsideration partly meritorious, and rendered an
Amended Decision20 on 26 June 2009. The CTA First
Division stated that the claim for refund or credit with the
BIR and the subsequent appeal to the CTA must be filed
within the two-year period prescribed under Section 229.
The two-year prescriptive period in Section 229 was
denominated as a mandatory statute of limitations.
Therefore, Mindanao IIÊs claims for refund for the first and
second quarters of 2003 had already prescribed.
The CTA First Division found that the records of
Mindanao IIÊs case are bereft of evidence that the sale of
the Nissan
_______________
18 Id., at pp. 199-207.
19 G.R. No. 172129, 12 September 2008, 565 SCRA 154.
20 Rollo (G.R. No. 193301), pp. 209-218.
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VOL. 693, MARCH 11, 2013 61

Internal Revenue
Patrol is not incidental to Mindanao IIÊs VAT zero-rated

operations. Moreover, Mindanao IIÊs submitted documents
failed to substantiate the requisites for the refund or credit
claims.
The CTA First Division modified its 22 September 2008
Decision to read as follows:
WHEREFORE, the Petition for Review is hereby PARTIALLY

GRANTED. Accordingly, [the CIR] is hereby ORDERED to
REFUND or to ISSUE A TAX CREDIT CERTIFICATE [to
Mindanao II Geothermal Partnership] in the modified amount of
TWO MILLION NINE HUNDRED EIGHTY THOUSAND EIGHT
HUNDRED EIGHTY SEVEN AND 77/100 PESOS (P2,980,887.77)
representing its unutilized input VAT for the third and fourth
quarters of the taxable year 2003.
SO ORDERED.21
Mindanao II filed a Petition for Review,22 docketed as

CTA EB No. 513, before the CTA En Banc.
The Court of Tax AppealsÊ Ruling: En Banc
On 10 March 2010, the CTA En Banc rendered its
Decision23 in CTA EB No. 513 and denied Mindanao IIÊs
petition. The CTA En Banc ruled that (1) Section 112(A)
clearly provides that the reckoning of the two-year
prescriptive period for filing the application for refund or
credit of input VAT attributable to zero-rated sales or

effectively zero-rated sales shall be counted from the close
of the taxable quarter when the sales were made; (2) the
Atlas and Mirant cases applied different tax codes: Atlas
applied the 1977 Tax Code while Mirant applied the 1997
Tax Code; (3) the sale of the fully-depreciated Nissan Patrol
is incidental to Mindanao IIÊs VAT
_______________
21 Id., at p. 218.
22 Id., at pp. 231-256. Pursuant to Section 4(b), Rule 8 of the Revised
Rules of the Court of Tax Appeals.
23 Id., at pp. 11-32.
62

Internal Revenue
zerorated transactions pursuant to Section 105; (4)

Mindanao II failed to comply with the substantiation
requirements provided under Section 113(A) in relation to
Section 237 of the 1997 Tax Code as implemented by
Section 4.104-1, 4.104-5, and 4.108-1 of Revenue
Regulation No. 7-95; and (5) the doctrine of strictissimi
juris on tax exemptions cannot be relaxed in the present
case.
The dispositive portion of the CTA En BancÊs 10 March
2010 Decision reads:
WHEREFORE, on the basis of the foregoing considerations, the

Petition for Review en banc is DISMISSED for lack of merit.
Accordingly, the Decision dated September 22, 2008 and the
Amended Decision dated June 26, 2009 issued by the First Division
are AFFIRMED.
SO ORDERED.24
The CTA En Banc issued a Resolution25 on 28 July 2010

denying for lack of merit Mindanao IIÊs Motion for
Reconsideration.26 The CTA En Banc highlighted the
following bases of their previous ruling:
1. The Supreme Court has long decided that the claim for refund of
unutilized input VAT must be filed within two (2) years after the
close of the taxable quarter when such sales were made.
2. The Supreme Court is the ultimate arbiter whose decisions all other
courts should take bearings.
3. The words of the law are clear, plain, and free from ambiguity;
hence, it must be given its literal meaning and applied without any
interpretation.27
_______________
24 Id., at p. 31.
25 Id., at pp. 47-54.
26 Id., at pp. 285-307.
27 Id., at p. 50.
64

Internal Revenue
G.R. No. 194637

Mindanao I v. CIR
The Facts
G.R. No. 194637 covers two cases consolidated by the
CTA EB: CTA EB Case Nos. 476 and 483. Both CTA EB
cases consolidate three cases from the CTA Second
Division: CTA Case Nos. 7228, 7286, and 7318. CTA Case
Nos. 7228, 7286, and 7318 claim a tax refund or credit of
Mindanao IÊs accumulated unutilized and/or excess input
taxes due to VAT zero-rated sales. In CTA Case No. 7228,
Mindanao I claims a tax refund or credit of P3,893,566.14
for the first quarter of 2003. In CTA Case No. 7286,
for the second quarter of 2003. In CTA Case No. 7318,
for the third and fourth quarters of 2003.
Mindanao I is similarly situated as Mindanao II. The
CTA Second DivisionÊs narration of the pertinent facts is as
follows:
xxxx
In December 1994, [Mindanao I] entered into a contract of Build-

Operate-Transfer (BOT) with the Philippine National Oil
Corporation·Energy Development Corporation (PNOC-EDC) for
the finance, design, construction, testing, commissioning, operation,
maintenance and repair of a 47-megawatt geothermal power plant.
Under the said BOT contract, PNOC-EDC shall supply and deliver
steam to [Mindanao I] at no cost. In turn, [Mindanao I] will convert
the steam into electric capacity and energy for PNOC-EDC and
shall subsequently supply and deliver the same to the National
Power Corporation (NPC), for and in behalf of PNOC-EDC.
[Mindanao IÊs] 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 Executive
Order No. 215, wherein Certificate of Accreditation No. 95-037 was
issued.
64

Revenue
On June 26, 2001, Republic Act (R.A.) No. 9136 took effect, and
the relevant provisions of the National Internal Revenue Code
(NIRC) of 1997 were deemed modified. R.A. No. 9136, also known as
the „Electric Power Industry Reform Act of 2001 (EPIRA), was
enacted by Congress to ordain reforms in the electric power
industry, highlighting, among others, the importance of ensuring
the reliability, security and affordability of the supply of electric
power to end users. Under the provisions of this Republic Act and
its implementing rules and regulations, the delivery and supply of
electric energy by generation companies became VAT zero-rated,
which previously were subject to ten percent (10%) VAT.
xxxx
The amendment of the NIRC of 1997 modified the VAT rate
applicable to sales of generated power by generation companies
from ten (10%) percent to zero percent (0%). Thus, [Mindanao I]
adopted the VAT zero-rating of the EPIRA in computing for its VAT
payable when it filed its VAT Returns, on the belief that its sales
qualify for VAT zero-rating.
[Mindanao I] reported its unutilized or excess creditable input
taxes in its Quarterly VAT Returns for the first, second, third, and
fourth quarters of taxable year 2003, which were subsequently

amended and filed with the BIR.
On April 4, 2005, [Mindanao I] filed with the BIR separate
administrative claims for the issuance of tax credit certificate on its
alleged unutilized or excess input taxes for taxable year 2003, in the
accumulated amount of P14,185, 294.80.
Alleging inaction on the part of [CIR], [Mindanao I] elevated its
claims before this Court on April 22, 2005, July 7, 2005, and
September 9, 2005 docketed as CTA Case Nos. 7228, 7286, and
7318, respectively. However, on October 10, 2005, [Mindanao I]
received a copy of the letter dated September 30, 2003 (sic) of the
BIR denying its application for tax credit/refund.28
_______________
28 Rollo (G.R. No. 194637), pp. 231-235.
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The Court of Tax AppealsÊ Ruling: Division

On 24 October 2008, the CTA Second Division rendered
its Decision29 in CTA Case Nos. 7228, 7286, and 7318. The
CTA Second Division found that (1) pursuant to Section
112(A), Mindanao I can only claim 90.27% of the amount of
substantiated excess input VAT because a portion was not
reported in its quarterly VAT returns; (2) out of the
P14,185,294.80 excess input VAT applied for refund, only
P11,657,447.14 can be considered substantiated excess
input VAT due to disallowances by the Independent
Certified Public Accountant, adjustment on the
disallowances per the CTA Second DivisionÊs further
verification, and additional disallowances per the CTA
Second DivisionÊs further verification; (3) Mindanao IÊs
accumulated excess input VAT for the second quarter of
2003 that was carried over to the third quarter of 2003 is
net of the claimed input VAT for the first quarter of 2003,
and the same procedure was done for the second, third, and
fourth quarters of 2003; and (4) Mindanao IÊs
administrative claims were filed within the two-year

prescriptive period reckoned from the respective dates of
filing of the quarterly VAT returns.
The dispositive portion of the CTA Second DivisionÊs 24
October 2008 Decision reads:
WHEREFORE, premises considered, the consolidated Petitions

for Review are hereby PARTIALLY GRANTED. Accordingly, [the
CIR] is hereby ORDERED TO ISSUE A TAX CREDIT
CERTIFICATE in favor of [Mindanao I] in the reduced amount of
TEN MILLION FIVE HUNDRED TWENTY THREE THOUSAND
ONE HUNDRED SEVENTY SEVEN PESOS AND 53/100
(P10,523,177.53) representing [Mindanao IÊs] unutilized input VAT
for the four quarters of the taxable year 2003.
_______________
29 Id., at pp. 230-245. Penned by Associate Justice Juanito C. Castañeda,
Jr., with Associate Justices Erlinda P. Uy and Olga Palanca-Enriquez,
concurring.
66

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SO ORDERED.30
Mindanao I filed a motion for partial reconsideration

with motion for clarification31 on 11 November 2008. It
claimed that the CTA Second Division should not have
allocated proportionately Mindanao IÊs unutilized
creditable input taxes for the taxable year 2003, because
the proportionate allocation of the amount of creditable
taxes in Section 112(A) applies only when the creditable
input taxes due cannot be directly and entirely attributed
to any of the zero-rated or effectively zero-rated sales.
Mindanao I claims that its unreported collection is directly
attributable to its VAT zero-rated sales. The CTA Second
Division denied Mindanao IÊs motion and maintained the
proportionate allocation because there was a portion of the
gross receipts that was undeclared in Mindanao IÊs gross
receipts.
The CIR also filed a motion for partial reconsideration32

on 11 November 2008. It claimed that Mindanao I failed to
exhaust administrative remedies before it filed its petition
for review. The CTA Second Division denied the CIRÊs
motion, and cited Atlas33 as the basis for ruling that it is
more practical and reasonable to count the two-year
prescriptive period for filing a claim for refund or credit of
input VAT on zero-rated sales from the date of filing of the
return and payment of the tax due.
The dispositive portion of the CTA Second DivisionÊs 10
March 2009 Resolution reads:
WHEREFORE, premises considered, [the CIRÊs] Motion for

Partial Reconsideration and [Mindanao IÊs] Motion for Partial
Reconsideration with Motion for Clarification are hereby DENIED
for lack of merit.
_______________
30 Id., at p. 244.
31 Id., at pp. 246-254.
32 Id., at pp. 256-269.
33 Supra note 14.
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SO ORDERED.34
The Ruling of the Court of Tax Appeals: En Banc

On 31 May 2010, the CTA En Banc rendered its
Decision35 in CTA EB Case Nos. 476 and 483 and denied
the petitions filed by the CIR and Mindanao I. The CTA En
Banc found no new matters which have not yet been
considered and passed upon by the CTA Second Division in
its assailed decision and resolution.
The dispositive portion of the CTA En BancÊs 31 May
2010 Decision reads:
WHEREFORE, premises considered, the Petitions for Review are

hereby DISMISSED for lack of merit. Accordingly, the October 24,
2008 Decision and March 10, 2009 Resolution of the CTA Former
Second Division in CTA Case Nos. 7228, 7286, and 7318, entitled
„Mindanao I Geothermal Partnership vs. Commissioner of Internal
Revenue‰ are hereby AFFIRMED in toto.
SO ORDERED.36
Both the CIR and Mindanao I filed Motions for

Reconsideration of the CTA En BancÊs 31 May 2010
Decision.
In an Amended Decision promulgated on 24 November
2010, the CTA En Banc agreed with the CIRÊs claim that
Section 229 of the NIRC of 1997 is inapplicable in light of
this CourtÊs ruling in Mirant. The CTA En Banc also ruled
that the procedure prescribed under Section 112(D) [now
112(C)]37 of the 1997 Tax Code should be followed first
before the CTA En Banc can act on Mindanao IÊs claim. The
CTA En Banc
_______________
34 Rollo (G.R. No. 194637), p. 278.
35 Id., at pp. 14-26.
36 Id., at p. 25.
37 RA 9337 renumbered Section 112(D) of the 1997 Tax Code to
112(C). In this Decision, we refer to Section 112(D) under the 1997 Tax
Code as it is currently numbered, 112(C).
68

Internal Revenue
reconsidered its 31 May 2010 Decision in light of this

CourtÊs ruling in Commissioner of Internal Revenue v. Aichi
Forging Company of Asia, Inc. (Aichi).38
The pertinent portions of the CTA En BancÊs 24
November 2010 Amended Decision read:
C.T.A. Case No. 7228:

(1) For calendar year 2003, [Mindanao I] filed with the BIR its
Quarterly VAT Returns for the First Quarter of 2003. Pursuant to
Section 112(A) of the NIRC of 1997, as amended, [Mindanao I] has
two years from March 31, 2003 or until March 31, 2005 within
which to file its administrative claim for refund;
(2) On April 4, 2005, [Mindanao I] applied [for] an
administrative claim for refund of unutilized input VAT for the first
quarter of taxable year 2003 with the BIR, which is beyond the two-
year prescriptive period mentioned above.
Quarterly VAT Returns for the second quarter of 2003. Pursuant to
Section 112(A) of the NIRC of 1997, as amended, [Mindanao I] has
two years from June 30, 2003, within which to file its
administrative claim for refund for the second quarter of 2003, or
until June 30, 2005;
(2) On April 4, 2005, [Mindanao I] applied an administrative
claim for refund of unutilized input VAT for the second quarter of
taxable year 2003 with the BIR, which is within the two-year
prescriptive period, provided under Section 112 (A) of the NIRC of
1997, as amended;
(3) The CIR has 120 days from April 4, 2005 (presumably the
date [Mindanao I] submitted the supporting documents together
with the application for refund) or until August 2, 2005, to decide
the administrative claim for refund;
(4) Within 30 days from the lapse of the 120-day period or from
August 3, 2005 to September 1, 2005, [Mindanao I] should have
elevated its claim for refund to the CTA in Division;
_______________
38 G.R. No. 184823, 6 October 2010, 632 SCRA 422.
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(5) However, on July 7, 2005, [Mindanao I] filed its Petition for

Review with this Court, docketed as CTA Case No. 7286, even
before the 120-day period for the CIR to decide the claim for refund
had lapsed on August 2, 2005. The Petition for Review was,
therefore, prematurely filed and there was failure to exhaust
administrative remedies;
xxxx

Quarterly VAT Returns for the third and fourth quarters of 2003.
Pursuant to Section 112(A) of the NIRC of 1997, as amended,
[Mindanao I] therefore, has two years from September 30, 2003 and
December 31, 2003, or until September 30, 2005 and December 31,
2005, respectively, within which to file its administrative claim for
the third and fourth quarters of 2003;
(2) On April 4, 2005, [Mindanao I] applied an administrative
claim for refund of unutilized input VAT for the third and fourth
quarters of taxable year 2003 with the BIR, which is well within the
two-year prescriptive period, provided under Section 112(A) of the
NIRC of 1997, as amended;
(3) From April 4, 2005, which is also presumably the date
[Mindanao I] submitted supporting documents, together with the
aforesaid application for refund, the CIR has 120 days or until
August 2, 2005, to decide the claim;
(4) Within thirty (30) days from the lapse of the 120-day period
or from August 3, 2005 until September 1, 2005 [Mindanao I]
should have elevated its claim for refund to the CTA;
(5) However, [Mindanao I] filed its Petition for Review with the
CTA in Division only on September 9, 2005, which is 8 days beyond
the 30-day period to appeal to the CTA.
Evidently, the Petition for Review was filed way beyond the 30-
day prescribed period. Thus, the Petition for Review should have
been dismissed for being filed late.
In recapitulation:
70

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(1) C.T.A. Case No. 7228

Claim for the first quarter of 2003 had already prescribed for
having been filed beyond the two-year prescriptive period;
(2) C.T.A. Case No. 7286
Claim for the second quarter of 2003 should be dismissed for
[Mindanao IÊs] failure to comply with a condition precedent when it
failed to exhaust administrative remedies by filing its Petition for
Review even before the lapse of the 120-day period for the CIR to
decide the administrative claim;

(3) C.T.A. Case No. 7318
Petition for Review was filed beyond the 30-day prescribed
period to appeal to the CTA.
xxxx
The May 31, 2010 Decision of this Court En Banc is hereby
REVERSED.
Accordingly, the Petition for Review of the Commissioner of
Internal Revenue in CTA EB No. 476 is hereby GRANTED and the
entire claim of Mindanao I Geothermal Partnership for the first,
second, third and fourth quarters of 2003 is hereby DENIED.
SO ORDERED.39
The Issues
G.R. No. 193301
Mindanao II v. CIR
Mindanao II raised the following grounds in its Petition
for Review:
_______________
39 Rollo (G.R. No. 194637), pp. 47-50.
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I. The Honorable Court of Tax Appeals erred in holding that the

claim of [Mindanao II] for the 1st and 2nd quarters of year 2003 has
already prescribed pursuant to the Mirant case.
A. The Atlas case and Mirant case have conflicting
interpretations of the law as to the reckoning date of the two
year prescriptive period for filing claims for VAT refund.
B. The Atlas case was not and cannot be superseded by
the Mirant case in light of Section 4(3), Article VIII of the
1987 Constitution.
C. The ruling of the Mirant case, which uses the close of
the taxable quarter when the sales were made as the
reckoning date in counting the two-year prescriptive period
cannot be applied retroactively in the case of [Mindanao II].
II. The Honorable Court of Tax Appeals erred in interpreting
Section 105 of the [1997 Tax Code], as amended in that the sale of
the fully depreciated Nissan Patrol is a one-time transaction and is
not incidental to the VAT zero-rated operation of [Mindanao II].
III. The Honorable Court of Tax Appeals erred in denying the
amount disallowed by the Independent Certified Public Accountant
as [Mindanao II] substantially complied with the requisites of the
[1997 Tax Code], as amended, for refund/tax credit.
A. The amount of P2,090.16 was brought about by the
timing difference in the recording of the foreign currency
deposit transaction.
B. The amount of P2,752.00 arose from the out-ofpocket
expenses reimbursed to SGV & Company which is
substantially suppoerted [sic] by an official receipt.
C. The amount of P487,355.93 was unapplied and/or was
not included in [Mindanao IIÊs] claim for refund or tax credit
for the year 2004 subject matter of CTA Case No. 7507.
IV. The doctrine of strictissimi juris on tax exemptions should be
relaxed in the present case.40
_______________
40 Rollo (G.R. No. 193301), pp. 83-84.
72

Internal Revenue
G.R. No. 194637

Mindanao I v. CIR
Mindanao I raised the following grounds in its Petition
for Review:
I. The administrative claim and judicial claim in CTA Case No.

7228 were timely filed pursuant to the case of Atlas Consolidated
Mining and Development Corporation vs. Commissioner of Internal
Revenue, which was then the controlling ruling at the time of filing.
A. The recent ruling in the Commissioner of Internal
Revenue vs. Mirant Pagbilao Corporation, which uses the end
of the taxable quarter when the sales were made as the
reckoning date in counting the two-year prescriptive period,
cannot be applied retroactively in the case of [Mindanao I].
B. The Atlas case promulgated by the Third Division of

this Honorable Court on June 8, 2007 was not and cannot be
superseded by the Mirant Pagbilao case promulgated by the
Second Division of this Honorable Court on September 12,
2008 in light of the explicit provision of Section 4(3), Article
VIII of the 1987 Constitution.
II. Likewise, the recent ruling of this Honorable Court in
Commissioner of Internal Revenue vs. Aichi Forging Company of
Asia, Inc., cannot be applied retroactively to [Mindanao I] in the
present case.41
In a Resolution dated 14 December 2011,42 this Court

resolved to consolidate G.R. Nos. 193301 and 194637 to
avoid conflicting rulings in related cases.
The CourtÊs Ruling
Determination of Prescriptive Period
G.R. Nos. 193301 and 194637 both raise the question of
the determination of the prescriptive period, or the
interpretation
_______________
41 Rollo (G.R. No. 194637), pp. 70-71.
42 Rollo (G.R. No. 193301), p. 738; id., at p. 704.
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of Section 112 of the 1997 Tax Code, in light of our rulings

in Atlas and Mirant.
Mindanao IIÊs unutilized input VAT tax credit for the
first and second quarters of 2003, in the amounts of
P3,160,984.69 and P1,562,085.33, respectively, are covered
by G.R. No. 193301, while Mindanao IÊs unutilized input
VAT tax credit for the first, second, third, and fourth
quarters of 2003, in the amounts of P3,893,566.14,
P2,351,000.83, and P7,940,727.83, respectively, are covered
by G.R. No. 194637.
Section 112 of the 1997 Tax Code
The pertinent sections of the 1997 Tax Code, the law
applicable at the time of Mindanao IIÊs and Mindanao IÊs

administrative and judicial claims, provide:
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)(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 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.
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
74

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hundred twenty (120) days from the date of submission of complete

documents in support of the application filed in accordance with
Subsections (A) and (B) 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 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.
x x x x43 (Underscoring supplied)
The relevant dates for G.R. No. 193301 (Mindanao II)

are:
CTA Period Close of Last day Actual date of Last day Actual
Case covered by quarter for filing filing for filing Date of
No. VAT Sales in when application application for case with filing
45
2003 and sales of tax tax refund/ CTA case with
amount were refund/tax credit with the CTA
made credit CIR (judicial
certificate (administrative claim)
44
with the claim)
CIR
7227 1st Quarter, 31 March 31 March 13 April 2005 12 22 April
P3,160,984.69 2003 2005 September 2005
2005
7287 2nd Quarter, 30 June 30 June 13 April 2005 12 7 July
P1,562,085.33 2003 2005 September 2005
2005
7317 3rd and 4th 30 30 13 April 2005 12 9
Quarters, September September September September
P3,521,129.50 2003 2005 2005 2005
_______________
43 See note 37.
44 The CIR had 120 days, or until 11 August 2005, to act on Mindanao
IIÊs claim. At the time of filing of Mindanao IIÊs appeal with the CTA,
Mindanao IIÊs application for refund remained unacted upon. Rollo (G.R.
No. 193301), p. 183.
45 Mindanao II had 30 days from the receipt of the CIRÊs denial of its
claim or after the expiration of the 120-day period to appeal the decision
or the unacted claim before the CTA. The 30th day after 11 August 2005,
10 September 2005, fell on a Saturday. Thus, Mindanao II had until 12
September 2005 to file its judicial claim. See Section 1, Rule 22, The 1997
Rules of Civil Procedure.
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2003 December 2005 being a Saturday)
The relevant dates for G.R. No. 194637 (Mindanao I)

are:
CTA Period Close of Last day Actual date of Last day Actual
Case covered by quarter for filing filing application for filing Date of
No. VAT Sales in when application for tax refund/ case with filing
47
2003 and sales of tax credit with the CTA case with
amount were refund/tax CIR(administrative CTA
46
made credit claim) (judicial
certificate claim)
with the
CIR
7228 1st Quarter, 31 March 31 March 4 April 2005 1 22 April
P3,893,566.14 2003 2005 September 2005
2005
7286 2nd Quarter, 30 June 30 June 4 April 2005 1 7 July
P2,351,000.83 2003 2005 September 2005
2005
7318 3rd and 4th 30 30 4 April 2005 1 9
Quarters, September September September September
P7,940,727.83 2003 2005 2005 2005
31 2 January
December 2006 (31
2003 December
2005 being a
Saturday)
When Mindanao II and Mindanao I filed their respective

administrative and judicial claims in 2005, neither Atlas
nor Mirant has been promulgated. Atlas was
promulgated on 8 June 2007, while Mirant was
promulgated on 12 September 2008. It is therefore
misleading to state that Atlas was the controlling
doctrine at the time of filing of the claims. The 1997
Tax Code, which took effect on 1
_______________
46 The CIR had 120 days, or until 2 August 2005, to act on Mindanao
IÊs claim. At the time of filing of Mindanao IÊs appeal with the CTA,
Mindanao IÊs application for refund remained unacted upon. Rollo (G.R.
No. 194637), p. 234.
47 Mindanao I had 30 days from the receipt of the CIRÊs denial of its
claim or after the expiration of the 120-day period to appeal the decision
or the unacted claim before the CTA. Thus, Mindanao II had until 1
September 2005 to file its judicial claim.
76

Internal Revenue
January 1998, was the applicable law at the time of filing

of the claims in issue. As this Court explained in the recent
consolidated cases of Commissioner of Internal Revenue v.
San Roque Power Corporation, Taganito Mining
Corporation v. Commissioner of Internal Revenue, and
Philex Mining Corporation v. Commissioner of Internal
Revenue (San Roque):48
Clearly, San Roque failed to comply with the 120-day waiting

period, the time expressly given by law to the Commissioner to
decide whether to grant or deny San RoqueÊs application for tax
refund or credit. It is indisputable that compliance with the 120-day
waiting period is mandatory and jurisdictional. The waiting
period, originally fixed at 60 days only, was part of the provisions of
the first VAT law, Executive Order No. 273, which took effect on 1
January 1988. The waiting period was extended to 120 days
effective 1 January 1998 under RA 8424 or the Tax Reform Act of
1997. Thus, the waiting period has been in our statute books
for more than fifteen (15) years before San Roque filed its
judicial claim.
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 taxpayerÊs petition. Philippine
jurisprudence is replete with cases upholding and reiterating these
doctrinal principles.
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
CommissionerÊs decision, or inaction
_______________
48 G.R. Nos. 187485, 196113, and 197156, 12 February 2013, 690 SCRA 336.
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„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.
San RoqueÊs failure to comply with the 120-day mandatory
period renders its petition for review with the CTA void. Article 5 of
the Civil Code provides, „Acts executed against provisions of
mandatory or prohibitory laws shall be void, except when the law
itself authorizes their validity.‰ San RoqueÊs void petition for review
cannot be legitimized by the CTA or this Court because Article 5 of
the Civil Code states that such void petition cannot be legitimized
„except when the law itself authorizes [its] validity.‰ There is no law
authorizing the petitionÊs validity.
It is hornbook doctrine that a person committing a void act
contrary to a mandatory provision of law cannot claim or acquire
any right from his void act. A right cannot spring in favor of a
person from his own void or illegal act. This doctrine is repeated in
Article 2254 of the Civil Code, which states, „No vested or acquired
right can arise from acts or omissions which are against the law or
which infringe upon the rights of others.‰ For violating a mandatory
provision of law in filing its petition with the CTA, San Roque
cannot claim any right arising from such void petition. Thus, San
RoqueÊs petition with the CTA is a mere scrap of paper.
This Court cannot brush aside the grave issue of the mandatory
and jurisdictional nature of the 120-day period just because the
Commissioner merely asserts that the case was prematurely filed
with the CTA and does not question the entitlement of San Roque to
the refund. The mere fact that a taxpayer has undisputed excess
input VAT, or that the tax was admittedly illegally, erroneously or
excessively collected from him, does not entitle him as a matter of
right to a tax refund or credit. Strict compliance with the
mandatory and jurisdictional conditions prescribed by law to claim
such tax refund or credit is essential and necessary for such claim
to prosper. Well-settled is the rule that tax refunds or credits,
just like tax exemptions, are strictly construed against the
taxpayer. The burden is on the taxpayer to show that he has
strictly complied with the conditions for the grant of the tax refund
or credit.
This Court cannot disregard mandatory and jurisdictional
conditions mandated by law simply because the Commissioner
chose not to contest the numerical correctness of the claim for tax
refund or
78

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credit of the taxpayer. Non-compliance with mandatory periods,

non-observance of prescriptive periods, and non-adherence to
exhaustion of administrative remedies bar a taxpayerÊs claim for
tax refund or credit, whether or not the Commissioner questions the
numerical correctness of the claim of the taxpayer. This Court
should not establish the precedent that noncompliance with
mandatory and jurisdictional conditions can be excused if the claim
is otherwise meritorious, particularly in claims for tax refunds or
credit. Such precedent will render meaningless compliance with
mandatory and jurisdictional requirements, for then every tax
refund case will have to be decided on the numerical correctness of
the amounts claimed, regardless of non-compliance with mandatory
and jurisdictional conditions.
San Roque cannot also claim being misled, misguided or
confused by the Atlas doctrine because San Roque filed its
petition for review with the CTA more than four years
before Atlas was promulgated. The Atlas doctrine did not exist
at the time San Roque failed to comply with the 120-day period.
Thus, San Roque cannot invoke the Atlas doctrine as an excuse for
its failure to wait for the 120-day period to lapse. In any event, the
Atlas doctrine merely stated that the two-year prescriptive period
should be counted from the date of payment of the output VAT, not
from the close of the taxable quarter when the sales involving the
input VAT were made. The Atlas doctrine does not interpret,
expressly or impliedly, the 120+30 day periods.49 (Emphases in
the original; citations omitted)
Prescriptive Period for

the Filing of Administrative Claims
In determining whether the administrative claims of
Mindanao I and Mindanao II for 2003 have prescribed, we
see no need to rely on either Atlas or Mirant. Section
112(A) of the 1997 Tax Code is clear: „[A]ny 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
_______________
49 Id.
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certificate or refund of creditable input tax due or paid

attributable to such sales x x x.‰
We rule on Mindanao I and IIÊs administrative claims for
the first, second, third, and fourth quarters of 2003 as
follows:
(1) The last day for filing an application for tax refund
or credit with the CIR for the first quarter of 2003 was on
31 March 2005. Mindanao II filed its administrative claim
before the CIR on 13 April 2005, while Mindanao I filed its
administrative claim before the CIR on 4 April 2005. Both
claims have prescribed, pursuant to Section 112(A) of
the 1997 Tax Code.
or credit with the CIR for the second quarter of 2003 was
on 30 June 2005. Mindanao II filed its administrative claim

claims were filed on time, pursuant to Section 112(A)
of the 1997 Tax Code.
or credit with the CIR for the third quarter of 2003 was on
30 September 2005. Mindanao II filed its administrative
claim before the CIR on 13 April 2005, while Mindanao I
filed its administrative claim before the CIR on 4 April
2005. Both claims were filed on time, pursuant to
Section 112(A) of the 1997 Tax Code.
or credit with the CIR for the fourth quarter of 2003 was on
2 January 2006. Mindanao II filed its administrative claim
claims were filed on time, pursuant to Section 112(A)
of the 1997 Tax Code.
80

Internal Revenue
Prescriptive Period for

the Filing of Judicial Claims
In determining whether the claims for the second, third
and fourth quarters of 2003 have been properly appealed,
we still see no need to refer to either Atlas or Mirant, or
even to Section 229 of the 1997 Tax Code. The second
paragraph of Section 112(C) of the 1997 Tax Code is clear:
„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 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.‰
The mandatory and jurisdictional nature of the 120+30
day periods was explained in San Roque:
At the time San Roque filed its petition for review with the CTA,
the 120+30 day mandatory periods were already in the law. Section
112(C) expressly grants the Commissioner 120 days within which to
decide the taxpayerÊs claim. The law is clear, plain, and
unequivocal: „x x x 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.‰ Following the verba legis doctrine, this law must be
applied exactly as worded since it is clear, plain, and unequivocal.
The taxpayer cannot simply file a petition with the CTA without
waiting for the CommissionerÊs decision within the 120-day
mandatory and jurisdictional period. The CTA will have no
jurisdiction because there will be no „decision‰ or „deemed a denial‰
decision of the Commissioner for the CTA to review. In San RoqueÊs
case, it filed its petition with the CTA a mere 13 days after it filed
its administrative claim with the Commissioner. Indisputably, San
Roque knowingly violated the mandatory 120-day period, and it
cannot blame anyone but itself.
Section 112(C) also expressly grants the taxpayer a 30-day period
to appeal to the CTA the decision or inaction of the Commissioner,
thus:
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x x x the taxpayer affected may, within thirty (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)
This law is clear, plain, and unequivocal. Following the well-settled
verba legis doctrine, this law should be applied exactly as worded
since it is clear, plain, and unequivocal. As this law states, the
taxpayer may, if he wishes, appeal the decision of the Commissioner
to the CTA within 30 days from receipt of the CommissionerÊs
decision, or if the Commissioner does not act on the taxpayerÊs
claim within the 120-day period, the taxpayer may appeal to the
CTA within 30 days from the expiration of the 120-day period.
xxxx
There are three compelling reasons why the 30-day period need
not necessarily fall within the two-year prescriptive period, as long
as the administrative claim is filed within the two-year prescriptive
period.
First, 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 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.
Second, Section 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
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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 Âwithin two years x x x apply for the issuance of a tax
credit or refundÊ refers to applications for refund/credit with
the CIR and not to appeals made to the CTA.‰

Third, if the 30-day period, or any part of it, is 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.
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.
Section 112(A) and (C) must be interpreted according to its clear,
plain, and unequivocal language. The taxpayer can file his
administrative claim for refund or credit at 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 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
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his judicial claim with the CTA. This is not only the plain meaning
but also the only logical interpretation of Section 112(A) and (C).50
(Emphases in the original; citations omitted)
In San Roque, this Court ruled that „all taxpayers can

rely on BIR Ruling No. DA-489-03 from the time of its
issuance on 10 December 2003 up to its reversal in
Aichi on 6 October 2010, where this Court held that
the 120+30 day periods are mandatory and
jurisdictional.‰51 We shall discuss later the effect of San
RoqueÊs recognition of BIR Ruling No. DA-489-03 on claims
filed between 10 December 2003 and 6 October 2010.
Mindanao I and II filed their claims within this period.
We rule on Mindanao I and IIÊs judicial claims for the
second, third, and fourth quarters of 2003 as follows:
G.R. No. 193301
Mindanao II v. CIR
Mindanao II filed its administrative claims for the
second, third, and fourth quarters of 2003 on 13 April 2005.
Counting 120 days after filing of the administrative claim
with the CIR (11 August 2005) and 30 days after the CIRÊs
denial by inaction, the last day for filing a judicial
claim with the CTA for the second, third, and fourth
quarters of 2003 was on 12 September 2005. However,
the judicial claim cannot be filed earlier than 11 August
2005, which is the expiration of the 120-day period for the
Commissioner to act on the claim.
(1) Mindanao II filed its judicial claim for the second
quarter of 2003 before the CTA on 7 July 2005, before the
expiration of the 120-day period. Pursuant to Section
112(C) of the 1997 Tax Code, Mindanao IIÊs judicial claim
for the
_______________
50 Id.
51 Id.
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second quarter of 2003 was prematurely filed. However,

pursuant to San RoqueÊs recognition of the effect of
BIR Ruling No. DA-489-03, we rule that Mindanao IIÊs

judicial claim for the second quarter of 2003
qualifies under the exception to the strict
application of the 120+30 day periods.
(2) Mindanao II filed its judicial claim for the third
quarter of 2003 before the CTA on 9 September 2005.
Mindanao IIÊs judicial claim for the third quarter of
2003 was thus filed on time, pursuant to Section
112(C) of the 1997 Tax Code.
(3) Mindanao II filed its judicial claim for the fourth
Mindanao IIÊs judicial claim for the fourth quarter of
2003 was thus filed on time, pursuant to Section
112(C) of the 1997 Tax Code.
G.R. No. 194637
Mindanao I v. CIR
Mindanao I filed its administrative claims for the
second, third, and fourth quarters of 2003 on 4 April 2005.
Counting 120 days after filing of the administrative claim
with the CIR (2 August 2005) and 30 days after the CIRÊs
denial by inaction,52 the last day for filing a judicial
claim with the CTA for the second, third, and fourth
quarters of 2003 was on 1 September 2005. However,
the judicial claim cannot be filed earlier than 2 August
2005, which is the expiration of the 120-day period for the
Commissioner to act on the claim.
(1) Mindanao I filed its judicial claim for the second
quarter of 2003 before the CTA on 7 July 2005, before the
expira-
_______________
52 On 10 October 2005, Mindanao I received a copy of the letter dated
30 September 2005 from the CIR denying its application for tax refund or
credit. Rollo (G.R. No. 194637), p. 235.
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tion of the 120-day period. Pursuant to Section 112(C) of

the 1997 Tax Code, Mindanao IÊs judicial claim for the
second quarter of 2003 was prematurely filed. However,
pursuant to San RoqueÊs recognition of the effect of
BIR Ruling No. DA-489-03, we rule that Mindanao IÊs
judicial claim for the second quarter of 2003
qualifies under the exception to the strict
application of the 120+30 day periods.
(2) Mindanao I filed its judicial claim for the third
Mindanao IÊs judicial claim for the third quarter of
2003 was thus filed after the prescriptive period,
pursuant to Section 112(C) of the 1997 Tax Code.
(3) Mindanao I filed its judicial claim for the fourth
Mindanao IÊs judicial claim for the fourth quarter of
2003 was thus filed after the prescriptive period,
pursuant to Section 112(C) of the 1997 Tax Code.
San Roque: Recognition of BIR Ruling No. DA-489-03
In the consolidated cases of San Roque, the Court En
Banc53 examined and ruled on the different claims for tax
refund or credit of three different companies. In San Roque,
we reiterated that „[f]ollowing the verba legis doctrine,
[Sec-
_______________
53 The Court En Banc voted in San Roque, thus: Associate Justice
Antonio T. Carpio penned the Decision, with Associate Justices Teresita
J. Leonardo-De Castro, Arturo D. Brion, Diosdado M. Peralta, Lucas P.
Bersamin, Roberto A. Abad, Martin S. Villarama, Jr., Jose P. Perez, and
Bienvenido L. Reyes, concurring. Chief Justice Maria Lourdes P.A.
Sereno penned a Dissenting Opinion. Associate Justice Presbitero J.
Velasco, Jr., penned a Dissenting Opinion, and is joined by Associate
Justices Jose C. Mendoza and Estela M. Perlas-Bernabe. Associate
Justice Marvic Mario Victor F. Leonen penned a Separate Opinion, and is
joined by Associate Justice Mariano C. Del Castillo.
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tion 112(C)] must be applied exactly as worded since it is

clear, plain, and unequivocal. The taxpayer cannot simply
file a petition with the CTA without waiting for the
CommissionerÊs decision within the 120-day mandatory
and jurisdictional period. The CTA will have no jurisdiction
because there will be no ÂdecisionÊ or Âdeemed a denial
decisionÊ of the Commissioner for the CTA to review.‰
Notwithstanding a strict construction of any claim for
tax exemption or refund, the Court in San Roque
recognized that BIR Ruling No. DA-489-03 constitutes
equitable estoppel54 in favor of taxpayers. BIR Ruling No.
DA-489-03 expressly states that the „taxpayer-
claimant need not wait for the lapse of the 120-day
period before it could seek judicial relief with the
CTA by way of Petition for Review.‰ This Court
discussed BIR Ruling No. DA-489-03 and its effect on
taxpayers, thus:
Taxpayers should not be prejudiced by an erroneous

interpretation by the Commissioner, particularly on a difficult
question of law. The abandonment of the Atlas doctrine by Mirant
and Aichi is proof that the reckoning of the prescriptive periods for
input VAT tax refund or credit is a difficult question of law. The
abandonment of the Atlas doctrine did not result in Atlas, or other
taxpayers simi-
_______________
54 See Section 246 of the 1997 Tax Code, which states:
Non-Retroactivity of Rulings.·Any revocation, modification or reversal of
any of the rules and regulations promulgated in accordance with the preceding
Sections or any of the rulings or circulars promulgated by the Commissioner
shall not be given retroactive application if the revocation, modification or
reversal will be prejudicial to the taxpayers, except in the following cases:
(a) Where the taxpayer deliberately misstates or omits material facts from
his return or any document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith.
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larly situated, being made to return the tax refund or credit they
received or could have received under Atlas prior to its
abandonment. This Court is applying Mirant and Aichi
prospectively. Absent fraud, bad faith or misrepresentation, the
reversal by this Court of a general interpretative rule issued by the
Commissioner, like the reversal of a specific BIR ruling under
Section 246, should also apply prospectively. x x x.
xxxx
Thus, the only issue is whether BIR Ruling No. DA-489-03 is a
general interpretative rule applicable to all taxpayers or a specific
ruling applicable only to a particular taxpayer.
BIR Ruling No. DA-489-03 is a general interpretative rule
because it was a response to a query made, not by a particular
taxpayer, but by a government agency tasked with processing tax
refunds and credits, that is, the One Stop Shop Inter-Agency Tax
Credit and Drawback Center of the Department of Finance. This
government agency is also the addressee, or the entity responded to,
in BIR Ruling No. DA-489-03. Thus, while this government agency
mentions in its query to the Commissioner the administrative claim
of Lazi Bay Resources Development, Inc., the agency was in fact
asking the Commissioner what to do in cases like the tax claim of
Lazi Bay Resources Development, Inc., where the taxpayer did not
wait for the lapse of the 120-day period.
Clearly, BIR Ruling No. DA-489-03 is a general interpretative
rule. Thus, all taxpayers 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, where this Court held that
the 120+30 day periods are mandatory and jurisdictional.
xxxx
Taganito, however, filed its judicial claim with the CTA on 14
February 2007, after the issuance of BIR Ruling No. DA-489-03 on
10 December 2003. Truly, Taganito can claim that in filing its
judicial claim prematurely without waiting for the 120-day period to
expire, it was misled by BIR Ruling No. DA-489-03. Thus, Taganito
can claim the benefit of BIR Ruling No. DA-489-03, which shields
the filing of its judicial claim from the vice of prematurity.
(Emphasis in the original)
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Summary of Administrative and Judicial Claims

G.R. No. 193301
Mindanao II v. CIR
Administrative Judicial Action on Claim

Claim Claim
1st Filed late -- Deny, pursuant to
Quarter, Section 112(A) of the
2003 1997 Tax Code
2nd Filed on time Prematurely Grant, pursuant to
Quarter, filed BIR Ruling No. DA-
2003 489-03
3rd Filed on time Filed on Grant, pursuant to
Quarter, time Section 112(C) of the
2003 1997 Tax Code
4th Filed on time Filed on Grant, pursuant to
Quarter, time Section 112(C) of the
2003 1997 Tax Code
G.R. No. 194637

Mindanao I v. CIR
Administrative Judicial Action on Claim
Claim Claim
1st Filed late -- Deny, pursuant to
Quarter, Section 112(A) of the
2003 1997 Tax Code
2nd Filed on time Prematurely Grant, pursuant to
Quarter, filed BIR Ruling No. DA-
2003 489-03
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3rd Filed Filed Deny, pursuant to Section 112(C)

Quarter, on time late of the 1997 Tax Code
2003
4th Filed Filed Deny, pursuant to Section 112(C)
Quarter, on time late of the 1997 Tax Code
2003
Summary of Rules on Prescriptive Periods

Involving VAT
We summarize 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, as follows:
(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 CIRÊs decision denying the
administrative claim or from the expiration of the 120-day
period 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.
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„Incidental‰ Transaction
Mindanao II asserts that the sale of a fully depreciated
Nissan Patrol is not an incidental transaction in the course
of its business; hence, it is an isolated transaction that
should not have been subject to 10% VAT.
Section 105 of the 1997 Tax Code does not support
Mindanao IIÊs 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 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 contracts of 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 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. (Emphasis supplied)
Mindanao II relies on Commissioner of Internal Revenue

v. Magsaysay Lines, Inc. (Magsaysay)55 and Imperial v.
Collector of Internal Revenue (Imperial)56 to justify its
position. Magsaysay, decided under the NIRC of 1986,
involved the sale of
_______________
55 529 Phil. 64; 497 SCRA 63 (2006).
56 97 Phil. 992 (1955).
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vessels of the National Development Company (NDC) to

Magsaysay Lines, Inc. We ruled that the sale of vessels was
not in the course of NDCÊs trade or business as it was
involuntary and made pursuant to the GovernmentÊs policy
for privatization. Magsaysay, in quoting from the CTAÊs
decision, imputed upon Imperial the definition of „carrying
on business.‰ Imperial, however, is an unreported case that
merely stated that „Âto engageÊ is to embark in a business or
to employ oneself therein.‰57
Mindanao IIÊs 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 IIÊs business is to convert the
steam supplied to it by PNOC-EDC 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
IIÊs property, plant, and equipment. Therefore, the sale of
the Nissan Patrol is an incidental transaction made in the
course of Mindanao IIÊs business which should be liable for
VAT.
Substantiation Requirements
Mindanao II claims that the CTAÊs disallowance of a
total amount of P492,198.09 is improper as it has
substantially complied with the substantiation
58
requirements of Section 113(A) in
_______________
57 Id.
58 Section 113. Invoicing and Accounting Requirements for VAT-
Registered Persons.·
(A) Invoicing Requirements.·A VAT-registered person shall, for
every sale, issue an invoice or receipt. In addition to the information
required under Section 237, the following information shall be indicated
in the invoice or receipt:
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relation to Section 23759 of the 1997 Tax Code, as

implemented by Section 4.104-1, 4.104-5 and 4.108-1 of
Revenue Regulation No. 7-95.60
_______________
(1) A statement that the seller is a VAT-registered person, followed
by his taxpayerÊs identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay
to the seller with the indication that such amount includes the value-
added tax.
59 Section 237. Issuance of Receipts or Sales or Commercial Invoices.
·All persons subject to an internal revenue tax shall, for each sale or
transfer of merchandise or for services rendered valued at Twenty-five
pesos (P25.00) or more, issue duly registered receipts or sales or
commercial invoices, prepared at least in duplicate, showing the date of
transaction, quantity, unit cost and description of merchandise or nature
of service: Provided, however, That in the case of sales, receipts or
transfers in the amount of One hundred pesos (P100.00) or more, or
regardless of the amount, where the sale or transfer is made by a person
liable to value-added tax to another person also liable to value-added tax;
or where the receipt is issued to cover payment made as rentals,
commissions, compensations or fees, receipts or invoices shall be issued
which shall show the name, business style, if any, and address of the
purchaser, customer or client: Provided, further, That where the
purchaser is a VAT-registered person, in addition to the information
herein required, the invoice or receipt shall further show the Taxpayer
Identification Number (TIN) of the purchaser.
The original of each receipt or invoice shall be issued to the purchaser,
customer or client at the time the transaction is effected, who, if engaged
in business or in the exercise of profession, shall keep and preserve the
same in his place of business for a period of three (3) years from the close
of the taxable year in which such invoice or receipt was issued, while the
duplicate shall be kept and preserved by the issuer, also in his place of
business, for a like period.
The Commissioner may, in meritorious cases, exempt any person
subject to internal revenue tax from compliance with the provisions of

this Section.
60 Section 4.104-1. Credits for input tax.·Any input tax evidenced
by a VAT invoice or official receipt issued by a VAT-
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We are constrained to state that Mindanao IIÊs

compliance with the substantiation requirements is a
finding of fact. The
_______________
registered person in accordance with Section 108 of the Code, on the
following transactions, shall be creditable against the output tax:
(a) Purchase or importation of goods
1. For sale; or
2. For conversion into or intended to form part of a finished product
for sale, including packaging materials; or
3. For use as supplies in the course of business; or
4. For use as raw materials supplied in the sale of services; or
5. For use in trade or business for which deduction for depreciation
or amortization is allowed under the Code, except automobiles, aircraft
and yachts.
(b) Purchase of real properties for which a VAT has actually been
paid;
(c) Purchase of services in which a VAT has actually been paid;
(d) Transactions „deemed sale‰ under Section 100 (b) of the Code;
(e) Presumptive input tax allowed to be carried over as provided for
in Section 4.105-1 of these Regulations;
(f) A VAT-registered person who is also engaged in transactions not
subject to VAT shall be allowed input tax credit as follows:
1. Total input which can be directly attributed to transactions
subject to VAT; and
2. A ratable portion of any input tax which cannot be directly
attributed to either activity.
Section 4.104-5. Substantiation of claims for input tax credit.·(a)
Input taxes shall be allowed only if the domestic purchase of goods,
properties or services is made in the course of trade or business. The

input tax should be supported by an invoice or receipt showing the
information as required under Sections 108 (a) and 238 of the Code.
Input tax on purchases of real property should be supported by a copy of
the public instrument i.e. deed of absolute sale, deed of conditional sale,
contract/agreement to sell, etc., together with the VAT receipt issued by
the seller.
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CTA En Banc evaluated the records of the case and found

that the transactions in question are purchases for services
_______________
A cash-register machine tape issued to a VAT-registered buyer by a
VAT-registered seller from a machine duly registered with the BIR in lieu
of the regular sales invoice, shall constitute valid proof of substantiation
of tax credit only if the name and TIN of the purchaser is indicated in the
receipt and authenticated by a duly authorized representative of the
seller.
(b) Input tax on importation shall be supported with the import
entry or other equivalent document showing actual payment of VAT on
the imported goods.
(c) Presumptive input tax shall be supported by an inventory of
goods as shown in a detailed list to be submitted to the BIR.
(d) Input tax on „deemed sale‰ transactions shall be substantiated
with the required invoices.
(e) Input tax from payments made to non-readers shall be supported
by a copy of the VAT declaration/return filed by the resident
licensee/lessee in behalf of the non-resident licensor/lessor evidencing
remittance of the VAT due.
Section 4.108-1. Invoicing Requirements.·All VAT-registered
persons shall, for every sale or lease of goods or properties or services,
issue duly registered receipts or sales or commercial invoices which must
show:
1. the name, TIN and address of seller;
2. date of transaction;
3. quantity, unit cost and description of merchandise or nature of

service;
4. the name, TIN, business style, if any, and address of the VAT-
registered purchaser, customer or client;
5. the word „zero rated‰ imprinted on the invoice covering zero-rated
sales; and
6. the invoice value or consideration.
In the case of sale of real property subject to VAT and where the zonal
or market value is higher than the actual consideration, the VAT shall be
separately indicated in the invoice or receipt.
Only VAT-registered persons are required to print their TIN followed
by the word „VAT‰ in their invoice or receipts and this shall
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and that Mindanao II failed to comply with the

substantiation requirements. We affirm the CTA En BancÊs
finding of fact, which in turn affirmed the finding of the
CTA First Division. We see no reason to overturn their
findings.
WHEREFORE, we PARTIALLY GRANT the petitions.
The Decision of the Court of Tax Appeals En Banc in CTA
EB No. 513 promulgated on 10 March 2010, as well as the
Resolution promulgated on 28 July 2010, and the Decision
ofthe Court of Tax Appeals En Banc in CTA EB Nos. 476
and 483 promulgated on 31 May 2010, as well as the
Amended Decision on 24 November 2010, are AFFIRMED
with MODIFICATION.
For G.R. No. 193301, the claim of Mindanao II
Geothermal Partnership for the first quarter of 2003 is
DENIED while its claims for the second, third, and fourth
quarters of 2003 are GRANTED. For G.R. No. 194637, the
claims of Mindanao I Geothermal Partnership for the first,
third, and fourth quarters of 2003 are DENIED while its
claim for the second quarter of 2003 is GRANTED.
SO ORDERED.
Brion, Del Castillo, Villarama, Jr.** and Perlas-
Bernabe, JJ., concur.
Petitions partially granted.
_______________
be considered as a „VAT Invoice.‰ All purchases covered by invoices
other than „VAT Invoice‰ shall not give rise to any input tax.
If the taxable person is also engaged in exempt operations, he should
issue separate invoices or receipts for the taxable and exempt operations.
A „VAT Invoice‰ shall be issued only for sales of goods, properties or
services subject to VAT imposed in Sections 100 and 102 of the Code.
The invoice or receipt shall be prepared at least in duplicate, the
original to be given to the buyer and the duplicate to be retained by the
seller as part of his accounting records.
** Designated acting member per Special Order No. 1426 dated 8
March 2013.
96

Internal Revenue
Notes.·The Court which will not lightly set aside the

conclusions reached by the Court of Tax Appeals (CTA)
which, by the very nature of its function of being dedicated
exclusively to the resolution of tax problems, has
accordingly developed an expertise on the subject, unless
there has been an abuse or improvident exercise of
authority. (Commissioner of Internal Revenue vs. Asian
Transmission Corporation, 640 SCRA 189 [2011])
Any person, who in the course of trade or business leases
goods or properties shall be subject to the value-added tax,
the imposable tax rate should not exceed two percent of
gross receipts of the lease of poles of the preceding calendar
year. (Cagayan Electric Power and Light Co., Inc. vs. City of
Cagayan de Oro, 685 SCRA 609 [2012])
··o0o··
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SUPREME COURT REPORTS ANNOTATED VOLUME 693 2019-04-11, 9:11 PM

G.R. No. 193301. March 11, 2013.*

MINDANAO II GEOTHERMAL PARTNERSHIP,

G.R. No. 194637. March 11, 2013.*

Taxation; Value-Added Tax; Tax Credits; Tax Refunds; Any VAT-

50 SUPREME COURT REPORTS ANNOTATED

Mindanao II Geothermal Partnership vs. Commissioner of Internal

such sales.·In determining whether the administrative claims

creditable input tax due or paid attributable to such sales x x x.‰

VOL. 693, MARCH 11, 2013 51

Mindanao II Geothermal Partnership vs. Commissioner of Internal

Same; Summary of the Rules on the Determination of the

Prescriptive Period for Filing a Tax Refund or Credit of Unutilized

52 SUPREME COURT REPORTS ANNOTATED

PETITIONS for review on certiorari of the decisions,

VOL. 693, MARCH 11, 2013 53

Mindanao II Geothermal Partnership vs. Commissioner of

En Banc affirmed the 22 September 2008 Decision4 as well

Separate Concurring and Dissenting Opinion.

54 SUPREME COURT REPORTS ANNOTATED

Banc in CTA EB Nos. 476 and 483. In its Amended

be considered a public utility operation. For this purpose, any person or

VOL. 693, MARCH 11, 2013 55

CIR claims for refund or tax credit of accumulated

their financial statements. (Emphasis supplied)

56 SUPREME COURT REPORTS ANNOTATED

On March 11, 1997, [Mindanao II] allegedly entered into a Built

CTA Period Date of Filing

7227 1st Quarter April 23, July 3, 2002 (sic), April 1,

58 SUPREME COURT REPORTS ANNOTATED

7287 2nd Quarter July 22, 2003 April 1, 2004

Considering that it has accumulated unutilized creditable input

The Court of Tax AppealsÊ Ruling: Division

1. There must be zero-rated or effectively zero-rated sales;

58 SUPREME COURT REPORTS ANNOTATED

With respect to the fifth requirement, the CTA First

CTA Period Date of Filing

Thus, counting from 23 April 2003, 22 July 2003, 25

VOL. 693, MARCH 11, 2013 59

judicial claims filed on 22 April 2005, 7 July 2005, and 9

WHEREFORE, the Petition for Review is hereby PARTIALLY

and Citibank NA Manila which were supported by billing statements but

60 SUPREME COURT REPORTS ANNOTATED

Mindanao II filed a motion for partial reconsideration.18

VOL. 693, MARCH 11, 2013 61

Patrol is not incidental to Mindanao IIÊs VAT zero-rated

WHEREFORE, the Petition for Review is hereby PARTIALLY

Mindanao II filed a Petition for Review,22 docketed as

credit of input VAT attributable to zero-rated sales or

62 SUPREME COURT REPORTS ANNOTATED

zerorated transactions pursuant to Section 105; (4)

WHEREFORE, on the basis of the foregoing considerations, the

The CTA En Banc issued a Resolution25 on 28 July 2010

64 SUPREME COURT REPORTS ANNOTATED

G.R. No. 194637

In December 1994, [Mindanao I] entered into a contract of Build-

64 SUPREME COURT REPORTS ANNOTATED

fourth quarters of taxable year 2003, which were subsequently

VOL. 693, MARCH 11, 2013 65