Criminal Law 2Mr.
Jhon Michael Mugas
REYMART SAMBRANO
BSCRIM 3F
24-01958
TABLE OF CONTENTS
I. Introduction
A. Case Title and Citation
B. Parties to the Case
C. Nature of the Case
D. Brief Statement of Facts
II. Issues
A. Whether M2GP is entitled to a refund/tax credit for unapplied input VAT.
B. Whether direct attributability of input tax to zero-rated sales is required for a VAT refund
under the Tax Code.
III. Ruling of the Supreme Court
A. Interpretation of Section 112(A) of the Tax Code
B. Significance of the VAT Reform Act of 2005 *
C. Inapplicability of Older Regulations (RR Nos. 5-87 and 3-88)
D. Analysis of Factual Findings by the CTA
E. Emphasis on the Principle of Respect for CTA Findings
IV. Decision
A. Denial of the CIR's Petition for Review
B. Affirmation of the CTA En Banc's Decision
C. Granting of Partial Refund to M2GP
Criminal Law 2Mr. Jhon Michael Mugas
Commissioner of Internal Revenue vs. Mindanao II Geothermal Partnership
GR. No. 253003 / January 24,2024
Justice Dimaampao
Facts:
Mindanao II Geothermal Partnership (M2GP), engaged in electricity generation, entered a Build-
OperateTransfer contract with PNOC-EDC, supplying electricity to NPC. M2GP filed quarterly VAT
returns for 2008 and subsequently claimed a refund/tax credit for unapplied input VAT. The CIR
examined M2GP's records. M2GP was dissolved in 2010. Initially, the Court of Tax Appeals (CTA)
dismissed M2GP's petition for review due to premature filing, a decision later reversed by the Supreme
Court, which remanded the case. The CTA then partially granted M2GP's claim, awarding a partial
refund. Both parties appealed to the CTA En Banc, which affirmed the CTA Division's ruling. The CIR's
motion for reconsideration was denied, leading to this petition for review.
Issue/s:
At its core, the case hinges on the interpretation and application of Section 112(A) of the National
Internal Revenue Code (NIRC) of 1997, as amended, which governs the refund or tax credit of input
VAT for zerorated sales. Specifically, the central issue revolves around the degree of "attributability"
required between input tax and zero-rated sales for a taxpayer to be eligible for a refund or tax credit.
Ruling:
The Supreme Court held that direct attributability of input tax to zero-rated sales is not required for a
VAT refund or tax credit certificate under Section 112(A) of the Tax Code. The Court emphasized that
the law requires the input VAT to be "attributable" to zero-rated sales, meaning the input VAT must be
caused by such sales, not necessarily directly used in the production chain. The Court clarified that the
older regulations (RR Nos. 5-87 and 3-88) requiring direct attributability, relied upon by the CIR, were
already revoked and superseded by subsequent regulations implementing the VAT Reform Act of 2005.
The Court further noted that Section 110 of the Tax Code does not limit creditable input tax to purchases
forming part of the finished product but includes other business-related purchases and services.
Decision:
The Supreme Court denied the CIR's petition and affirmed the CTA En Banc's decision. The Court
reiterated the principle that factual findings of the CTA are generally respected and deemed conclusive.
M2GP was entitled to the partial refund granted by the CTA, as the requirement of direct attributability
Criminal Law 2 Mr. Jhon Michael Mugas
of input tax to zero-rated sales is
not mandated by the current tax code and regulations.
