CIR vs. Magsaysay Lines, Inc. , et. al
COMASERCO asserted that: 1) it
FACTS: Because of the privatization program of the government,
NDC decided to sell NMC shares and 5 ships. In a VAT ruling, it was
held that the said sale was subject to VAT since NDC was a VAT-
registered enterprise & such transaction is incident to its normal
VAT-registered activity of leasing out personal property.
ISSUE: WON NDC’s sale is subject to VAT.
RULING: NO. The sale of the vessels are not subject to VAT since
it is not in the ordinary course of trade or business of NDC. The
sale which was involuntary and made pursuant to the declared
policy of government for privatization could no longer be
repeated or carried over with regularity. It should be emphasized
that the normal VAT-registered activity of NDC is leasing personal
property. Any sale, barter, or exchange of goods or services not in
the course of trade or business is not subject to tax.
CIR vs. CA and Comaserco
FACTS: Commonwealth Management and Services Corporation
(COMASERCO) is a domestic corporation. It is an affiliate of
Philippine American Life Insurance Co. (Philamlife). It was
organized by the latter to perform collection, consultative and
other technical services, including functioning as an internal
auditor, of Philamlife and its other affiliates.
In 1992, the Bureau of Internal Revenue (BIR) issued an
assessment to private respondent COMASERCO for deficiency
value-added tax (VAT) amounting to P351,851.00 for taxable year
1988. In the same year, COMASERCO filed with the BIR, a letter-
protest objecting to the latter’s finding of deficiency VAT.
Afterwards, the Commissioner of Internal Revenue sent a
collection letter to COMASERCO demanding payment of the
deficiency VAT. The following month of the same year,
COMASERCO filed with the CTA a petition for review contesting
the Commissioner’s assessment.
was on a “no-profit, reimbursement-of-cost-only” basis; 2) it was
not engaged in the business of providing services to Philamlife
and its affiliates; 3) COMASERCO was established to ensure
operational orderliness and administrative efficiency of
Philamlife and its affiliates, not on the sale of services; and 4) it
even did not generate profit but suffered a net loss in taxable year
1988. Thus, it was not liable to pay VAT.
In 1995, the CTA rendered a decision in favor of the
Commissioner with slight modifications. COMASERCO was liable
to pay the amount of P335,831.01. During the same year,
COMASERCO filed with the CA, a petition for review of the decision
of the CTA. The CA ruled in favor of the respondent and based its
decision in another tax case involving the same parties where it
was held that COMASERCO was not liable to pay fixed and
contractor’s tax and it was not engaged in business of providing
services to Philamlife and its affiliates. Hence, this petition was
filed before the SC.
ISSUE: WON COMASERCO is engaged in the sale of services, thus
liable to pay VAT.
HELD: Yes. It is liable to pay VAT. On May 28, 1994, Congress
enacted Republic Act No. 7716, the Expanded VAT Law (EVAT),
amending among other sections, Section 99 of the Tax Code. On
January 1, 1998, Republic Act 8424, the National Internal Revenue
Code of 1997, took effect. The amended law provides that:
Sec. 105. Persons Liable. — Any person who, in the course
of trade or business, sells, barters, exchanges, leases goods
or properties, renders services, and any person who
imports goods shall be subject to the value-added tax
(VAT) imposed in Sections 106 and 108 of this Code.
The value-added tax is an indirect tax and the
amount of tax may be shifted or passed on to the buyer,
transferee or lessee of the goods, properties or services.
This rule shall likewise apply to existing sale or lease of
 goods, properties or services at the time of the effectivity
of Republic Act No. 7716.
The phrase "in the course of trade or business"
means the regular conduct or pursuit of a commercial or
an economic activity, including transactions incidental
thereto, by any person regardless of whether or not the
person engaged therein is a nonstock, nonprofit
organization (irrespective of the disposition of its net
income and whether or not it sells exclusively to members
of their guests), or government entity.
The rule of regularity, to the contrary
notwithstanding, services as defined in this Code
rendered in the Philippines by nonresident foreign
persons shall be considered as being rendered in the
course of trade or business.
Contrary to COMASERCO’s contention, Sec. 105 of the Tax
Code states that even a non-stock, non-profit, organization or
government entity, is liable to pay VAT on the sale of goods or
services. VAT is a tax on transactions, imposed at every stage of
the distribution process on the sale, barter, exchange of goods or
property, and on the performance of services, even in the absence
of profit attributable thereto. The term “in the course of trade or
business” requires the regular conduct or pursuit of a commercial
or an economic activity, regardless of whether or not the entity is
profit-oriented.
As long as the entity provides service for a fee,
remuneration or consideration, then the service rendered is
subject to VAT. Because taxes are the lifeblood of the nation,
statutes that allow exemptions are construed strictly against the
grantee and liberally in favor of the government. Section 109 of
the Tax Code enumerates the transactions exempted from VAT.
The services rendered by COMASERCO do not fall within the
exemptions. It falls under Section 108 of the Tax Code in which it
defines the phrase “sale of services” as the performance of all
kinds of services for others for a fee, remuneration or
consideration.
CIR v. SONY PH
FACTS: In November 1998, the Commissioner of Internal
Revenue issued a Letter of Authority numbered 19734 (LOA
19734) which authorized certain revenue examiners to examine
Sony Philippines’ books of accounts regarding revenue taxes for
“the period 1997 and unverified prior years.”
After the examination of said books, the CIR found out, among
others, that Sony Philippines is liable for deficiency taxes and
penalties for value added tax amounting to P11,141,014.41.
Sony Philippines contested such finding as it argued that the basis
used by the CIR to assess said deficiency were the records
covering the period of January 1998 through March 1998 which
was a period not covered by the letter of authority so issued. The
CIR countered that the LOA phrase “the period 1997 and
unverified prior years” should be understood to mean the fiscal
year ending on March 31, 1998.
Eventually the case reached the Court of Tax Appeals and the CTA
decided agreed with Sony Philippines on this one. So did the CTA
en banc.
ISSUE: Whether or not the CIR is correct.
HELD: No. The LOA issued is clear on which period is covered by
the examination to be conducted. It’s only meant to cover the year
“1997 and unverified prior years” not the year 1998. The revenue
officers who examined the records covering the period of January
to March 1998 had exceeded the jurisdiction granted to them by
the LOA.
Further, the LOA which covered “1997 and unverified prior years”
is in violation of the principle that a Letter of Authority should
cover a taxable period not exceeding one taxable year. If the audit
of a taxpayer shall include more than one taxable period, the other
periods or years shall be specifically indicated in the LOA (as
embodied in Section C of Revenue Memorandum Order No. 43-90
dated September 20, 1990).
CIR v. SEAGATE
FACTS: Respondent is a resident foreign corporation duly
registered with the Securities and Exchange Commission to do
business in the Philippines and is registered with the Philippine
Export Zone Authority (PEZA). The respondent is Value Added
Tax-registered entity and filed for the VAT returns. An
administrative claim for refund of VAT input taxes in the amount
of P28,369,226.38 with supporting documents (inclusive of the
P12,267,981.04 VAT input taxes subject of this Petition for
Review), was filed on 4 October 1999, but no final action has been
received by the respondent from the petitioner on the claim for
VAT refund. CIR asserts that by virtue of the PEZA registration
alone of respondent, the latter is not subject to the VAT.
Consequently, the capital goods and services respondent has
purchased are not considered used in the VAT business, and no
VAT refund or credit is due.
ISSUE: Whether or not Seagate, a VAT-Registered PEZA
Enterprise is entitled to tax refund or credit.
HELD: Yes, Seagate is entitled to refund or credit. As a PEZA-
registered enterprise within a special economic zone, respondent
is entitled to the fiscal incentives and benefit provided for in either
PD 66 or EO 226. It shall, moreover, enjoy all privileges, benefits,
advantages or exemptions under both Republic Act Nos. (RA)
7227 and 7844.
Respondent, which as an entity is exempt, is different from its
transactions which are not exempt. The end result, however, is
that it is not subject to the VAT. The non-taxability of transactions
that are otherwise taxable is merely a necessary incident to the
tax exemption conferred by law upon it as an entity, not upon the
transactions themselves.
The petitioner’s assertion that the capital goods and services
respondent has purchased are not considered used in the VAT
business, and thus no VAT refund or credit is due is non sequitur.
On this matter, the SC held that by the VAT’s very nature as a tax
on consumption, the capital goods and services respondent has
purchased are subject to the VAT, although at zero rate.
Seagate has complied with all the requisites for VAT refund or
credit. First, respondent is a VAT-registered entity. Second, the
input taxes paid on the capital goods of respondent are duly
supported by VAT invoices and have not been offset against any
output taxes.
To summarize, special laws expressly grant preferential tax
treatment to business establishments registered and operating
within an ecozone, which by law is considered as a separate
customs territory. As such, respondent is exempt from all internal
revenue taxes, including the VAT, and regulations pertaining
thereto. Its sales transactions intended for export may not be
exempt, but like its purchase transactions, they are zero-rated. No
prior application for the effective zero rating of its transactions is
necessary. Being VAT-registered and having satisfactorily
complied with all the requisites for claiming a tax refund of or
credit for the input VAT paid on capital goods purchased,
respondent is entitled to such VAT refund or credit.
Having determined that respondent’s purchase transactions are
subject to a zero VAT rate, the SC has determined that tax refund
or credit is in order.
TOSHIBA v. CIR
FACTS: Toshiba is a domestic corporation registered with the
Philippine Economic Zone Authority (PEZA) as an Economic Zone
(ECOZONE) export enterprise.It filed two separate applications
for tax credit/refund of its unutilized input VAT payments. The
CIR denied the application. On appeal, the CTA ruled that Toshiba
is entitled to the credit/refund of the input VAT paid on its
purchases of goods and services relative to such zero-rated export
sales. The Court of Appeals reversed the decision of the CTA in the
petition for review stating that Toshiba is a tax exempt entity
under R.A. No. 7916 thus not entitled to refund the VAT payments
made in the domestic purchase of goods and services.
ISSUE: Is Toshiba entitled to VAT refund?
HELD: YES. Such export sales took place before October 15, 1999,
when the old rule on the VAT treatment of PEZA-registered
enterprises still applied. Under this old rule, it was not only
possible, but even acceptable, for Toshiba, availing itself of the
income tax holiday option under Section 23 of Republic Act No.
7916, in relation to Section 39 of the Omnibus Investments Code
of 1987, to be subject to VAT, both indirectly (as purchaser to
whom the seller shifts the VAT burden) and directly (as seller
whose sales were subject to VAT, either at ten percent [10%] or
zero percent [0%])
CIR v. TOSHIBA
FACTS: Toshiba was claiming for a refund for the input tax it paid
on unutilized capital goods purchased. However, CIR said that it
can’t be because the capital goods and services it purchased are
considered not used in VAT taxable business and therefore, it’s
not entitled to refund of input taxes. Toshiba contended that it is
PEZA-registered and located within the said economic zone,
therefore, it is qualified as a VAT-exempt entity.
ISSUE: WON Toshiba is entitled for a refund.
HELD: YES. CIR failed to differentiate between VAT-exempt
transactions from VAT-exempt entities. The former are
transactions specifically listed in and expressly exempted from
VAT under the Tax Code without regard to the tax status of the
taxpayer. The latter is a person or entity granted VAT exemption
under the Tax Code, special law or international agreement in
which the Philippines is a signatory. Toshiba, a PEZA-registered
and located within the economic zone is a VAT-exempt entity
because of a special that established the fiction that economic
zones are foreign territory, hence, it cannot pass on output VAT to
an economic zone enterprise since it is exempt.
CIR v. CEBU TOYO
FACTS: Respondent Cebu Toyo Corporation is a domestic
corporation engaged in the manufacture of lenses and various
optical components. Its principal office is located at the Mactan
Export Processing Zone (MEPZ) in Lapu-Lapu City, Cebu and is a
subsidiary of Toyo Lens Corporation, a non-resident corporation
organized under the laws of Japan. It is a zone export enterprise
registered with the Philippine Economic Zone Authority (PEZA),
pursuant PD 66 and is also registered with the BIR as a VAT
taxpayer.
The sales of respondent are considered export sales subject to
VAT at 0% rate under Section 106 of the NIRC, as amended.
Respondent then filed, an application for tax credit/refund of VAT
paid for the period April 1, 1996 to December 31, 1997 amounting
to P4,439,827.21 representing excess VAT input payments.
Respondents claim that they can avail of the tax credits as they are
VAT-registered exporter of goods at the rate of 0%.
The CIR oppose such stating that they are not entitled to the tax
credit as the claims for refund are strictly construed against
respondents as it is of the nature of tax exemption.
The CTA granted the motion partially to the respondents as they
only lowered the tax credits to P2,158,714.46 representing
unutilized input tax payments. The CIR filed a petition with the CA
which was denied.
ISSUE: WON Cebu Toyo Corporation can avail of the tax credits.
RULING: YES. Respondents availed of an income tax holiday as
provided in the Omnibus Investments Code ( EO 226). It is one of
the fiscal incentives granted to PEZA-registered enterprises and
one of the options to its tax burden. Both the CA and CTA found
that respondent availed of the income tax holiday for four (4)
years as it was shown in their Annual Corporate Income Tax
Returns. In it also is where respondent specified that it was
availing of the tax relief under EO 226. Hence, respondent is not
exempt from VAT and it correctly registered itself as a VAT
taxpayer. In fine, it is engaged in taxable rather than exempt
transactions.
Taxable transactions are those transactions which are subject to
value-added tax either at the rate of ten percent (10%) or zero
percent (0%). In taxable transactions, the seller shall be entitled
to tax credit for the value-added tax paid on purchases and leases
of goods, properties or services.
An exemption means that the sale of goods, properties or services
and the use or lease of properties is not subject to VAT (output
tax) and the seller is not allowed any tax credit on VAT (input tax)
previously paid. The person making the exempt sale of goods,
properties or services shall not bill any output tax to his
customers because the said transaction is not subject to VAT.
Thus, a VAT-registered purchaser of goods, properties or services
that are VAT-exempt, is not entitled to any input tax on such
purchases despite the issuance of a VAT invoice or receipt.
The court also held that respondent is subjected to VAT at 0% rate
as it is engaged in the export business.
SAN ROQUE POWER CORPORATION VS CIR
FACTS: Petitioner entered into a Power Purpose Agreement with
NAPOCOR. Petitioner will design, construct, install, complete and
test the power station, NPC shall purchase all the electricity
generated by the power plant. Petitioner applied as zero rated
status from BIR from September 27, 1998-2002. Petitioner filed
with BIR separate administrative claims for refund for unutilized
input VAT paid for the period of Jan-March 2002, April-June 2002,
July-Sept 2002 and Oct-Dec 2002.
Respondent failed to act on the request for tax refund or credit of
the petitioner, which prompted the latter to file on April 5, 2004
with CTA Division, before it could be barred by prescription. CTA
division denied the petition, En Banc affirmed it because it did not
present any records of zero-rated or effectively zero-rated
transactions.
ISSUE: W/N petitioner is entitled to refund or tax credit
representing zero-rated or effectively zero-rated sales.
HELD: Yes, the evidence presented by the petitioner shows
compliance with the requirements for refund or credit of VAT.
Based on the evidences presented petitioner complied with the
abovementioned requirements, first, petitioner had adequately
proved that it is a VAT-registered taxpayer when it presented
Certificate of Registration. Second, it is unquestionable that
petitioner is engaged in providing electricity for NPC, an activity
which is subject to zero-rate. Third, petitioner offered as evidence
VAT invoices and official receipts. Fourth, the input taxes claimed,
which consisted of local purchases and importations made in
2002, are not transitional taxes. Fifth, the audit report affirms that
the input VAT claimed for tax refund or credit is net of the input
VAT that was already offset against output VAT. Next, the VAT
paid by petitioner to local purchases is not transitional input tax.
The requirement that to be entitled to tax refund for zero-rated
sales, the foreign exchange proceeds must have duly accounted
for per BSP rule does not apply where the sale of electricity did
not involve any foreign currency. Lastly, the claim for VAT refund
was filed within 2 years after the close of the taxable quarter when
sales were made.
The main issue here is the compliance with 6th requirement, the
existence of zero rated or effectively zero rated transaction to
which creditable input tax may be attributed. NIRC does not limit
the definition of "sale" to commercial transactions in the normal
course of business, rather it extends the term to transactions that
are "deemed" sale, The fact that it was not transferred through a
commercial sale or in the normal course of business does not
deflect from the fact that such transaction is deemed as a sale
under the law.
Petitioner was able to positively show that it was able to
accumulate excess input taxes on various importations and local,
which were attributable to a transfer of electricity in favor of NPC.
The fact that it had filed its claim for refund or credit during the
quarter when the transfer of electricity had taken place, instead of
at the close of the said quarter does not make petitioner any less
entitled to its claim. Given the special circumstances of this case,
wherein petitioner was incorporated for the sole purpose of
constructing or operating a power plant that will transfer all the
electricity it generates to NPC, there is no danger that petitioner
would try to fraudulently claim input tax paid on purchases that
will be attributed to sale transactions that are not zero-rated.
Substantial justice, equity and fair play are on the side of the
petitioner. Technicalities and legalisms, however, exalted, should
not be misused by the government to keep money not belonging
to it, thereby enriching itself at the expense of its law abiding
citizens.
CIR v. AMERICAN EXPRESS INTERNATIONAL, INC.
(Phil. Branch)
FACTS: Respondent, a VAT taxpayer, is the Philippine Branch of
AMEX USA and was tasked with servicing a unit of AMEX-
Hongkong Branch and facilitating the collections of AMEX-HK
receivables from card members situated in the Philippines and
payment to service establishments in the Philippines.
It filed with BIR a letter-request for the refund of its 1997 excess
input taxes, citing as basis Section 110B of the 1997 Tax Code,
which held that “xxx Any input tax attributable to the purchase of
capital goods or to zero-rated sales by a VAT-registered person
may at his option be refunded or credited against other internal
revenue taxes, subject to the provisions of Section 112.”
In addition, respondent relied on VAT Ruling No. 080-89, which
read, “In Reply, please be informed that, as a VAT registered entity
whose service is paid for in acceptable foreign currency which is
remitted inwardly to the Philippine and accounted for in
accordance with the rules and regulations of the Central Bank of
the Philippines, your service income is automatically zero rated
xxx”
Petitioner claimed, among others, that the claim for refund should
be construed strictly against the claimant as they partake of the
nature of tax exemption.
CTA rendered a decision in favor of respondent, holding that its
services are subject to zero-rate. CA affirmed this decision and
further held that respondent’s services were “services other than
the processing, manufacturing or repackaging of goods for
persons doing business outside the Philippines” and paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of BSP.
ISSUE: W/N AMEX Phils is entitled to refund
HELD: Yes. Section 102 of the Tax Code provides for the VAT on
sale of services and use or lease of properties. Section 102B
particularly provides for the services or transactions subject to
0% rate:
(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the BSP;
(2) Services other than those mentioned in the preceding
subparagraph, e.g. those rendered by hotels and other service
establishments, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the BSP
Under subparagraph 2, services performed by VAT-registered
persons in the Philippines (other than the processing,
manufacturing or repackaging of goods for persons doing
business outside the Philippines), when paid in acceptable foreign
currency and accounted for in accordance with the R&R of BSP,
are zero-rated. Respondent renders service falling under the
category of zero rating.
As a general rule, the VAT system uses the destination
principle as a basis for the jurisdictional reach of the tax. Goods
and services are taxed only in the country where they are
consumed. Thus, exports are zero-rated, while imports are taxed.
In the present case, the facilitation of the collection of receivables
is different from the utilization of consumption of the outcome of
such service. While the facilitation is done in the Philippines, the
consumption is not. The services rendered by respondent are
performed upon its sending to its foreign client the drafts and
bulls it has gathered from service establishments here, and are
therefore, services also consumed in the Philippines. Under the
destination principle, such service is subject to 10% VAT.
However, the law clearly provides for an exception to the
destination principle; that is 0% VAT rate for services that are
performed in the Philippines, “paid for in acceptable foreign
currency and accounted for in accordance with the R&R of BSP.”
The respondent meets the following requirements for exemption,
and thus should be zero-rated:
(1) Service be performed in the Philippines
(2) The service fall under any of the categories in Section 102B
of the Tax Code
(3) It be paid in acceptable foreign currency accounted for in
accordance with BSP R&R.
CIR VS. PLACER DOME TECHNICAL SERVICES (PHILS.), INC.,
FACTS: Sometime in 1996, at the San Antonio Mines in
Marinduque owned by Marcopper Mining Corporation
(Marcopper), mine tailings from the Taipan Pit started to escape
through the Makulapnit Tunnel and Boac Rivers, causing the
cessation of mining and milling operations, and causing potential
environmental damage to the rivers and the immediate area. To
contain the damage and prevent the further spread of the tailing
leak, Placer Dome, Inc. (PDI), the owner of 39.9% of Marcopper,
undertook to perform the clean-up and rehabilitation of the
Makalupnit and Boac Rivers, through a subsidiary. To accomplish
this, PDI engaged Placer Dome Technical Services Limited
(PDTSL), a non-resident foreign corporation with office in Canada,
to carry out the project. In turn, PDTSL engaged the services of
Placer Dome Technical Services (Philippines), Inc. (respondent), a
domestic corporation and registered Value-Added Tax (VAT)
entity, to implement the project in the Philippines.
PDTSL and respondent entered into an Implementation
Agreement. The Agreement further stipulated that PDTSL was to
pay respondent an amount of money, in U.S. funds, equal to all
Costs incurred for Implementation Services performed under the
Agreement,[5] as well as a fee agreed to one percent (1%) of such
Costs.
Later, respondent amended its quarterly VAT returns. In the
amended returns, respondent declared a total input VAT payment
of P43,015,461.98 for the said quarters, and P42,837,933.60 as its
total excess input VAT for the same period. Then respondent filed
an administrative claim for the refund of its reported total input
VAT payments in relation to the project it had contracted from
PDTSL, amounting to P43,015,461.98. In support of this claim for
refund, respondent argued that the revenues it derived from
services rendered to PDTSL, pursuant to the Agreement,
qualified as zero-rated sales under Section 102(b)(2) of the
then Tax Code, since it was paid in foreign currency inwardly
remitted to the Philippines.
CIR did not act on this claim. Thus, respondent filed a Petition for
Review with the Court of Tax Appeals (CTA), praying for the
refund of its total reported excess input VAT totaling
P42,837,933.60.
ISSUE: Whether respondent Placer is entitled to the refund as the
revenues qualified as zero rated sales.
HELD: YES. Section 102(b) Transactions Subject to Zero Percent
(0%) Rate- The following services performed in the Philippines by
VAT-registered persons shall be subject to zero percent (0%) rate:
(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP);(2) Services other than those mentioned in the preceding
subparagraph, the consideration for which is paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the [BSP].
It is Section 102(b)(2) which finds special relevance to this case. is done in the Philippines, the consumption is not. Respondent
The VAT is a TAX on consumption “expressed as a percentage of renders assistance to its foreign clients the ROCs outside the
the value added to goods or services” purchased by the producer country by receiving the bills of service establishments located
or taxpayer. As an indirect tax on services, its main object is the here in the country and forwarding them to the ROCs abroad. The
transaction itself or, more concretely, the performance of all kinds consumption contemplated by law, contrary to petitioner's
of services conducted in the course of trade or business in the administrative interpretation, does not imply that the service be
Philippines. These services must be regularly conducted in this done abroad in order to be zero-rated.
country; undertaken in “pursuit of a commercial or an economic
Consumption is "the use of a thing in a way that thereby exhausts
activity;” for a valuable consideration; and not exempt under the
it." Applied to services, the term means the performance or
Tax Code, other special laws, or any international agreement. Yet
"successful completion of a contractual duty, usually resulting in
even as services may be subject to VAT, our tax laws extend the
the performer's release from any past or future liability x x x" The
benefit of zero-rating the VAT due on certain services. Under the
services rendered by respondent are performed or successfully
last paragraph of Scetion 102 (b), services performed by VAT-
completed upon its sending to its foreign client the drafts and bills
registered persons in the Philippines, when paid in acceptable
it has gathered from service establishments here. Its services,
foreign currency and accounted for in accordance with the rules
having been performed in the Philippines, are therefore also
and regulations of the BSP, are ZERO-RATED.
consumed in the Philippines.
Petitioner invokes the “destination principle,” citing that
Unlike goods, services cannot be physically used in or bound for a
respondent’s while rendered to a non-resident foreign
specific place when their destination is determined. Instead, there
corporation, are not destined to be consumed abroad. Hence, the
can only be a "predetermined end of a course" when determining
onus of taxation of the revenue arising therefrom, for VAT
the service "location or position x x x for legal purposes."
purposes, is also within the Philippines. The Court in American
Respondent's facilitation service has no physical existence, yet
Express debunked this argument. As a general rule, the VAT
takes place upon rendition, and therefore upon consumption, in
system uses the destination principle as a basis for the
the Philippines. Under the destination principle, as petitioner
jurisdictional reach of the tax. Goods and services are taxed only
asserts, such service is subject to VAT at the rate of 10 percent.
in the country where they are consumed. Thus, exports are zero-
rated, while imports are taxed. Thus, exports are zero-rated while However, the law clearly provides for an exception to the
imports are taxed. destination principle; that is, for a zero percent VAT rate for
services that are performed in the Philippines, "paid for in
Confusion in zero rating arises because petitioner equates the
acceptable foreign currency and accounted for in accordance with
performance of a particular type of service with the consumption
the rules and regulations of the [BSP]." Thus, for the supply of
of its output abroad. In the present case, the facilitation of the
service to be zero-rated as an exception, the law merely requires
collection of receivables is different from the utilization or
that first, the service be performed in the Philippines; second, the
consumption of the outcome of such service. While the facilitation
service fall under any of the categories in Section 102(b) of the
Tax Code; and, third, it be paid in acceptable foreign currency
accounted for in accordance with BSP rules and regulations.
The law neither makes a qualification nor adds a condition in
determining the tax situs of a zero-rated service. Under this
criterion, the place where the service is rendered determines the
jurisdiction to impose the VAT. Performed in the Philippines,
such service is necessarily subject to its jurisdiction, for the
State necessarily has to have "a substantial connection" to it,
in order to enforce a zero rate. The place of payment is
immaterial; much less is the place where the output of the
service will be further or ultimately used.
CIR v. BURMEISTER AND WAIN SCANDINAVIAN CONTRACTOR
MINDANAO, INC
FACTS: A foreign consortium, parent company of Burmeister,
entered into an O&M contract with NPC. The foreign entity then
subcontracted the actual O&M to Burmeister. NPC paid the foreign
consortium a mixture of currencies while the consortium, in turn,
paid Burmeister foreign currency inwardly remitted into the
Philippines. BIR did not want to grant refund since the services
are “not destined for consumption abroad” (or the destination
principle).
ISSUE: Are the receipts of Burmeister entitled to VAT zero-rated
status?
HELD: PARTIALLY. Respondent is entitled to the refund prayed
for BUT ONLY for the period covered prior to the filing of CIR’s
Answer in the CTA.
The claim has no merit since the consortium, which was the
recipient of services rendered by Burmeister, was deemed doing
business within the Philippines since its 15-year O&M with NPC
can not be interpreted as an isolated transaction.
In addition, the services referring to ‘processing, manufacturing,
repacking’ and ‘services other than those in (1)’ of Sec. 102 both
require (i) payment in foreign currency; (ii) inward remittance;
(iii) accounted for by the BSP; AND (iv) that the service recipient
is doing business outside the Philippines. The Court ruled that if
this is not the case, taxpayers can circumvent just by stipulating
payment in foreign currency.
The refund was partially allowed since Burmeister secured a
ruling from the BIR allowing zero-rating of its sales to foreign
consortium. However, the ruling is only valid until the time that
CIR filed its Answer in the CTA which is deemed revocation of the
previously-issued ruling. The Court said the revocation can not
retroact since none of the instances in Section 246 (bad faith,
omission of facts, etc.) are present.
ACCENTURE, INC. vs. COMMISSIONER OF INTERNAL REVENUE
Facts: Petitioner Accenture, a VAT registered entity, is a
corporation engaged in the business of providing management
consulting, business strategies development, and selling and/or
licensing of software. The monthly and quarterly VAT returns of
Accenture show that, notwithstanding its application of the input
VAT credits earned from its zero-rated transactions against its
output VAT liabilities, it still had excess or unutilized input VAT
credits in the amount of P37,038,269.18. Thus, Accenture filed
with the Department of Finance (DoF) an administrative claim for
the refund or the issuance of a Tax Credit Certificate (TCC). When
the DoF did not act on the claim, Accenture filed a Petition for
Review with CTA praying for the issuance of a TCC in its favour.
The CIR answered that the sale by Accenture of goods and
services to its clients are not zero-rated transactions and that
Accenture has failed to prove that it is entitled to a refund, because
its claim has not been fully substantiated or documented. Ruling
that Accenture’s services would qualify for zero-rating under the
1997 National Internal Revenue Code of the Philippines (Tax
Code) only if the recipient of the services was doing business
outside of the Philippines, the Division of the CTA ruled that since
Accenture had failed to present evidence to prove that the foreign
clients to which the former rendered services did business outside
the Philippines, it was not entitled to refund.
On appeal before the CTA en banc, Accenture argued that
because the case pertained to the third and the fourth quarters of
taxable year 2002, the applicable law was the 1997 Tax Code, and
not R.A. 9337 and that prior to the amendment introduced by
(R.A.) 9337, there was no requirement that the services must be
rendered to a person engaged in business conducted outside the
Philippines to qualify for zero-rating. Nevertheless, the CTA en
banc affirmed the decision of the division. Hence this present
petition for review before the SC.
Issues:
1. Should the recipient of the services be "doing business
outside the Philippines" for the transaction to be zero-
rated under Section 108(B)(2) of the 1997 Tax Code?
2. Has Accenture successfully proven that its clients are
entities doing business outside the Philippines?
3. Is Accenture entitled to tax refund?
Held:
1. Recipient of services must be doing business outside the
Philippines for the transactions to qualify as zero-rated.
Accenture anchors its refund claim on Section 112(A) of the 1997
Tax Code, which allows the refund of unutilized input VAT earned
from zero-rated or effectively zero-rated sales. The provision
reads:
SEC. 112. Refunds or Tax Credits of Input Tax. -
(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 of properties or services, and the amount of creditable
input tax due or paid cannot be directly and entirely attributed to
any one of the transactions, it shall be allocated proportionately
on the basis of the volume of sales. Section 108(B) referred to in
the foregoing provision was first seen when Presidential Decree
No. (P.D.) 199431 amended Title IV of P.D. 1158 which is also
known as the National Internal Revenue Code of 1977. Several
Decisions have referred to this as the 1986 Tax Code, even though
it merely amended Title IV of the 1977 Tax Code.
Two years thereafter, or on 1 January 1988, Executive Order No.
(E.O.) 27333 further amended provisions of Title IV. E.O. 273 by
transferring the old Title IV provisions to Title VI and filling in the
former title with new provisions that imposed a VAT.
The VAT system introduced in E.O. 273 was restructured through
Republic Act No. (R.A.) 7716. This law, which was approved on 5
May 1994, widened the tax base. Section 3 thereof reads:
SECTION 3. Section 102 of the National Internal Revenue Code, as
amended, is hereby further amended to read as follows:
"SEC. 102. Value-added tax on sale of services and use or lease of
properties. x x x
xxx xxx xxx
"(b) Transactions subject to zero-rate. — The following services
performed in the Philippines by VAT-registered persons shall be
subject to 0%:
"(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP).
"(2) Services other than those mentioned in the preceding sub-
paragraph, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP)."
Essentially, Section 102(b) of the 1977 Tax Code—as amended by
P.D. 1994, E.O. 273, and R.A. 7716—provides that if the
consideration for the services provided by a VAT-registered
person is in a foreign currency, then this transaction shall be
subjected to zero percent rate.
The 1997 Tax Code reproduced Section 102(b) of the 1977 Tax
Code in its Section 108(B), to wit:
(B) Transactions Subject to Zero Percent (0%) Rate. - The
following services performed in the Philippines by VAT-
registered persons shall be subject to zero percent (0%) rate.
(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
(2) Services other than those mentioned in the preceding
paragraph, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP); x x x.
On 1 November 2005, Section 6 of R.A. 9337, which amended the
foregoing provision, became effective. It reads:
SEC. 6. Section 108 of the same Code, as amended, is hereby
further amended to read as follows:
"SEC. 108. Value-added Tax on Sale of Services and Use or Lease
of
Properties. -
(B) Transactions Subject to Zero Percent (0%) Rate. - The
following services performed in the Philippines by VAT-
registered persons shall be subject to zero percent (0%) rate:
(1) Processing, manufacturing or repacking goods for other
persons doing business outside the Philippines which goods are
subsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
"(2) Services other than those mentioned in the preceding
paragraph rendered to a person engaged in business conducted
outside the Philippines or to a nonresident person not engaged in
business who is outside the Philippines when the services are
performed, the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP); x x x."
(Emphasis supplied)
We rule that the recipient of the service must be doing business
outside the Philippines for the transaction to qualify for zero-
rating under Section 108(B) of the Tax Code.
This Court upholds the position of the CTA en banc that, because
Section 108(B) of the 1997 Tax Code is a verbatim copy of Section
102(b) of the 1977 Tax Code, any interpretation of the latter holds
true for the former.
Moreover, even though Accenture’s Petition was filed before
Burmeister was promulgated, the pronouncements made in that
case may be applied to the present one without violating the rule
against retroactive application. When this Court decides a case, it
does not pass a new law, but merely interprets a preexisting one.
When this Court interpreted Section 102(b) of the 1977 Tax Code
in Burmeister, this interpretation became part of the law from the
moment it became effective. It is elementary that the
interpretation of a law by this Court constitutes part of that law
from the date it was originally passed, since this Court's
construction merely establishes the contemporaneous legislative
intent that the interpreted law carried into effect.
That the recipient of the service should be doing business outside
the Philippines to qualify for zero-rating is the only logical
interpretation of Section 102(b)(2) of the 1977 Tax Code, as we
explained in Burmeister:
This can only be the logical interpretation of Section 102 (b) (2).
If the provider and recipient of the "other services" are both doing
business in the Philippines, the payment of foreign currency is
irrelevant. Otherwise, those subject to the regular VAT under
Section 102 (a) can avoid paying the VAT by simply stipulating
payment in foreign currency inwardly remitted by the recipient of
services. To interpret Section 102 (b) (2) to apply to a payer-
recipient of services doing business in the Philippines is to make
the payment of the regular VAT under Section 102 (a) dependent
on the generosity of the taxpayer. The provider of services can
choose to pay the regular VAT or avoid it by stipulating payment
in foreign currency inwardly remitted by the payer-recipient.
Such interpretation removes Section 102 (a) as a tax measure in
the Tax Code, an interpretation this Court cannot sanction. A tax
is a mandatory exaction, not a voluntary contribution.
xxx xxx xxx
Further, when the provider and recipient of services are both
doing business in the Philippines, their transaction falls squarely
under Section 102 (a) governing domestic sale or exchange of
services. Indeed, this is a purely local sale or exchange of services
subject to the regular VAT, unless of course the transaction falls
under the other provisions of Section 102 (b).
Thus, when Section 102 (b) (2) speaks of "services other than
those mentioned in the preceding subparagraph," the legislative
intent is that only the services are different between
subparagraphs 1 and 2. The requirements for zero-rating,
including the essential condition that the recipient of services is
doing business outside the Philippines, remain the same under
both subparagraphs.
Lastly, it is worth mentioning that prior to the promulgation of
Burmeister, Congress had already clarified the intent behind
Sections 102(b)(2) of the 1977 Tax Code and 108(B)(2) of the
1997 Tax Code amending the earlier provision. R.A. 9337 added
the following phrase: "rendered to a person engaged in business
conducted outside the Philippines or to a nonresident person not
engaged in business who is outside the Philippines when the
services are performed."
2. Accenture has failed to establish that the recipients of its
services do business outside the Philippines.
In the CTA’s opinion, however, the documents presented by
Accenture merely substantiate the existence of the sales, receipt
of foreign currency payments, and inward remittance of the
proceeds of these sales duly accounted for in accordance with BSP
rules. Petitioner presented no evidence whatsoever that these
clients were doing business outside the Philippines.
Accenture insists, however, that it was able to establish that it had
rendered services to foreign corporations doing business outside
the Philippines, unlike in Burmeister, which allegedly involved a
foreign corporation doing business in the Philippines.51
3. We deny Accenture’s Petition for a tax refund.
The evidence presented by Accenture may have established that
its clients are foreign.1âwphi1 This fact does not automatically
mean, however, that these clients were doing business outside the
Philippines. After all, the Tax Code itself has provisions for a
foreign corporation engaged in business within the Philippines
and vice versa, to wit:
SEC. 22. Definitions - When used in this Title:
xxx xxx xxx
(H) The term "resident foreign corporation" applies to a foreign
corporation engaged in trade or business within the Philippines.
(I) The term ‘nonresident foreign corporation’ applies to a foreign
corporation not engaged in trade or business within the
Philippines. (Emphasis in the original)
Consequently, to come within the purview of Section 108(B)(2), it
is not enough that the recipient of the service be proven to be a
foreign corporation; rather, it must be specifically proven to be a
nonresident foreign corporation.
There is no specific criterion as to what constitutes "doing" or
"engaging in" or "transacting" business. We ruled thus in
Commissioner of Internal Revenue v. British Overseas Airways
Corporation:52
x x x. There is no specific criterion as to what constitutes "doing"
or "engaging in" or "transacting" business. Each case must be
judged in the light of its peculiar environmental circumstances.
The term implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the performance
of acts or works or the exercise of some of the functions normally
incident to, and in progressive prosecution of commercial gain or
for the purpose and object of the business organization. "In order
that a foreign corporation may be regarded as doing business
within a State, there must be continuity of conduct and intention
to establish a continuous business, such as the appointment of a
local agent, and not one of a temporary character."53
A taxpayer claiming a tax credit or refund has the burden of proof
to establish the factual basis of that claim.1âwphi1 Tax refunds,
like tax exemptions, are construed strictly against the taxpayer.54
Accenture failed to discharge this burden. It alleged and presented
evidence to prove only that its clients were foreign entities.
However, as found by both the CTA Division and the CTA En Banc,
no evidence was presented by Accenture to prove the fact that the
foreign clients to whom petitioner rendered its services were
clients doing business outside the Philippines.
THE COMMISIONER OF INTERNAL REVENUE, Petitioner, 
 vs.

 ACESITE (PHILIPPINES) HOTEL CORPORATION,
Respondent.
FACTS: 1. Acesite is the owner and operator of the Holiday Inn
Manila Pavilion Hotel. It leases 6,768.53 square meters of the
hotel’s premises to the Philippine Amusement and Gaming
Corporation for casino operations and caters food and beverages
to PAGCOR’s casino patrons through the hotel’s restaurant
outlets.
2.For the period January 96 to April 1997, Acesite incurred VAT
amounting to P30,152,892.02 from its rental income and sale of
food and beverages to PAGCOR during said period. Acesite tried
to shift the said taxes to PAGCOR by incorporating it in the amount
assessed to PAGCOR but the latter refused to pay the taxes on
account of its tax exempt status.1awphi1.net
3. PAGCOR paid the amount due to Acesite minus the
P30,152,892.02 VAT while the latter paid the VAT to the
Commissioner of Internal Revenue.
4.However, Acesite belatedly arrived at the conclusion that its
transaction with PAGCOR was subject to zero rate as it was
rendered to a tax-exempt entity.
5. Acesite filed an administrative claim for refund with the CIR but
the latter failed to resolve the same. Acesite filed a petition with
the Court of Tax Appeals
CTA Decision: Petitioner is subject to zero percent tax insofar
as its gross income from rentals and sales to PAGCOR, a tax
exempt entity by virtue of a special law. Accordingly, the
amounts of P21,413,026.78 and P8,739,865.24, representing the
10% EVAT on its sales of food and services and gross rentals,
respectively from PAGCOR shall be refunded to the petitioner..
CA Decision: PAGCOR was not only exempt from direct taxes
but was also exempt from indirect taxes like the VAT and
consequently, the transactions between respondent Acesite and
PAGCOR were "effectively zero-rated" because they involved the
rendition of services to an entity exempt from indirect taxes.
ISSUE/S: (1) whether PAGCOR’s tax exemption privilege includes
the indirect tax of VAT to entitle Acesite to zero percent (0%) VAT
rate; and (2) whether the zero percent (0%) VAT rate under then
Section 102 (b)(3) of the Tax Code (now Section 108 (B)(3) of the
Tax Code of 1997) legally applies to Acesite.

HELD:
1. Yes. PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR,
grants the latter an exemption from the payment of taxes. Section
13 of P.D. 1869 pertinently provides exemption.
Under the above provision [Section 13 (2) (b) of P.D. 1869], the
term "Corporation" or operator refers to PAGCOR. Although the
law does not specifically mention PAGCOR’s exemption from
indirect taxes, PAGCOR is undoubtedly exempt from such
taxes because the law exempts from taxes persons or entities
contracting with PAGCOR in casino operations. Although,
differently worded, the provision clearly exempts PAGCOR from
indirect taxes. In fact, it goes one step further by granting tax
exempt status to persons dealing with PAGCOR in casino
operations. The unmistakable conclusion is that PAGCOR is not
liable for the P30,152,892.02 VAT and neither is Acesite as the
latter is effectively subject to zero percent rate under Sec. 108 B
(3). R.A. 8424. (Emphasis supplied.)
2. The manner of charging VAT does not make PAGCOR liable
to said tax
It is true that VAT can either be incorporated in the value of the
goods, properties, or services sold or leased, in which case it is
computed as 1/11 of such value, or charged as an additional 10%
to the value. Verily, the seller or lessor has the option to follow
either way in charging its clients and customer. In the instant case,
Acesite followed the latter method, that is, charging an additional
10% of the gross sales and rentals. Be that as it may, the use of
either method, and in particular, the first method, does not
denigrate the fact that PAGCOR is exempt from an indirect tax, like
VAT.
3. Yes. VAT exemption extends to Acesite
Thus, while it was proper for PAGCOR not to pay the 10% VAT
charged by Acesite, the latter is not liable for the payment of it as
it is exempt in this particular transaction by operation of law to
pay the indirect tax. Such exemption falls within the former
Section 102 (b) (3) of the 1977 Tax Code, as amended (now Sec.
108 [b] [3] of R.A. 8424), which provides:
Section 102. Value-added tax on sale of services – (a) Rate and
base of tax – There shall be levied, assessed and collected, a value-
added tax equivalent to 10% of gross receipts derived by any
person engaged in the sale of services x x x; Provided, that the
following services performed in the Philippines by VAT-
registered persons shall be subject to 0%
(3) Services rendered to persons or entities whose exemption
under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such
services to zero (0%) rate (emphasis supplied).
4. Acesite paid VAT by mistake
Considering the foregoing discussion, there are undoubtedly
erroneous payments of the VAT pertaining to the effectively zero-
rate transactions between Acesite and PAGCOR. Verily, Acesite
has clearly shown that it paid the subject taxes under a mistake of
fact, that is, when it was not aware that the transactions it had
 with PAGCOR were zero-rated at the time it made the payments.
Solutio indebiti applies to the Government
Tax refunds are based on the principle of quasi-contract or solutio
indebiti and the pertinent laws governing this principle are found
in Arts. 2142 and 2154 of the Civil Code. When money is paid to
another under the influence of a mistake of fact, that is to say, on
the mistaken supposition of the existence of a specific fact, where
it would not have been known that the fact was otherwise, it may
be recovered.
Action for refund strictly construed; Acesite discharged the
burden of proof
Since an action for a tax refund partakes of the nature of an
exemption, which cannot be allowed unless granted in the most
explicit and categorical language, it is strictly construed against
the claimant who must discharge such burden convincingly.11
CIR v. PHIL HEALTH CARE
FACTS: On 1987, CIR issued VAT Ruling No. 231-88 stating that
Philhealth, as a provider of medical services, is exempt from the
VAT coverage. When RA 8424 or the new Tax Code was
implemented it adopted the provisions of VAT and E-VAT. On
1999, the BIR sent Philhealth an assessment notice for deficiency
VAT and documentary stamp taxes for taxable years 1996 and
1997. After CIR did not act on it, Philhealth filed a petition for
review with the CTA. The CTA withdrew the VAT assessment. The
CIR then filed an appeal with the CA which was denied.
ISSUES:
1. Whether Philhealth is subject to VAT.
2. Whether VAT Ruling No. 231-88 exempting Philhealth from
payment of VAT has retroactive application.
RULING: YES. Section 103 of the NIRC exempts taxpayers engaged
in the performance of medical, dental, hospital, and veterinary
services from VAT. But, in Philhealth's letter requesting of its VAT-
exempt status, it was held that it showed Philhealth provides
medical service only between their members and their accredited
hospitals, that it only provides for the provision of pre-need
health care services, it contracts the services of medical
practitioners and establishments for their members in the
delivery of health services.
Thus, Philhealth does not fall under the exemptions provided in
Section 103, but merely arranges for such, making Philhealth not
VAT-exempt. YES. Generally, the NIRC has no retroactive
application except when:
1. where the taxpayer deliberately misstates or omits material facts
from his return or in any document required of him by the Bureau
of Internal Revenue;
2. where the facts subsequently gathered by the Bureau of Internal
Revenue are materially different from the facts on which the
ruling is based, or
3. where the taxpayer acted in bad faith.
The Court held that Philhealth acted in good faith. The term health
maintenance organization was first recorded in the Philippine
statute books in 1995. It is apparent that when VAT Ruling No.
231-88 was issued in Philhealth's favor, the term health
maintenance organization was unknown and had no significance
for taxation purposes. Philhealth, therefore, believed in good faith
that it was VAT exempt for the taxable years 1996 and 1997 on
the basis of VAT Ruling No. 231-88. The rule is that the BIR
rulings have no retroactive effect where a grossly unfair deal
would result to the prejudice of the taxpayer.

FIRST PLANTERS v. CIR
FACTS: In a Pre-assessment Notice, petitioner was informed by
the BIR that it has an existing tax deficiency on its VAT and
Documentary Stamp Tax (DST) liabilities for the year
2000. Petitioner protested the assessment for lack of legal and
factual bases.
Petitioner subsequently received a Formal Assessment Notice,
directing payment of VAT deficiency and DST deficiency, inclusive
of surcharge and interest. Petitioner filed a protest, which was
denied by the Acting Regional Director.
Petitioner then filed a petition for review with the CTA, which
upheld the deficiency assessment. Petitioner filed an MR which
was denied.
Petitioner appealed to the CTA En Banc which denied the Petition
for Review. Petitioner sought reconsideration but this was denied
by the CTA.. Hence, the present petition for review under Rule 45
of the ROC.
The core of petitioner’s argument is that it is not a lending investor
within the purview of Section 108(A) of the NIRC, as amended,
and therefore not subject to VAT. Petitioner also contends that a
pawn ticket is not subject to DST because it is not proof of the
pledge transaction, and even assuming that it is so, still, it is not
subject to tax since a DST is levied on the document issued and not
on the transaction.
ISSUE: is petitioner in this case liable for:
1. VAT
2. DST
HELD:
1. NO. The determination of petitioner’s tax liability depends on
the tax treatment of a pawnshop business. It was the CTA’s view
that the services rendered by pawnshops fall under the general
definition of “sale or exchange of services” under Section 108(A)
of the Tax Code of 1997.
The Court finds that pawnshops should have been treated as non-
bank financial intermediaries from the very beginning, subject
to the appropriate taxes provided by law.
At the time of the disputed assessment, that is, for the year 2000,
pawnshops were not subject to 10% VAT under the general
provision on “sale or exchange of services” as defined under
Section 108(A) of the Tax Code of 1997. Instead, due to the specific
nature of its business, pawnshops were then subject to 10% VAT
under the category of non-bank financial intermediaries, as
provided in the same Section 108(A), which reads:
SEC. 108. Value-added Tax on Sale of Services and Use or Lease of
Properties.–
(A) xx
The phrase “sale or exchange of services” means the performance
of all kinds or services in the Philippines for others for a fee,
remuneration or consideration, including x x x services of banks,
non-bank financial intermediaries and finance companies;
and non-life insurance companies (except their crop insurances),
including surety, fidelity, indemnity and bonding companies..xx
Coming now to the issue at hand – Since petitioner is a non-bank
financial intermediary, it is subject to 10% VAT for the tax years
1996 to 2002; however, with the levy, assessment and
collection of VAT from non-bank financial intermediaries
being specifically deferred by law, then petitioner is not
liable for VAT during these tax years. But with the full
implementation of the VAT system on non-bank financial
intermediaries starting January 1, 2003, petitioner is liable for
10% VAT for said tax year. And beginning 2004 up to the present,
by virtue of R.A. No. 9238, petitioner is no longer liable for VAT
but it is subject to percentage tax on gross receipts from 0% to 5
%, as the case may be.
1. YES
Applying jurisprudence, it was ruled that the subject of DST is not
limited to the document alone. Pledge, which is an exercise of a
privilege to transfer obligations, rights or properties incident
thereto, is also subject to DST, thus –
Also, Section 195 of the NIRC unqualifiedly subjects all
pledges to DST. It states that “[o]n every x x x pledge x x x there
shall be collected a documentary stamp tax x x x.” It is clear,
categorical, and needs no further interpretation or construction.
In the instant case, there is no law specifically and expressly
exempting pledges entered into by pawnshops from the payment
of DST. Section 199 of the NIRC enumerated certain documents
which are not subject to stamp tax; but a pawnshop ticket is not
one of them. Hence, petitioner’s nebulous claim that it is not
subject to DST is without merit.

TAMBUNTING v. CIR
xx.. the subject of a DST is not limited to the document embodying
the enumerated transactions. A DST is an excise tax on the
exercise of a right or privilege to transfer obligations, rights or
properties incident thereto… xx

Pledge is among the privileges, the exercise of which is subject to

DST. A pledge may be defined as an accessory, real and unilateral
contract by virtue of which the debtor or a third person delivers
to the creditor or to a third person movable property as security
for the performance of the principal obligation, upon the
fulfillment of which the thing pledged, with all its accessions and
accessories, shall be returned to the debtor or to the third person

True, the law does not consider said ticket as an evidence of

security or indebtedness. However, for purposes of taxation, the
same pawn ticket is proof of an exercise of a taxable privilege
of concluding a contract of pledge. At any rate, it is not said
ticket that creates the pawnshop’s obligation to pay DST but the
exercise of the privilege to enter into a contract of pledge. There
is therefore no basis in petitioner’s assertion that a DST is literally
a tax on a document and that no tax may be imposed on a pawn
ticket.
FACTS: Petitioner was assessed for deficiency Value Added Tax
and Documentary Stamp Tax on the premise that, for the Value
Added Tax, it was engaged in the sale of services.
ISSUES: (1) Is Petitioner liable for the Value Added Tax?
(2) Can the imposition of surcharge and interest be waived on the
imposition of deficiency Documentary Stamp Tax?
HELD: (1) NO. Since Petitioner is considered a non-bank financial
intermediary, it is subject to 10% VAT for the tax years 1996 to
2002 but since the collection of Value Added Tax from non-bank
financial intermediaries was specifically deferred by law,
Petitioner is not liable for Value Added Tax during these tax years.
With the full implementation of the Value Added Tax system on
non-bank financial intermediaries starting January 1, 2003,
Petitioner is liable for 10% Value Added Tax for said tax year. And
beginning 2004 up to the present, by virtue of R.A. No. 9238,
petitioner is no longer liable for VAT but it is subject to percentage
tax on gross receipts from 0% to 5%, as the case may be.
(2) YES. Petitioner's argument against liability for surcharges and
interest — that it was in good faith in not paying documentary
stamp taxes, it having relied on the rulings of respondent CIR and
the CTA that pawn tickets are not subject to documentary stamp
taxes — was found to be meritorious. Good faith and honest belief
that one is not subject to tax on the basis of
previous interpretations of government agencies tasked to
implement the tax law are sufficient justification to delete the
imposition of surcharges and interest.
FORT BONIFACIO DEV’T v. CIR
FACTS: Petitioner was a real estate developer that bought from
the national government a parcel of land that used to be the Fort
Bonifacio military reservation. At the time of the said sale there
was as yet no VAT imposed so Petitioner did not pay any VAT on
its purchase. Subsequently, Petitioner sold two parcels of land to
Metro Pacific Corp. In reporting the said sale for VAT purposes
(because the VAT had already been imposed in the interim),
Petitioner claimed transitional input VAT corresponding to its
inventory of land. The BIR disallowed the claim of presumptive
input VAT and thereby assessed Petitioner for deficiency VAT.
ISSUE: Is Petitioner entitled to claim the transitional input VAT on
its sale of real properties given its nature as a real estate dealer
and if so (i) is the transitional input VAT applied only to the
improvements on the real property or is it applied on the value of
the entire real property and (ii) should there have been a previous
tax payment for the transitional input VAT to be creditable?
HELD: YES. Petitioner is entitled to claim transitional input VAT
based on the value of not only the improvements but on the value
of the entire real property and regardless of whether there was in
fact actual payment on the purchase of the real property or not.
The amendments to the VAT law do not show any intention to
make those in the real estate business subject to a different
treatment from those engaged in the sale of other goods or
properties or in any other commercial trade or business. On the
scope of the basis for determining the available transitional input
VAT, the CIR has no power to limit the meaning and coverage of
the term "goods" in Section 105 of the Tax Code without statutory
authority or basis. The transitional input tax credit operates to
benefit newly VAT-registered persons, whether or not they
previously paid taxes in the acquisition of their beginning
inventory of goods, materials and supplies.
LUZON HYDRO v. CIR
FACTS: Luzon Hyrdo Corporation, a corporation duly organized
under the laws of the Philippines, has been registered with the
Bureau of Internal Revenue (BIR) as a VAT taxpayer. It was
formed as a consortium of several corporations.
Pursuant to the Power Purchase Agreement entered into with the
National Power Corporation (NPC), the electricity produced by
the petitioner from its operation of the Bakun Hydroelectric
Power Plant was to be sold exclusively to NPC. Relative to its sale
to NPC, the petitioner was granted by the BIR a certificate for Zero
Rate for VAT purposes in the periods from January 1, 2000 to
December 31, 2000; February 1, 2000 to December 31, 2000.
The petitioner alleged herein that it had incurred input VAT in the
amount of P9,795,427.89 on its domestic purchases of goods and
services used in its generation and sales of electricity to NPC in the
four quarters of 2001; and that it had declared the input VAT
of P9,795,427.89 in its amended VAT returns for the four quarters
on 2001.
On November 26, 2001, the petitioner filed a written claim for
refund or tax credit relative to its unutilized input VAT for the
period from October 1999 to October 2001
aggregating P14,557,004.38. Subsequently, on July 24, 2002, it
amended the claim for refund or tax credit to cover the period
from October 1999 to May 2002 forP20,609,047.56
The BIR, through Revenue Examiner Felicidad Mangabat of
Revenue District Office No. 2 in Vigan City, concluded an
investigation, and made a recommendation favorable to the
petitioner’s claim for the period from January 1, 2001 to
December 31, 2001.
Respondent Commissioner of Internal Revenue (Commissioner)
did not ultimately act on the petitioner’s claim despite the
favorable recommendation. Hence, on April 14, 2003, the
petitioner filed its petition for review in the CTA, praying for the
refund or tax credit certificate (TCC) corresponding to the
unutilized input VAT paid for the four quarters of 2001
totalling P9,795,427.88.
The CTA in Division promulgated its decision in favor of the
respondent denying the petition for review on the ground that in
the petitioner’s VAT returns for the four quarters of 2001, no
amount of zero-rated sales was declared. Without zero-rated sales
for the four quarters of 2001, the input VAT payments allegedly
attributable thereto cannot be refunded
On May 5, 2009, the CTA En Banc promulgated the assailed
decision affirming the Division, and denying the claim for refund
or tax credit. Hence, this appeal to the SC.

ISSUE: Whether or not Luzon Hydro Corporation is entitled to a
tax refund or tax credit certificate for the Input VAT payments
allegedly attributable to zero-rated sales. – NO
RULING: The SC said NO, the petition is without merit.
Section 112 of the National Internal Revenue Code 1997 provides:
SEC. 112. Refunds or Tax Credits of Input Tax.—
(A) Zero-rated or Effectively Zero-rated Sales--Any VAT-
registered person, whose sales are zero-rated or effectively zero-
rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the
extent that such input tax has not been applied against output tax:
Provided, however, That in the case of zero-rated sales under
Section 106(A)(2)(a)(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.
A claim for refund or tax credit for unutilized input VAT may be
allowed only if the following requisites concur, namely:
(a) the taxpayer is VAT-registered;
(b) the taxpayer is engaged in zero-rated or effectively zero-rated
sales;
(c) the input taxes are due or paid;
(d) the input taxes are not transitional input taxes;
(e) the input taxes have not been applied against output taxes
during and in the succeeding quarters;
(f) the input taxes claimed are attributable to zero-rated or
effectively zero-rated sales;
(g) for zero-rated sales under Section 106(A)(2)(1) and (2);
106(B); and 108(B)(1) and (2), the acceptable foreign currency
exchange proceeds have been duly accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas;
(h) where there are both zero-rated or effectively zero-rated sales
and taxable or exempt sales, and the input taxes cannot be directly
and entirely attributable to any of these sales, the input taxes shall
be proportionately allocated on the basis of sales volume; and
(i) the claim is filed within two years after the close of the taxable
quarter when such sales were made.
The petitioner did not competently establish its claim for refund
or tax credit.1avvphi1 We agree with the CTA En Banc that the
petitioner did not produce evidence showing that it had zero-
rated sales for the four quarters of taxable year 2001. As the CTA
En Banc precisely found, the petitioner did not reflect any zero-
rated sales from its power generation in its four quarterly VAT
returns, which indicated that it had not made any sale of
electricity. Had there been zero-rated sales, it would have
reported them in the returns. Indeed, it carried the burden not
only that it was entitled under the substantive law to the
allowance of its claim for refund or tax credit but also that it met
all the requirements for evidentiary substantiation of its claim
before the administrative official concerned, or in the de novo
litigation before the CTA in Division.
Although the petitioner has correctly contended here that the sale
of electricity by a power generation company like it should be
subject to zero-rated VAT under Republic Act No. 9136,31 its
assertion that it need not prove its having actually made zero-
rated sales of electricity by presenting the VAT official receipts
and VAT returns cannot be upheld. It ought to be reminded that it
could not be permitted to substitute such vital and material
documents with secondary evidence like financial statements.
NIPPON EXPRESS v. CIR
FACTS:
Petitioner Corporation applied for a tax credit/refund
based on section 112 of the Tax Code in the amount of
P24,826,667.61 representing the value of input VAT paid by the
corporation in relation to sales which are attributable to zero-
rated sales. Petitioner corporation filed the administrative claim
with the with the One-Stop Shop Inter-Agency Tax Credit and Duty
Drawback Center of the Department of Finance (OSSAC-DOF) on
September 24, 2001. Having no resolution from the OSSAC-DOF,
petitioner corporation filed a petition for review with the CTA on
April 24, 2002. The CTA denied the calim for tax credit/refund for
petitioner’s failure to comply with the receipt and invoicing
requirements provided by the Tax Code for refund based on zero-
rated transactions.
ISSUES:
1. Did the CTA acquire jurisdiction over the controversy?
2. Is there a difference between ainvoicing requirements and
receipt requirements in zero-rated transactions?
RULING:
1. No, the CTA did not acquire jurisdiction over the
controversy. The Supreme Court stated that strict
compliance with the prescriptive periods in claiming for
refund of creditable input tax due or paid attributable to
any zero-rated or effectively zero-rates sales
(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). Petitioner Corporation
has failed to comply with the 120+30 day period, which is
mandatory and jurisdictional, in filing its petition for
review. The 120 day period for the administrative office to
act ended on September 22, 2001, thus petitioner should
have filed its petition for review thirty days thereafter or
on or before April 24, 2002.
2. A VAT invoice is necessary for every sale, barter or
exchange of goods or properties while a VAT official
receipt properly pertains to every lease of goods or
properties, and every sale, barter or exchange of
services. In other words, the VAT invoice is the seller’s
best proof of the sale of the goods or services to the buyer
while the VAT receipt is the buyer’s best evidence of the
payment of goods or services received from the seller.
NORTHERN MINDANAO POWER v. CIR
FACTS:
On 20 June 2000, NMPC filed an administrative claim for a refund
for the 3rd and the 4th quarters of taxable year 1999, and on 25
July 2001 for taxable year 2000. Alleging that there was inaction
on the part of CIR, it filed a Petition with the CTA on 28 Septembe
r 2001.
ISSUE:
WON the CTA has acquired jurisdiction over the claim for refund.
RULING:
No. Although the question of jurisdiction was never raised as an i
ssue by the parties, it is well-
settled rule that the issue of jurisdiction over the subject matter
may, at any time, be raised by the parties or considered by the Co
urt motu proprio.
Counting 120 days from 20 June 2000, the CIR had until 18 Octob
er 2000 within which to decide on the claim for an input VAT ref
und for the 3rd and the 4th quarters of taxable year 1999. If after
the expiration of that period, there is inaction, petitioner could e
levate the matter to the court within 30 days or until 17 Novemb
er 2000. Therefore, NMPC belatedly filed its judicial claim with th
e CTA on September 28, 2001.
With regard the claim for refund for taxable year 2000, petitione
r did not wait for the expiration of the 120-
day period since barely 64 days had lapses when the judicial clai
m was filed with the CTA. Thus, the judicial claim was premature
ly filed.
CARGILL v. CIR
FACTS: Cargill, a VAT-registered domestic corporation, filed two
petitions in the Court of Tax Appeals for the refund of unutilized
input taxes attributable to zero-rated sales.
On June 27, 2003, Cargill filed an administrative claim for refund
of unutilized input taxes with the BIR. Three days after, on June
30, 2003, Cargill filed the first petition with the Court of Tax
Appeals. The second petition was filed on May 31, 2005, which
was the same date when Cargill filed an administrative claim with
the BIR.
ISSUE: WON Cargill’s petitions for refund of unutilized input VAT
before the CTA should be dismissed on the ground of prematurity?
RULING: The first petition was filed prematurely while the second
petition was properly filed because it was exempted from the
mandatory 120-day period.
Sec. 112(A) of RA 8424 provides that claims for tax credit or tax
refund of unutilized input taxes attributable to zero-rated sales
can be claimed within two years after the close of the taxable
quarter when the sales were made. Sec. 112(D) of RA 8424 also
provides that the Commissioner shall grant a refund or issue the
tax credit certificate for creditable input taxes within one hundred
twenty days from the date of submission of complete documents.
Within thirty (30) days from receipt of the Commissioner’s
decision or after the expiration of the 120-day period, the
taxpayer may appeal the decision or the unacted claim with the
CTA.
In the landmark case of Aichi Forging vs. CIR, it was held that the
observance of the 120-day period is a mandatory and
jurisdictional requisite to the filing of a judicial claim for refund
before the CTA. As such, its non-observance would warrant the
dismissal of the dismissal of the judicial claim for lack of
jurisdiction. In Aichi, it was held that the two-year period only
applies to administrative claims, and not judicial claims. Once the
administrative claim is filed within the 2-year period, the taxpayer
must wait for the lapse of the 120-day period before filing a
judicial claim for refund, even if the 120-day period is beyond the
original 2-year period abovementioned.
However, the Supreme Court held in CIR v. San Roque that a valid
claim for equitable estoppel by the taxpayer because of reliance of
an earlier ruling issued by the BIR is an exception to the
mandatory nature of the 120-day period. BIR Ruling No. DA-489-
03 stated that the taxpayer-claimant need not wait for the lapse of
the 120-day period before seeking judicial relief. Taxpayers did
not need to observe the stringent 120-day period for the period
December 10, 2003 to October 6, 2010 because the BIR Ruling
(DA-489-03) was still effective at that time. However, for the
periods BEFORE and AFTER the abovementioned period
(December 10, 2003 to October 6, 2010) the 120-day period was
mandatory and jurisdictional.
Hence, in this case, the first petition, which was filed on June 30,
2003, was prematurely filed because Cargill did not wait for the
lapse of the 120-day period before seeking relief with the CTA.
The first petition is not covered by the exception based on
estoppel because it was filed before the BIR issued Ruling No. DA-
489-03. The CTA did not have jurisdiction over the first petition.
The second petition, however, fell within the exemption from the
120-day period because it was filed within the effectivity of BIR
Ruling No. DA-489-03 (within Dec. 10, 2003 to Oct. 6, 2010). Since
the second petition was timely filed, it was reinstated and
remanded to the CTA for its resolution on the merits.
MINDANAO II GEOTHERMAL v. CIR
FACTS:
Mindanao II Geothermal Partnership sold its fully depreciated Ni
ssan Patrol, CIR said that the sale is subject to VAT. Mindanao, in
its defense, asserted that the sale is not incidental transaction in t
he course of its business, hence, an isolated transaction that shou
ld not have been subject to VAT.
ISSUE:
Whether or not an isolated transaction can be an incidental trans
action for purposes of VAT liability.
RULING:
Yes, just because a transaction is said to be an isolated one, it doe
s not follow that it cannot be an incidental transaction.
Mindanao II’s business is to convert the steam supplied to it by P
NOC/EDC into electricity and to deliver the electricity to NPC. In
the course of business, Mindanao II bought and eventually sold a
Nissan Patrol. Prior to the sale, the Nissan Patrol was part of Min
danao II’s property, plant and equipment. Therefore, the sale of t
he Nissan Patrol is an incidental transaction made in the course o
f business which should be liable for VAT.
ATLAS CONSOLIDATED v. CIR
FACTS: Petitioner corporation, a VAT-registered taxpayer
engaged in mining, production, and sale of various mineral
products, filed claims with the BIR for refund/credit of input VAT
on its purchases of capital goods and on its zero-rated sales in the
taxable quarters of the years 1990 and 1992. BIR did not
immediately act on the matter prompting the petitioner to file a
petition for review before the CTA. The latter denied the claims on
the grounds that for zero-rating to apply, 70% of the company's
sales must consists of exports, that the same were not filed within
the 2-year prescriptive period (the claim for 1992 quarterly
returns were judicially filed only on April 20, 1994), and that
petitioner failed to submit substantial evidence to support its
claim for refund/credit.
The petitioner, on the other hand, contends that CTA failed to
consider the following: sales to PASAR and PHILPOS within the
EPZA as zero-rated export sales; the 2-year prescriptive period
should be counted from the date of filing of the last adjustment
return which was April 15, 1993, and not on every end of the
applicable quarters; and that the certification of the independent
CPA attesting to the correctness of the contents of the summary of
suppliers’ invoices or receipts examined, evaluated and audited
by said CPA should substantiate its claims.
ISSUE: Did the petitioner corporation sufficiently establish the
factual bases for its applications for refund/credit of input VAT?
HELD: No. Although the Court agreed with the petitioner
corporation that the two-year prescriptive period for the filing of
claims for refund/credit of input VAT must be counted from the
date of filing of the quarterly VAT return, and that sales to PASAR
and PHILPOS inside the EPZA are taxed as exports because these
export processing zones are to be managed as a separate customs
territory from the rest of the Philippines, and thus, for tax
purposes, are effectively considered as foreign territory, it still
denies the claims of petitioner corporation for refund of its input
VAT on its purchases of capital goods and effectively zero-rated
sales during the period claimed for not being established and
substantiated by appropriate and sufficient evidence.
Tax refunds are in the nature of tax exemptions. It is regarded
as in derogation of the sovereign authority, and should be
construed in strictissimi juris against the person or entity
claiming the exemption. The taxpayer who claims for exemption
must justify his claim by the clearest grant of organic or statute
law and should not be permitted to stand on vague implications.
CIR v. MIRANT OPERATIONS
FACTS: Mirant filed its final adjusted Annual Income Tax Return
for fiscal year ending 1999 declaring a net loss. It then amended
the said return this time reflecting an increased net loss and
showing that it opted to carry over as tax credit its overpayment
to the succeeding taxable year. This excess tax credit was
unutilized in 2000 as Mirant still reported a net loss. Mirant then
filed a claim for refund of its excess creditable income tax for
1999.
ISSUE: Can Mirant claim for refund its excess credits from 1999?
HELD: NO. Mirant’s choice to carry over its 1999 excess income
tax credit to succeeding taxable years is irrevocable, regardless of
whether it was able to actually apply the said amount to a tax
liability. It is a mistake to understand the phrase "for that taxable
period" as a prescriptive period for the irrevocability rule – i.e.,
that since the tax credit in this case was acquired in 1999, and
Respondent opted to carry it over to 2000, then the irrevocability
of the option to carry over expired by the end of 2000, leaving
Respondent free to again take another option as regards its 1999
excess income tax credit. The Court ruled that this interpretation
effectively renders nugatory the irrevocability rule.
CIR v. AICHI FORGING
FACTS: On September 30, 2004, Aichi Forging filed a claim for
refund/credit of input VAT attributable to its zero-rated sales for
the period July 1, 2002 to September 30, 2002 with the CIR
through the DOF One-Stop Shop. On the same day, Aichi Forging
filed a Petition for Review with the CTA for the same action. The
BIR disputed the claim and alleged that the same was filed beyond
the two-year period given that 2004 was a leap year and thus the
claim should have been filed on September 29, 2004. The CIR also
raised issues related to the reckoning of the 2-year period and the
simultaneous filing of the administrative and judicial claims.
ISSUES: (1) Was the Petitioner’s administrative claim filed out of
time? (2) Was the filing of the judicial claim premature?
HELD: (1) NO. The right to claim the refund must be reckoned
from the “close of the taxable quarter when the sales were made”
– in this case September 30, 2004. The Court added that the rules
under Sections 204 (C) and 229 as cross-referred to Section 114
do not apply as they only cover erroneous payments or illegal
collections of taxes which is not the case for refund of unutilized
input VAT. Thus, the claim was filed on time even if 2004 was a
leap year since the sanctioned method of counting is the number
of months.
(2) YES. Section 112 mandates that the taxpayer filing the refund
must either wait for the decision of the CIR or the lapse of the 120-
day period provided therein before filing its judicial claim. Failure
to observe this rule is fatal to a claim. Thus, Section 112 (A) was
interpreted to refer only to claims filed with the CIR and not
appeals to the CTA given that the word used is “application”.
Finally, the Court said that applying the 2-year period even to
judicial claims would render nugatory Section 112 (D) which
already provides for a specific period to appeal to the CTA --- i.e.,
(a) within 30 days after a decision within the 120-day period and
(b) upon expiry of the 120-day without a decision.
VISAYAS GEOTHERMAL v. CIR
Facts:
On December 6, 2006, VGPC filed an administrative claim for refu
nd with the BIR District Office. And on January 3, 2007, while the
administrative claim was pending, VGPC filed its judicial claim vi
a petition for review with the CTA praying for a refund or the iss
uance of a tax credit certificate.
CTA En Banc dismissed the petition on the ground that the judici
al claim was prematurely filed because according to it, 120-
day has to expire first before it can be appealed.
Issue:
WON VGPC’s judicial claim for refund was prematurely filed.
Ruling:
No. The general rule is that the 120+30 day period is mandatory
and jurisdictional from the effectivity of the 1997 NIRC on Januar
y 1, 1998 up to present. As an exception, judicial claims filed fro
m December 10, 2003, in view of the BIR Ruling No. DA-489-
03, to October 6, 2010, when it was reversed by the Supreme Cou
rt in Aichion Case, need not wait for the exhaustion of the 120-
day period.
In the case at bar, VGPC filed its administrative claim with the CI
R on December 6, 2006 and later, its judicial claim with the CTA
on January 3, 2007. The judicial claim was clearly filed within the
period of exception and was, therefore, not premature and shoul
d not have been dismissed by the CTA En Banc.