Tuesday, January 14, 2014

Commissioner of Internal Revenue vs. Visayas Geothermal Power Company, Inc. – G.R. No. 181276, November 11, 2013

Commissioner of Internal Revenue vs. Visayas Geothermal Power Company, Inc. – G.R. No. 181276, November 11, 2013

Facts:

Respondent Visayas Geothermal Power Company, Inc. (VGPCI) is engaged in the business of generation and sale of electricity. Due to Republic Act No. 9136, effective June 26, 2001, VGPCI’s sales of generated power becamse zero-rated and were no longer subject to VAT at 10%.


On June 26, 2003, VGPCI filed before the BIR Revenue District No. 89 of Ormoc City a claim for refund of unutilized input VAT payment in the amount of P1,142,666.32 for the third quarter of 2001. On December 18, 2003, another claim was filed in the amount of P19,070,378.18 for the last quarter of 2001 and the four quarters of 2002. For failure of the BIR to act on the claims, VGPCI filed separate petitions of review before the CTA on September 30, 2003 and December 19, 2003, praying for a refund or the issuance of a tax credit certificate on the abovementioned taxes covering the period from July to September 2001 and for the period from October 2001 to December 2002.

(My Own Note: There are two claims for refund before the BIR. There were also two petitions for review before the CTA. Both petitions for review before the CTA were filed before the expiration of the 120-day period under Section 112(D). The petition for review before the CTA for the refund of unutilized input taxes for the last quarter of 2001 and the entire 2002 was filed on December 19, 2003 or one day after the second administrative claim for refund was filed before the BIR.)

The CIR contends that the CTA did not have jurisdiction over VGPCI’s petition for review because it was filed before the expiration of the 120-day period wherein which the CIR should act on the taxpayer’s administrative claim for a refund or tax credit of unutilized input taxes.

VGPCI contends that the petitions before the CTA were filed correctly because both the administrative and the judicial claims for refund must be filed within the two-year prescriptive period, regardless of the length of time during which the administrative claim has been pending with the CIR. VGPCI cites Section 229 of the NIRC and the cases of Gibbs v. Collector of Internal Revenue and College of Oral & Dental Surgery v. Court of Tax Appeals, both cases of which state that the taxpayer need not wait for the decision of the BIR because the filing of a judicial claim BEYOND the two-year period bars recovery of the tax paid.

The First Division of the CTA partially granted VGPCI’s petition and ordered the CIR to issue refund or issue a tax credit certificate to VGPCI in the amount of P16,355,749.74 representing unutilized input VAT from Sept. 1, 2001 to Dec. 31, 2002. The CTA En Banc affirmed the decision of the First Division of the CTA.

ISSUE:

Whether VGPCI failed to observe the proper prescriptive period required by law for the filing of an appeal before the CTA because it filed its petition before the end of the 120-day period granted to the CIR to decide its claim for refund under Section 112(D) of the National Internal Revenue Code (NIRC).

RULING:

VGPCI’s judicial claim filed on September 30, 2003 was prematurely filed. However, the judicial claim filed on December 19, 2003 was properly filed because of the exception brought about by BIR Ruling DA-489-03.

VGPCI’s reliance on Gibbs and College of Oral & Dental Surgery is misplaced. At the time that both cases were decided, there was no provision yet in the NIRC in force similar to Section 112.

VGPCI is also mistaken to argue that Section 229 is the more relevant provision of law. Section 229 applies only to taxes erroneously or illegally collected. The applicable provision of the NIRC is undoubtedly Section 112, which deals specifically with creditable input tax.

The Court relied on the cases of Commissioner vs. Mirant, G.R. 172129, Commissioner vs. Aichi Forging, G.R. 184823, and Commissioner vs. San Roque Power, G.R. No. 187485 to state that the appropriate period for claiming a refund or a tax credit for unutilized input VAT is Section 112(A), and not Section 229 of the NIRC. Further, input VAT is not “excessively” collected as understood under Section 229 because at the time the input VAT is collected, the amount paid is correct and proper.

The 120-day period under Section 112(D) is crucial in filing an appeal with the CTA.

The application of the 30-day period from receipt of the decision of the CIR or from the lapse of the 120-day period (the “120+30 day period”) given to the taxpayer within which to file a petition for review with the CTA is mandatory and jurisdictional.

However, the court took notice of the issuance by the BIR of Ruling No. DA-489-03 dated December 10, 2003 which allowed for the filing of a judicial claim without waiting for the end of the 120-day period granted to the CIR to decide on the application for refund. Therefore, although the 120+30 day period in Section 112(D) is mandatory and jurisdictional and must be applied from the effectivity of the 1997 Tax Code on January 1, 1998, an exception shall be made for judicial claims filed from the issuance of BIR Ruling No. DA 489-03 on December 10, 2003 until the promulgation of Commissioner vs. Aichi on October 6, 2010.


Hence, the judicial claim filed on September 30, 2003 was prematurely filed and cannot be taken cognizance of. However, the judicial claim filed on December 19, 2003 can be considered by the CTA because of the exception brought about by the BIR Ruling.

(Disclaimer: Although most of this digest is copied from the actual decision, they are not identical. Copy at your own risk for your pleadings or for classroom purposes. Also, I provided the emphasis on some text.)

Happy reading!