PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
Note: This covers significant and relevant
Supreme Court jurisprudence on taxation law
from January 31, 2013 to March 31, 2014.
Possessors may reproduce and distribute this
supplement provided my name remains clearly
associated with my work and no alterations in
the form and content of this supplement are
made. No stamping is allowed.
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GENERAL PRINCIPLES
---------------------------------------------------------
Q. What is a tax amnesty?
A. A Tax amnesty refers to the articulation of
the absolute waiver by a sovereign of its right
to collect taxes and power to impose
penalties on persons or entities guilty of
violating a tax law. Tax amnesty aims to
grant a general reprieve to tax evaders who
wish to come clean by giving them an
opportunity to straighten out their records.
(CS Garments, Inc. v. Commissioner
of Internal Revenue, G.R. No.
182399, March 12, 2014)
Note: Amnesty taxpayers may immediately
enjoy the privileges and immunities under a
Tax Amnesty Law, provided they fulfill the
suspensive conditions imposed therein. (CS
Garments, Inc. v. Commissioner of
Internal Revenue, G.R. No. 182399,
March 12, 2014)
Q. ABC Petroleum sold XYZ Airlines
petroleum fuel. ABC Petroleum
passed on the related excise tax to
XYZ Airlines. Now, XYZ Airlines
sought to refund the said excise taxes
on the basis of the tax exemption
privileges provided for in its
franchise. The CIR argues that XYZ
Airlines has no personality to file the
subject tax refund claim because it is
not the statutory taxpayer. Does XYZ
Airlines have personality to file the
refund?
A. Yes. In Philippine Airlines v.
Commissioner of Internal Revenue,
G.R. No. 198759, July 1, 2013, the
Supreme Court held that the rule in the
Silkair case does is inapplicable to a case
where the party to which the economic
burden is shifted is provided an exemption
from both direct and indirect taxes. In
Silkair, the Court held that the the proper
party to question, or seek a refund of, an
indirect tax is the statutory taxpayer, the
person on whom the tax is imposed by law
and who paid the same even if he shifts the
burden thereof to another.
In this case, the Supreme Court held that the
abovementioned rule should not apply to
instances where the law clearly grants the
party to which the economic burden of the
tax is shifted an exemption from both direct
and indirect taxes. In which case, the latter
must be allowed to claim a tax refund even if
it is not considered as the statutory taxpayer
under the law.
The Court applied the Maceda case, where it
upheld the National Power Corporation’s
(NPC) claim for a tax refund since its own
charter specifically granted it an exemption
from both direct and indirect taxes.
The Supreme Court held that the propriety
of a tax refund claim is hinged on the kind of
exemption which forms its basis. If the law
confers an exemption from both direct or
indirect taxes, a claimant is entitled to a tax
refund even if it only bears the economic
burden of the applicable tax. On the other
hand, if the exemption conferred only applies
to direct taxes, then the statutory taxpayer is
regarded as the proper party to file the refund
claim.
Q. ABC Petroleum sold to various
international airlines petroleum fuel.
ABC Petroleum is prohibited from
passing on the said excise taxes to the
international airlines as the latter are
exempt from excise tax under Section
135. Thus, ABC Petroleum sought to
refund the said excise taxes. The BIR
argues that pursuant to the
Philippine Acetylene case, a tax
exemption being enjoyed by the buyer
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 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
cannot be the basis of a claim for tax
exemption by the manufacturer or
seller of the goods for any tax due to
it as the manufacturer or seller. Can
ABC Petroleum refund the said
excise taxes?
A. Yes. In Commissioner of Internal
Revenue v. Pilipinas Shell, G.R. No.
188497, February 19, 2014 , the Supreme
Court held that a petroleum company, as the
statutory taxpayer who is directly liable to pay
the excise tax on its petroleum products, is
entitled to a refund or credit of the excise
taxes it paid for petroleum products sold to
international carriers, the latter having been
granted exemption from the payment of said
excise tax under Sec. 135 (a) of the NIRC.
The Court maintained that Section 135 (a), in
fulfillment of international agreement and
practice to exempt aviation fuel from excise
tax and other impositions, prohibits the
passing of the excise tax to international
carriers who buys petroleum products from
local manufacturers/sellers such as
respondent. However, the Court agreed that
there was a need to reexamine the effect of
denying the domestic manufacturers/sellers’
claim for refund of the excise taxes they
already paid on petroleum products sold to
international carriers, and its serious
implications on our Government’s
commitment to the goals and objectives of
the Chicago Convention.
Under the basic international law principle of
pacta sunt servanda, we have the duty to
fulfill our treaty obligations in good faith.
This entails harmonization of national
legislation with treaty provisions. In this case,
Sec. 135(a) of the NIRC embodies our
compliance with our undertakings under the
Chicago Convention and various bilateral air
service agreements not to impose excise tax
on aviation fuel purchased by international
carriers from domestic manufacturers or
suppliers. Construction of the tax exemption
provision in question should give primary
consideration to its broad implications on our
commitment under international agreements.
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INCOME TAX
---------------------------------------------------------
Q. XYZ Bank Philippines remitted to
XYZ Bank Germany an amount
representing the 15% branch profit
remittance tax on its regular banking
unit net income to XYZ Germany.
Realizing that it made an
overpayment of BPRT, XYZ
Philippines filed with the BIR an
administrative claim for refund and at
the same time requested from the
International Tax Affairs Division
(ITAD) a confirmation of its
entitlement to the preferential tax
rate of 10% under the RP-Germany
Tax Treaty. The BIR denied the
claim on the ground that the
application for a tax treaty relief was
not filed with ITAD prior to the
payment by the former of its BPRT
and actual remittance of its branch
profits to DB Germany, or prior to
its availment of the preferential rate
of ten percent (10%) under the RP-
Germany Tax Treaty provision. The
CIR contends that the XYZ
Philippines violated the fifteen (15)
day period mandated under Section
III paragraph (2) of Revenue
Memorandum Order (RMO) No. 1-
2000. Will the failure to strictly
comply with RMO No. 1-2000
deprive persons or corporations of
the benefit of a tax treaty?
A. No. In Deutsche Bank AG Manila v.
Commissioner of Internal Revenue,
G.R. No. 188550, August 19, 2013 , the
Supreme Court held that the noncompliance
with the 15-day period for prior application
should not operate to automatically divest
entitlement to the tax treaty relief especially in
claims for refund.
Our Constitution provides for adherence to
the general principles of international law as
part of the law of the land. The time-honored
international principle of pacta sunt servanda
demands the performance in good faith of
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 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
treaty obligations on the part of the states
that enter into the agreement. Every treaty in
force is binding upon the parties, and
obligations under the treaty must be
performed by them in good faith. More
importantly, treaties have the force and effect
of law in this jurisdiction.
A state that has contracted valid international
obligations is bound to make in its
legislations those modifications that may be
necessary to ensure the fulfillment of the
obligations undertaken.” Thus, laws and
issuances must ensure that the reliefs granted
under tax treaties are accorded to the parties
entitled thereto. The BIR must not impose
additional requirements that would negate
the availment of the reliefs provided for under
international agreements. More so, when the
RP-Germany Tax Treaty does not provide
for any pre-requisite for the availment of the
benefits under said agreement.
Likewise, it must be stressed that there is
nothing in RMO No. 1-2000 which would
indicate a deprivation of entitlement to a tax
treaty relief for failure to comply with the 15-
day period. We recognize the clear intention
of the BIR in implementing RMO No. 1-
2000, but the CTA’s outright denial of a tax
treaty relief for failure to strictly comply with
the prescribed period is not in harmony with
the objectives of the contracting state to
ensure that the benefits granted under tax
treaties are enjoyed by duly entitled persons
or corporations.
Bearing in mind the rationale of tax treaties,
the period of application for the availment of
tax treaty relief as required by RMO No. 1-
2000 should not operate to divest entitlement
to the relief as it would constitute a violation
of the duty required by good faith in
complying with a tax treaty. The denial of the
availment of tax relief for the failure of a
taxpayer to apply within the prescribed
period under the administrative issuance
would impair the value of the tax treaty. At
most, the application for a tax treaty relief
from the BIR should merely operate to
confirm the entitlement of the taxpayer to the
relief.
The obligation to comply with a tax treaty
must take precedence over the objective of
RMO No. 1-2000. Logically, noncompliance
with tax treaties has negative implications on
international relations, and unduly
discourages foreign investors. While the
consequences sought to be prevented by
RMO No. 1-2000 involve an administrative
procedure, these may be remedied through
other system management processes, e.g., the
imposition of a fine or penalty. But we cannot
totally deprive those who are entitled to the
benefit of a treaty for failure to strictly comply
with an administrative issuance requiring
prior application for tax treaty relief.
Q. What are the requirements for a claim
for refund of excess creditable
withholding tax?
A. A taxpayer claiming for a tax credit or refund
of creditable withholding tax must comply
with the following requisites:
1) The claim must be filed with the CIR
within the two-year period from the date
of payment of the tax;
2) It must be shown on the return of the
recipient that the income received was
declared as part of the gross income; and
3) The fact of withholding is established by
a copy of a statement duly issued by the
payor to the payee showing the amount
paid and the amount of tax withheld.
(Commissioner of Internal Revenue
v. TeaM (Philippines) Operations
Corporation, G.R. No. 185728,
October 16, 2013 )
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VALUE-ADDED TAX
---------------------------------------------------------
Q. What are the requirements for a claim
for VAT refund?
A. A claim for refund or tax credit for unutilized
input VAT may be allowed only if the
following requisites concur, namely:
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 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
1) The taxpayer is VAT-registered;
2) The taxpayer is engaged in zero-rated or
effectively zero-rated sales;
3) The input taxes are due or paid;
4) The input taxes are not transitional input
taxes;
5) The input taxes have not been applied
against output taxes during and in the
succeeding quarters;
6) The input taxes claimed are attributable to
zero-rated or effectively zero-rated sales;
7) 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;
8) 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
9) The claim is filed within two years after
the close of the taxable quarter when such
sales were made
( Luzon Hydro Corporation v.
Commissioner of Internal
Revenue, G.R. No. 188260,
November 13, 2013)
Q. ABC Hydro Corporation, is a
renewable power
company. It filed a claim for refund to
cover its unutilized input VAT
corresponding to the four quarters of
taxable year 2001. It, however, did
not produce evidence showing
  that
  it
 
had
  zero-­‐rated
  sales
  for
  the
  four
  quarters
  2) The CIR has 120 days from the date of
of
  taxable
  year
  2001.
  Should
  ABC’s
  claim
  submission of complete documents in
be
 denied?
A. Yes. In Luzon Hydro Corporation v.
Commissioner of Internal Revenue,
G.R. No. 188260, November 13, 2013 ,
the Supreme Court held that petitioner did
not competently establish its claim for refund
or tax credit. The petitioner did not produce
evidence showing that it had zero-rated sales
for the four quarters of taxable year 2001. 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.
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, 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.
Q. What are the rules on the
determination of the prescriptive
period for filing a tax refund or credit
of unutilized input VAT as provided
in Section 112 of the 1997 Tax Code?
A. In Mindanao II Geothermal
Partnership v. Commissioner of
Internal Revenue, and Mindanao I
Geothermal Partnership v.
Commissioner of Internal Revenue, 1
the Supreme Court provided the following
generation rules on prescriptive periods involving VAT:
1) An administrative claim must be filed with
the CIR within two years after the close of
the taxable quarter when the zero-rated or
effectively zero-rated sales were made.
support of the administrative claim within
which to decide whether to grant a refund
or issue a tax credit certificate. The 120-
day period may extend beyond the two-
year period from the filing of the
administrative claim if the claim is filed in
the later part of the two-year period. If the
120-day period expires without any
1
G.R. Nos. 193301 and 194637, March 11, 2013.
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 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
decision from the CIR, then the
administrative claim may be considered to
be denied by inaction.
3) A judicial claim must be filed with the
CTA within 30 days from the receipt of
the CIR’s decision denying the
administrative claim or from the
expiration of the 120-day period without
any action from the CIR.
4) All taxpayers, however, can rely on BIR
Ruling No. DA-489- 03 from the time of
its issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6
October 2010, as an exception to the
mandatory and jurisdictional 120+30 day
periods.
(See Commissioner of Internal Revenue
v. San Roque Power Corporation, G.R.
No. 187485, Taganito Mining
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, February 12, 2013 )
Otherwise presented, the Supreme Court in
Commissioner of Internal Revenue v.
Mindanao II Geothermal Partnership,
G.R. No. 191498, January 15, 2014
summarized the rules as follows:
A. Two-Year Prescriptive Period
1) It is only the administrative claim that
must be filed within the two-year
prescriptive period. (Aichi)
2) The proper reckoning date for the two-
year prescriptive period is the close of the
taxable quarter when the relevant sales
were made. (San Roque)
3) The only other rule is the Atlas ruling,
which applied only from 8 June 2007 to
12 September 2008. Atlas states that the
two- year prescriptive period for filing a
claim for tax refund or credit of
unutilized input VAT payments should
be counted from the date of filing of the
VAT return and payment of the tax. (San
Roque)
B. 120+30 Day Period
1) The taxpayer can file an appeal in one of
two ways: (1) file the judicial claim within
thirty days after the Commissioner
denies the claim within the 120-day
period, or (2) file the judicial claim within
thirty days from the expiration of the 120-
day period if the Commissioner does not
act within the 120-day period.
2) The 30-day period always applies,
whether there is a denial or inaction on
the part of the CIR.
3) As a general rule, the 30-day period to
appeal is both mandatory and
jurisdictional. (Aichi and San Roque)
4) As an exception to the general rule,
premature filing is allowed only if filed
between 10 December 2003 and 5
October 2010, when BIR Ruling No.
DA-489-03 was still in force. (San
Roque)
5) Late filing is absolutely prohibited, even
during the time when BIR Ruling No.
DA-489-03 was in force. (San Roque)
A taxpayer can file his administrative claim
for refund or issuance of tax credit certificate
anytime within the two- year prescriptive
period. If he files his claim on the last day of
the two-year prescriptive period, his claim is
still filed on time. The Commissioner will
then have 120 days from such filing to decide
the claim. If the Commissioner decides the
claim on the 120th day or does not decide it
on that day, the taxpayer still has 30 days to
file his judicial claim with the CTA. (Team
Energy Corporation v.
Commissioner of Internal Revenue,
G.R. No. 190928, January 13, 2014 )
(See Commissioner of Internal
Revenue v. Visayas Geothermal
Power Company, G.R. No. 181276,
November 11, 2013 )
Q. What is the reckoning date of the
two-year prescriptive period to file
the administrative claim for refund?
A. The reckoning date is the close of the taxable
quarter when the relevant sales were made.
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 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
The Atlas doctrine, which held that claims
for refund or credit of input VAT must
comply with the two-year prescriptive period
under Section 229 (date of filing of return and
payment of tax) should be effective only from
its promulgation on 8 June 2007 until its
abandonment on 12 September 2008 in
Mirant. The Atlas doctrine was limited to the
reckoning of the two-year prescriptive period
from the date of payment of the output VAT.
Prior to the Atlas doctrine, the two-year
prescriptive period for claiming refund or
credit of input VAT should be governed by
Section 112(A) following the verba legis rule.
The Mirant ruling, which abandoned the
Atlas doctrine, adopted the verba legis rule,
thus applying Section 112(A) in computing
the two-year prescriptive period in claiming
refund or credit of input VAT.
(Commissioner of Internal Revenue v.
Mindanao II Geothermal
Partnership, G.R. No. 191498,
January 15, 2014 )
Q. What is the distinction between an
‘excess input VAT” and an
“excessively collected” tax?
A. The 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 input VAT is a tax liability of,
and legally paid by, a VAT-registered seller of
goods, properties or services used as input by
another VAT-registered person in the sale of
his own goods, properties, or services. This
tax liability is true even if the seller passes on
the input VAT to the buyer as part of the
purchase price. The second VAT- registered
person, who is not legally liable for the input
VAT, is the one who applies the input VAT
as credit for his own output VAT.
In a claim for refund or credit of “excess”
input VAT under Section 110(B) and Section
112(A), the input VAT is not “excessively”
collected as understood under Section 229.
At the time of payment of the input VAT the
amount paid is the correct and proper
amount. Under the VAT System, there is no
claim or issue that the input VAT is
“excessively” collected, that is, that the input
VAT paid is more than what is legally due.
The person legally liable for the input VAT
cannot claim that he overpaid the input VAT
by the mere existence of an “excess” input
VAT. The term “excess” input VAT simply
means that the input VAT available as credit
exceeds the output VAT, not that the input
VAT is excessively collected because it is
more than what is legally due. Thus, the
taxpayer who legally paid the input VAT
cannot claim for refund or credit of the input
VAT as “excessively” collected under Section
229.
Any suggestion that the “excess” input VAT
under the VAT System is an “excessively”
collected tax under Section 229 may lead
taxpayers to file a claim for refund or credit
for such “excess” input VAT under Section
229 as an ordinary tax refund or credit
outside of the VAT System.
From the plain text of Section 229, it is clear
that what can be refunded or credited is a tax
that is “erroneously, x x x illegally, x x x
excessively or in any manner wrongfully
collected.” In short, there must be a wrongful
payment because what is paid, or part of it, is
not legally due. As the Court held in Mirant,
Section 229 should “apply only to instances of
erroneous payment or illegal collection of
internal revenue taxes.” Erroneous or
wrongful payment includes excessive
payment because they all refer to payment of
taxes not legally due. Under the VAT
System, there is no claim or issue that the
“excess” input VAT is “excessively or in any
manner wrongfully collected.”
(Commissioner of Internal Revenue v.
San Roque Power Corporation, G.R.
No. 187485, Taganito Mining
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, February 12, 2013 )
Q. What is the effect of failure to comply
6
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
with the 120-day waiting period in a
claim for refund of input taxes?
A. Failure to comply with the 120-day waiting
period violates a mandatory provision of law.
It violates the doctrine of exhaustion of
administrative remedies and renders the
petition premature and thus without a cause
of action, with the effect that the CTA does
not acquire jurisdiction over the taxpayer’s
petition.
The charter of the CTA expressly provides
that its jurisdiction is to review on appeal
“decisions of the Commissioner of Internal
Revenue in cases involving x x x refunds of
internal revenue taxes.”
When a taxpayer prematurely files a judicial
claim for tax refund or credit with the CTA
without waiting for the decision of the
Commissioner, there is no “decision” of the
Commissioner to review and thus the CTA
as a court of special jurisdiction has no
jurisdiction over the appeal.
The charter of the CTA also expressly
provides that if the Commissioner fails to
decide within “a specific period” required
by law, such “inaction shall be deemed a
denial” of the application for tax refund or
credit. It is the Commissioner’s decision, or
inaction “deemed a denial,” that the taxpayer
can take to the CTA for review. Without a
decision or an “inaction x x x deemed a denial”
of the Commissioner, the CTA has no
jurisdiction over a petition for review.
(Commissioner of Internal Revenue v.
San Roque Power Corporation, G.R.
No. 187485, Taganito Mining
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, February 12, 2013 )
The 30-day period to appeal to the CTA is
dependent on the 120-day period and
compliance with both periods is
jurisdictional. The period of 120 days is a
prerequisite for the commencement of the 30-
day period to appeal to the CTA. (CBK
Power Limited v. Commissioner of
Internal Revenue, G.R. Nos. 198729-
30, January 15, 2014 )
In Nippon Express (Philippines)
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196907,
March 13, 2013 , the petition failed because
the judicial claim of petitioner was filed on
April 25, 2003, only one day after it submitted
its administrative claim to the CIR.
Petitioner failed to wait for the lapse of the
requisite 120-day period or the denial of its
claim by the CIR before elevating the case to
the CTA by a petition for review. As its
judicial claim was filed during which strict
compliance with the 120+30-day period was
required, the Court cannot but declare that
the filing of the petition for review with the
CTA was premature and that the CTA had
no jurisdiction to hear the case.
Q. Is the 30-day period within which to
file the judicial claim required to fall
within the 2-year prescriptive period?
A. The 30-day period need not necessarily fall
within the two-year prescriptive period for
the following reasons:
1) Section 112(A) clearly, plainly, and
unequivocally provides that the taxpayer
“may, within two (2) years after the close of
the taxable quarter when the sales were
made, apply for the issuance of a tax credit
certificate or refund of the creditable input
tax due or paid to such sales.” In short, the
law states that the taxpayer may apply
with the Commissioner for a refund or
credit “within two (2) years,” which means
at anytime within two years. Thus, the
application for refund or credit may be
filed by the taxpayer with the
Commissioner on the last day of the two-
year prescriptive period and it will still
strictly comply with the law. The two- year
prescriptive period is a grace period in
favor of the taxpayer and he can avail of
the full period before his right to apply for
a tax refund or credit is barred by
prescription.
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 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes

 
2) Section 112(C) provides that the his administrative claim within the two-
Commissioner shall decide the application year prescriptive period.
for refund or credit “within one hundred
twenty (120) days from the date of The theory that the 30-day period must fall
submission of complete documents in within the two-year prescriptive period
support of the application filed in adds a condition that is not found in the
accordance with Subsection (A).” The law. It results in truncating 120 days from
reference in Section 112(C) of the the 730 days that the law grants the
submission of documents “in support of taxpayer for filing his administrative claim
the application filed in accordance with with the Commissioner. This Court
Subsection A” means that the application cannot interpret a law to defeat, wholly or
in Section 112(A) is the administrative even partly, a remedy that the law
claim that the Commissioner must decide expressly grants in clear, plain, and
within the 120-day period. In short, the unequivocal
 language.
two- year prescriptive period in Section
112(A) refers to the period within which (Commissioner of Internal Revenue
the taxpayer can file an administrative v. San Roque Power Corporation,
claim for tax refund or credit. Stated G.R. No. 187485, Taganito Mining
otherwise, the two-year prescriptive Corporation v. Commissioner of
period does not refer to the filing of the Internal Revenue, G.R. No. 196113,
judicial claim with the CTA but to the Philex Mining Corporation v.
filing of the administrative claim with the Commissioner of Internal
Commissioner. As held in Aichi, the Revenue, G.R. No. 197156,
“phrase ‘within two years x x x apply for February 12, 2013 )
the issuance of a tax credit or refund’ refers
to applications for refund/credit with the It is only the administrative claim that
CIR and not to appeals made to the must be filed within the two-year
CTA.” prescriptive period; the judicial claim need
3) If the 30-day period, or any part of it, is not fall within the two-year prescriptive
required to fall within the two-year period. (Commissioner of Internal
prescriptive period (equivalent to 730 Revenue v. Mindanao II
days), then the taxpayer must file his Geothermal Partnership, G.R. No.
administrative claim for refund or credit 191498, January 15, 2014 )
within the first 610 days of the two-year
prescriptive period. Otherwise, the filing Q. ABC argues that the judicial claim is
of the administrative claim beyond the first seasonably filed so long as it is filed
610 days will result in the appeal to the after the 120-day waiting period but
CTA being filed beyond the two-year before the lapse of the two-year
prescriptive period. Thus, if the taxpayer prescriptive period under Section
files his administrative claim on the 611th 112(A). In other words, a taxpayer
day, the Commissioner, with his 120-day may file an appeal with the CTA after
period, will have until the 731st day to the expiration of the 120-day period,
decide the claim. If the Commissioner in which case the 30-day period does
decides only on the 731st day, or does not not apply. Is this contention correct?
decide at all, the taxpayer can no longer
file his judicial claim with the CTA A. No. The
 30-­‐day
 period
 applies
 not
 only
 to
 
because the two-year prescriptive period instances
 of
 actual
 denial
 by
 the
 CIR
 of
 the
 
(equivalent to 730 days) has lapsed. The claim
 for
 refund
 or
 tax
 credit,
 but
 to
 cases
 
30-day period granted by law to the of
 inaction
 by
 the
 CIR
 as
 well.
taxpayer to file an appeal before the CTA
 
becomes utterly useless, even if the The taxpayer can file the appeal in one of two
taxpayer complied with the law by filing ways: (1) file the judicial claim within thirty

8
 

 
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
days after the Commissioner denies the claim
within the 120-day period, or (2) file the
judicial claim within thirty days from the
expiration of the 120-day period if the
Commissioner does not act within the 120-
day period.
(Commissioner of Internal Revenue v.
Mindanao II Geothermal
Partnership, G.R. No. 191498,
January 15, 2014 )
Q. Should the 120+30 day period rule be
given only prospective effect given
that the manner by which the BIR
and the CTA actually treated the
120+30 day period constitutes an
operative fact?
A. No. The general rule is that a void law or
administrative act cannot be the source of
legal rights or duties.
The doctrine of operative fact is an exception
to the general rule, such that a judicial
declaration of invalidity may not necessarily
obliterate all the effects and consequences of
a void act prior to such declaration
Clearly, for the operative fact doctrine to
apply, there must be a “legislative or executive
measure,” meaning a law or executive
issuance, that is invalidated by the court.
From the passage of such law or
promulgation of such executive issuance until
its invalidation by the court, the effects of the
law or executive issuance, when relied upon
by the public in good faith, may have to be
recognized as valid. In the present case,
however, there is no such law or executive
issuance that has been invalidated by the
Court except BIR Ruling No. DA-489-03.
The doctrine of operative fact was applied by
the Supreme Court when it recognized the
simultaneous filing during the period
between 10 December 2003, when BIR
Ruling No. DA-489-03 was issued, and 6
October 2010, when this Court promulgated
Aichi declaring the 120+30 day periods
mandatory and jurisdictional, thus reversing
BIR Ruling No. DA-489-03.
( Commissioner of Internal Revenue
v. San Roque Power Corporation,
G.R. No. 187485, Taganito Mining
Corporation v. Commissioner of
Internal Revenue, G.R. No. 196113,
Philex Mining Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197156, October 8, 2013)
Note: Thus, in Procter & Gamble Asia
PTE Ltd. v. Commissioner of Internal
Revenue, G.R. No. 202071, February 19,
2014 , the Petitioner was able to claim the
benefit of BIR Ruling No. DA-489-03 as the
judicial claims were filed on October 2, 2006
and December 29, 2006.
In Team Energy Corporation v.
Commissioner of Internal Revenue,
G.R. No. 197760, January 13, 2014 ,
petitioner filed its judicial claim on April 18,
2007 or after the issuance of BIR Ruling No.
DA-489-03 on December 10, 2003 but before
October 6, 2010, the date when the Aichi case
was promulgated. Thus, even though
petitioner's judicial claim was prematurely filed
without waiting for the expiration of the 120-day
mandatory period, the CTA may still take
cognizance of the instant case as it was filed
within the period exempted from the 120-30-day
mandatory period.
In Commissioner of Internal Revenue v.
Team Sual Corporation, G.R. No.
194105, February 5, 2014 , Team Sual filed
its judicial claim for refund/tax credit of its
unutilized input VAT with the CTA on April 1,
2002 – more than a year before the issuance of
BIR Ruling No. DA-489-03. Accordingly,
Team Sual cannot benefit from the declaration
laid down in BIR Ruling No. DA-489-03. As
stressed by the Court in San Roque, prior to the
issuance of BIR Ruling No. DA-489-03, the
BIR held that the 120-day period was
mandatory and jurisdictional, which is the
correct interpretation of the law.
In Republic of the Philippines v. GST
Philippines, G.R. No. 190872, October 17,
2013, it was held that GST can benefit from
BIR Ruling No. DA-489-03 with respect to its
claims for refund of unutilized excess input VAT
9
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
for the second and third quarters of taxable year
2005 which were filed before the CIR on
November 18, 2005 but elevated to the CTA on
March 17, 2006 before the expiration of the 120-
day period (March 18, 2006 being the 120th day).
BIR Ruling No. DA-489-03 effectively shielded
the filing of GST's judicial claim from the vice of
prematurity.
GST's claims, however, for the four quarters of
taxable year 2004 and the first quarter of taxable
year 2005 should be denied for late filing of the
petition for review before the CTA. GST filed
its VAT Return for the first quarter of 2004 on
April 16, 2004. Reckoned from the close of the
first taxable quarter of 2004 on March 31, 2004,
the administrative claim filed on June 9, 2004
was well within the required two-year
prescriptive period from the close of the taxable
quarter, the last day of filing being March 31,
2006. The CIR then had 120 days from June 9,
2004, or until October 7, 2004, to decide the
claim. Since the Commissioner did not act on
the claim within the said period, GST had 30
days from October 7, 2004, or until November
6, 2004, to file its judicial claim. However, GST
filed its petition for review before the CTA only
on March 17, 2006, or 496 days after the last day
of filing. In short, GST was late by one year and
131 days in filing its judicial claim.
For the second quarter of taxable year 2004,
GST filed its administrative claim on August 12,
2004. The 120-day period from the filing of such
claim ended on December 10, 2004, and the 30th
day within which to file a judicial claim fell on
January 9, 2005. However, GST filed its
petition for review before the CTA only on
March 17, 2006, or 432 days after the last day of
filing. GST was late by one year and 67 days in
filing its judicial claim.
For the third and fourth quarters of taxable year
2004, GST filed its administrative claims on
th
February 18, 2005. The 120 day, or June 18,
2005, lapsed without any action from the CIR.
Thus, GST had 30 days therefrom, or until July
18, 2005, to file its judicial claim, but it did so
only on March 17, 2006, or 242 days after the last
day of filing. GST was late by 242 days in filing
its judicial claim.
In Applied Food Ingredients Company
v. Commissioner of Internal Revenue,
G.R. No. 184266, November 11, 2013 , the
Petitioner’s judicial claim was filed on 24 July
2002, when the 120+30 day mandatory periods
were already in the law and BIR Ruling No.
DA-489-03 had not yet been issued, Petitioner
does not have an excuse for not observing the
120+30 day period. Failure of petitioner to
observe the mandatory 120-day period is fatal to
its claim and rendered the CTA devoid of
jurisdiction over the judicial claim.
In Commissioner of Internal Revenue v. Dash
Engineering, G.R. No. 184145, December 11,
2013, the Supreme Court held that respondent's
judicial claim for refund must be denied for
having been filed late. Although respondent
filed its administrative claim with the BIR on
August 9, 2004 before the expiration of the two-
year period in Section l 12(A), it undoubtedly
failed to comply with the 120+30-day period in
Section l l 2(D) (now subparagraph C) which
requires that upon the inaction of the CIR for
120 days after the submission of the documents
in support of the claim, the taxpayer has to file
its judicial claim within 30 days after the lapse of
the said period. The 120 days granted to the
CIR to decide the case ended on December 7,
2004. Thus, DEPI had 30 days therefrom, or
until January 6, 2005, to file a petition for review
with the CTA. Unfortunately, DEPI only
sought judicial relief on May 5, 2005 when it
belatedly filed its petition to the CTA, despite
having had ample time to file the same, almost
four months after the period allowed by law. As
a consequence of DEPI's late filing, the CTA
did not properly acquire jurisdiction over the
claim.
In Commissioner of Internal Revenue v.
Toledo Power Company, G.R. No.
183880, January 20, 2014 Respondent’s
judicial claims for refund of its unutilized input
VAT covering the third and fourth quarters of
2001 were filed on October 24, 2003 and January
22, 2004, respectively.
As held in the San Roque ponencia, strict
compliance with the 120+30 day mandatory and
jurisdictional periods is not necessary when the
judicial claims are filed between December 10,
2003 (issuance of BIR Ruling No. DA-489-03
which states that the taxpayer need not wait for
10
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes

 
the 120-day period to expire before it could seek
judicial relief) to October 6, 2010 (promulgation Q. ABC Corporation filed a claim for
of the Aichi doctrine). refund of unutilized input taxes. ABC
Corporation changed its name to
Clearly, therefore, Respondent’s refund claim of DEF Corporation. Thus, the official
unutilized input VAT for the third quarter of receipts presented beared the name of
2001 was denied for being prematurely filed with DEF Corporation instead of ABC
the CTA, while its refund claim of unutilized Corporation. The BIR contends that
input VAT for the fourth quarter of 2001 may be ABC failed to comply with the VAT
entertained since it falls within the exception invoicing requirements as the use of
provided in the Court’s most recent rulings. the business name “DEF” by ABC
was never approved by the SEC. Is
Q. What is the effect non-compliance the BIR’s contention correct?
with the documentary and evidentiary
requirements for a VAT refund claim? A. Yes. In Bonifacio Water Corporation
v. The Commissioner of Internal
A. No. In J.R.A Philippines v. Revenue, G.R. No. 175142, July 22,
Commissioner of Internal Revenue , 2013, , the Supreme Court held that the
the Supreme Court held that failure to change of petitioner’s name to “Bonifacio
comply with the invoicing requirements GDE Water Corporation,” being
provides sutt1cient ground to deny a claim for unauthorized and without approval of the
tax refund or tax credit. A claim for tax SEC, and the issuance of official receipts
refund or tax credit, the applicant must prove under that name which were presented to
not only entitlement to the claim but also support petitioner’s claim for tax refund,
compliance with all the documentary and cannot be used to allow the grant of tax
evidentiary requirements therefor. refund or issuance of a tax credit certificate in
petitioner’s favor. The absence of official
Q. ABC Corporation filed a claim for receipts issued in its name is tantamount to
refund of unutilized input taxes. The non- compliance with the substantiation
BIR contends that ABC failed to requirements provided by law.
comply with the VAT invoicing
requirements as the words “zero- ---------------------------------------------------------
rated” was merely stamped and not -
pre-printed. Is the BIR’s contention JUDICIAL REMEDIES (CTA)
correct? ---------------------------------------------------------
-
A. No. In Commissioner of Internal Q. May the Supreme Court motu
Revenue v. Toledo Power Company, proprio determine if the CTA has
G.R. No. 183880, January 20, 2014 , the jurisdiction over a claim for refund?
Supreme Court held that the words “zero-
rated” appeared on the VAT invoices/official A. Yes. In Commissioner of Internal
receipts presented by the Repondent in Revenue v. Silicon Philippines, G.R.
support of its refund claim. Although the No. 169778, March 12, 2014 , the
same was merely stamped and not pre- Supreme Court held that the
 CTA
 is
 a
 court
 
printed, the same is sufficient compliance of
 special
 jurisdiction.
 As
 such,
 it
 can
 only
 
with the law, since the imprinting of the word take
  cognizance
  of
  such
  matters
  as
  are
 
“zero-rated” was required merely to
 
clearly
  within
  its
  jurisdiction. However,
 
distinguish sales subject to 12% VAT, those although
  the
  parties
  have
  not
  raised
  the
 
that are subject to 0% VAT (zero-rated) and issue
  of
  jurisdiction,
  nevertheless,
  the
 
exempt sales, to enable the Bureau of Supreme
  court
  Court
  may
  motu proprio
Internal Revenue to properly implement and determine
  whether
  or
  not
  the
  CTA
  has
 
enforce the other VAT provisions of the Tax jurisdiction
  over
  respondent’s
  judicial
 
Code. claim
 for
 refund
 taking
 into
 consideration,
 

11  
 
 PM REYES BAR REVIEWER ON TAXATION
SUPPLEMENT FOR THE 2014 BAR
Atty. Pierre Martin D. Reyes
 
the   factual   and   legal   allegations   contained  
in   the   pleadings   filed   by   both   parties   and  
found  by  the  court  a quo.

*** Nothing else follows ***

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