Tax Case Digest: CIR V. Team Energy Corporation (formerly Mirant Pagbilao Corporation) G.R. No. 230412, March 27, 2019

CIR V. Team Energy Corporation (formerly Mirant Pagbilao Corporation)
G.R. No. 230412, March 27, 2019.

Second Division
J. REYES, JR., J.:

Lessons Applicable: VAT tax refund, judicial claim,
Laws Applicable: Section 108(B)(3) of NIRC, Section 4.108-1 of Revenue Regulations No. 7-95 (Consolidated Value Added Tax Regulations)

FACTS:

• Team Energy Corporation (TEC) (formerly Mirant Pagbilao Corporation) is principally engaged in the business of power generation and the subsequent sale thereof to the National Power Corporation (NPC) under a Build, Operate, Transfer Scheme.  It is also a VAT taxpayer.
• December 17, 2004: TEC filed with the BIR Audit Information, Tax Exemption and Incentives Division an Application for Effective Zero-Rate for the supply of electricity to the NPC for the period January 1, 2005 to December 31, 2005, which was subsequently approved.
• December 20, 2006: TEC filed an administrative claim for cash refund or issuance of tax credit certificate corresponding to the input VAT reported in its Quarterly VAT Returns for the 1st 3 quarters of 2005 and Monthly VAT Declaration for October 2005 in the amount of P80,136,251.60
• April 18, 2007: Due to inaction on its claim, TEC filed a Petition for Review before the CTA in Division
• CTA in Division on July 13, 2010: Partially granted ordered to refund or in the alternative, issue a tax credit certificate in the amount of P79,185,617.33 representing unutilized input VAT, attributable to its effectively zero-rated sales of power generation services to NPC for the period covering January 1, 2005 to October 31, 2005.
• Court in Division: Granted CIR’s Motion for Reconsideration, reversed and set aside the Decision dated July 13, 2010, and dismissed the Petition for Review for having been filed prematurely
• CTA En Banc: denied the Petition for Review for lack of merit and denied tis MR
• Supreme Court 3rd Division: Granted Motion to Admit Attached Petition for Review on Certiorari and granted the Certiorari remanded to the Court of Tax Appeals for the proper determination of the refundable amount.  It became final and executory on March 10, 2014 and was recorded in the Book of Entries of Judgments.
• January 9, 2015: CIR filed a Manifestation with Motion for Reinstatement of the July 13, 2010 Decision of the Court of Tax Appeals
• CTA En Banc: Petition for Review is denied.
• CIR filed a petition for review on certiorari

ISSUES:
1.    W/N the Certificate of Compliance (COC) issued by the Energy Regulation Commission (ERC) is indispensable in claiming a tax refund or tax credit.
2.    W/N judicial claim was prematurely filed for its failure to exhaust administrative remedies when it failed to submit complete supporting documents for its administrative claim

HELD:  Petition is denied.
1.    Yes.  But, considering that Team Energy's refund claim is premised on Section 108(B)(3) of the 1997 NIRC, in relation to Section 13 of the NPC Charter, as amended by Section 10 of P.D. No. 938, the requirements under the EPIRA are inapplicable. To qualify its electricity sale to NPC as zero-rated, Team Energy needs only to show that it is a VAT-registered entity and that it has complied with the invoicing requirements under Section 108(B)(3) of the 1997 NIRC, in conjunction with Section 4,.108-1 of Revenue Regulations No. 7-95.

• CIR v. Toledo Power Company (G.R. No. 196415, December 02, 2015)
• requirements of the EPIRA must be complied with only if the claim for refund is based on EPIRA
• Section 6 of the EPIRA provides that the sale of generated power by generation companies shall be zero-rated. Section 4 (x) of the same law states that a generation company "refers to any person or entity authorized by the ERC to operate facilities used in the generation of electricity." Corollarily, to be entitled to a refund or credit of unutilized input VAT attributable to the sale of electricity under the EPIRA, a taxpayer must establish: (1) that it is a generation company, and (2) that it derived sales from power generation.

• Team Energy Corporation v. CIR (G.R. Nos. 197663 and 197770, March 14, 2018)
• CIR that Team Energy is not entitled to tax refund or tax credit because it cannot qualify for VAT zero-rating for its failure to submit its ERC Registration and COC required under the EPIRA.

• Effective zero-rating was intended to relieve the exempt entity from being burdened with the indirect tax which is or which will be shifted to it had there been no exemption. In this case, respondent is being exempted from paying VAT on its purchases to relieve NPC of the burden of additional costs that respondent may shift to NPC by adding to the cost of the electricity sold to the latter.

2.    No.  There is no showing that the CIR sent a written notice requiring respondent to submit additional documents — a process that is indispensable in computing the 120+30 day period.

• Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue (GR No. 207112, December 08, 2015)
• To summarize, for the just disposition of the subject controversy, the rule is that from the date an administrative claim for excess unutilized VAT is filed, a taxpayer has thirty (30) days within which to submit the documentary requirements sufficient to support his claim, unless given further extension by the CIR. Then, upon filing by the taxpayer of his complete documents to support his application, or expiration of the period given, the CIR has 120 days within which to decide the claim for tax credit or refund. Should the taxpayer, on the date of his filing, manifest that he no longer wishes to submit any other addition documents to complete his administrative claim, the 120-day period allowed to the CIR begins to run from the date of filing. 

Tax Case Digest: CIR v. Univation Motor Philippines, Inc. , G.R. No. 231581, April 10, 2019

Commissioner Of Internal Revenue  v. Univation Motor Philippines, Inc. (formerly Nissan Motor Philippines, Inc.).
G.R. No. 231581, April 10, 2019.

Second Division
REYES, J. JR., J.:

Lessons Applicable:  2-year prescription period, judicial claim, Factual Finding by the CTA
Laws Applicable: Sections 204 and 229 of NIRC, Section 7 of Republic Act No. 9282, Sec. 8 of RA 1125

FACTS: 

• March 12, 2012: Univation Motor Philippines, Inc. (UMP) filed its administrative claim with the Bureau of Internal Revenue (BIR) explaining that the overpayment of P26,103,898.52 consists of prior year's excess credits in the amount of P15,576,837.00 less Minimum Corporate Income Tax amounting to P2,341,683.48 and creditable withholding taxes accumulated during the four quarters of 2010 in the amount of P12,868,745.00.
• April 12, 2013: Since the BIR has not acted upon the application for tax credit, UMP filed a petition for review with the CTA
• CTA En Banc affirmed the CTA First Division decision partially granting the petition for Review and ordered the CIR to issue a tax credit certificate and denied CIR’s MR.
• CIR filed a Petition for Review on Certiorari.

ISSUES:
1. W/N CTA has prematurely assumed jurisdiction on judicial claim for tax refund or credit without waiting for the decision of BIR.
2. W/N CTA en Banc erred in granting the claim for refund despite its failure to substantiate its claim by sufficient documentary proof.

HELD:
1.    NO. No violation of the doctrine of exhaustion of administrative remedies.  The law only requires that an administrative claim be priorly filed.  As long as the administrative claim and the judicial claim were filed within the two-year prescriptive period, then there was exhaustion of the administrative remedies.

• 2-year prescriptive period to claim a refund actually commences to run, at the earliest, on the date of the filing of the adjusted final tax return because this is where the figures of the gross receipts and deductions have been audited and adjusted, reflective of the results of the operations of a business enterprise. 
• 2-year period to file a claim for refund is reckoned from the date of filing its Final Adjustment Return – April 15, 2011 – both claims were filed on time:
• Administrative claim – March 12, 2012
• Judicial claim – April 12, 2013

•  Under the circumstances, if respondent awaited for the commissioner to act on its administrative claim (before resort to the Court), chances are, the two-year prescriptive period will lapse effectively resulting to the loss of respondent's right to seek judicial recourse and worse, its right to recover the taxes it erroneously paid to the government.

2.    No.  CIR did not even render a Decision denying respondent's administrative claim on the ground that it had failed to submit all the required documents.  Considering that the administrative claim was never acted upon, there was no decision for the CTA to review on appeal per se. However, this does not preclude the CTA from considering evidence that was not presented in the administrative claim with the BIR.

• Pilipinas Total Gas v. CIR (G.R. No. 207112, December 08, 2015): A distinction must be made between administrative cases (1) appealed due to inaction and those (2) dismissed at the administrative level due to the failure of the taxpayer to submit supporting documents. If an administrative claim was dismissed by the CIR due to the taxpayer's failure to submit complete documents despite notice/request, then the judicial claim before the CTA would be dismissible, not for lack of jurisdiction, but for the taxpayer's failure to substantiate the claim at the administrative level.  Failure to submit a document requested by the BIR at the administrative level cannot be cured by filing before the CTA.
• Cases filed in the CTA are litigated de novo as such, respondent "should prove every minute aspect of its case by presenting, formally offering and submitting x x x to the Court of Tax Appeals all evidence x x x required for the successful prosecution of its administrative claim." Consequently, the CTA may give credence to all evidence presented by respondent, including those that may not have been submitted to the CIR as the case is being essentially decided in the first instance.
• The issue of whether or not respondent was able to prove by preponderance of evidence its entitlement to the issuance of a Tax Credit certificate, the same is a factual matter. "It is doctrinal that the Court will not lightly set aside the conclusions reached by the CTA which, by the very nature of its function of being dedicated exclusively to the resolution of tax problems, has developed an expertise on the subject, unless there has been an abuse or improvident exercise of authority."

• Jurisprudence laid down the basic requirements in order for a taxpayer to claim tax credit or refund of creditable withholding tax, thus: (1) The claim must be filed with the CIR within the two-year period from the date of payment of the tax, as prescribed under Section 229 of the NIRC of 1997; (2) 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; and (3) It must be shown on the return of the recipient that the income received was declared as part of the gross income.  The second and third requirements are found under Section 2.58.3(B) of Revenue Regulation No. 2-98, as amended.
• CTA En Banc correctly appreciated that there were certain income payments which, although respondent expected to receive in 2006, 2008 and 2009, were only remitted to it in 2010.    The delay in collection of certain income payments caused the timing difference between the actual reporting of the income by respondent and the actual withholding of the corresponding creditable income tax by its customers.  What is important is that the creditable withholding taxes corresponding to the related income in the respondent's books for CY's 2006, 2008 and 2009 were not yet claimed as income tax credits in respondent's annual ITRs corresponding to the said years.  It presented Schedule/Summary of Creditable Taxes Withheld for the year 2010 and the related Certificates of Creditable Taxes Withheld at Source (BIR form No. 2307) duly issued to it by various withholding agents for the year 2010xxx.  Court was able to trace the income payments related to the substantiated CWT of P12,868,745.87 (save for the amount of P139,127.97 CWT) to UMP’s General Ledger (GL) for CY 2010, 2009, 2008 and 2006.

Tax Case Digest: CIR v. Aichi Forging Company (2010)

FIRST DIVISION
CIR v. Aichi Forging Company (2010)
G.R. No. 184823  October 6, 2010
DEL CASTILLO, J.

Lessons Applicable: Legal Period: 1 year = 12 months, Exhaust Administrative Claim Before Judicial Claim, Lex Posterioni Derogati Priori

Laws Applicable:

FACTS:

• Aichi forging, a VAT entity filed a claim for refund of input  VAT for its zero-rated sales with the Dept. of Finance One-Stop Inter-Agency Tax Credit and Duty Drawback Center on Sept 30, 2004.
• On the same date, it filed a Petition for Review with the CTA. 
• CTA partially granted the refund by reducing the leaseless claims. 
• CIR filed a Motion for Reconsideration insisting that they were filed beyond the prescriptive period in accordance to Art. 13 that: 1 year = 365 days and that filing an administrative claim is a condition precedent before a judicial claim can be filed with the CTA.
• CTA and CTA En Banc denied petition.

ISSUE:
1. W/N the claim was filed with the prescriptive period of 2 year provided under Sec. 112 (A) NIRC
2. W/N filing an administrative claim is a condition precedent to a judicial claim for refund.

HELD:
1. Yes. Sec. 204 (c) and 229 are applied only in instances of erroneous payment and illegal collection.  Sec. 112 (A) of NIRC applies here.  Sec. 31 Chapter VIII Book I of the Administrative Code of 1987 being the more recent law governing legal period applies making 1 year = 12 months.  The principle of Lex Posterioni Derogati Priori applies.  Thus, since it is filed on exactly Sept. 30, 2004 filing is timely.

2. Yes. Sec. 112 (D) of the NIRC clearly provides that the CIR has 120 days from date of the submission of the complete documents in support of the application within which to grant or deny the claim.  In case of full or partial denial by the CIR, the recourse is to appeal before the CTA within 30 days from receipt of the decision of the CIR.  However, if after the 120-day period the CIR fails to act on the application for tax refund, the remedy is to appeal the inaction of the CIR to the CTA within 30 days.