Mindanao II Geothernmal Partnership vs. Commissioner of Internal Revenue

DECISION

PALANCA-ENRIQUEZ, J.:

The 30-day period within which to file an appeal with the CTA is jurisdictional and failure to comply therewith would bar the appeal and mJv C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

2 deprive the CTA of its jurisdiction. Such period is not merely directory but mandatory and it is beyond the power of the courts to extend the same (Rizal Commercial Banking Corporation v. Commissioner of Internal Revenue, 522 SCRA 144). This rule applies to cases of refund or issuance of tax credit under Section 112 of the NIRC of 1997, as amended, where the taxpayer may, within 30 days from receipt of the decision denying the claim or after the expiration of the 120-day period, appeal the decision or unacted claim with the CTA. Likewise, the premature filing of the claim/credit of input VAT before the CTA warrants a dismissal, inasmuch as no jurisdiction was acquired by the CT A (Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. , 632 SCRA 422).

THE CASE

This is a Petition for Review filed by Mindanao II Geothermal Partnership (hereafter "petitioner") praying for the refund or issuance of a tax credit certificate (TCC) representing its creditable input value-added taxes (hereafter "input VAT") paid and attributed to its effectively zero- rated sales for taxable year 2007.

THE PARTIES

Petitioner is a partnership duly registered with the Securities and w C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

3 Exchange Commission, with principal address at Barangay Ilomavis, Kidapawan City, Cotabato.

Respondent, on the other hand,

IS

the duly appointed Commissioner of Internal Revenue, vested with authority to act as such, including, among others, the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes. Summons, pleadings and other legal processes may be served at the BIR National Office Building, BIR Road, Diliman, Quezon City.

THE FACTS

The facts of the case, as culled from the records, are as follows: On March 11, 1997, petitioner entered into a Build-Operate- Transfer Contract with the Philippine National Oil Company-Energy Development Corporation(PNOC-EDC) for the finance, engineering, supply, installation, testing, commissioning, operation and maintenance of a 48.25 megawatt geothermal power plant, provided that PNOC-EDC shall supply and deliver steam to petitioner at no cost. In turn, petitioner shall convert the steam into electric capacity and energy for PNOC-EDC and shall deliver the same to the National Power Corporation (NPC) for and in behalf ofPNOC-EDC.

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

4 As a power generation company utilizing geothermal energy and steam, petitioner's sale of generated power and delivery of electric capacity and energy to NPC for and in behalf of PNOC-EDC, under the BOT contract, is VAT zero-rated, pursuant to Section 1 08(B) of the NIRC of 1997, as amended by RA 933 7.

As a result of said transactions, petitioner allegedly incurred input VAT, which are attributed and allocated to effectively zero-rated sales in the amount ofP8,255,554.02 for taxable year 2007. On the following dates, petitioner filed with the BIR its Original Quarterly VAT Returns for taxable year 2007:

Taxable Quarter

Date of Filing of Original Return

1st April 25, 2007 2nd July 25, 2007 3rd October 24, 2007 4th January 28, 2008 On March 30, 2009, petitioner filed its administrative claim for refund of unutilized input VAT for taxable year 2007, together with the supporting documents.

Due to respondent's inaction, petitioner filed with the CTA the following Petitions for Review:

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

5 CTA Case No.

Quarters

Unutilized Input

Date of Filing of

VAT

Petition for Review

7899 1 st P4,048,0 11.48 March 31, 2009 7942 2 nd p 1,484,924.01 June 30, 2009 7960 3ro & 4th P2, 722,618.53 August 12, 2009 On August 12, 2009, petitioner filed a "Motion to Consolidate C.T.A. Case No. 7960 with C.T.A. Case Nos. 7899 and 7942, which the Court granted.

Thus, C.T.A. Case Nos. 7960 and 7942 were consolidated with C.T.A. Case No. 7899, the case bearing the lowest docket number.

In C.T.A. CASE No. 7899, respondent CIR, in her answer, alleged by way of special and affirmative defenses: "6.

The amount of P4,048,011.48 being claimed by petitioner as alleged unutilized input VAT on domestic purchases of capital goods other than capital and services for the first quarter of the year 2007 is not properly documented. 7.

Petitioner must prove that it has complied with the provisions of Section 112(A) and (C) of the NIRC of 1997, as amended, on the prescriptive period for claims for VAT refund/credit.

8.

Proof of compliance with the prescribed checklist of requirements to be submitted involving claims for VAT refund pursuant to RMO No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative claim for refund, the administrative claim thereof being mere pro-forma.

Furthermore, Section 112(D) of the NIRC of 1997, as amended, requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period shall apply, an~re the C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

taxpayer could avail of judicial remedies as provided for in the law.

Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for review. 9.

Petitioner must prove that it has complied with the invoicing requirements mentioned in Sections 110 and 113 of the 1997 Tax Code, as amended, in relation to the provisions ofRR No. 7-95.

10.

In an action for tax refund/credit, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit (Asia Petroleum Co. v. Llanes, 49 Phil 466 cited in Collector of Internal Revenue v. Manila Jockey Club, Inc., 98 Phil 670). 11 .

Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such; they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121 ).

12.

The CTA has no jurisdiction to entertain the instant petition for review for failure on the part of the petitioner to comply with the provisions of Section 112 (D) of the 1997 Tax Code which provides, thus:

"SEC. 112. Refunds or Tax Credits of Input Tax. -

XXX

XXX

(D)Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty ( 120) days from the date of submission of complete documents in support of the ~ 6 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." 13.

As stated in the petition, petitioner filed the administrative claim for refund with respondent on March 30, 2009. Subsequently, on March 31, 2009 or only one day thereafter, the instant petition was filed. Obviously the 120 days given to respondent to decide on the claim had not yet lapsed when the petition was filed.

The petition was prematurely filed, hence, it must be dismissed for lack of jurisdiction. "

7 On the other hand, in C.T.A. CASE No. 7942, respondent CIR, in her answer, alleged by way of special and affirmative defenses: "6.

The amount of P 1,484,924.01 being claimed by petitioner as alleged unutilized input VAT on domestic purchases of capital goods other than capital and services for the 2nd quarter of the year 2007 is not properly documented. 7.

Petitioner must prove that it has complied with the provisions of Section 112(A) and (C) of the NIRC of 1997, as amended, on the prescriptive period for claims for VAT refund/credit.

8.

Proof of compliance with the prescribed checklist of requirements to be submitted involving claims for VAT refund pursuant to RMO No. 53-98, otherwise there would be no sufficient compliance with the filing of admw tive C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

claim for refund, the administrative claim thereof being mere pro-forma.

Furthermore, Section 112(D) of the NIRC of 1997, as amended, requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law.

Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for review. 9.

Petitioner must likewise prove that it has complied with the invoicing requirements mentioned in Sections 110 and 113 of the 1997 Tax Code, as amended, in relation to the provisions ofRR No. 7-95.

10.

In an action for tax refund/credit, the onus probandi is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit (Asia Petroleum Co. v. Llanes, 49 Phil 466 cited in Collector of Internal Revenue v. Manila Jockey Club, Inc., 98 Phil 670). 11.

Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such; they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121 ).

12.

The CT A has no jurisdiction to entertain the instant petition for review for failure on the part of the petitioner to comply with the provisions of Section 112 (C) of the 1997 Tax Code which provides, thus:

"SEC. 112. Refunds or Tax Credits of Input Tax. -

XXX

XXX

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper casw e 8 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." 13.

As stated in the petition, petitioner filed the administrative claim for refund with respondent on March 30, 2009. Subsequently, on June 30, 2009 or only ninety

(90) days thereafter, the instant petition was filed. Obviously the 120 days given to respondent to decide on the claim had not yet lapsed when the petition was filed. The petition was prematurely filed, hence, it must be dismissed for lack of jurisdiction."

9 While in C.T.A. CASE No. 7960, respondent CIR, in her answer, alleged by way of special and affirmative defenses: "5.

The amount of P2,722,618.53 being claimed by petitioner as alleged excess and unutilized creditable input taxes for the 3rct and 4th quarters of the year 2007 was not properly documented.

6.

In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund/credit.

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

7.

To support its claim, it is imperative for petitioner to prove the following, viz:

a. The registration requirements of a value-added taxpayer in compliance with Section 6(a) and (b) of Revenue Regulations No. 6-97 in relation to Section 4.107-a(a) ofRR No. 7-95, and Section 236 of the NIRC of 1997;

b. The invoicing and accounting requirements for VAT -registered persons, as well as the filing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the NIRC of 1997;

c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claims for VAT refund in pursuance to RMO No. 53-98, otherwise there would be no sufficient compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim.

It is worthy of emphasis that Section 112(D) of the NIRC of 1997 requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for revtew;

d. That the input taxes ofP2,722,618.53 allegedly paid by petitioner on its domestic purchases of non- capital goods and services, services rendered by non-residents and importation of non-capital goods for the third and fourth quarters of taxable year 2007 were attributable to its zero-rated sales and such have not been applied against any ~t tax 10 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

and were not carried over in the succeeding taxable quarter or quarters;

e. That petitioner's administrative and judicial claims for tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Sections 112(A) and (D);

f. That petitioner's domestic purchases of goods and services were made in the course of its trade or business, properly supported by VAT invoices and/or official receipts and other documents, such as subsidiary purchase journal, showing that it actually paid VAT in accordance with Sections 110(A)(2) and 113 of the NIRC of 1997, and in pursuance to Section 4.104-5(a) and (b) ofRR No. 7-95· '

g. The requirements as enumerated under Section 4.104-2 ofRR No. 7-95;

8.

The petition for review was prematurely filed. Section 112(D) of the NIRC of 1997 categorically provides, thus: "SEC. 112. Refunds or Tax Credits of Input Tax. -

XXX

XXX

(C)Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

~ 11 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." There was likewise no proof of compliance with the prescribed checklist of requirements to be submitted involving a claim for VAT refund pursuant to RMO No. 53- 98, hence, there was no sufficient compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with the provision of Section 229 of the NIRC of 1997. It is worthy of emphasis that Section 112(D) of the NIRC of 1997 requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Since petitioner did not submit complete documents in support of its administrative claim for refund as indicated under Section 112(D) of the NIRC of 1997, the 120-day period starts to run on 30 March 2009, the date when it filed its administrative claim for refund. The said period is yet to expire on 28 July 2009. Hence, the 30-day period within which to file the petition for review is yet to expire on 27 August 2009. This being so, the Second Division had no jurisdiction to act on the instant petition for review. Moreover, petitioner's failure to submit documents supporting its claim for refund makes its administrative claim for refund pro-forma. This pro-forma administrative claim for refund should have been filed prior to the institution of a judicial claim for refund. Thus, without a validly and duly filed administrative claim for refund, the Second Divison is without jurisdiction to entertain the Petition fowview. 12 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

Petitioner's failure to comply with a condition precedent prior to the institution of its petition for review makes it dismissible for absence of jurisdiction on the part of the Honorable Court.

13 9.

Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121)." Petitioner presented Michael L. Aguirre and Daisy C. Abenes, as witnesses, and documentary evidence, which were admitted by the Court in its Resolutions dated May 18, 2011 and July 22, 2011. On the other hand, respondent CIR was declared to have waived her right to present evidence for the repeated failure of respondent CIR' s counsel to appear during the scheduled initial presentation of the evidence for respondent, despite notice. Thereafter, both parties were ordered to file their simultaneous memoranda, within thirty (30) days from notice. Afterwhich, the case shall be deemed submitted for decision. On September 22, 2011, petitioner filed its "Memorandum". On the other hand, respondent failed to file her memorandum despite notice; hence, on October 25,2011, the case was deemed submitted for decision. w C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

ISSUE

14 As stipulated by the parties, the following are the issues for this Court's consideration:

I

WHETHER OR NOT THIS HONORABLE COURT HAS

JURISDICTION OVER THE PRESENT CASE.

II

WHETHER OR NOT PETITIONER'S ADMINISTRATIVE

AND JUDICIAL CLAIMS WERE TIMELY FILED.

III

WHETHER

OR

NOT

PETITIONER'S

SALE

OF

GENERATED POWER BY GEOTHERMAL ENERGY

QUALIFIES AS VAT ZERO-RATED UNDER RA NO. 9136, THEN AND EFFECTIVE NOVEMBER 1, 2005, UNDER THE 1997 TAX CODE, AS AMENDED BY RA 9337.

IV

WHETHER OR NOT THE AMOUNT OF P8,255,554.02

REPRESENTS THE ACCUMULATED EXCESS AND

UNUTILIZED CREDITABLE INPUT TAXES PAID BY

PETITIONER WITHIN THE YEAR 2007 DIRECTLY

ATTRIBUTABLE TO ITS PRIMARY SOURCE OF

REVENUE WHICH IS VAT ZERO-RATED.

v

WHETHER OR NOT PETITIONER'S EXCESS AND

UNUTILIZED INPUT TAXES FOR YEAR 2007 IS DULY

SUPPORTED BY PERTINENT DOCUMENTS, WH

AS

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

VAT -COMPLIANT

RECEIPTS.

INVOICES

VI

AND

OFFICIAL

WHETHER OR NOT THE ACCUMULATED EXCESS

AND

UNUTILIZED

INPUT

TAXES

PAID

BY

PETITIONER WITHIN THE YEAR 2007 IN THE TOTAL

AMOUNT OF P8,255,554.02 REMAINS UNUTILIZED AND/OR UNAPPLIED.

Principal Issue

15 The issue to be resolved is whether or not petitioner is entitled to a refund or issuance of a TCC representing its excess and unutilized input VAT for the four quarters of taxable year 2007 in the aggregate amount ofP8,255,544.02.

THE COURT'S RULING

The petition is partly meritorious.

Before resolving the principal issue raised in this petition, the Court deems it necessary to first determine whether the present Petitions for Review were timely filed.

In this regard, Section 112 of the NIRC of 1997, as amended, 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 u C.T.A. CASE NOS. 7899,7942 & 7960

DECISION

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 1 06(A)(2)(a)(l ), (2) and (b) and Section 1 08(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: Provided, finally, that for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales.

XXX

XXX

(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty

(30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty- [t} 16 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

day period, appeal the decision or the unacted claim with the Court of Tax Appeals."

17 In the recent case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc., supra, the Supreme Court ruled that the second paragraph of Section 112 (C) of the NIRC of 1997, as amended, envisions two scenarios: ( 1) when a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CT A. Applying the above ruling to this case, records show that on March 30, 2009, petitioner filed with the BIR an administrative claim for refund for taxable year 2007, which is within the two year prescriptive period from the close of the taxable quarter when the sales were made, pursuant to Section 112 (A) of the NIRC of 1997, as amended. Counting 120 days from March 30, 2009, pursuant to Section 112 (C) of the NIRC of 1997, as amended, the CIR had until July 28, 2009 to decide petitioner's administrative claim.

Since the CIR failed to act on petitioner's administrative claim for refund, pursuant to Section 112 (C) of the NIRC of 1997, as amended, the taxpayer had 30 days from July 29, 2009, or until August 27, 2009 to appeal the inaction to the CTA.

IJi

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

C.T.A. Case Nos. 7899 and 7942 18 As regards C.T.A.

Case No.

7899, records show that petitioner filed the Petition for Review on March 31, 2009, barely 1 day after filing its application for refund with respondent CIR. As to C.T.A. Case No. 7942, records show that petitioner filed the Petition for Review on June 30, 2009, 28 days before the lapse of the 120-day period for respondent CIR to decide the claim. Clearly, both Petitions for Review, docketed as C.T.A. Case Nos. 7899 and 7942, were prematurely filed, as petitioner did not wait for the lapse of the 120 days before filing its appeal with the CT A, in violation of Section 112(C) of the NIRC of 1997, as amended. Pursuant to the Aichi ruling, the premature filing of petitioner's judicial claims for refund/credit of input VAT with this Court warrants a dismissal, inasmuch as no jurisdiction was acquired by this Court. C.T.A. Case No. 7960 As regards C.T.A. Case No. 7960, records reveal that petitioner filed the Petition for Review on August 12, 2009. Since petitioner had until August 27, 2009 within which to file its judicial claim for refund, the claims for the third and fourth quarters of 2007, subject of C.T.A. case No. 7960, were therefore, filed on time.

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

19 Pursuant to Section 112 (A) of the NIRC of 1997, as amended, in order to be entitled to a refund or issuance of a TCC of input VAT paid attributable to zero-rated or effectively zero-rated sales, the following requisites must be complied with:

1) there must be zero-rated or effectively zero-rated sales; 2) that input taxes were incurred or paid; 3) that such input taxes are attributable to zero-rated sales or effectively zero-rated sales;

4) that the input taxes were not applied against any output VAT liability; and 5) that the claim for refund was filed within the two-year prescriptive period.

Thus, it is imperative that petitioner should be able to prove the above prescribed requisites.

First Requisite:

There must be zero-rated or effectively zero rated sales As regards the first requisite, petitioner contends that its sales of electricity as a power generation company, qualify for VAT zero-rating, under Section 108(B)(7) of the NIRC of 1997, as amended, which provides:

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

"SEC. 108. Value-added Tax on Sale of Services and Use

or Lease of Properties--

XXX

XXX

(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:

XXX

XXX

(7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels.

xxx xxx."

20 Corollary thereto, Section 4.108-5 (C) (7) of Revenue Regulations No. 16-2005 which implements the said provision, provides: "SEC. 4.108-5. Zero-Rated Sales of Service--

XXX

XXX

(C)

Transactions Subject to Zero Percent (0%) VAT Rate-

The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate:

XXX

XXX

(7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels: Provided, however, (919[ C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

that zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power. xxx xxx" 21 To qualify for VAT zero-rating, petitioner must therefore, be able to establish that: (1) it is a VAT-registered company; and (2) its sale of power is generated through renewable sources of energy. After a careful review and examination of the evidence on record, the Court finds that the above prescribed requisites have been duly established by petitioner.

As to the first requisite, records show that petitioner 1s duly registered with the BIR with Tax Identification No. 004-766-953 as a VAT entity.

As regards the second requisite, records show that petitioner owns and operates a 48.25-megawatt geothermal power plant facility, which has been accredited by the Department of Energy, as a Block Power Production Facility (Exhibit "D") and a Certificate of Compliance No. 03-10-GXT25-0025, dated October 15, 2003.

As a VAT-registered

power generation company utilizing geothermal energy, petitioner's sale of generated power and delivery of electric capacity and energy to the NPC for and in behalf of PNOC-EDC, pursuant to the BOT Contract, is ~ C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

22 VAT zero-rated in the amount ofP175,965,639.50 which was declared in its Quarterly VAT Returns for the same period, as follows:

Zero-Rated

Exhibit

Year 2007

Sales/Receipts

3rd Quarter 88,706,977.90 4th Quarter 87,258,661.60 p 175,965,639.50 Thus, petitioner's sales of electricity as a power generation company amounting to P175,965,639.50 qualify for VAT zero-rating.

Second and Third Requisites:

Input taxes were incurred or paid and that such input taxes are attributable to zero-rated sales or e([ectively zero-rated sales Having resolved that petitioner's gross receipts from power generation services rendered to NPC for the third and fourth quarters of 2007 in the amount ofP175,965,639.50 qualify for VAT zero-rating, We now proceed to determine the amount of input VAT attributable thereto. Section 113(A) and (B) of the NIRC of 1997, as amended by RA 9337, provides:

"SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.

(A) Invoicing Requirements. -A VAT-registered person shall issue:

(1) A VAT invoice for every sale, barter or exchange of goods or properties; and C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. 23 (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN);

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That:

(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from value-added tax, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt;

(c) If the sale is subject to zero percent (0%) value- added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt;

(d) Ifthe sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT -exempt, the invoice or receipt shall clearly indicate the breakdown of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: "Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero- rated components of the sale.

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and ( 4) In the case of sales in the amount of one thousand pesos (Pl ,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and taxpayer identification number (TIN) of the purchaser, customer or client."

Mt-1

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

24 Pursuant to the above provisiOn, purchases of goods must be supported by VAT invoices, while purchases of services must be supported by VAT official receipts. In addition, the VAT invoice or official receipt must contain the following information: (1) the seller is a VAT -registered person, followed by his taxpayer's identification number;

(2) the total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax; provided that, the amount of the tax shall be shown as a separate item in the invoice or receipt; (3) the date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and ( 4) in the case of sales in the amount of one thousand pesos (P 1 ,000) or more, where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client.

In support of its claimed unutilized input taxes reflected in its Quarterly VAT Returns for the third and fourth quarters of 2007, in the amount of P2,722,618.53, petitioner presented various suppliers' invoices, official receipts, Bureau of Customs (BOC) Import Entries and Internal Revenue Declarations (IEIRDs), BOC and bank official receipts (Exhibit "UU" as summarized in Exhibit "TT").

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

25 Upon a careful perusal of said documents, the Court finds that only the invoice issued by 128 Convenient Store (Exhibit S.15) and official receipt issued by SGV& Co. (Exhibit T60) amounting to P6,634.29, complied with the requirements prescribed in Section 113 (A) and (B) of the NIRC of 1997, as amended by RA 9337. The rest of the input VAT claims for the third and fourth quarters of 2007 are hereby disallowed for the following reasons:

Exh.

Inv/OR #

Inv/OR Date

Supplier

Input VAT

1) Domestic purchases of goods and services supported by an invoice or receipt_ respectively, outside of the Jd and .fh quarters of 2007 S.1 0007 S.4 3556 S.7 39052 S.26A 39161 T.49 8156 T.52 0251 06/30/07 05/31/07 6/15/07 06/28/07 06/22/07 04/27/07

Austin Herrick

Mabuhay Vinyl Corp

Nalco Philippines, Inc Nalco Philippines, Inc

Mabuhay Vinyl Corp

Marubeni Energy Services

p 237, 199.91 11,151.99 17,117.93 17,249.39 11,131.53 403,471.37 2) Purchase of goods or services supported by invoice or receipt_ respectively, with company TIN and VAT component not indicated therein S.5 0258 S.14 1904 S.16 1915 S.17 8759 S.18 S.24 S.46 S.48 S.50 T.3 T.7 T.25 T.44 T.46 T.50 19408 0261 14530 2151 0263 14591 0265 0271 20296 2227 0272 07/10/07 08/02/07 08/05/07 08/02/07 08/28/07 08/08/07 09/28/07 09/20/07 09/07/07 10/26/07 10/08/07 11/12/07 12/12/07 12/19/07 12/10/07

Marubeni Energy Services

Breadcart Bakeshop

Breadcart Bakeshop

Dawn's Cafe

House of Travel

Marubeni Energy Services

Jetour Philippines, Inc.

Julieta Marco

Marubeni Energy Services

Jetour Philippines, Inc.

Marubeni Energy Services

Marubeni Energy Services

House of Travel

Julieta Marco

Marubeni Energy Services

p 221,946.10 147.30 227.68 160.71 674.00 253,199.65 1,281.00 60.00 321,668.93 1,317.00 259,644.13 337,940.92 1,126.00 4,260.00 420,040.02 3) Purchase of services and goods supported by receipt or in voice, respectively, not in the name of the company S.8 S.54 T.30 184830 229594 273288 07/05/07 09/05/07 11/05/07

PLOT

PLOT

PLOT

p 217.64 217.64 217.64 4) Purchase of goods or services supported by invoice or receipt_ respectively, VAT component not indicated therein S.10 0441 07/13/07

Plumas Transportation Corp

P

9,107.14 C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

S.20 41096 08/04/07 S.29 0450 08/10/07 S.36 25732 08/03/07 S.38 26204 08/31/07

SAO

388232 11/28/07 S.42 1265 09/28/07 S.44 5126 09/25/07 S.52 0326 09/28/07 S.56 0470 09/07/07 S.60 26201 09/07/07 S.62 26517 09/28/07 T.1 55033 10/05/07 T.13B 495713 10/10/07 T.32 0553 11/16/07 T.36 27179 11/09/07 T.38 27623 11/29/07

TAO

66208 12/28/07 T.58 0562 12/07/07 T.62 27624 12/07/07 26

Julie's Bakeshoppe

26.25

Plumas Transportation Corp

9,107.14

Triple Eight Int'l Travel

2,538.00

Triple Eight Int'l Travel

1,223.00 Universal Holidays, Inc 298.92

CIFRA Industrial Services

10,259.64 Exhibits Asia, inc.

5,357.14

Peamkonstruct Builders

99,399.84

Plumas Transportation Corp

9,107.14

Triple Eight Int'l Travel

2,538.00

Triple Eight Int'l Travel

1,281.00 Ansuico, inc.

13,200.00

TNT Express

795.39

Plumas Transportation Corp

9,767.14

Triple Eight Int'l Travel

642.00

Triple Eight Int'l Travel

656.00 General Electric Philippines, Inc.

46,714.28

Plumas Transportation Corp

9,107.14

Triple Eight Int'l Travel

3,274.00 5) Purchase of goods or services supported by invoice or receipt_ respective!~ with company name, TIN and VAT component not indicated therein S.12 0047 07/23/07 S.32 0019 08/23/07 S.58 0031 09/24/07 T.11 0002 10/23/07 T.34 0064 11/21/07 Smart Communications Inc.

p Smart Communications Inc.

Smart Communications Inc.

Smart Communications Inc.

Smart Communications Inc.

147.48 156.40 468.55 328.64 473.59 6) Purchase of goods or services supported by invoice or receipt_ respective!~ wtth company TIN not indicated therein S.23 0003617 T.6A 0003730 T.6B 0003664 T.27 0021128 07/09/07 08/23/07 07/30/07 10/16/07

Mabuhay Vinyl Corp

Mabuhay Vinyl Corp

Mabuhay Vinyl Corp

Maxandrea Hotel

P11,281.56 P11,281.56 P11,377.04 225.00 7) Purchase of goods not supported by an invoice and purchases of services not supported by receipts S.21 Kidapawan Mega center Corp

P

56.33 S.27

PLOT

217.64 S.31

Showa Manpower Services

267.86 S.34

Survive Marketing

65.09 S.35

Survive Marketing

29.63 T.9

PLOT

217.64 T.56

PLOT

217.64

Fourth Requisite:

Input taxes were not applied against any output VAT liability As regards the fourth requisite, a perusal of petitioner's Quarterly VAT Returns for the four quarters of 2007 {Exhibits "F ", "G ", "H" and "!"), shows that it has no output tax liability against which the substantiated w C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

27 input VAT of P6,634.29 may be applied or credited. The Court further finds that the input VAT of P6,634.29 was not carried to the succeeding first quarter of2008 {Exhibit "J ') .

In sum, the Court finds that petitioner is entitled to a refund or issuance of a TCC, representing unutilized input VAT paid on its domestic purchases of goods and services attributable to zero-rated sales for the third and fourth quarters of 2007, but only in the reduced amount ofP6,634.29.

WHEREFORE, premises considered:

1) As regards C.T.A. Case No. 7899, the Petition for Review is hereby DISMISSED for having been prematurely filed; 2) As regards C.T.A. Case No. 7942, the Petition for Review is hereby DISMISSED for having been prematurely filed; and 3) As regards C.T.A. Case No. 7960, the Petition for Review is hereby PARTLY GRANTED. Accordingly, respondent CIR is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of SIX THOUSAND SIX HUNDRED

THIRTY FOUR PESOS and

29/100 (P6,634.29), representing unutilized input VAT paid on its domestic ~ ' .

C.T.A. CASE NOS. 7899, 7942 & 7960

DECISION

28 purchases of goods and services which are attributable to zero-rated sales for the third and fourth quarters of calendar year 2007.

~~~~UEZ

Associate Justice

~~~~,/~ AMELIA R. COTANGCO-MANALASTAS

Associate Justice

ATTESTATION

I attest that the conclusions in the above Decisio were reached in consultation before the case was assigned to the writen of the opinion of the Court's Division.

LO

c ust ce Chairperso , Third Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. \_~ t;,Q~ ERNESTO D. ACOSTA

Presiding Justice

REPUBLIC OF THE PHILIPPINES

Court ofT ax Appeals

QUEZON CITY

Third Division

MINDANAO II GEOTHERMAL

PARTNERSHIP, Petitioner, -versus-

COMMISSIONER OF INTERNAL

REVENUE, Respondent.

X----------------------------------------------X

MINDANAO II GEOTHERMAL

PARTNERSHIP, Petitioner, -versus-

COMMISSIONER OF INTERNAL

REVENUE, Respondent.

X-----------------------------------------------X

MINDANAO II GEOTHERMAL

PARTNERSHIP, Petitioner,

Members:

BAUTISTA, Chairperson -versus- P ALANCA-ENRIQUEZ, and COTANGCO-MANALASTAS,Jl

COMMISSIONER OF INTERNAL

REVENUE, Respondent.

Promulgated:

AU6 1 2012

X-------------------------------------------------------------------------------------------------------------X

I

CONCURRING AND DISSENTING OPINION

CT A CASE NOS. 7899, 7942 & 7960

Page 3 of 4

Where there has been justifiable reliance on Our decisions, and those who have so relied may be substantially harmed if reh·oactive effect is given, where the purpose of the new rule can be adequately effectuated without giving it reh·oaclive operation, or where retroactive operation might greatly burden the administration of justice, it is Our duty to apply the new rule prospectively;3 for it would be the height of injustice to impose a new ruling, on the basis of the so-called "adherence to precedence."

For emphasis, the latter issued doch·ine is clearly promulgated after the taxpayer-claimant had faithfully relied and complied with the Court's former ruling. And even the taxpayer-claimant itself could not have foreseen that after it had filed its claims before the administrative and judicial fora, a subsequent ruling, either modifying or overruling a previous one, would be issued that would put to naught its claims.

Prior determirtations deemed to have finality and acted upon accordingly, demands examination. The effect of a subsequent ruling as to invalidity may have to be considered in various aspects. It may have consequences which cannot just be ignored.4 3 Magtoto v. Manguera, el nl., G.R. Nos. L-37201-02, L-37424, and L-38929, March 3, 1975, 63 SCRA 4, Concurring Opinion penned by Justice Felix Q. Antonio, with Justices Antonio P. Barreda and Cecilia Muf\oz-Palma, concurring.

4 AlbinoS. Co v. Court of Appeals, et nl., G.R. No. 100776, October 28, 1993, 277 SCRA 444, citing Clricol Corlllhj ~ om;'"'" o;,,;" "· B"xta """' .,,,, 308 us 3n, 374 /1940/.

I

CONCURRING AND DISSENTING OPINION

cr A CASE NOS. 7899, 7942 & 7960

Page 2 of 4

CONCURRING AND DISSENTING OPINION

BAUTISTA,[.:

While I concur with the order of refund or issuance of a tax credit certificate insofar as the Petition for Review, docketed as CTA Case No. 7960 is concerned; I must, nevertheless, point out my non-concurrence with the findings that the Petitions for Review, docketed as CTA Case No. 7899 and CTA Case No. 7942 were prematurely filed, for the factual milieu present in the case at bench must be taken into consideration - the then prevailing jurisprudence at the time the claim was lodge in this Court.

The Court must note that when petitioner filed its claim for refund/ tax credit with respondent on March 30, 2009, and the consequent Petitions for Review on the following dates: March 31, 2009, covering the first (l 5t) quarter of the taxable year 2007, docketed as CTA Case No. 7899; June 30, 2009, covering the second (2 11d) quarter of the taxable year 2007, docketed as CTA Case No. 7942; and August 12, 2009, covering the third (3rd) and fourth (4th) quarters of the taxable year 2007, docketed as CTA Case No. 7960, the then controlling doch·ine in this forum is that of the case of Commissioner of Internal Re11enue 11. Mimnt Przgbilrzo Corporrztion [Formerly Southern Energy Quezon, Inc.).l It was merely unfortunate that during the pendency of the case at bench that the Supreme Court issued the case of Commissioner of Internal Re11enue 11. Aichi Forging Comprzny of Asirz, Inc.2 ' G.R. No. 172129, September 12, 2008, 565 SCRA 154. 2 G.R. No. 184823, October 6, 2010.

(

CONCURRING AND DISSENTING OPINION

Cf A CASE NOS. 7899, 7942 & 7960

Page4of4

Applying the above disquisitions, petitioner had until two (2) years from the close of the relevant taxable quarters of the year 2007, within which to file both its adminish·ative and judicial claims.

With this, I find the adminish·ative and judicial claims filed within the prescribed period.

Accordingly, I vote that the Petitions for Review, docketed as CTA Case No. 7899 and CTA Case No. 7942 be GRANTED, subject to the verification of the subject claims.