CIR vs.

AICHI FORGING COMPANY OF ASIA

GR No. 184823

October 6, 2010

FACTS

 AICHI is a corporation engaged in the manufacturing and processing of steel and its by-products and is registered with
the BIR as a VAT entity.

 ON SEPTEMBER 30, 2004 (remember this date kay important), AICHI filed a claim for tax refund/credit of Input VAT
for the period July 1,2002 – September 30, 2002 with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback
Center of DOF. (administrative claim)

 On even date (SEPTEMBER 30, 2004), AICHI filed a petition for review with the CTA for refund/credit of the same Input
VAT. It argued that for the period (July 1, 2002-September 2, 2002) it generated and recorded zero-rated sales which
was paid and for the said period, it incurred and paid Input VAT P3,912,088.14 from purchases and importation
attributable to its zero-rated sales and that in its application for refund/credit filed, it only claimed the amount
P3,891,123.82. (judicial claim)

CTA Division:

- Partially granted AICHI’s claim for refund/credit but reduced its amount to P3,239,119.25

- The CTA Division found that the first 3 requirements for Tax Credits of Input Tax were complied with by AICHI however
as to the requirement that the creditable input tax due or paid must be attributable to such zero-rated sales to the
extent that such input tax has not been applied against the output tax have not been complied by AICHI since there are
some documents and claims of petitioner that are baseless and have not been substantiated.

 So as result of the CTA decision, BIR filed a motion for reconsideration insisting that administrative and judicial claims
were filed BEYOND THE 2-YEAR PERIOD to claim a tax refund as provided under Sec. 112 (A) and 229 of NIRC.

o Since 2004 was a LEAP YEAR, the filing for tax refund on September 30, 2004 was beyond the 2-year period,
which expired on September 29, 2004 (BASICALLY, ana si BIR nga dapat ang prescriptive period nga 2
years to claim the refund kay mu-end siya after Sept. 29 kay LEAP YEAR man following Art. 13 of the
Civil Code nga 1 year = 365 days)

 BIR also argued that the simultaneous filing of the administrative and judicial claims contravenes Sec. 112 and 229 of
NIRC since prior filing of an administrative complaint is a “condition precedent” before a judicial claim can be filed.

CTA En Banc:

- Affirmed the CTA Division ruling allowing partial tax refund in favor of AICHI

- Applying Sec. 114 (A) in NIRC, a taxpayer has twenty five (25) days from the close of each
taxable quarter within which to file a quarterly return of the amount of his gross sales or receipts.
In the case at bar, the taxable quarter involved was for the period of July 1, 2002 to September 30,
2002. Applying Section 114 of the 1997 NIRC, respondent (AICHI) has until October 25, 2002
 within which to file its quarterly return for its gross sales or receipts [with] which it complied when
it filed its VAT Quarterly Return on October 20, 2002.

- As to the reckoning point for the 2-year prescriptive period: IT MUST START FROM THE PAYMENT OF THE TAX
SUBJECT CLAIM FOR REFUND under Sec. 229 of NIRC

- In this case, AICHI filed its VAT Return for the taxable 3rd quarter of 2002 on October 20, 2002 – THUS AICHI’S
ADMINISTRATIVE AND JUDICIAL CLAIMS FOR REFUND FILED ON SEPTEMBER 30, 2004 WERE FILED ON TIME SINCE
AICHI HAS UNTIL OCTOBER 20, 2004 WITHIN WHICH TO FILE ITS TAX REFUND

- As to the simultaneous filing of the administrative and judicial claim: COURT RULED THAT THE NIRC DOES NOT
REQUIRE THE PREVIOUS FILING OF ADMINISTRATIVE CLAIM FOR REFUN PRIOR TO JUDICIAL CLAIM, what is
controlling is that both claims for refund must be filed within the 2 year prescriptive period.

Following CTA En Banc decision, BIR filed this petition before the Supreme Court

Petitioner (BIR) Arguments Respondent (AICHI)

1. Filing of the tax refund claims within the 2-year - It is entitled to tax refund as a matter of right
prescriptive period because it has substantially complied with all
requirements under the law

- AICHI’s claims for tax refund were filed - Sec. 112 (A) of NIRC must be read together
BEYOND the 2 year prescriptive period under with Sec. 114 (A)
Sec. 112(A) and 229 of NIRC since 2004 was a
leap year and the prescriptive period expired
on Sept. 29, 2004; but AICHI only filed its
claim on Sept. 30, 2004 (one day late daw
kuno sa pag-file si AICHI)

- Nasayop sad daw ug apply sa provision ang

CTA En Banc because the applicable provision
daw is Sec. 112(A), instead of Sec. 114 (A),
because Sec. 112 specifically provides for the
period within which to claim for a tax
refund/credit should be made. Ang Sec. 114
(A) only pertains to the period within
which to the compliance requirements in
payment of VAT.

2. Simultaneous filing of the administrative & judicial
claims for tax refund
- simultaneous filing of the administrative and
the judicial claims contravenes Section 229 of
the NIRC, which requires the prior filing of an
administrative claim
- The alleged simultaneous filing of its
administrative and judicial claims, respondent
contends that it first filed an administrative
claim with the One-Stop Shop Inter-Agency
Tax Credit and Duty Drawback Center of the
DOF before it filed a judicial claim with the
CTA

- Non-observance of the 120-day period given

to the CIR to act on the claim for tax
refund/credit in Section 112(D) is NOT FATAL
because what is important is that both claims
are filed within the two-year prescriptive
 period

RULING (So marami ang remedial issues in this case so I will try to break them down)

I. As to the 2-YEAR PRESCRIPTIVE PERIOD FOR THE FILING A TAX REFUND/CREDIT

1. Which provision is applicable: Sec. 112 (A) or Sec. 204 (C) and 229 of the NIRC as to determining the reckoning
period of 2 years to claim the refund?

THE APPLICABLE PROVISION in this case is SEC. 112 (A) in determining the start of the 2-year period
for claiming a refund/credit of unutilized input VAT.

Sec. 112 (A) – Claim for unutilized input VAT
Reckoning period: Within 2 years after close of
taxable quarter when the sales were made
Sec. 204 (C) and 229 – Claim for erroneous
payment or illegal collection of internal revenue
taxes
Reckoning period: Within 2 years after the
payment of tax or penalty

SEC. 112. Refunds or Tax Credits of Input
Tax. –
(A) Zero-rated or Effectively Zero-rated
Sales – Any VAT-registered person, whose
sales are zero-rated or effectively
zero-rated may, within two (2) years after
the close of the taxable quarter when the
sales were made, apply for the issuance of
a tax credit certificate or refund of
creditable input tax due or paid
attributable to such sales, except
transitional input tax, to the extent that
such input tax has not been applied
against output tax: Provided, however,
That in the case of zero-rated sales under
Section 106(A)(2)(a)(1), (2) and (B) and
Section 108 (B)(1) and (2), the acceptable
foreign currency exchange proceeds
thereof had been duly accounted for in
accordance with the rules and regulations
of the Bangko Sentral ng Pilipinas (BSP):
Provided, further, That where the
taxpayer is engaged in zero-rated or
effectively zero-rated sale and also in
taxable or exempt sale of goods or
properties or services, and the amount of
creditable input tax due or paid cannot be
Sec. 204. Authority of the Commissioner
to Compromise, Abate and Refund or
Credit Taxes. – The Commissioner may –
(c) Credit or refund taxes erroneously or
illegally received or penalties imposed
without authority, refund the value of
internal revenue stamps when they are
returned in good condition by the
purchaser, and, in his discretion, redeem
or change unused stamps that have been
rendered unfit for use and refund their
value upon proof of destruction. No credit
or refund of taxes or penalties shall be
allowed unless the taxpayer files in writing
with the Commissioner a claim for credit
or refund within two (2) years after the
payment of the tax or penalty: Provided,
however, That a return filed showing an
overpayment shall be considered as a
written claim for credit or refund.
Sec. 229. Recovery of Tax Erroneously or
Illegally Collected. – No suit or proceeding
shall be maintained in any court for the
recovery of any national internal revenue
tax hereafter alleged to have been
erroneously or illegally assessed or
 directly and entirely attributed to any one
of the transactions, it shall be allocated
proportionately on the basis of the volume
of sales. (Emphasis supplied.)
collected, or of any penalty claimed to
have been collected without authority, of
any sum alleged to have been excessively
or in any manner wrongfully collected
without authority, or of any sum alleged to
have been excessively or in any manner
wrongfully collected, until a claim for
refund or credit has been duly filed with
the Commissioner; but such suit or
proceeding may be maintained, whether
or not such tax, penalty, or sum has been
paid under protest or duress.

In any case, no such suit or proceeding

shall be filed after the expiration of two (2)
years from the date of payment of the tax
or penalty regardless of any supervening
cause that may arise after payment:
Provided, however, That the
Commissioner may, even without a
written claim therefor, refund or credit
any tax, where on the face of the return
upon which payment was made, such
payment appears clearly to have been
erroneously paid.

Reckoning for prescriptive period under Secs. 204(C) and 229 of the NIRC inapplicable since it prescribes a different
starting point for the 2-year prescriptive limit for the filing of a claim. Both provisions only apply to instances
of erroneous payment of illegal collection of internal revenue of taxes

In this case, the creditable input VAT was NOT erroneously paid.

2. What is the reckoning point then for the 2-year prescriptive period within which to file a tax refund/credit for
unutilized input VAT?

Unutilized input VAT must be claimed within two years after the close of the taxable quarter when the
sales were made.

it is clear that Sec. 112 (A) of the NIRC, providing a two-year prescriptive period reckoned from the close of
the taxable quarter when the relevant sales or transactions were made pertaining to the creditable input
VAT, applies to the instant case, and not to the other actions which refer to erroneous payment of taxes
In short, sayop si CTA En Banc on relying on Sec. 229 with regard sa 2 year prescriptive period and sakto si BIR na
dapat Sec. 112 (A) ang applicable provision in determining the reckoning point of the prescriptive period

3. So was the administrative claim for refund filed within the 2-year prescriptive period?

YES, the administrative claim was TIMELY FILED within the 2-year prescriptive period.

3.1 Which is applicable: Art. 13 Civil Code which provides 1 year = 365 days or Administrative Code which
provides 1 year = 12 calendar months? (ang claim ni BIR kay i-apply ang Civil Code nga 1 year = 365 days so
that since leap year man ang 2004, the claim was filed beyond the prescriptive period)

The applicable provision is the Administrative Code being the more recent law which governs the
computation of legal period so 1 year = 12 calendar months

The 2-year period to file a claim for tax refund/credit for the period of July 1, 2002 – September
30, 2002 EXPIRED ON SEPTEMBER 30, 2004. Hence AICHI’s administrative claim was timely filed

II. As to the SIMULTANEOUS FILING OF THE ADMINISTRATIVE AND JUDICIAL CLAIM FOR TAX REFUND

1. Since the administrative claim was timely filed, does it follow that the judicial claim was also filed on time?

NO, the filing of the judicial claim was PREMATURE. Notwithstanding the timely filing of the administrative
claim, AICHI’s claim for tax refund/credit was filed in violation of Sec. 112 (D) of the NIRC.

SEC. 112. Refunds or Tax Credits of Input Tax. –

(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 application filed in accordance with Subsections (A)
and (B) 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. (Emphasis supplied.)

Section 112(D) of the NIRC clearly provides that the CIR has "120 days, from the date of the submission of
the complete documents in support of the application [for tax refund/credit]," within which to grant or deny
the claim.

In this case, the administrative and judicial claims were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period hence
the filing of the judicial claim with CTA was premature.

Ana si Court nga excited ra kaayo naka-file ug judicial claim for refund si AICHI with CTA. Wala pa gani ni-rule ang
CIR as to whether i-grant ba or i-deny iya refund within 120 days, ni-diretso na dayon siya ug file with CTA.

In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, which already
provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR.

The second paragraph of Section 112(D) of the NIRC 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 CTA. As we see it then, the 120-day period is crucial in
filing an appeal with the CTA.

In fine, the premature filing of respondent’s claim for refund/credit of input VAT before the CTA warrants
a dismissal inasmuch as no jurisdiction was acquired by the CTA.
CIR vs SAN ROQUE POWER CORP; TAGANITO MINING CORP; PHILEX MINING CORP

GR NO. 187485; 196113; 197156

February 12, 2013

FACTS

Consolidated cases ni siya so I will illustrate the facts and the respective rulings per case.

CIR vs SAN ROQUE CIR vs TAGANITO MINING PHILEX MINING VS CIR

 San Roque is a domestic corporation
engaged in construction of power
generating plants.
 As a seller of services, it entered into a
 Taganito Mining filed its Monthly and
Quarterly VAT returns for the period
January 1 2005 – December 31, 2005
 NOVEMBER 14, 2006 – Taganito filed a
 On October 21, 2005, [Philex] filed its
Original VAT Return for the third
quarter of taxable year 2005 and
Amended VAT Return for the same
quarter on December 1, 2005
 Power Purchase Agreement (PPA) with
NPC to develop hydro-potential of the
Lower Agno River by building the San
Roque Multi-Purpose Project
 San Roque] allegedly incurred, excess
input VAT in the amount of
₱559,709,337.54 for taxable year 2001
which it declared in its Quarterly VAT
Returns filed for the same year. [San
Roque] duly filed with the BIR separate
claims for refund, in the total amount of
₱559,709,337.54, representing unutilized
input taxes as declared in its VAT returns
for taxable year 2001
 MARCH 28, 2003 – San Roque filed its
amended Quarterly VAT return for the
year 2001 and filed separate amended
claims for tax refund
Ps: WALA PA NI-LAPSE ANG 120-DAY PERIOD
WITHIN WHICH BIR WILL DECIDE ON THE
ADMINISTRATIVE CLAIM (this is the reason
why ang argument ni BIR kay prematurely
filed daw ang judicial claim)
 SINCE CIR DID NOT ACT ON ITS
CLAIM, San Roque filed a Petition for
Review before the CTA on APRIL 10,
2003
CTA DIVISION RULING
The CTA Second Division found legal basis
to partially grant San Roque’s claim. The
CTA Second Division ordered the
Commissioner to refund or issue a tax credit
in favor of San Roque in the amount of
₱483,797,599.65, which represents San
Roque’s unutilized input VAT on its purchases
of capital goods and services for the taxable
year 2001.
CTA EN BANC RULING
CTA En Banc affirmed CTA Division ruling
claim for tax credit/refund of supposed
input VAT for the period covering
January 1, 2004 – December 31, 2004
Ps: WALA PA NI-LAPSE ANG 120-DAY PERIOD
WITHIN WHICH BIR WILL DECIDE ON THE
ADMINISTRATIVE CLAIM (this is the reason
why ang argument ni BIR kay prematurely
filed ang judicial claim)
 Since the period within which to file a
refund was about to expire AND BIR
DID NOT ACT ON THE CLAIM –
Taganito filed a Petition for Review with
CTA on FEBRUARY 17, 2007
CTA DIVISION RULING
Partially granted Taganito’s claim – entitled
to tax refund of input VAT attributable to
zero-rated or effectively zero-rated sales
The judicial claim was filed within the
2-year prescriptive period reckoned from
the CLOSE OF EACH TAXABLE QUARTER
covering January 1 – December 31, 2005
CTA EN BANC RULING
 MARCH 20, 2006 – filed a claim for
tax refund/credit with the One Stop
Shop Center of DOF
Ps: take note nga ni-lapse na ang 120-day
period within which to decide the
administrative complaint ani nga case
 OCTOBER 17, 2007 – filed a Petition
for Review with CTA due to inaction
by the BIR
CTA DIVISING RULING
Denied Philex claim due to prescription
Administrative claim was timely filed ON
March 20, 2006
BUT, judicial claim was BARRED BY
PRESCRIPTION since it was filed late on
October 17, 2007
CTA EN BANC RULING
and ruled that San Roque’s judicial claim
was not prematurely filed
- Claim for refund with BIR and
subsequent appeal to the CTA must
be filed within the 2-year prescriptive
period
CTA En Banc also relied on REVENUE MEMO
CIRCULAR NO. 42-2003:
- Where the taxpayer has filed for
Petition for Review with CTA involving
claim for refund which is pending with
BIR, the administrative agency and
the CTA may act on the case
separately
- If the CTA is able to release its
decision ahead of the evaluation of
the administrative agency, BIR shall
cease from processing the claim
RULING:
I. APPLICATION OF THE 120+30 DAY PERIODS (remember the AICHI Doctrine)
Reversed the decision
Although Taganito filed its administrative
claim within the prescribed period, its judicial
claim was prematurely filed SINCE THE
JUDICIAL CLAIM WAS FILED AFTER THE
LAPSE OF 92 DAYS FROM THE FILING OF
THE ADMINISTRATIVE CLAIM – violating
the 120-day period
Affirmed the Division ruling
From March 20, 2006, which is also presumably
the date [Philex] submitted supporting
documents, together with the aforesaid
application for refund, the CIR has 120 days, or
until July 18, 2006, within which to decide the
claim.
Within 30 days from the lapse of the 120-day
period, or from July 19, 2006 until August 17,
2006, [Philex] should have elevated its claim for
refund to the CTA. However, [Philex] filed its
Petition for Review only on October 17, 2007,
which is 426 days way beyond the 30- day period
prescribed by law
Ps: As you remember the AICHI doctrine:
120+30 days, ana ang Court nga within 120
days mu-decide ang BIR sa administrative
claim, after that period, naa pa jud option si
Philex to appeal to the CTA within 30 days
from the lapse of the 120 days PERO VERY
LATE NA KAAYO ANG PAG-FILE NI PHILEX SA
CTA
ONE OF THE CONDITIONS FOR A JUDICIAL CLAIM OF REFUND/CREDIT UNDER THE VAT SYSTEM IS compliance
with the 120+30 day mandatory and jurisdictional period

Under Sec. 112 (D), the Commissioner is given 120-day waiting period within which to grant or deny the application
for tax refund.

(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
application filed in accordance with Subsection (A) and (B) 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.

It is indisputable that compliance with the 120-day waiting period is mandatory and jurisdictional.

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 also expressly provides that if the Commissioner fails to decide within "a specific period"
required by law, such "inaction shall be deemed a denial"48 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.

Non-compliance with mandatory periods, non-observance of prescriptive periods, and non-adherence to exhaustion
of administrative remedies bar a taxpayer’s claim for tax refund or credit, whether or not the Commissioner questions
the numerical correctness of the claim of the taxpayer.

Following the verba legis doctrine, this law must be applied exactly as worded since it is clear, plain, and unequivocal.
The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioner’s decision within
the 120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no
"decision" or "deemed a denial" decision of the Commissioner for the CTA to review.

Section 112(D) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the
Commissioner

As this law states, the taxpayer may, if he wishes, appeal the decision of the Commissioner to the CTA within 30 days
from receipt of the Commissioner’s decision, or if the Commissioner does not act on the taxpayer’s claim within the
120-day period, the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.
 San Roque Taganito Philex

San Roque failed to comply with the
120-day waiting period, the time expressly
given by law to the Commissioner to decide
whether to grant or deny San Roque’s
application for tax refund
In San Roque’s case, it filed its petition with
the CTA a mere 13 days after it filed its
administrative claim with the
Commissioner. Indisputably, San Roque
knowingly violated the mandatory 120-day
period
Filed its judicial claim ON TIME with the
CTA within the prescribed period
Taganito can invoke BIR Ruling No.
DA-489-0357 dated 10 December 2003,
which expressly ruled that the
"taxpayer-claimant need not wait for the lapse
of the 120-day period before it could seek
judicial relief with the CTA by way of Petition
for Review."
Taganito filed its judicial claim after the issuance
of BIR Ruling No. DA-489-03 but before the
adoption of the Aichi doctrine
Unlike San Roque and Taganito, Philex’s case
is not one of premature filing but of late
filing. Philex did not file any petition with the
CTA within the 120-day period. Philex did not
also file any petition with the CTA within 30
days after the expiration of the 120-day
period.
Philex filed its judicial claim long after the
expiration of the 120-day period, in fact 426
days after the lapse of the 120-day period. In
any event, whether governed by jurisprudence
before, during, or after the Atlas case, Philex’s
judicial claim will have to be rejected
because of late filing.

Subsidiary Issue: Can the respondents rely on the ATLAS DOCTRINE: 2-year prescriptive period
should be counted from the date of payment of the output VAT, not from the close of the taxable
quarter when the sales involving input VAT were made?

San Roque - NO Taganito - NO Philex - NO

San Roque cannot also claim being
misled, misguided or confused by
the Atlas doctrine because San
Roque filed its petition for review
with the CTA more than four years
before Atlas was promulgated.
Like San Roque, Taganito also filed its
petition for review with the CTA
without waiting for the 120-day period
to lapse. Also, like San Roque, Taganito
filed its judicial claim before the
promulgation of the Atlas doctrine.
Philex timely filed its administrative claim
on 20 March 2006, within the two-year
prescriptive period. Even if the two-year
prescriptive period is computed from the date
of payment of the output VAT under Section
229, Philex still filed its administrative claim on
time. Thus, the Atlas doctrine is
immaterial in this case.

In any event, the Atlas doctrine Taganito is similarly situated as San

merely stated that the two-year Roque - both cannot claim being
prescriptive period should be misled, misguided, or confused by
counted from the date of payment of the Atlas doctrine.
the output VAT, not from the close
of the taxable quarter when the sales
involving the input VAT were made.
The Atlas doctrine does not interpret,
expressly or impliedly, the 120+3052
day periods.

The Atlas doctrine cannot be

invoked by anyone to disregard
compliance with the 30-day
mandatory and jurisdictional
period.

=====================================================================================================

II. PRESCRIPTIVE PERIOD UNDER SEC. 112 (A) AND (C)

Should the 30-day period (within which mu-appeal si taxpayer to the CTA from the denial of his claim or after the
lapse of the 120-day period) necessarily fall within the TWO-YEAR PRESCRIPTIVE PERIOD? – NO

TWO-YEAR PRESCRIPTIVE PERIOD – does not refer to the filing of the judicial claim to the CTA BUT TO THE
FILING OF THE ADMINISTRATIVE CLAIM with the Commissioner.

If the 30-day period is required to be within the 2-year prescriptive period, then taxpayer must file his
administrative claim for refund within the first 610 days of the 2 year period. Otherwise, the filing of the
administrative claim beyond the 610 days will result in the appeal to the CTA being filed beyond the 2 year
prescriptive period

Medyo libog but ingun ani ang idea:

If we convert the 2 year period = 730 days, so let’s say mu-file si taxpayer sa iyang administrative claim on the
611th day (kay iapil naman nimu ug count ang 30 days), BIR (with 120 day-period) will have until the 731st day
to decide on the claim - then if BIR will decide on the 731st day or dili jud siya mu-decide at all, DILI NA
MAKA-FILE UG JUDICIAL CLAIM KAY NAHUROT NAMAN ANG 2-YEAR PERIOD, in the end useless na nga
maka-appeal pa si taxpayer to CTA even if maka-file siya on time sa iyang administrative claim.

The theory that the 30-day period must fall within the two-year prescriptive period adds a condition that is not found
in the law. It results in truncating (cutting off) 120 days from the 730 days (2 years) that the law grants the
taxpayer for filing his administrative claim with the Commissioner.
Section 112(A) and (C) must be interpreted according to its clear, plain, and unequivocal language. The taxpayer can
file his administrative claim for refund or credit at 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 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.

===============================================================

III. “EXCESS” INPUT VAT vs. “EXCESSIVELY’’ COLLECTED TAX (pls. also refer to the matrix I made in the AICHI
case)

Is “Excess” Input VAT considered as “excessively” collected as understood under Sec. 229? - NO

“Excess” Input VAT (Sec. 110-B, 112-A) is not “excessively” collected as understood under Sec. 229 because at the
time the input VAT is collected the amount paid is correct and proper.

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 it is 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”. In fact, if the “excess” input VAT is an “excessively” collected tax under Sec. 229, then the
taxpayer claiming to apply such “excessively” collected input VAT to offset his output VAT may have NO
LEGAL BASIS to make such offsetting.

“Excessively” Collected Tax (Sec. 229) – mere payment of a tax beyond what is legally due can be claimed as a
refund or credit, what can be refunded or credit is tax that is “erroneously, illegally or excessively” paid or in
any manner wrongfully collected. THERE MUST BE WRONGFUL PAYMENT because what is paid is not legally due.

Erroneous or wrongful payment includes excessive payment because they all refer to payment of taxes not legally
due.

============================================================================
=========

IV. EFFECTIVITY AND SCOPE OF THE Atlas Doctrine

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, should be effective only from its promulgation on 8 June 2007 until its abandonment
on 12 September 2008 in Mirant.
============================================================================
========

V. Revenue Memo Circular No. 49-03 (April 2003) – the one which was used by CTA En Banc in the San Roque case

Is there a need for the taxpayer to wait for the 120-day period to expire before filing a judicial claim with CTA? YES
(because in such case there will be premature filing of judicial claim, pero even if there is premature filing of the
judicial claim, it does not mean nga BIR will be divested of its jurisdiction over the administrative claim)

There is nothing in RMC 49-03 that states, expressly or impliedly, that the taxpayer need not wait for the 120-day
period to expire before filing a judicial claim with the CTA. RMC 49-03 merely authorizes the BIR to continue
processing the administrative claim even after the taxpayer has filed its judicial claim, without saying that the
taxpayer can file its judicial claim before the expiration of the 120-day period.

Thus, if the taxpayer files its judicial claim before the expiration of the 120-day period, the BIR will nevertheless
continue to act on the administrative claim because such premature filing cannot divest the Commissioner of
his statutory power and jurisdiction to decide the administrative claim within the 120-day period.

The internal administrative evaluation of the taxpayer’s claim must necessarily continue to enable the BIR to oppose
intelligently the judicial claim or, if the facts and the law warrant otherwise, for the BIR to concede to the judicial claim,
resulting in the termination of the judicial proceedings.

Mere filing by a taxpayer of a judicial claim with the CTA before the expiration of the 120-day period CANNOT
operate to divest the BIR of its jurisdiction to decide an administrative claim within the 120-day mandatory
period, UNLESS the Commissioner has clearly given cause for equitable estoppel to apply as expressly
recognized under Sec. 246 of the Tax Code.

================================================================

VI. BIR Ruling No. DA-489-03 – the one used in Taganito case katong gi-allow ra siya maka-claim ug refund

What are the exceptions to the 120-day period rule for the filing of the judicial claim with CTA?

1. If the Commissioner, through a specific ruling, misleads a particular taxpayer to prematurely file a
judicial claim with the CTA. Such specific ruling is applicable only to such particular taxpayer

2. When the Commission, through a general interpretative ruling issued under Sec. 4 Tax Code misleads
all taxpayer into filing prematurely judicial claims with the CTA

What is under BIR Ruling No. DA-489-03?

"Taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with
the CTA by way of Petition for Review."

Is BIR Ruling No. DA-489-03 a General Interpretative Ruling? – YES

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to a query made, not by a
particular taxpayer, but by a government agency tasked with processing tax refunds and credits, that is, the
One Stop Shop Inter-Agency Tax Credit and Drawback Center of the Department of Finance.

Thus, all taxpayers 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, where this Court held that the 120+30 day periods
are mandatory and jurisdictional.

Can BIR Ruling No. DA-489-03 be given retroactive effect as to apply to San Roque and Philex? – NO retroactive
effect

San Roque, therefore, cannot benefit from BIR Ruling No. DA-489-03 because it filed its judicial claim prematurely
on 10 April 2003, before the issuance of BIR Ruling No. DA-489-03

Philex’s situation is not a case of premature filing of its judicial claim but of late filing, indeed very late filing.
Philex cannot claim the benefit of BIR Ruling No. DA-489-03 because Philex did not file its judicial claim
prematurely but filed it long after the lapse of the 30-day period following the expiration of the 120-day period

Taganito, however, filed its judicial claim with the CTA on 14 February 2007, after the issuance of BIR Ruling No.
DA-489-03 on 10 December 2003. Truly, Taganito can claim that in filing its judicial claim prematurely without waiting
for the 120-day period to expire, it was misled by BIR Ruling No. DA-489-03. Thus, Taganito can claim the benefit of
BIR Ruling No. DA-489-03

CIR vs. MINDANAO II GEOTHERMAL PARTNERSHIP

GR No. 191498

January 15, 2014

FACTS

 Mindanao II Geothermal is engaged in the business of power generation and sale of electricity to NAPOCOR
 Filed its Quarterly VAT returns for the 2nd, 3rd and 4th quarters of taxable year 2004

Date filed Quarter Taxable Year

 Original Amended

26 July 2004 12 July 2005 2nd 2004

22 October 2004 12 July 2005 3rd 2004

25 January 2005 12 July 2005 4th 2004

 OCTOBER 6, 2005 – filed with BIR an application for tax refund/credit of accumulated unutilized
creditable input taxes
 The administrative claim remained unsolved (120 day period – until Feb. 3, 2006)
 MINDANAO HOWEVER DID NOT FILE AN APPEAL to CTA within the 30-day period (supposed to be on
March 5, 2006) after the lapse of the 120 day-period

Reason why it did not file an appeal: MINDANAO believed that a judicial claim must be filed within the 2-year
prescriptive period under Sec. 112(A) and that such time frame would be reckoned from the filing of the Quarterly
VAT returns for the 2nd, 3rd, and 4th quarters.

 JULY 21, 2006 – filed a Petition for Review with CTA for tax refund/credit

While this case was pending, ATLAS case was rendered by the Court in 2007 – 2-year prescriptive period for filing of
tax refund/credit of input VAT is reckoned from the date of filing of quarterly VAT return and payment of tax

CTA Division Ruling

 Granted the tax credit but on a reduced amount

 BIR filed an MR pointing out that prescription had already set in since the appeal to CTA was filed only
on July 21, 2006 which was beyond the last day of appeal – March 5, 2006. (MR DENIED BY CTA
DIVISION)

Meanwhile, the MIRANT case was rendered by the Court in 2008 – reckoning date of the 2-year prescriptive period
for application of refund: close of the taxable quarter when the relevant sales were made

 BIR elevated the case to CTA En Banc arguing that as the two-year prescriptive period ended on 30 June 2006,
the Petition for Review of Mindanao II was filed out of time on 21 July 2006 – invoked the MIRANT ruling

CTA En Banc Decision:

  Denied BIR petition for review, ATLAS remained to be the controlling doctrine and Mindanao relied on
the old doctrine of ATLAS and acted in good faith

 As to the compliance with the 30-day period for appeal to CTA – this only applies when the CTA DENIES
the claim. In cases of BIR inaction, 30-day period is not a mandatory requirement; judicial claim is filed on
time as long as it is after the lapse of 120-day waiting period but within 2 years from the filing of the return

RULING

I. MINDANAO’S APPLICATION REFUND (Administrative Claim)

Was Mindanao’s application for refund filed on time? – YES

a. What should then be filed within the 2-year prescriptive period?

ONLY ADMINISTRATIVE CLAIM; Judicial claim need not be filed within the 2-year prescriptive period

The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate or refund" refers
to applications for refund/credit filed with the CIR and not to appeals made to the CTA.

In fact, applying the two-year period to judicial claims would render nugatory Section 112 (D) of the NIRC,
which already provides for a specific period within which a taxpayer should appeal the decision or inaction of
the CIR. The second paragraph of Section 112 (D) of the NIRC 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 CTA.

b. What is the reckoning point of the 2-year prescriptive period?

Close of the taxable quarter when the relevant sales were made

Section 112(A) is the Applicable Rule – remember the Aichi Doctrine

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.

Under Section 229, the prescriptive period for filing a judicial claim for refund is two years from the date of payment of the
tax "erroneously, . . . illegally, . . . excessively or in any manner wrongfully collected." The prescriptive period is reckoned
from the date the person liable for the tax pays the tax.
 Under Section 110(B) and Section 112(A), the prescriptive period for filing a judicial claim for "excess" input VAT is
two years from the close of the taxable quarter when the sale was made by the person legally liable to pay the output VAT.

Based on the San Roque ruling:

For recovery of unutilized input VAT – Sec. 112 is applicable, not Sec. 229

Prior to June 8, 2007 (before ATLAS case) - Sec. 112 (A) is applicable

Now let’s apply this in the case of Mindanao……

Date of Filing Administrative Claim: OCTOBER 6, 2005

Therefore, MINDANAO is covered by the rule prior to ATLAS or MIRANT and the reckoning date as provided
under Sec. 112(A) is close of taxable quarter when the relevant sales were made.

Were the administrative claims (2nd, 3rd, 4th quarter) filed within the 2-year prescriptive period? YES

SECOND QUARTER – within 2-year period

Date of Filing Administrative Claim: OCTOBER 6, 2005

 THIRD QUARTER – within 2-year period

Date of Filing Administrative Claim: OCTOBER 6, 2005

FOURTH QUARTER – within 2-year period

Date of Filing Administrative Claim: OCTOBER 6, 2005

============================================================

II. MINDANAO’S JUDICIAL CLAIM FOR REFUND

Was Mindanao’s judicial claim for refund filed on time? – NO

Section 112(D) speaks of two periods:

1. Period of 120 days, which serves as a waiting period to give time for the CIR to act on the administrative claim for
refund or credit

2. Period of 30 days, which refers to the period for interposing an appeal with the CTA

Now according to CTA En Banc, since Sec. 112(D) uses the word “or” which is a disjunctive term the 30-day period
would only apply when the CIR denies the administrative claim but it will not apply after the lapse of the 120-day
waiting period. Is this correct? – NO

The 30-day period applies not only to instances of actual denial by the CIR of the claim for refund or tax credit,
but to cases of inaction by the CIR as well.

The San Roque pronouncement is clear. The taxpayer can file the 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.

Now let’s apply this in the case of Mindanao……

Mindanao II filed its administrative claim for refund on 6 October 2005. The CIR, therefore, had a period of 120
days, or until 3 February 2006, to act on the claim. The CIR, however, failed to do so. Mindanao II then could
treat the inaction as a denial and appeal it to the CTA within 30 days from 3 February 2006, or until 5 March
2006.

BUT, this is what happened:

Date of Filing Petition for Review (Judicial Claim): JULY 21, 2006 (138 DAYS after the lapse of 30-day period on
March 5, 2006 – therefore the judicial claim was filed late)
The 30-Day Period to Appeal is Mandatory and Jurisdictional

Following the well-settled verba legis doctrine, this law should be applied exactly as worded since it is clear, plain, and
unequivocal. As this law states, the taxpayer may, if he wishes, appeal the decision of the Commissioner to the CTA within 30 days
from receipt of the Commissioner's decision, or if the Commissioner does not act on the taxpayer's claim within the 120-day period,
the taxpayer may appeal to the CTA within 30 days from the expiration of the 120-day period.

the law does not make the 120+30 day periods optional just because the law uses the word " may." The word "may"
simply means that the taxpayer may or may not appeal the decision of the Commissioner within 30 days from
receipt of the decision, or within 30 days from the expiration of the 120-day period.

CBK POWER COMPANY LIMITED vs. COMMISSIONER OF INTERNAL REVENUE

PERLAS-BERNABE, J.:

Facts:

CBK Power is a limited partnership duly organized and existing under the laws of the Philippines, and primarily engaged in the
development and operation of the Caliraya, Botocan, and Kalayaan hydro electric power generating plants in Laguna (CBK
Project).

To finance the CBK Project, CBK Power obtained in August 2000 a syndicated loan from several foreign banks, acting through
an Inter-Creditor Agent, a merged entity being named as Mizuho Corporate Bank (Mizuho Bank). It had a branch in the
Philippines. Certain portions of the loan were subsequently assigned by the original lenders to various other banks, which were
not residents of the Philippines.

In February 2001, CBK Power borrowed money from Industrial Bank of Japan, Fortis-Netherlands, Raiffesen Bank,
Fortis-Belgium, and Mizuho Bank for which it remitted interest payments from May 2001 to May 2003.11 It allegedly withheld
final taxes from said payments based on the following rates, and paid the same to the (BIR): (a) fifteen percent (15%) for
Fortis-Belgium, Fortis-Netherlands, and Raiffesen Bank; and (b) twenty percent (20%) for Industrial Bank of Japan and Mizuho
Bank.12

However, according to CBK Power, under the relevant tax treaties between the Philippines and the respective countries in
which each of the banks is a resident, the interest income derived by the aforementioned banks are subject only to a
preferential tax rate of 10%.

Accordingly, on April 14, 2003, CBK Power filed a claim for refund of its excess final withholding taxes allegedly erroneously
withheld and collected for the years 2001 and 2002 with the BIR. The claim for refund of excess final withholding taxes in 2003
was subsequently filed on March 4, 2005.14

The Commissioner of Internal Revenue’s (Commissioner) inaction on said claims prompted CBK Power to file petitions for
review before the CTA.

The CTA First Division Rulings

In a Decision17 dated August 28, 2008, the CTA First Division granted the petitions and ordered the refund of the amount of
15,672,958.42 upon a finding that the relevant tax treaties were applicable to the case. however, upon motion for
reconsideration23 filed by the Commissioner, the CTA First Division amended its earlier decision by reducing the amount of the
refund from P15,672,958.42 to P14,835,720.39 on the ground that CBK Power failed to obtain an ITAD ruling with respect to its
transactions with Fortis-Netherlands.

The CTA En Banc Ruling

In a Decision34 dated March 29, 2010, the CTA En Banc affirmed the ruling of the CTA First Division that a prior application with
the ITAD is indeed required by Revenue Memorandum Order (RMO) 1-2000,35 which administrative issuance has the force and
effect of law and is just as binding as a tax treaty.

The CTA En Banc further held that CBK Power’s petitions for review were filed within the two-year prescriptive period provided
under Section 22937of the National Internal Revenue Code of 199738 (NIRC), and that it was proper for CBK Power to have filed
said petitions without awaiting the final resolution of its administrative claims for refund before the BIR; otherwise, it would
have completely lost its right to seek judicial recourse if the two-year prescriptive period lapsed with no judicial claim filed.

Issues:

1. Whether the BIR may add a requirement– prior application for an ITAD ruling – that is not found in the income tax
treaties signed by the Philippines before a taxpayer can avail of preferential tax rates under said treaties. - NO
2. Whether or not CBK Power should wait for the Commissioner’s ruling before it files its judicial claim. - NO

Held:

1. No.

The Philippine 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 treaty
obligations on the part of the states that enter into the agreement. In this jurisdiction, treaties have the force and effect of law.

Deutsche Bank AG Manila Branch v. Commissioner of Internal Revenue 43 (Deutsche Bank):

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.

The objective in requiring the application for treaty relief with the ITAD before a party’s availment of the preferential rate under
a tax treaty is to avert the consequences of any erroneous interpretation and/or application of treaty provisions, such as
claims for refund/credit for overpayment of taxes, or deficiency tax liabilities for underpayment.45 However, as pointed out in
Deutsche Bank, the underlying principle of prior application with the BIR becomes moot in refund cases– as in the present case
– where the very basis of the claim is erroneous or there is excessive payment arising from the non-availment of a tax treaty
relief at the first instance.

Not only is the requirement illogical, but it is also an imposition that is not found at all in the applicable tax treaties. In
Deutsche Bank, the Court categorically held that the BIR should not impose additional requirements that would negate the
availment of the reliefs provided for under international agreements, especially since said tax treaties do not provide for any
prerequisite at all for the availment of the benefits under said agreements.48

Since CBK Power had requested for confirmation from the ITAD on June 8, 2001 and October 28, 200250 before it filed on April
14, 2003 its administrative claim for refund of its excess final withholding taxes, the same should be deemed substantial
compliance with RMO No. 1-2000, as in Deutsche Bank. To rule otherwise would defeat the purpose of Section 229 of the
NIRC in providing the taxpayer a remedy for erroneously paid tax solely on the ground of failure to make prior application
for tax treaty relief.
 2. No.The Commissioner argues56 that the failure on the part of CBK Power to give him a reasonable time to act on its
claim is violative of the doctrines of exhaustion of administrative remedies and of primary jurisdiction.

For its part, CBK Power maintains57 that it would be prejudicial to wait for the Commissioner’s ruling before it files its judicial
claim since it only has 2 years from the payment of the tax within which to file both its administrative and judicial claims.

The Court rules for CBK Power. Sections 204 and 229 of the NIRC pertain to the refund of erroneously or illegally collected
taxes.

Section 204 applies to administrative claims for refund, while Section 229 to judicial claims for refund.

In both instances, the taxpayer’s claim must be filed within two (2) years from the date of payment of the tax or penalty.

However, Section 229 of the NIRC further states the condition that a judicial claim for refund may not be maintained until a
claim for refund or credit has been duly filed with the Commissioner. These provisions respectively read:

SEC. 204. Authority of the Commissioner to Compromise, Abate and Refund or Credit Taxes. – The Commissioner may -

xxxx

(C) Credit or refund taxes erroneously or illegally received or penalties imposed without authority, refund the value of internal
revenue stamps when they are returned in good condition by the purchaser, and, in his discretion, redeem or change unused
stamps that have been rendered unfit for use and refund their value upon proof of destruction. No credit or refund of taxes or
penalties shall be allowed unless the taxpayer files in writing with the Commissioner a claim for credit or refund within two
(2) years after the payment of the tax or penalty: Provided, however, That a return filed showing an overpayment shall be
considered as a written claim for credit or refund.

xxxx

SEC. 229. Recovery of Tax Erroneously or Illegally Collected. – No suit or proceeding shall be maintained in any court for the
recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of
any penalty claimed to have been collected without authority, of any sum alleged to have been excessively or in any manner
wrongfully collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected,
until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained,
whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the
tax or penalty regardless of any supervening cause that may arise after payment: x x x.

Indubitably, CBK Power’s administrative and judicial claims for refund of its excess final withholding taxes covering taxable year
2003 were filed within the two-year prescriptive period, as shown by the table below:58

WHEN FINAL WHEN LAST DAY OF WHEN WHEN PETITION

INCOME REMITTANCE THE 2-YEAR ADMINISTRATIVE FOR REVIEW
TAXES WERE RETURN PRESCRIPTIVE CLAIM WAS FILED WAS FILED
WITHHELD FILED PERIOD

February 2003 03/10/03 03/10/05 March 4, 2005 03/09/05

May 2003 06/10/03 06/10/05 March 4, 2005 03/09/05

With respect to the remittance filed on March 10, 2003, the Court agrees with the ratiocination of the CTA En Banc in
debunking the alleged failure to exhaust administrative remedies. Had CBK Power awaited the action of the Commissioner on
its claim for refund prior to taking court action knowing fully well that the prescriptive period was about to end, it would have
lost not only its right to seek judicial recourse but its right to recover the final withholding taxes it erroneously paid to the
government thereby suffering irreparable damage.59

Also, while it may be argued that, for the remittance filed on June 10, 2003 that was to prescribe on June 10,2005, CBK Power
could have waited for, at the most, three (3) months from the filing of the administrative claim on March 4, 2005 until the last
day of the two-year prescriptive period ending June 10, 2005, that is, if only to give the BIR at the administrative level an
opportunity to act on said claim, the Court cannot, on that basis alone, deny a legitimate claim that was, for all intents and
purposes, timely filed in accordance with Section 229 of the NIRC. There was no violation of Section 229 since the law, as
worded, only requires that an administrative claim be priorly filed.

P.J. Kiener Co., Ltd. v. David60 (Kiener): the Court went on to say that the claim with the Collector of Internal Revenue was
intended primarily as a notice of warning that unless the tax or penalty alleged to have been collected erroneously or illegally is
refunded, court action will follow, viz.: The controversy centers on the construction of the aforementioned section of the Tax
Code.

The preceding provisions seem at first blush conflicting. It will be noticed that, whereas the first sentence requires a claim to be
filed with the Collector of Internal Revenue before any suit is commenced, the last makes imperative the bringing of such suit
within two years from the date of collection. But the conflict is only apparent and the two provisions easily yield to
reconciliation, which it is the office of statutory construction to effectuate, where possible, to give effect to the entire
enactment.

To this end, and bearing in mind that the Legislature is presumed to have understood the language it used and to have acted
with full idea of what it wanted to accomplish, it is fair and reasonable to say without doing violence to the context or either of
the two provisions, that by the first is meant simply that the Collector of Internal Revenue shall be given an opportunity to
consider his mistake, if mistake has been committed, before he is sued, but not, as the appellant contends that pending
consideration of the claim, the period of two years provided in the last clause shall be deemed interrupted. Nowhere and in
no wise does the law imply that the Collector of Internal Revenue must act upon the claim, or that the taxpayer shall not go to
court before he is notified of the Collector’s action. x x x. We understand the filing of the claim with the Collector of Internal
Revenue to be intended primarily as a notice of warning that unless the tax or penalty alleged to have been collected
erroneously or illegally is refunded, court action will follow. x x x.

PILIPINAS TOTAL GAS, INC. v. COMMISSIONER OF INTERNAL REVENUE

G.R. No. 207112, December 08, 2015
MENDOZA, J.:

FACTS:

-Petitioner Pilipinas Total Gas, Inc. (Total Gas) is engaged in the business of selling, transporting and distributing industrial gas. It
is also engaged in the sale of gas equipment and other related businesses. Total Gas is VAT-registered.

- For the First and Second quarters of 2007, Total Gas claimed it incurred unutilized input VAT credits from its domestic
purchases of noncapital goods and services in the total amount of P8,124,400.35. Of this total accumulated input VAT, Total Gas
claimed that it had P7,898,433.98 excess unutilized input VAT.

-On May 15, 2008, Total Gas filed an administrative claim for refund of unutilized input VAT for the first two quarters of taxable
year 2007, inclusive of supporting documents.

-On August 28, 2008, Total Gas submitted additional supporting documents to the BIR.

-On January 23, 2009, Total Gas elevated the matter to the CTA in view of the inaction of the Commissioner of Internal Revenue
(CIR).

Ruling of the CTA Division

The CTA Division dismissed the petition for being prematurely filed. It explained that Total Gas failed to complete the
necessary documents to substantiate a claim for refund of unutilized input VAT on purchases of goods and services enumerated
under Revenue Memorandum Order (RMO) No. 53-98. Believing that Total Gas failed to complete the necessary documents to
substantiate its claim for refund, the CTA Division was of the view that the 120-day period allowed to the CIR to decide its claim
under Section 112 (C) of the National Internal Revenue Code of 1997 (NIRC), had not even started to run. MR denied.

Ruling of the CTA En Banc

As to whether TG filed the judicial claim on time, the CTA En Banc ruled that the CTA Division had no jurisdiction over the
case because Total Gas failed to seasonably file its petition. Counting from the date it filed its administrative claim on May 15,
2008, the CTA En Banc explained that the CIR had 120 days to act on the claim (until September 12, 2008), and Total Gas had 30
days from then, or until October 12, 2008, to question the inaction before the CTA. Considering that Total Gas only filed its
petition on January 23, 2009, the CTA En Banc concluded that the petition for review was belatedly filed. For the tax court, the
120-day period could not commence on the day Total Gas filed its last supporting document on August 28, 2008, because to
allow such would give the taxpayer unlimited discretion to indefinitely extend the 120-day period by simply filing the required
documents piecemeal.15

As to whether TG was able to substantiate its claim, the CTA En Banc affirmed the CTA Division that Total Gas failed to submit
the complete supporting documents to warrant the grant of its application for refund. CTA En Banc likewise concurred in its
finding that the judicial claim of Total Gas was prematurely filed because the 120-day period for the CIR to decide the claim
had yet to commence to run due to the lack of essential documents. MR denied.

-Hence, the present petition.TG argues that it filed the judicial claim on time as provided in Aichi and questions the logic of the
assailed CTA decision which ruled that their claim was both prematurely and belatedly filed.

ISSUES

(a) whether the judicial claim for refund was belatedly filed on 23 January 2009, or way beyond the 30-day period to appeal
as provided in Section 112(c) of the Tax Code, as amended since the period commenced to run from the date when Total Gas
first filed its claim-NO, it should be reckoned from the date of submission of complete documents (August 28, 2008), so the
judicial claim was timely filed.

(b) whether the submission of incomplete documents at the adminstrative level (BIR) renders the judicial claim premature
and dismissible for lack of jurisdiction-NO kai gifile ang claim before sa pronouncement sa Aichi doctrine, plus ni run jud ang
120+30 day period in this case.
Ruling of the Court

Judicial claim timely filed.

From Section 112(c), it is apparent that the CIR has 120 days from the date of submission of complete documents to decide a
claim for tax credit or refund of creditable input taxes. The taxpayer may, within 30 days from receipt of the denial of the claim
or after the expiration of the 120-day period, which is considered a "denial due to inaction," appeal the decision or unacted
claim to the CTA.

To be clear, Section 112(C) categorically provides that the 120-day period is counted "from the date of submission of complete
documents in support of the application." Contrary to this mandate, the CTA En Banc counted the running of the period from
the date the application for refund was filed or May 15, 2008, and, thus, ruled that the judicial claim was belatedly filed.

This should be corrected.

Indeed, the 120-day period granted to the CIR to decide the administrative claim under the Section 112 is primarily intended to
benefit the taxpayer, to ensure that his claim is decided judiciously and expeditiously. After all, the sooner the taxpayer
successfully processes his refund, the sooner can such resources be further reinvested to the business translating to greater
efficiencies and productivities that would ultimately uplift the general welfare. To allow the CIR to determine the completeness
of the documents submitted and, thus, dictate the running of the 120-day period, would undermine these objectives, as it would
provide the CIR the unbridled power to indefinitely delay the administrative claim, which would ultimately prevent the filing of a
judicial claim with the CTA.

Thus, the question must be asked: In an administrative claim for tax credit or refund of creditable input VAT, from what point
does the law allow the CIR to determine when it should decide an application for refund? Or stated differently: Under present
law, when should the submission of documents be deemed "completed" for purposes of determining the running of the
120-day period?

Guys, medjo libog ni diri ha kai lahi ug rule sa before June 11, 2014 (issuance sa RMC 54-2014) and lahi sa after. Tapos naa pa jud
mga unique circumstances sa pagfile sa claim sa Total Gas.

History of the rules regarding the filing of the claim for refund or credit of unutilized input VAT (basaha na lang bahala taas
para kasabot mo why important na ang certain reckoning points and notices, and rmc’s and stuff)

Thus, when the VAT was first introduced through Executive Order No. 273:The CIR was not only given 60 days within which to
decide an administrative claim for refund of input taxes, but the beginning of the period was reckoned "from the date the
application for refund was filed."

Republic Act (R.A.) No. 7716 was amended to read: Again, while the CIR was given only 60 days within which to act upon an
administrative claim for refund or tax credit, the period came to be reckoned "from the date of submission of complete
documents in support of the application." With this amendment, the date when a taxpayer made its submission of complete
documents became relevant.

In order to ensure that such date was at least determinable, RMO No. 4-94 was issued.

This time, the period granted to the CIR to act upon an administrative claim for refund was extended to 120 days. The reckoning
point however, remained "from the date of submission of complete documents."

Aware that not all taxpayers were able to file the complete documents to allow the CIR to properly evaluate an administrative
claim for tax credit or refund of creditable input taxes, the CIR issued RMC No. 49-2003, which provided:

For claims to be filed by claimants with the respective investigating/processing office of the administrative agency, the same
shall be officially received only upon submission of complete documents.

For current and future claims for tax credit/refund, the same shall be processed within one hundred twenty (120) days from
receipt of the complete documents. If, in the course of the investigation and processing of the claim, additional documents are
required for the proper determination of the legitimate amount of claim, the taxpayer-claimants shall submit such
documents within thirty (30) days from request of the investigating/processing office, which shall be construed as within the
one hundred twenty (120) day period.

Consequently, upon filing of his application for tax credit or refund for excess creditable input taxes, the taxpayer-claimant is
given thirty (30) days within which to complete the required documents, unless given further extension by the head of the
processing unit. If, in the course of the investigation and processing of the claim, additional documents are required for the
proper determination of the legitimate amount of claim, the taxpayer-claimants shall submit such documents within thirty (30)
days from request of the investigating/processing office. Notice, by way of a request from the tax collection authority to
produce the complete documents in these cases, became essential. It is only upon the submission of these documents that
the 120-day period would begin to run.

R.A. No. 9337 was passed on July 1, 2005:

With the amendments only with respect to its place under Section 112, the Court finds that RMC No. 49-2003 should still be
observed. Thus, taking the foregoing changes to the law altogether, it becomes apparent that, for purposes of
determining when the supporting documents have been completed — it is the taxpayer who ultimately determines when
complete documents have been submitted for the purpose of commencing and continuing the running of the 120-day period.

Then, except in those instances where the BIR would require additional documents in order to fully appreciate a claim for tax
credit or refund, in terms what additional document must be presented in support of a claim for tax credit or refund - it is the
taxpayer who has that right and the burden of providing any and all documents that would support his claim for tax credit or
refund. After all, in a claim for tax credit or refund, it is the taxpayer who has the burden to prove his cause of action. As such,
he enjoys relative freedom to submit such evidence to prove his claim.

The foregoing conclusion is but a logical consequence of the due process guarantee under the Constitution. Corollary to the
guarantee that one be afforded the opportunity to be heard, it goes without saying that the applicant should be allowed
reasonable freedom as to when and how to present his claim within the allowable period.

Thereafter, whether these documents are actually complete as required by law - is for the CIR and the courts to determine.

Lest it be misunderstood, the benefit given to the taxpayer to determine when it should complete its submission of
documents is not unbridled.

1. Under RMC No. 49-2003, the taxpayer-claimants shall submit such documents within thirty (30) days from request of the
investigating/processing office. Again, notice, by way of a request from the tax collection authority to produce the complete
documents in these cases, is essential.

2. Section 112(A) of the NIRC,36 as amended by RA 9337, a taxpayer has two (2) years, after the close of the taxable quarter
when the sales were made, to apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid
attributable to such sales. Thus, before the adminstrative claim is barred by prescription, the taxpayer must be able to submit
his complete documents in support of the application filed.

OLD RULE applicable to TG: 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.

In all cases, whatever documents a taxpayer intends to file to support his claim must be completed within the two-year period
under Section 112(A) of the NIRC. The 30-day period from denial of the claim or from the expiration of the 120-day period within
which to appeal the denial or inaction of the CIR to the CTA must also be respected.

NEW RULES applicable now:

It bears mentioning at this point that the foregoing summation of the rules should only be made applicable to those claims for
tax credit or refund filed prior to June 11, 2014, such as the claim at bench. As it now stands, RMC 54-2014 dated June 11, 2014
mandates that:
The application for VAT refund/tax credit must be accompanied by complete supporting documents as enumerated in Annex
"A" hereof. In addition, the taxpayer shall attach a statement under oath attesting to the completeness of the submitted
documents (Annex B). The affidavit shall further state that the said documents are the only documents which the taxpayer will
present to support the claim. If the taxpayer is a juridical person, there should be a sworn statement that the officer signing the
affidavit (i.e., at the very least, the Chief Financial Officer) has been authorized by the Board of Directors of the company.

Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other
documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the
Commissioner based only on the documents submitted by the taxpayer. The application for tax refund/tax credit shall be denied
where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned
processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayer/claimant.
Thus, under the current rule, the reckoning of the 120-day period has been withdrawn from the taxpayer by RMC 54-2014,
since it requires him at the time he files his claim to complete his supporting documents and attest that he will no longer
submit any other document to prove his claim. Further, the taxpayer is barred from submitting additional documents after he
has filed his administrative claim.

New rule should not apply to Total Gas.

On this score, the Court finds that the foregoing issuance cannot be applied rectroactively to the case at bar since it imposes
new obligations upon taxpayers in order to perfect their administrative claim. (Rule on Non-Retroactivity of Ruling Sec. 246)

Application of the Old Rule sa case:

Applying the foregoing precepts to the case at bench, it is observed that the CIR made no effort to question the inadequacy of
the documents submitted by Total Gas. It neither gave notice to Total Gas that its documents were inadequate, nor ruled to
deny its claim for failure to adequately substantiate its claim. Thus, for purposes of counting the 120-day period, it should be
reckoned from August 28, 2008, the date when Total Gas made its "submission of complete documents to support its
application" for refund of excess unutilized input VAT. Consequently, counting from this later date, the BIR had 120 days to
decide the claim or until December 26, 2008. With absolutely no action or notice on the part of the BIR for 120 days, Total Gas
had 30 days or until January 25, 2009 to file its judicial claim.

Total Gas, thus, timely filed its judicial claim on January 23, 2009.

2. Judicial claim not prematurely filed

The alleged failure of Total Gas to submit the complete documents at the administrative level did not render its petition for
review with the CTA dismissible for lack of jurisdiction. First, the 120-day period had commenced to run and the 120+30 day
period was, in fact, complied with. As already discussed, it is the taxpayer who determines when complete documents have
been submitted for the purpose of the running of the 120-day period. It must again be pointed out that this in no way precludes
the CIR from requiring additional documents necessary to decide the claim, or even denying the claim if the taxpayer fails to
submit the additional documents requested.

Second, the CIR sent no written notice informing Total Gas that the documents were incomplete or required it to submit
additional documents.

Finally, it should be mentioned that the appeal made by Total Gas to the CTA cannot be said to be premature on the ground
that it did not observe the otherwise mandatory and juridictional 120+30 day period. When Total Gas filed its appeal with the
CTA on January 23, 2009, it simply relied on BIR Ruling No. DA-489-03, which, at that time, was not yet struck down by the
Court's ruling in Aichi. As explained in San Roque, this Court recognized a period in time wherein the 120-day period need not
be strictly observed. Thus:
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the taxpayer. One of the
conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and
jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper, whether
before, during, or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No.
DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+30
day periods as mandatory and jurisdictional.

xxxx

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all taxpayers 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, where this Court held
that the 120+30 day periods are mandatory and jurisdictional.
A distinction must, thus, be made between administrative cases appealed due to inaction and those 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. When a judicial claim for refund or tax credit in the CTA is an appeal of an unsuccessful administrative
claim, the taxpayer has to convince the CTA that the CIR had no reason to deny its claim. It, thus, becomes imperative for the
taxpayer to show the CTA that not only is he entitled under substantive law to his claim for refund or tax credit, but also that he
satisfied all the documentary and evidentiary requirements for an administrative claim. It is, thus, crucial for a taxpayer in a
judicial claim for refund or tax credit to show that its administrative claim should have been granted in the first place.
Consequently, a taxpayer cannot cure its failure to submit a document requested by the BIR at the administrative level by filing
the said document before the CTA.

In the present case, however, Total Gas filed its judicial claim due to the inaction of the BIR. Considering that the administrative
claim was never acted upon; there was no decision for the CTA to review on appeal per se. Consequently, the CTA may give
credence to all evidence presented by Total Gas, including those that may not have been submitted to the CIR as the case is
being essentially decided in the first instance. The Total Gas must prove every minute aspect of its case by presenting and
formally offering its evidence to the CTA, which must necessarily include whatever is required for the successful prosecution of
an administrative claim.40
The Court cannot, however, make a ruling on the issue of whether Total Gas is entitled to a refund or tax credit certificate. The
Court is not a trier of facts, especially when such facts have not been ruled upon by the lower courts. The case shall, thus, be
remanded to the CTA Division for trial de novo.

Side issue: Whether or not the claim of Total Gas should be rejected because it failed to comply with RMO 53-98- NO diri pd
mugawas ang peculiarities sa pagfile sa Total Gas-wala diay na stamp ang date jud.

Anent RMO No. 53-98, the CTA Division found that the said order provided a checklist of documents for the BIR to consider in
granting claims for refund, and served as a guide for the courts in determining whether the taxpayer had submitted complete
supporting documents.

As can be gleaned from RMO No. 53-98, it is addressed to internal revenue officers and employees, for purposes of equity and
uniformity, to guide them as to what documents they may require taxpayers to present upon audit of their tax liabilities.
Nothing stated in the issuance would show that it was intended to be a benchmark in determining whether the documents
submitted by a taxpayer are actually complete to support a claim for tax credit or refund of excess unutilized excess VAT. As
expounded in Commissioner of Internal Revenue v. Team Sual Corporation (formerely Mir ant Sual Corporation):37
The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 of the NIRC. RR 3-88 or RMO K3-Q8 itself that
requires submission of the complete documents enumerated in RMO 53-98 for a grant of a refund or credit of input VAT.
Moreover, if TSC indeed failed to submit the complete documents in support of its application, the CIR could have informed TSC
of its failure, consistent with Revenue Memorandum Circular No. (RMC) 42-03.

As explained earlier and underlined in Team Sual above, taxpayers cannot simply be faulted for failing to submit the complete
documents enumerated in RMO No. 53-98, absent notice from a revenue officer or employee that other documents are
required. Granting that the BIR found that the documents submitted by Total Gas were inadequate, it should have notified
the latter of the inadequacy by sending it a request to produce the necessary documents in order to make a just and
expeditious resolution of the claim.

Indeed, a taxpayer's failure with the requirements listed under RMO No. 53-98 is not fatal to its claim for tax credit or refund
of excess unutilized excess VAT. This holds especially true when the application for tax credit or refund of excess unutilized
excess VAT has arrived at the judicial level. After all, in the judicial level or when the case is elevated to the Court, the Rules of
Court governs. Simply put, the question of whether the evidence submitted by a party is sufficient to warrant the granting of its
prayer lies within the sound discretion and judgment of the Court.
At this point, it is worth emphasizing that the reckoning of the 120-day period from August 28, 2008 cannot be doubted.
First, a review of the records of the case undubitably show that Total Gas filed its supporting documents on August 28,
2008, together with a transmittal letter bearing the same date. These documents were then stamped and signed as received by
the appropriate officer of the BIR.
Second, contrary to RMO No. 40-94, which mandates officials of the BIR to indicate the date of receipt of documents
received by their office in every claim for refund or credit of VAT, the receiving officer failed to indicate the precise date and
time when he received these documents. Clearly, the error is attributable to the BIR officials and should not prejudice Total Gas.
Third, it is observed that whether before the CTA or this Court, the BIR had never questioned the date it received the
supporting documents filed by Total Gas, or the propriety of the filing thereof.
Finally, in consonance with the presumption that a person acts in accordance with the ordinary course of business, it is
presumed that such documents were received on the date stated therein.

If only to settle any doubt, this Court is by no means setting a precedent by leaving it to the mercy of the taxpayer to determine
when the 120- day reckoning period should begin to run by providing absolute discretion as to when he must comply with the
mandate submitting complete documents in support of his claim. In addition to the limitations thoroughly discussed above, the
peculiar circumstance applicable herein, as to relieve Total Gas from the application of the rule, is the obvious failure of the BIR
to comply with the specific directive, under RMO 40-94, to stamp the date it received the supporting documents which Total
Gas had submitted to the BIR for its consideration in the processing of its claim. The utter failure of the tax administrative
agency to comply with this simple mandate to stamp the date it receive the documents submitted by Total Gas - should not in
any manner prejudice the taxpayer by casting doubt as to when it was able to submit its complete documents for purposes of
determing the 120-day period.
While it is still true a taxpayer must prove not only his entitlement to a refund but also his compliance with the procedural due
process38 - it also true that when the law or rule mandates that a party or authority must comply with a specific obligation to
perform an act for the benefit of another, the non-compliance therof by the former should not operate to prejudice the latter,
lest it render the nugatory the objective of the rule. Such is the situation in case at bar.

PAL v CIR

G.R. No. 198759 July 1, 2013

Taxation; Proper party to claim refund. [T]he 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.

In this case, PAL’s franchise grants it an exemption from both direct and indirect taxes on its purchase of petroleum
products.

Withdrawal of PAL’s tax exemption privileges refers only to excise taxes imposed on locally manufactured petroleum
products. [T]he Court observes that the phrase “purchase of domestic petroleum products for use in its domestic
operations” – which characterizes the tax privilege LOI 1483 withdrew – refers only to PAL’s tax exemptions on passed
on excise tax costs due from the seller, manufacturer/producer of locally manufactured/ produced goods for privileges
concerning imported goods, and does not, in any way, pertain to any of PAL’s tax privileges concerning imported goods.

Facts:

 petition for review on certiorari: CTA en banc decision which denied petitioner Philippine Airlines, Inc.’s (PAL) claim for
refund of the excise taxes imposed on its purchase of petroleum products from Caltex Philippines, Inc. (Caltex).
  For the period July 24 to 28, 2004, Caltex sold 804,370 liters of imported Jet A-1 fuel to PAL for the latter’s domestic
operations.4 Consequently, on July 26, 27, 28 and 29, 2004, Caltex electronically filed with the Bureau of Internal
Revenue (BIR) its Excise Tax Returns for Petroleum Products
 On August 3, 2004, PAL received from Caltex an Aviation Billing Invoice for the purchased aviation fuel in the
amount of US$313,949.54, reflecting the amount of US$52,669.33 as the related excise taxes on the transaction.
 On October 29, 2004, PAL, through a letter-request dated October 15, 2004 addressed to respondent Commissioner
of Internal Revenue (CIR), sought a refund of the excise taxes passed on to it by Caltex. It hinged its tax refund claim
on its operating franchise, i.e., Presidential Decree No. 15907 issued on June 11, 1978 (PAL’s franchise), which conferred
upon it certain tax exemption privileges on its purchase and/or importation of aviation gas, fuel and oil, including those
which are passed on to it by the seller and/or importer thereof. Further, PAL asserted that it had the legal personality
to file the aforesaid tax refund claim.
 Due to the CIR’s inaction, PAL filed a Petition for Review with the CTA on July 25, 2006.9 In its Answer, the CIR
averred that since the excise taxes were paid by Caltex, PAL had no cause of action.
 The CTA Division Ruling: denied PAL’s petition on the ground that only a statutory taxpayer (referring to Caltex in this
case) may seek a refund of the excise taxes it paid.12 It added that even if the tax burden was shifted to PAL, the latter
cannot be deemed a statutory taxpayer + PAL’s claim for refund should be denied altogether on account of Letter of
Instruction No. 1483 (LOI 1483) which already withdrew the tax exemption privileges previously granted to PAL on its
purchase of domestic petroleum products. MR denied
 The CTA En Banc Ruling: affirmed the ruling of the CTA Second Division. MR denied

Issues: (a) whether PAL has the legal personality to file a claim for refund of the passed on excise taxes –YES—ky law grants
exemption from payment of indirect taxes man sad daw;

(b) whether the sale of imported aviation fuel by Caltex to PAL is covered by LOI 1483 which withdrew the tax
exemption privileges of PAL on its purchases of domestic petroleum products for use in its domestic operations – NO--
k imported daw ang petroleum sa Caltex; and

(c) whether PAL has sufficiently proved its entitlement to refund – YES—na prove daw sa PAL

Held:

A. PAL’s legal personality to file a claim for refund of excise taxes.

Under Section 129 of the National Internal Revenue Code (NIRC), as amended, excise taxes are imposed on two (2) kinds of
goods, namely: (a) goods manufactured or produced in the Philippines for domestic sales or consumption or for any other
disposition; and (b) things imported.

With respect to the first kind of goods, Section 130 of the NIRC states that, unless otherwise specifically allowed, the taxpayer
obligated to file the return and pay the excise taxes due thereon is the manufacturer/producer.

On the other hand, with respect to the second kind of goods, Section 131 of the NIRC states that the taxpayer obligated to
file the return and pay the excise taxes due thereon is the owner or importer, unless the imported articles are exempt from
excise taxes and the person found to be in possession of the same is other than those legally entitled to such tax exemption.
While the NIRC mandates the foregoing persons to pay the applicable excise taxes directly to the government, they may,
however, shift the economic burden of such payments to someone else – usually the purchaser of the goods – since excise
taxes are considered as a kind of indirect tax.

Jurisprudence states that indirect taxes are those which are demanded in the first instance from one person with the
expectation and intention that he can shift the economic burden to someone else. In this regard, the statutory taxpayer can
transfer to its customers the value of the excise taxes it paid or would be liable to pay to the government by treating it as
part of the cost of the goods and tacking it on to the selling price. Notably, this shifting process, otherwise known as
"passing on," is largely a contractual affair between the parties. Meaning, even if the purchaser effectively pays the value of the
tax, the manufacturer/producer (in case of goods manufactured or produced in the Philippines for domestic sales or
consumption or for any other disposition) or the owner or importer (in case of imported goods) are still regarded as the
statutory taxpayers under the law. To this end, the purchaser does not really pay the tax; rather, he only pays the seller more
for the goods because of the latter’s obligation to the government as the statutory taxpayer.

In this relation, Section 204(c) of the NIRC states that it is the statutory taxpayer which has the legal personality to file a
claim for refund. Accordingly, in cases involving excise tax exemptions on petroleum products under Section 13529 of the
NIRC, the Court has consistently held that it is the statutory taxpayer who is entitled to claim a tax refund based thereon
and not the party who merely bears its economic burden.

However, 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. Precisely, this is the peculiar
circumstance which differentiates the Maceda case from Silkair.

To elucidate, in Maceda, the Court 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,

in Silkair: The exemption granted under Section 135(b) of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement
between RP and Singapore cannot, without a clear showing of legislative intent, be construed as including indirect taxes.
Statutes granting tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority, and if an exemption is found to exist, it must not be enlarged by construction.

Based on these rulings, it may be observed 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.

In this case, PAL’s franchise grants it an exemption from both direct and indirect taxes on its purchase of petroleum
products. Section 13 thereof reads:

SEC. 13. In consideration of the franchise and rights hereby granted, the grantee [PAL] shall pay to the Philippine Government
during the life of this franchise whichever of subsections (a) and (b) hereunder will result in a lower tax:

(a) The basic corporate income tax based on the grantee's annual net taxable income computed in accordance with the
provisions of the National Internal Revenue Code; or

(b) A franchise tax of two per cent (2%) of the gross revenues derived by the grantee from all sources, without
distinction as to transport or nontransport operations; provided, that with respect to international air-transport
service, only the gross passenger, mail, and freight revenues from its outgoing flights shall be subject to this tax.

The tax paid by the grantee under either of the above alternatives shall be in lieu of all other taxes, duties, royalties,
registration, license, and other fees and charges of any kind, nature, or description, imposed, levied, established,
assessed, or collected by any municipal, city, provincial, or national authority or government agency, now or in the future,
including but not limited to the following:

1. All taxes, duties, charges, royalties, or fees due on local purchases by the grantee of aviation gas, fuel, and oil,
whether refined or in crude form, and whether such taxes, duties, charges, royalties, or fees are directly due from or
imposable upon the purchaser or the seller, producer, manufacturer, or importer of said petroleum products but are
billed or passed on the grantee either as part of the price or cost thereof or by mutual agreement or other
arrangement; provided, that all such purchases by, sales or deliveries of aviation gas, fuel, and oil to the grantee shall
be for exclusive use in its transport and nontransport operations and other activities incidental thereto;

2. All taxes, including compensating taxes, duties, charges, royalties, or fees due on all importations by the grantee of
aircraft, engines, equipment, machinery, spare parts, accessories, commissary and catering supplies, aviation gas, fuel,
and oil, whether refined or in crude form and other articles, supplies, or materials; provided, that such articles or
supplies or materials are imported for the use of the grantee in its transport and transport operations and other
activities incidental thereto and are not locally available in reasonable quantity, quality, or price;

xxxx

Based on the above-cited provision, PAL’s payment of either the basic corporate income tax or franchise tax, whichever is
lower, shall be in lieu of all other taxes, duties, royalties, registration, license, and other fees and charges, except only
real property tax. The phrase "in lieu of all other taxes" includes but is not limited to taxes that are "directly due from or
imposable upon the purchaser or the seller, producer, manufacturer, or importer of said petroleum products but are billed or
passed on the grantee either as part of the price or cost thereof or by mutual agreement or other arrangement." In other words,
in view of PAL’s payment of either the basic corporate income tax or franchise tax, whichever is lower, PAL is exempt from
paying: (a) taxes directly due from or imposable upon it as the purchaser of the subject petroleum products; and (b) the cost of
the taxes billed or passed on to it by the seller, producer, manufacturer, or importer of the said products either as part of
the purchase price or by mutual agreement or other arrangement. Therefore, given the foregoing direct and indirect tax
exemptions under its franchise, and applying the principles as above-discussed, PAL is endowed with the legal standing to
file the subject tax refund claim, notwithstanding the fact that it is not the statutory taxpayer as contemplated by law.

Silkair v CIR

G.R. No. 173594 February 6, 2008

Facts:

 Petitioner, Silkair (Singapore) Pte. Ltd. (Silkair), a corporation organized under the laws of Singapore which has a
Philippine representative office, is an online international air carrier operating the Singapore-Cebu-Davao-Singapore,
Singapore-Davao-Cebu-Singapore, and Singapore-Cebu-Singapore routes.
 On December 19, 2001, Silkair filed with the Bureau of Internal Revenue (BIR) a written application for the refund of
P4,567,450.79 excise taxes it claimed to have paid on its purchases of jet fuel from Petron Corporation from January
to June 2000
 As the BIR had not yet acted on the application as of December 26, 2001, Silkair filed a Petition for Review before
the CTA following Commissioner of Internal Revenue v. Victorias Milling Co., Inc., et al.

 Opposing the petition, respondent Commissioner on Internal Revenue (CIR) alleged in his Answer that, among other
things,
o Petitioner failed to prove that the sale of the petroleum products was directly made from a domestic oil
company to the international carrier. The excise tax on petroleum products is the direct liability of the
manufacturer/ producer, and when added to the cost of the goods sold to the buyer, it is no longer a tax
but part of the price which the buyer has to pay to obtain the article. (Emphasis and underscoring supplied)
  CTA denied Silkair’s petition on the ground that as the excise tax was imposed on Petron Corporation as the
manufacturer of petroleum products, any claim for refund should be filed by the latter; and where the burden of tax is
shifted to the purchaser, the amount passed on to it is no longer a tax but becomes an added cost of the goods
purchased.
 Silkair filed a Motion for Reconsideration- denied

Issue: WON pewtitioner is the proper party to claim for refund or tax credit

Held: NO.

Silkair bases its claim for refund or tax credit on Section 135 (b) of the NIRC of 1997 which reads

Sec. 135. Petroleum Products sold to International Carriers and Exempt Entities of Agencies. – Petroleum products
sold to the following are exempt from excise tax:

xxxx

(b) Exempt entities or agencies covered by tax treaties, conventions, and other international agreements for their use
and consumption: Provided, however, That the country of said foreign international carrier or exempt entities or
agencies exempts from similar taxes petroleum products sold to Philippine carriers, entities or agencies; x x x

x x x x,

and Article 4(2) of the Air Transport Agreement between the Government of the Republic of the Philippines and the
Government of the Republic of Singapore (Air Transport Agreement between RP and Singapore) which reads

Fuel, lubricants, spare parts, regular equipment and aircraft stores introduced into, or taken on board aircraft in the
territory of one Contracting party by, or on behalf of, a designated airline of the other Contracting Party and intended
solely for use in the operation of the agreed services shall, with the exception of charges corresponding to the service
performed, be exempt from the same customs duties, inspection fees and other duties or taxes imposed in the
territories of the first Contracting Party , even when these supplies are to be used on the parts of the journey
performed over the territory of the Contracting Party in which they are introduced into or taken on board. The
materials referred to above may be required to be kept under customs supervision and control.

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.37 Section 130 (A) (2) of the NIRC
provides that "[u]nless otherwise specifically allowed, the return shall be filed and the excise tax paid by the manufacturer or
producer before removal of domestic products from place of production." Thus, Petron Corporation, not Silkair, is the
statutory taxpayer which is entitled to claim a refund based on Section 135 of the NIRC of 1997 and Article 4(2) of the Air
Transport Agreement between RP and Singapore.

Even if Petron Corporation passed on to Silkair the burden of the tax, the additional amount billed to Silkair for jet fuel is not
a tax but part of the price which Silkair had to pay as a purchaser.

Silkair nevertheless argues that it is exempt from indirect taxes because the Air Transport Agreement between RP and
Singapore grants exemption "from the same customs duties, inspection fees and other duties or taxes imposed in the territory
of the first Contracting Party."39 It invokes Maceda v. Macaraig, Jr.40 which upheld the claim for tax credit or refund by the
National Power Corporation (NPC) on the ground that the NPC is exempt even from the payment of indirect taxes.

Silkairs’s argument does not persuade. In Commissioner of Internal Revenue v. Philippine Long Distance Telephone Company, this
Court clarified the ruling in Maceda v. Macaraig, Jr., viz:

It may be so that in Maceda vs. Macaraig, Jr., the Court held that an exemption from "all taxes" granted to the National
Power Corporation (NPC) under its charter includes both direct and indirect taxes. But far from providing PLDT
comfort, Maceda in fact supports the case of herein petitioner, the correct lesson of Maceda being that an
 exemption from "all taxes" excludes indirect taxes, unless the exempting statute, like NPC’s charter, is so
couched as to include indirect tax from the exemption. Wrote the Court:

x x x However, the amendment under Republic Act No. 6395 enumerated the details covered by the
exemption. Subsequently, P.D. 380, made even more specific the details of the exemption of NPC to cover,
among others, both direct and indirect taxes on all petroleum products used in its operation. Presidential
Decree No. 938 [NPC’s amended charter] amended the tax exemption by simplifying the same law in general
terms. It succinctly exempts NPC from "all forms of taxes, duties[,] fees…"

The use of the phrase "all forms" of taxes demonstrates the intention of the law to give NPC all the tax
exemptions it has been enjoying before…

xxxx

It is evident from the provisions of P.D. No. 938 that its purpose is to maintain the tax exemption of NPC
from all forms of taxes including indirect taxes as provided under R.A. No. 6395 and P.D. 380 if it is to attain
its goals. (Italics in the original; emphasis supplied)42

The exemption granted under Section 135 (b) of the NIRC of 1997 and Article 4(2) of the Air Transport Agreement between RP
and Singapore cannot, without a clear showing of legislative intent, be construed as including indirect taxes. Statutes granting
tax exemptions must be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing
authority, 43 and if an exemption is found to exist, it must not be enlarged by construction.44
CIR v. Procter and Gamble Philippine Manufacturing Corporation
G.R. No. L-66838
April 15, 1988

Facts:

 Procter and Gamble Philippine Manufacturing Corporation (PMC-Phil.) is a Philippine corporation doing business in the
Philippines and is a wholly owned subsidiary of Procter and Gamble, U.S.A. (PMC-USA)
 PMC USA- a non-resident foreign corporation in the Philippines, not engaged in trade and business in the Philippines.
 PMC-U.S.A. is the sole shareholder or stockholder of PMC Phil., as PMC-U.S.A. owns wholly or by 100% the voting stock
of PMC Phil. and is entitled to receive income from PMC-Phil. in the form of dividends, if not rents or royalties.
 For the taxable year ending June 30, 1974 PMC-Phil. realized a taxable net income of P56,500,332.00 and accordingly
paid the corresponding income tax thereon equivalent to P25%-35%.
 After taxation its net profit was P36,735,216.00. Out of said amount it declared a dividend in favor of its sole corporate
stockholder and parent corporation PMC-U.S.A. in the total sum of P17,707,460.00 which latter amount was subjected
to Philippine taxation of 35% (WITHHOLDING TAX AT SOURCE).
 PMC-Phil., invoking the tax-sparing credit provision in Section 24(b), as the withholding agent of the Philippine
government, with respect to the dividend taxes paid by PMC-U.S.A., filed a claim with the herein petitioner,
Commissioner of Internal Revenue, for the refund of the 20 percentage-point portion of the 35 percentage-point whole
tax paid, arising allegedly from the alleged "overpaid withholding tax at source or overpaid withholding tax in the
amount of P4,832,989.00.

According to them, instead of the 35% tax rate, 15% tax rate should be used pursuant to the tax sparing proviso.

 There being no immediate action by the BIR on PMC-Phils' letter-claim, it latter sought the intervention of the CTA and
filed a petition for review praying that it be declared entitled to the refund or tax credit claimed and ordering
respondent therein to refund to it the amount of P4,832,989.00, or to issue tax credit in its favor in lieu of tax refund.
 Court of Tax Appeals in its decision ruled in favor of the herein petitioner.

Issue:

WON PMC Phil is entitled to the preferential 15% tax rate on dividends declared and remitted to its parent
corporation.- NO

From this issue two questions are posed:

(1) Whether or not PMC-Phil. is the proper party to claim the refund -NO

The petitioner maintains that it is the PMC-U.S.A., the tax payer and not PMC-Phil, the remitter or payor of the dividend
income, and a mere withholding agent for and in behalf of the Philippine Government, which should be legally entitled
to receive the refund if any.

The submission of the Commissioner of Internal Revenue that PMC-Phil. is but a withholding agent of the government
and therefore cannot claim reimbursement of the alleged over paid taxes, is completely meritorious. The real party in interest
being the mother corporation in the United States, it follows that American entity is the real party in interest, and should have
been the claimant in this case.

It will be observed at the outset that petitioner raised this issue for the first time in the Supreme Court. He did not raise
it at the administrative level, nor at the Court of Tax Appeals. As clearly ruled by Us "To allow a litigant to assume a different
posture when he comes before the court and challenges the position he had accepted at the administrative level," would be to
sanction a procedure whereby the Court-which is supposed to review administrative determinations would not review, but
determine and decide for the first time, a question not raised at the administrative forum." Thus it is well settled that under the
same underlying principle of prior exhaustion of administrative remedies, on the judicial level, issues not raised in the lower
court cannot generally be raised for the first time on appeal.

Nonetheless it is axiomatic that the State can never be in estoppel, and this is particularly true in matters involving
taxation. The errors of certain administrative officers should never be allowed to jeopardize the government's financial position.

(2) Whether or not the U. S. allows as tax credit the "deemed paid" 20% Philippine Tax on such dividends?
 The law pertinent to the issue is Section 902 of the U.S. Internal Revenue Code, as amended by Public Law 87-834 (ok Commented [a1]: SEC. 902 - CREDIT FOR CORPORATE
raman gru d basahon ang law nila kay wa d man kayu nice haha tapos wa man sad gani pa ta kasabot sa atung very own NIRC STOCKHOLDERS IN FOREIGN CORPORATION.
haha), the law governing tax credits granted to U.S. corporations on dividends received from foreign corporations, (a) Treatment of Taxes Paid by Foreign Corporation - For
purposes of this subject, a domestic corporation which
To Our mind there is nothing in the aforecited provision that would justify tax return of the disputed 15% to the private owns at least 10 percent of the voting stock of a foreign
respondent. Furthermore, as ably argued by the petitioner, the private respondent failed to meet certain conditions necessary in corporation from which it receives dividends in any taxable
year shall-
order that the dividends received by the non-resident parent company in the United States may be subject to the preferential
(1) to the extent such dividends are paid by such foreign
15% tax instead of 35%. Among other things, the private respondent failed: (1) to show the actual amount credited by the U.S. corporation out of accumulated profits [as defined in
government against the income tax due from PMC-U.S.A. on the dividends received from private respondent; (2) to present the subsection (c) (1) (a)] of a year for which such foreign
income tax return of its mother company for 1975 when the dividends were received; and (3) to submit any duly authenticated corporation is not a less developed country corporation, be
document showing that the U.S. government credited the 20% tax deemed paid in the Philippines. deemed to have paid the same proportion of any income,
war profits, or excess profits taxes paid or deemed to be
paid by such foreign corporation to any foreign country or
to any possession of the United States on or with respect to
such accumulated profits, which the amount of such
dividends (determined without regard to Section 78) bears
to the amount of such accumulated profits in excess of such
income, war profits, and excess profits taxes (other than
CIR v. Wander Philippines those deemed paid); and
(2) to the extent such dividends are paid by such foreign
G.R. No. L-68375, April 15, 1988 corporation out of accumulated profits [as defined in
subsection (c) (1) (b)] of a year for which such foreign
Facts: corporation is a less-developed country corporation, be
deemed to have paid the same proportion of any income,
 Wander Philippines, Inc. - is a domestic corporation organized under Philippine laws. war profits, or excess profits taxes paid or deemed to be
It is wholly-owned subsidiary of the Glaro S.A. Ltd.,a Swiss corporation not engaged in trade or business in the paid by such foreign corporation to any foreign country or
Philippines. to any possession of the United States on or with respect to
such accumulated profits, which the amount of such
 On July 18, 1975, Wander filed its withholding tax return for the second quarter and remitted to its parent company,
dividends bears to the amount of such accumulated profits.
Glaro dividends on which 35% withholding tax thereof was withheld and paid to the Bureau of Internal Revenue. xxx xxx xxx
 Again, on July 14, 1976, Wander filed a withholding tax return for the second on the dividends it remitted to Glaro on (c) Applicable Rules
wich 35% tax was withheld and paid to the Bureau of Internal Revenue. (1) Accumulated profits defined - For purpose of this section,
 Wander filed with the Appellate Division of the Internal Revenue a claim for refund and/or tax credit in the amount of the term 'accumulated profits' means with respect to any
foreign corporation.
P115,400.00, contending that it is liable only to 15% withholding tax in accordance with Section 24 (b) (1) of the Tax (A) for purposes of subsections (a) (1) and (b) (1), the
Code and not on the basis of 35% which was withheld and paid to and collected by the government. amount of its gains, profits, or income computed without
 BIR failed to act on the above-said claim for refund. reduction by the amount of the income, war profits, and
 Wander filed a petition with respondent Court of Tax Appeals. excess profits taxes imposed on or with respect to such
profits or income by any foreign country.... ; and
 CTA ruled in favour of Wander.
(B) for purposes of subsections (a) (2) and (b) (2), the
amount of its gains, profits, or income in excess of the
income, was profits, and excess profits taxes imposed on or
Issue w/ Ruling: with respect to such profits or income.
The Secretary or his delegate shall have full power to
WON Wander is entitled to the preferential rate of 15% withholding tax on dividends declared and remitted to its determine from the accumulated profits of what year or
years such dividends were paid, treating dividends paid in
parent corporation, Glaro- YES
the first 20 days of any year as having been paid from the
accumulated profits of the preceding year or years (unless
From this issue, two questions were posed by petitioner:
to his satisfaction shows otherwise), and in other respects
1. WON Wander is the proper party to claim the refund treating dividends as having been paid from the most
recently accumulated gains, profits, or earnings. .. (Rollo,
Yes. (waah in conflict sa CIR v. Procter and Gamble nga ruling nga ako sad ang nagdigest. Note: same sila ug day nga pp. 55-56)
g-decidean sa court and same sila nga wholly-owned subsidiary of a foreign corp.)

CIR maintains and argues that it is Glaro the tax payer, and not Wander, the remitter or payor of the dividend income
and a mere withholding agent for and in behalf of the Philippine Government, which should be legally entitled to
receive the refund if any.

It will be noted, however, that Petitioner's above-entitled argument is being raised for the first time in this Court. It was
never raised at the administrative level, or at the Court of Tax Appeals. To allow a litigant to assume a different posture when he
comes before the court and challenge the position he had accepted at the administrative level, would be to sanction a
procedure whereby the Court—which is supposed to review administrative determinations—would not review, but determine
and decide for the first time, a question not raised at the administrative forum. Thus, it is well settled that under the same
underlying principle of prior exhaustion of administrative remedies, on the judicial level, issues not raised in the lower court
cannot be raised for the first time on appeal.
 In any event, the submission of petitioner that Wander is but a withholding agent of the government and therefore
cannot claim reimbursement of the alleged overpaid taxes, is untenable. It will be recalled, that said corporation is first and
foremost a wholly owned subsidiary of Glaro. The fact that it became a withholding agent of the government which was not by
choice but by compulsion under Section 53 (b) of the Tax Code, cannot by any stretch of the imagination be considered as an
abdication of its responsibility to its mother company. Thus, this Court construing Section 53 (b) of the Internal Revenue Code
held that "the obligation imposed thereunder upon the withholding agent is compulsory." It is a device to insure the collection
by the Philippine Government of taxes on incomes, derived from sources in the Philippines, by aliens who are outside the taxing
jurisdiction of this Court.

In fact, Wander may be assessed for deficiency withholding tax at source, plus penalties consisting of surcharge and
interest (Section 54, NLRC). Therefore, as the Philippine counterpart, Wander is the proper entity who should for the refund or
credit of overpaid withholding tax on dividends paid or remitted by Glaro.

2. WON Switzerland allows as tax credit the "deemed paid" 20% Philippine Tax on such dividends

YES.

The dispute in this issue lies on the fact that Switzerland does not impose any income tax on dividends received by
Swiss corporation from corporations domiciled in foreign countries.

Section 24 (b) (1) of the Tax Code, as amended by P.D. 369 and 778, the law involved in this case, reads:

Tax on foreign corporations. — 1) Non-resident corporation. A foreign corporation not engaged in trade or business in
the Philippines, including a foreign life insurance company not engaged in the life insurance business in the Philippines, shall pay
a tax equal to 35% of the gross income received during its taxable year from all sources within the Philippines, as interest
(except interest on foreign loans which shall be subject to 15% tax), dividends, premiums, annuities, compensations,
remuneration for technical services or otherwise, emoluments or other fixed or determinable, annual, periodical or casual gains,
profits, and income, and capital gains: ... Provided, still further That on dividends received from a domestic corporation liable to
tax under this Chapter, the tax shall be 15% of the dividends received, which shall be collected and paid as provided in Section
53 (d) of this Code, subject to the condition that the country in which the non-resident foreign corporation is domiciled shall
allow a credit against the tax due from the non-resident foreign corporation taxes deemed to have been paid in the Philippines
equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax (15%) dividends
as provided in this section: ...

From the above-quoted provision, the dividends received from a domestic corporation liable to tax, the tax shall be
15% of the dividends received, subject to the condition that the country in which the non-resident foreign corporation is
domiciled shall allow a credit against the tax due from the non-resident foreign corporation taxes deemed to have been paid in
the Philippines equivalent to 20% which represents the difference between the regular tax (35%) on corporations and the tax
(15%) dividends.

In the instant case, Switzerland did not impose any tax on the dividends received by Glaro. Accordingly, Wander claims
that full credit is granted and not merely credit equivalent to 20%.

CIR avers the tax sparing credit is applicable only if the country of the parent corporation allows a foreign tax credit not
only for the 15 percentage-point portion actually paid but also for the equivalent twenty percentage point portion spared,
waived or otherwise deemed as if paid in the Philippines; that private respondent does not cite anywhere a Swiss law to the
effect that in case where a foreign tax, such as the Philippine 35% dividend tax, is spared waived or otherwise considered as if
paid in whole or in part by the foreign country, a Swiss foreign-tax credit would be allowed for the whole or for the part, as the
case may be, of the foreign tax so spared or waived or considered as if paid by the foreign country.

While it may be true that claims for refund are construed strictly against the claimant, nevertheless, the fact that
Switzerland did not impose any tax or the dividends received by Glaro from the Philippines should be considered as a full
satisfaction of the given condition. For, as aptly stated by respondent Court, to deny private respondent the privilege to
withhold only 15% tax provided for under Presidential Decree No. 369, amending Section 24 (b) (1) of the Tax Code, would run
counter to the very spirit and intent of said law and definitely will adversely affect foreign corporations" interest here and
discourage them from investing capital in our country.

Accordingly, the withholding tax rate of 15% is hereby affirmed.