Abakada Guro Partylist v.
PROCEDURAL ISSUES:
Ermita
September 1, 2005
FACTS:
 RA 9337 is not unconstitutional by the very fact
that every law enjoys in its favor the presumption
of constitutionality. Petitioners failed to justify
their call for the invalidity of the law.
 ABAKADA GURO Party List, et al., filed a petition
for prohibition questioning the constitutionality of
Sections 4, 5 and 6 of R.A. No. 9337, amending
Sections 106, 107 and 108, respectively, of the
NIRC
 Section 4 imposes a 10% VAT on sale of goods and
properties
 Section 5 imposes a 10% VAT on importation of
goods
 Section 6 imposes a 10% VAT on sale of services
and use or lease of properties.
 These questioned provisions contain a uniform
proviso authorizing the President, upon
recommendation of the Secretary of Finance, to
raise the VAT rate to 12%, effective January 1,
2006, after the satisfaction of some conditions
 Association of Pilipinas Shell Dealers, Inc.,
contends that Section 8, amending Section 110
(A)(2) and Section 110 (B) as well as Section 12,
amending Section 114 (c) of the NIRC, of the
NIRC, being arbitrary, oppressive, excessive and
confiscatory
 This is because these are violations of Article 3
Section1 of the Constitution where it impose
limitations on the amount of input tax that may be
claimed
 CONTENTION OF THE PETITIONERS: input tax
partakes the nature of a property that may not be
confiscated, appropriated, or limited without due
process of law. Petitioners further contend that
like any other property or property right, the input
tax credit may be transferred or disposed of, and
that by limiting the same, the government gets to
tax a profit or value-added even if there is no profit
or value-added.
 Also these are violations of the constitutional
guarantee of equal protection of the law under
Article III, Section 1 of the Constitution,
 It violates also Article VI, Section 28(1) of the
Constitution where smaller businesses with higher
input tax to output tax ratio that will suffer the
consequences thereof for it wipes out whatever
meager margins the petitioners make.
 OSG  in behalf of the respondents, contend that
R.A. No. 9337 enjoys the presumption of
constitutionality and petitioners failed to cast
doubt on its validity.
Page | 1
Whether R.A. No. 9337 violates the provisions of the
Constitution
SUBSTANTIVE ISSUES:
Whether Sections 4, 5 and 6 of R.A. No. 9337, amending
Sections 106, 107 and 108 of the NIRC, violates the
Constitution
Whether Section 8 of R.A. No. 9337, amending Sections
110(A)(2) and 110(B) of the NIRC; and Section 12 of
R.A. No. 9337, amending Section 114(C) of the NIRC,
violates the Constitution
HELD:
 The VAT is a tax on spending or consumption. It is
levied on the sale, barter, exchange or lease of goods
or properties and services. Being an indirect tax on
expenditure, the seller of goods or services may pass
on the amount of tax paid to the buyer, with the
seller acting merely as a tax collector. The burden of
VAT is intended to fall on the immediate buyers and
ultimately, the end-consumers.
 PROCEDURAL ISSUES: In Tolentino vs. Secretary
of Finance, the Court already made the
pronouncement that if a change is desired in the
practice [of the Bicam Conference Committee] it
must be sought in Congress since this question is not
covered by any constitutional provision but is only an
internal rule of each house. The Congress has not
seen it fit to make such changes adverted to by the
Court. It seems, therefore, that Congress finds the
practices of the bicameral conference committee to be
very useful for purposes of prompt and efficient
legislative action.
 SUBSTANTIVE ISSUES: no
 Clearly, the legislature may delegate to executive
officers or bodies the power to determine certain
facts or conditions, or the happening of
contingencies, on which the operation of a statute is,
by its terms, made to depend, but the legislature
must prescribe sufficient standards, policies or
limitations on their authority. While the power to
tax cannot be delegated to executive agencies, details
as to the enforcement and administration of an
exercise of such power may be left to them, including
the power to determine the existence of facts on
which its operation depends.
 The rationale for this is that the preliminary
ascertainment of facts as basis for the enactment of
legislation is not of itself a legislative function, but is
simply ancillary to legislation. Thus, the duty of
correlating information and making
recommendations is the kind of subsidiary activity
which the legislature may perform through its
members, or which it may delegate to others to
perform. Intelligent legislation on the complicated
problems of modern society is impossible in the
absence of accurate information on the part of the
legislators, and any reasonable method of securing
such information is proper.
Taxation Law 2
Abakada Guro Partylist v. that recognizes a capitalist economy that the
enterprise has a right to its profits. Today, the
Ermita Court instead affirms that there is no such right.
Should capital flight ensue, the phenomenom
October 18, 2005
should not be blamed on investors in view of our
judicial systems rejection of capitalisms
(Dissenting Opinion) fundamental precept.

FACTS: I hesitate to say this, but there will be confusion,

 I pointed out in my Dissenting Opinion that instability, and multiple fatalities within the
under current accepted international accounting business sector with the enforcement of the
standards, the 30% prepaid input VAT would be amendments of Section 8 and 12 of the E-VAT Law.
recorded as a loss in the accounting books, since It could have been stopped through the allowance of
the possibility of its recovery is improbable, the petition in G.R. No. 168461, but regrettably the
considering that the E-VAT Law allows its Court did not act.
recovery only after the business has ceased to
exist. Even the Bureau of Internal Revenue itself
has long recognized the unutilized input VAT as HELD:
an asset.
 The majority fails to realize that even under the
new E-VAT Law, the State recognizes that the
persons who pre-pay that input VAT, usually the
dealers or retailers, are not the persons who are
liable to pay for the tax. The VAT system, as
implemented through the previous VAT law and
the new E-VAT Law, squarely holds the end
consumer as the taxpayer liable to shoulder the
input VAT. Nonetheless, under the mechanism
foisted in the new E-VAT Law, the dealer or
retailer who pre-pays the input VAT is virtually
precluded from recovering the pre-paid input
VAT, since the law only allows such recovery
upon the cessation of the business. Indeed, the
only way said class of taxpayers can recover this
pre-paid input VAT was if it were to cease
operations at the end of every quarter.
 The pre-paid input VAT, for which the petitioners
and other similarly situated taxpayers are not
even ultimately liable in the first place,
represents in tangible terms an actual loss. To
put it more succinctly, when the taxpayer prepays
the 30% input VAT, there is no chance for its
recovery except until after the taxpayer ceases to
be such. This point is crucial, as it goes in the
heart of the constitutional challenge raised by the
petitioners. A recognition that the input VAT is a
property asset places it squarely in the ambit of
the due process clause.

As stated in my Dissenting Opinion, the

Constitution itself recognizes a right to income and
profit when it recognizes the right of enterprises to
reasonable returns on investments, and to
expansion and growth.[6] Section 20, Article II of
the Constitution further mandates that the State
recognize the indispensable role of the private
sector, the encouragement of private enterprise,
and the provision of incentives to needed
investments.[7] Indeed, there is a fundamental
recognition in any form of democratic government

Page | 2 Taxation Law 2

Commissioner of Internal
Revenue v. Acesite (Phil)
HELD:
Hotel Corporation
February 16, 2007
FACTS:
 Acesite is the owner and operator of the Holiday
Inn Manila Pavilion Hotel along United Nations
Avenue in Manila. It leases 6,768.53 square
meters of the hotels premises to the Philippine
Amusement and Gaming Corporation [hereafter,
PAGCOR] for casino operations. It also caters
food and beverages to PAGCORs casino patrons
through the hotels restaurant outlets. For the
period January (sic) 96 to April 1997, Acesite
incurred VAT amounting to P30,152,892.02 from
its rental income and sale of food and beverages
to PAGCOR during said period. Acesite tried to
shift the said taxes to PAGCOR by incorporating
it in the amount assessed to PAGCOR but the
latter refused to pay the taxes on account of its
tax exempt status.
 Thus, PAGCOR paid the amount due to Acesite
minus the P30,152,892.02 VAT while the latter
paid the VAT to the Commissioner of Internal
Revenue [hereafter, CIR] as it feared the legal
consequences of non-payment of the tax.
However, Acesite belatedly arrived at the
conclusion that its transaction with PAGCOR was
subject to zero rate as it was rendered to a tax-
exempt entity. On 21 May 1998, Acesite filed an
administrative claim for refund with the CIR but
the latter failed to resolve the same. Thus on 29
May 1998, Acesite filed a petition with the Court
of Tax Appeals [hereafter, CTA] which was
decided in this wise:
 As earlier stated, Petitioner is subject to zero
percent tax pursuant to Section 102 (b)(3) [now
106(A)(C)] insofar as its gross income from
rentals and sales to PAGCOR, a tax exempt
entity by virtue of a special law. Accordingly, the
amounts of P21,413,026.78 and P8,739,865.24,
representing the 10% EVAT on its sales of food
and services and gross rentals, respectively from
PAGCOR shall, as a matter of course, be refunded
to the petitioner for having been inadvertently
remitted to the respondent.
 Thus, taking into consideration the prescribed
portion of Petitioners claim for refund of
P98,743.40, and considering further the principle
of solutio indebiti which requires the return of
what has been delivered through mistake
Section 108 (B)(3) of the Tax Code of 1997)
legally applies to Acesite
 PAGCOR is exempt from payment of
indirect taxes
 Section 13 of P.D. 1869, the charter creating
PAGCOR, grants the latter an exemption
from the payment of taxes. However, a close
scrutiny of the above provisos clearly gives
PAGCOR a blanket exemption to taxes with
no distinction on whether the taxes are
direct or indirect. We are one with the CA
ruling that PAGCOR is also exempt from
indirect taxes, like VAT.
 Extending the exemption to entities or
individuals dealing with PAGCOR, the
legislature clearly granted exemption also
from indirect taxes. It must be noted that
the indirect tax of VAT, as in the instant
case, can be shifted or passed to the buyer,
transferee, or lessee of the goods,
properties, or services subject to VAT. Thus,
by extending the tax exemption to entities
or individuals dealing with PAGCOR in
casino operations, it is exempting PAGCOR
from being liable to indirect taxes.
 Thus, while it was proper for PAGCOR not
to pay the 10% VAT charged by Acesite, the
latter is not liable for the payment of it as it
is exempt in this particular transaction by
operation of law to pay the indirect tax.
Such exemption falls within the former
Section 102 (b) (3) of the 1977 Tax Code, as
amended

ISSUES:
 Whether PAGCORs tax exemption privilege
includes the indirect tax of VAT to entitle
Acesite to zero percent (0%) VAT rate
 Whether the zero percent (0%) VAT rate under
then Section 102 (b)(3) of the Tax Code (now
Page | 3 Taxation Law 2
Commissioner of Internal of Revenue Memorandum Order No. 43-90
dated September 20, 1990).
Revenue v. Sony
Philippines, Inc.
November 17, 2010

In November 1998, the Commissioner of

Internal Revenue issued a Letter of Authority
numbered 19734 (LOA 19734) which
authorized certain revenue examiners to
examine Sony Philippines’ books of accounts
regarding revenue taxes for “the period 1997
and unverified prior years.”

After the examination of said books, the CIR

found out, among others, that Sony Philippines
is liable for deficiency taxes and penalties for
value added tax amounting to P11,141,014.41.

Sony Philippines contested such finding as it

argued that the basis used by the CIR to assess
said deficiency were the records covering the
period of January 1998 through March 1998
which was a period not covered by the letter of
authority so issued. The CIR countered that
the LOA phrase “the period 1997 and
unverified prior years” should be understood to
mean the fiscal year ending on March 31, 1998.

Eventually the case reached the Court of Tax

Appeals and the CTA decided agreed with
Sony Philippines on this one. So did the CTA
en banc.

ISSUES:
Whether or not the CIR is correct

HELD:
No. The LOA issued is clear on which period is
covered by the examination to be conducted.
It’s only meant to cover the year “1997 and
unverified prior years” not the year 1998. The
revenue officers who examined the records
covering the period of January to March 1998
had exceeded the jurisdiction granted to them
by the LOA.

Further, the LOA which covered “1997 and

unverified prior years” is in violation of the
principle that a Letter of Authority should
cover a taxable period not exceeding one
taxable year. If the audit of a taxpayer shall
include more than one taxable period, the
other periods or years shall be specifically
indicated in the LOA (as embodied in Section C
Page | 4 Taxation Law 2
Fort Bonifacio Development VAT on its sale of real properties given its nature
as a real estate dealer and if so (i) is the
Corporation v. transitional input VAT applied only to the
improvements on the real property or is it applied
Commissioner of Internal on the value of the entire real property and (ii)
should there have been a previous tax payment for
Revenue the transitional input VAT to be creditable?
November 19, 2014
HELD:
FACTS:  YES. Petitioner is entitled to claim transitional
 Petitioner was a real estate developer that bought input VAT based on the value of not only the
from the national government a parcel of land improvements but on the value of the entire real
that used to be the Fort Bonifacio military property and regardless of whether there was in
reservation. At the time of the said sale there was fact actual payment on the purchase of the real
as yet no VAT imposed so Petitioner did not pay property or not.
any VAT on its purchase. Subsequently,  The amendments to the VAT law do not show
Petitioner sold two parcels of land to Metro any intention to make those in the real estate
Pacific Corp. In reporting the said sale for VAT business subject to a different treatment from
purposes (because the VAT had already been those engaged in the sale of other goods or
imposed in the interim), Petitioner claimed properties or in any other commercial trade or
transitional input VAT corresponding to its business. On the scope of the basis for
inventory of land. The BIR disallowed the claim of determining the available transitional input
presumptive input VAT and thereby assessed VAT, the CIR has no power to limit the meaning
Petitioner for deficiency VAT. and coverage of the term "goods" in Section 105
 PETITIONER: claims that "the 10% value- of the Tax Code without statutory authority or
added tax is based on the gross selling price basis. The transitional input tax credit operates
or gross value in money of the ‘goods’ sold, to benefit newly VAT-registered persons,
bartered or exchanged." Petitioner likewise whether or not they previously paid taxes in the
claims that by definition, the term "goods" acquisition of their beginning inventory of goods,
was limited to "movable, tangible objects materials and supplies.
which is appropriable or transferable" and
that said term did not originally include
"real property," as defined by BIR.
 Among the new provisions included by Executive
Order No. 273 in the NIRC was Section 105:
Transitional Input Tax Credits. — A person who
becomes liable to value-added tax or any person
who elects to be a VAT registered person shall,
subject to the filing of an inventory as prescribed
by regulations, be allowed input tax on his
beginning inventory of goods, materials and
supplies equivalent to 8%of the value of such
inventory or the actual value-added tax paid on
such goods, materials and supplies, whichever is
higher, which shall be creditable against the
output tax.
 RESPONDENT: Claims that the 8% input
tax credit provided for in Section 105 of the
NIRC, in relation to Section 100 thereof, is
based on the value of the improvements on
the land. The taxpayer is entitled to the
input tax credit provided for in Section 105
of the NIRC only if it has previously paid
VAT or sales taxes on its inventory of land.
Section 4.105-1 of Revenue Regulations No.
7-95 of the BIR is valid, effective and has
the force and effect of law, which
implemented Section 105 of the NIRC.

ISSUES:
Is Petitioner entitled to claim the transitional input
Page | 5 Taxation Law 2
LVM Construction
Corporation v. Sanchez
December 5, 2011
FACTS:
Petitioner LVM Construction Corporation (LVM) is
a duly licensed construction firm primarily engaged
in the construction of roads and bridges for the
Department of Public Works and Highways. The
construction of the Arterial Road Link Development
Project in Southern Leyte was awarded to LVM. It
sub-contracted approximately 30% of the contract
amount with the Joint Venture composed of
respondents F.T. Sanchez Corporation, Socor
Construction Corporation and Kimwa Construction
Development Corporation for the contract price of
P90,061,917.25 which was later on reduced to
P86,318,478.38. The Joint Venture sent LVM a
total of 27 Billings. For Billing Nos. 1 to 26, LVM
paid the Joint Venture the total sum of
P80,414,697.12 and retained the sum of
P8,041,469.79 by way of the 10% retention
stipulated in the Sub-Contract Agreement. For
Billing No. 27 in the sum of P5,903,780.96, on the
other hand, LVM paid the Joint Venture the partial
sum of P2,544,934.99 on 31 May 2001, claiming
that it had not yet been fully paid by the DPWH.
Finding that the delays incurred by the Joint
Venture were justified, the Construction Industry
Arbitration Commission likewise denied LVM’s
counterc laim for liquidated damages for lack of
contractual basis. The CIAC rendered its decision
granting the Joint Ventures claims for the payment
of the retention money for Billing Nos. 1 to 26 as
well as the interest thereon and the unpaid balance
billing from 6 August 1999 to 1 January 2006 in the
aggregate sum of P11,307,646.68. Discounting the
contractual and legal bases for LVMs claim that it
had the right to offset its E-VAT payments from the
retention money still in its possession, the CIAC
ruled that the VAT deductions the DPWH made
from its payments to LVM were for the whole
project and already included all its supplies and
subcontractors. Instead of withholding said
retention money, LVM was determined to have to
its credit and for its use the input VAT
corresponding to the 10% equivalent VAT paid by
the Joint Venture based on the BIR-registered
official receipts it issued. Elevated by LVM to the
CA through a petition for review but the CA the
affirmed the CIACs decision in toto
ISSUES:
Whether or not the joint venture is liable for the
8.5% E-VAT
Whether or not the respondents are deemed to have
already paid value added tax merely because
respondents had allegedly issued receipts for
services rendered.
Page | 6
LEGAL BASIS:
Section 114. Return and Payment of Value-Added
Tax. (C) Withholding of Creditable Value-added
Tax. - The Government or any of its political
subdivisions, instrumentalities or agencies,
including government-owned or -controlled
corporations (GOCCs) shall, before making
payment on account of each purchase of goods from
sellers and services rendered by contractors which
are subject to the value-added tax imposed in
Sections 106 and 108 of this Code, deduct and
withhold the value-added tax due at the rate of
three percent (3%) of the gross payment for the
purchase of goods and six percent (6%) on gross
receipts for services rendered by contractors on
every sale or instalment payment which shall be
creditable against the value-added tax liability of
the seller or contractor: Provided, however, That in
the case of government public works contractors,
the withholding rate shall be eight and one-half
percent (8.5%): Provided, further, That the payment
for lease or use of properties or property rights to
nonresident owners shall be subject to ten percent
(10%) withholding tax at the time of payment. For
this purpose, the payor or person in control of the
payment shall be considered as the withholding
agent.
HELD:
No. There was no provision in the Sub-Contract
Agreement that would hold Sanchez liable for EVAT on
the amounts paid to it by LVM. As pointed out by the
CIAC in its Award, the contract documents provide only
for the payment of the awarded cost of the project less
9%. Any other deduction must be clearly stated in the
provisions of the contract or upon agreement of the
parties. The tribunal finds no provision that EVAT will
be deducted from the sub-contractor. If [the Joint
Venture] should pay or share in the payment of the
EVAT, it must be clearly defined in the sub-contract
agreement. Indeed, a contract constitutes the law
between the parties who are, therefore, bound by its
stipulations which, when couched in clear and plain
language, should be applied according to their literal
tenor.
Yes. Under the VAT Law, everyone must pay 10% VAT
based on their issued official receipts. These receipts
must be official receipts and registered with the BIR.
Elucidating further, CIAC pointed out that Sanchez,
under the contract was required to issue official receipts
registered with the BIR for every payment LVM makes
for the progress billings, which it did. For these official
receipts issued by Sanchez to LVM, Sanchez already paid
10% VAT to the BIR, thus: Respondent LVM must pay its
output Vat based on its receipts. Complainant Sanchez
must also pay output VAT based on its receipts. The law
however allow each entity to deduct the input VAT based
on the official receipts issued to it. Clearly, therefore,
respondent LVM, has to its credit the 10% output VAT
paid by claimant Joint Venture based on the official
receipts issued to it. Respondent [LVM] can use this
input VAT to offset any output VAT respondent LVM
must pay for any of its other projects.
Taxation Law 2
Commissioner of Internal
Revenue v. Mirant Pagbilao
Corporation
September 12, 2008

FACTS:
 Mirant filed its final adjusted Annual
Income Tax Return for fiscal year
ending 1999 declaring a net loss. It then
amended the said return this time
reflecting an increased net loss and
showing that it opted to carry over as
tax credit its overpayment to the
succeeding taxable year. This excess tax
credit was unutilized in 2000 as Mirant
still reported a net loss. Mirant then
filed a claim for refund of its excess
creditable income tax for 1999.

ISSUES:
 Can Mirant claim for refund its excess
credits from 1999?

HELD:
 NO. Mirant’s choice to carry over its
1999 excess income tax credit to
succeeding taxable years is irrevocable,
regardless of whether it was able to
actually apply the said amount to a tax
liability. It is a mistake to understand
the phrase "for that taxable period" as a
prescriptive period for the irrevocability
rule – i.e., that since the tax credit in
this case was acquired in 1999, and
Respondent opted to carry it over to
2000, then the irrevocability of the
option to carry over expired by the end
of 2000, leaving Respondent free to
again take another option as regards its
1999 excess income tax credit. The
Court ruled that this interpretation
effectively renders nugatory the
irrevocability rule.

Page | 7 Taxation Law 2

Commissioner of Internal
Revenue v. Aichi Forging
Company of Asia, Inc.
October 6, 2010
FACTS:
Respondent Aichi filed a claim for refund/credit
of input VAT for the period July 1, 2002 to
September 30, 2002, with the petitioner
Commissioner of Internal Revenue (CIR),
through the Department of Finance (DOF)
One-Stop Shop Inter-Agency Tax Credit and
Duty Drawback Center.On even date,
respondent filed a Petition for Review with the
CTA for the refund/credit of the same input
VAT. The CTA partially granted the petition.
In a Motion for Reconsideration, petitioner
argued that the simultaneous filing of the
administrative and the judicial claims
contravenes Sections 112 and 229 of the NIRC
and a prior filing of an administrative claim is
a “condition precedent” before a judicial claim
can be filed. The CTA En Banc affirmed the
division ruling.
ISSUES:
Whether the respondent’s judicial and
administrative claims for tax refund/credit
were filed within the two-year prescriptive
period as provided in Sections 112(A) and 229
of the NIRC.
HELD:
NO.
The two-year period to file a claim for tax
refund/credit for the period July 1, 2002 to
September 30, 2002 expired on September 30,
2004. Hence, respondent’s administrative
claim was timely filed.The filing of the judicial
claim was premature. However,
notwithstanding the timely filing of the
administrative claim, [the Supreme Court is]
constrained to deny respondent’s claim for tax
refund/credit for having been filed in violation
of Section 112(D). 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 case of full or partial denial
by the CIR, the taxpayer’s recourse is to file an
appeal before the CTA within 30 days from
receipt of the decision of the CIR. However, if
after the 120-day period the CIR fails to act on
Page | 8
the application for tax refund/credit, the
remedy of the taxpayer is to appeal the
inaction of the CIR to CTA within 30 days.
In this case, the administrative and the
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. For this reason, we find
the filing of the judicial claim with the CTA
premature. 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.
DOCTRINE:
– The CIR has 120 days, from the date of the
submission of the complete documents within
which to grant or deny the claim for
refund/credit of input vat. In case of full or
partial denial by the CIR, the taxpayer’s
recourse is to file an appeal before the CTA
within 30 days from receipt of the decision of
the CIR. However, if after the 120-day period
the CIR fails to act on the application for tax
refund/credit, the remedy of the taxpayer is to
appeal the inaction of the CIR to CTA within
30 days.
– A taxpayer is entitled to a refund either by
authority of a statute expressly granting such
right, privilege, or incentive in his favor, or
under the principle of solutio indebiti requiring
the return of taxes erroneously or illegally
collected. In both cases, a taxpayer must prove
not only his entitlement to a refund but also
his compliance with the procedural due
process.
– As between the Civil Code and the
Administrative Code of 1987, it is the latter
that must prevail being the more recent law,
following the legal maxim, Lex posteriori
derogat priori.
– The phrase “within two (2) years x x x apply
for the issuance of a tax credit certificate or
refund” under Subsection (A) of Section 112 of
the NIRC refers to applications for
refund/credit filed with the CIR and not to
appeals made to the CTA.
Taxation Law 2
Western Mindanao Power In a claim for tax refund or tax credit, the
applicant must prove not only entitlement to
Corporation v. the grant of the claim under substantive law.
It must also show satisfaction of all the
Commissioner of Internal documentary and evidentiary requirements for
Revenue an administrative claim for a refund or tax
June 13, 2012 credit. Hence, the mere fact that petitioner’s
application for zero-rating has been approved
FACTS: by the CIR does not, by itself, justify the grant
 Petitioner WMPC is a domestic corporation of a refund or tax credit. The taxpayer claiming
engaged in the production and sale of the refund must further comply with the
electricity. invoicing and accounting requirements
 It is registered with the BIR as a VAT mandated by the NIRC, as well as by revenue
taxpayer. regulations implementing them.
 Petitioner alleges that it sells electricity Under the NIRC, a creditable input tax should
solely to the National Power Corporation be evidenced by a VAT invoice or official
(NPC), which is in turn exempt from the receipt, which may only be considered as such
payment of all forms of taxes, duties, fees when it complies with the requirements of RR
and imposts. 795, particularly Section 4.1081. This section
 In view thereof and pursuant to Section requires, among others, that if the sale is
108(B) of the NIRC petitioner’s power subject to zero percent (0%) value-added tax,
generation services to NPC is zero-rated. the term zero-rated sale shall be written or
 WMPC filed with the CIR applications for a printed prominently on the invoice or receipt.
tax credit certificate of its input VAT.
 Noting that the CIR was not acting on its
application, and fearing that its claim would
soon be barred by prescription, WMPC filed
with the CTA a Petition for Review.
 The CIR filed its Comment on the CTA
Petition, arguing that WMPC was not
entitled to the latter’s claim for a tax refund
in view of its failure to comply with the
invoicing requirements – they failed to put
the word zero rated imprinted on the invoice
covering zero rated Sales.
 WMPC countered that the invoicing and
accounting requirements laid down in RR
795 were merely compliance requirements,
which were not indispensable to establish
the claim for refund of excess and unutilized
input VAT.

ISSUES:
Whether the CTA seriously erred in dismissing
the claim of petitioner for a refund or tax credit
on input tax on the ground that the latter’s
Official Receipts do not contain the phrase zero
rated

HELD:
Thus, a taxpayer engaged in zero-rated or
effectively zero-rated sale may apply for the
issuance of a tax credit certificate or refund of
creditable input tax due or paid, attributable to
the sale.
Page | 9 Taxation Law 2
Commissioner of Internal
Revenue v. San Roque
Power Corporation
February 12, 2013
FACTS:
 On October 11, 1997, [San Roque] entered into a
Power Purchase Agreement ("PPA") with the
National Power Corporation ("NPC") to develop
hydro-potential of the Lower Agno River and
generate additional power and energy for the
Luzon Power Grid, by building the San Roque
 Multi-Purpose Project located in San Manuel,
Pangasinan. The PPA provides, among others,
that [San Roque] shall be responsible for the
design, construction, installation, completion,
testing and commissioning of the Power Station
and shall operate and maintain the same,
subject... to NPC instructions. During the
cooperation period of twenty-five (25) years
commencing from the completion date of the
Power Station, NPC will take and pay for all
electricity available from the Power Station.
 On the construction and development of the San
Roque Multi-Purpose Project which comprises of
the dam, spillway and power plant, [San Roque]
allegedly incurred, excess input VAT in the
amount of P559,709,337.54 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 P559,709,337.54, representing
unutilized input taxes as declared in its VAT
returns for taxable year 2001.
 However, on March 28, 2003, [San Roque] filed
amended Quarterly VAT Returns for the year
2001 since it increased its unutilized input VAT
to the amount of P560,200,283.14. Consequently,
[San Roque] filed with the BIR on even date,
separate amended claims for refund in the...
aggregate amount of P560,200,283.14.
 [CIR's] inaction on the subject claims led to the
filing by [San Roque] of the Petition for Review
with the Court [of Tax Appeals] in Division on
April 10, 2003.
 Lastly, it is apparent from the following
provisions of Revenue Memorandum Circular
No. 49-03 dated August 18, 2003, that [the CIR]
knows that claims for VAT refund or tax credit
filed with the Court [of Tax Appeals] can proceed
simultaneously with the ones filed with the
BIR... and that taxpayers need not wait for the
lapse of the subject 120-day period
ISSUES:
The Court of Tax Appeals En Banc erred in holding
that [San Roque's] claim for refund was not
prematurely filed
Page | 10
HELD:
 On 10 April 2003, a mere 13 days after it filed its
amended administrative claim with the
Commissioner on 28 March 2003, San Roque filed
a Petition for Review with the CTA docketed as
CTA Case No. 6647. From this we gather two
crucial facts: first, San Roque did not wait... for
the 120-day period to lapse before filing its
judicial claim; second, San Roque filed its judicial
claim more than four (4) years before the
Atlas[45] doctrine, which was promulgated by the
Court on 8 June 2007.
 Clearly, 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 or credit. It is indisputable that
compliance with the 120-day waiting period is...
mandatory and jurisdictional. The waiting period,
originally fixed at 60 days only, was part of the
provisions of the first VAT law, Executive Order
No. 273, which took effect on 1 January 1988. The
waiting period was extended to 120 days effective
1 January 1998 under RA
 8424 or the Tax Reform Act of 1997. Thus, the
waiting period has been in our statute books for
more than fifteen (15) years before San Roque
filed its judicial claim.
 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. Philippine jurisprudence is
replete with cases upholding and reiterating these
doctrinal principles.
 It is hornbook doctrine that a person committing
a void act contrary to a mandatory provision of
law cannot claim or acquire any right from his
void act. A right cannot spring in favor of a person
from his own void or illegal act.
 This law is clear, plain, and unequivocal.
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.
Taxation Law 2
Nippon Express (Phil)
Corporation v.
Commissioner of Internal
Revenue
March 13, 2013
FACTS:
 Petitioner Nippon Express (Philippines)
Corporation (petitioner) is a corporation duly
organized and registered with the Securities and
Exchange Commission. It is also a value-added
tax (VAT)-registered entity with the Large
Taxpayer District of the Bureau of Internal
Revenue (BIR).[2] For the year 2001, it regularly
filed its amended quarterly VAT returns.
 On April 24, 2003, it filed an administrative claim
for refund of ?20,345,824.29 representing excess
input tax attributable to its effectively zero-rated
sales in 2001
 Pending review by the BIR, on April 25, 2003,
petitioner filed a petition for review with the
CTA, requesting for the issuance of a tax credit
certificate in the amount of P20,345,824.29.
 On January 26, 2009, the First Division of the
CTA denied the petition for insufficiency of
evidence.
 The CTA First Division took judicial notice of the
records of C.T.A. Case No. 6967, also involving
petitioner, to show that the claim of input tax had
not been applied against any output tax in the
succeeding quarters. As to the timeliness of the
filing of petitioner's administrative and judicial
claims, the CTA First Division ruled that while
the administrative application for refund was
made within the two-year prescriptive period,
petitioner's immediate recourse to the court was a
premature invocation of the court's jurisdiction
due to the non-observance of the procedure in
Section 112(D)[7] of the National Internal
Revenue Code (NIRC) providing that an appeal
may be made with the CTA within 30 days from
the receipt of the decision of the CIR denying the
claim or after the expiration of the 120-day period
without action on the part of the CIR.
Considering, however, that the CIR did not
register his objection when he filed his Answer,
he is deemed to have waived his objection
thereto.[8] The CIR sought reconsideration but
his motion was denied in the June 16, 2009
Resolution[9] of the CTA First Division.
 In its May 13, 2011 Resolution,[14] the CTA En
Banc held that the 120-day period under Section
112(D) of the NIRC, which granted the CIR the
opportunity to act on the claim for refund, was
jurisdictional in nature such that petitioner's
failure to observe the said period before resorting
to judicial action warranted the dismissal of its
petition for review for having been prematurely
Page | 11
filed, in accordance with the ruling in
Commissioner of Internal Revenue v. Aichi
Forging Company of Asia, Inc.[15] With respect
to the use of official receipts interchangeably with
sales invoices, the tax court cited the ruling of the
Court in Kepco Philippines Corporation v.
Commissioner of Internal Revenue[16] which
concluded that a VAT invoice and a VAT receipt
should not be confused as referring to the same
thing. A VAT invoice was the seller's best
proof of the sale of the goods or services to
the buyer while the VAT receipt was the
buyer's best evidence of the payment of
goods and services received from the seller.
ISSUES:
WON the CTA has jurisdiction over the case
HELD:
 NO
 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.
 A simple reading of the abovequoted provision
reveals that the taxpayer may appeal the denial
or the inaction of the CIR only within thirty (30)
days from receipt of the decision denying the
claim or the expiration of the 120-day period
given to the CIR to decide the claim. Because the
law is categorical in its language, there is no need
for further interpretation by the courts and non-
compliance with the provision cannot be justified.
 Based on the foregoing discussion and the ruling
in San Roque, the petition must fail because the
judicial claim of petitioner was filed on April 25,
2003, only one day after it submitted its
administrative claim to the CIR. Petitioner failed
to wait for the lapse of the requisite 120-day
period or the denial of its claim by the CIR before
elevating the case to the CTA by a petition for
review. As its judicial claim was filed during
which strict compliance with the 120+30-day
period was required, the Court cannot but declare
that the filing of the petition for review with the
CTA was premature and that the CTA had no
jurisdiction to hear the case.
Taxation Law 2
Bonifacio Water
Corporation v.
Commissioner of Internal
Revenue
July 22, 2013

FACTS:

ISSUES:

HELD:

Page | 12 Taxation Law 2

Commissioner of Internal
Revenue v. GST Philippines,
Inc.
October 2, 2013

FACTS:

ISSUES:

HELD:

Page | 13 Taxation Law 2

Commissioner of Internal
Revenue v. Mindanao II
Geothermal Partnership
January 15, 2014

FACTS:

ISSUES:

HELD:

Page | 14 Taxation Law 2