Deutsche Knowledge Services Pte. Ltd. Vs. Commissioner of Internal Revenue
G.R. No. 197980. December 1, 2016

The petitioner filed its administrative claim for tax credit/refund of its allegedly excess and unutilized input VAT for the 1st quarter of the calendar year 2007 in the amount of P12,549,446.30 with respondent on March 31, 2009.

Subsequently, petitioner filed its judicial claim on the same matter through a petition for review with the CTA on April 17, 2009.

1.    Under Section 112(D) of the NIRC, may a taxpayer apply a simultaneous administrative and judicial claims for the issuance of a tax credit certificate or refund of creditable input tax due or paid?

Generally, the taxpayer has to wait 120 days before filing a judicial claims. The 120-day period as mandatory and jurisdictional before a judicial claim can be filed.

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 the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days.


2.    When may a taxpayer apply for the issuance of a tax credit certificate or refund of creditable input tax?

Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two 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.


3.    May a taxpayer appeal to the CTA within the two-year 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 CT A.

The taxpayer is given 30 days to appeal before the CTA after the lapsed of 120-day period from receipt of the decision of the CIR or its inaction.


4.    Was the petitioner's judicial claim timely filed?

Yes.

In accordance with the doctrine laid down in San Roque, the petitioner's judicial claim had been timely filed and should be given due course and consideration by the CTA.

As a rule, a judicial claim for refund of input VAT which was filed with the CTA before the lapse of the 120-day period under Section 112 of the NIRC is considered to have been timely made, if such filing occurred after the issuance of the Bureau of Internal Revenue (BIR) Ruling No. DA-489-03 dated December 10, 2003 but before the adoption of the Aichi doctrine which was promulgated on October 6, 2010.

The 120-day period as mandatory and jurisdictional before a judicial claim can be filed. Nevertheless, there are two exceptions to this rule: (1) if the CIR, through a specific ruling, misleads a particular taxpayer to prematurely file a judicial claim with the CTA - that specific ruling is applicable only to such particular taxpayer; and (2) if the CIR, through a general interpretative rule issued under Section 4 of the NIRC, misleads all taxpayers into filing prematurely judicial claims with the CTA - in these cases, the CIR cannot later on be allowed to question the CTA's assumption of jurisdiction over such claim since equitable estoppel has set in as expressly authorized under Section 246 of the NIRC.


5.    What is the effect of reversal of a BIR regulation or ruling?

A reversal of a BIR regulation or ruling cannot adversely prejudice a taxpayer who in good faith relied on the BIR regulation or ruling prior to its reversal and that taxpayers should not be prejudiced by an erroneous interpretation by the CIR, particularly on a difficult question of law.

SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases:

(a)   Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue;

(b)  Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or

(c)   Where the taxpayer acted in bad faith.


6.    Under Section 246 of the NIRC, who has the authority to reverse a ruling?

Section 246 of the NIRC is not limited to a reversal only by the CIR because the same expressly states "[a]ny revocation, modification or reversal" without specifying who made the revocation, modification or reversal; hence, a reversal by a Court is covered under the said tax provision.

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