Deutsche Knowledge Services Pte. Ltd. vs. CIR Case Digest

Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue

G.R. No. 197980. December 1, 2016

Facts

On March 31, 2009, petitioner filed an application 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 Commissioner of Internal Revenue. Citing inaction on the part of respondent, petitioner on April 17, 2009 filed a Petition for Review or [ s ]eventeen (17) days after petitioner filed an application for tax credit/refund with respondent based on Section 112 and 229 of the National Internal Revenue Code of 1997, as amended.

However, on June 8, 2009, instead of an Answer respondent filed a Motion to Dismiss on ground of prescription. Citing the case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (Mirant Case), respondent alleged that the Petition for Review was filed out of time on the ground of having been filed beyond the two-year prescriptive period.

A day after or on June 9, 2009, respondent filed an Answer again citing the same grounds in the Motion to Dismiss in her Special and Affirmative defenses. CTA Second Division resolved to grant said motion on October 28, 2009. Petitioner filed a motion for reconsideration thereon on November 16, 2009. The Court promulgated a Resolution which denied petitioner's Motion for Reconsideration.

Petitioner then filed a petition for review with the CTA En Banc. However, the said tribunal merely affirmed with modification the assailed resolutions and dismissed petitioner's suit for having been prematurely filed prior to the expiration of the 120-day period granted to respondent to resolve the tax claim. Hence, petitioner resorted to the present appeal, by way of a petition for review under Rule 45.

Issue: Whether the filing of petitioner's claim for refund/credit of input VAT before the CTA warrants a dismissal as premature for non-compliance with the 120+30 day period.

Ruling

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.

In the instant case, the administrative claim or application for tax credit/refund of its allegedly excess and unutilized input VAT for the first quarter of taxable year 2007 was filed on March 31, 2009 or within the two-year prescriptive period. Respondent had 120 days or until July 29, 2009 to determine the validity of the claim. However, petitioner filed an appeal by way of a petition for review on April 17, 2009 or 17 days after the filing of the administrative claim. Apparently, petitioner did not wait for the decision of the CIR or the lapse of the 120-day period and this is in clear contravention of Section l 12(D) [now Section l 12(C)] of the 1997 NIRC, as amended, and of the doctrine laid down in the Aichi case.

However, subsequent to the Aichi ruling and during the pendency of the case at bar, the Supreme Court En Banc resolved the consolidated cases involved in Commissioner of Internal Revenue v. San Roque Power Corporation (San Roque case) and stated that a judicial claim for refund of input VAT which was filed with the CT A 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.

Pursuant to the CIR's power to interpret tax laws under Section 4 of the NIRC, the CIR issued BIR Ruling No. DA-489-03 which we considered in San Roque as a general interpretative rule that may be relied upon by taxpayers from the time the rule was issued up to its reversal by the CIR or by this Court, thus, providing a valid claim for equitable estoppel under Section 246 of the NIRC.

In the present case, the records indicate that 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 with respondent on March 31, 2009. Subsequently, petitioner filed its judicial claim on the same matter through a petition for review with the CT A on April 17, 2009. It is undisputed that the aforementioned date of filing falls within the period following the issuance of BIR Ruling No. DA-489-03 on December 10, 2003 but before the promulgation of the Aichi case on October 6, 2010. In accordance with the doctrine laid down in San Roque, we rule that petitioner's judicial claim had been timely filed and should be given due course and consideration by the CTA.

WHEREFORE, the petition is GRANTED. The Decision dated July 22, 2011 of the Court of Tax Appeals En Banc in CTA EB Case No. 596 is REVERSED and SET ASIDE. The Court of Tax Appeals is hereby ORDERED to proceed with the hearing and resolution of CTA Case No. 7921.