ORICA PHILIPPINES INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No.8 (For DCC) 111111111111111111111111111 11111 11111 11111111111111111111 11111111111111111111111 19-000075-0085 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE NO. 10036 ORICA PIDLIPPINES INC., Petitioner, -versus- NOTICE OF RESOLUTION COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street, Legazpi Village Makati City ATTY. CLARISSA J. VIRTUDES-BABARAN Bureau of Internal Revenue Room 703, Litigation Division, BIR National Office Building Sen. Miriam P. Defensor-Santiago Avenue Diliman, Quezon City CABRERA & COMPANY 28th Floor, Philamlife Tower 8767 Paseo de Roxas, Makati City GREETINGS: You are hereby notified by these presents that on May 14, 2024, a Resolution was rendered in the above-entitled case, copy of which is attached h ereto. Quezon City, Philippines, M ay 15, 2024. . AttyE. xMecaurtiiavJ~ ~o. uCrthaIIn-Te

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION ORICA PHILIPPINES INC. , CTA Case No. 10036 Petitioner, Members: DEL ROSARIO ,P.J.,Chairperson, -versus- MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - RESOLUTION MANAHAN, J.: For this Court's resolution is petitioner's Motion for Reconsideration (Re: 19 December 2023 Decision of the Honorable Court of Tax Appeals-Special First Division) filed on January 18, ~024, with r espondent's Comment and Opposition (Re: Motion for Reconsideration dated 18 January 2024) filed on February 7, 2024. Petitioner prays for the reversal of the Court's Decision dated December 19, 2023, the dispositive portion of which, reads as follows: "WHEREFORE , in light of the foregoing considerations, the instant Petition for Review is DISMISSED for lack of jurisdiction .

Resolution CTA Case No. 10036 Petitioner sets forth the following arguments in support of its Motion for Reconsideration, to wit: 1. The judicial appeal for the value-added tax (VAT) refund for the fourth (4th) quarter of calendar year (CY) 2016 was filed within the prescriptive period provided under the pertinent provisions of the Tax Code and its implementing regulations; 2. The applicable law at the time of filing of the administrative and judicial claims for refund is Section 112 (C) of the Tax Code, as amended by the TRAIN Law, hence, the jurisprudential bases of the Honorable Court are not in all fours with the instant case; and 3. To construe inaction of the Respondent as deemed denial contravenes the intention of the lawmakers in deleting the "deemed denied" provision of the Tax Code under TRAIN." Petitioner maintains that the administrative and judicial claims for refund were both filed within the period prescribed by the relevant law, specifically Section 112 (A) and (C) of the 1997 National Internal Revenue Code (NIRC), as amended. It narrates that it filed an application for refund with the Bureau of Internal Revenue (BIR) on September 25, 2018 on its alleged unutilized input VAT for the fourth quarter of 2016 and received a letter from the BIR partially denying said claim on December 7, 2018. Petitioner firmly asserts that the Petition for Review (appealing the partial denial of its claim) filed with the Court on January 7, 2018 and reckoned from its date of receipt on December 7, 2018, was well-within the thirty (30)-day period prescribed by said Section 112 (C) of the 1997 NIRC , as amended. It alleges that the Court erred in ruling that its failure to file a timely judicial appeal within thirty days upon the lapse of the ninety-day (90) period proved fatal to its cause. Petitioner emphasizes that the claim for refund was filed under the provisions of Republic Act (RA) No . 10963 or the Tax Reform for Acceleration and Inclusion Law otherwise known as the TRAIN Law which took effect on January 1, 2018. It argues that S ection 112 (C) as amended by the TRAIN Law already removed the phrase "inaction" thereby rendering inapplicable the~

Resolution CTA Case No. 10036 jurisdiction of the Court over inactions of the Commissioner of Internal Revenue (CIR) in cases where no action was done within a specified/prescribed period. To put it simply, petitioner claims that the phrase "inaction shall be deemed a denial" as found in Section 7 of RA 1125, as amended by RA 9282 finds no place when the instant claim for refund was filed with the BIR. Petitioner reasons that it is no longer mandatory on its part to file a Petition for Review within thirty-days from the lapse of the ninety-day period and insists that it had the option to wait for the decision of the CIR and then file a Petition for Review with the Court within thirty days from its receipt as was done in the instant case. Petitioner also rejects the application of the decision of the Supreme Court in the case of Silicon Philippines, Inc., (formerly Intel Philippines Manufacturing Inc. us. Commissioner of Internal Revenue (Silicon case), 1 cited by the Court in the assailed Decision and asserts that said case involved claims for input VAT refund covering taxable year 2001 which was before the enactment of the TRAIN Law, hence, should not have been the basis for the conclusion reached by the Court. In his Comment and Opposition, respondent cites the same provisions of Section 112 (A) and (C) of the 1997 NIRC, as amended, and interprets it differently and maintains that the inaction of the CIR within the ninety-day period is still considered a "deemed denial" of the claim for refund which has to be mandatorily elevated to the Court within thirty-days from its expiration, otherwise, the "decision" of the CIR becomes final and unappealable. Respondent echoes the ruling of the Court in the assailed Decision and states that the 90 + 30 day period to file a judicial appeal is mandatory and jurisdictional and that failure to observe said period is a cause for the dismissal of the action for lack ofjurisdiction. ea-.--�- - 1 G.R. No. 182737, March 2, 2016.

Resolution CTA Case No. 10036 RULING OF THE COURT After a careful consideration of petitioner's Motion for Reconsideration, the Court finds no compelling reason to modify or reverse the assailed Decision. In concise terms, petitioner argues that it can still wait until the respondent issues a decision on its application or claim for refund even after the lapse of the ninety-day period and appeal said decision to the Court within 30 days from its receipt. It anchors this theory on the amendments introduced by the TRAIN Law particularly on Section 112 (C) of the 1997 NIRC which removed the phrase "failure on the part of the Commissioner to act on the application within the period prescribed above" and the addition of the phrase "the failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90) day period shall be punishable under Section 269 of this Code." We find petitioner 's arguments without merit. It must be emphasized that the assailed Decision dismissed the Petition for Review for lack of jurisdiction b ased specifically on Section 7 (a )(l) and (2) of RA 11252 , as a mended by RA 92823, quoted as follows : Section 7. Jurisdiction. - The CTA s hall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as h erein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under th e National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue; 2 An Act Creating the Court of Tax Appeals. 3 An Act Expanding the Jurisdiction of the Court of Tax Appeals, Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging the M embership, Amending for the Purpose c:a-..___ Certain Sections of the Law Creating the Court ofTax Appea ls, and for other Purposes.

Resolution CTA Case No. 10036 (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees, or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period for action, in which case the inaction shall be deemed a denial. (Emphases supplied) Section 11 of RA 1125, as amended by RA 9282 provides as follows: Section 11. Who May Appeal; Mode of Appeal; Effect of Appeal. - Any party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue, the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade and Industry or the Secretary of Agriculture or the Central Board of Assessment Appeals or the Regional Trial Courts, may file an appeal with the CTA within thirty (30) days after the receipt of such decision or ruling or after the expiration of the period ilXed by law for action as referred to in Section 7(a)(2) herein. (Emphasis supplied) XXX XXX XXX As elucidated in the assailed Decision, the "inaction" provided in the afore-quoted CTA Charter occurs when respondent fails to decide within a specific period required by law. i.e., upon the lapse of the ninety (90) day period provided in Section 112 (C) of the 1997 NIRC, as amended by the TRAIN Law. The advent of the TRAIN Law did not have the effect of repealing a n d/or a m ending the provisions of RA 1125, as amended by RA 9282, and still remains a good law. In the Silicon case4 cited in the assailed Decision, the Supreme Court made it clear that the 30-day period is reckoned from the receipt of respondent's decision or ruling or after the expiration of the 120-day (now 90-day) period, whichever is sooner. On a practical standpoint, to eliminate the "deem ed denial" scenario would place the taxpayers at the mercy of the revenue officers who might not act on their claims for refund leaving them with 4 /bid. ~

Resolution CTA Case No. 10036 no other recourse on their "unacted" claims for refund pending with the BIR. The petitioner's failure to file a judicial appeal within 30 days from the lapse of the 90-day period deprives the Court of the requisite jurisdiction to take cognizance of the case. WHEREFORE, in light of the foregoing considerations, p etitioner's Motion for Reconsideration (Re: 19 December 2023 Decision of the Honorable Court of Tax Appeals-Special First Division) filed on January 18, 2024 is DENIED for lack of merit. SO ORDERED. (~?-- CATHERINE T. MANAHAN Associate Justice WE CONCUR: (no part) ROMAN G. DEL ROSARIO Presiding Justice ~on.~rrinr.g~ O~ini-olniY ~ MARIAN IVY F. REYES-FAJARDO Associate Justice

REPUBLIC OF THE PHILIPPINES COURT OFTAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION ORICA PHILIPPINES INC., CTA Case No.10036 Petitioner, Members: -versus- DEL ROSARIO, PJ, Chairperson, MANAHAN, and REYES-FAJARDO, 11 COMMISSIONER OF Promulgated: INTERNAL REVENUE, MAY 1 Respondent. REYES-FAJARDO, J. : I agree with the ponencia that the Court of Tax Appeals (CTA) in Division lacks jurisdiction over CTA Case No. 10036. I, however, take this opportunity to rectify petitioner's erroneous perception advanced in its Motion for Reconsideration (Re: 19 December 2023 Decision of the Honorable Court of Tax Appeals-Special First Division), i.e., the Bureau of Internal Revenue (BIR)'s adverse decision rendered outside the ninety (90)-day period to decide an administrative claim for input Value-Added Tax (VAT), may be appealed to the CTA in Division. In refund of unused input VAT attributable to zero-rated sales, the CTA in Division may only take cognizance of a refund claimant's judicial claim, upon strict adherence with Section 112(C) of the 1997 National Internal Revenue Code (NIRC). Juxtaposed below are the then Section 112(C) of the NIRC, with Section 112(C) of the NIRC, as

CONCURRING OPINION CTA Case No. 10036 amended by Republic Act (RA) No. 10963, otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN): Section 112(C) of the NIRC, prior to Section 112(C) of the N IRC, as amendment by TRAIN amended by TRAIN SEC. 112. Refunds or Tax Credits of SEC. 112. Refunds or Tax Credits of Input Tax. - Input Tax.- (C) Period within which Refund or (C) Period within which Refund or Tax Credit of Input Taxes shall be Tax Credit of Input Taxes shall be Made. - In proper cases, the Made. - In proper cases, the Commissioner shall grant a refund or Commissioner shall grant a refund issue the tax credit certificate for for creditable input taxes within creditable input taxes within one ninety (90) days from the date of hundred twenty (120) days from the submission of the official receipts or date of submission of complete invoices and other documents in documents m support of the support of the application filed in application filed in accordance with accor dance with Subsections (A) and Subsection (A) hereof. (B) hereof: Provided, That should the In case of full or partial denial of the Commissioner find that the grant of claim for tax refund or tax credit, or refund is not proper, the the failure on the part of the Commissioner must state in w riting Commissioner to act on the the legal and factual basis for the application within the period denial. prescribed above, the taxpayer In case of full or partial denial of the affected may, within thirty (30) days claim for tax refund, the taxpayer from the receipt of the decision affected may, within thirty (30) days denying the claim or after the from the receipt of the decision expiration of the one hundred twenty denying the claim, appeal the day-period, appeal the decision or the decision with the Court of Tax unacted claim w ith the Court of Tax Appeals: Provided, however, That Appeals.1 failure on the part of any official, agent, or employee of the BIR to act on the application w ithin ninety (90) days period shall be punishable under Section 269 of this Code.2 Boldfacing supplied. 2 Boldfacing supplied.

CONCURRING OPINION CTA Case No. 10036 Indeed, TRAIN introduced amendments on the then Section 112(C) of the NIRC. To be precise, the Legislature removed the phrases "or the failure on the part of the Commissioner to act on the application within the period prescribed above," "or after the expiration of the one hundred twenty day-period" in the second paragraph thereof. The same provision, too, states that the taxpayer may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the CTA. These variations might lead one to deduce that the BIR's adverse decision in an administrative claim for unutilized input VAT refund may be elevated to the CTA in Division, irrespective of whether the same was rendered within or outside the ninety (90)-day period to decide such administrative claim. Yet, Commissioner of Internal Revenue v. Secretary ofJustice, et al.3 taught us that: A law must not be read in truncated parts: its provisions must be read in relation to the whole law. It is the cardinal rule in statutory construction that a statute's clauses and phrases must not be taken as detached and isolated expressions but the whole and every part thereof must be considered in fixing the meaning of any of its parts in order to produce a harmonious whole. Every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with other parts of the statute and kept subservient to the general intent of the whole enactment. In constructing a statute, courts have to take the thought conveyed by the statute as a whole: construe the constituent parts together; ascertain the legislative intent from the whole act; consider each and every provision thereof in the light of the general purpose of the statute; and endeavor to make every part effective, harmonious and sensible. By wholistically reading Section 112(C) of the NIRC, as amended by TRAIN, with RA No. 1125, as amended by RA No. 9282, only the adverse decision rendered by the BIR within the ninety (90)-day period prescribed therein, may be the subject of an appeal before the Court in Division. Bear in mind: First. The first paragraph of Section 112(C) of the NIRC, as amended by TRAIN, states that "[i]n proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) 3 G.R. No. 177387, November 9, 2016, citing Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, G.R. No. 170680, October 2, 2009.

CONCURRING OPINION CTA Case No. 10036 Page 4 of5 days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial." Jurisprudence holds that "... the word 11shall11 connotes mandatory character; it indicates a word of command, and one which has always or which must be given a compulsory meaning, and it is generally imperative or mandatory in nature." 4 Therefore, the claimant's administrative claim for input VAT refund must be decided by the BIR, within the ninety (90)-day prescribed period under Section 112(C) of the NIRC, as amended by TRAIN. Second. The second paragraph of Section 112(C) of the NIRC, as amended by TRAIN, penalizes the failure of any BIR official, agent, or employee to decide on an administrative claim for input VAT refund, within the ninety (90)-day period prescribed therein. Punishing the pertinent BIR personnel's failure to render an adverse decision within said ninety (90)-day period underscores the compulsory nature of the time to decide the administrative claim in Section 112(C) of the NIRC, as amended. Third. Likewise, in the second paragraph of Section 112(C) of the NIRC, as amended by TRAIN, the word 'decision' was preceded by the definite article 'the.' The definite article 'the' particularizes the subject spoken of, and refers to a certain object, as opposed to the article'a' which refers to the indefinite.s It means that the BIR adverse decision in input VAT refund cases specifically pertains to one decided within the ninety (90)-day period to decide an administrative claim, as commanded by the first paragraph of the same provision of the Code. Ergo, petitioner erred in arguing that the amendments introduced by TRAIN on Section 112(C) of the NIRC allows an appeal to the CTA in Division, the BIR's adverse decision rendered outside the ninety (90)-day period decide an administrative claim for input VAT refund. 4 UCPB General Insurance Company v. Hughes Electronics Corporation, G.R. No. 190385, November 16, 2016. 5 See Commissioner of Internal Revenue v. GMA Network Films, Inc., CTA EB No. 2441, October 17, 2022. Citations omitted .

CONCURRING OPINION CTA Case No. 10036 FOR THESE REASONS, I CONCUR with Associate Justice Catherine T. Manahan in: (1) DENYING petitioner's Motion for Reconsideration (Re: 19 December 2023 Decision of the Honorable Court of Tax Appeals-Special First Division); and (2) AFFIRMING the Decision dated December 19,2023 in CTA Case No. 10036. ~ ~F~-f~~~ MARIAN IVYF. REYfS-FAJARDO Associate Justice