MINDANAO II GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY En Bane MINDANAO II GEOTHERMAL CTA EB CASE NO. 855 PARTNERSHIP, (CTA Case No. 8248) Petitioner, Present: Del Rosario, P.J. -versus- Castaneda, Jr., Bautista, Uy, Casanova, Fabon-Victorino, Mindaro-Grulla, Cotangco-Manalastas, and Ringpis-Liban,JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated: JUL 15 1013 llt4J,;A/'1)-A4, ,~.~ Respondent. )( --------------------------------------------------------------------------------------- )( DECISION BAUTISTA, J.: Before the Court En Bane is a "Petition for Review" filed by petitioner Mindanao II Geothermal Partnership ("Mindanao") appealing the Resolution of the First Division of this Court ("Court in Division") dated August 25, 20111, and December 19, 20112 granting respondent's "Motion to Dismiss" and accordingly, dismissing petitioner's claim for excess creditable input taxes for the 1st to 4th Quarters of 2009 in the amount of Eight Million Two Hundred Fifty Eight Thousand Eight Hundred Twenty-Three and 74/100 Pesos (P8,258,823.74) for being filed out of time. 1 Rollo, (CTA EB CASE No. 855) pp. 13-23, Penned by Associa te Justice Esperanza R. Fabon- TJ Victorino, with Associate Justice Erlinda P. Uy, concurring, and Presiding Justice Ernesto D. Acos ta, on leave. _/ ' Rollo, (CfA EB CASE No. 855) pp. S-11 .

DECISION CTA EB CASE NO. 855 (CTA Case N o. 8248) Mindanao II Geo thermal Partnership vs . Commissioner of Internal Revenue The Parties Petitioner Mindanao II Geothermal Partnership is a general partnership duly registered with the Securities and Exchange Commission, with registered principal address at Barangay Ilomavis, Kidapawan City, North Cotabato, and whose principal purpose is to participate in the developing, financing, construction, ownership, operation, maintenance, and transfer of a geothermal electrical generation plant located in Mount Apo, North Cotabato, Mindanao, the Philippines, and otherwise to do all things including the ownership of interests in corporations or other entities in furtherance thereo�.3 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue empowered to perform the duties of her office, including among others, the duty to act upon and approve claims for tax refund or tax credits as provided by law. Antecedent Facts On March 31, 2011, petitioner filed a Petition for Review with the Court in Division for its excess and unutilized creditable input taxes for the 1st to 4th Quarters of 2009 in the amount of P8,258,823.74.4 On May 26, 2011 respondent filed her" Answer." 5 On June 22, 2011, respondent filed a " Motion to Dismiss"6 on the ground that petitioner's "Petition for Review" was filed out of time. Respondent states that said petition was filed more than six (6) months beyond the thirty (30)-day prescriptive period provided by Section 112(D) of the NIRC of 1997. 3 Rollo (CTA EB CASE NO. 855), p . 131. I 4 Records, (CTA Case N o. 8248), pp. 1-168, with Annexes. s Records (CTA Case N o. 8248), pp. 182-192. 6 Records, (CTA Case No . 8248), pp. 215-228.

DECISION CTA EB CASE N O . 855 (CTA Case N o. 8248) Mindanao II Geo thermal Partnership vs. Commissioner of Internal Revenue On August 10, 2011, petitioner filed its "Comment/Opposition (To Respondent's Motion to Dismiss)"7 claiming that petitioner's peculiar situation, its SEC approved dissolution, justifies the late filing of its "Petition for Review." Petitioner claims that it had two (2) years from March 29, 2010, to file a judicial claim for refund. The Ruling of the Court in Division On August 25, 2011, the Court in Division promulgated a resolution resolving respondent's "Motion to Dismiss"8 as follows: "WHEREFORE, the Motion to Dismiss dated June 21, 2011, filed by respondent Commissioner of Internal Revenue, is hereby GRANTED. Consequently, the instant Petition for Review filed by petitioner Mindanao II Geothermal Partnership on March 31, 2011, is hereby DISMISSED . SO ORDERED ."9 The Court in Division dismissed the Petition for Review on the ground of lack of jurisdiction over the subject matter of the petition due to petitioner' s failure to file its Petition for Review within thirty (30) days from the 120-day period given respondent to resolve the administrative claim. The Court explained that the second paragraph of Section 112(C) of the NIRC of 1997, as amended, presents 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 scenarios, the taxpayer has thirty (30) days to file an appeal with the CTA. The Court in Division further explained that the two (2) -~ 7 Records, (CTA Case No. 8248), pp. 248-254. s Records, (CTA Case No. 8248), pp. 257-267. 9 Ibid. p . 267.

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue year period from which petitioner can claim for the issuance of a tax credit certificate for unutilized input tax refers to the period for filing the administrative claim and not the judicial claim for refund as stated in the Supreme Court decision Commissioner of Internal Revenue vs. Aichi Forging Company ofA sia (" Aichi case") .lO On September 20, 2011, petitioner filed a "Motion for Reconsideration,''11 assailing the prospective application of a new doctrine in the Aichi case, and reiterating that its petition should be given due course. On October 25, 2011, respondent filed its "Comment"12 reiterating its argument that the Court in Division did not have jurisdiction over the petition because the same was filed out of time. On November 14, 2011, petitioner filed its Reply,13 reiterating its argument against the prospective application of the Aichi case. On December 27, 2011, the Court in Division promulgated its Resolution resolving petitioner's "Motion for Reconsideration" as follows: 14 "WHEREFORE, the Motion for Reconsideration c/J dated September 19, 2011, filed by petitioner, is hereby /) DENIED, for lack of merit. SO ORDERED ."ls 1o G.R. N o. 184823, October 6, 20120, 632 SCRA 442. 11 Records, (CTA Case N o. 8248), pp. 290-308. 12 Records, (CTA Case N o. 8248), pp. 318-340. 13 Records, (CTA Case N o. 8248), pp. 344-355. 14 Records, (CTA Case No. 8248), pp. 361-367. 1s Ibid . p . 267.

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue On January 26, 2012, petitioner filed this Petition for Review16 via registered mail before the Court En Bane, assailing the August 25, 2011 and December 27, 2011 Resolutions of the Court in Division. On February 23, 2012, the Court En Bane ordered respondent to file her comment within ten (10) days from receipt of the order. On March 15, 2012, respondent filed a "Comment (Re: Petition for Review)" arguing that the Court in Division did not have jurisdiction over petitioner's claim for refund because it was filed out of time; that the Court in Division was correct in applying the Aichi case and that petitioner is mistaken in claiming that the Aichi case imposes a "new doctrine; that tax laws are civil in nature, and may be applied retroactively, and that when the law is clear and free from any doubt or ambiguity, there is no room for construction or interpretation. Respondent also prayed that the Court En Bane deny the petition for lack of merit. On May 7, 2012, the Court En Bane ordered both parties to file their simultaneous memoranda.17 On July 9, 2012, respondent filed a "Manifestation (Re: Resolution dated May 7, 2012)"18 stating that she is adopting the arguments raised in her "Comment (Re: Petition for Review)" filed on March 15,2012 as her Memorandum. On July 16, 2012, petitioner filed its "Memorandum" v1a registered mail. Aside from adopting all references and arguments raised in its Petition for Review dated January 26, 2012, petitioner invokes the doctrine of equal protection of laws, stating that the Court should consider that recent Supreme Court decisions that did not apply the Aichi case retroactively and the principle of soluti: ; 16 Rollo, (CTA EB CASE No. 827) pp. 9-54. 17 Rollo, (CTA EB CASE No. 827) pp. 519-520. ts Rollo, (CTA EB CASE No. 827) pp. 526-529.

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue indebiti, stating that technicalities should yield to the substantive merits of their claim. Petitioner states further, that a denial of its claim would be contrary to the declared policies of the EPIRA law. Issues Raised by Petitioner In its Petition for Review19 before the Court En Bane, petitioner raised the following issues: "I. TECHNICALITIES AND LEGALISMS SHOULD YIELD TO THE SUBSTANTIVE MERITS OF PETITIONER'S CLAIM IN LIGHT OF THE SPECIAL CIRCUMSTANCES OBTAINING IN THE PRESENT CASE: A. THAT PETITIONER IS ALREADY A DISSOLVED CORPORATION. B. THAT IT WAS ESTABLISHED THAT PETITIONER WAS PURELY A POWER GENERATION COMPANY UNDER THE EPIRA LAW. II. PROCEDURAL RULES MAY BE RELAXED TO RELIEVE A LITIGANT OF A GRAVE INJUSTICE BROUGHT ABOUT BY ITS RELIANCE ON THE THEN CONSISTENT RULINGS OF THIS HONORABLE~ COURT. 19 Ibid.

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue III. THE AICHI RULING LAID DOWN A NEW DOCTRINE OVERTURNING THE PREVIOUS WELL- SETTLED DOCTRINE LAID DOWN BY THIS HONORABLE COURT WHICH PETITIONER AND OTHER TAXPAYERS RELIED UPON IN GOOD FAITH FOR ALMOST A DECADE. IV. THE AICHI RULING LAID DOWN A PROCEDURAL RULE WHICH AFFECTS SUBSTANTIVE RIGHTS, AND THEREFORE SHOULD NOT BE APPLICABLE LAW AND SETTLED JURISPRUDENCE UPHOLDING THE PRINCIPLE OF PROSPECTIVITY. V. THE HONORABLE SUPREME COURT ITSELF HAS NOT APPLIED THE AICHI RULING RETROACTIVELY VI. THE RETROACTIVE APPLICATION OF THE AICHI RULING TO PETITIONER'S PENDING CLAIM WILL GO AGAINST THE BASIC POLICIES OF THE EPIRA LAW." zo 2o Id., p. 264.

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue The Ruling of the Court En Bane The Court En Bane finds the petition bereft of merit. In the case of Commissioner of Internal Revenue vs. San Roque Power Corporation; Taganito Mining Corporation vs. Commissioner of Internal Revenue; Philex Mining Corporation vs. Commissioner of Internal Revenue21 ("San Roque case") clarifying the application of the doctrines in the cases of Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue,22 Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, 23 and Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc., 24 the Supreme Court states that compliance with the 120-day and 30-day periods under Section 112(D) of the NIRC of 1997, as amended, is both mandatory and jurisdictional. In finding San Roque Power Corporation's claim to be filed out of time, the Supreme Court explains as follows: "Section 112(D) of the 1997 Tax Code is clear, unequivocal, and categorical that the Commissioner has 120 days to act on an administrative claim. The taxpayer can file the judicial claim (1) only within thirty days after the Commissioner partially or fully denies the claim within the 120-day period, or (2) only within thirty days from the expiration of the 120-day period if the Commissioner does not act within the 120-day period." 25 Simply put, compliance with the 120-day and 30-day periods is critical to a taxpayer's appeal. Failure to comply with the same warrants a dismissal as no jurisdiction is acquired by the Court over the petition. U Furthermore, in the same case, while finding that the claim of Philex Mining Corporation was also filed out of time, the Supreme Court stated as follows: ( 21 G.R. No. 187485; G.R. No. 196113; G.R. No. 197156, February 12, 2013. 22 G.R. Nos. 141104 & 148763, 8 June 2007, 524 SCRA 73. 23 G.R. No. 172129, 12 September 2008, 565 SCRA 154. 24 G.R. No. 184823, 6 October 2010, 632 SCRA 422. 25 G.R. No. 187485; G.R. No. 196113; G.R. No. 197156, February 12, 201 3.

DECISION CTA EB CASE NO. 855 (CTA Case No . 8248) Mindanao II Geo therm al Partnership vs. Commissioner of Internal Revenue "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. Whether the two-year prescriptive period is counted from the date of payment of the output VAT following the Atlas doctrine, or from the close of the taxable quarter when the sales attributable to the input VAT were made following the Mirant and Aichi doctrines, Philex's judicial claim was indisputably filed late. The Atlas doctrine cannot save Philex from the late filing of its judicial claim. The inaction of the Commissioner on Philex's claim during the 120-day period is, by express provision of law, "deemed a denial" of Philex's claim. Philex had 30 days from the expiration of the 120-day period to file its judicial claim with the CTA. Philex's failure to do so rendered the "deemed a denial" decision of the Commissioner final and inappealable. The right to appeal to the CTA from a decision or "deemed a denial" decision of the Commissioner is merely a statutory privilege, not a constitutional right. The exercise of such statutory privilege requires strict compliance with the conditions attached by the statute for its exercise. Philex failed to comply with the statutory conditions and must thus bear the consequences." 26(Underlining ours.) r Clearly, as explained above, late filing of the petition after the inaction of the Commissioner renders the Court without jurisdiction ;} to entertain the petition. 26 G.R. No. 187485; G.R. No. 196113; G.R. No. 197156, February 12, 201 3.

DECISION CTA EB CASE NO. 855 (CTA Case N o. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue This situation is undeniably similar to that before the Court En Bane. Petitioner filed its administrative claim for refund or issuance of a tax credit certificate of its unutilized input taxes for the year 2009 in the amount of P8,258,823.74 on April12, 2010.27 In accordance with Section 112(D) of the NIRC, as amended, respondent had 120 days or until August 10, 2010 to rule on petitioner's administrative claim. Thus, petitioner had thirty (30) days after August 10, 2010 or until September 10, 2010 to file its judicial claim, in the event of respondent's inaction. However, petitioner filed its judicial claim before the Court in Division on March 31, 201128 via registered mail. Simple math shows that petitioner filed its judicial claim six (6) months and twenty one (21) days BEYOND the period prescribed by law. Technical rules of procedure are designed not to frustrate the ends of justice, rather, they are intended to effect the proper and orderly disposition of cases,29 and thus strict compliance w ith procedural rules is required to facilitate the orderly administration of justice.30 More so in cases such as this, where, as stated in the above- quoted Supreme Court Decision, "the right to appeal to the CTA from a decision or "deemed a denial" decision of the Commissioner is merely a statutory privilege, not a constitutional right. The exercise of such statutory privilege requires strict compliance with the conditions attached by the statute for its exercise." Due to petitioner's failure to file its judicial claim within thirty (30) days from the lapse of the mandatory 120-day period under Section 112(C) of the NIRC of 1997, as amended, the Court En Bane finds no other recourse but to uphold the assailed Resolutions of the r Court in Division, and dismiss the petition on the ground of the lack /) of jurisdiction. 27 Records, (CTA Case N o. 8248), Annex " L," pp. 159-168. 28 Records, (CTA Case No. 8248), pp. 1-168, with Annexes. 29 Ismael V . Santos, Alfredo G. A rce and Hilario M . Pastrana vs. Court of Appeals, Pepsi Cola Produ cts Phils., In c., Luis Lorenzo, Jr. and Frederick Dael, G.R. No. 141947, July 5, 2001, 360 SCRA 512. 30 PET Plans, In c. vs. Court of Appeals, G. R. No. 148287, November 23, 2004, 443 SCRA 510.

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue WHEREFORE, in view of the foregoing, the Petition for Review is hereby DENIED for lack of merit. Accordingly, the Resolutions dated August 25, 2011 and December 19, 2011, promulgated by the First Division of the Court are hereby AFFIRMED in toto. SO ORDERED. ISTA Associ WE CONCUR: Presiding Justice ~ "4u~ <::7 - ~~ z ~ . ... fuANITo c. cAsTA:NEnK,jR. Eg~ P.UY Associate Justice Associate Justice ~ CAESAR A. CASANOVA Associate Justice ~ N.M~~ - C~ LA/.~/- CIELITO N. MINDARO-GRULLA AMELIG.Co'TANGCO-MANALASTAS Associate Justice Associate Justice ~ . ~ ~--~ MA. BELEN M. RINGPIS-LIBAN Associate Justice

DECISION CTA EB CASE NO. 855 (CTA Case No. 8248) Mindanao II Geothermal Partnership vs. Commissioner of Internal Revenue CERTIFICATION Pursuant to Section 13 of Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bane before the case was assigned to the writer of the opinion of this Court. Presiding Justice