DEUTSCHE KNOWLEDGE SERVICES,PTE. LTD. v. COMMISSIONER OF INTERNAL REVENUE

Republic o f th e Philippines COURT OF TAX APPEALS Quezon City EN BANC DEUTSCHE KNOWLEDGE SERVICES PTE LTD., CTA EB CASE NO. 667 Petitioner, (CTA Case No. 7979) For: Refund or Issua nce of a Tax Credit Certifica te -versus- Present: ACOSTA P.J .. COMMISSIONER OF INTERNAL CASTANEDA JR. REVENUE , Respondent. BAUTISTA UY CASANOVA PALANCA-ENR IQUEZ FABON -VICTORINO MINDARO-GRULLA COTANGCO-MANALASTAS, JJ. X--------------------------------------------------------------------------------------X DECISION MINDARO -GRULLA, J..: Submitted for decision is a Petition for Review for th e Court En Bone und e r Section 18 of Republic Act (RA) No. 1125, as amended, as well as under Sec tion 2(a)(1), Rule 4, in relation to Section 4(b), Rule 8 of the 2005 Revised Rules of the Court of Tax Appeals, as amended, (

De utsc he Kn o wl e d ge Se rvices PTE LTD. vs. CIR Pag e 2 o f 19 C TA EB C as e No. 66 7 (C TA C ase No. 79 79) DECISION o f the Reso lutio ns dote d April 12, 2010 1a nd July 20, 201 02, res p ec tive ly, rende red b y th e First Divisio n:l o f this C o urt. Pe titi o ne r see ks a re ve rsa l o f th e a fore m e ntio ned Resolutio ns, th e disp ositive p orti o ns o f whi c h, res p ec tive ly, re ad a s fo llo w s: Resolution dated April 12, 2010: " WH EREFO RE, th e M o tion to Dis miss dote d Oc to b e r 15, 2009 , fil e d by re spondent Commissio ne r of Inte rnal Reve nu e , is he re b y GRA NTED . C onse qu e ntly, th e instant Pe tition fo r Revie w is he re b y DISMISSED. SO O RDER ED." Resolution dated July 20, 2010: " WHEREFO RE , pre mi ses co nsid e re d , th e Motion for Rec onsid e rati o n (R e : Re so luti o n dote d April 12, 201 0) fi led by petition e r on Apri l 30, 2010, is he re by DEN IED for lock of merit. SO ORDER ED." The an tece d e n t fa c ts as c ul le d fro m the re c o rds of the case ore as fo ll ow s: Pe titi o ne r 1s licens e d to do busin e ss as a reg io na l operatin g hea dq ua rte rs in th e Philip p ines by th e Sec urities and Exc han ge Co mm ission on A pril 25 , 2 00 5.~ It IS reg iste re d with th e BIR as a VATc, ' En Bone Doc ke l , p p . 54-60. 2 /d. o l 68-75. 3 A pproved b y Presiding Justi ce Ern es to D. Acos ta a nd Associa te Justi ce Esp e ronzo R. Fob o n-Vic to rin o, w ith Disse nling O pini o n sig ned by Assoc io le Justi ce Erl indo P. Uy . 4 En Bon e Doc ke l , p. 8 .

Deutsc he Knowl edge Services PTE LTD. vs. CIR Page 3 of 19 CTA EB Case No. 667 (CTA Case No . 7979) DECISION registe red taxpayer with Taxpaye r Id e ntific ation No. (TIN) 238-7 63-115- 000. 5 Res pondent is the duly appointed Commissioner of Interna l Revenue e mpowered to perform th e duties o f said office, among others, th e duty to a c t upon and approve c laims for refund or tax c red it as provid e d by low, with o ffi ce address at th e 51h Floor, BIR National Office Bui lding, Aghom Rood, Dilimon, Quezon City. On th e 3rd quarter of th e taxabl e year 2007, petitioner a lleged ly re nd ered services in th e Philippines to persons engaged in bu siness conducted outside th e Philippin es, th e payments for which were mode in Euro and o th e r ac ce ptabl e fore ign curre ncy and accounted for in accordance with th e rul es and regu lati ons o f th e Bangko Sen tral ng Pilipinas J' On October 18, 2007, petitioner fil ed with th e BIR its original Quarterly VAT Return for th e 3rd quarter of th e taxabl e yea r 2007 .7 On November 17, 2007, petition e r filed on am ende d Quarterly VAT return for the 3rd quarter of th e taxabl e year 2007.8, 5 Jd. 6 En Bone Docket, p. 9. 7 /d. 8 Jd.

Deu tsc he Knowledge Services PTE LTD. vs. CIR Page 4 of 19 C TA EB Case No . 667 (C TA Case No . 7979 ) DECISION For th e 3rcJ quarte r o f th e ta xa bl e year 200 7, p e titi o ne r all e g e dly a cc umulate d excess input VAT in th e to tal am o unt o f Fourtee n Million Two Hundre d Se ve ntee n Th o usand Two Hundre d Twe nty Two Pesos and Ei g hty Seve n Ce ntavos (PHP 14,2 17,222 .87 ) attributabl e to zero-rate d sal es whi c h, to date, ha s re main e d unutilized and/or unapplie d against p e titi o ne r's o utput VAT liability .9 On Se pte mbe r 18, 2009 , p e titi o ne r fil e d with th e BIR-R e ve nu e Di stri c t Office No. 47 an Applic ati o n for Tax Cre dits/R e fund s (BIR Fo rm No . 1914) o f its e xcess and unutilize d in p ut VAT fo r th e 3rc:l quarte r o f th e ta xabl e ye ar 200 7 in th e am o unt o f PHP 14,2 17, 22 2.87.w O n Se pte mbe r 30, 2009 , p e titi o ne r fil e d a Pe titi o n for Re vi e w b efore thi s C o urt in ord e r to to ll th e runnin g o f th e prescriptiv e p e ri o d und e r Sec tio n 229 o f th e Notio nal Inte rnal Re ve nue Cod e o f 1997, a s a m e nde d (th e "Tax Co d e" ) 11 On O c to b e r 19, 2009 , ins te ad o f filing an Answe r, res p o nd e nt fil e d a M o ti on to Dismiss th e p e titi o n o n th e g ro und o f la c k o f c au se o f a c ti o n du e to failure to exhau st administrati ve re m e dies .12 Sh e p osits th a t th e pe titi o n for re vi ew was prema ture ly fil e d b e fore th e C o urt o ft 9 En Bone Doc ke t, p. 10. 10 /d . 11 Division Do c ke t, p. 5. 12 Jd . at 50-53.

Deu tsche Kn owledge Services PTE LTD. vs. CIR Page 5 o f 19 CTA EB Cas e No. 667 (C TA Cas e No . 7979 ) DECISION Ta x App e als b e cause the sam e wa s fil e d prior to the lapse of the 120- day p e ri o d provid e d und e r Sec tio n 11 2 (C ), Ta x Co d e fo r he r to d ecide or a c t o n th e c laim for ta x re fund/ c re dit. He nce, she wa s no t give n suffic ie nt tim e to a c t on th e administrative claim for ta x re fund/ c re dit. On Dece mbe r 14, 2009 , p e titi o ne r fil e d its C o mm e nt/Oppositio n (To Res p o nd e nt' s Motion to Di smi ss Date d October 15, 2009) (With M o ti o n to Decl are Res p o nd e nt in De fault). 13 It all e g es that res p o nd e nt 's filin g o f th e M o ti o n to Di smiss wa s in d e fian ce o f thi s Co urt 's o rd e r to fil e an Answe r in ste ad o f a M o ti o n to Di smiss; he nce, suc h fa ilure to fil e an An sw e r is suffic ie nt b a sis to dec lare res p o nd e nt in de fau lt pursuant to Sec . 3, Rule 9, Revised Rules o f Co urt. 1-1 Furth e r, it a sseve rates that th e filing o f a p e titi o n fo r re vi e w b e fore this C o urt prior to th e lapse o f 120-day p e ri o d un der Sec . 11 2 (C ), Ta x Co d e is no t fatal to its cl aim fo r re fund and ne ith e r is it a vio latio n o f th e d oc trin e o f exha usti o n o f administrativ e re m e dies. I S Pe titi o ne r a rg ues that th e prev ailin g jurisprud e nce is that th e 120- da y p e ri o d und e r Sec tio n 11 2 (C ), Tax Co d e is ne ith e r mandatory no r com pul sory, and ma y b e disp e nse d with a s lo ng a s th e c laim s for re fund are fil e d within th e tw o-ye ar p e rio d presc rib e d und e r Sec tio n.t. 13 /d . at 60-85. 14 /d . o t 61 . 15 /d.

Deu tsc he Knowl e dg e Services PTE LTD. vs. CIR Page 6 o f 19 CT A EB Case No. 667 (C TA Case No. 7979 ) D E CISION 229, Tax Co d e . 16 Significantly, petitioner points out that res pondent he rself has mod e co nte mporan eo us pronouncements on the non- mandatory nature of th e p e riod s state d und e r Section 112(C) , Tax Code by way o f iss uan ce o f various revenue regu lation s. '; On April 12, 201 0, this Court's First Division re nd e red a Resolution 1s granting respo nd e nt' s M o ti o n to Di smi ss and accordingly dismissed th e Pe tition for Review ba sed o n lo c k o f jurisdic tion . Th e Court a quo he ld that th e two-ye ar prescriptive period und e r Section 11 2 {A} , Tax Co de de fin es th e limit fo r filin g on administrativ e claim for ta x re fund o r cred it for input taxes with th e Commissioner of Inte rnal Reven ue and no t resort to Court action; 19 whereas, Sec tio n 229, Tax Code co ve rs re fund of inte rnal revenue taxes o th e r than input valu e-added tax, e rron eously or ill eg ally a ssesse d or collected, p e nalties impose d without authority and any sum alleged to hove b ee n e xcessive or in any mann e r wrongfully co ll e cted. 2o Thu s, th e Court a quo co nc lud ed that it is only upon d e nial o r th e expiration of th e allowabl e period of 120 days without any a c tion o n th e pori o f respo nd e nt that petitioner may, with th e period of 30 days from no ti ce, invoke th e Court's co mpe te nce to( 16 Divisio n Docke l , p. 65. 17 /d. a1 77 -82, c iting Revenue Regu latio ns No . 7-95; Reve nue Regu lations 16-05; Rev e nue M emorandum C ircu lar No . 49-03; Rev e nu e M e m o randum C irc ular No. 029- 09. 18 /d. at 90-96. 19 /d. at 94. 20 /d. a t 95.

Deu tsche Knowledge Services PTE LTD. vs. CIR Page 7 o f 19 C TA EB Case No. 667 (CTA Case No. 7979) DECISION he ar its p e titi o n for re vie w. 21 Pri o r to that, th e C o urt ha s no jurisdictio n to en te rta in pe titi o ne r's ap p e al .77 Pe titi o ne r fi le d a m o ti o n for reco nsid e ratio n o f th e abo ve-cite d Resolutio n, whi c h wa s subse qu e ntly de nied in a Resolutio n23 date d July 20,2010 . He nce, p e titi o ne r fil e d th e in stan t Pe titi o n for Re vie w b e fore th e Cou rt En Ba n e o n A ug ust 26, 20 l 0. 7 ~ Respo nd e nt, o n th e o th e r hand , fai le d to fi le he r C o mm e nt to th e Pe titi o n for Re vi e w .25 Pe titi o ne r ra ise d th e fo ll owing a rgume nts be fore th e Co urt En Ba n e, to wi t: l . The C TA-Div isio n e rred in not gran tin g pe titi o ne r's Motion to Dec lare Responden t in Default and fa il ing to consider tha t responden t had defied the CTA-Division 's order to fil e an Answer, instead of a motion to dismiss. Therefo re, such fai lure to fil e an answe r should be sufficient basis to declare responden t in default; 26 and 2. Pe titi one r's fil ing of its Petition for Review before the 120-day period under Sec ti o n l l2 (c ), Tax Code, has lapsed is not fa tal to its cla im fo r re fund and does not rend e r the Petiti on fo r Review dismissible. 71' 21 /d. 22 fd. 23 fd. o l 164- 17 l. 24 Th e Pe titi on for Re vie w was fi le d wi thin th e ex te nd e d p e riod g ron le d by lhe Court En Bone in a Resolu tion do le d Aug us ! 12, 2010 . 25 As p e r Records V e rifica ti o n Form dol e d Novembe r 3, 20 10, En Bone Docke t, p. 84. 26En Bone Dockel , pp. 16-2 1. 21 /d. at 21 -46.

Deulsche Knowledge Services PTE LTD. vs. CIR Page 8 o f 19 CTA EB Case No . 667 (CTA Case No. 7979 ) DECISION Th e principal iss ue is whether or not th e taxpayer's co mpliance with the 120 and 30-da y p e riod provided under Section 112(C) , Tax Code, is mandatory and jurisdic tional. He nce, th e c rux of the co ntroversy lies on th e correct interpretation of Sections 112(C) and 229, Tax Code in so far as th e prescriptiv e period for the filing judic ial c laims for unutilized input VAT re fund/ c re dit is co ncerned. Petitioner strongly argu es that th e law co nfe rs a full two-year period within which to fil e both its administrative and judic ial claims for ta x refund/credit as th e prevailing jurisprudence 2B on th e matter provides that th e 120-d ay period under Sec tion 11 2(C ), Tax Code is neither mandatory nor compulsory, and may be dispensed with as long as claims for refund are fil ed within th e two-year period prescribed under Section 229 of the some Code .79 Further, petitioner subm its that Section 11 2 (C) , Tax Code, merely deals with VAT and the periods within which respondent shall grant a refund or issue a ta x c red it, and does not deal with th e period within which a taxpayer can go to court and seek judicial remedy; whereas , Section 229, Tax Code, specifica lly provides that no suit or proceeding sha ll be maintained in any co urt for,c 28 Ci ting C TA En Bane's Decision on CE Luzon Geo th erma l Power Compa ny, In c. v. Commissioner of Inf e rnal Revenue I Com missioner o f Inte rnal Revenue v. CE Luzon Geothermal Power Compa ny, Inc. , CT A EB Nos. 553 and 55 4, July 20, 20 l 0. 29 En Bane Docket, p. 22.

Deutsche Kn owle dg e Servi ces PTE LTD . vs. CIR Page 9 of 19 CTA EB Case No. 667 (C TA Case No . 7979) DECISION the recovery of taxes e rro neously or illega lly co ll ected. 30 Hence, p e tition e r co nclud es that Section 112 (C ), Tax Code should be harmonized with Section 229 of th e same Code , which gives the ta xpa ye r th e b e ne fit o f th e full two-year period fro m th e date o f payment o f th e ta x within whi c h to fil e its judic ial c laim for re fund b e fore th e Court o f Tax Appeals.:l l We find no merit in petitioner's argum e nt. It is worthy of e mpha sis that th e pivotal issue o f wh e n to fil e administrative and judic ial c laims for unutilize d input VAT refu nd/c re dit is no long e r novel as the Supre m e Court has already settled the said issue in th e rece nt c a se of Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc . (th e "Aichi Case "). J? As to th e prescriptiv e period for filin g an administrative c laim for unutilized input VAT re fund/ c red it, th e Supreme Court in th e Aichi Case re itera te d its ruling in th e case of Commissioner of Internal Revenue v. Mirant Pagbilao Corporation JJ that Sec tion 11 2(A), Tax Code is th e applicable provision in determining th e start o f th e two-year period for c laiming a re fund/cre dit of unutilized input VAT and not Sections 204(C)l 3o /d. at 23-24. 31 /d. ol24. 32 G.R. No. 184823, Oc tober 6, 2010. 33 G.R. No . 172 129, September 12, 2008, 565 SCRA 154.

Deutsche Knowledge Services PTE LTD. vs. CIR Page 10 of 19 CTA EB Case No. 667 (CTA Case No. 7979) D E CISION and 229, Tax Code, which apply only to instances of erroneous payment or illegal collection of internal revenue taxes. Thus, the two-year period for claiming unutilized input VAT refund/credit before the Commissioner of Internal Revenue should be reckoned from the close of the taxable quarter when the sales were made. Thus, it ruled that: "The pivotal question of when to reckon the running of the two-year prescriptive period, however, has already been resolved in Commissioner of Internal Revenue v. Miront Pogbiloo Corporation [G.R. No. 172129, September 12, 2008, 565 SCRA 154] , where we ruled that Section 112(A) of the NIRC is the applicable provision in determining the start of the two-year period for claiming a refund/ credit of unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes. xxx" [Emphasis supplied.] On another score, in determining th e period on when to file a judic ial claim for unu tilized input VAT re fund/cred it before th e Court of Tax Appea ls, Section 112(C) , Tax Code is applicable, which reads: "Sec. ll2(C) Period within which Refund or Tax Credit of Input Taxes shall be Mode. - 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 Subsection (A) hereof. In case of full or partial denial of th e claim for tax refund or tax credit, or th e 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 ." [Emphasis supplied.]'

Deutsc he Knowledge Services PTE LTD. vs. CIR Page 11 of 19 C TA EB Case No . 667 (CTA Case No. 7979) D EC ISION In interpreting th e foregoing provision, th e Supreme Court in the Aichi Case c le arly d e lin e ated th e proce dure insofar a s judicial appeal b e fore th e Court of Tax Appeals is co nce rn e d , thus: "Section 11 2(0) of the NIRC clearly provides that the CIR has '120 days, from the dote o f the submission o f the complete documents in support of the application [for tax refund/credit],' w ithin which to grant or deny the c laim. 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 Cl R. 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." [Emphasis supplied .] M oreover, in th e some case, th e Supreme Court c ategorically rul ed that th e 120-day period under Sec tio n 11 2(0 ) (now, Sec tio n 11 2[Cl), Tax Code, fo r th e Co mmission e r of Inte rnal Revenue to act on administrative c laims for unutilized input VAT re fund/ c redit is c rucial in filing an appeal to th e Co urt o f Tax Appeals. The pertinent portion o f th e sa id decision re ads: "Respondent 's assertion that the non-observa nce of the 120- doy period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial c laims are filed w ithin the two-year prescriptive period has no legal basis. There is nothing in Section 11 2 of th e NIRC to support respondent' s view. Subsection (A) of the said provision states that "any VAT-registered person, whose soles are zero-rated or effectively zero-rated may, within two years after the c lose of the taxable quarter when th e soles were mode, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such soles." 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 CTA. This is apparent in the first paragraph of subsection (D) of the so m e provision, whic h states that the CIR has "120 days(

Deu tsc he Knowledge Services PTE LTD. vs. CIR Page 12 o f 19 CTA EB Case No. 667 (CTA Case No. 7979 ) D E CISION from the submission of com p lete d ocu ments in su pport of the application fil e d in accord a nce with Subsections (A) a nd (B)" w ithin whic h to d ecide on the c laim . In fact, applying the two-year period to jud icial c laims would re nder nug atory Secti on 11 2(0 ) of the NI RC. w hic h already provides for a specific p eriod w ithin w hic h a taxp ayer should a ppeal th e decision or inaction of the CIR. The second paragraph of Section 112(0) of the NIRC envisions 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 instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA. With regard to Commissioner of In ternal Revenue v. Victorias Milling, Co., Inc. [1 30 Phil. 12 ( 1968}] re lied upon by respondent, we find th e same inapplic a b le as the tax provision involved in that case is Section 306, now Section 229 of the NIRC. And as a lre a dy discussed , Section 229 does not apply to refu nds/credits of inp ut VAT, such as the insta nt case . In fi ne, 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." [Em phasis sup p lied .] Con sequ e ntly, it is cl e ar th a t co mplian ce with th e 120-day p e rio d p rovid e d und e r Sec tio n 11 2(C ), Tax Co d e, is mandatory and jurisd ic ti o nal . Thu s, th e in esc apabl e co nc lusio n is that p e titio ner c an o nly invo ke th e jurisdic tio n of this Co urt within th e p e rio d o f 30 days recko ne d fro m th e no tice o f d e nial o r expiratio n o f th e 120-da y perio d w ith o ut a n y ac tio n o n th e part o f respo nde nt. Failure to heed th e m a nd ato ry perio d o f 120 and 30-da ys is c ru c ial to its a p p e al and w a rra nts a dismissal o n th e g ro und o f lac k o f jurisdic tio n to hear and c dec ide pe titio ner 's a p p e al.

Deutsche Kn owle d ge Servi ces PTE LTD . vs. C IR Page 13 o f 19 CTA EB Case No. 667 (C TA Case No. 7979 ) DECISION In th e in stant case, petition e r filed its administrative c laim for tax re fund/credit of its excess and unutilized input VAT for th e 3rd quarter of th e taxabl e ye ar 2007 with the BIR on September 18, 2009.34 Clearly th e n, petition e r tim e ly fil ed its administrative claim with th e BIR , within two (2) yea rs recko ne d from th e close o f th e taxabl e quarter when th e sa les w e re made. As to its judic ial claim , howeve r, petitioner fil ed a Petition for Review b e fore this Court in Division on September 30, 2009 35 or barely a month after petitioner fil ed its application for re fund with the BIR . Indispu tably, p e titi oner fail ed to co mply with th e mandatory period of 120 and 30 days under Section 11 2{C), Tax Code, which is c ru c ial in filin g an app ea l b e fore th e Court o f Tax Appeals , as he ld in th e Aichi Case . Hence, th e filing o f p e titi oner's c la im for unutilize d input VAT re fund/ cred it before th e Court a quo was premature as th e re wa s no CIR d ecisio n for this Court to re vi ew nor wa s th e re ina c tion on th e part of th e CIR after th e lapse o f th e 120-day p eriod provid e d under Sec tion 112(C) , Tax Code. Therefore, th e p e tition for review filed before thi s Court warrants a dismissa l o n th e ground o f absence of jurisd ictio n to take cog nizan ce o f th e case. ( 34 Divisio n Docket, p. 7. 35 /d. at 5.

Deutsche Knowl e dg e Services PTE LTD . vs. CIR Page 14 o f 19 CTA EB Case No . 667 (C TA Case No. 7979 ) DECISION It is axiomatic that th e "Court o f Ta x App e als is a co urt o f special jurisd ic ti on and c an o nly tak e cog nizance o f suc h matte rs as are c le arly within its jurisdiction." :l6 A c lose scru tiny o f Section 7 of Republic Act (R.A.) No . 9282 , am e nding R.A No. 11 25, otherwise known a s th e Law Creating the Co urt of Tax Appeats31 and Section 3, Rule 4 and Section 3(a) , Rule 8 of the Revised Rules of the Court of Tax Appeals38(, 36 Riza l Co mm e rc ial Bonking Corp. vs. Co mmissioner o f Inte rnal Revenue , G.R . No. 168498 , April 24, 2007,522 SCRA 144. 37 Sec. 7. Jurisdic tio n. - Th e CTA shall exerc is e: (a) Exclusive app e ll a te jurisdic ti o n to revie w by appea l, as he re in provid e d : ( 1) Decisio ns o f th e Commissioner of Inte rnal Re ve nu e in cases invo lving disput e d assess m e nts, re fun ds o f inf e rnal re v e nue taxes, fees o r o ther c harges, pena lties in re lation th e re to, o r o th e r ma tte rs arising unde r th e Natio nal Inte rnal Reve nu e o r o th e r laws ad minis te re d by the Burea u o f Inte rna l Revenue; (2 ) In action by th e Com missio ne r o f Inte rnal Reve nu e in cases in vo lving d ispute d assessmen ts, re fund s o f inte rnal re ve nue taxes , fees o r o th e r c harges, p e na lt ies in re latio n th e re to, or o th e r mat te rs arising under the Nationa l Int e rnal Revenue Cod e or o th e r laws adm inistered by th e Bureau of Inf erna l Revenue, wh ere th e Na ti ona l Int e rnal l~eve nu e Code provides a sp ecific pe ri od of a c tion , in whic h c ase the ina c tion shall b e d eem e d a d e nial ; XXX 38 Rule 4, Sec ti on 3. Cases Within th e Jurisdic tion o f th e Co urt in Divisio n .- Th e Co urt in Divisio n sha ll exerc is e: (a) Exclusiv e o rig inal or appell a te jurisd ic ti on to review by appeal the following: ( 1) Decisio ns of th e Commissio ne r o f Inte rnal Re ve nue in c ases invo lving disput e d assessmen ts, re fund s o f inf e rnal reve nue taxes, fees or o th e r c harges, p e nalties in re latio n th e re to, o r o th e r matte rs arising und e r th e Nationa l Inf e rnal Reve nu e Code or o th e r laws ad ministe re d by th e Bureau o f Inte rnal Revenue; (2) Ina c tion by th e Commissio ne r o f Inte rnal Revenue in cases involving dispute d assessmen ts, re funds o f inte rnal re v e nue ta xes, fees o r o th e r c harges, p e nalties in re lation th e re to, or o th e r matte rs

De utsc he Knowle dg e Se rvi ces PTE LTD . vs. C IR Page 15 of 19 CTA EB C as e No. 66 7 (C TA C as e No . 7979) DECISION reve a ls that th e jurisdictio n o f th e C o urt o f Ta x Ap pe a ls ha s b ee n expa nded to inc lud e no t o nl y d e c isio ns or ruli ngs b ut inac ti o n as w e ll o f th e Comm issio ne r o f Inte rn a l Re ve nu e. Evide ntly, th e dec isions, ru lings or in actio n o f th e Co mmissio ner a re necessary in o rder to ves t th e Court o f Tax Appea ls w ith jurisd ic tio n to e nte rta in th e appeal, 39 sp e c ifica lly on claim fo r re fun d, provided it is fil ed w ithin 30 d ays a ft er th e re ceip t o f suc h dec isio n o r ru lin g, or within 30 d ays after th e ( ari sing und e r the Nolio nol lnl e rno l Reve nue Cod e o r o th e r lows administe re d by l he Bure au o f In te rnal Reve nue, wh e re the Notio nal Inte rna l Reve nu e Co d e o r o lh er applic abl e lo w pro vid es o sp ec ifi c p e rio d fo r a c tion: Provid e d , that in c as e o f dispu te d ass essm e nts, th e inac tio n o f th e Comm ission er of Inte rna l Re v e nue w ithin the o ne hundre d e ighty day-p e rio d und er Sec lio n 228 o f the Notio nal In te rna l Re ve nu e Cod e shal l b e d eem e d o d e nial for purposes o f all o wing t he loxpoye r to appe al his case lo lh e Courl and d oes no t necess arily co nsti tute o fo rma l d ecisio n o f lh e Commi ssio ne r o f In te rn a l Re ve nu e o n th e ta x c as e ; Pro vid e d , fu rlh er, lhot sho uld th e taxpaye r o p t to owoit th e fi nal d ecisi o n of th e C ommissio ne r o f Inte rnal Re ve nue o n the d ispute d ass e ssm e n ts b e yo nd the o ne hundre d eighty day-p e rio d abo v e m e n tio ne d , the taxpaye r may app e al suc h fina l d ecisio n to the Co urt und e r Sec tio n 3 (o) , Rul e 8 o f lhese Rules; and Provid e d , sti ll furth e r, thol in l he c as e o f c laims for re fun d o f lo xes e rro neously o r ille ga lly co llec le d , th e lo xpoye r must fil e o pe lil io n for re vi e w w ith th e Courl p ri o r lo th e e xp ira lio n o f l he lwo-ye or p e ri o d unde r Sectio n 229 o f the Noti o na l Inte rna l Re ve nu e Co d e; XXX Rule 8, Sec tio n 3. Wh o m a y a p p e al; p e rio d to fife pe titio n. - (o) A party ad ve rsely offec led by o d ecisio n , ruling o r lhe inoc lio n o f the Co mm issio ne r o f Inte rna l Reve nu e o n d isput ed as sess m e n ts o r c laim s fo r re fund o f in te rn a l re ve nu e lo xes, or by o d ecisio n or ru ling o f the Co mm issio ne r o f C usto m s, t he Secre tory of Finance, the Secre tory o f Trad e and Industry, th e Secre tory o f Agric ulture, o r o Re gio nal Trial Co urt in t he e xe rc ise o f its origina l jurisdic tio n may a ppe al lo th e Court b y p e titi o n fo r re vi e w fil ed w ilh in lhirly days o fl e r receipt o f o co py o f suc h d ecisio n o r rul ing, o r e xpirati o n o f l he p e ri o d fi xed by low fo r th e Commissio ne r o f ln le rnol Re ve nue to o c l o n lh e dispul e d assess m e nts. In case o f inac tio n o f th e Co mmissio ne r o f lnl e rnol Re ve nue o n c laims fo r re fund o f in te rna l re ve nue loxes e rro neously o r ille ga lly collec te d , th e ta xpaye r must fi le o p e li ti o n fo r re vi ew w ithin the two -ye ar p e ri o d prescrib e d by low fro m pa ym e nt o r co llec lio n o f lh e taxes. 39 Sup ra no te 36.

Deutsche Knowl e dg e Services PTE LTD. vs. CIR Page 16 o f 19 CT A EB Case No . 667 (CTA Case No. 7979) D EC ISION expiration of th e 120-day period fix e d by law for the Commissioner to act o n claim fo r re fund .11o Thi s 30-doy period after th e receipt of suc h d ecision or ruling, or ina c tion on th e port of th e CIR after th e expiration o f th e 120-doy p e riod , within which to fil e on appeal is jurisdic tional and failure to co mply th e rewith would bar th e appeal and deprive th e Court of Tax Appeals of its jurisdiction to en te rtain and determin e th e appeal or petition for review. Said period is no t m e re ly direc tory but mandatory and it is beyond the powe r of th e cou rts to extend or shorte n th e some . Furth e r, jurisprud e nce is re plete with c as es in ho lding that " th e ri g ht to appea l is not a natural right or a port of due process, it is m e re ly a sta tuto ry privilege, and th e some may be exerc ised o nly in th e mann e r and in accordance with the provisions of low. Th e party who seeks to avail o f th e some must co mply with th e require m e nts o f th e low. Foilin g to do so, th e right to appea l is l os t." ~ 1 Finally, anent petitioner's argument that th e Court a quo shou ld hove gra nte d its motion to declare res pondent in default o n th e e 4o See Commissioner o f Internal Revenue v. Aichi Forging Company of Asia. In c .. supra note 32. 41 Produce rs Bonk of th e Phil. vs. Court of Appeals. G.R . No. 126620. 38 1 SCRA 185. Ap ril 17, 2002 c iting Ortiz vs. Court of Appea ls. 299 SCRA 708 ( 1998).

Deu lsc he Knowl e dg e Services PTE LTD. vs . CIR Pag e 17 o f 19 CTA EB Case No . 667 (C TA Case No. 7979 ) DECISION ground that th e Iotte r fil ed a Motion to Di smiss instead of on An swer, the some must necessarily foil. Jurisdic tion is defined as th e authority to try, hear and decide a c aseY M o reover, that jurisdiction o f th e court over th e subjec t matter of the action is a matter of low and it may not be conferred by consent or agreem e nt of th e porties.~ 3 In fact, th e lock of jurisdiction of a court may be raised at any stage of the proc ee dings, even on oppeol .~ 4 Hence, where th e court itse lf clearly ha s no jurisdiction over the subject matte r, the a c ti on shall b e dismissed. ~~' Sec tion I, Rule 9, Revised Rules of Court, aptly provides that wh e n it appe ars from th e pl e adings or th e evid ence on record that th e cou rt ha s no jurisdiction over the subjec t matter of the case, the co urt sha ll dismiss th e c laim , rega rdl ess of whether or not th e so m e was pl e ad e d e ith e r in a motion to dismiss or in th e answe r, thu s: "Sec tion 1. Defenses and objections not pleaded. - Defenses and objec tions not pleaded either in a motion to dismiss or in the answer ore d eemed waived. However, when it appears from the pleadings or the evidence on record that the~ 42 Fort Bonifacio Development Corp ora tio n v. Hon. Edwin D. Sorongo n, e t of., G.R. No. 176709, May 8, 2009 c itin g Tolentino v. Leviste, G.R. No. 1561 18, 19 November 2004, 443 SCRA 27 4, 284; Toyota v. The Director o f th e Bureau of Labor Relations, 363 Phil . 437 (1999); Zamora v. Co urt o f Appeals, G.R. No. 78206, 19 Marc h 1990, 183 SCRA 279. 43 Justice Jose Y. Feria and Mario Co ncepc io n S. Noche, Civ il Proce dure Annotated, Vo l. l, 200 1 Ed., p. 3 18. 44 fd . 45Lo Novo/ Drug Corporatio n vs. Court of Appeals, G.R. No. 103200,31 August 1994 c itin g Sec ti o n 2, Rule 9, Rul es o f Cou rt (n ow, Section 1, Rule 9, Rev ise d Rules o f Court).

Deutsche Knowledge Services PTE LTD. vs. CIR Page 18 of 19 CTA EB Case No. 667 (CTA Case No. 7979) D E CISION court has no jurisdiction over the subject matter, that th e re is another action pending between the some parties for the some cause, o r that the action is barred by a prior jud gment o r by sta tute of limitati ons, the court shall dismiss the claim ." [Emphasis supp li ed. ] Evidently, th e co urt c on m o tu proprio dismi ss th e claim on th e ground of lo c k o f jurisdic ti o n over th e subject matter o f th e case . This belies petitioner's claim that th e Court a quo should hove declared respondent in default on th e ground that th e Iotte r fil ed a M o ti o n to Dismiss in stead of on Answer. WHEREFORE prem 1ses conside red, th e petition is DENIED. Th e Resolutions of th e First Division of thi s Court in CTA Case No. 7979 doted Ap ril 12, 20 l 0 and July 20, 20 l 0 ore hereby AFFIRMED . No pronouncement as to cos ts. SO ORDERED. WE CO NC UR : ~ N.M ~ . 6~ CIEliTO N. MINDARO-GRULLA Associate Ju stice L\9. c~ ERNESTO D. ACOSTA Presiding Ju sti ce

Deutsche Knowl e dg e Services PTE LTD . vs. CIR Page 19 o f 19 CTA EB Case No. 667 (CTA Case No . 7979 ) DECISION ~~ac.Gr~~'*� ~ frJANITO C. CASTANEDA ,~. - CAESAR A. CASANOVA Associate Justice Associate Ju stice AsEsRo~~~~-�iyce fi?.e_e-~ OLGA PALANCA-ENRIQUEZ Associate Ju sti ce ~~A--/~- AMEliA R. COTA�c'O-MANALASTAS Assoc iate Ju sti ce CERTIFICATION Pursuant to Arti c le VIII , Section 13 of th e Constitution , it is he reby ce rtifi ed that th e conclusions in th e above Decision w e re rea c he d in co nsullation among th e m e mbe rs o f th e Court En Bane before th e case was assigned to th e writer o f th e opinio n o f th e Court En Bane . \J:~t,. . t'~ ERNESTO D. ACOSTA Presiding Ju sti ce

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY En Bane DEUTSCHE KNOWLEDGE CTA EB CASE NO. 667 SERVICES, PTE. LTD., (CTA Case No. 7979) Petitioner, Present: Acosta, P.J. -versus- Castaneda, Jr., Bautista, Uy, Casanova, Palanca-Enriquez, Fa bon-Victorino, Mindaro-Grulla, and Cotangco-Manalastas, Jl. COMMISSIONER OF INTERNAL Promulgated: REVENUE, SEP 1 6 2011 U"r_~/~ Respondent. 9:~ a -. ~ �. X-------------------------------------------------------------------------------------------------------------X Dissenting Opinion BAUTISTA, [.: While the Court En Bane denied the present Petition for Review, and accordingly, affirmed the assailed Resolutions of the First Division of the Court ("Court in Division") dated April 12, 2010 and July 20, 2010, which dismissed the Petition for Review before the Court in Division on the ground of lack of jurisdiction, I, on the other hand, opts to uphold the pronouncements made in the cases of

Disse11ti11g Opi11io11 CfA EB CASE NO. 667 (CfA Case No. 7979) Commissioner of Internal Revenue v. Toledo Power, Inc.,1 and Commissioner of Internal Revenue v. San Roque Power Corporation.2 A plain reading of Section 112 of the 1997 National Internal Revenue Code ("NIRC"), as amended, will show that the provision use the word "may" instead of a more restrictive or mandatory term.3 Since it is well-settled that the word "may" when used in a statute, is merely permissive and operates to confer discretion, the same word incorporated in Section 112 of the 1997 NIRC, particularly paragraph (C) thereof, should be construed as permissive and not restrictive in nature. And consistent with the provision's permissive nature, the preceding paragraph, specifically paragraph (A), likewise use the same word in stating that a "VAT-registered person whose sales are zero-rated or effectively-zero-rated may apply for the issuance of a tax credit certificate or refund xxx". Therefore, the judicial recourse to this Court within thirty (30) days after the lapse of the one hundred twenty (120)-day period is merely directory and permissive, and not mandatory nor jurisdictional, however, subject only to the period provided under the same provision, i.e., within two (2) years after the close of the taxable quarter when the sales were made. With this, if the two (2)-year prescriptive period is about to expire, there is no need to wait for the denial of the claim or the inaction by the Commissioner of 1 CfA EB No. 321 (CfA Case Nos. 6805 & 6851), May 7, 2008. 2 CfA EB No. 408 (CTA Case No. 6647), March 25, 2009. 3 As amended by Republic Act No. 9337.

Disse11ti11g Opi11i011 CTA EB CASE NO. 667 (CTA Case No. 7979) Internal Revenue after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal with this Court.4 Thus, it must be borne in mind that no claim can be had, whether in the administrative or judicial fora, beyond the two (2)-year period provided under Section 112 of the 1997 NIRC, as amended. Based on the records of the case, the present claim involves a claim for refund of excess and unutilized input tax for the period covering the third (3rd) quarter of the calendar year 2007, or from July 1, 2007 to September 30, 2007, in the amount of P14,217,222.87. Applying the foregoing, petitioner had until September 30, 2009, within which to file both its administrative and judicial claims. Considering that petitioner filed its administrative claim on September 18, 2009, and its Petition for Review on September 30, 2009, I find the same to be made within the prescribed period. Accordingly, I vote that the Petition for Review, claiming for refund of unutilized input value-added tax for the period covering the third (3rd) quarter of the calendar year 2007, in the amount of P14,217,222.87 be GIVEN DUE COURSE. 4 Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc., CTA EB No. 426, May 29, 2009.