COMMISSIONER OF INTERNAL REVENUE v. VISAYAS GEOTHERMAL POWER COMPANY (Consolidated with EB 562)

v \).\l' .. \J I <-J Republic of the Philippines COURT OF TAX APPEALS Quezon City En Bane COMMISSIONER OF INTERNAL EB Case No. 561 REVENUE (CTA Case No. 7559) Petitioner, -versus- VISAYAS GEOTHERMAL POWER COMPANY, Respondent. x----- -- --- ------- ------x VISAYAS GEOTHERMAL EB Case No. 562 POWER COMPANY, (CTA Case No. 7559) Petitioner, Members: -versus- ACOSTA, PJ, CASTANED A, JR., COMMISSIONER OF INTERNAL BAUTISTA, REVENUE, UY, CASANOVA, Re s pondent. PALANCA-ENRIQUEZ, FABON- YfCTORfNO, MINDARO-GRULLA, and COTANGCO-MANALASTAS, JJ Promulgated: FEB 07 2011~ ~~~A1 X- - -- - - - - - - - -- - - - - - - - - - -- - - - - - - - - - - - -- - - - - - - - - - - - - - - -- - -----X

CTA EB CASE NO. 56 1 & 562 D EC ISION DECISION CASANOVA, J.: Thi s is an appeal, by way of Petiti ons for Rev iew, fi led by both parties seeking the reversal of the CTA Former Second Division Dec ision1 (the "Assailed Decision") dated April 17, 2009 and th e Reso lut ion2 (the "Assailed Reso lution") dated October 29, 2009, denyin g both part ies' Moti ons fo r Partia l Reco nsideration . The facts of the case, as fou nd by the CTA Former Second Division, are as follo ws: "Pet itioner Visayas Geothermal Power Co mpany is a special purpose limi ted partnership duly organized and existing und er Philippines laws, with Taxpayer lde ntiiication No . (T IN) 003-832-53 8-VAT3 and prin cipal office at Mil ag ro. Ormoc City, Prov ince of Leyte.4 It is principall y engaged in th e business of power generation through geothermal energy and the subsequ ent sa le of generated power to the Philipp ine Nati onal Oil Com pany- Energy Development Corporation (PNOC-EDC), pursuan t to an Energy Co nve rsion Agreement.5 On the other hand , respo nd ent is th e du ly appointed Commiss ioner of Internal Revenue empowered to perform the duties of the said offi ce including, among others, the power to deci de, approve and grant refund s or tax credi ts of erroneo usly or excess ively paid taxes�. He holds offi ce at the Bureau of In terna l Revenue (B IR) Nationa l Office Building, BJR Road, Diliman, Quezon Cityfo 1 Division Docket, pp. 60 7-625. 2 Division Docket, pp. 754-759 . 3 Certifi cate of Registrat ion , Ex hib it "C", Divis ion Docket, p. 46 1. 4 Par. I, Peti tion fo r Rev iew, Divi sion Docket, p. I. 5 Par. 3, Peti tion fo r Rev iew, Divis ion Docket, p.2; Ann ex '�B", Petit ion for Review, Di vision Docket, pp. 18-76. 6 Par. I, Admi tted Facts, Jo int Stipu lation of Facts and Issues (JSF I), Di vis ion Docket, p. 163.

CTA EB CAS E NO. 56 1 & 562 DEC ISION Petiti oner filed with the BI R its Ori gina l Qu arterl y VAT Returns for the first to fourth qu arters of taxable yea r 2005 on the followin g dates:7 Taxable Quarter Date of Fi ling of Original Return April 25 , 2005 1st July 25, 2005 2na 3ra October 25 , 2005 4tn January 20, 2006 However, petitioner amended its Quarterly VAT Returns and reflected therein an excess or unuti lized VAT credits, ari sing from its domestic purchases o!� non -cap ital good s and serv ices, services rendered by non-res id ents, and im portati on of non-capital good s, detailed as foll ows: 8 Exces s/Unutilized VAT Credits Total Taxable Date of Dom estic Domestic Serv ices Importation - 5,819 ,085.68 Quarter Fil ing of Purchases- Purchases- Rendered by Goods other 2,478 ,997.07 Amended Goods other than Capital 2,345,887.26 1st Return th an Capital Se rvices Non- 3,516,837 .94 2nd Reside nts Goods 14, 160,807 .95 3rd Goods 4th Total 11 /18/05 318,985.97 5,484 ,269.7 1 - 15,830.00 11/18/05 402,569.87 1,770,122.20 - 306 ,305.00 11 /18/05 584 ,207 .59 1,544 ,120.96 104,032 .71 113,526.00 07/ 14/ 06 1,018 ,936 .20 1,919,888 .09 395,763 .65 182 ,250 .00 . ~32'!,69 9.6 ~ - 10,7113,_400~~ 6 __'!99,796.36 617 ,911 .00 ----- -- - On December 6, 2006, petiti oner filed an admini strative claim for refund of the amount of P14, 160,807.959 wit h th e BIR Di strict Office No. 89, Ormoc City, on the belief th at it is entit led to recover excess an~ 7 Par. 2, Admitted Facts, JSFI , Division Docket, pp. 163-161. 8 Par. 3, Admitted Facts, JSFI , Division Docket, p. 164. 9 Par. 4, Admitted Facts, JSF I, Ibid.; Ex hib it '�L", Division Docket, pp. 495 -496.

CTA EB CASE NO . 561 & 562 DECISION unutilized input VAT paym ents for the four quarters of taxable year 2005, pursuant to Rep ublic Act (R.A .) No. 9 I36, and its Imp lementing Rules and Regulations, which treat sa les of generated power subject to VAT at zero (0%) percent rate startin g June 26, 200 I. The BIR's in act ion on its clai m for refund prompted petitioner to seek recourse before this Co urt on January 3, 2007, praying for the refund or the issuance of tax credit certificate in the amount of Pl4,160,807.95 covering the four quarters of taxab le year 2005. In the Answer fil ed on March I, 2007 ,10 respondent raises the fo llowing Special and Affi rmntive Defenses : ' 4. Petiti oner's alleged cl aim for refu nd is subject to admini strative routinary investi gation/examination by the Bureau; 5. The amount o r P I4, I60, 807.95 being claimed by petiti oner as all eged unuti li zed input VAT from its domesti c purch ases of non-capital goods and services, services rendered by non-resid ents and importation of non-capital goods for the first to fourth quarters of taxabl e year 2005 was not pro perly documented; 6. In an action for refund, the burden of proof is on the taxpaye r to establish its right to refund , and fai lure to susta in the burden is fata l to th e claim for refund/credit; 7. To sup port its claim, it is im perative for petitioner to prove the fo ll owin g, viz.: a. The regi stration require ments of a value-added taxpa ye r in co mpli ance with Section 6(a) and (b) of Revenue Regu lation s No . 6-97 in relation to Sect ion 4. I07-a (a) of Reve nue Regulations No . 7-95, and Secti on 236 of the National Interna l Re venue Code of I997 (N IRC of 1997);-6L 10 Division Docket, pp. I02-10 7.

CTA EB CASE NO. 56 1 & 56 2 DEC IS ION b. The invo ic ing and acco untin g requirements for VAT-registered persons, as well as the filin g and payment of VAT in co mp liance with the pro visions of Secti ons 113 and I 14 of the NIRC of 1997 ; c. Proof of comp li ance with th e prescribed ch eck li st of requirements to be submitted invo lving claim fo r VAT refund in pursuance to Revenue Memorandum Orde r No . 53-98, otherwise there wo uld be no sufficient complia nce with the fi lin g of admini strati ve cl aim fo r refund whi ch is a co nd ition sine qua non prior to the fil in g of jud icial claim in accord ance with the provi sion of Section 229 of th eN IRC of 1997. It is worthy of emphasis that Secti on 11 2(0) of the NI RC of 1997 requires th e submi ss ion of co mplete docum ents in sup port of th e appli cati on fil ed with the Bureau o f Interna l Revenue before the 120-day audit peri od sha ll app ly. and before the tax payer coul d ava iI of j udi cial rem edi es as provided for in the law. Hence, pet iti oner' s failure to submit proof of comp li ance with th e above-stated requireme nts wa rrants im med iate di smi ssa l of the petit ion for review; d. That the input ta xes of P20,546,004. 87 all egedl y paid by petitioner on its do mestic purchases of non-capita l goods and servi ces, services ren de red by non- res ide nts and importation of non-ca pi ta l goods fo r the fi rst to fourth quarters of taxa ble year 2005 vve re attrib utable to its zero-rated sal es and such have not been applied aga inst any ou tpu t tax and we re not carri ed over in the succeedin g taxab le qu arter or quarters; e. That petiti on er' s ad mini strative and judicial claims fo r tax credit or refu nd of the unutilized in put tax (VAT) was fi led within two (2) years after th e close o r the ta xa ble qu arter when the sal es were made in acco rdance with Sections 112 (/\) and (D) and 22 9 of the N IRC of 1997 ;~

CTA EB CASE NO . 561 & 562 DECISION f. That pet itioner's dom estic pu rchases of goods and services were made in the course of its trade or busi ness, properly supponed by VAT in vo ices and/or offic ial receipts and other documen ts, such as subsidi ary purchase journal, sh ow in g that it actu all y paid VAT in acco rdance with Sections II 0 (A) (2) and 113 of the N IRC of 1997, and in pursuance to Section 4.104-5 (a) and (b) of Reve nue Regulatio ns No. 7-95 (RE: Substa ntiation of Claims for Input Tax Credit); g. The req uirem ents as enumerated under Section 4.1 04-2 of Reve nu e Regulati ons 7-95. (Re: Persons who can avail of the Input Tax Credits). 8. The Petition for Rev iew is premature. Since petitioner did not su bmit complete docume nts in support of its admini strative ciaim for refund as ind icated under Section 112 (D) of the N IRC of 1997, the 120-day period sta rts to ru n on 6 December 2006, the date when it fil ed its admin istrative claim for refund . The said peri od is yet to exp ire on 5 April 200 7. Hence, the 30- day per iod withi n whi ch to file the petition for review before thi s Honorab le Co urt is yet to ex pire on 5 May 2007. This bein g so, this Honorable Court has no jurisdi ctio n to act on the in stant peti tion fo r review. 9. Claim s lor refund are construed strictly aga inst the claim ant for the same partake the nature of exemption from taxatio n (Commissioner of Internal Revenue vs. Ledesma. 31 SCRA 95) and as such , they are looked upon with disfavo r (Western Mino lco Corp . vs. Commissioner oflnternal Revenue, 124 SCRA 1211).' Durin g tri al, onl y pet iti oner presented its ev idence whi le respondent's coun se l. /\ tty. Clari ssa Virtudes-Babaran, manifested that she will not be presen ting ev id en ce on behalf of respo ndent and this case w~

CTA EB CASE NO. 56 1 & 562 DEC IS ION deemed submi tted for decision in the Reso lu ti on dated Jul y 24, 2008 ,11 taking into consideratio n both parties' res pec t ive Me mora ndum . 12 " The parties, in th eir Jo int Sti pul ati on of Facts and Issues To Be Resolved 13, filed on June 4, 2007, submi tted the fo llowin g issues 14 fo r thi s Court' s reso lution, to wit: " I. Wh ether or not Pet itioner is entitl ed to the refund in th e amount of Fourteen Milli on One Hundred Sixty Thou sa nd Eight Hun dred Seven and 95/1 00 Pesos (P 14, 160,807.95) representin g its all eged unutilized inpu t Va lue Added Tax ("VAT") for the 1st to 4th quarters of2 005 ; 2. Wh ether or not the inp ut V1\.T amount of Fourteen Mill ion One Hun dred Sixty Th ousand Eight Hundred Seven and 95/ I00 Pesos (P 14. 160,807.95) allegedl y pa id by Pet itioner from its domesti c pu rchases of non- capi tal goods and serv ices, services rendered by non- res idents and importa ti on of no n-ca pita l goods was attri butable to its zero- rated sa les and such input VAT has not been appl ied aga inst an y output tax ; 3. Wh ether or no t the ad min istrative cla ims fo r refund we re fil ed withi n the period all ovved under the law; and 4. Wh eth er or not Petitio ner' s domestic purchases of good s and services du rin g the Ist to 4th quarters of 2005 we re made in the co urse of its trade or business." On April 17, 2009. th e CTA Fo rm er Se cond Division pro mul gated the Assail ed Deci sion, the dispos itive porti on of which reads as fo ll ovvs ~ 11 Ibid. , at p. 582 . 12 Petitioner fil ed its Memo ra ndum on June 19. 2008 and Rep ly Memo rand um on August 29, 2008 (admitted on September 4, 20 08), while respo nde nt fil ed his Memo randum on July 2 1, 200 8, Division Docket, pp. 547-564, 586-603. 56 5-579, respecti ve ly. 13 JSFI, Division Docket, pp . 163- 16 7. 14 Ibid, p. 166 .

CTA EB CASE NO. 561 & 562 DECISION "WHEREFORE, in view of the forego in g considerations, the Petition for Review is hereby PARTIA LLY GRANTED. Accordingly, respondent is ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX C RE DIT CERTIFICATE in favor of petitioner the reduced amount of SEVEN MILLIO N SIX HUNDRED NINETY NINE THOUSAN D THREE HUNDRED SIXTY SIX PESOS AND 37/100 (P7,699,366.37) representi ng unutili zed input VAT paid on domestic purchases of non-cap ital goods and services, services rendered by non-residents, and importation s of non-capital goods for the first to fourth quarters of taxable year 2005. SO ORDERED." Not satisfied with the sa id Decision, peti tio ner-VISA YAS GEOTHERMAL filed its Motion for Parti al Reco nsiderat ion (Re: Deci sion Dated 17 April 2009) 15 on May 6, 2009, while respondent-CI R filed its Motio n for Partial Reconsideration 16 on May 7, 2009. In a Resolution 17 promu lgated on October 29, 2009, the CTA Former Second Division denied both parties' respecti ve Motion. Hence, the in stant Petiti ons for Review filed by both parties, viz: a. CTA EB No. 56 1 - Commiss ione r of Internal Reve nue vs. Visayas Geothermal Power Company b. CTA EB No. 562 - Visayas Geothermal Power Company vs. Commissioner of Interna l Reven ue On February 12, 20 I0, the Court En Bane issued a Reso lution 18 consolidating CTA EB No. 562 with CTA EB No. 56 1, the case bearin g the lower docket number; and ordering both parties to submit their respective co nsolidated memorandum within thirty (30) days from receipt o f the reso luti on after which th e case shall be deemed submitte~ 15 Division Docket, pp. 626-655 . 16 Division Docket, pp . 672-690. 17 Division Docket, pp . 754- 759 . 18 En Bane Rollo, pp. 98-99.

CTA EB CAS E NO . 561 & 562 DECISION for decision. In compli ance with th e sa id Resolution , VISA YAS GEOTHERMAL filed its Consolidated Memorand um 19 on Ma rch 22, 20 I0. On the other hand, C IR filed his Memoranda20 (in CTA Case N os . 56 1 & 562) both on Fe bruary 18, 20 I0. In support of th ei r res pective Petition for Rev iew, the C IR and VISA YAS GEOTHERMAL presented th eir respecti ve iss ues/discuss ions, to wit: CTA EB Case No. 561 (CIR, petitioned 1 "I WHETH ER OR NOT THE IIONORABL E COU RT ERRED IN PARTIA LLY GR ANT ING RES PONDENT' S CLAIM FOR REFUN D IN TH E REDU CE D AMOUNT OF P7,699,366.37 ALLEG EDLY REPR ESENT ING UNUTILI ZE D INPUT VAT PAID ON DOM ESTIC PU RCHASES OF NON-CAPITAL GOODS AN D SERVI CE S, SERVICES REN DERED BY NON- RESID ENTS AN D IMPORTATIONS OF NON-CAPITAL GOODS FO R TH E FIRST TO FOURTH QUARTERS OF TAXAB LE YEAR 2005 BECAUS E RESPON DENT HAS NOT SUFFICI ENTLY PROVEN ITS ENT ITLEMENT TO REFUN D. II. THE CLAIM WA S NOT 1-' ILED IN ACCO RDANCE WITH TH E PROC EDURE PRESC RIBE D BY LA W. THUS THE SECOND DI VI SION l iAS NO JU RISDI CTION TO ACT ON THE PET IT ION FOR REV II~ W. '' CTA EB Case No. 562 (VI SA YAS GEOTH ERMAL, petitioner) " A. PETITI ONE R' S OFFIC IAL RECE IPTS AN D INVO ICES SUPPO RT ING ITS CLA IME D INPUT VAT CONTAINED ALL TH E INFORM AT ION REQ UIR ED BY THE TAX CODE AND TH E RE LEVANT RULES AND REGU LATIONS. THE~ 19 En Bane Rollo (EB 561 ), pp. 125-2 15. 20 Ibid, p. I00-1 18 ; En Bane Roll o (EB 562) p. I09- 114. 2 1 Petition for Review, En Ba ne Roll o (CT!\ E13 No. 56 1), p. 7.

CTA EB CA SE NO. 56 1 & 562 DECISION fNNOC UOUS CO RRECTIONS IN THE OFFICIAL RECEIPTS AND INVOICES DO NOT JUSTIFY DISALLOWANCE Of-INP UT VAT.22 B. PETITI ONER'S OFFIC IAl , RECE IPTS AN D INVOICES SUPPORTING ITS UNUT ILIZED INP UT VAT COMPLY WITH THE INVOI CI NG REQU IR EMENTS OF THE LAW.23 c. RES PON DENT WAIVED OR AB AN DONED ANY OBJEC T ION RE GARDING TH E INVOICING REQUIR EMENTS WHEN HE FAILED TO RAISE THE SAME DURING TRI AL. 24 D. IN CIVIL CASES, ONLY A PREPON DERANC E OF EVID ENCE IS REQ U!RED. 25 ., After a careful and thorou gh evaluation and consideration of the records of the cases, the Court En Bane finds mct�it in CIR's Petiti on fo r Review (CTA EB Case No. 561). VISA YAS GEOTHERM AL anchors its claim under Sections II 0 (B), and 112(A) ofthe NIRC of 1997, which. respectively, provi des: "SEC. 110. Ta x Credits. - XXX XXX XX X (B) Excess Output or I npu t Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT- registered person. If the in put tax exceeds the ou tput tax, the excess shall be catTied over to the succeeding qua rter or quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registere~ 22 Petiti on for Review, En Bane Ro ll o (CT!\ EB No . 562), p. 19. 23 Ibid, p. 27. 24 Ibid, p. 47 . 25 Ibid, p. 49 .

CTA EB CASE NO. 561 & 562 DECISION Page II of 17 person may at his option be refunded or cred ited against other internal revenue taxes, su bject to the pro visions of Section 112. XXX XXX xx x" "SEC. 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Ze ro-rated Sa les. - Any VAT-registered person, whose sales are zero-rated or el'fective ly ze ro-rated may, wi thin two (2) years after the close of the taxable quarter whe n the sales were made, apply for the issuance of a tax cred it certi ficate or refu nd of creditable input tax due or paid attributable to such sales, except trans itiona l input tax, to the extent that such input tax has not been applied aga inst outp ut tax: Provided, however, That in the case of zero-rated sales under Section I06(A)(2)(a)( I),(2) and (B) and Section I08(8)( I) and (2), the acceptable foreign currency exchange proceeds thereof had been dul y acco unted for in accorda nce with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided,further. That where the taxpayer is engaged in zero-rated or effectively ze ro-rated sale and also in taxable or exempt sale of goods or properties or services. an d the amount of creditable input tax due or paid cannot be directl y and entirel y attributed to any one of the transactions, it shall be allocated proportionately on the bas is of the vo lume of sales." Pursuant to th e afore-quoted Section 112 (A) of the 1997 NIRC, in order to be entitled to a refund/tax credit of unuti li zcd in put VAT. the following requisites must be complied with: I. there mu st be zero-rated or effective ly zero-rated sales; 2. that input taxes were incurred or pa id ; 3. that such input taxes arc attributab le to zero- rated or effectively zero-rated sales ; 4. that the in put ta xes were not applied again st any o utput VAT liability; 5. that the ad ministrati ve claim for refund was filed within the two-year prescriptive period . The Court En Bane deem s it proper to resol ve fi rst VISA YAS GEOTHERMAL 's conformity or non-comp li ance with the fl fth requisite before determining whether or not VISA YAS GEOTH ER MA L is entitl ed to its c laim for refu nd/credit~

CTA EB CASE NO. 56 1 & 562 DECISION In the case of Commissioner of Intern al Revenue vs. Mirant Pagbilao Corporation (formerly Southern Energy Quezon, Inc.), G. R. N o. 172129, September 12, 2008, the Highest Tribunal held , and We qu ote: " The cla im for refund or tax credit for the creditable input VAT payment by M PC embodi ed in 0 R No. 0189 was filed beyond the period provided by law for such claim. Section 11 2 (A) of the NJRC pertinently read s: ' (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effective ly zero-rated ma y, w ith in two (2) years after the close of th e taxa b le quarter when t he sa les were made, apply fo r t he issu a nce of a ta x credit ce rtificate or refund of creditable input tax due or paid attributable to such sales, except tran sitional input tax, to th e ex tent that such input tax has not been appli ed again st output tax: xxx ' The above provi so c learly prov ides in no uncertain terms that unutilized inpu t VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed w ithin two years reckoned from the close of taxab le qu a rter when th e relevant sales we re made pertaining to the input VAT r ega rdless of whet her said tax was paid or not. xxx" (Emphasis sup pli ed) Applying th e afo re-quoted rulin g in the case at bar, the Co urt En Bane finds that the administrative claim of VISA YA S G EOTHE RM AL was filed within the two-year prescriptive period pu rs uan t to Section 11 2 (A) of the NIRC of 1997. The present cl a im pertains to VISA YAS GEOT HERMAL 's alleged unutilized input VAT in the amount of P 14, 160,807.95, from its domesti c purchases of non-capital goods an~

CTA EB CASE NO. 56 1 & 562 DEC ISION services, services ren dered by non-residents, and importat ions of non-capital goods for the first to fourth quarters of taxable yea r 2005. Co unti ng from March 31, 2005 (end of Ist quarter of2005), Jun e 30,2005 (end of 2nd quarter of 2005 ), September 30,2005 (end of3rd quarter of 2005) and Dece mber 3 1, 200 5 (e nd of 4 th qua rter of 2005), petitioner had until March 3 1, 2007, Jun e 30, 2007 , September 30, 2007 and December 31 , 2007, respectively, within which to file its clai m for refund in the admini strative level. Having filed a c laim for refund or issuance of a tax credit certificate w ith the BIR, Di strict Office No. 89 of Ormoc City on December 6, 2006, the sa id administrat ive cl a im was seasonably filed within the two-year prescriptive peri od. Notwithstandin g such findin g of lact, We are constra ined to grant CIR's Petition for Review due to the premature filin g of VISA YAS GEOT HERMAL 's judicial claim for refund/credit with th is Co urt provided under Section 112 (D) of the NfRC, which is hereunder quoted for easy reference: "SECTION 112. Refunds or Tax Credits ofInput Tax.- XXX XX X XXX (D) Period wi thin w hich Rcl'und or Tax Credit of Input Taxes shall be Made . - In proper cases, the Com mi ss io ner sha ll grant a refund or issue the tax credit certificate for creditab le inpu t taxes wi thin one hundred twenty (120) days from th e date of submission of co mplete documents in support of the applica tion filed in accorda nce wit h Subsections (A) and (B) hereof. In case of full or parti a l deni al of the claim for tax refund or tax credit, or the failure on the part of th e Comm iss ioner to act on the application within the period presc ribed above, the taxpayer may, within thirty (30) days from receipt of the decision denying the clai m or after the expiration of the one hund red twenty-day period, appeal the decision or the unacted claim with th e Court of Tax Appeals." (Emph as is s upplied~

CTA EB CASE NO. 561 & 562 DECISION The Supreme Court, in the recent case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, I nc., G.R. No. 184823, October 6, 2010, interpreted the above provision , to wit: " Section 11 2 (D) of the N lRC c learly prov ides that the CIR has '120 days, from th e date of subm iss ion of the compl ete documents in support of the application [for tax refun d/tax credit],' with in w hich to grant or deny the claim. In case of full or parti a l deni al by the ClR , the taxpayer's recourse is to file an appeal befo re the CTA wit hin 30 days from receipt ofthe decision of the CIR. However, if after th e 120-day period the C IR fa il s to act on the application for tax refund/credit, th e re medy of the taxpayer is to appeal the inaction ofthe C IR to CTA within 30 days. In th is case, the admi nistrative and judicial claims were simultaneous ly fil ed on Septembe r 30, 2004 . Obvious ly, respondent did not wait for the decisio n of the Cl R or the lapse of the 120-day period . For this reason, we fin d the filing ofthe jud icial c laim wi th the CTA premature. Respon dent ' s assertion th at the no n-observance of the 120-day period is not fatal to the filing of a j udi cia l c la im as lon g as both the administrative and judicial cl a im s are filed with in the two-year prescriptive period has no legal basi s. There is nothin g in Section 11 2 of the NIRC to support respondent's view. Subsection (A) of the said pro vis ion states that 'any VAT-registered person , whose sales are zero-rated or effective ly zero- rated may, within two years after th e c lose of th e taxa bl e q uarter when the sales were made, apply for the issuan ce of a tax credit certificate or refun d of creditable input tax due or paid attributab le to such sa les.' T he phrase ' within two (2) years xxx app ly for th e iss uance of a tax credit certificate or refund' refers to application s for refund/credit fil ed w ith the CIR and not to appeals made t~

CTA EB CASE NO. 56 1 & 562 DEC ISION the CTA . Thi s is apparent in the first pa ragraph of subsecti on (D) ofthe same provi sion, which states that the CIR has ' 120 days fro m the submission of compl ete documents in support of th e applica tion fi led in accordance with Subsections (A) and (B)' within whi ch to dec ide on the claim. In fac t, app lying the two-year peri od to j udi cial claims would render nugatory Secti on 11 2 (D) of the NIRC, whi ch alread y prov ides for a specific period within which a taxpayer should appea l the decis ion or inaction of the CIR. The second paragrap h of Secti on 11 2 (D) of the N IRC envi sions two scenarios: ( I) when a decis ion is issued by the CIR before the lapse of the 120-day period ; and (2) when no deci sion is made afte r the 120-day period. In both instances, the taxpayer has 30 days withi n which to fil e an appeal with the CTA . As we see it then, the 120-day peri od is crucial in filin g an appeal with the CTA . XXX XXX XXX In fi ne, the premature fi lin g of respondent' s claim fo r refund/cred it of input VAT befo re th e CTA wa rrants a dis mi ssal inasmu ch as no j uri sdiction was acquired by the CTA.'' As shown by th e reco rds of this case, the admi ni strati ve claim was fil ed on December 6, 2006. Hence, the CIR has 120 days or until April 5, 2007 within which to decide on the said clai m. After the lapse of the sai d 120-day peri od with out any action on the part of the CIR, petitioner may appea l with the CTA the unacted ad mini strati ve claim within thirty (30) days or until May 5, 2007. However, con sideri ng that the present Petition for Review was filed on January 3, 2007, or 28 days after pet itioner filed its admini strati ve claim without waiting for the expirati on of the 120-day period, such j udi cial claim was fil ed prematurel y. Thu s, the Court acqu ires no juri sdi cti on to act on the sai d judicial c l a im .~

.. CTA EB CASE NO. 56 1 & 562 DEC ISION With the above di scuss ion, the Co urt En Bane deems it proper to deny VISA YAS GEOTHERMA L's Petit ion for Review (CTA EB Case No. 562). WHEREFOR E, premi ses co nsidered: 1. As rega rd s CTA E B C ase No. 562, th e Petiti on for Review is hereby DISMISSED ; and 11. As rega rds CTA E B case No. 561 , th e Petition for Review is hereby GRANT E D. Accordingly, the Decis ion dated April 17, 2009 and the Resolution dated October 29, 2009 of the CTA Former Second Division are hereby RE VERSED and SET ASIDE, and another one is hereby entered DISM ISSI NG the Peti tion for Rev iew fil ed in CTA Case No. 7559 for hav ing been filed premat urely. SO ORDERED. ~ CAESAR A. CASANOVA Assoc iate Justice WE CONCU R: L ~ Q__.,_ ERN ESTO D. ACOSTA Presidi ng Justice c, q... ~C.CA~ST~AN~E/DA,, J1gt.,.. eifUANITO Assoc iate Justice ' O~P&~E~ Associate Justi ce E~P. UY Assoctate Justice

CTA EB CASE NO. 56 1 & 562 DEC ISION ~ N. M""~ - G'v.Jtc CIELITO N. MINDARO-GRULLA Associate Justi ce /4- /. ~;LJ~ AMELIA R. COTANGCO-MANALASTAS Associate Justice CER T I F ICA TI ON Pursuant to Arti cle Vlll , Secti on 13 of the Consti tuti on, it is hereby cert ifi ed that the above Decision has been reached in consu ltati on wi th the mem bers of the Court en bane before the case was assigned to the writer of th e op inio n of the Co Uii . tt~1P \)~ ERNESTO �D. ACOSTA Pres idi ng Justi ce