PANAY POWER CORPORATION ( Formerly: AVON RIVER POWER HOLDINGS CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

~/�\,a~ REPUBLIC OF THE PHILIPPINES Court ol Tax Anneals QUEZON CITY SPECIAL FIRSTDIVISION PANAY POWER CORPORATION CTA CASE NO. 7402 (Formerly: Avon River Power Holdings Corporation), Members : ACOSTA, Chairperson Petitioner, BAUTISTA, and CASANOVA, JJ. - versus - COMM ISSION ER OF INTERNAL Prom ulgated: REVENU E, ut~ r: 0 6 2010 ,' ~~(::>()~~ Respond ent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X AMENDED DECISION CASANOVA, J.: On March 10, 2010, petitioner filed its Motion for Reconsideration (Re: Decision dated February 18/ 2010) with Motion for Leave to Submit Supplemental Evidence with Reservation to Present Additional Evidence, praying for the granting by this Court of the following: "1. On the basis of law and evidence, reverse and set aside the Decision and issue an amended decision in favor of Petitioner granting the refund of input VAT on capital goods amounting to P14,122,347.21; 2. Grant Petitioner leave to submit and offer supplemental evidence and allow the admission of its audited financia ~

AMENDED DECISION ITA CASE NO. 7402 statements and/or to recall Ms. Reymonda Aida Obrero to identify the documents; 3. Grant Petitioner's prayer for reservation of the right to present additional evidence in support of its claim; and 4. On the basis of the supplemental evidence submitted or to be submitted, consider the same as sufficient and competent to prove that Petitioner's claim for refund of input VAT on capital goods is duly substantiated." On April 30, 2010, a Resolutiorr was issued by this Court granting the Motion for Leave to Submit Supplemental Evidence with Reservation to Present Additional Evidence. After presentation and formal offer of petitioner's supplemental evidence, specifically, Exhibits "R" to "U", the same were admitted in evidence as per Resolutiort dated August 31, 2010. In the same Resolution, petitioner's Motion for Reconsideration filed on March 10, 2010 was submitted for resolution. After a close scrutiny of the arguments as well as the pertinent doctrine and jurisprudence applicable in this case, this Court is constrained to give a second hard look on the facts surrounding the case and the findings in the assailed Decision, specifically, regarding the issue on prescription. In the recent case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia/ Inc. 3, the Supreme Court explained how the periods mentioned in Section 112 of the National Internal Revenue Code (NIRC) of 1997 should be applied in determining the timeliness of the filing of a claim fo~ 1 Docket, pp . 921 -922 2 Docket, pp. 1242- 1243 3 G.R. No. 184823, October 6, 2010

AMENDED DECISION CTA CASE NO. 7402 refund of unutilized input value-added tax (VAT) . The pertinent portions of the said decision are quoted as follows: "xxx. To be clear, Section 112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned �from the close of the taxable quarter when the sales were made. XXX XXX XXX Bearing this in mind, we shall now proceed to determine whether the administrative claim was timely filed. XXX XXX XXX Applying this to the present case, the two-year period to file a claim for tax refund/credit for the period July 1, 2002 to September 30, 2002 expired on September 30, 2004. Hence, respondent's administrative claim was timely filed. XXX XXX XXX xxx. Subsection (A) of the said provision states that 'any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.' The phrase 'within two (2) years xxx 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. xxx" (Emphasis supplied) In the present case, petitioner seeks the refund or the issuance of tax credit certificate for its unutilized input VAT on its purchases of capital goods and services made during the fourth quarter of 2003. Considering the above- stated jurisprudence, the reckoning date of the two-year prescriptive period for filing of the administrative claim for tax refund was the close of the fourth taxable quarter of 2003 or December 31, 2003. ~

AMENDED DECISION CfA CASE NO. 7402 In order to compute the two-year prescriptive period for the filing of an administrative claim for refund, this Court deems it necessary to quote the significant parts of the Supreme Court's decision in the case of Commissioner ofInternal Revenue, eta/. vs. Primetown Property Group, Inc. 4 to wit: , "Both Article 13 of the Civil Code and Section 31, Chapter VIII, Book I of the Administrative Code of 1987 deal with the same subject matter - the computation of legal periods. Under the Civil Code, a year is equivalent to 365 days whether it be a regular year or a leap year. Under the Administrative Code of 1987, however, a year is composed of 12 calendar months. Needless to state, under the Administrative Code of 1987, the number of days is irrelevant. There obviously exists a manifest incompatibility in the manner of computing legal periods under the Civil Code and the Administrative Code of 1987. For this reason, we hold that Section 31, Chapter VIII, Book I of the Administrative Code of 1987, being the more recent law, governs the computation of legal periods. Lex posteriori derogat priori. Applying Section 31, Chapter VIII, Book I of the Administrative Code of 1987 to this case, the two-year prescriptive period (reckoned from the time respondent filed its final adjusted return on April 14, 1998) consisted of 24 calendar months, computed as follows: Year 1 1st calendar month April 151 1998 to May 141 1998 2nd calendar month May 151 1998 to June 141 1998 calendar month June 151 1998 to July 141 1998 3'd calendar month July 151 1998 to August 141 1998 4th calendar month August 151 1998 to September 141 1998 5th calendar month September 151 1998 to October 141 1998 6th calendar month October 151 1998 to November 141 1998 7th calendar month November 151 1998 to December 141 1998 8th calendar month December 151 1998 to January 141 1999 gth calendar month January 151 1999 to February 141 1999 calendar month February 151 1999 to March 141 1999 lOth calendar month March 151 1999 to April 141 1999 11th calendar month April 151 1999 to May 141 1999 calendar month May 151 1999 to June 141 1999 12th calendar month June 151 1999 to July 141 1999 Year 2 13th calendar month July 151 1999 to August 141 1999 calendar month August 151 1999 to September 141 1999 14th calendar month September 151 1999 to October 14I 1999 15th calendar month October 151 1999 to November 141 1999 16th calendar month November 151 1999 to December 141 1999~ 17th 18th 19th 20th 4 G.R. No. 1621551 August 281 2007

AMENDED DECISION CTA CASE NO. 7402 21st calendar month December 15, 1999 to January 14, 2000 February 14, 2000 22nd calendar month January 15, 2000 t o March 14, 2000 23rd calendar month Febru ary 15, 2000� to April 14, 2000 24th calendar month Ma rch 15, 2000 to We therefore hold that respondent's petition (filed on April 14, 2000) was filed on the last day of the 24th calendar month from the day respondent filed its final adjusted return. Hence, it was filed within the reglementary period ." Based on the foregoing, two (2) years is equivalent to twenty-four (24) calendar months, regardless of the number of days, for purposes of computing legal periods. On such basis, petitioner may only file a claim for refund in the administrative level until December 31, 2005. Clearly, petitioner seasonably filed its administrative claim for refund on December 29, 2005. After determining the timeliness of the filing of the administrative claim for tax refund, this Court shall now proceed with the determination of the timeliness of the filing of the judicial appeal before this Court. This Court finds instructive the provision of Section 112(D) [now Section 112(C) of the NIRC of 1997, as amended] of the NIRC of 1997, the pertinent portion of which reads: "SEC. 112. Refunds or Tax Credits ofInput Tax.- XXX XXX XXX (D) Period within which Refund or Tax Credit of Input Taxes shall be Made. - 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 Subsections (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the perio~

AMENDED DECISION CTA CASE NO. 7402 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) Significantly, in the same case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia/ Inc.5, the Supreme Court emphasized the mandatory nature of the periods provided in Section 112(D) [now Section 112 (C)] of the NIRC of 1997, in the following manner: "Section 112(D) of the NIRC clearly provides that the CIR has '120 days, from the date of the submission of the complete documents in support of the application [for tax refund/credit],' within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before the CTA within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to CTA within 30 days. XXX XXX XXX There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A) of the said provision states that 'any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales.' The phrase 'within two (2) years xxx 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 same provision, which states that the CIR has '120 days from the submission of complete documents in � support of the application filed in accordance with Subsections (A) and (B)' within which to decide on the claim. In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, whic~ s Supra.

AMENDED DECISION GA CASE NO. 7402 already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(D) 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." (Emphasis supplied) Accordingly, counting from the filing of the administrative claim on December 29, 2005, which presumably is also the date when petitioner submitted the complete documents supporting its claim, the Revenue Commissioner has one hundred twenty (120) days or until April 28, 2006 within which to decide on the said claim. After the lapse of the said period, without a decision on its administrative claim, the said inaction shall be deemed a denial of the claim and such denial may be appealed before this Court within thirty (30) days or until May 26, 2006. Nevertheless, petitioner filed its judicial claim on January 20, 2006 or merely twenty-two (22) days from the filing of the administrative claim. Obviously, petitioner prematurely filed the instant Petition for Review without waiting for the lapse of the 120- day period. Thus, petitioner's non-observance of the 120-day period, in violation of Section 112(D) of the NIRC of 1997, would mean that this Court cannot take cognizance of the instant Petition for Review. Consequently, petitioner's motion to reconsider this Court's Decision and the consideration of its supplemental evidence are now rendered moot by the finding that this Court did not acquire jurisdiction over the present case~

AMENDED DECISION CTA CASE NO. 7402 WHEREFORE, premises considered, the instant Motion for Reconsideration is hereby DENIED; while the Petition for Review is hereby DISMISSED for being prematurely filed. SO ORDERED. ~ CAESAR A. CASANOVA Associate Justice WE CONCUR: Q__..$'~. ~ ERNESTO D. ACOSTA Presiding Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. G-- 1$4 � 'C.~ ERNESTO D. ACOSTA Presiding Justice Chairperson, First Division