EN BANC
G.R. No. 187485, October 08, 2013
COMMISSIONER OF INTERNAL REVENUE, Petitioner, v. SAN ROQUE POWER CORPORATION, Respondent.
G.R. No. 196113, October 08, 2013
TAGANITO MINING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
G.R. No. 197156, October 08, 2013
PHILEX MINING CORPORATION, Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.
R E S O L U T I O N
CARPIO, J.:
The decision now on appeal reflects the orthodox view that an unconstitutional act, for that matter an executive order or a municipal ordinance likewise suffering from that infirmity, cannot be the source of any legal rights or duties. Nor can it justify any official act taken under it. Its repugnancy to the fundamental law once judicially declared results in its being to all intents and purposes a mere scrap of paper. As the new Civil Code puts it: “When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution.” It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive.Clearly, for the operative fact doctrine to apply, there must be a “legislative or executive measure,” meaning a law or executive issuance, that is invalidated by the court. From the passage of such law or promulgation of such executive issuance until its invalidation by the court, the effects of the law or executive issuance, when relied upon by the public in good faith, may have to be recognized as valid. In the present case, however, there is no such law or executive issuance that has been invalidated by the Court except BIR Ruling No. DA-489-03.
Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: “The actual existence of a statute, prior to such a determination [of unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects, with respect to particular relations, individual and corporate, and particular conduct, private and official.” This language has been quoted with approval in a resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc. v. Flores. An even more recent instance is the opinion of Justice Zaldivar speaking for the Court in Fernandez v. Cuerva and Co. (Boldfacing and italicization supplied)
At the time San Roque filed its petition for review with the CTA, the 120+30 day mandatory periods were already in the law. Section 112(C) expressly grants the Commissioner 120 days within which to decide the taxpayer’s claim. The law is clear, plain, and unequivocal: “x x x 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.” Following the verba legis doctrine, this law must be applied exactly as worded since it is clear, plain, and unequivocal. The taxpayer cannot simply file a petition with the CTA without waiting for the Commissioner’s decision within the 120-day mandatory and jurisdictional period. The CTA will have no jurisdiction because there will be no “decision” or “deemed a denial” decision of the Commissioner for the CTA to review. In San Roque’s case, it filed its petition with the CTA a mere 13 days after it filed its administrative claim with the Commissioner. Indisputably, San Roque knowingly violated the mandatory 120-day period, and it cannot blame anyone but itself.San Roque’s argument must, therefore, fail. The doctrine of operative fact is an argument for the application of equity and fair play. In the present case, we applied the doctrine of operative fact when we recognized simultaneous filing during the period between 10 December 2003, when BIR Ruling No. DA-489-03 was issued, and 6 October 2010, when this Court promulgated Aichi declaring the 120+30 day periods mandatory and jurisdictional, thus reversing BIR Ruling No. DA-489-03.
Section 112(C) also expressly grants the taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner x x x.
x x x
To repeat, a claim for tax refund or credit, like a claim for tax exemption, is construed strictly against the taxpayer. One of the conditions for a judicial claim of refund or credit under the VAT System is compliance with the 120+30 day mandatory and jurisdictional periods. Thus, strict compliance with the 120+30 day periods is necessary for such a claim to prosper, whether before, during, or after the effectivity of the Atlas doctrine, except for the period from the issuance of BIR Ruling No. DA-489-03 on 10 December 2003 to 6 October 2010 when the Aichi doctrine was adopted, which again reinstated the 120+30 day periods as mandatory and jurisdictional.6
SEC. 246. Non-Retroactivity of Rulings. - Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification or reversal will be prejudicial to the taxpayers, except in the following cases:chanroblesvirtualawlibraryUnder Section 246, taxpayers may rely upon a rule or ruling issued by the Commissioner from the time the rule or ruling is issued up to its reversal by the Commissioner or this Court. The reversal is not given retroactive effect. This, in essence, is the doctrine of operative fact. There must, however, be a rule or ruling issued by the Commissioner that is relied upon by the taxpayer in good faith. A mere administrative practice, not formalized into a rule or ruling, will not suffice because such a mere administrative practice may not be uniformly and consistently applied. An administrative practice, if not formalized as a rule or ruling, will not be known to the general public and can be availed of only by those with informal contacts with the government agency.
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue;
(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or
(c) Where the taxpayer acted in bad faith. (Emphasis supplied)
Endnotes:
1 G.R. No. 187485, Motion for Reconsideration, p. 3.cranad
2 See Republic v. Court of Appeals, G.R. No. 79732, 8 November 1993, 227 SCRA 509.cranad
3 148 Phil. 443, 447-448 (1971). Emphasis added. Citations omitted.cranad
4Emphasis supplied. G.R. No. 187485, Motion for Reconsideration, p. 7.cranad
5 CA-G.R. SP No. 63340.cranad
6Commissioner of Internal Revenue v. San Roque Power Corporation, G.R. No. 187485, 12 February 2013, 690 SCRA 336, 387 and 398-399.cranad
7Western Mindanao Power Corporation v. Commissioner of Internal Revenue, G.R. No. 181136, 13 June 2012, 672 SCRA 350; Southern Philippines Power Corporation v. Commissioner of Internal Revenue, G.R. No. 179632, 19 October 2011, 659 SCRA 658; Microsoft Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 180173, 6 April 2011, 647 SCRA 398; KEPCO Philippines Corporation v. Commissioner of Internal Revenue, G.R. No. 179961, 31 January 2011, 641 SCRA 70; Silicon Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 172378, 17 January 2011, 639 SCRA 521; Hitachi Global Storage Technologies Philippines Corp. v. Commissioner of Internal Revenue, G.R. No. 174212, 20 October 2010, 634 SCRA 205; Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, 550 Phil. 751 (2007); Commissioner of Internal Revenue v. Mirant Pagbilao Corporation, 535 Phil. 481 (2006); Commissioner of Internal Revenue v. Toshiba Information Equipment (Phils.), Inc., 503 Phil. 823 (2005); Commissioner of Internal Revenue v. Cebu Toyo Corporation, 491 Phil. 625 (2005).cranad
8Commissioner of Internal Revenue v. San Roque Power Corporation, supra note 6 at 410.cranad
9 G.R. No. 196113, Motion for Reconsideration, p. 4.
VELASCO, JR., J.:
SEC. 112. Refunds or Tax Credits of Input Tax. –In his Resolution denying the motions at bar, Justice Carpio reiterates the Decision dated February 12, 2013. He explained that the period in Section 112 (C) must be construed as mandatory from January 1, 1998 until December 10, 2003. From December 11, 2003, the 120<30 day period is discretionary until October 5, 2010. Then, from October 6, 2010 onwards, the 120<30 day period is again mandatory.
x x x
(C) 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 Subsection (A) thereof.
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 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. (Underscoring supplied.)
SEC. 245. The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code. x x xMeanwhile, Section 4 of the 1977 NIRC, as amended, specified the provisions that must be contained in rules and regulations, not just in rulings of the BIR. Among other things, the 1977 NIRC required that “[t]he conditions to be observed by revenue officers, provincial fiscals and other officials respecting the institution and conduct of legal actions and proceedings”6 must be defined in a revenue regulation, not just an issuance of the BIR. Certainly, therefore, the specification of the details regarding the observance of the prescriptive period for the filing of judicial claims is within the power of the Secretary of Finance, not the CIR.
SEC. 244. The Secretary of Finance, upon recommendation of the Commissioner, shall promulgate all needful rules and regulations for the effective enforcement of the provisions of this Code.In turn, Section 4 of the 1997 NIRC provides that the CIR has the “power to interpret the provisions of the [1997 Tax] Code x x x subject to the review by the Secretary of Finance.” Ergo, the interpretation of the Secretary of Finance, as embodied in revenue regulations, prevails over rulings issued by the CIR, who is only empowered, at most, “to recommend the promulgation of rules and regulations by the Secretary of Finance.”7cralawlibrary
SEC. 245. The rules and regulations of the Bureau of Internal Revenue shall, among other things, contain provisions specifying, prescribing or defining:chanroblesvirtualawlibraryxxx xxx xxx
(d) The conditions to be observed by revenue officers respecting the institutions and conduct of legal actions and proceedings;
Q-17: If a claim submitted to the Court of Tax Appeals for judicial determination is denied by the CTA due to lack of documentary support, should the corresponding claim pending at the BIR offices be also denied?This situation was later clarified by RMC No. 49-03 dated August 15, 2003 entitled “Amending Answer to Question Number 17 of Revenue Memorandum Circular No. 42-2003 and Providing Additional Guidelines on Issues Relative to the Processing of Claims for Value-Added Tax (VAT) Credit/Refund.” This RMC was intended as a “response to request of selected taxpayers for adoption of procedures in handling refund cases that are aligned to the statutory requirements that refund cases should be elevated to the Court of Tax Appeals before the lapse of the period prescribed by law.”9 And yet, RMC 49-03 allowed for the simultaneous processing of the administrative and judicial claims for input VAT refund/issuance of TCC by the BIR and the CTA, respectively, and NOT the dismissal of the judicial claim on the ground of prematurity.10cralawlibrary
A-17: Generally, the BIR loses jurisdiction over the claim when it is filed with the CTA. Thus, when the claim is denied by the CTA, the BIR cannot grant any tax credit or refund for the same claim. However, cases involving tax credit/refund claims, which are archived in the CTA and have not been acted upon by the said court, may be processed by the concerned BIR office upon approval of the CTA to archive or suspend the proceeding of the case pending in its bench
[A] a taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review. Neither is it required that the Commissioner should first act on the claim of a particular taxpayer before the CTA may acquire jurisdiction, particularly if the claim is about to prescribe. The Tax Code fixed the period of two (2) years filing a claim for refund with the Commissioner [Sec. 112(A) in relation to Sec. 204(c)] and for filing a case in court [Section 229]. Hence, a decision of the Commissioner is not a condition or requisite before the taxpayer can resort to the judicial remedy afforded by law.13Hence, the prevailing rule even after the effectivity of the 1997 NIRC was to treat the 120<30-day period as non-mandatory since RR 7-95 was not affected and remained in effect.
SECTION 2. Coverage. — Beginning January 1, 2000, general professional partnerships, professionals and persons described above shall be governed by the provisions of Revenue Regulation No. 7-95, as amended, otherwise known as the "Consolidated Value-Added Tax Regulations." x x x17Numerous BIR rulings rendered after the effectivity of the 1997 NIRC regarding tax incidents that occurred after January 1, 1998 similarly applied the relevant provisions of RR 7-95.18cralawlibrary
On 4 August 2000, Hitachi filed an administrative claim for refund or issuance of a tax credit certificate before the BIR. The claim involved P25,023,471.84 representing excess input VAT attributable to Hitachi’s zero-rated export sales for the four taxable quarters of 1999.It is, therefore, inaccurate to state that before the issuance of BIR Ruling DA-489-03 in Lazi Bay on 10 December 2003, there was no administrative practice, rule or ruling rule followed by the BIR that supported simultaneous filing of claims and that prior to the Lazi Bay ruling, the BIR considered the 120<30 day period mandatory. Rather, the Lazi Bay ruling is one of the outcomes and tangible evidence of such practice, as made concrete by RR 7-95, that allowed the simultaneous filing of claims.
On 2 July 2001, due to the BIR’s inaction, Hitachi filed a petition for review with the CTA …
x x x
We already settled the issue of printing the word "zero-rated" on the sales invoices in Panasonic v. Commissioner of Internal Revenue. In that case, we denied Panasonic’s claim for refund of the VAT it paid as a zero-rated taxpayer on the ground that its sales invoices did not state on their face that its sales were "zero-rated." We said:chanroblesvirtualawlibraryBut when petitioner Panasonic made the export sales subject of this case, i.e., from April 1998 to March 1999, the rule that applied was Section 4.108-1 of RR 7-95, otherwise known as the Consolidated Value-Added Tax Regulations, which the Secretary of Finance issued on December 9, 1995 and took effect on January 1, 1996. It already required the printing of the word "zero-rated" on invoices covering zero-rated sales. When R.A. 9337 amended the 1997 NIRC on November 1, 2005, it made this particular revenue regulation a part of the tax code. This conversion from regulation to law did not diminish the binding force of such regulation with respect to acts committed prior to the enactment of that law.Likewise, in this case, when Hitachi filed its claim for refund or tax credit, RR 7-95 was already in force.21
Section 4.108-1 of RR 7-95 proceeds from the rule-making authority granted to the Secretary of Finance under Section 245 of the 1997 NIRC (Presidential Decree 1158) for the efficient enforcement of the tax code and of course its amendments. The requirement is reasonable and is in accord with the efficient collection of VAT from the covered sales of goods and services. As aptly explained by the CTA’s First Division, the appearance of the word "zero-rated" on the face of the invoices covering zero-rated sales prevents buyers from falsely claiming input VAT from their purchases when no VAT was actually paid. If absent such word, a successful claim for input VAT is made, the government would be refunding money it did not collect. (Emphasis supplied)
Although CTA Decisions are not binding legal precedents, their factual recitals are nothing less than indelible records of, and incontrovertible proof as to, the manner in which both the BIR and the CTA regarded the 120<30 day period, and the manner in which they actually handled administrative and judicial claims for refund/tax credit during the period in question. And the narrations of facts and case antecedents culled from the CTA En Banc Decisions establish that the BIR and CTA, by their very actuations in the period between 1996 and 2005, did in fact permit, tolerate and encourage taxpayers to file their refund/tax credit claims without regard to the 120<30 day period in Section 112.
CTA EB Case No. Case Title Date of Administrative Claim Date of Judicial Claim Comment 14 ECW Joint Venture, Inc. v. CIR June 19, 2002 July 19, 2002 Case was decided on the merits. CIR and CTA said nothing about prematurity of judicial claim or CTA’s lack of jurisdiction. 43 Overseas Ohsaki Construction Corp. v. CIR Oct. 23, 2001 Oct. 24, 2001 -ditto- 47 BASF Phils., Inc. v. CIR Mar. 27, 2001 Apr. 19, 2001 -ditto- 53 Jideco Mfg. Phils. Inc. v. CIR Oct. 23, 2002 Oct. 24, 2002 -ditto- 85 Applied Food Ingredients Co. v. CIR July 5, 2000 Sep. 29, 2000 -ditto- 186 Kepco Phils. Corp. v. CIR Jan. 29, 2001 Apr. 24, 2001 -ditto-197 American Express Int’l Inc. – Phil. Branch. CIR Apr. 25, 2002 Apr. 25, 2002 -ditto- 226 Mirant (NavotasII) Corporation (formerly, Southern Energy Navotas II Power, Inc.) v. CIR) Mar. 18, 2003 Mar. 31, 2003 & Jul. 22, 2003 -ditto- 231 Marubeni Phils. Corp. v. CIR Mar. 30, 2001 Apr. 25, 2001 -ditto- 24 Intel Technology Phils., Inc. v. CIR May 6, 1999 Sep. 29, 2000 CTA EB explicitly noted that the judicial claim was filed long after the lapse of the 120<30 day period under Sec. 112. However, no mention was made about the prescription or the CTA’s lack of jurisdiction. The case was decided on the merits. 28 Intel Technology Phils., Inc. v. CIR May 18, 1999 Mar. 31, 2000 Case was resolved on the merits. No one raised the issue of violation of Sec. 112 or the CTA’s lack of jurisdiction. 54 Hitachi Global Storage Technologies Phils. Corp. v. CIR Aug. 4, 2000 July 2, 2002 -ditto- 107 Kepco Phils. Corp. v. CIR Oct. 25, 1999 Oct. 1, 2001 -ditto- 154 Silicon Phils., Inc. v. CIR Oct. 25, 1999 Oct. 1, 2001 -ditto- 174 Kepco Phils. Corp. v. CIR Oct. 1, 2001 & June 24, 2002 Apr. 22, 2003 -ditto- 181 Intel Technology Phils., Inc. v. CIR Aug. 26, 1999 Jun. 29, 200 -ditto- 209 Intel Phils. Mfg., Inc. v. CIR Aug. 6, 1999 Mar. 30, 2001 -ditto- 219 Silicon Phils., Inc. v. CIR Aug. 10, 2000 June 28, 2002 -ditto- 233 Panasonic Communications Imaging Corp, of the Phils. v. CIR Feb. 8, 2000 & Aug. 25, 2000 Mar. 6, 2001 -ditto- 239 Panasonic Communications Imaging Corp, of the Phils. v. CIR Mar. 12, 1999 & Jul. 20, 1999 Dec. 16, 1999 -ditto-
An examination of the narration of facts in each case of the above-listed cases shows that each case pertains to a judicial claim for refund of excess unutilized input VAT pursuant to Section 112 of the 1997 NIRC, and these judicial claims were all filed with the CTA within the period starting from January 1, 1998 to December 10, 2003, the so-called period of strict enforcement of the 120<30 day period according to this Court’s February 12, 2013 Decision in the present consolidated cases. Without exception, each of the above-listed judicial claims did not comply with the 120<30 day period requirement. But in every instance and notwithstanding that the narrations of facts very clearly and unmistakably showed that these claims failed to comply with the aforesaid requirement, this Court nonetheless either granted those judicial claims or else denied them on grounds other than such non-compliance. Notably, in every single occasion, the Court let pass said non-compliance sans comment.
1) CIR v. Cebu Toyo Corporation, G.R. No. 149073, February 16, 2005; 2) CIR v. Toshiba Information Equipment, G.R. No. 150154, August 9, 2005; 3) CIR v. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, Inc.), G.R. No. 159593, October 12, 2006; 4) Intel Phils. v. CIR, G.R. No. 166732, April 27, 2007; 5) CIR v. Ironcon Builders & Development Corp., G.R. No. 180042, February 8, 2010. 6) Mirant Sual Corporation (formerly, Southern Energy Philippines, Inc.) v. CIR, G.R. No. 167315, February 10, 2010. 7) Hitachi Global Storage Technologies Phils. Corp. v. CIR, G.R. No. 174212, October 20, 2010. 8) Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.) v. CIR, G.R. No. 172378, January 17, 2011. 9) Kepco Philippines Corp. v. CIR, G.R. No. 179961, January 31, 2011; 10) Microsoft Philippines, Inc. v. CIR, G.R. No. 180173, April 6, 2011; 11) Southern Philippines Power Corporation v. CIR, G.R. No. 179632, October 19, 2011; 12) Western Philippines Power Corporation v. CIR, G.R. 181136, June 13, 2012; 13) Eastern Telecom Phils., Inc. v. CIR G.R. No. 168856, August 29, 2012; 14) Silicon Philippines, Inc. v. CIR, (Formerly Intel Philippines, Inc.) v. CIR, G.R. No. 179904, February 6, 2013 [This is an unsigned Resolution of the Court’s Second Division]; 15) Intel Technology Philippines, Inc. v. CIR, G.R. No. 172613, February 13, 2013 [This is an unsigned Resolution of the Court’s Second Division].
SEC. 4.112-1. Claims for Refund/Tax Credit Certificate of Input Tax. –Since, similar to RR 7-95, RR 16-2005 was promulgated pursuant to Sections 244 and 245 of the 1997 Tax Code,22 it embodies a legislative rule that deserves the deference and respect due the law it implements. For this reason, from the effectivity of RR 16-2005 on November 1, 2005, all taxpayers are bound to strictly observe the 120<30 day period provided in Section 112 (C) and there was no need to wait for the promulgation of a decision like Aichi in view of the existence of a clear legislative rule that finally repealed all other rulings that may have clouded the mandatory nature of the 120<30 day period.
x x x
(d) Period within which refund or tax credit certificate/refund of input taxes shall be made
In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate/refund 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 subparagraph (a) above.
In case of full or partial denial of the claim for tax credit certificate/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirty (30) days from the receipt of said denial, otherwise the decision shall become final. However, if no action on the claim for tax credit certificate/refund has been taken by the Commissioner of Internal Revenue after the one hundred twenty (120) day period from the date of submission of the application with complete documents, the taxpayer may appeal to the CTA within 30 days from the lapse of the 120-day period. (Emphasis supplied.)
The Court finds the questioned revenue regulation to be legislative in nature. Section 1 of Revenue Regulation 19-86 plainly states that it was promulgated pursuant to Section 277 of the NIRC. Section 277 (now Section 244) is an express grant of authority to the Secretary of Finance to promulgate all needful rules and regulations for the effective enforcement of the provisions of the NIRC. In Paper Industries Corporation of the Philippines v. Court of Appeals, the Court recognized that the application of Section 277 calls for none other than the exercise of quasi-legislative or rule-making authority. Verily, it cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the rule-making power of the Secretary of Finance, thus making it legislative, and not interpretative as alleged by BLC.The rule and practice observed between 1996 and November 2005 that allowed the non-mandatory application of the 120<30 day is an operative fact that must be considered in resolving judicial claims filed during the period. Hence, justice and fairness dictate that the tax claimants who relied on RR 07-95, and the practice observed by the BIR, the CTA and this Court be given relief
x x x
The principle is well entrenched that statutes, including administrative rules and regulations, operate prospectively only, unless the legislative intent to the contrary is manifest by express terms or by necessary implication. In the present case, there is no indication that the revenue regulation may operate retroactively. Furthermore, there is an express provision stating that it "shall take effect on January 1, 1987," and that it "shall be applicable to all leases written on or after the said date." Being clear on its prospective application, it must be given its literal meaning and applied without further interpretation. Thus, BLC is not in a position to invoke the provisions of Revenue Regulation 19-86 for lease rentals it received prior to January 1, 1987.24
Respondent deferentially submits that fairness and evenhandedness will opt for a prospective application of the new interpretation, given the unalterable fact that taxpayers had taken their cue from the policies, and procedures of the tax agency and the tax court, (which policies, issuances and procedures enjoyed what amounts to the tacit approval of the High Court), and had filed their claims accordingly, and now are in no position to undo what had been done years before.Thus, if, as the Decision declares, “[t]axpayers should not be prejudiced by an erroneous interpretation by the Commissioner, particularly on a difficult question of law,” there is more reason to maintain that refund seekers should not be prejudiced, penalized nor castigated for having taken guidance from the policies, pronouncements, issuances and actuations of the BIR and the CTA, which actuations have direct bearing on a difficult question of law.
The pragmatic application of the principle of operative fact calls to mind a kindred tenet viz., the legal maxim “Cursus curia est lex curiae,” which means the “practice of the court is the law of the court” [Also written as “cursus buriae est lex curiae,” the practice of the court is the law of the court. 3 Burst. 53; Broom, Leg. Max. (3d London Ed.)126; 12 C.B. 414; 17 Q. B. 86; 8 Exch. 199; 2 Maule & S. 25; 15 East, 226; 12 Mees. & W. 7; 4 Mylne & C. 635; 3 Scott, N. R. 599.] Of Ancient vintage, this principle or maxim declares that historically, the customs of the Court, are as binding as the law. Herbert Broom explains the significance of the maxim in this manner:chanroblesvirtualawlibrary“Where a practice has existed it is convenient to adhere to it, because it is the practice even though no reason can be assigned for it; for an inveterate practice in the law generally stands upon principles that are founded in justice and convenience. Hence, if any necessary proceeding in an action be informal, or be not done within the time limited for it, or in the manner prescribed by the practice of the court, it may be set aside for irregulartity.” [Broom, Herbert, A Selection of Legal Maxims Classified and Illustrated, (London: Sweet & Maxweel Limited, 1845)The “operative fact” principle would suggest that due recognition be given to the fact that the non-observance of the 120<30 day period requirement has been the consistent, long-standing practice or the “cursus curiae” of the CTA, the CIR and the CA (with the tacit approval of this Honorable Court) for over a decade and a half, and that the binding effect thereof cannot simply be made to vanish by waving a new judicial interpretation.26
Article 526. He is deemed a possessor in good faith who is not aware that there exists in his title or mode of acquisition any flaw which invalidates it.This Court is, therefore, duty-bound to actively refrain from actions that may be perceived as elevating strict adherence to procedural rules and technicalities over and above the taxpayer’s clear, substantive legal right to the refund sought. We must remain cognizant of the taxpayer’s good faith compliance with procedures approved and sanctioned by the BIR and the CTA and accepted by this Court, and avoid creating obstacles to defeat the taxpayer’s substantive right to refunds.
x x x
Mistake upon a doubtful or difficult question of law may be the basis of good faith.chanrob1esvirtualawlibrary
SEC. 7. Jurisdiction. – The CTA shall exercise:chanroblesvirtualawlibraryThe act of the CTA in granting San Roque’s claim based on the merits of its claim is a further indication of the long-observed practice allowing the premature filing of judicial claims. In fact, in applying the foregoing provision of RA 1125, the presently observed and still effective Revised Rules of the Court of Tax Appeals29 did not mention the period provided in Section 112 (C). Instead, it still underscores the two (2) year period contemplated in RR 7-95:chanroblesvirtualawlibrary
a. Exclusive appellate jurisdiction to review appeal, as herein provided:chanroblesvirtualawlibrary
x x x
2. Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue provided a specific period of action, in which case the inaction shall be deemed a denial.chanrob1esvirtualawlibrary
We cannot, therefore, deny the movant’s claim for refund solely based on the prematurity of its judicial filing, which in the first place has been instigated by the taxpayer’s good faith reliance on a revenue regulation issued by the Secretary of Finance, the practice observed by the BIR and the CTA, and the silent tolerance by this Court.Rule 4
JURISDICTION OF THE COURT
Sec. 3. Cases within the jurisdiction of the Court in Divisions. -
(a) Exclusive original over or appellate jurisdiction to review by appeal the following:chanroblesvirtualawlibrary
x x x
(2) Inaction by the Commissioner of Internal Revenue involving disputed assessments, refunds of internal revenue, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides as specific period of action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty-day period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of the Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessment beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code;
x x xRule 8
PROCEDURE IN CIVIL CASES
Sec. 3. Who may appeal; period to file petition –
(a) A party adversely affected by a decision, ruling or inaction of the Commissioner of Internal Revenue on disputed assessments or claims for refund of internal revenue taxes xxx xxx may appeal to the Court by petition for review filed within thirty days after receipt of a copy of such decision or ruling, or expiration of the period fixed by law for the Commissioner of Internal Revenue to act on the disputed assessments. In case of inaction of the Commissioner of Internal Revenue on claims for refund of internal revenue taxes erroneously or illegally collected, the taxpayer must file a petition within the two-year period prescribed by law from payment or collection of the taxes.30
Endnotes:
1 Previously Section 112 (D) of the 1997 Tax Code.cranad
2 G.R. No. 184823, October 6, 2010.cranad
3 RA 7716, entitled "An Act Restructuring The Value Added Tax (VAT) System, Widening Its Tax Base And Enhancing Its Administration And For These Purposes Amending And Repealing The Relevant Provisions Of The National Internal Revenue Code, As Amended, And For Other Purposes" (dated May 5, 1994), amended Presidential Decree 1158, otherwise known as the 1977 Tax Code, and first introduced the period within which to file a judicial claim for the refund of VAT or the issuance of a TCC. Section 6 of which stated:chanroblesvirtualawlibrarySection 6. Section 106 of the National Internal Revenue Code, as amended, is hereby further amended to read as follows:chanroblesvirtualawlibrary4 Entitled “Consolidated Value-Added Tax Regulations” issued on December 9, 1995 and effective January 1, 1996. It implemented RA 7716, RA 8241 entitled "An Act Amending Republic Act No. 7716, Otherwise Known As The Expanded Value-Added Tax Law And Other Pertinent Provisions Of The National Internal Revenue Code As Amended" (dated December 10, 1996); and RA 8424, as amended, entitled "An Act Amending The National Internal Revenue Code, As Amended, And For Other Purposes" (effective January 1, 1998), specifically, Sections 105, 106, 106(A), 106(B), 106(C), 106(D), 107, 107(A), 107(B), 108, 108(A), 108(B), 108(C), 109, 110, 110(A), 110(B), 110(C), 111, 111(A), 111(B), 112, 112(A), 112(B), 112(C), 112(D), 112(E), 113, 113(A), 113(B), 114, 114(A), 114(B), 114(C), 115, 115(a), 115(b) and 236 and Title IV of the NIRC of 1997.cranad
"Sec. 106. Refunds or tax credits of creditable input tax. — (a) Any VAT-registered person, whose sales are zero-rated or effectively zero-rated, may, within two (2) 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, xxx
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 for creditable input taxes within sixty (60) days from the date of submission of complete documents in support of the application filed in accordance with sub-paragraphs (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 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 sixty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals.” (Emphasis and underscoring supplied.)
5 Section 4.106-2 of RR 07-95 provided that taxpayers applying for input VAT refund/issuance of TCCs must file their judicial claims before the lapse of two (2) years from the date of filing of the VAT return for taxable years. This reference to the 2-year period in the filing of the judicial claim for refund/issuance of TCC led to the discretionary treatment of the period given to the CIR to resolve the administrative claim in order to toll the running of the 2-year prescriptive period.cranad
6 Section 4(C), 1977 Tax Code. Emphasis supplied.cranad
7 Section 7(a), 1997 Tax Code.cranad
8 Section 7 (b), 1997 Tax Code.cranad
9 Emphasis and underscoring supplied.cranad
10 In consonance therewith, the following amendments are being introduced to RMC No. 42-2003, to wit:chanroblesvirtualawlibrary
I.) A-17 of Revenue Memorandum Circular No. 42-2003 is hereby revised to read as follows:chanroblesvirtualawlibrary
In cases where the taxpayer has filed a "Petition for Review" with the Court of Tax Appeals involving a claim for refund/TCC that is pending at the administrative agency (Bureau of Internal Revenue or OSS-DOF), the administrative agency and the tax court may act on the case separately. While the case is pending in the tax court and at the same time is still under process by the administrative agency, the litigation lawyer of the BIR, upon receipt of the summons from the tax court, shall request from the head of the investigating/processing office for the docket containing certified true copies of all the documents pertinent to the claim. The docket shall be presented to the court as evidence for the BIR in its defense on the tax credit/refund case filed by the taxpayer. In the meantime, the investigating/processing office of the administrative agency shall continue processing the refund/TCC case until such time that a final decision has been reached by either the CTA or the administrative agency.
If the CTA is able to release its decision ahead of the evaluation of the administrative agency, the latter shall cease from processing the claim. On the other hand, if the administrative agency is able to process the claim of the taxpayer ahead of the CTA and the taxpayer is amenable to the findings thereof, the concerned taxpayer must file a motion to withdraw the claim with the CTA. A copy of the positive resolution or approval of the motion must be furnished the administrative agency as a prerequisite to the release of the tax credit certificate/tax refund processed administratively. However, if the taxpayer is not agreeable to the findings of the administrative agency or does not respond accordingly to the action of the agency, the agency shall not release the refund/TCC unless the taxpayer shows proof of withdrawal of the case filed with the tax court. If, despite the termination of the processing of the refund/TCC at the administrative level, the taxpayer decides to continue with the case filed at the tax court, the litigation lawyer of the BIR, upon the initiative of either the Legal Office or the Processing Office of the Administrative Agency, shall present as evidence against the claim of the taxpayer the result of investigation of the investigating/processing office.cranad
11 Previously Section 112 (D) of the 1997 Tax Code.cranad
12 Section 4.106-2 of RR 7-95.cranad
13 Emphasis and underscoring supplied.
14 Section 106 (D), 1997 NIRC Section 112 (C), 1997 NIRC Sec. 106. Refunds or tax credits of creditable input tax. — x x x Section 112. Refunds or Tax Credits of Input Tax. – x x x 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 for creditable input taxes within sixty (60) days from the date of submission of complete documents in support of the application filed in accordance with sub-paragraphs (a) and (b) hereof. (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 Subsection (A) 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 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 sixty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals. 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 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.
15Commissioner of Internal Revenue v. American Express, G.R. No. 152609, June 29, 2005, 462 SCRA 197, 229-230.cranad
16 Implementing Section 5 of Republic Act No. 8424, Otherwise Known as the Tax Reform Act of 1997, and Other Pertinent Provisions of the National Internal Revenue Code of 1997, Imposing Value-Added Tax (VAT) on Sale of Services by Persons Engaged in the Practice of Profession or Calling and Professional Services Rendered by General Professional Partnerships; Services Rendered by Actors, Actresses, Talents, Singers and Emcees; Radio and Television Broadcasters and Choreographers; Musical, Radio, Movie, Television and Stage Directors; and Professional Athletes, beginning January 1, 2000
17 Underscoring supplied.cranad
18 ITAD RULING NO. 145-03, September 26, 2003, addressed to Synertronix Inc.; ITAD RULING NO. 131-03, August 18, 2003, addressed to Bernaldo Mirador Law Offices; ITAD RULING NO. 103-03, July 24, 2003, addressed to Baniqued & Baniqued Attorneys at Law; ITAD RULING NO. 211-02 dated ITAD RULING NO. 211-02, addressed to Terumo (Philippines) Corporation; ITAD RULING NO. 185-02, October 21, 2002, addressed to Fuji Plastic Industry Phils., Inc.; ITAD RULING NO. 147-02 dated ITAD RULING NO. 147-02, addressed to Sycip Gorres Velayo & Co.; ITAD RULING NO. 136-02 dated August 5, 2002, addressed to Noritake Porcelana Mfg., Inc.; ITAD RULING NO. 066-02 dated April 24, 2002 addressed to Castillo & Poblador Law Offices; ITAD RULING NO. 040-02 dated ITAD RULING NO. 040-02 addressed to Punongbayan & Araullo; ITAD RULING NO. 128-01 dated December 21, 2001 addressed to December 21, 2001; ITAD RULING NO. 116-01 dated ITAD RULING NO. 116-01 addressed to Punongbayan & Araullo; ITAD RULING NO. 086-01 dated October 10, 2001 addressed to Castillo Laman Tan Pantaleon & San Jose Law Offices; BIR RULING [DA-(S40M-023) 560-08] dated December 19, 2008 addressed to Platon Martinez Flores San Pedro Leaño; BIR RULING [DA-330-98] dated July 17, 1998 addressed to Sycip Gorres Velayo; VAT RULING NO. 016-05 dated August 26, 2005 addressed to SyCip Gorres Velayo & Co.; VAT RULING NO. 020-02 dated April 1, 2002 addressed to Joaquin Cunanan & Co.cranad
19 G.R. No. 174212, October 20, 2010.cranad
20 G.R. No. 178090, February 8, 2010.cranad
21 Emphasis and underscoring supplied.cranad
22 In relation to Section 23 of RA 9337 which states: Value-Added Tax (VAT) Reform Act, effective July 1, 2005. “SECTION 23.Implementing Rules and Regulations. — The Secretary of Finance shall, upon the recommendation of the Commissioner of Internal Revenue, promulgate not later than June 30, 2005, the necessary rules and regulations for the effective implementation of this Act. Upon issuance of the said rules and regulations, all former rules and regulations pertaining to value-added tax shall be deemed revoked.”
23 G.R. No. 127624, November 18, 2003.cranad
24Emphasis supplied.cranad
25Francisco Serrano de Agbayani v. Philippine National Bank et al., G.R. No. L-23127 April 29, 1971; citing Chicot County Drainage Dist. v. Baxter States Bank 308 US 371, 374 (1940).cranad
26 Supplemental Motion for Resolution, pp. 16-17.cranad
27Heirs of Juanita Padilla v. Magdua, G.R. No. 176858, September 15, 2010.cranad
28 An Act Creating the Court of Tax Appeals.cranad
29 A.M. No. 05-11-07-CTA, Effective November 22, 2005 (last amended as of 15, 2008)
30 Emphasis and underscoring supplied.
LEONEN, J.:
(C) 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 Subsection (A) thereof.There is no room for any other interpretation of the text except that resort to an appeal with the Court of Tax Appeals is made (a) only after the 120-day period from the date of submission of complete documents to support the refund or tax credit certificate with the Commissioner of Internal Revenue or (b) within the 120-day period from the time the claim has been denied or only partially granted.
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 period prescribed above, the taxpayers 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 provided)
Sec. 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. — The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.However, the Commissioner of Internal Revenue cannot legislate guidelines contrary to the law it is tasked to implement. Hence, its interpretation is not conclusive and will be ignored if judicially found to be erroneous.
x x x
Vested right is “some right or interest in the property which has become fixed and established, and is no longer open to doubt or controversy."There are no vested rights in procedure. Taxpayers do not have vested rights over tax refunds. Refunds need to be proven and its application raised in the right manner as required by statute. Only after a final determination of the right to refund and its amount does it become a vested right for the taxpayer.
x x x
“Rights are vested when the right to enjoyment, present or prospective, has become the property of some particular person or persons as a present interest. The right must be absolute, complete, and unconditional, independent of a contingency, and a mere expectancy of future benefit, or a contingent interest in property founded on anticipated continuance of existing laws, does not constitute a vested right. So, inchoate rights which have not been acted on are not vested."9
Section 246. Non-Retroactivity of Rulings. – Any revocation, modification or reversal of any of the rules and regulations promulgated in accordance with the preceding Sections or any of the rulings or circulars promulgated by the Commissioner shall not be given retroactive application if the revocation, modification, or reversal shall be prejudicial to the taxpayer, except in the following cases:chanroblesvirtualawlibraryThis provision should only apply when there is a valid interpretation made by the Commissioner of Internal Revenue. In the present case, the Bureau of Internal Revenue Ruling No. DA-489-03 is ultra vires and was not validly issued since it was promulgated by a Deputy Commissioner.
(a) Where the taxpayer deliberately misstates or omits material facts from his return or any document required of him by the Bureau of Internal Revenue;(b) Where the facts subsequently gathered by the Bureau of Internal Revenue are materially different from the facts on which the ruling is based; or(c) Where the taxpayer acted in bad faith.
Section 4.106-2. Procedures for claiming refunds or tax credits of input tax. — (a) x x x.On the contrary, it is clear from the provision cited above that the appeal to the Court of Tax Appeals may be made only after the lapse of the 60-day (now 120-day) period without action by the Commissioner of Internal Revenue on the administrative claim. A rule or regulation cannot go beyond the terms and provisions of the basic law.15 Revenue Regulation No. 07-95, therefore, cannot go beyond the provisions of the Tax Code.
x x x
(c) Period within which refund or tax credit of input taxes shall be made. — In proper cases, the Commissioner shall grant a tax credit/refund for creditable input taxes within sixty (60) days from the date of submission of complete documents in support of the application filed in accordance with subparagraphs (a) and (b) above.
In case of full or partial denial of the claim for tax credit/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from the receipt of said denial, otherwise the decision will become final. However, if no action on the claim for tax credit/refund has been taken by the Commissioner of Internal Revenue after the sixty (60) day period from the date of submission of the application but before the lapse of the two (2) year period from the date of filing of the VAT return for the taxable quarter, the taxpayer may appeal to the Court of Tax Appeals.
x x x
Endnotes:
1 Republic Act No. 8424 as amended by Republic Act No. 9337.cranad
2 G.R. No. 184823, October 6, 2010, 632 SCRA 422.cranad
3 Id.cranad
4Philippine Basketball Association v. Court of Appeals, 392 Phil. 133, 144 (2000).cranad
5 CONSTITUTION, Art. V, Sec. 5 (2)(a).cranad
6Philippine Petroleum Corp. v. Municipality of Pililla, Rizal, G.R. No. 90776, June 3, 1991, 198 SCRA 82, 88.Well-settled is the rule that administrative regulations must be in harmony with the provisions of the law. In case of discrepancy between the basic law and an implementing rule or regulation, the former prevails.chanrob1esvirtualawlibrary7See Agbayani, de v. Philippine National Bank, et al., 148 Phil. 443 (1971).cranad
8 98 Phil. 711 (1956) citing Balboa v. Farrales, 51 Phil. 498, 502 (1928) and 16 C.J.S. 214-215.cranad
9 Id. at 722.cranad
10Baybay Water District v. Commission on Audit, 425 Phil. 326, 342 (2002).cranad
11 SECTION 4. Power of the Commissioner to Interpret Tax Laws and to Decide Tax Cases. — The power to interpret the provisions of this Code and other tax laws shall be under the exclusive and original jurisdiction of the Commissioner, subject to review by the Secretary of Finance.
The power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto, or other matters arising under this Code or other laws or portions thereof administered by the Bureau of Internal Revenue is vested in the Commissioner, subject to the exclusive appellate jurisdiction of the Court of Tax Appeals.cranad
12 SECTION 7. Authority of the Commissioner to Delegate Power. — The Commissioner may delegate the powers vested in him under the pertinent provisions of this Code to any or such subordinate officials with the rank equivalent to a division chief or higher, subject to such limitations and restrictions as may be imposed under rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner: Provided, however, That the following powers of the Commissioner shall not be delegated:chanroblesvirtualawlibrary
(a) The power to recommend the promulgation of rules and regulations by the Secretary of Finance;
(b) The power to issue rulings of first impression or to reverse, revoke or modify any existing ruling of the Bureau;
(c) The power to compromise or abate, under Sec. 204(A) and (B) of this Code, any tax liability: x x x; and
(d) The power to assign or reassign internal revenue officers to establishments where articles subject to excise tax are produced or kept.cranad
13 Rulings of first impression as defined in Revenue Administrative Order No. 2-2001, dated October 22, 2001, refer to the rulings, opinions and interpretations of the Commissioner of Internal Revenue with respect to the provisions of the Tax Code and other tax laws without established precedent, and which are issued in response to a specific request for ruling filed by a taxpayer with the Bureau of Internal Revenue. Provided, however, that the term shall include reversal, modifications or revocation of any existing ruling.cranad
14 Consolidated Value-Added Tax Regulations.cranad
15 CIVIL CODE, Art. 7.x x xAdministrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution.chanrob1esvirtualawlibrary16 SECTION 110. Tax Credits. — x x x
x x x
(B)Excess Output or Input 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 input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, That the input tax inclusive of input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70%) of the output VAT: Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.
x x x
17 SECTION 112. Refunds or Tax Credits of Input Tax. —
(A)Zero-Rated or Effectively Zero-Rated Sales. — Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) 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, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provide, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance 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 zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. EAIaHD
x x x
18Wee Poco & Co., v. Posadas, 64 Phil. 640, 648 (1937).cranad
19 Encyclopedia Britannica. (visited September 25, 2013).cranad
20 D. PERKINS, S. RADELET, AND D. LINDAUER, ECONOMICS OF DEVELOPMENT, 401 (Sixth Edition, 2006).cranad
21 This concept in economics is referred to as the relative inelasticity of private savings. For a more technical explanation, refer to J. STIGLITZ, ECONOMICS OF THE PUBLIC SECTOR 584-586 (Third Edition, 2000).cranad
22 Id. at 584.cranad
23 Id.cranad
24 “The basic economic rationale for public investment is to finance projects for which the benefits accruing to a private investor are too small to make the venture profitable but benefits to society more broadly can be quite large.” D. Perkins, S. Radelet, and D. LINDAUER, ECONOMICS OF DEVELOPMENT 400-401 (Sixth Edition).cranad
25 Id. at 411.cranad
26 Id.cranad
27 D. PERKINS, S. RADELET, AND D. LINDAUER, ECONOMICS OF DEVELOPMENT, supra at 411-414.cranad
28 D. PERKINS, S. RADELET, AND D. LINDAUER, ECONOMICS OF DEVELOPMENT, supra at 412.cranad
29 The World Bank has been aggregating data for indicators of governance and institutions, and one of the things they measure is Rule of Law, which is defined as “perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.” See D. KAUFMANN, A. KRAAY, AND M. MASTRUZZI, Governance Matters VIII: Aggregate and Individual Governance Indicators 1996-2008, p. 6. (visited May 27, 2013).