Maibarara Geothermal v. Commissioner of Internal Revenue
REITERATIONFacts
The Antecedents: Maibarara Geothermal, Inc. (MGI), a VAT-registered corporation engaged in geothermal energy, filed claims for refund of unutilized input Value-Added Taxes (VAT) for the first, second, third, and fourth quarters of taxable year 2011. MGI is a registered VAT taxpayer and a Renewable Energy Developer. Procedural History: The Commissioner of Internal Revenue failed to act on MGI's administrative claims. Consequently, MGI filed petitions for review before the Court of Tax Appeals (CTA) First Division, which denied the claims for lack of merit. The CTA First Division's decision was affirmed by the CTA En Banc. MGI's subsequent motion for reconsideration was also denied. The Petition: MGI filed a Petition for Review on Certiorari before the Supreme Court, assailing the CTA En Banc's decision and resolution.
Issue(s)
Whether petitioner is entitled to the refund of its unutilized input VAT for the first, second, third, and fourth quarters of taxable year 2011, considering the existence of zero-rated or effectively zero-rated sales. Whether the two-year prescriptive period for filing a claim for refund or tax credit under Section 112(A) of the National Internal Revenue Code (NIRC) should be reckoned from the close of the taxable quarter when the relevant zero-rated or effectively zero-rated sales were made, and not from the time the input VAT was incurred.
Ruling
The Petition for Review on Certiorari is DENIED. The assailed Decision of the Court of Tax Appeals En Banc dated March 14, 2019, and Resolution dated November 15, 2019, are AFFIRMED. Consequently, the CTA First Division's Decision dated August 18, 2017, and Resolution dated January 3, 2018, are AFFIRMED.
Ratio Decidendi
On the entitlement to refund of unutilized input VAT: The Court reiterated that a claim for refund or tax credit of unutilized input VAT is fundamentally premised on the existence of zero-rated or effectively zero-rated sales to which the input taxes can be attributed. As admitted by petitioner MGI, it had no zero-rated or effectively zero-rated sales during the first to fourth quarters of taxable year 2011. Without such zero-rated sales, there is no output VAT against which the input VAT can be deducted, and consequently, the input VAT incurred cannot be refunded. The burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for refund, which MGI failed to do. On the reckoning of the prescriptive period: The Court clarified that the phrase "when the sales were made" in Section 112(A) of the NIRC refers to the zero-rated or effectively zero-rated sales, not to the purchase of goods and services from which the input VAT was incurred. The prescriptive period for filing an administrative claim for refund begins to run from the close of the taxable quarter when the relevant zero-rated or effectively zero-rated sales were made. This interpretation is consistent with the purpose of Section 112(A), which is to provide a mechanism for taxpayers engaged in zero-rated sales to recover input VAT that cannot be offset against output VAT. To interpret "relevant sales" as the purchase of goods and services would lead to an absurd situation where the input VAT is attributed to purchases rather than the taxpayer's own sales, contrary to the clear intent of the law.
Main Doctrine
A claim for refund or tax credit of unutilized input VAT is only granted if the input taxes are attributable to zero-rated or effectively zero-rated sales, and the claim must be filed within two years from the close of the taxable quarter when such zero-rated or effectively zero-rated sales were made.