Mandatory and jurisdictional period exceptions

Mandatory and jurisdictional period exceptions by: Oliver Gil M. Beltran

ONE of the basic principles of law that is well-established in prevailing jurisprudence is that a claimant has the burden of proof to establish the factual basis of his or her claim for tax refund. This is because tax refunds are in the nature of tax exemptions that are to be construed strictissimi juris against the taxpayer.

Taxpayer-claimants are admonished that although they may have the right to file a claim for tax refund, such right becomes worthless unless they are able to sufficiently prove their claim to the amount in question. Likewise, compliance with the fundamental procedural requirements is mandatory.

Moreover, one of the more controversial procedural issues involving tax refund cases pertain to the periods given the taxpayer to file his administrative and judicial claims with the Bureau of Internal Revenue (BIR) and the Court of Tax Appeals (CTA), respectively.

Earlier this year, the Supreme Court (SC) En Banc promulgated a consolidated decision involving separate claims for tax refund of unutilized input value-added tax (VAT) by San Roque Power Corp., Taganito Mining Corp., and Philex Mining Corp. In the aforementioned decision, the SC clarified the correct interpretation of the two-year prescriptive period provided under Section 229 of the Tax Code.

In the case of San Roque, the Court denied its Petition for Refund since it was filed with the CTA without exhausting the 120-day period for the Commissioner of Internal Revenue (CIR) to issue a decision on the administrative claim for refund. According to the Court, Section 112 (C) of the Tax Code grants a taxpayer a 30-day period to appeal to the CTA the decision or inaction of the Commissioner. In other words, the mandatory 30-day period starts to run 120 days from the submission by the taxpayer-claimant of complete documents in support of its administrative claim for refund.

On the other hand, in the case of Taganito, the Court held that while similar to the case of San Roque, Taganito also filed its Petition for Refund with the CTA without waiting for the lapse of the 120-day period, the latter can nonetheless invoke BIR Ruling DA-489-03, dated Dec. 10, 2003, since Taganito filed its petition before the promulgation of the Aichi Doctrine on Oct. 6, 2010. The SC emphasized that BIR Ruling DA-489-03 expressly provided the “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.”

The Supreme Court ruled that BIR Ruling No. DA-489-03 is a general interpretative rule, the benefits of which may be invoked by all taxpayers, and though considered as a misleading and erroneous interpretation by the Commissioner on a difficult question of law, it nevertheless provides a valid claim for equitable estoppel under Section 246 of the Tax Code. Hence, the Court said, “taxpayers acting in good faith should not be made to suffer for adhering to general interpretative rules of the Commissioner interpreting tax laws, should such interpretation later turn out to be erroneous and reversed by the Commissioner or the Court.”

This effect of BIR Ruling No. DA-489-03 was further explained by the Court in the consolidated cases of Mindanao II Geothermal Partnership vs. CIR, and Mindanao I Geothermal Partnership vs. CIR, G.R. Nos. 193301 and 194637, March 11, 2013.

As per the SC, “(a)ll taxpayers, however, can rely on BIR Ruling DA-489-03 from the time of its issuance on Dec. 10, 2003 up to its reversal by this Court in Aichi on Oct. 6, 2010, as an exception to the mandatory and jurisdictional 120+30 day periods.”

From the foregoing pronouncements of the SC, a considerable number of taxpayer-claimants whose claims for refund were previously denied either by the CTA Division or En Banc pursuant to the Aichi Doctrine, were given a new lease on life.

Nonetheless, emphasis must be made on the fact that only those taxpayer-claimants whose claims were re spectively filed during the effectivity of BIR Ruling DA-489-03 (before promulgation of the Aichi case), and which claims are still pending before the Courts may benefit from this exemption to the general rule. Taxpayer-claimants who failed to file their respective timely appeals on the previous denials made by the CTA before the promulgation of the San Roque and Mindanao Geothermal decisions are barred from relying on the benefits extended by BIR Ruling DA-489-03, as their failure to file an appeal resulted to res judicata in their own case.

Truly, while it is essential for a taxpayer-claimant to prove not only his entitlement to a refund but also his compliance with the procedural due process as non-observance of the prescriptive periods within which to file the administrative and the judicial claims would result in the denial of his claim, valid exceptions such as those offered under BIR Ruling DA-489-03 should also be recognized.

As decided by the SC in one case, “technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens.”

source:  Punongbayan and Araullo