Supreme Court upholds CBK Power’s tax refund claim

THE SUPREME COURT has ruled in favor of hydroelectric producer CBK Power Co. Ltd. over a consolidated tax refund case amounting P 100 million.

In a 13-page decision, the high court sitting en banc reversed an earlier decision made by the Court of Tax Appeals (CTA), which rejected the company’s petition for a tax refund.

CBK Power filed its first petition on March 26, 2009 involving a claim of P58.8 million covering tax year 2007. It filed a claim with the CTA on March 27, 2009 after the Bureau of Internal Revenue (BIR) failed to rule on its administrative claim.

The company lodged another tax refund claim with the BIR on two separate dates on March 31, 2008, and July 23, 2008 covering a claim from the tax year 2006 in the amount of P43.81 million. It filed a judicial claim with the CTA on July 24 of the same year.

The BIR ruled that the petitions were prematurely filed, a finding that was upheld by the CTA’s Third Division.

In appealing before the high tribunal, the company argued that under the National Internal Revenue Code, the period for refund or tax credit of input taxes is “directory and permissive, as long as it is made within the two-year prescriptive period prescribed under Section 229 (Recovery of Tax Erroneously or Illegally Collected) of the same code.

It also argued that the CTA did not consider the “huge financial impact” for the denial of refund or issuance of tax credit certificates.

But the BIR said that the two-year period pertains to administrative claims with the BIR, while judicial claims with the CTA must be made within 30 days upon receipt of the BIR’s decision or after the lapse of the 120-period given to the BIR to act on the claim.

It argued that the observance of the 120-day period is mandatory and jurisdictional, and non-compliance results in the denial of the claim.

In deciding in the case, the high court cited the case of Commissioner of Internal Revenue vs. San Roque Power Corporation.

“This court held that compliance with the 120-day and the 30-day periods under Section 112 of the Tax Code, save for those Value-Added Tax refund cases that were prematurely (i.e., before the lapse of the 120-day period) filed with the Court of Tax Appeals between Dec. 10, 2003 and Oct. 6, 2010, is mandatory and jurisdictional,” the court said.

While the court said that the company failed to comply with the 120-day period, it filed the judicial claims within the CTA in a timely manner.

“Nevertheless, since the judicial claims were filed within the window created in San Roque, the petitions are exempted from the strict application of the 120-day mandatory period,” the court ruled.

The high court then ordered that the cases be remanded to the CTA for the determination and computation of amounts valid for refund.

CBK Power operates the Caliraya, Botocan, and Kalayaan hydroelectric power plants and related facilities in Laguna. -- Reden D. Madrid

source:   Businessworld