Commissioner Of Internal Revenue V Cebu Toyo Corp.docx

COMMISSIONER OF INTERNAL REVENUE v. CEBU TOYO CORPORATION. G.R. No. 149073. February 16, 2005 FACTS:

Respondent Cebu Toyo Corporation is a domestic corporation engaged in the manufacture of lenses and various optical components. Its principal office is located at the Mactan Export Processing Zone (MEPZ) in Lapu-Lapu City, Cebu and is a subsidiary of Toyo Lens Corporation, a non-resident corporation organized under the laws of Japan. It is a zone export enterprise registered with the Philippine Economic Zone Authority (PEZA), pursuant PD 66 and is also registered with the BIR as a VAT taxpayer.

The sales of respondent are considered export sales subject to VAT at 0% rate under Section 106 of the NIRC, as amended.

Respondent then filed, an application for tax credit/refund of VAT paid for the period April 1, 1996 to December 31, 1997 amounting to P4,439,827.21 representing excess VAT input payments. Respondents claim that they can avail of the tax credits as they are VAT-registered exporter of goods at the rate of 0%.

The CIR oppose such stating that they are not entitled to the tax credit as the claims for refund are strictly construed against respondents as it is of the nature of tax exemption.

The CTA granted the motion partially to the respondents as they only lowered the tax credits to P2,158,714.46 representing unutilized input tax payments. The CIR filed a petition with the CA which was denied.

ISSUE: Whether Cebu Toyo Corporation can avail of the tax credits.

RULING:

YES. Respondents availed of an income tax holiday as provided in the Omnibus Investments Code ( EO 226). It is one of the fiscal incentives granted to PEZA-registered enterprises and one of the options to its

tax burden. Both the CA and CTA found that respondent availed of the income tax holiday for four (4) years as it was shown in their Annual Corporate Income Tax Returns. In it also is where respondent specified that it was availing of the tax relief under EO 226. Hence, respondent is not exempt from VAT and it correctly registered itself as a VAT taxpayer. In fine, it is engaged in taxable rather than exempt transactions.

Taxable transactions are those transactions which are subject to value-added tax either at the rate of ten percent (10%) or zero percent (0%). In taxable transactions, the seller shall be entitled to tax credit for the value-added tax paid on purchases and leases of goods, properties or services.

An exemption means that the sale of goods, properties or services and the use or lease of properties is not subject to VAT (output tax) and the seller is not allowed any tax credit on VAT (input tax) previously paid. The person making the exempt sale of goods, properties or services shall not bill any output tax to his customers because the said transaction is not subject to VAT. Thus, a VAT-registered purchaser of goods, properties or services that are VAT-exempt, is not entitled to any input tax on such purchases despite the issuance of a VAT invoice or receipt.

The court also held that respondent is subjected to VAT at 0% rate as it is engaged in the export business.

ATLAS CONSOLIDATED MINING DEVT CORP vs. CIR 524 SCRA 73, 103 GR Nos. 141104 & 148763, June 8, 2007

"The taxpayer must justify his claim for tax exemption or refund by the clearest grant of organic or statute law and should not be permitted to stand on vague implications."

"Export processing zones (EPZA) are effectively considered as foreign territory for tax purposes."

FACTS: Petitioner corporation, a VAT-registered taxpayer engaged in mining, production, and sale of various mineral products, filed claims with the BIR for refund/credit of input VAT on its purchases of capital goods and on its zero-rated sales in the taxable quarters of the years 1990 and 1992. BIR did not immediately act on the matter prompting the petitioner to file a petition for review before the CTA. The latter denied the claims on the grounds that for zero-rating to apply, 70% of the company's sales must consists of exports, that the same were not filed within the 2-year prescriptive period (the claim for 1992 quarterly returns were judicially filed only on April 20, 1994), and that petitioner failed to submit substantial evidence to support its claim for refund/credit. The petitioner, on the other hand, contends that CTA failed to consider the following: sales to PASAR and PHILPOS within the EPZA as zero-rated export sales; the 2-year prescriptive period should be counted from the date of filing of the last adjustment return which was April 15, 1993, and not on every end of the applicable quarters; and that the certification of the independent CPA attesting to the correctness of the contents of the summary of suppliers’ invoices or receipts examined, evaluated and audited by said CPA should substantiate its claims.

ISSUE: Did the petitioner corporation sufficiently establish the factual bases for its applications for refund/credit of input VAT?

HELD: No. Although the Court agreed with the petitioner corporation that the two-year prescriptive period for the filing of claims for refund/credit of input VAT must be counted from the date of filing of the quarterly VAT return, and that sales to PASAR and PHILPOS inside the EPZA are taxed as exports because these export processing zones are to be managed as a separate customs territory from the rest of the Philippines, and thus, for tax purposes, are effectively considered as foreign territory, it still

denies the claims of petitioner corporation for refund of its input VAT on its purchases of capital goods and effectively zero-rated sales during the period claimed for not being established and substantiated by appropriate and sufficient evidence. Tax refunds are in the nature of tax exemptions. It is regarded as in derogation of the sovereign authority, and should be construed in strictissimi juris against the person or entity claiming the exemption. The taxpayer who claims for exemption must justify his claim by the clearest grant of organic or statute law and should not be permitted to stand on vague implications.

COMMISSIONER OF INTERNAL REVENUE vs. MIRANT (PHILIPPINES) OPERATIONS, CORPORATION- Tax Credit and Tax Refund

FACTS: Mirant filed its final adjusted Annual Income Tax Return for fiscal year ending 1999 declaring a net loss. It then amended the said return this time reflecting an increased net loss and showing that it opted to carry over as tax credit its overpayment to the succeeding taxable year. This excess tax credit was unutilized in 2000 as Mirant still reported a net loss. Mirant then filed a claim for refund of its excess creditable income tax for 1999.

ISSUE: Can Mirant claim for refund its excess credits from 1999?

HELD: NO. Mirant’s choice to carry over its 1999 excess income tax credit to succeeding taxable years is irrevocable, regardless of whether it was able to actually apply the said amount to a tax liability. It is a mistake to understand the phrase "for that taxable period" as a prescriptive period for the irrevocability rule – i.e., that since the tax credit in this case was acquired in 1999, and Respondent opted to carry it over to 2000, then the irrevocability of the option to carry over expired by the end of 2000, leaving Respondent free to again take another option as regards its 1999 excess income tax credit. The Court ruled that this interpretation effectively renders nugatory the irrevocability rule.