COMMISSIONER OF INTERNAL REVENUE vs. AICHI FORGING COMPANY OF ASIA, INC.- Tax Refund

FACTS:

On September 30, 2004, Aichi Forging filed a claim for refund/credit of input VAT attributable to its zero-rated sales for the period July 1, 2002 to September 30, 2002 with the CIR through the DOF One-Stop Shop. On the same day, Aichi Forging filed a Petition for Review with the CTA for the same action. The BIR disputed the claim and alleged that the same was filed beyond the two-year period given that 2004 was a leap year and thus the claim should have been filed on September 29, 2004. The CIR also raised issues related to the reckoning of the 2-year period and the simultaneous filing of the administrative and judicial claims.

ISSUES:

(1) Was the Petitioner’s administrative claim filed out of time?
(2) Was the filing of the judicial claim premature?

HELD:

(1) NO. The right to claim the refund must be reckoned from the “close of the taxable quarter when the sales were made” – in this case September 30, 2004. The Court added that the rules under Sections 204 (C) and 229 as cross-referred to Section 114 do not apply as they only cover erroneous payments or illegal collections of taxes which is not the case for refund of unutilized input VAT.  Thus, the claim was filed on time even if 2004 was a leap year since the sanctioned method of counting is the number of months.

(2) YES. Section 112 mandates that the taxpayer filing the refund must either wait for the decision of the CIR or the lapse of the 120-day period provided therein before filing its judicial claim. Failure to observe this rule is fatal to a claim. Thus, Section 112 (A) was interpreted to refer only to claims filed with the CIR and not appeals to the CTA given that the word used is “application”. Finally, the Court said that applying the 2-year period even to judicial claims would render nugatory Section 112 (D) which already provides for a specific period to appeal to the CTA --- i.e., (a) within 30 days after a decision within the 120-day period and (b) upon expiry of the 120-day without a decision.