G.R. No. 197519 . November 8, 2017.
Mindanao I Geothermal Partnership, Petitioner, vs. Commissioner of Internal Revenue, Respondent.

FACTS

Petitioner Mindanao I Geothermal Partnership (M1), operating a BOT geothermal power plant accredited as a Private Sector Generation Facility, filed administrative and judicial claims for a tax credit certificate representing unutilized creditable input VAT for the second to fourth quarters of 2004, asserting its sales were zero-rated. The Commissioner of Internal Revenue (CIR) did not act on the administrative claim within the 120-day period. The CTA First Division partially granted the claim for the third and fourth quarters but denied the second quarter claim, ruling the judicial claim for that quarter was filed beyond the two-year prescriptive period under Section 112(A) of the NIRC, as interpreted in Mirant. M1 moved for reconsideration, arguing the prescriptive period should be reckoned from the filing of the quarterly VAT returns per the earlier Atlas doctrine.
The CTA First Division, in its Amended Decision, granted M1’s motion, applying the Atlas rule and ordering the issuance of a TCC. The CTA En Banc affirmed, rejecting the CIR’s argument that M1’s judicial claim was prematurely filed for non-compliance with the mandatory 30-day period under Section 112(C) after the CIR’s inaction. The CIR elevated the case via petition for review.

ISSUE

Whether the CTA correctly granted M1’s claim for a tax credit certificate for unutilized input VAT for the second quarter of 2004.

RULING

Yes. The Supreme Court affirmed the CTA En Banc’s decision. The prescriptive period for filing a judicial claim for refund or tax credit of unutilized input VAT is governed by Section 112(A) of the NIRC, which states the claim must be filed within two years after the close of the taxable quarter when the zero-rated sales were made. At the time M1 filed its judicial claim on July 21, 2006, the prevailing jurisprudence was Atlas, which held the two-year period should be counted from the filing of the quarterly VAT return. Under Atlas, M1’s claim for the second quarter of 2004, filed on July 21, 2006, was timely, as the VAT return for that quarter was filed on July 22, 2004. The subsequent Mirant ruling, which changed the reckoning point to the end of the quarter, cannot be applied retroactively to prejudice M1, as it would violate the principles of due process. Furthermore, the Court upheld the CTA’s jurisdiction, noting that while strict compliance with the 120+30 day periods under Section 112(C) is generally mandatory, the CIR is estopped from raising the defense of premature filing since its inaction on the administrative claim effectively lured M1 into filing the judicial claim. The Court emphasized that tax refunds, while construed strictly, must be administered fairly, and taxpayers should not be prejudiced by a belated shift in judicial interpretation.