CASE DIGEST: Philippine Geothermal v. CIR

 

[ GR NO. 154028, Aug 29, 2005 ]

PHILIPPINE GEOTHERMAL v. CIR

 

FACTS:

Petitioner is a resident foreign corporation licensed by the Securities and Exchange Commission (SEC) to engage in the exploration, development and exploitation of geothermal energy and resources in the Philippines.  In September 1971, it entered into a service contract with the National Power Corporation (NPC) to supply steam to the latter.

From September 1995 to February 1996, petitioner billed NPC, Value Added Tax (VAT) computed at ten percent of the service fee charged on the supply of steam.  NPC did not pay the VAT. To avoid any possible tax deficiency, petitioner remitted VAT equivalent to 1/11 of the fees received from NPC or P39,328,775.41.

Petitioner filed an administrative claim for refund with the Bureau of Internal Revenue on July 10, 1996.  According to petitioner, the sale of steam to NPC is a VAT-exempt transaction under Sec. 103 of the Tax Code. Petitioner claimed that Fiscal Incentives Review Board (FIRB) Resolution No. 17-87, approved by President Aquino pursuant to Executive Order No. 93, expressly exempted NPC from VAT.

ISSUE:

WON petitioner can claim tax refund

RULING:

Tax refunds are in the nature of tax exemptions, and are to be construed strictissimi juris against the entity claiming the same. Thus, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence, its entitlement to a claim for refund.  In the Bureau of Internal Revenue's Ruling dated March 15, 1996, that the supply of steam by petitioner to NPC is exempt from VAT, petitioner has indubitably established its basis for claiming a refund.

That NPC may have reimbursed petitioner the 10% VAT is not a ground for the denial of the claim for refund.  The CTA overlooked the fact that it was petitioner who paid the VAT out of its own service fee.  The erroneous payments of the VAT were only discontinued when the BIR issued its Ruling No. DA-111-96 in favor of petitioner on March 15, 1996.  By then, petitioner had already remitted a sizeable amount of P39,328,775.41 to the Government.  The only recourse of petitioner is the complete restitution of the erroneous payments of taxes.