Gangwam Corporation (GC) filed its quarterly tax returns for the calendar year 2012 as follows:
First quarter – April 25, 2012
Second quarter – July 23, 2012
Third quarter – October 25, 2012
Fourth quarter – January 27, 2013
On December 22, 2013, GC filed with the Bureau of Internal Revenue (BIR) an administrative claim for refund of its unutilized input Value-Added Tax (VAT) for the calendar year 2012. After several months of inaction by the BIR on its claim for refund, GC decided to elevate its claim directly to the Court of Tax Appeals (CTA) on April 22, 2014.
In due time, the CTA denied the tax refund relative to the input VAT of GC for the first quarter of 2012, reasoning that the claim was filed beyond the two-year period prescribed under Section 112(A) of the National Internal Revenue Code (NIRC).
(A) Is the CTA correct? (3%)
(B) Assuming that GC filed its claim before the CTA on February 22, 2014, would your answer be the same? (3%)
Suggested answer only. Not an official answer and not legal advice.
(A) No, the CTA is not correct. (B) Yes, the answer is the same that Section 112(A) does not bar the claim, though the appeal would fail for prematurity.
Under Sec. 112(A), NIRC (Aichi; San Roque), the 2-year prescriptive period applies solely to administrative claims from the close of the taxable quarter. Under Sec. 112(C), judicial claims require awaiting 120 days of BIR inaction.
(A) GC's Dec. 22, 2013 claim was within 2 years from March 31, 2012, and its April 22, 2014 appeal was timely after 120 days. (B) A Feb. 22, 2014 appeal remains valid under Sec. 112(A) but premature for non-lapse of 120 days.
Thus, the CTA erred in applying Section 112(A) to judicial appeals, though a February filing lacks CTA jurisdiction.
This is not an official scoring system and carries no weight with the Supreme Court or any bar review provider. It measures how much of the suggested answer's wording your response covers, not whether your reasoning is correct. For practice only.
Quick check
When does the two-year prescriptive period for filing an administrative input VAT refund claim begin under Section 112(A) of the NIRC?
The two-year prescriptive period under Section 112(A) runs from the close of the taxable quarter when the sales were made.
What is the legal effect of filing a judicial claim with the CTA before the lapse of the 120-day administrative period under Section 112(C)?
Compliance with the 120-day administrative period is mandatory and jurisdictional, making early judicial appeals premature.
Which landmark Supreme Court decision established that the two-year period in Section 112(A) applies only to administrative claims?
CIR v. Aichi established that the two-year prescriptive period under Section 112(A) applies solely to administrative refund claims.
How many days does a taxpayer have to appeal to the CTA after the lapse of the 120-day BIR inaction period?
A taxpayer has thirty days from the expiration of the 120-day inaction period to file a petition for review with the CTA.
In the case of Gangwam Corporation, why was the April 22, 2014 judicial appeal to the CTA timely?
The April 22, 2014 appeal was filed after 120 days of BIR inaction and within the subsequent 30-day appeal period.
Learn more about these topics
1. Two-Year Prescriptive Period
Under Section 112(A) of the National Internal Revenue Code, an administrative claim for the refund or credit of unutilized input Value-Added Tax must be filed within two years from the close of the taxable quarter when the sales were made. In Commissioner of Internal Revenue versus Aichi Forging Company of Asia, Incorporated, the Supreme Court ruled that this two-year prescriptive period applies exclusively to administrative claims filed with the Bureau of Internal Revenue and does not govern judicial appeals filed before the Court of Tax Appeals.
2. Administrative Review Period
Under Section 112(C) of the Tax Code, the Commissioner of Internal Revenue has an administrative period of one hundred twenty days from the date of submission of complete supporting documents to decide an input Value-Added Tax refund claim. In Commissioner of Internal Revenue versus San Roque Power Corporation, the Supreme Court held that compliance with the one hundred twenty-day waiting period is mandatory and jurisdictional. Elevating a judicial claim to the Court of Tax Appeals before the expiration of the one hundred twenty-day period renders the appeal premature.
3. Judicial Appeal Window
Once the one hundred twenty-day administrative period expires without action by the Bureau of Internal Revenue, or upon receipt of a decision denying the claim, the taxpayer has thirty days to file a petition for review before the Court of Tax Appeals. Filing a judicial claim prior to the lapse of the one hundred twenty-day period deprives the Court of Tax Appeals of jurisdiction, whereas filing after the expiration of the one hundred twenty-day period plus thirty-day appeal window results in prescription of the judicial remedy.