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TAGANITO MINING CORPORATION v. CIR

FACTS:

Taganito Mining Corporation (TMC) is a registered VAT taxpayer engaged in exporting beneficiated nickel silicate ores and chromite ores. TMC filed an application for refund/credit of its VAT input taxes for the year 2007 in the amount of P7,572,550.29. The Bureau of Internal Revenue recommended a refund of P15,023,736.12 but disallowed the amount of P7,572,550.29 on deferred input VAT on capital goods, recommending that it be amortized over 60 months. The Court of Tax Appeals Division dismissed TMC's petition, which was affirmed by the Court of Tax Appeals En Banc. The court held that the amortization of input VAT also applied to claims for refund or tax credit, and only the amortized amount of P1,277,591.16 was refundable or creditable as of December 31, 2007. TMC filed a motion for reconsideration, which was denied. TMC then filed a Petition for Review on Certiorari before the Supreme Court, arguing that the Court of Tax Appeals En Banc erred in its interpretation of the law.

The petitioner, a taxpayer engaged in zero-rated sales, filed a claim for refund or tax credit of input tax paid on the purchase of capital goods exceeding P1,000,000, which were directly attributable to its zero-rated export sales. The Bureau of Internal Revenue (BIR) denied the claim, stating that the input tax should be amortized over the useful life of the product. The petitioner argued that there is no law or regulation mandating the amortization of creditable input tax and that the Court of Tax Appeals En Banc committed judicial legislation in filling the gap in the law. The respondent, on the other hand, argued that the law provides for the amortization of input tax on zero-rated transactions involving capital goods. The main issue in this case is whether the input tax credit on capital goods directly attributable to zero-rated export sales should be amortized over the useful life of the product.

The case involves the interpretation of Section 112(A) of the National Internal Revenue Code (NIRC). The provision pertains to the refund or tax credit of input tax for zero-rated or effectively zero-rated sales. Zero-rated transactions generally refer to the export sale of goods and services, where the tax rate is set at zero. Section 112(A) states that a claim for refund or tax credit of input tax should not have been applied against output tax.

ISSUES:

  1. Whether the claim for refund or tax credit of input tax directly attributable to zero-rated transactions should be subject to the amortization rule under Section 110(A) of the NIRC.

  2. Whether or not Section 4.110-3 of Revenue Regulations No. 16-2005 amends Section 110(B) of the tax code.

RULING:

  1. The Court ruled that the claim for refund or tax credit of input tax directly attributable to zero-rated transactions should not be subject to the amortization rule under Section 110(A) of the NIRC. The use of the term "any" in Section 110(B) does not prevent the zero-rated taxpayer from claiming its input tax in full. It is not the word "any" which qualifies a claim for refund or tax credit of input tax but the amount of the purchased or imported goods used for trade or business, and whether depreciation is allowed for it.

  2. The Supreme Court held that Section 4.110-3 of Revenue Regulations No. 16-2005 does not amend Section 110(B) of the tax code. Section 4.110-3 merely bridges the gap between Section 110(A) and Section 112(A) and provides the requirements for claiming input tax credit or refund for depreciable assets. As long as the regulation does not contravene the tax code and is within the scope of statutory authority, it is valid. In this case, the petitioner failed to show that Section 4.110-3 contradicts the tax code.

PRINCIPLES:

  • In statutory construction, a law's clauses and phrases must not be taken as detached and isolated expressions but must be considered in relation to the whole law. The whole statute must be interpreted with reference to the context and the general intent of the whole enactment.

  • The use of the term "any" in Section 110(B) does not prevent the application of the amortization rule under Section 110(A) to "input tax attributable to zero-rated sales". The amortization rule does not preclude the zero-rated taxpayer from claiming its input tax in full.

  • The amount of the purchased or imported goods used for trade or business, and whether depreciation is allowed for it, qualifies a claim for refund or tax credit of input tax.

  • The 60-month amortization of input tax under Section 110(A) of the Tax Code only delays but does not permanently deprive a taxpayer from crediting the input tax. It is a valid limitation to the right of crediting input tax against output tax.

  • The amortization rule applies to claims for refund or applications for issuance of a tax credit certificate for goods or services that are depreciable and above the threshold amount.

  • The power to fill in the details and manner as to the enforcement and administration of a law may be delegated to specialized administrative agencies, such as the Secretary of Finance. Revenue regulations are considered part of the taxation laws and are entitled to weight and respect.

  • Delegation of legislative power has become the rule and its non-delegation the exception, given the increasing complexity of modern life and the legislature's limited ability to directly address all problems. (Maceda v. Macaraig, Jr.)

  • Rules and regulations implementing a law fill in the details or make explicit what is general and should be given weight and respect by the courts, as those who formulate them possess specific expertise in their respective fields. (Maceda v. Macaraig, Jr.)

  • A revenue regulation must be within the scope of statutory authority or standard granted by the legislature, germane to the object and purpose of the law, and issued for the sole purpose of carrying into effect the general provisions of the tax laws. (Maceda v. Macaraig, Jr.)

  • The burden of proof lies with the taxpayer to substantiate its claim for input tax credit and to show that it properly amortized the related input VAT over the estimated useful life of the capital goods. (Taganito Mining Corporation v. Commissioner of Internal Revenue)