BIR Ruling [DA-206-05]

April 25, 2005 BIR RULING [DA-206-05] R.R. 5-2000 Babcock Hitachi (Philippines) Inc. Exchange Corner Building 107 Herrera St., Legaspi Village Makati City Attention: Yoshito Saito President Gentlemen : This refers to your letter dated March 31, 2005 requesting that you be allowed to use the Tax Credit Certificate (TCC) No. R-013900 which was issued in your favor in lieu of the lost TCC No. 005649 dated February 1, 1995. Records disclosed that on February 1, 1995, Babcock Hitachi (Philippines), Inc. (BHI for brevity) was issued TCC No. 005649 in the amount P3,345,290.95. Sometime in 1996, BHI requested for cash conversion of the said TCC. However, the conversion of the TCC did not materialize because the same was lost while in the custody of the Bureau of Internal Revenue (BIR). As it was ascertained that the TCC was lost at the stage of processing the conversion to cash, the BIR itself recommended for the TCC's replacement with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center (OSS Center for brevity) as evidenced by its letter to Mr. Ernesto Q. Hiansen dated October 1, 2003. Upon the recommendation of the BIR, the Department of Finance OSS Center issued a replacement of the lost TCC only on February 24, 2005 with TCC No. R-013900. Sad to say, however, said TCC bears a remark which states: "(T)his TCC [R-013900] expired last February 1, 2005." Undoubtedly from the face of the TCC itself, it can longer be used as payment for internal revenue tax liabilities of BHI because of the inscripted remark on the expiration. In reply, please be informed that after a thorough evaluation of the facts surrounding your case, this Office holds that BHI can use TCC No. R-013900 in payment for its internal revenue tax notwithstanding the information stated in the TCC that it expired last February 1, 2005. It is undeniably clear that BHI did not waste time in exercising its right as the owner of the issued TCC during the validity period, i.e., from the time it requested for cash conversion which resulted to its loss until it requested for its replacement. All the recorded delay in the processing of every request should not be faulted against BHI, otherwise, it would be unfair and unjust (to BHI). Additionally, Section 5 (a) and (c) of Revenue Regulations 5-2000 provides: "SEC. 5. PERIOD OF VALIDITY, CONVERSION AND REVALIDATION. a. Validity Period . Any Tax Credit Certificate issued. in accordance with the pertinent provision of the Tax code of 1997 which remains unutilized after five (5) years from date of issue shall, unless revalidated before the end of the fifth year , be considered invalid and shall not be allowed for use in payment of any of the taxpayers' internal revenue tax liability nor allowed to be transferred and the unutilized amount thereof shall revert to the General Fund of the National Government. The revalidated TCC shall be valid for a period of five years from the date of issue." (emphasis supplied) xxx xxx xxx c. Revalidation Period . In general, a TCC may be revalidated prior to the expiration of its validity period. . . Accordingly, TCCs issued under the pertinent provisions of the Tax Code may be used as payment of any internal revenue tax, except withholding tax, within five (5) years from date of issue. After which, the same may no longer be utilized except if it (TCC) has been revalidated prior to the expiration of the five year period. It is the submission of this Office that the TCC issued to BHI retained its validity despite the fact that it was not revalidated within five (5) years from its issuance. It was impossible on the part of BHI to request for revalidation considering that the TCC was lost and its request for replacement was still in process. TCDHIc Finally, to consider TCC No. R-013900 useless because it expired on February 1, 2005 would constitute a contradictory act on the part of the issuing Office because the TCC was issued only on February 24, 2005 or 23 days after it has allegedly expired. There was no reason then to issue for a replacement of the TCC if the end result would be the same. In view of all the foregoing, this Office holds that Babcock Hitachi (Phils.) Inc. can make use of TCC No. R-013900 covering the amount of P3,345,290.95 as payment of its internal revenue tax liabilities except withholding tax. This will, therefore, serve as your authority in securing the Tax Debit Memo as a requirement prior to the utilization of the Tax Credit Certificate. Very truly yours, (SGD.) JOSE MARIO C. BUAG Deputy Commissioner Legal & Inspection Group