• This case involves a claim for refund by Melco, a PAGCOR-licensed casino operator, for input VAT passed on by its suppliers. The Supreme Court affirmed the denial of the refund, not because the claim was filed late, but because the passed-on VAT was not "erroneously or illegally collected" but was a legitimate part of the purchase price. Crucially, the Court reversed the Court of Tax Appeals' (CTA) ruling on the prescriptive period, declaring that the two-year period for a non-statutory taxpayer to claim a refund should be counted from its own payment or filing date, not from the nearly impossible-to-determine payment dates of its numerous suppliers.

• Claimant's Status: Melco operates the City of Dreams Manila casino under a license from PAGCOR. By virtue of PAGCOR's charter (P.D. 1869), Melco is exempt from VAT on its gaming revenues.
• The Refund Claim: For the 1st quarter of 2016, Melco's suppliers passed on input VAT amounting to PHP 81,119,005.84 on its purchases. Melco filed an administrative claim for refund of this amount with the BIR on December 19, 2017.
• BIR's Denial: The BIR denied the claim, citing a Revenue Memorandum Circular stating that income from gaming activities is subject to 12% VAT.

• CTA Division Ruling: The CTA Division denied the refund, ruling that Melco's gaming activities are VAT-exempt, not zero-rated. Therefore, it cannot claim a refund for input VAT under Section 112 of the Tax Code.
• CTA En Banc Ruling: The CTA *En Banc* affirmed the denial. It added that even if the claim was under Section 229 (erroneously paid taxes), Melco failed to prove it was timely filed. The CTA *En Banc* controversially ruled that the two-year prescriptive period should be counted from the date Melco's *suppliers* filed their own VAT returns and paid the tax, a date Melco could not possibly know.

• Is Melco, as a VAT-exempt entity, entitled to a refund for input VAT passed on to it by its suppliers?
• For a refund claim under Section 229 of the Tax Code by a party who is not the statutory taxpayer (like Melco), when does the two-year prescriptive period begin to run?

The Supreme Court PARTLY GRANTED the petition. It affirmed the denial of the refund but reversed the CTA's ruling on the prescriptive period.

• On the Refund: The Court affirmed the denial. The input VAT passed on to Melco by its suppliers was not an "erroneously or illegally collected" tax. It was a legitimate cost component of its purchases. Since Melco's gaming revenue is VAT-exempt, it cannot claim a refund for the input VAT it shoulders.
• On the Prescriptive Period: The Court REVERSED the CTA's ruling. It declared that the two-year period for a non-statutory taxpayer like Melco to claim a refund should be reckoned from the date of its *own* payment or the filing of its adjusted final tax return. The CTA's requirement to prove the suppliers' payment dates was deemed "absurd, inconvenient, unfair, and unreasonable."

• VAT-Exempt vs. Zero-Rated: A VAT-exempt transaction is not subject to output VAT, and the seller cannot claim a refund for the input VAT passed on to them. A zero-rated transaction, while not subject to output VAT, allows the seller to claim a refund for input VAT.
• Refund under Sec. 229 of the Tax Code: This applies to taxes "erroneously or illegally collected." Input VAT passed on to a VAT-exempt entity by its suppliers is not considered erroneously collected from the entity; it is part of the cost of purchase.
• Prescriptive Period for Refund (Non-Statutory Taxpayer): The two-year period for a non-statutory taxpayer (one who bears the economic burden but does not directly remit the tax) to claim a refund under Sec. 229 is reckoned from the date of its own payment or the filing of its adjusted final tax return, not from the payment date of the statutory taxpayer (the supplier).