GALILEO ASIA, LLC- PHILIPPINE BRANCH v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City FIRST DIVISION GALILEO ASIA, LLC - CTA Case No. 8868 PHILIPPINE BRANCH, For: Refund Petitioner, -versus- Members: DEL ROSARIO, P.J., Chairperson, COMMISSIONER OF UY,and INTERNAL REVENUE, MINDARO-GRULLA, JJ. Respondent. Promulgated: ~ANk~ x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION MINDARO-GRULLA, .}_.: This Petition for Review filed by Galilee Asia, LLC-Philippine Branch seeks the refund or issuance of tax credit certificate (TCC) in the amount of Six Million Eighty Thousand Thirty-Five Pesos and 23/100 (~6,080,035.23), representing petitioner's alleged excess and unutilized input value-added tax (VAT) on its domestic purchases of goods and services attributable to its zero-rated sales of services for the period covering February 1, 2012 to December 31, 2012. 1 Petitioner Galilee Asia, LLC-Philippine Branch is a branch office in the Philippines of Galilee Asia, LLC which is a foreign corporation organized and existing under the laws of the State of Delaware, United States of America (USA). 2 It is licensed by the Securities and Exchange Commission (SEC) to do business and is actually doing business in the Philippines at 18th Floor, Pacific Star Building, Makati Ave., Makati City. Petitioner is established in the Philippines to provide travel reservations, products and services to travel agencies and to foreign and domestic airlines using a global computer reservation system 1 Par. 1.1, Brief Statement of the Case, Joint Stipulation of Facts and Simplification of Issues (JSFSI), Docket, vol. I, p. 446 2 Exhibit "P-17", Docket, vol. I, p. 187 <

CTA CASE NO. 8868 Page 2 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION (CRS).3 It is a VAT-registered taxpayer with Taxpayer Identification No. (TIN) 004-460-118-000.4 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), empowered to perform the duties of the said office, including, among others, the power to decide, approve, and grant refunds or tax credits of erroneously or excessively paid taxes as provided by law. He holds office at the BIR National Office Building, BIR Road, Diliman, Quezon City. Petitioner and Travelport Global Distribution System B.V. ("Travelport" for brevity) entered into a Marketing Services Agreement on January 1, 2009.5 Petitioner filed its Pt, 2nd, 3rd, and 4th Quarterly VAT Returns for taxable year (TY) 2012 on April 25, 2012, July 25, 2012, October 25, 2012, and January 25, 2013, respectively.6 On March 19, 2014, petitioner filed its administrative claim for refund with respondent. 7 However, respondent failed to act on petitioner's administrative claim, prompting petitioner to file the present Petition for Review8 before this Court on August 14, 2014. In the Answer9 filed through registered mail on October 10, 2014 and received by the Court on October 22, 2014, respondent interposed the following special and affirmative defenses: "1. Respondent reiterates and repleads the preceding paragraphs of the answer as part of his Special and Affirmative Defenses; 2. Petitioner's claim for refund is still subject to investigation by the Bureau of Internal Revenue; 3 Par. 2.3, Admitted Facts/Documents, JSFSI, Docket, val. I, p. 447 4 Exhibit "P-45", Docket, val. I, p. 295 5 Exhibit "P-21", Docket, val. 1, pp. 262 to 284 6 Exhibits "P-35", "P-38", "P-41", and "P-44" 7 Exhibits "P-14" and "P-15" 8 Docket, val. I, pp. 17-30 9 Docket, val. I, pp. 152 to 154 <

CTA CASE NO. 8868 Page 3 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION 3. Petitioner failed to demonstrate that the tax, which is the subject of this case, was erroneously or illegally collected; 4. Taxes paid and collected are presumed to be made in accordance with the laws and regulations, hence, not refundable; 5. It is incumbent upon the Petitioner to show that it has complied with the provision of Section 204(C) in relation to Section 229 of the 1997 Tax Code, as amended; 6. Petitioner's claim for refund or issuance of tax credit certificate in the amount of Php6,080,035.23 as alleged unutilized input VAT paid on purchases of goods and services attributable to its zero-rated sales for the period February 1, 2012 to December 31, 2012 was not fully substantiated by proper documents, such as sales invoices, official receipts and others. 7. In an action for tax credit or refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to discharge the said burden is fatal to the claim (Emmanuel & Zenaida Aguilar v. Commissioner, CA-GR No. Sp. 16432, March 30, 1990 cited in Aban, Law of Basic Taxation in the Philippines, 1st Edition, p. 206); 8. Claims for refund are construed strictly against the claimant, the same partake the nature of exemption from taxation (Commissioner ofInternal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor. (Western Minolco Corp. vs. Commissioner ofInternal Revenue, 124 SCRA 121)." Petitioner filed its Pre-Trial Brief10 on January 13, 2015; while respondent's Pre-Trial Brief11 was filed through registered mail on January 5, 2015 and received by this Court on January 14, 2015. 1o Docket, val. I, pp. 327 to 364 11 Docket, val. I, pp. 366 to 369 ~

CTA CASE NO. 8868 Page 4 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION On January 22, 2015, the Court granted petitioner's Urgent Motion to Take Deposition of Ms. Sheiryll Soldevilla.12 Accordingly, the deposition of Ms. Sheiryll Soldevilla was taken on January 28, 2015.13 Thereafter, the Pre-Trial Conference was held on March 19, 2015.14 On even date, the Court granted petitioner's Motion for the Appointment of an Independent Certified Public Accountant15� The parties then submitted their Joint Stipulation of Facts and Simplification of Issues16 on March 31, 2015. Consequently, the Court issued a Pre-Trial Order17 on May 6, 2015. As trial ensued, petitioner presented Mr. Jerome Antonio B. Constantino as its witness. Thereafter, petitioner formally offered its pieces of documentary evidence which were later admitted by the Court. 18 Petitioner's documentary evidence are as follows: Exhibit Description P-1 The First Binder consisting of the Administrative Claim with annexes "A" to "N". P-2 The Second Binder labeled Exhibit "M-001" to "N-172". P-3 The Third Binder labeled Exhibit "N-173" to "N-314". P-4 The Fourth Binder labeled Exhibit "N-315" to "N-461". P-5 The Fifth Binder labeled Exhibit "N-462" to "N-615". P-6 The Sixth Binder labeled Exhibit "N-616" to "N-765". P-7 The Seventh Binder labeled Exhibit "N-766" to "N-939". P-8 The Eighth Binder labeled Exhibit "N-940" to "N-1079". P-9 The Ninth Binder labeled Exhibit "N-1080" to "N-1234". P-10 The Tenth Binder labeled Exhibit "N-1235" to "N-1270". P-11 The Eleventh Binder labeled "N-1271" to "N-1380". P-12 The Twelfth Binder labeled Exhibit "N-1381" to "N-1527". P-13 The Thirteenth Binder labeled Exhibit "N-1528" to "N-1647". P-14 The Administrative Claim dated March 19, 2014 addressed to the BIR Revenue District Office No. 49, to the attention of the 12 Resolution, Docket, vol. I, pp. 378 to 381 13 Resolution, Docket, vol. I, pp. 385 to 386 14 Resolution, Docket, vol. I, pp. 438 to 441 15 Docket, vol. I, pp. 395 to 398 16 Docket, vol. I, pp. 446 to 471 17 Docket, vol. I, pp. 484 to 500 18 Resolution dated August 28, 2015, Docket, vol. II, pp. 623 to 625; Resolution dated December 11, 2015, Docket, vol. II, pp. 668 to 671 <.

erA CASE NO. 8868 Page 5 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION P-14-1 Revenue District Officer, consisting of 5 pages found in the P-15 first binder (Exh. P-1). The name and signature of Mr. Richard R. Lapres appearing P-15-1 on page 5 of the Administrative Claim. Application for Tax Credit/Refunds (BIR Form No. 1914) P-15-2 signed by Sheiryll Soldevilla attached as Annex F to the first P-16 binder (Exh. P-1). The stamp "Received" by the Administrative Section of the P-16-1 BIR Revenue District Office No. 49 with an initial of a receiving P-17 officer and date "March 19, 2014". The name Sheiryll Soldevilla and her signature appearing in P-18 the lower left portion in the Application. Notarized Certification of Ms. Sheiryll Soldevilla dated P-19 February 24, 2014 attached as Annex L to the Administrative Claim found in the first binder (Exh. P-1). P-20 The name Sheiryll Soldevilla and her signature appearing in P-21 the lower left portion in the Certification. Amended SEC License No. AF094-000080 of Petitioner dated P-22 26 April 2002 with attached Petition for Amendment of License P-22-1 consisting of 41 pages, certified as a true copy by the P-23 Securities and Exchange Commission (SEC). P-23-1 A copy of the "Amendment of the Articles of Association" of P-24 Travelport Global Distribution System B.V. together with the P-24-1 English translation, notarized and authenticated by the Philippines Embassy in the Netherlands. P-25 A copy of the "Informal Translation of the Articles of P-25-1 Travelport Global Distribution System B.V." with the English P-26 translation, notarized and authenticated by the Philippine P-26-1 Embassy in the Netherlands. The SEC Certification of Non-Registration of Travelport Global Distribution System B.V. dated September 23, 2014. A copy of the Marketing Services Agreement between Travelport Global Distribution System B.V. and Galileo Asia LLC-Philippine Branch notarized and authenticated by the Philippine Embassy in the U.S. The Certificate of Inward Remittance issued by Bank of America and notarized on October 28, 2014. The name and signature of Ms. Eilee G. Canillas appearing in the lower left hand corner of the Certificate. Official Receipt No. 0592 dated February 14, 2012 for the amount of USD 269,061.00. Signature of Ms. Sheiryll Soldevilla. Official Receipt No. 0593 dated March 12, 2012 in the amount of USD 223,048.00. Signature of Ms. Sheiryll Soldevilla. Official Receipt No. 0609 dated April 23, 2012 for the amount of USD 146,627.00. Signature of Ms. Sheiryll Soldevilla. Official Receipt No. 0716 dated May 21, 2012 for the amount of USD 128,275.00. Signature of Ms. Sheiryll Soldevilla. <

CTA CASE NO. 8868 Page 6 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION P-27 Official Receipt No. 0758 dated June 11, 2012 for the amount of USD 215,477.00 P-27-1 Signature of Ms. Sheiryll Soldevilla. P-28 Official Receipt No. 0782 dated July 9, 2012 for the amount of USD 176,620.00 P-28-1 Signature of Ms. Sheiryll Soldevilla. P-29 Official Receipt No. 0851 dated August 13, 2012 for the amount of USD 207,203.00. P-29-1 Signature of Ms. Sheiryll Soldevilla. P-30 Official Receipt No. 0001 dated September 17, 2012 in the amount of USD 149,931.00. P-30-1 Signature of Ms. Sheiryll Soldevilla. P-31 Official Receipt No. 0004 dated December 10, 2012 in the amount of USD 297,506.00. P-31-1 Signature of Ms. Sheiryll Soldevilla. P-32 Sworn Statement of Ms. Sheiryll Soldevilla. P-32-1 The name Sheiryll Soldevilla and her signature appearing in the lower right portion of the Sworn Statement. P-33 Monthly VAT Return (BIR Form 2550 M) for January 2012 consisting of two (2) pages in the First Binder (Exh. P-1). P-33-1 BIR stamp "Received" and the date February 17, 2012. P-33-2 The name Sheiryll Soldevilla and signature appearing in the lower left portion on the first page. P-34 Monthly VAT Return (BIR Form 2550M) for February 2012 consisting of two (2) pages in the First Binder (Exh. P-1) P-34-1 BIR stamp "Received" and the date March 20, 2012. P-34-2 The name Sheiryll Soldevilla and signature appearing in the lower left portion on the first page. P-35 Quarterly VAT Return (BIR Form 2550Q) for the first Quarter of 2012 consisting of four (4) pages in the First Binder (Exh. P-35-1 P-1). P-35-2 BIR stamp "Received" and the date April 25, 2012. The name Sheiryll Soldevilla and signature appearing in the P-36 lower left portion on the first page. Monthly VAT Return (BIR Form 2550 M) for April 2012 P-36-1 consisting of two (2) pages in the First Binder (Exh. P-1). P-36-2 BIR stamp "Received" and the date May 21, 2012. The name Sheiryll Soldevilla and signature appearing in the P-37 lower left portion on the first page. Monthly VAT Return (BIR Form 2550M) for May 2012 P-37-1 consisting of three (3) pages in the First Binder (Exh. P-1). P-37-2 BIR stamp "Received" and the date June 20, 2012. The name Sheiryll Soldevilla and signature appearing in the P-38 lower left portion on the first page. Quarterly VAT Return (BIR Form 2550 Q) for the second P-38-1 quarter 2012 consisting of four (4) pages in the First Binder P-38-2 (Exh. P-1). BIR stamp "Received" and the date July 25, 2012. The name Sheiryll Soldevilla and signature appearing in the lower left portion on the first page. ~

CTA CASE NO. 8868 Page 7 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION P-39 Monthly VAT Return (SIR Form 2550 M) for July 2012 P-39-1 consisting of three (3) pages in the First Binder (Exh. P-1). P-39-2 SIR stamp "Received" and the date August 22, 2012. P-40 The name Sheiryll Soldevilla and signature appearing in the P-40-1 lower left portion on the first page. P-40-2 Monthly VAT Return (SIR Form 2550 M) for August 2012 P-41 consisting of three (3) pages in the First Binder (Exh. P-1). SIR stamp "Received" and the date September 20, 2012. P-41-1 The name Sheiryll Soldevilla and signature appearing in the P-41-2 lower left portion on the first page. P-42 Quarterly VAT Return (BIR Form 2550 Q) for the third quarter P-42-1 2012 consisting of four (4) pages in the First Binder (Exh. P- P-43 1). P-43-1 SIR stamp "Received" and the date October 25, 2012. P-43-2 The name Sheiryll Soldevilla and signature appearing in the P-44 lower left portion on the first page. Monthly VAT Return (BIR Form 2550 M) for October 2012 P-44-1 consisting of three (3) pages in the First Binder (Exh. P-1). P-44-2 SIR stamp "Received" and the date November 20, 2012. P-45 Monthly VAT Return (SIR Form 2550 M) for November 2012 P-45-1 consisting of three (3) pages in the First Binder (Exh. P-1). P-46 BIR stamp "Received" and the date December 20, 2012. The name "Sheiryll Soldevilla and signature appearing in the P-47 lower left portion on the first page. P-47-1 Quarterly VAT Return (SIR Form 2550 Q) for the fourth P-48 quarter 2012 consisting of one (1) page in the First Binder P-48-1 (Exh. P-1). P-49 SIR stamp "Received" and the date January 25, 2013. P-49-1 The name "Sheiryll Soldevilla and signature appearing in the P-49-2 lower left portion on the first page. Petitioner's SIR Certificate of Registration (SIR Form No. 2303) OCN 9RC0000345327. Petitioner's TIN 004-460-118-000. PLOT's Permit to use computerized accounting system, with Permit No. 0909-116-00012-CAS issued on September 9, 2009 by the BIR Large Taxpayers Service consisting of eleven ( 11) pages, certified as a true copy by the SIR Large Taxpayers Assistant Division. Judicial Affidavit of Sheiryll Soldevilla dated December 16, 2014. Name and signature of Ms. Soldevilla appearing on page 22 of Ms. Soldevilla's Judicial Affidavit. Judicial Affidavit of Mr. Richard R. Lapres dated December 10, 2014. Name and signature of Mr. Lapres appearing in the last page of Mr. Lapres' Judicial Affidavit. Part 1 of Mr. Jerome Antonio B. Constantino's (ICPA) Report dated April 20, 2015. Part 2 of the ICPA Report. The name Jerome Antonio B. Constantino and signature on page 27, Part 1 of the ICPA Report. ~

CTA CASE NO. 8868 Page 8 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION P-50 Official Receipt No. 0002 dated October 9, 2012 for the amount of USD 340,134.00. P-51 Petitioner's BIR Certificate of Registration with RDO Control No. 9RC0000063092. P-52 Petitioner's Application for Registration Information Update - Change in Registered Address. P-53 Official Receipt No. 0003 dated November 21, 2012 for the amount of USD 219,431.00. P-54 Petitioner's general ledger of marketing fees. P-55 Summary of zero-rated sales prepared by Petitioner. P-56 Petitioner's general ledger of asset clearing. P-57 Certificate of Inward Remittances issued by Bank of America notarized on February 7, 2014. P-58 Petitioner's general ledger of input tax. P-59 Petitioner's 2012 Audited Trial Balance Sheet. P-60 Petitioner's 2012 Audited Financial Statements. P-61 Summary List of local sales prepared by Petitioner. P-62.1 to VAT Official Receipts. P-62.409 P-63 Summary List of input tax prepared by Petitioner. P-64.1 Petitioner's Monthly VAT Declaration for the month ended January 31, 2013. P-64.2 Petitioner's Monthly VAT Declaration for the month ended February 28, 2013. P-64.3 Petitioner's Quarterly VAT return for the quarter ended March 31, 2013. P-64.4 Petitioner's Monthly VAT Declaration for the month ended April 30, 2013. P-64.5 Petitioner's Monthly VAT Declaration for the month ended May 31, 2013. P-64.6 Petitioner's Quarterly VAT Return for the quarter ended June 30, 2013 (2nd Quarter). P-64.7 Petitioner's Monthly VAT Declaration for the month ended July 31, 2013. P-64.8 Petitioner's Monthly VAT Declaration for the month ended August 31, 2013. P-64.9 Petitioner's Quarterly Vat Return for the quarter ended September 30, 2013 (3rd Quarter). P-64.10 Petitioner's Monthly VAT Declaration for the month ended October 31, 2013. P-64.11 Petitioner's Monthly VAT Declaration for the month ended November 30, 2013. P-64.12 Petitioner's Quarterly VAT Return for the quarter ended December 31, 2013 (4th Quarter). P-65.1 Petitioner's Monthly VAT Declaration for the month ended January 31, 2014. P-65.2 Petitioner's Monthly VAT Declaration for the month ended February 29, 2014. P-65.3 Petitioner's Quarterly VAT Return for the quarter ended March 31, 2014 (Pt Quarter). ~

CTA CASE NO. 8868 Page 9 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION P-65.4 Petitioner's Monthly VAT Declaration for the month ended April 30, 2014. P-65.5 Petitioner's Monthly VAT Declaration for the month ended May 31, 2014. P-65.6 Petitioner's Quarterly VAT Return for the quarter ended June 30, 2014 (2nd Quarter). P-65.7 Petitioner's Monthly VAT Declaration for the month ended July 31, 2014. P-65.8 Petitioner's Monthly VAT Declaration for the month ended August 31, 2014. P-65.9 Petitioner's Quarterly VAT Return for the quarter ended September 30, 2014 (3rd Quarter). P-65.10 Petitioner's Monthly VAT Declaration for the month ended October 31, 2014. P-65.11 Petitioner's Monthly VAT Declaration for the month ended November 30, 2014. P-65.12 Petitioner's Quarterly VAT Return for the quarter ended December 31, 2014 (4th Quarter). P-66.1 to Documents supporting input taxes for the 1st quarter of 2012 P-66.205 (excluding January) - i.e. sales invoices, official receipts, billing statements (Part 1 of 2). P-66.206 to Documents supporting input taxes for the 1st Quarter of 2012 P-66.360 (excluding January) - i.e. sales invoices, official receipts, billing statements (Part 2 of 2). P-67.1 to Documents supporting the input taxes for the 2nd quarter of P-67.263 2012 - i.e. sales invoices, official receipts, billing statements (Part 1 of 3). P-67.264 to Documents supporting the input taxes for the 2nd quarter of P-67.316 2012 - i.e. sales invoices, official receipts, billing statements (Part 2 of 3). P-67.317 to Documents supporting the input taxes for the 2nd quarter of P-67.528 2012 - i.e. sales invoices, official receipts, billing statements (Part 3 of 3). P-68.1 to Documents supporting the input taxes for the 3rd quarter of P-68.248 2012 - i.e. sales invoices, official receipts, billing statements (Part 1 of 4). P-68.249 to Documents supporting the input taxes for the 3rd quarter of P-68.317 2012 - i.e. sales invoices, official receipts, billing statements (Part 2 of 4). P-68.318 to Documents supporting the input taxes for the 3rd quarter of P-68.405 2012 - i.e. sales invoices, official receipts, billing statements (Part 3 of 4). P-68.406 to Documents supporting the input taxes for the 3rd quarter of P-68.508 2012 - i.e. sales invoices, official receipts, billing statements (Part 4 of 4). P-69.1 to Documents supporting the input taxes for the 4th quarter of P-69.205 2012 - i.e. sales invoices, official receipts, billing statements (Part 1 of 3). P-69.206 to Documents supporting the input taxes for the 4th quarter of P-69.249 2012 - i.e. sales invoices, official receipts, billing statements (Part 2 of 3). ~

CTA CASE NO. 8868 Page 10 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION P-69.250 to Documents supporting the input taxes for the 4th quarter of P-69.441 2012- i.e. sales invoices, official receipts, billing statements P-70 (Part 3 of 3). PLOT's Permit to use computerized accounting system, with P-71 Permit No. 0909-116-00012-CAS issued on September 9, P-72 2009 by the BIR Large Taxpayers Service, certified as a true copy by the BIR Large Taxpayers Assistant Division. P-73 Petitioner's Monthly VAT Declaration for the month ended P-73-1 January 31, 2015. Certificate of Inward Remittance issued by Bank of America by order of Travelport Finance Ltd. Notarized on October 28, 2014. Mr. Jerome Antonio B. Constantino's Judicial Affidavit dated May 6, 2015. Name and signature of Mr. Constantino appearing in page 14 of Mr. Constantino's Judicial Affidavit On the other hand, respondent's counsel manifested that she would not be presenting evidence on the ground that there is no report of investigation.19 On February 10, 2016, the case was deemed submitted for decision after petitioner filed its Memorandum20 on January 13, 2016 and the Judicial Records Division of this Court issued a Records Verification21 on February 2, 2016, stating that respondent failed to file a Memorandum.22 As stipulated by the parties, the sole issue submitted for this Court's resolution is whether petitioner is entitled to a refund or issuance of TCC in the amount of P6,080,035.23, representing its alleged unutilized input VAT on purchases of goods and services attributable to its VAT zero-rated sales of services for the period covering February 1, 2012 to December 31, 2012.23 Petitioner contends that it is entitled to a refund or issuance of a TCC in the amount of P6,080,035.23 when it incurred total accumulated input VAT from its domestic purchases of goods and services attributable to its VAT zero-rated sales of services to its foreign affiliate during the period of February 1, 2012 to December 31, 2012. Petitioner also states that the said amount was paid in the ordinary 19 Resolution dated May 19, 2015, Docket, vol. I, pp. 525 to 526 20 Docket, vol. II, pp. 672 to 716 21 Docket, vol. II, p. 717 22 Resolution, Docket, vol. II, p. 719 23 Simplification of Issues, JSFSI, Docket, vol. I, p. 449 <

CTA CASE NO. 8868 Page 11 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION course of business. Petitioner further avers that its input VAT was neither applied against any output VAT, nor utilized, nor carried forward to the succeeding taxable quarters subsequent to the filing of petitioner's administrative claim for refund or issuance of TCC. Petitioner points out that it is a registered VAT taxpayer since January 1, 1997 up to the present, including the period within which petitioner is claiming tax refund or issuance of TCC. Petitioner also asserts that it was engaged in zero-rated sales during the claimed period under Section 108(8)(2) of the National Internal Revenue Code (NIRC) of 1997, as amended. Petitioner likewise insists that it has filed its administrative claim within the two-year prescriptive period, and in support thereof, petitioner has allegedly submitted pertinent documents. Section 112(A) and (C) of the NIRC of 1997, as amended, provides the basis for administrative and judicial claims for refund or tax credit of input tax attributable to zero-rated or effectively zero- rated sales, quoted hereunder for easy reference: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Effectively Zero-RatedSales. -Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the 8angko Sentral ng Pilipinas (8SP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed c.

CTA CASE NO. 8868 Page 12 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero- rated sales. XXX XXX XXX (C) Period within which Refund or Tax Credit ofInput Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." Pursuant to the afore-quoted provisions, and as laid down by the Supreme Court in a number of cases,24 a taxpayer may claim a refund or tax credit certificate for input taxes paid on purchases of goods and services attributable to zero-rated sales upon compliance with the following requisites: 1. the taxpayer-claimant must be VAT-registered; 2. there must be zero-rated or effectively zero-rated sales; 24 Commissioner of Internal Revenue vs. Toledo Power Company, G.R. Nos. 195175 & 199645, August 10, 2015; Luzon Hydro Corporation vs. Commissioner of Internal Revenue, G.R. No. 188260, November 13, 2013; Southern Philippines Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 179632, October 19, 2011; Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioneroflnternal Revenue, G.R. No. 172378, January 17, 2011; AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; Intel Technology Philippines, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 166732, April 27, 2007. <

CTA CASE NO. 8868 Page 13 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION 3. input taxes were incurred or paid; 4. the input taxes incurred or paid must be attributable to zero-rated or effectively zero-rated sales; 5. the input taxes were not applied against any output VAT liability; and 6. the claim for refund must be timely filed both in the administrative and judicial levels. Petitioner's administrative and judicial claims were filed within the period prescribed by law. The Court shall determine first the timeliness of the filing of petitioner's claim. Pursuant to Section 112(A) of the NIRC of 1997, as amended, the application for tax credit certificate or refund of unutilized excess input VAT must be filed within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the four quarters of taxable year 2012. Counting from the close of the said taxable quarters, petitioner had until the following dates to file its administrative claim for refund or issuance of TCC of unutilized input VAT attributable to its zero-rated sales: 2-year Close of Taxable Prescriptive I Quarter ! Quarter March 31, 2012 Period pt June 30, 2012 September 30, 2012 March 31, 2014 2nd December 31, 2012 3rd June 30, 2014 4th September 30, 2014 December 31, 2014 Clearly, petitioner's administrative claim for refund or issuance of TCC, together with the supporting documents, was seasonably filed on March 19, 2014.25 25 Exhibits "P-14" and "P-15" <:

CfA CASE NO. 8868 Page 14 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION On the other hand, Section 112(C) of the NIRC of 1997, as amended, states the time requirements for filing of a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the BIR Commissioner to act on the administrative claim for refund or tax credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA.26 Note that the 120-day period begins to run from the date of submission of complete documents supporting the administrative claim. If there is no evidence showing that the taxpayer was required to submit - or actually submitted - additional documents after the filing of the administrative claim, it is presumed that the complete documents accompanied the claim when it was filed. 27 Applying the foregoing to the instant case, the 120-day period provided for respondent to act on petitioner's administrative claim expired on July 17, 2014. Without petitioner receiving any decision from respondent on the said claim, petitioner had thirty (30) days from July 17, 2014, or until August 16, 2014, to appeal such inaction by respondent before this Court. Thus, the Petition for Review filed on August 14, 2014 fell within the "120+30" day period. The Court shall now proceed to determine petitioner's compliance with the other requisites. Petitioner is a VAT- registered entity. Petitioner is registered with the Bureau of Internal Revenue as a VAT taxpayer with TIN 004-460-118-000.28 26 ROHM Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015 27 Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue, G.R. No. 182737, March 2, 2016 28 Par. 2.4, Admitted Facts/Documents, JSFSI, docket, vol. I, p. 447; Exhibit "P-45", Docket, vol. I, p. 295 c

CTA CASE NO. 8868 Page 15 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION Petitioner has zero- rated sales. Petitioner avers that it rendered services in the Philippines to Travelport Global Distribution System, B.V. that is doing business outside the Philippines for the period February 1, 2012 to December 31, 2012. Petitioner posits that such services which were paid for in acceptable foreign currency and duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas are subject to zero-percent (0�/o) VAT pursuant to Section 108(8)(2) of the NIRC of 1997, as amended, which states: "SEC. 108. Value-added Tax on Sale ofServices and Use or Lease ofProperties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0�/o) rate: ( 1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas(BSP); (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" In the case of Commissioner ofInternal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.29 (Burmeister case), 29 G.R. No. 153205, January 22, 2007. .('

CTA CASE NO. 8868 Page 16 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION the Supreme Court held that in order for the sale of services to be VAT zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended, the following requisites must be met: 1. the services by a VAT-registered person must be other than processing, manufacturing or repacking of goods; 2. the payment for such services must be in acceptable foreign currency accounted for in accordance with the 8SP rules and regulations; and 3. the recipient of such services is doing business outside the Philippines. It is undisputed that petitioner is a branch office in the Philippines of Galileo Asia, LLC, a foreign corporation organized and existing under the laws of the State of Delaware, USA. Petitioner is licensed by the SEC to do business and is actually doing business in the Philippines.30 Pursuant to the Marketing Services Agreement31 executed on January 1, 2009, petitioner was appointed by Travelport as its distributor for the marketing, promotion, distribution supply and support of Travelport Global Distribution Systems (TGDS) in the Philippines. The TGDS enables travel agencies and other organizations to make bookings with participating companies, such as airlines and other providers of travel-related services. Petitioner's services clearly fall within the scope of"services other than processing, manufacturing or repacking of goods" as contemplated in Section 108(8)(2) of the NIRC of 1997, as amended. Furthermore, Travelport is a corporation established in Amstelveen, Netherlands as evidenced by its Amended Articles of Association32 with the corresponding Informal Translation33 in English, and is not registered in the Philippines as a corporation or partnership as certified by the SEC.34 With the foregoing, the Court finds that petitioner sufficiently proved that Travelport, as recipient of petitioner's services, is doing business outside the Philippines. 30 Par. 2.1, Admitted Facts/Documents, JSFSI, Docket, val. I, p. 447; Exhibit "P-17", Docket, val. I, p. 187 31 Exhibit "P-21", Docket, val. I, pp. 262 to 284 32 Exhibit "P-18", Docket, val. I, pp. 228 to 238 33 Exhibit "P-19", Docket, val. I, pp. 239 to 260 34 Exhibit "P-20", Docket, val. I, p. 261 <

CTA CASE NO. 8868 Page 17 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION Moreover, Section 113(A)(2), (8)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Section 4.113-1(A)(2), (B)(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, as amended, provides that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services issue a VAT official receipt which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall issue: XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VATInvoice or VAT Official Receipt - The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) value- added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; ~

CTA CASE NO. 8868 Page 18 of 29 Galilee Asia, LLC-Philippine Branch vs. CIR DECISION XXX XXX XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and" (Emphasis supplied) "SECTION 4.113-1. Invoicing Requirements.- (A) A VAT-registered person shall issue:- XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt -The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: ~

CTA CASE NO. 8868 Page 19 of 29 Galilee Asia, LLC-Philippine Branch vs. CIR DECISION XXX XXX XXX (c) If the sale is subject to zero percent (0�/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) Based on the foregoing provisions, the foreign currency remittances referred to under Section 108(B)(2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts. Records show that for the period covering February 1, 2012 to December 31, 2012, petitioner's sales of services to Travelport amounted to US$2,373,313.00 or equivalent to P100,552,650.29. 35 The said amount is duly supported by VAT zero-rated official receipts36 (in US dollar denomination) that are compliant with the invoicing requirements. These US dollar receipts can also be traced to the inward remittances to petitioner's bank account as certified by the Bank of America.37 Evidently, petitioner's sales of services for the claimed period in the amount of P100,552,650.29, which was duly reported in its 2012 Quarterly VAT Returns 38 , would qualify for VAT zero-rating under Section 108(B)(2) of the NIRC of 1997, as amended. 35 Exhibit "P-49", Findings and Observations, No. 3, p. 8; Exhibit "P-55" 36 Exhibits "P-23" to "P-31", Docket, vol. I, pp. 286 to 294; Exhibits "P-50" and "P-53" 37 Exhibit "P-57" 38 Exhibit CY 2012 Zero-Rated "P-35" Sales/ Receipts 1st Quarter p 21 336,512.44 ! "P-38" 2nd Quarter 20 863,762.02 "P-41" 3rd Quarter 22 629,400.94 "P-44" 4th Quarter 35,722,974.89 Total p 100,552,650.29 ~

CTA CASE NO. 8868 Page 20 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION Input taxes were incurred or paid. Petitioner's total input VAT credits for taxable year 2012, excluding the month of January 2012, amounted to P7,125,127.22, computed as follows: 39 DESCRIPTION 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Consolidated Input tax on domestic covering covering April covering July covering Total purchases of capital goods January to to June 2012 to September October to exceeding P1M (Exhibit P-38) December Add: Input tax deferred on March 2012 2012 2012 capital goods exceeding P1M l_Exhibit P-35) (Exhibit P-41) from previous quarter (Exhibit P-4~J Less: Input tax on domestic purchases of capital goods p - p 142 714.27 p -p - p 142 714.27 exceeding P1M deferred to the succeeding period 1 376,348.43 1179 978.55 1118 394.39 919 260.82 (a) Amortized portion of the 1179,978.55 1118 394.39 919 260.82 741 119.43 input tax on domestic purchases ofcapital goods 196 369.88 204 298.43 199 133.57 178 141.39 777 943.27 exceeding P1M (b) Input tax on domestic 96 503.57 103 258.93 151 382.14 17 164.29 368 308.93 purchases of capital goods not exceeding P1M 12 264.32 3 929.36 11625.14 13 736.14 41 554.96 (c) Input tax on domestic purchases of goods other than 1 283 102.43 1 570 109.75 1 328 863.74 2 300 289.58 6 482 365.50 capital goods 545 045.44 545 045.44 (d) Input tax on domestic - - - purchases of services Less: Input tax for the month P1,043,194.76 P1,881,596.47 P1,691,004.59 P2,509,331.40 P7,125,127.22 of January (Exhibit P-33) Total input VAT credits (a+b+c+d) Deducting the output tax liability of petitioner from these available input VAT yields an excess input VAT amounting to P6,713,052.06: In ut tax credits er VAT returns 7 125 127.22 Less: Output VAT liability 412,075.1640 39 Exhibit "P-49", Annex 1 40 Exhibit CY 2012 Output Tax Due "P-35" 1st Quarter "P-38" 2nd Quarter p 35J918.41 "P-41" 3rd Quarter "P-44" 4th Quarter 94 528.90 116,362.43 165,265.42 <.

CTA CASE NO. 8868 Page 21 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION I I Unutilized excess input VAT per VAT returns P6,713,052.06l However, only the amount of P6,080,035.23 out of P6,713,052.06 is being claimed for refund by petitioner, as computed below: Input tax per Summary List of input taxes prepared by p 5,477,047.08 petitioner: 306,541.08 a) Input VAT on domestic purchases of services and goods other than capital goods 708,522.23 b) Input VAT on domestic purchases of capital goods not P6,492,110.39 exceeding P1 Million 412,075.16 c) Amortization of input VAT on domestic purchases of capital goods exceeding P1 Million P6,080,035.23 Total input VAT per Summary List of Input Taxes41 Less: Output VAT liability Excess Input VAT claimed for refund Petitioner was not able to account for the difference of P633,016.83 between the excess input VAT per VAT returns of P6,713,052.06 and the amount claimed for refund of P6,080,035.23. To prove that it incurred/paid the input VAT of P6,492,110.39 from February 1 to December 31, 2012, petitioner submitted various suppliers' invoices and official receipts which were examined by the Court-commissioned Independent Certified Public Accountant (ICPA), Mr. Jerome Antonio B. Constantino. a) Input VAT on domestic purchases of services and goods other than capital goods, and b) Input VAT on domestic purchases of capital goods not exceeding Pl Million Based on the ICPA Report42 dated April 20, 2015, out of the P5,477,047.08 input VAT claim on domestic purchases of services and goods other than capital goods and P306,541.08 input VAT claim on Total I I P 412,075.16 41 Exhibit "P-63" 42 Exhibit "P-49", pp. 16 to 20

CTA CASE NO. 8868 Page 22 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION domestic purchases of capital goods not exceeding Pl Million, totaling P5,783,588.16, only the amount of P1,185,686.34 was properly substantiated. With regard to the remaining input VAT claim of P4,597,901.8243, the !CPA noted the following findings: FINDINGS EXHIBIT P-49 INPUT TAX ANNEX 1 Input VAT on domestic purchase of services supported by VAT Reg. ~ 137,516.10 TIN/TIN No. VAT ORs but petitioner's TIN not indicated 5-A4, 5-84, 5-C5, 5-D4 17,562.14 2 Input VAT on domestic purchase of goods supported by TIN No. VAT 5-A5, 5-85, invoices butpetitioner's TIN not indicated 5-C6, 5-D5 75,101.80 5-A6, 5-86 3 Input VAT on domestic purchase of capital goods not exceeding P1M 5-A7, 5-87, 15,158.30 supported by TIN No. VAT invoices but petitioner's TIN not indicated 5-C7, 5-D6 6,083.81 4 Input VAT on domestic purchases of services supported by VAT Reg. 5-88, 5-C8, TIN/TIN No. VAT ORs dated not within the quarter of claim but within the 5-D7 938.57 period of claim and petitioner's TIN not indicated 5-D8 121,178.57 5 Input VAT on domestic purchase of goods supported by TIN No. VAT invoices dated not within the quarter of claim but within the period of claim 5-89, 5-C9 985,968.61 and petitioner's TIN not indicated 17,500.66 5-A8, 5-810, 6 Input VAT on domestic purchase of goods supported by TIN No. VAT 5-ClO, 5-D9 2,596,439.00 invoices dated not within the quarter of claim but within the period of claim 5-A9, 5-C11 6,964.17 and petitioner's name and TIN not indicated 5-AlO, 5-8-11, 5- 13,432.29 7 Input VAT on domestic purchase of capital goods not exceeding P1M C12, 5-DlO 189,458.82 supported by TIN No. VAT dated not within the quarter of claim but within 5-812, 5-C13 the period of claim and petitioner's TIN not indicated 119.35 5-813, 5-C14 8 Input VAT on domestic purchase of services supported by VAT Reg. 908.54 TIN/TIN No. VAT ORs but no VAT breakdown 5-A11, 5-814, 5- C15, 5-D11 61,175.91 9 Input VAT on domestic purchase of services supported by VAT Reg. 129,273.43 TIN/TIN No. VAT ORs but no VAT breakdown and dated not within the 5-A12 82,983.67 quarter of claim but within period of claim 5-815 1,894.93 10 Input VAT on domestic purchase of services supported by VAT Reg. 1,826.79 TIN/TIN No. VAT ORs but no VAT breakdown and petitioner's TIN not 5-816, 5-C16 indicated 5-A13, 5-817, 5- 11 Input VAT on domestic purchase of services supported by VAT Reg. C17, 5-D12 TIN/TIN No. VAT ORs but no VAT breakdown and petitioner's TIN is 5-818, 5-C18, 5- altered but with countersignature D13 12 Input VAT on domestic purchase of services supported by VAT Reg. 5-D14 TINmN No. VAT ORs but no VAT breakdown and petitioner's TIN is 5-819 altered but without countersignature 13 Input VAT on domestic purchase of services supported by VAT Reg. TIN/TIN No. VAT ORs but no VAT breakdown, dated not within the quarter of claim but within the period of claim and petitioner's TIN not indicated 14 Input VAT on domestic purchase of services supported by VAT Reg. TIN/TIN No. VAT ORs but no VAT breakdown, dated not within the quarter of claim but within the period of claim and wrong petitioner's TIN 15 Input VAT on domestic purchase of services supported by VAT Reg. TIN/TIN No. VAT ORs but no VAT breakdown, no date indicated and petitioner's TIN not indicated 16 Input VAT on domestic purchase of services supported by VAT Reg. TIN/TIN No. VAT ORs but wrong petitioner's TIN 17 Input VAT on domestic purchase of services supported by documents other than VAT OR 18 Input VAT on domestic purchase of services supported by photocopied ORs 19 Input VAT on domestic purchase of goods supported by photocopied invoices 20 Input VAT on domestic purchase of services supported by photocopied ORs and petitioner's TIN not indicated 43 P5,783,588.16 less P1,185,686.34

CTA CASE NO. 8868 Page 23 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION 21 Input VAT on domestic purchase of goods supported by photocopied 5-A14, 5-C19 1,528.50 invoices but petitioner's TIN not indicated 5-820 744.00 644.25 22 Input VAT on domestic purchase of goods supported by photocopied 5-821, 5-C20 invoices but incomplete petitioner's TIN 5-A15 1,714.29 23 Input VAT on domestic purchase of goods supported by photocopied Invoices dated not within the quarter of claim but within the period of 5-A16, 5-822, 5- 183,269.50 claim C21 5-D15 2 934.1844 24 Input VAT on domestic purchase of services supported by VAT Reg. 5-A17, 5-823, 5- (54 418.28)45 TIN/TIN No. VAT ORs but not within the period of claim C22, 5-D16 P4,597,901.9046 25 Input VAT on domestic purchase of services where documents are still being located by petitioner 26 Overclaimed input VAT Underclaimed input VAT Total For not being properly substantiated by VAT invoices or official receipts as prescribed under Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-2, 4.110- 3, 4.110-8, and 4.113-1 of RR No. 16-05, as amended, the above input taxes shall be disallowed. However, it must be noted that in arriving at the above total input VAT of P4,597,901.90, the ICPA deducted the amount of P54,418.28 representing petitioner's underclaimed input VAT, i.e., the excess of the input VAT reflected per petitioner's supporting invoices/official receipts over the input VAT shown per petitioner's summary list and VAT Returns. In effect, the deduction of the amount of P54,418.28 has reduced the input VAT disallowances and has increased the input VAT which may be refunded. The Court finds such deduction of P54,418.28 improper since petitioner cannot be allowed to refund more than what it declared in the VAT Returns. 44 Exhibit P-49 Quarter Overstatement Annex 1st Quarter 5-A17 2nd Quarter p 933.48 5-823 3rd Quarter 5-C22 4th Quarter 1,309.23 5-D16 49.16 642.31 p 2,934.18 45 Exhibit P-49 Quarter Understatement Annex 1st Quarter 5-A17 2nd Quarter p {_4 410.84) 5-823 3rd Quarter 5-C22 4th Quarter (3 306.34) 5-D16 (4 440.67) (42 260.43) p (54,418.28) 46 Difference of P.08 due to rounding off

CTA CASE NO. 8868 Page 24 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION Likewise, it is erroneous to disallow input taxes which are more than those reflected per summary list/VAT Returns. Thus, the amount of P19,880.16, detailed below, representing the excess of the input VAT per supporting VAT invoices/official receipts as found by the ICPA over the input VAT reported per summary list/VAT Returns shall be taken out from the total amount of P4,597,901.90: Exhibit P-49 Exhibit Supplier Input VAT Input VAT Difference Annex No. PRO FLIGHTS TRAVEL per VAT per ICPA PLDT Returns Findings p 0.01 5-A4 5A-17 P-66.189 PLDT p 555.10 p 555.11 P-67.388 PLDT 960.00 17.14 5-B16, 5-B23 P-67.389 PLDT 900.00 977.14 P-67.392 PLDT 600.00 916.07 16.07 5-BlO 5-B23 P-67.393 PLDT 480.00 610.71 5-B17 5-B23 P-67.394 PLDT 960.00 488.57 10.71 5-B17 5-B23 P-67.395 PLDT 1 080.00 977.14 5-C4 5-C22 P-67.396 PLDT 2 496.00 1,099.29 8.57 5-ClO 5-C22 P-67.397 PLDT 160.71 2,540.57 5-C17, 5-C22 P-67.398 PLDT 160.71 163.58 17.14 5-D9, 5-D16 P-67.399 PLDT 160.71 163.58 5-DlO, 5-D16 P-67.400 CENTURY PROPERTIES MGT INC 160.71 163.59 19.29 5-D13, 5-D16 P-67.401 GLOBE TELECOM 160.71 163.58 5-D12 5-D16 P-67.268 GLOBE TELECOM 24 424.54 163.58 44.57 P-67.453 PLDT 380.65 25 565.87 P-67.454 CENTURY PROPERTIES MGT INC 222.69 832.54 2.87 P-68.253 GLOBE TELECOM 5 029.20 225.68 P-68.281 INSTONE PHILIPPINES INC 25 242.54 5 031.06 2.87 P-68.428 SIM COMPUTER SALES INC 259.00 25 565.87 P-68.431 EASTERN TELECOM 50.76 259.62 2.88 P-68.434 STARS TRAVEL INC 261.16 2 106.99 P-69.224 MARSMAN DRYSDALE TRAVEL INC 2,488.12 375.00 2.87 P-69.189 PLDT 480.00 3 108.75 P-69.244 PLDT 697,155.49 830.46 2.87 P-69.349 PLDT 7 510.74 711 810.84 P-69.350 PLDT 4,974.00 7 512.67 1141.33 P-69.357 INNOVE COMMUNICATIONS 168.32 4 975.29 P-69.358 960.00 168.39 451.89 P-69.417 104.70 968.57 106.61 2.99 1.86 323.33 0.62 2 056.23 113.84 620.63 350.46 14 655.35 1.93 1.29 0.07 8.57 1.91 p 19 880.16 In addition, petitioner's claimed input VAT in the amount of P394,540.80, as detailed below, shall also be disallowed for non- compliance with the substantiation requirements as provided by law and revenue regulations: ICPA EXHIBIT SUPPLIER INVOICE/OR NO. DATE INPUT VAT REPORT NO. ANNEX 0182 0179 No description ofservice indicated in OR 5-C1 P-68.251 GOLDEN WORLD TRAVEL AND TOURS 8/24/2012 p 277.00 7/26/2012 505.47 5-Cl P-68.252 GOLDEN WORLD TRAVEL AND TOURS

CTA CASE NO. 8868 Page 25 of 29 Galilee Asia, LLC-Philippine Branch vs. CIR DECISION S-Dl I I I P-69.167 GOLDEN WORLD TRAVEL AND TOURS 0188 12/21/2012 1S2.90 SUBTOTAL p 935.37 Overclaimed input VAT 2/7/2012 p 22.93 S-Al P-66.178 WI-TRIBE TEELCOM 1S724-BR1 6/21/2012 8.S7 PLOT PBMOR000938619 6/21/2012 17.14 S-Bl P-67.179 PLOT PBMOR000938627 6/21/2012 17.14 PLOT PBMOR000938687 6/21/2012 2.87 S-Bl P-67.190 PLOT PBMOR000938668 8/16/2012 0.01 PLOT PQGOR033778766 8/lS/2012 S-Bl P-67.223 PELOR000662374 7/12/2012 0.01 PBMOR0009S7038 7/6/2012 S-Bl P-67.231 PELOR000637S29 SUBTOTAL p 68.67 S-Cl P-68.160 7/23/2012 p 7,13S.l4 9/18/2012 7,34S.83 S-Cl P-68.188 PLOT 10/23/2012 7,34S.83 SUBTOTAL p 21,826.80 Petitioner's address incomplete and no description ofservice in OR 6/11/2012 p 2S,71S.87 S-Cl P-68.3 BAYANTEL 896734 7/18/2012 466.80 9048SO 11/29/2012 S-Cl P-68.4 BAYANTEL 917109 11/29/2012 S,777.22 SUBTOTAL p 818.38 S-Dl P-69.1 BAYANTEL 2/28/2012 p 32,778.27 Petitioner's address not indicated and VAT not separately shown in OR 2/21/2012 1,37S.70 S-Bl P-67.1 CENTURY PROPERTIES MGMT. INC 81462 2/29/2012 SS0.69 S-Cl P-68.2 TRAVEL HIGH TOURS CORP 062S 2/23/2012 432.01 2/7/2012 S-Dl P-69.112 STARS TRAVEL INC 880S3A 2/7/2012 368.26 1,261.28 S-016 P-69.112 STARS TRAVEL INC 880S3A 2/7/2012 S,29S.27 3/16/2012 Petitioner's address not indicated in OR 3/2/2012 1,807.61 3/1/2012 2S7.70 S-Al P-66.174 CAREER PHIUPPINES 22936 S/23/2012 300.00 S/31/2012 320.91 SHIPMANAGEMENT INC. 9SlS8 4/2/2012 12678 4/20/2012 1,296.84 S-Al P-66.17S CLASSIC TRAVELHAUS INC 6/22/2012 300.00 3S47A S/18/2012 S-Al P-66.176 PHILIPPINE GLOBAL 1S724-BR1 2,6SS.44 4/27/2012 6,22S.62 COMMUNICATIONS INC 22923 60,717.60 S/24/2012 1,473.17 S-Al P-66.177 PROFLIGHTS TRAVEL 3S40A 6/29/2012 9S401 S/16/2012 818.2S S-Al P-66.178 WI-TRIBE TEELCOM 081S 0976 7/13/2012 9,009.SO S-Al P-66.179 CAREER PHILIPPINES 0248 7/24/2012 3S9.49 08S4 7/2S/2012 lSO.OO SHIPMANAGEMENT INC. S116 7/2S/2012 9S963 7/2S/2012 1,848.61 S-Al P-66.180 PROFLIGHTS TRAVEL 77101 9/10/2012 919.74 23023 9/7/2012 S-Al P-66.181 CLASSIC TRAVELHAUS INC 9/14/2012 S,SlS.72 23001 8/3/2012 S3,2SO.OO S-Al P-66.182 RG FINANCIAL SERVICES LTD 9/27/2012 1S734400 1,693.18 S-Al P-66.183 TRAVELEXPERTSINC 16014800 8/23/2012 300.00 126.90 S-Bl P-67.2 SURE TRAVEL INC 81342 127.3S 264.00 S-Bl P-67.3 RG FINANCIAL SERVICES LTD 0403 0423 2,819.81 S-Bl P-67.4 ROYAL BARGE TRAVEL AND TOURS 13972 13973 2,6Sl.67 S-Bl P-67.S CLASSIC TRAVELHAUS INC 13974 0896 S-Bl P-67.6 BUDGET TRAVEL AND TOURS 96687 96742 S-Bl P-67.7 CAREER PHILIPPINES 77327 231S8 SHIPMANAGEMENT INC. 2312S S-Bl P-67.8 CAREER PHILIPPINES SHIPMANAGEMENT INC. S-Bl P-67.239 INTELLICARE S-Bl P-67.240 INTELLICARE S-B2 P-67.264 CENTURY PROPERTIES MANAGEMENT INC S-Cl P-68.S SURE TRAVEL INC S-Cl P-68.6 SURE TRAVEL INC S-Cl P-68.7 QUISUMBING TORRES S-Cl P-68.8 QUISUMBING TORRES S-Cl P-68.9 QUISUMBING TORRES S-Cl P-68.10 RG FINANCIAL SERVICES LTD S-Cl P-68.13 CLASSIC TRAVELHAUS INC S-Cl P-68.14 CLASSIC TRAVELHAUS INC S-Cl P-68.1S BUDGET TRAVEL AND TOURS S-Cl P-68.16 CAREER PHILIPPINES SHIPMANAGEMENT INC. S-Cl P-68.17 CAREER PHILIPPINES SHIPMANAGEMENT INC.

CTA CASE NO. 8868 Page 26 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION 5-C1 P-68.249 INTELLICARE 16157500 7/26/2012 338.71 5-D1 P-69.113 SURE TRAVEL INC 0631 10/10/2012 1,927.79 5-D1 P-69.114 TRAVELEXPERTSINC 1418 10/8/2012 480.00 3635 11/28/2012 40,935.00 5-D1 P-69.115 PROFLIGHTS TRAVEL 5-D1 P-69.116 PROFLIGHTS TRAVEL 3636 11/28/2012 1,894.69 5-D1 P-69.118 SAFARI RENT-A-CAR INC 26005 11/9/2012 3,840.00 5-D1 P-69.119 CAREER PHILIPPINES 23230 11/22/2012 4,897.11 SHIPMANAGEMENT INC. 5-D1 P-69.120 CAREER PHILIPPINES 23215 11/6/2012 2,384.98 SHIPMANAGEMENT INC. 5-D1 P-69.121 TRAVEL HIGH TOURS CORP 067 12/12/2012 320.79 SUBTOTAL p 221,511.39 Petitioner's address not indicated in sales invoice 5-C2 P-68.501 SIM COMPUTER SALES INC 27331 7/11/2012 p 32,625.00 � 5-C2 P-68.502 SIM COMPUTER SALES INC 27340 7/13/2012 15,133.93 5-C2 P-68.503 SIM COMPUTER SALES INC 27427 7/31/2012 18,423.21 5-C2 P-68.504 SIM COMPUTER SALES INC 27486 8/17/2012 1,821.43 5-C2 P-68.505 SIM COMPUTER SALES INC 24324 8/24/2012 13,339.29 5-C2 P-68.506 SIM COMPUTER SALES INC 24353 9/17/2012 14,566.07 5-D2 P-69.438 SIM COMPUTER SALES INC 24505 10/11/2012 12,235.71 5-D2 P-69.439 SIM COMPUTER SALES INC 24452 10/4/2012 787.50 5-D3 P-69.440 SIM COMPUTER SALES INC 24377 9/19/2012 155.36 5-D3 P-69.441 SIM COMPUTER SALES INC 24414 9/27/2012 1,173.21 SUBTOTAL p 110,260.71 Petitioner's address and description ofservice not indicated in OR 5-D1 P-69.117 ROYAL BARGE TRAVEL AND TOURS 5291 10/22/2012 p 1,662.28 Petitioner's TIN and address and description ofservice not indicated in OR 5-C4 P-68.254 TRAVEL HIGH TOURS CORP 0666 10/12/2012 p 320.06 5-D1 P-69.184 SKYCABLE 930640 10/4/2012 278.46 SUBTOTAL p 598.52 Petitioner's TIN not indicated in OR 5-C1 P-68.164 PLDT PBMOR000971385 7/31/2012 p 900.00 PBMOR000949152 7/10/2012 5-Cl P-68.165 PLDT PBMOR000971836 7/31/2012 960.00 PBMOR000949153 7/10/2012 5-D1 P-69.165 PLDT PBMOR001039576 10/1/2012 883.93 5-D1 P-69.166 PLDT PBMOR001039577 10/1/2012 942.86 SUBTOTAL p 3,686.79 Wrong TIN ofpetitioner in OR 5-C1 P-68.1 EASTERN COMMUNICATIONS EHOCM0000018059 7/25/2012 p 1,212.00 TOTAL p 394,540.80 l__ - I -~ ~-- - In sum, out of petitioner's input VAT claim of P5,783,588.16 arising from domestic purchases of services and goods other than capital goods and domestic purchases of capital goods not exceeding Pl Million, a total amount of P5,026,980.82 shall be disallowed, computed as follows: Input VAT Not Properly Substantiated Per ICPA Report p 4,597,901.90 Add: Underclaimed Input VAT Erroneously Deducted 54,418.28 Additional Input VAT Not Properly Substantiated per the Court's 394,540.80 Verification Less: Input VAT Disallowed by ICPA in Excess of the Input VAT per I Return Input VAT Not Properly Substantiated Per ICPA Report, As 19,880.16 I Adjusted P5,026,980.82 ~

CfA CASE NO. 8868 Page 27 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION c) Amortization of input VAT on domestic purchases of capital goods exceeding Pl Million With reference to the claimed P708,522.23 amortization of input VAT on domestic purchases of capital goods exceeding P1 Million, records show that the amount of P680,772.2747 arose from purchases prior to 2012, while the amount of P27,749.9648 pertains to purchases in May 2012 with the related input VAT of P142,714.2749 � However, petitioner failed to submit before this Court VAT invoices/official receipts in support of its claimed amortization of input tax on purchases prior to 2012 in the amount of P680,772.27. As to the claimed P27,749.96 amortization of input VAT on May 2012 purchases, the ICPA found that petitioner's TIN was not reflected in the supporting invoices.50 As such, the entire claimed P708,522.23 amortization of input VAT on domestic purchases of capital goods exceeding P1 Million must be disallowed. To recapitulate, out of the P6,492,110.39 total input VAT per petitioner's summary list, only the amount of P756,607.34 represents petitioner's valid input tax, as computed below: Input tax per Summary List of Input Taxes: P5,477,047.08 Input VAT on domestic purchases of services and goods other 306,541.08 than capital goods 708,522.23 Input VAT on domestic purchases of capital goods not exceeding PlMillion P6,492,110.39 Amortization of input VAT on domestic purchases of capital goods exceeding PlMillion P5,026,980.82 Total input VAT per Summary List of Input Taxes Less: Disallowances 1) Input VAT on domestic purchases of services and goods other than capital goods and domestic purchases of capital goods not exceeding PlMillion 47 P708,522.23 less P27,749.96; Exhibit "P-49", Findings and Observations No. 1, p. 22 48 Monthly amortization of P3,964.28 x 7 months (May, July to Dec. 2012); Exhibit "P-49", Findings and Observations No. 1, p. 22 49 Exhibit "P-49", Findings and Observations No. 3, p. 23 50 Exhibit "P-49", Annex 6 ~

CTA CASE NO. 8868 Page 28 of 29 Galilee Asia, LLC-Philippine Branch vs. CIR DECISION 2) Amortization of input VAT on domestic purchases of 708,522.23 capital goods exceeding P1Million P5,735,503.05 Total Disallowances P756,607 .34 Valid Input VAT L---- Petitioner's excess input taxes were attributable to its zero-rated sales and remained unutilized in the succeeding quarters. A portion of the P756,607.34 valid input VAT shall be applied against petitioner's reported output VAT liability for the four taxable quarters of 2012 in the amount of P412,075.16. Hence, only the remaining input VAT of P344,532.18 can be attributed to petitioner's zero-rated sales for taxable year 2012, as shown below: Valid Input VAT p 756,607.34 Less: Output VAT Due 412,075.16 Excess Input VAT Attributable to Zero-Rated Sales P344,532.18 Even though the input VAT claimed herein for refund or issuance of TCC amounting to P6,080,035.23 was carried over to petitioner's VAT Returns subsequent to December 2012, 51 the same remained unutilized until it was deducted as "VAT Refund/TCC Claimed" in the November 2014 VAT Return52 � Thus, it can be ascertained that it will no longer be utilized as credit for any future VAT liability. WHEREFORE, premises considered, this Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the amount of P344,532.18 in favor of petitioner, representing the latter's unutilized excess input VAT attributable to its zero-rated sales of services for the period covering February 1, 2012 to December 31, 2012. SO ORDERED. Clu; N-~~G~ CIELITO N. MINDARO-GRULLA Associate Justice 51 Exhibits "P-64.1" to "P-65.11" 52 Exhibit "P-65.11", Line 200

CTA CASE NO. 8868 Page 29 of 29 Galileo Asia, LLC-Philippine Branch vs. CIR DECISION ER~P.' UV WE CONCUR: Associate Justice Presiding Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ROMAN G. DE[ ROSARIO Presiding Justice Chairperson, 1st Division