COLT COMMERCIAL INC. v. THE COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF TH E PHILIPPINES Court ofTax Appeals QUEZON CITY Third Division COLT COMMERCIAL, INC. CTA CASE NO. 9205 Petitioner, Members: - versus - BAUTISTA, Chairperson FABON-VICTORINO, and RINGPIS-LIBAN, IJ. THE COMMISSIONER OF Promulgated: INTERNAL REVENUE, DECISION BAUTISTA, J.: The Case Before the Court is a Petition for Review1 filed by petitioner on November 23, 2015, p u rsu ant to Section 7(a)(2)2 of Republic Act ("RA") No. 11253, as amended by RA No . 92824 and RA No. 95035, in relation to 1 Records, CTA Case No. 9205, Vol. 1, Petition f or Review ("PFR"), pp. 10-80, with annexes. 2 Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: XXX XXX XX X (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial; 3 An Act Creating the Court of Tax Appeals, as amended. 4 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes. s An Act Enlarging the Organizational Structure of the Court of Tax Appeals, Amending for the Purpose Certain Sections of the Law Creating the Court of Tax Appeals, and for Other Purposes.

DECISION CTA CASE NO. 9205 Page 2of23 Section 3(a)(1)6, Rule 4 of the Revised Rules of the Court of Tax Appeals ('RRCTA")l, seeking for the Court to render judgment granting its claim for refund in the amount of Php2,131,445.288 representing its alleged unutilized input tax payments attributable to its zero-rated sales for the second quarter of taxable year ("TY") 2013.9 The Parties Petitioner is a corporation duly organized and existing under the laws of the Philippines, with business address at Suite 508 Padilla Delos Reyes Bldg., 232 Juan Luna St., Brgy. 289 Zone 027, Binondo Manila.lo Its primary purposes are (1) "[t]o engage in the business of merchandising, distributing and marketing; whether as principal, agent, indenter or manufacturer's representative, wholesale or retail, such as but not limited to industrial, agricultural, manufacturing tools and equipment, engineering products, hardware items, construction materials, and electrical supplies and[/]or any and all kinds of goods, wares and merchandise[;]"11 and (2) "[t]o engage in the business of import and export as principals, factors, representatives, agents or commissioned merchants with respect to buying, selling[,] trading or dealing in any and all kinds of goods, wares, products of all classes and description, distribution, import and export business[.]"12 6 Sec. 3. Cases within the jurisdiction of the Court in Division. -The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: xxx XXX XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; xxx 7 A.M. No. 05-11-07-CTA, November 22,2005. s See Records, Vol. 1, Resolution, p. 449; the Court noted petitioner's Manifestation to rectify the erroneously stated amount for refund in the Petition for Review from Php2,194,583.72 to Php Php2,131,445.28. 9 Records, Vol. 1, PFR, Prayer, p. 18. 1o Records, Vol. 2, Joint Stipulation of Facts and Issues ("JSFI"), par. 1(a), p. 507; Records, Vol. 1, Exhibit "P-1," Certificate ofIncorporation and Cover Sheet, pp. 148-149. u Records, Vol. 2, JSFI, par. 1(b), p. 507; Records, Vol. 1, Exhibit "P-2," Articles ofIncorporation, Primary, par. 1, p. 150. 12 Records, Vol. 1, Exhibit "P-2," Articles of Incorporation, Primary, par. 2, p. 150. (

DECISION CTA CASE NO. 9205 Page3of23 Petitioner is registered with Revenue District Office ("RDO") No. 30, Binondo, Manila, as a VAT taxpayer with Taxpayer Identification No. 008-327-264-000.13 Respondent is the duly appointed Commissioner of Internal Revenue ("CIR"), vested with authority to administer and to enforce all laws pertaining to internal revenue taxes, and has jurisdiction to decide claims for refund. The Facts Petitioner has zero-rated and VATable sales per Quarterly VAT Returns filed for the second quarter of TY 2013.14 In its Administrative Claim for Excess Input VAT Refund1S dated June 26, 2015 filed with BIR RDO No. 30 on even date, petitioner claimed the amount of Php2,131,445.28 as excess input VAT.16 Attached thereto are its Application for Registration Information Update (BIR Form No. 1905)17, Application for Tax Credits/Refunds (BIR Form No. 1914)18, and a Sworn Certification19 that the documents submitted are complete for the purpose of processing the claim for refund. On August 6, 2015, petitioner, through a certain Jennifer S. Mafiago, received Letter of Authority ("LOA")-030-2015-00000243 (SN: eLA201100089502)2� dated July 30, 2015 issued by Officer-In- Charge (" OIC")-Regional Director of Revenue Region No. 6 - Manila, Araceli L. Francisco. The LOA authorizes Revenue Officer ("RO") Eliseo Raul Bacalzo and Group Supervisor ("GS") Fernando Matias of Revenue District No. 030- Binondo to examine petitioner's books of accounts and other accounting records pursuant to a mandatory audit for its claim for VAT refund covering the period starting April1, 2013 to June 30,2013. n Records, Vol. 2, JSFI, par. 1(c), p. 507; Records, Vol. 1, Exhibit "P-5," BIR Certificate of Registration, unnumbered page between pp. 178 and 179. 14 Records, Vol. 2, JSFI, par. 1(d), p. 507. 15 Id., Vol. 1, Exhibit "P-13," Administrative Claim, p. 390. 16 Id., Vol. 2, JSFI, par. 1(e), p. 508. 17 Id., Vol. 1, Exhibit "P-14," BIR Form No. 1905, pp. 391-392. 1s Id., Exhibit "P-15," BIR Form No. 1914, p. 393. 19 Id., Exhibit "P-16," Sworn Certification, p. 394. f 20 BIR Records, Letter ofAuthority, p. 1.

DECISION CTA CASE NO. 9205 Page4 of23 On November 23, 2015, petitioner filed the present Petition for Review21 with the Court. The Court issued Summons22 against respondent on December 4, 2015, ordering him to submit his Answer within fifteen (15) days from service. Respondent filed an Answer23 on December 22, 2015, interposing the following Special and Affirmative Defenses: (1) that the Petition for Review is premature, considering that petitioner's claim for refund or credit of unutilized tax payments attributable to zero-rated sales for the first quarter of TY 2013 in the amount of Php2,131,445.28 is still pending investigation; (2) that petitioner already applied the entire amount of input tax by carrying it over to succeeding taxable quarters; (3) that the remedies of tax refund and input tax carry-over are alternative and the choice of one precludes the other; (4) that a claim for refund is construed strictly against the claimant and should not be allowed unless proven explicitly and categorically; and (5) and that tax refunds are in the nature of tax exemptions, and claimants bear the burden of proving the factual basis or bases of their claims, and showing that the legislature intended to exempt them.24 On March 28, 2016, petitioner and respondent respectively submitted their Pre-Trial Brief25 and Respondent's Pre-Trial Brief26� During the Pre-Trial Conference27 held on March 29, 2016, the Court granted the parties a period of fifteen (15) days or until April12, 2016 to submit their joint stipulation of facts and issues. Accordingly, on April 13, 2016 and April 22, 2016, the parties filed their Joint Stipulation of Facts and Issues2s ("JSFI") and Supplemental JSFI29, respectively. On May 5, 2016, a Pre-Trial Order30 was issued by the Court terminating the Pre-Trial Conference. 21 Records, Vol. 1, PFR, pp. 10-80, with annexes. 22 Id., Summons, p. 81. 23 Id., Answer, pp. 82-85. 24 Id., Answer, Special and Affirmative Defenses, p. 83. 25 Id., Pre-Trial Brief pp. 130-147. 26 Id., Respondent's Pre-Trial Brief pp. 441-443. 27 Records, Vol. 1, Minutes ofHearing dated March 29, 2016, p. 444. zs Id., Vol. 2, JSFI, pp. 507-509. 29 Id., Supplemental JSFI, pp. 510-523. 3o Id., Pre-Trial Order ("PTO"), pp. 525-530. (

DECISION CTA CASE NO. 9205 Page 5 of23 On August 22, 2016, the Court-appointed31 Independent Certified Public Accountant ("ICPA") transmitted a softcopy of his ICPA Report, along with annexes and exhibits.32 In the course of the proceedings, petitioner presented the following witnesses: (1) Mr. Cyrus S. Chung33, petitioner's President; (2) Ms. Cherilyn R. Chung34, petitioner's Corporate Secretary and Treasurer; (3) Ms. Jennifer S. Mafiago3s, petitioner's accounting head; and (4) Mr. Garry Pagaspas36, the Court-appointed ICPA. On October 28, 2016, petitioner filed its Formal Offer of Evidence37 ("FOE"), offering Exhibits "P-1," "P-2," "P-3," "P-4," "P-5," "P - 6 I I " P - 7 I I "P-8 I I " P - 9 I I "P-10 I I "P-11I II " P - 12 II "P-13 I I "P-14 I I "P- I I I I I I I I 15," "P-16,11 "P-17-A,11 "P-17-B," "P-18," "P-19-A," "P-19-B," "P-19-C," "P-19-D,11 "P-20-A,11 "P-20-B,11 "P-20-C,11 "P-20-D,11 "P-21-A,11 "P-21-B,11 "P-22,11 "P-23,11 "P-24,11 "P-25," "P-26," "P-26-A,11 "P-27,11 "P-27-A,11 "P- 28," "P-28-A," "P-29,11 "P-29-A,11 "P-30,11 and "P-30-A." On January 6, 2017, the Court admitted all of petitioner's exhibits, save for Exhibit "P-7" for failure to present the original for comparison, and Exhibits "P-8,11 "P-10,11 and "P-2411 for failure to submit the duly marked exhibits.38 The Court likewise noted that Exhibits "P-9,11 "P-11,11 and "P-25" respectively refer to Exhibits "P-44- Series," "P-45-Series,11 and "P-45-Seriesll to "P-48-Series" in the ICPA Report. Unsatisfied, petitioner filed its Motion for Partial Reconsideration39 on January 23, 2017. During the hearing4o held on 31 Records, Vol. 1, Motion to Commission Independent Certified Public Accountant, pp. 453-457; Records, Vol. 1, Exhibits "P-41" and "P-41a," Judicial Affidavit ("JA"), pp. 458-505, with annexes; Records, Vol. 1, Oath of Commission (For a CPA Firm), p. 543; Records, Vol. 1, July 19, 2016 Minute Resolution, p. 542. 32 CD, !CPA Report with annexes. 33 Records, Vol. 1, Exhibits "P-26" and "P-26-a," JA, pp. 109-122; Records, Vol. 2, July 19, 2016 Minutes ofHearing, p. 542; Transcript of Stenographic Notes ("TSN"), July 19, 2016 Hearing, pp. 16-32. 34 Records, Vol. 1, Exhibits "P-27" and "P-27-a," JA, pp. 123-129; Records, Vol. 2, August 16, 2016 Minutes of Hearing, p. 546; Transcript of Stenographic Notes ("TSN"), August 16, 2016 Hearing, pp. 7- 13. 35 Records, Vol. 1, Exhibits "P-28" and "P-28-a," JA, pp. 99-108; Records, Vol. 2, September 19, 2016 Minutes of Hearing, p. 549; TSN, September 19, 2016 Hearing, pp. 3-34. 36 Records, Vol. 2, Exhibits "P-30" and "P-30-a," JA, pp. 551-567; Records, Vol. 2, October 17, 2016 Minutes of Hearing, p. 568; TSN, October 17,2016, pp. 3-12. 37 Records, Vol. 2, Formal Offer of Evidence ("FOE"), pp. 572-804, with annexes. 38 Id., Resolution, pp. 810-811. 39 Id., Motion for Partial Reconsideration, pp. 814-873, with annexes. 40 Id., Januan; 23, 2017 Minutes ofHearing, p. 874.

DECISION CTA CASE NO. 9205 Page 6of23 that date and as confirmed in an Order41, respondent manifested that he has no evidence to present, as the report for investigation has yet to be approved by higher authorities. The parties were then granted thirty (30) days from receipt of the resolution on petitioner's Motion for Partial Reconsideration to submit their respective memoranda. On February 17, 2017, the Court resolved to admit Exhibits "P-8" and "P-10," and reiterated its denial of Exhibit "P-7."42 Respondent's Memorandum43 was submitted to the Court on March 23, 2017 via registered mail; while petitioner filed its Memorandum44 on April12, 2017. Thereafter, the Court resolved to submit the case for decision through its Resolution4s dated April19, 2017; hence, this Decision. The Issue46 WHETHER PETITIONER IS ENTITLED TO A REFUND OF THE AMOUNT OF PHP2,131,445.28 FOR THE SECOND QUARTER OF TY 2013. Petitioner's Arguments47 Petitioner alleges that the Petition for Review is not premature as respondent failed to act on the administrative claim within one hundred and twenty (120) days, as prescribed by law; that petitioner is entitled to a VAT refund in the amount of Php2,131,445.28 for the second quarter of TY 2013; and that respondent's defense of its carry- over of unutilized excess input VAT does not have the effect of utilization as the input VAT claimed was deducted as "VAT Refund/TCC Claimed" in petitioner's quarterly VAT Return for the first quarter of 2015. 41 Records, Vol. 2, Order, pp. 875-876. 42 Id., Resolution, pp. 882-883. 43 Id., Respondent's Memorandum, pp. 885-888. 44 Id., Memorandum, pp. 890-913. 45 Id., Resolution, p. 915. 46 Id., PTO, B. Issue, p. 526. ( 47 Records, Vol. 2, Memorandum, Discussion, pp. 902-911.

DECISION CTA CASE NO. 9205 Page 7of23 Respondent's Counter-Arguments4B Respondent claims that per Table 10 of the ICPA Report, the entire amount of input tax of Php2,131,445.28 was applied against its output tax by carrying over the same to succeeding taxable quarters; that petitioner failed to provide the Court with the originals or Certified True Copies of the PEZA and SMBA Certificates of Registration of petitioner's clients or customers, which fact was admitted by the ICPA in his report; that the denial of Exhibit uP-7'' is fatal to petitioner's Petition for Review; that while the ICPA recommended in his report for the VAT refund in the amount of Phpl,612,443.35, such recommendation is still subject to the Court's discretion relating to the documentation requirements; that in a claim for refund or tax credit, the applicant must satisfy all the documentary and evidentiary requirements of an administrative claim; and that being a derogation of the sovereign authority, a statute granting tax exemption is strictly construed against the person claiming exemption. The Ruling of the Court Petitioner's claim was not prematurely filed, and the Court has jurisdiction over the instant case. The Court must first determine whether petitioner's Petition for Review was filed prematurely, to establish its jurisdiction over the case at bar. Anent the timeliness of filing the administrative claim for refund, Section 112(A) of the 1997 NIRC provides as follows: SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Effectively Zero-Rated Sales.- 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 48 Records, Vol. 2, Respondent's Memorandum, Argument/Discussion, pp. 886-887. I

DECISION CTA CASE NO. 9205 Page 8 of23 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 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): 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 to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. XXX XXX xxx49 As to the timeliness of the judicial claim for refund, Section 112(C) of the 1997 NIRC, in relation toRR No. 16-200550, is instructive, to wit: SEC. 112. Refunds or Tax Credits ofInput Tax.- 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 Subsections (A) and (B) 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. XXX XXX xxx51 Corollary, Section 4.112-1(d) of RR No. 16-2005 states the following: 49 Underscoring ours. 50 Consolidated Value-Added Tax Regulations of 2005, effective November 1, 2005. 51 Italics retained, underscoring ours. (

DECISION CTA CASE NO. 9205 Page 9of23 Sec. 4.112-1. Claims for Refund/Tax Credit Certificate of Input Tax. XXX XXX XXX (d) Period within which refund or tax credit certificate/refund ofinput taxes shall be made In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate/refund 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 subparagraph (a) above. In case of full or partial denial of the claim for tax credit certificate/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirty (30) days from the receipt of said denial, otherwise the decision shall become final. However, if no action on the claim for tax credit certificate/refund has been taken by the Commissioner of Internal Revenue after the one hundred twenty (120) day period from the date of submission of the application with complete documents, the taxpayer may appeal to the CTA within 30 days from the lapse of the 120-day period.s2 The above provisions were applied in Philippine jurisprudence in the case of Commissioner ofInternal Revenue v. Mindanao II Geothermal Partnership-53, wherein the Highest Tribunal held that the taxpayer can file a judicial claim in one of two ways, viz.: (1) within thirty (30) days after the CIR denies the claim within the one hundred and twenty (120)-day period; or (2) within thirty (30) days from the expiration of the one hundred and twenty (120)-day period, if the CIR does not act within the one hundred and twenty (120)-day period. Moreover, the Supreme Court in Rohm Apollo Semiconductor Phils. v. Commissioner of Internal Revenue54 reminded taxpayers that when the one hundred and twenty (120)-day period lapses and there is inaction on the part of the CIR, the taxpayer must no longer await the decision. This is because the CIR's inaction is already deemed a denial of the refund claim; hence, the taxpayer must file an appeal 52 Italics retained, underscoring ours. 53 G.R. No. 191498, January 15, 2014, 713 SCRA 645. ( 54 G.R. No. 168950, January 14, 2015, 745 SCRA 663.

DECISION CTA CASE NO. 9205 Page 10of23 within thirty (30) days from the lapse of the one hundred and twenty (120)-day waiting period. The above is consistent with the jurisdiction of the division of the CTA under Section 3(a)(2), Rule 4 of the RRCTAss. It provides that the Court in Division shall exercise exclusive original or appellate jurisdiction to review, by appeal, the inaction by the CIR in cases involving refunds of internal revenue taxes, where the 1997 NIRC provides a specific period for action. In sum, based on Section 112(A) of the 1997 NIRC, petitioner has two (2) years from the close of the taxable quarter when the sales were made to file its administrative claim with the CIR. The latter is given one hundred and twenty (120) days from submission of complete supporting documents to decide the claim. In case of inaction by the CIR after one hundred and twenty (120) days from the date of submission of the application with complete documents, Section 112(C) of the 1997 NIRC, in relation toRR No. 16-2005, grants petitioner thirty (30) days to file its judicial claim with the CTA. If the CIR does not decide within that period, taxpayers must elevate the matter to the CTA within thirty (30) days; otherwise, the Court will be deprived of jurisdiction to hear and determine the case. The subject period covers April 1, 2013 to June 30, 2013, the second quarter of TY 2013; hence, the taxable quarter closes on June 30, 2013. Therefrom, petitioner had two (2) years or until June 30, 2015 to file its administrative claim for refund. Records reveal that petitioner timely filed its administrative claim for refund on June 26, 2015, four (4) days before due date. Thereafter, the CIR has one hundred and twenty (120) days or until October 24, 2015 to act on the claim. Due to the inaction of respondent, petitioner had thirty (30) days or until November 23,2015 to appeal to the CTA. Therefore, the present Petition for Review was filed just in time on November 23, 2015. Having settled that the petitioner timely file the instant Petition for Review, the Court shall now proceed to determine petitioner's compliance with the other requisites, pursuant to the afore-quoted provision of Section 112(A) of the 1997 NIRC, to wit: 55 A.M. No. 05-11-07-CTA, November 22,2005. (

DECISION CTA CASE NO. 9205 Page 11 of23 1. Petitioner is VAT-registered; 2. There must be zero-rated or effectively zero-rated sales; 3. The input taxes were incurred or paid; 4. Such input taxes are attributable to zero-rated or effectively zero-rated sales; and 5. The input taxes were not applied against any output tax liability. Petitioner is VAT-registered. It is undisputed that petitioner is registered with the BIR as a VAT taxpayer, as evidenced by its BIR Certificate of Registration No. C0000579258 and Taxpayer's Identification Number 008-327-264-000.56 Petitioner has zero-rated or effectively zero-rated sales. With regard to the requisite that the taxpayer should be engaged in zero-rated or effectively zero-rated sales, records show that petitioner is duly registered with the Securities and Exchange Commission ("SEC")57 and is primarily engaged in the business of merchandising, distributing, and marketing, whether as principal, agent, indenter or manufacturer's representative wholesale, or retail, such as but not limited to industrial, agricultural, manufacturing tools and equipment, engineering products, hardware items, construction materials, and electrical supplies and or any all kinds of goods, wares and merchandise.ss Petitioner avers that majority of its clients are entities doing business within the economic zone and registered with the Philippine Economic Zone Authority ("PEZA") and Subic Bay Metropolitan 56 Records, Vol. 1, Exhibit "P-5," Bureau of Internal Revenue Certificate ofRegistration, p. 178. 57 Id., Exhibit "P-1," SEC Certificate of Incorporation, p. 148. 58 Id., Exhibit "P-2," Articles ofIncorporation," p. 150.

DECISION CTA CASE NO. 9205 Page 12of23 Authority ("SBMA"),s9 and that the sales to said buyers are classified as effectively zero-rated transactions, pursuant to Section 106(A)(2)(c) of the 1997 NIRC of19976o, to wit: SEC. 106. Value-Added Tax on Sale ofGoods or Properties.- (A) Rate and Base of Tax- xxx (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: XXX XXX XXX (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate. Furthermore, pertinent provisions of Revenue Regulations ('RR") No. 16-2005 states: SEC. 4.106-5. Zero-Rated Sales of Goods or Properties.- xxx The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: XXX XXX XXX (c) 'Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement'. - Sales of goods or property to persons or entities who are tax-exempt under special laws, e.g. sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to R.A. No. 7227, sales to enterprises duly registered and accredited with the Philippine Economic Zone Authority (PEZA) or international agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI), etc., shall be effectively subject to VAT at zero-rate. It is clear from the foregoing that the sales of goods to entities registered with PEZA and SBMA are subject to VAT at zero percent (0%) rate. 59 Records, Vol. 1, PFR, par. 13, p. 12. 60 Id., par. 14, p. 15.

DECISION CTA CASE NO. 9205 Page 13 o�23 In its amended Quarterly VAT Return for the znct quarter of TY 2013,61 petitioner declared VATable sales, its corresponding output VAT, as well as zero-rated sales, as follows: Vatable Sales/Receipts Php 5,500,930.3462 Output VAT 660,111.6463 Zero-Rated Salesj Receipts 24,781,862.3464 To prove that its clients are duly registered with PEZA and SBMA, petitioner submitted the letter of PEZA Director General Lilia B. De Lima dated February 16, 2016 addressed to CCI President Mr. Cyrus S. Chung, confirming the issuance of VAT zero-rating certifications to the following petitioner's clients/ purchasers:65 NAME OF ENTERPRISE VAT CERT. NO. VAT CERT. DATE 1 Alpha Techno Toolings Inc. 730 17-Jan-13 2 Applied Machining Corp. 939 28-Jan-13 3 Cebu AOI Development Tech. Corp. 1636 4 Citizen Machinery Philippines, Inc. 97 24-May-13 5 Claymount Assemblies Phils. Inc. 454 11-Dec-12 6 Daitoh Precisions, Inc. 1578 07-Jan-13 7 Daiwa Seiko Phils. Corp. 448 22-Apr-13 8 Delfingen Ph-Filipinas, Inc 07-Jan-13 Formerly Sofandou (Phils.) Inc. 1569 18-Apr-13 9 Delta Design Phils. LLC 782 18-Jan-13 10 E N Corporation 1259 15-Feb-13 11 Exas Phils. Inc. 1358 27-Feb-13 12 Famous Secret Precision Machining 362 03-Jan-13 13 Fatec Corporation 1073 01-Feb-13 14 Ferusche Stainless Inc. 1658 05-Jun-13 15 Firstec Metallics, Inc. 14 04-Dec-12 16 Fujitsu Die-Tech Corp. of the Phils. 450 07-Jan-13 17 Gunma Gohkin Phil. Corp. 313 28-Dec-12 18 Harada Automotive Antenna Phils. Inc. 1173 06-Feb-13 Formerly Nippon Antenna Phils. Inc. 229 12-Dec-12 19 Hitachi Industrial Machinery Phils. Corp. 121 13-Dec-12 20 Honda Parts Manufacturing Corp. 633 15-Jan-13 21 Imasen Phil. Manufacturing Corp. 1367 01-Mar-13 22 Ina Micro Opto Corporation 1732 23 JFS Precision Tech. Corp. 968 09-Jul-13 24 Knowles Electronics Phils. Corp. 1459 28-Jan-13 25 Kodachi Seiki Philis. Inc. 79 13-Mar-13 26 Laguna AutoParts Manufacturing Corp. 266 10-Dec-12 27 Laguna Metts Corp. 167 26-Dec-12 28 Makoto Metal Tech. Inc. 17-Dec-12 61 Records, Vol. 1, Exhibit "P-19-B," p. 401. 62 Id., line 15A, p. 401. 63 Id., line 15B, p. 401. 64 Id., line 17, p. 401. 65 Id., Vol. 1, Exhibit "P-6," pp. 179-185.

DECISION 1694 27-Jun-13 CTA CASE NO. 9205 734 17-Jan-13 Page 14of23 264 26-Dec-12 29 Manufacturing Automation Solutions 1413 08-Mar-13 30 Meinan Phils. Inc. 839 21-Jan-13 887 23-Jan-13 31 Menima Casting Products Inc. 789 18-Jan-13 32 Micro Mechanics Tech. International Inc. 33 Micron Precision Phils. Inc. 1032 30-Jan-13 34 MI<Pinc. 431 07-Jan-13 35 MTE Technology Inc. 428 07-Jan-13 36 Nakashima Phils. Corp. 443 07-Jan-13 1747 15-Jul-13 Formerly Mikado Phils. Corp. 306 28-Dec-12 37 New Electronics System Co. Inc. 1263 18-Feb-13 38 Nidec Phils. Corp. 39 Nidec Precision Phils. Corp. 747 17-Jan-13 40 Nuvali Steel Processing Center Inc. 1552 12-Apr-13 41 Orbis Precision Tech. Inc. 861 22-Jan-13 42 Parts Phils. Inc. 1720 1054 08-Jul-13 43 Penta Technological Products Inc. 879 13-Jan-13 44 Philippine Kenko Corp. 22-Jan-13 45 Phil. Nagano Seiko Inc. 1907 46 Phil. Precision Technology Inc. 1313 16-0ct-13 47 Philippine Sanitary Fittings Inc. 165 20-Feb-13 48 Philippines TRC Inc. 1709 17-Dec-12 1979 02-Jul-13 49 Precise Parts Cooperation Inc. 18-Dec-13 50 Precise Techno Inc. 1827 51 Prophile Sound Industries Inc. 1095 27-Aug-13 52 Seo Jin Tronics Inc. 355 01-Feb-13 53 Shimano Phils. Inc. 695 02-Jan-13 16-Jan-13 54 Sinag Precision Manufacturing Laguna 30 05-Dec-12 55 Sonion Philippines Inc. 1939 11-Nov-13 56 Suminac Philippines Inc. 1001 29-Jan-13 57 Sunnelit Philippines Corp. 718 17-Jan-13 58 T&S Laser Solutions Inc. 2036 28-0ct-14 59 Tamiya Phils. Inc. 395 04-Jan-13 60 TMX Philippines Inc. 61 Tsukuba Phil. Diecasting Corp. 383 04-Jan-13 62 Ure-Shi Technologies Inc. 769 18-Jan-13 63 Vitalo Packaging International Inc. 64 Wacker Neuson Manila, Inc. Formerly Wacker Machinery Phils. Inc. 65 Yutaka Manufacturing Phils. Inc. Having been confirmed or certified by PEZA, only sales made to the above-mentioned clients shall qualify for VAT zero-rating, provided that the evidence66 presented complies with the invoicing requirements, pursuant to Section 1167 of Republic Act (RA") No. 9337, amending Section 113 of the 1997 NIRC. 66 !CPA Report, FOE Green Folder 2 of3, Exhibit "P-9" series; Box 1, Exhibit "P-44" series. 67 SEC. 11 Section 113 of the same code, as amended, is hereby further amended to read as follows: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (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 VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (

DECISION CTA CASE NO. 9205 Page 15 of23 The Court-commissioned ICPA noted that zero-rated sales amounting to Php231,288.24 were attributable to out-of-period sales, to discrepancy on the figures reported vis-a-vis the amount on sales invoice, and to other factors for which he was not able to fully account.68 Hence, the Court disallows the said zero-rated sales. Further study of the sales invoices issued by petitioner to the following customers/clients reveal that VAT zero-rating certifications were not issued by PEZA, SBMA, or BOI. Thus, zero-rated sales amounting to Php1,180,652.95 is also disallowed, to wit: INV.NO. CUSTOMER'S NAME AMOUNT EXHIBIT 1062 Silan Technologies Corporation Php 1,010.00 P-44-11 1072 Turu Santechno Corporation P-44-19 1073 Turu Santechno Corporation 35.00 P-44-20 1128 Histotech Precision Inc. 26,800.00 P-44-52 1226 Turu Santechno Corporation 3,500.00 P-44-105 1243 Silan Technologies Corporation 2,800.00 P-44-107 1261 Polarmarine Incorporated 2,400.00 P-44-118 1264 Polarmarine Incorporated 1,187.50 P-44-121 1278 Polarmarine Incorporated 27,000.00 P-44-131 1279 Polarmarine Incorporated 22,290.00 P-44-132 1328 Silan Technologies Corporation 40,680.00 P-44-163 1348 Silan Technologies Corporation 1,440.00 P-44-174 1376 Polarmarine Incorporated 1,320.00 P-44-193 3,100.00 (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: (a) The amount of the tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from value-added tax, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the breakdown of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and (4) In the case of sales in the amount of one thousand pesos (P1,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and taxpayer identification number (TIN) of the purchaser, customer or client." 68 ICPA Report, FOE Green Folder 1 of3, Exhibit "P-29," par. G, p. 10. !

DECISION CTA CASE NO. 9205 Page 16 of23 1555 Turu Santechno Corporation 5,600.00 P-44-301 1731 Turu Santechno Corporation 11,382.00 P-44-397 1747 Polarmarine Incorporated 5,400.00 P-44-408 1748 Polarmarine Incorporated 1,120.00 P-44-409 1749 Polarmarine Incorporated 5,800.00 P-44-410 1750 Polarmarine Incorporated 4,100.00 P-44-411 1752 Polarmarine Incorporated 37,350.00 P-44-412 1797 Turu Santechno Corporation P-44-443 1955 Turu Santechno Corporation 400.00 P-44-533 2021 Turu Santechno Corporation 1,440.00 P-44-575 2152 Polarmarine Incorporated 5,600.00 P-44-659 2153 Polarmarine Incorporated 42,800.00 P-44-660 2258 Citizen Machinery_ Phils. Inc. 5,800.00 P-44-718 2337 Polarmarine Incorporated 9,500.00 P-44-766 2341 Polarmarine Incorporated 15,750.00 P-44-767 2342 Polarmarine Incorporated 4,500.00 P-44-768 2361 Silan Technologies Corporation 58,600.00 P-44-782 2410 Ebara Benguet Inc. 2,400.00 P-44-809 2431 Turu Santechno Corporation 19,500.00 P-44-820 2472 Multiplast Corporation 3,300.00 P-44-845 1414 Premtol E.K. 13,050.00 P-44-871 1598 Mr. Kevin Tan 146,156.57 P-44-872 48,434.66 1880 Premtol E.K. P-44-873 1881 Premtol E.K. 99,271.17 P-44-874 2040 Premtol E.K. 235,050.38 P-44-875 2225 Premtol E.K. 44,429.97 P-44-876 TOTAL 220,355.70 PHP1,180,652.95 After a study of the documents submitted, the Court finds that out of the Php24,781,862.34 zero-rated sales declared per VAT Return filed for the second quarter of TY 2013, only the amount of Php23,369,921.15 qualifies for VAT zero-rating, computed as follows: Zero-rated Sales per BIR Form No.2550-Q Php 24,781,862.34 Disallowances: Php 1,411,941.19 PHP 23,369,921.15 Per ICPA findings Php 231,288.24 Per Court verification 1,180,652.95 VALID ZERO-RATED SALES Petitioner had input taxes attributable to zero-rated sales. Having resolved that petitioner had valid VAT zero-rated sales for the second quarter of TY 2013 in the amount of Php23,369,921.15, the Court proceeds to determine the amount of input VAT attributable thereto. J

DECISION CTA CASE NO. 9205 Page17of23 In its Quarterly VAT Return for the second quarter TY 2013,69 petitioner declared input VAT of Php2,791,566.92 on its domestic purchases and importation of goods other than capital goods, of which the amount of Php2,131,455.28 is the subject claim, as shown below: Input VAT: Php 971,257.68 Domestic purchases of goods other than cap. Goods 1,820,309.24 Importation of goods other than cap. Goods Php 2,791,566.92 Total input VAT 660,111.64 Less: Output VAT PHP 2,131,455.28 INPUTVAT PERCLAIM In support of its input VAT on current purchases/importations of goods amounting to Php2,791,566.92, petitioner presented schedule of purchases,70 various official receipts ("ORs") and invoices,n schedule of importation,72 Statement and Receipts of Duties Collected on Informal Entry ("SRDCIE"), Import Entry Internal Revenue Declarations ("IEIRDs"), and Bureau of Customs ("BOC") 0Rs73 issued by its suppliers, which were all examined by the Court- commissioned ICPA, who noted the following: Input tax properly supported Php 2,272,554.9974 Input Tax: Php 25,813.2175 518,340.55 Not under CCI's complete name 482,487.8176 671.3978 Without or incomplete address 10,039.5377 Php Without of incorrect TIN 2,791,566.9379 Unaccounted PHP TOTAL INPUT VAT The above-noted exceptions found by the ICPA in the aggregate amount of Php519,011.94 (Php518,340.55 plus Php671.39) are disallowed for not being properly substantiated by VAT invoices or ORs, as prescribed under Sections 110(A) and 113(A)(B) of the 1997 69 Records, Vol. 1, Exhibit "P-19-B," pp. 401-402. 70 Id., Vol. 2, Exhibit "P-10," series, pp. 856-873. 71 ICPA Report, FOE Green Folder 3 of3, Exhibit "P-11" series, also referred as Exhibits "P-45" to "P- 48" series. 72 Records, Vol. 2, Exhibit "P-24," series, pp. 753-756. 73 Box 1, Exhibit "P-25" series. 74 ICPA Report, FOE Green Folder 1 of1, Exhibit "P-29," Table 5. rl 75 Id., Table 6. 76 Id., Table 7. 77 Id., Table 8. 78 Id., Table 9, p. 12. 79 Rounding off difference of Php0.01.

DECISION CTA CASE NO. 9205 Page 18 of23 NIRC, in relation to Sections 4.110-2, 4.110-8 and 4.113-1 of RR No. 16- 05. Further verification of the ICPA Report, together with the supporting documents, reveals that the additional input VAT of Php30,692.38 shall likewise be disallowed for the reasons stated hereunder: EXHIBIT SUPPLIER'S NAME INPUT TAX REASON P-45-1 Best Price Php 267.86 With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier P-45-2 Besteel Merchandising 81.75 With noted alterations or additions in the supporting Invoice without 196.87 countersignature of the authorized representative of the supplier P-45-3 Besteel Merchandising 63.00 With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier P-45-4 Besteel Merchandising 79.50 With noted alterations or additions in the supporting Invoice without 317.25 countersignature of the authorized representative of the supplier P-45-5 ChamSamco 1,025.78 VAT not Separately Indicated P-45-6 ChamSamco 1,253.57 VAT not Separately Indicated P-45-49 GYH Industrial 107.89 With noted alterations or additions in the supporting Invoice without 124.18 countersignature of the authorized representative of the supplier P-45-67 Best Price 274.82 With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier P-45-68 Best Price 274.82 With noted alterations or additions in the supporting Invoice without 37.35 countersignature of the authorized representative of the supplier P-45-69 Best Price 77.55 With noted alterations or additions in the supporting Invoice without 64.80 countersignature of the authorized representative of the supplier P-45-70 Best Price 375.00 With noted alterations or additions in the supporting Invoice without 198.45 countersignature of the authorized representative of the supplier P-45-71 Best Price 461.25 P-45-72 Besteel Merchandising 253.33 With noted alterations or additions in the supporting Invoice without P-45-73 Besteel Merchandising 77.85 countersignature of the authorized representative of the supplier P-45-74 Besteel Merchandising 174.37 With noted alterations or additions in the supporting Invoice without P-45-75 Besteel Merchandising 334.80 countersignature of the authorized representative of the supplier P-45-76 Besteel Merchandising 56.25 With noted alterations or additions in the supporting Invoice without P-45-77 Besteel Merchandising 858.75 countersignature of the authorized representative of the supplier P-45-78 Besteel Merchandising 291.45 With noted alterations or additions in the supporting Invoice without P-45-79 Besteel Merchandising 941.25 countersignature of the authorized representative of the supplier P-45-80 Besteel Merchandising 45.00 With noted alterations or additions in the supporting Invoice without P-45-110 Grind Tech Abrasives 416.87 countersignature of the authorized representative of the supplier P-45-111 Grind Tech Abrasives 108.00 With noted alterations or additions in the supporting Invoice without P-45-112 Grind Tech Abrasives 171.45 countersignature of the authorized representative of the supplier P-45-113 Grind Tech Abrasives 965.25 With noted alterations or additions in the supporting Invoice without P-45-114 Grind Tech Abrasives countersignature of the authorized representative of the supplier P-45-115 Grind Tech Abrasives With noted alterations or additions in the supporting Invoice without P-45-116 GYH Industrial countersignature of the authorized representative of the supplier P-45-117 GYH Industrial With noted alterations or additions in the supporting Invoice without P-45-118 GYH Industrial countersignature of the authorized representative of the supplier P-45-119 GYH Industrial With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without I

DECISION CTA CASE NO. 9205 Page 19of23 P-45-120 GYH Industrial 458.70 countersignature of the authorized representative of the supplier P-45-121 GYH Industrial 189.38 With noted alterations or additions in the supporting Invoice without P-45-122 Iris Industrial 803.57 countersignature of the authorized representative of the supplier P-45-123 Iris Industrial 803.57 With noted alterations or additions in the supporting Invoice without P-45-124 Iris Industrial 803.57 countersignature of the authorized representative of the supplier P-45-126 LimYeeWan With noted alterations or additions in the supporting Invoice without P-45-127 LimYeeWan 38.68 countersignature of the authorized representative of the supplier P-45-128 LimYeeWan 25.45 With noted alterations or additions in the supporting Invoice without P-45-131 Limhuaco Metal 22.18 countersignature of the authorized representative of the supplier P-45-132 Limhuaco Metal 209.25 With noted alterations or additions in the supporting Invoice without P-45-133 MJS Appliance 202.18 countersignature of the authorized representative of the supplier P-45-134 MJS Appliance 7,500.00 With noted alterations or additions in the supporting Invoice without P-45-135 Office Master 3,750.00 countersignature of the authorized representative of the supplier P-45-138 Proton Plastic Packaging 2,098.40 With noted alterations or additions in the supporting Invoice without P-45-143 Screw City Hardware 892.86 countersignature of the authorized representative of the supplier P-45-144 Screw City Hardware 9.75 With noted alterations or additions in the supporting Invoice without P-45-145 Screw City Hardware 27.60 countersignature of the authorized representative of the supplier P-45-146 Serkline Trading 191.23 With noted alterations or additions in the supporting Invoice without P-45-147 Serkline Trading 76.61 countersignature of the authorized representative of the supplier P-45-148 Simplex Industrial 64.29 With noted alterations or additions in the supporting Invoice without P-45-149 Success Lightings 3.21 countersignature of the authorized representative of the supplier P-45-157 Best Price Multi Sales 113.93 With noted alterations or additions in the supporting Invoice without P-45-158 Best Price Multi Sales 137.41 countersignature of the authorized representative of the supplier P-45-159 Besteel Merchandising 1,253.57 With noted alterations or additions in the supporting Invoice without P-45-160 Besteel Merchandising 31.14 countersignature of the authorized representative of the supplier P-45-161 Besteel Merchandising 89.89 With noted alterations or additions in the supporting Invoice without P-45-162 Besteel Merchandising 51.30 countersignature of the authorized representative of the supplier P-45-163 Besteel Merchandising 36.93 With noted alterations or additions in the supporting Invoice without P-45-164 Besteel Merchandising 335.52 countersignature of the authorized representative of the supplier P-45-165 Besteel Merchandising 178.65 With noted alterations or additions in the supporting Invoice without P-45-166 Besteel Merchandising 81.00 countersignature of the authorized representative of the supplier TOTAL 236.25 With noted alterations or additions in the supporting Invoice without PHP30,692.38 countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized reJ>resentative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier With noted alterations or additions in the supporting Invoice without countersignature of the authorized representative of the supplier Thus, out of petitioner's total reported input VAT on current purchases/importations of Php2,791,566.92 for the second quarter of 2013, only the amount of Php2,241,862.60 represents its valid input VAT, as computed below: (

DECISION Php 2,791,566.92 CTA CASE NO. 9205 Page 20of23 Php 519,011.94 30,692.38 Php 549,704.32 Input VAT per Return PHP 2,241,862.60 Less: Disallowances Per ICPA findings Per Court verification VALID INPUT VAT However, a portion of the Php2,241,862.60 shall be applied against the reported output VAT liability of Php660,111.64.80 Consequently, only the remaining input VAT of Php1,581,750.96 can be attributed to the entire zero-rated sales amounting to Php24,781,862.34 and only the input VAT of Php1,491,631.04 is attributable to the valid zero-rated sales of Php23,369,921.15, computed as follows: Valid Input VAT Php 2,241,862.60 Less: Output VAT 660,111.64 Excess Input VAT Php 1,581,750.96 Multiply by Percent of Zero-rated Sales to Total Sales: Valid Zero-Rated Sales 23,369,921.15 Total Zero-Rated Sales 24,781,862.34 94.3025218% EXCESS INPUT VAT ATTRIBUT-A..,....B.,--LE::::-::--TO-:::-'::-Z=E.-:...RO-=--=-R-A--T=E=D-=S:--A-:-L=Es.,----..,....P=H=P-1-,4-:9-1,-63--1-.0--i4 Petitioner's input taxes are more than enough to cover output taxes. However, per evidence actually admitted, excess input taxes were carried over to succeeding quarters. As presented in the preceding computation, petitioner's excess input taxes were more than enough to cover output tax liability. However, an examination of the Quarterly VAT Returns reveals that the excess input VAT in the subject claim was carried to the succeeding periods but failed to provide evidence that it was deducted as "VAT Refund/TCC Claimed." As alleged by petitioner, the claimed input VAT remained unutilized until it was deducted as "VAT Refund/TCC Claimed" in its Quarterly VAT Return for the second quarter of TY 2015.81 Similarly, the ICPA also noted that input taxes for the 2nd quarter of TY 80 Records, Vol. 1, Exhibit "P-19-B," line 19B, p. 401. ( Bl Id., Vol. 2, petitioner's Memorandum, par. 52, p. 909.

DECISION CTA CASE NO. 9205 Page21 of23 2013 in the amount of Php2,943,224.19 was deducted as "VAT Refund/TCC Claimed" in the 2nd quarter of TY 2015.82 However, a scrutiny of the original return (BIR Form No. 2550- Q) for the 2nd quarter of TY 201583 reveals that the amount deducted as "VAT Refund/TCC Claimed" was Php2,194,583.72.84 This amount is the excess input tax for the 3RD QUARTER of TY 2013, and not for the claim period of 2ND QUARTER of TY 2013, for reference: Input VAT on goods other than capital goods Php 586,650.5885 Input VAT on Importation 2,662,153.0086 Total Php 3,248,803.58 Less: Output VAT 1,054,219.8687 EXCESS INPUT FOR THE 3RD QUARTER OF TY 2013 PHP 2,194,583.72 Subsequently, petitioner amended its BIR Form No. 2550-Q for the 2nd quarter of 2015 on February 12,2016, and indicated an amount deducted as "VAT Refund/TCC Claimed" of Php3,653,420.1288, which can be reconciled as follows: 2ND QTR. OF 2015 Php 498,010.62 Php 7,714.29 Php1,521,752.34 Input VAT on: 465,878.46 443,770.31 2,231,498.00 Cap. Goods not exceeding 1M Php1,216,431.90 29,130.04 Goods other than cap. Goods 6,060.56 Importation of Goods Php2,712,112.64 Others rhr 32,132.16 Total Php2,744,244.80 Input Vat on Cap. Good from Previous Qtr. Input Vat on Cap. Good deferred to succeeding Qtr. Php1,222,492.46 Total Less: Output VAT Input tax on sale to government closed to expense EXCESS INPUT TAX FOR THE 2ND QTR. OF 2015 2ND QTR. OF 2013 Input VAT on: Goods other than cap. Goods Php 971,257.68 Importation of Goods 1,820,309.24 Total Php2,791,566.92 Less: Output VAT Php 660,111.64 EXCESS INPUT TAX FOR THE 2ND QTR OF 2013 (SUBJECT CLAIM) 2,131,455.28 DEDUCTED AS "VAT REFUND/TCC CLAIMED" IN THE 2ND QTR OF CY 2015 3,653,207.6289 82 ICPA Report, FOE Green Folder 1 of3, Exhibit "P-29," par. A, p. 12. 83 Records, Vol. 2, Exhibit "P-18," p. 725. 84 Records, Vol. 2, Exhibit "P-18," line 230, p. 725. 85 Records, Vol. 1, Exhibit "P-19-C," line 21F, p. 403. 86 Records, Vol. 1, Exhibit "P-19-C," line 21H, p. 403. ( 87Records, Vol. 1, Exhibit "P-19-C," line 19B, p. 403. BB Green Folder, Exhibit P-43". 89 Difference of Php212.50.

DECISION CTA CASE NO. 9205 Page22of23 However, this document (amended BIR Form 2550-Q for the 2nd quarter of 2015) was not formally offered by petitioner and was never admitted by the Court, thus, cannot be given evidentiary value. Consequently, per evidence actually offered and admitted, the subject claim was carried-over to the succeeding periods. WHEREFORE, premises considered, the instant Petition for Review is hereby DENIED for lack of merit. SO ORDERED. LOVELL~. BAUTISTA Associate Justice WE CONCUR: ~. .4JA. ~�-- MA. BELEN M. RINGPIS-LIBAN Associate Justice ATTESTATION I attest 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's Division. LOVEL-~ Ass~~teBJAuUstTicIeSTA Chairperson

DECISION CTA CASE NO. 9205 Page 23 of23 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, 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. Presiding Justice