DOHLE SHIPMANAGEMENT PHISL. CORP. v. COMMISSIONER OF INTERNAL REVENUE

I REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SECOND DIVISION DOHLE SHIPMANAGEMENT CTA Case No. 8960 PHILS. CORP., Members: Petitioner, CASTANEDA, JR., Chairperson, and CASANOVA, 11. -versus- COMMISSIONER OF Promulgated: INTERNAL REVENUE, DEC 1 6 1016 ~ Respondent ) / 'f: ~l'" . x---------------------------------------------------------------------- -----------x DECISION CASTANEDA, JR., J.: THE CASE This is a Petition for Review1 filed by Dahle Shipmanagement Phils. Corp. on December 23, 2014 to seek the refund or issuance of tax credit certificate (TCC) in the amount of P8,718,593.13, allegedly representing its unapplied input value-added tax (VAT) paid on its domestic purchases of taxable goods and services attributable to its zero-rated sales for calendar year (CY) 2012. Jt- 1 Petition for Review, Docket, Vol. I, pp. 14-26.

DECISION CTA CASE NO. 8960 THE FACTS Petitioner Dahle Shipmanagement Phils. Corp. is a corporation duly organized and existing under the laws of the Philippines, with office address at No. 30-38 Sen. Gil Puyat, Brgy. San Isidro, Makati City. 2 It is a duly registered VAT taxpayer with Certificate of Registration No. OCN 9RC00003066743 dated January 1, 1996 and Tax Identification No. (TIN) 004-500-132-0004 � As stated in its Articles of Incorporation, its primary purpose is: 5 "To carry on the business of a shipmanager and to act as agents, brokers, ship chandler or representatives of any foreign shipping corporation and individual for the purpose of managing, operating, superv1smg, administering and developing the operation of vessels belonging to or which are or may be leased or operated by said foreign shipping corporation and individual and, for such purpose, to act as principal in and hire the services of a local manning agent for the overseas employment for seamen and to equip any and all kinds of ships, barges and vessels of every class and description owned by any foreign shipping corporation." 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. On January 1, 2009, petitioner and Dahle (IOM) Ltd. ("DIOM" for brevity) entered into a Service Agreement6, which provides that the former will act as Philippine representative for the latter and all its subsidiaries to carry out tasks which the latter will be requesting from time to time. j1v' 2 Exhibit "P-2", Docket, Vol. II, pp. 543-558. 3 Exhibit "P-11", Docket, Vol. II, p. 574. 4 Exhibit "P-11-A", Docket, Vol. II, p. 574. 5 Exhibit "P-2-A", Docket, Vol. II, p. 548. 6 Exhibit "P-3", Docket, Vol. II, pp. 559-561.

DECISION CTA CASE NO. 8960 On August 1, 2010, petitioner and DIOM executed Addendum No. 1 to the Service Agreemenf, which provides for additional services to be rendered by the former in favor of the latter. Petitioner electronically filed its Quarterly VAT Returns for calendar year 2012 on the following dates: 8 Quarterly VAT Returns Filing Date April 25, 2012 ptQuarter 20129 March 28_L 2014 1st Quarter 2012 (first amended)10 March 31, 2014 1st Quarter 2012 (second amended)11 July 24, 2012 2nd Quarter 201212 March 31, 2014 2nd Quarter 2012 (amended)13 October 19, 2012 3rd Quarter 201214 March 31, 2014 3rd Quarter 2012 (amended) 15 January 24 2013 4th Quarter 201216 March 31, 2014 4th Quarter 2012 (amended)17 On March 31, 2014, petitioner filed an application for refund or tax credit of its unutilized and unapplied input VAT covering the four quarters of calendar year 2012. 18 On July 28, 2014, petitioner submitted additional documents in support of its application for refund or issuance of TCC. 19 There being no action taken by respondent on petitioner's administrative claim for refund or issuance of TCC, petitioner filed the Jk- present Petition for Review before this Court on December 23, 2014. 7 Exhibit "P-4", Docket, Vol. II, pp. 562-563. 8 Par. 1, Joint Stipulation, Docket, Vol. I, p. 280. 9 Exhibit "P-24", Docket, Vol. II, pp. 605-606. 10 Exhibit "P-25", Docket, Vol. II, pp. 607-608. 11 Exhibit "P-26", Docket, Vol. II, pp. 609-610. 12 Exhibit "P-27", Docket, Vol. II, pp. 611-612. 13 Exhibit "P-28", Docket, Vol. II, pp. 613-614. 14 Exhibit "P-29", Docket, Vol. II, pp. 615-616. 15 Exhibit "P-30", Docket, Vol. II, pp. 617-618. 16 Exhibit "P-31", Docket, Vol. II, pp. 619-620. 17 Exhibit "P-32", Docket, Vol. II, pp. 621-622. 18 Exhibits "P-5", "P-6", "P-7", and "P-8", Docket, Vol. II, pp. 564-567. 19 Par. 2, Joint Stipulation, Docket, Vol. I, p. 281; Exhibits "P-9", "P-10", and "P-10-A", Docket, Vol. II, pp. 566-572.

DECISION CTA CASE NO. 8960 Respondent filed his Answer20 through registered mail on February 25, 2015 and received by the Court on March 6, 2015, interposing the following Special and Affirmative Defenses: "3. She reiterates and repleads the preceding paragraphs of this answer as part of her Special and Affirmative Defenses; 4. Taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable. 5. Petitioner's claim for refund/tax credit in the amount of Php8,718,593.13, as alleged unutilized input VAT paid attributable to its zero-rated sales of services for taxable year 2012 were not fully substantiated by proper documents, such [as] sales invoices, official receipts, import documents and other pertinent records. 6. In an action for refund/credit, the burden of proof is upon petitioner to establish its right to the claimed refund and failure to adduce sufficient proof is fatal to its claim. 7. Petitioner's sales of goods and services to various alleged clients/affiliates do not qualify as zero-rate[d] VAT under Section 108 (8)(2) of the 1997 Tax Code. 8. The amount subject of the claim for refund/tax credit of petitioner does not pertain in full to its input VAT attributable to its zero-rated sales of services for taxable year 2012. 9. Petitioner failed to comply with the substantiation requirements under Section 113 and 237 of the 1997 Tax Code in relation to Revenue Regulations No. 16-2005.JL 20 Docket, Vol. I, pp. 110-112.

DECISION CfA CASE NO. 8960 10. Petitioner failed to comply with the conditions/requirements under Section 112(A)(C) (D) of the 1997 Tax Code. 11. Claims for refund are construed strictly against herein petitioner for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211)." The Pre-Trial Conference21 was set on April 16, 2015. Respondent's Pre-Trial Brief22 was filed on April 10, 2015 while petitioner's Pre-Trial Brief23 was filed on April 13, 2015. The parties filed their Joint Stipulation24 on May 4, 2015, which was approved by the Court upon issuance of the Pre-Trial Order25 on May 7, 2015. Petitioner filed its Formal Offer of Evidence26 through registered mail on July 16, 2015 and received by the Court on July 23, 2015, offering Exhibits "P-1", "P-2", "P-2-A", "P-2-B", "P-3", "P-3-A", "P-3-B", "P-4", "P-4-A"I "P-4-B"I "P-5"I "P-5-A"I "P-5-B"I "P-6"I "P-6-A"I "P-6- B" "P-7" "P-7-A" "P-7-B" "P-8" "P-8-A" "P-8-B" "P-9" "P-9-A" "P-'III I I I I I 10, ' "P-10-A" "P-11" "P-11-A" "P-11-B" "P-11-C" "P-12" "P-13" "P- I I I I I I I 14" "P-15" "P-16" "P-17" "P-18" "P-19" "P-20" "P-21" "P-22" "P-'III I I I I I 23" "P-24" "P-25" "P-26" "P-27" "P-28" "P-29" "P-30" "P-31" "P-'III I I I I I 32", "P-36", "P-36-A", "P-36-B", "P-36-B-1 (inclusive of submarkings)", "P-36-B-2 (inclusive of submarkings)", "P-36-B-3 (inclusive of submarkings)", "P-36-B-4 (inclusive of submarkings)", "P-36-B-5 (inclusive of submarkings)", "P-36-B-6 (inclusive of submarkings)", "P- 36-B-7 (inclusive of submarkings)", "P-36-B-8 (inclusive of submarkings)", "P-36-B-9 (inclusive of submarkings)", "P-36-B-10 (inclusive of submarkings)", "P-36-B-11 (inclusive of submarkings)", Jc-- "P-36-B-12 (inclusive of submarkings)", "P-36-B-13 (inclusive of 21 Notice of Pre-Trial Conference, Docket, Vol. I, p. 114. 22 Docket, Vol. I, pp. 131-133. 23 Docket, Vol. I, pp. 264-275. 24 Docket, Vol. I, pp. 280-290. 25 Docket, Vol. I, pp. 292-297. 26 Docket, Vol. II, pp. 509-538.

DECISION CTA CASE NO. 8960 submarkings)", "P-36-B-14 (inclusive of submarkings)", "P-36-B-15 (inclusive of submarkings)", "P-36-B-16 (inclusive of submarkings)", "P-36-B-17 (inclusive of submarkings)", "P-36-B-18 (inclusive of submarkings)", "P-36-B-19 (inclusive of submarkings)", "P-36-B-20 (inclusive of submarkings)", "P-36-B-21 (inclusive of submarkings)", "P-36-B-22 (inclusive of submarkings)", "P-36-B-23 (inclusive of submarkings)", "P-36-B-24 (inclusive of submarkings)", "P-36-C", "P- 36-C-1", "P-36-D", "P-36-D-010001" to "P-36-D-010278", "P-36-D- "0P2-03060-D1"-0t4o0"0P0-13"6-tDo -0"P2-03363-D2"-'04"P0-23561-"D, -0"P3-03060-1D"-0to50"0P0-13"6-tDo-0"P30-3366-9D"-' 050252", "P-36-D-060001" to "P-36-D-060331", "P-36-D-070001" to "P-36-D-070320", "P-36-D-080001" to "P-36-D-080304", "P-36-D- 090001" to "P-36-D-090246", "P-36-D-100001" to "P-36-D-100268", "P-36-D-110001" to "P-36-D-110335", "P-36-D-120001" to "P-36-D- 120284", "P-36-E", "P-36-E-1", "P-36-F", "P-36-F-1", "P-36-F-2", "P- 36-F-3", "P-36-F-4", "P-36-F-5", "P-36-F-6", "P-36-F-7", "P-36-F-8", "P- "31P64--"3F' 6-"-9PF"-,-32"60P-"-F,3-6"1P-5F-"3'-16"0-PF"-'-32"61P-"-F,3-61"P-6F-"3'-16"1P-F"-'3-2"6P2-F-"3,-61"-P7F"-'-31"62P-"F-'3-"26P3-F-"3,-61"-8PF"-'-31"63P-"F-'3-"62P-4-F"3,-61"-9PF"--' 3F6-3-F0"-,25""P,-3"P6--3F6-3-F1-"2, 6""P' -"3P6--3F6--3F2-"2, 7""P' -"3P6--3F6--3F3-"2,8""'P"-3P6-3-F6--3F4-2",9""'P"-P36-3-F6-- "3P5-"3'6"-PF--3461-"F,-3"P6-"3' 6"P-F--3462-F",-3"P7-"3' 6"P-F-3-463-F",-3"P8"-'3"6P-F-3-464-F",-3"9P"-'3"6P-F-3-64-5F",-4"0P"-' 36-F-46", "P-36-F-47", "P-36-F-48", "P-36-H (inclusive of submarkings)", "P-36-I", "P-36-J", "P-36-J-1 (inclusive of submarkings)", "P-36-J-2 (inclusive of submarkings)", "P-36-J-3 (inclusive of submarkings)", "P-36-J-4 (inclusive of submarkings)", "P- 36-J-5 (inclusive of submarkings)", "P-36-J-6 (inclusive of submarkings)", "P-36-J-7 (inclusive of submarkings)", "P-36-J-8 (inclusive of submarkings)", "P-36-K", "P-36-K-1" to "P-36-K-316", "P- 36-L", "P-36-L-1" to "P-36-L-78", "P-36-M", "P-37 (inclusive of submarkings)", "P-38 (inclusive of submarkings)", "P-39 (inclusive of submarkings)", "P-40 (inclusive of submarkings)", and "P-41 (inclusive of submarkings)" as its documentary exhibits. Respondent, however, failed to file his comment to petitioner's Formal Offer of Evidence.27 dt-- During the hearing held on September 9, 2015, respondent manifested that he has no evidence to present in this case. 2 27 Records Verification dated August 4, 2015, Docket, Vol. II, p. 624. 28 Minutes of the hearing dated September 9, 2015, Docket, Vol. II, p. 627.

DECISION CTA CASE NO. 8960 In the Resolution29 dated September 9, 2015, the Court admitted "732E11P64"05x'-"h"-"4,,"'AiPb-""""APPPi'-t7s""---'P3-12"A"665-PP1"-""'-A''-114"""""P",-'PP'B-""--7P"P"12P'--76-B1-3"""2P"1'6''"---""'"AB5PPP""""--P-'',128"-""872P"PP'""--''--"A135P""1"6PP-'-A--8--BB"21"-P'"A-89'1-""""2"P'''P(-"-""iBn-P5PP1"c----'1B8l22u-"-"90CsPB' "i""v-"''"'3'eP"""""PP-P'Po6---"f-23"1P9's102"-u"""'3"P''b'"-""-PmA"6PPP-"a---9'-A23r1-"k"A213Pi'n""""-''"''g3P""""s-PPPP-B)6"----",32-11'B2"340"P"""P""'''''--3"""""4PPPPP6"------' B-2 (inclusive of submarkings)", "P-36-B-3 (inclusive of submarkings)", "P-36-B-4 (inclusive of submarkings)", "P-36-B-5 (inclusive of submarkings)", "P-36-B-6 (inclusive of submarkings)", "P-36-B-7 (inclusive of submarkings)", "P-36-B-8 (inclusive of submarkings)", "P- 36-B-9 (inclusive of submarkings)", "P-36-B-10 (inclusive of submarkings)", "P-36-B-11 (inclusive of submarkings)", "P-36-B-12 (inclusive of submarkings)", "P-36-B-13 (inclusive of submarkings)", "P-36-B-14 (inclusive of submarkings)", "P-36-B-15 (inclusive of submarkings)", "P-36-B-16 (inclusive of submarkings)", "P-36-B-17 (inclusive of submarkings)", "P-36-B-18 (inclusive of submarkings)", "P-36-B-19 (inclusive of submarkings)", "P-36-B-20 (inclusive of submarkings)", "P-36-B-21 (inclusive of submarkings)", "P-36-B-22 (inclusive of submarkings)", "P-36-B-23 (inclusive of submarkings)", "P-36-B-24 (inclusive of submarkings)", "P-36-C-1", "P-36-D", "P-36- D-010001" to "P-36-D-010231", "P-36-D-020001" to "P-36-D-020286", "P-36-D-030001" to "P-36-D-030369", "P-36-D-040001" to "P-36-D- 040251 ", "P-36-D-050001" to "P-36-D-050252", "P-36-D-060001" to "P-36-D-060331", "P-36-D-070001" to "P-36-D-070320", "P-36-D- 080001" to "P-36-D-080304", "P-36-D-090001" to "P-36-D-090246", "P-36-D-100001" to "P-36-D-100268", "P-36-D-110001" to "P-36-D- 110238", "P-36-D-120001" to "P-36-D-120284", "P-36-E", "P-36-E-1", "P-36-F", "P-36-F-1", "P-36-F-2", "P-36-F-3", "P-36-F-4", "P-36-F-5", "P-36-F-6", "P-36-F-7", "P-36-F-8", "P-36-F-9", "P-36-F-10", "P-36-F- "1P1-"3' 6"-PF--3167-"F, -"1P2-"3' 6"P-F--3168-"F,-1"P3-"3' 6"P-F-3-169-F",-1"P4"-'3"6P-F-3-260-F",-1"5P"-'3"6P-F-3-62-1F",-1"6P"-' 3F6-2-F7"-,22""P,-"3P6--3F6-2-F8-"2, 3""P' -"3P6--3F6-2-F9-"2, 4""P' -"3P6--3F6--3F0-"2,5""'P"-3P6-3-F6--3F1-2",6""'P"-P36-3-F6-- "3P2-"3' 6"-PF--3368-"F,-3"P3-"3' 6"P-F--3369-"F,-3"P4-"'36"P-F-3-460-F",-3"P5"-'3"6P-F-3-461-F",-3"6P"-'3"6P--F3-64-2F"-,3"7P"-' 36-F-43", "P-36-F-44", "P-36-F-45", "P-36-F-46", "P-36-F-47", "P-36- F-48", "P-36-H (inclusive of submarkings)", "P-36-1", "P-36-J", "P-36- J-1 (inclusive of submarkings)", "P-36-J-2 (inclusive of submarkings)", "P-36-J-3 (inclusive of submarkings)", "P-36-J-4 (inclusive of submarkings)", "P-36-J-5 (inclusive of submarkings)", "P-36-J-6 je-- 29 Docket, Vol. II, pp. 630-632.

DECISION CTA CASE NO. 8960 (inclusive of submarkings)", "P-36-J-7 (inclusive of submarkings)", "P- 36-J-8 (inclusive of submarkings)", "P-36-K", "P-36-K-1" to "P-36-K- 316", "P-36-L", "P-36-M", "P-37 (inclusive of submarkings)", "P-38 (inclusive of submarkings)", "P-39 (inclusive of submarkings)", "P-40 (inclusive of submarkings)", and "P-41 (inclusive of submarkings)" as petitioner's documentary exhibits. However, the Court denied the admission of Exhibits "P-36-C", "P-36-L-1" to "P-36-L-78", "P-36-D- 010232" to "P-36-D-010278", "P-36-D-020287" to "P-36-D-020332", and "P-36-D-110239" to "P-36-D-110335". On September 24, 2015, petitioner filed a Motion for Partial Reconsideration of the Resolution dated September 9, 2015 on Petitioner's Formal Offer of Evidence30, praying, among others, for the admission of Exhibits "P-36-C" and "P-36-L-1" to "P-36-L-78". Respondent failed to file his comment to petitioner's Motion for Partial Reconsideration. 31 In the Resolution32 dated December 4, 2015, the Court granted petitioner's Motion for Partial Reconsideration of the Resolution dated September 9, 2015 on Petitioner's Formal Offer of Evidence, and admitted Exhibits "P-36-C" and "P-36-L-1" to "P-36-L-78". The case was declared submitted for decision on January 18, 2016,33 considering the filing of the Memorandum for the Respondent34 on October 9, 2015 and of petitioner's Memorandum35 on January 7, 2016. THE ISSUES The parties submitted the following issues36 for the Court's resolution: 1. Whether or not Petitioner's sales to Dahle (IOM) Limited ("DIOM'') during the taxable year 20121- 30 Docket, Vol. II, pp. 636-640. 31 Records Verification dated October 28, 2015, Docket, Vol. II, p. 750. 32 Docket, Vol. II, pp. 752-753. 33 Resolution dated January 18, 2016, Docket, Vol. II, p. 808. 34 Docket, Vol. II, pp. 740-747. 3s Docket, Vol. II, pp. 759-806. 36 Joint Stipulation, Docket, Vol. I, p. 281.

DECISION CTA CASE NO. 8960 qualify as zero-rated sales, or are subject to zero percent rate under Section 108(8)(2) of the Tax Code. 2. Whether or not Petitioner is entitled to a refund of or the issuance of tax credit certificate for its unapplied input VAT payments for the period January to December 2012 in the total amount of P8,718,593.13, which are directly attributable to its zero-rated sales for the year 2012. THE COURT'S RULING Pertinent to the resolution of this case is Section 112(A) and (C) of the National Internal Revenue Code of 1997, as amended (1997 NIRC), quoted hereunder for ready 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: Providect 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): Providect 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: Providect finally, That for a person making sales that are 1v

DECISION CTA CASE NO. 8960 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." Thus, in order to be entitled to a refund or tax credit of excess input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied: 1. that there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input taxes are attributable to zero-rated or effectively zero-rated sales; 4. that the input taxes were not applied against any output VAT liability; and 5. that the claim for refund was filed within the prescribed period both in the administrative and judicial levels. The Court shall first determine petitioner's compliance with the fifth requisite which pertains to the timeliness of the filing of the claim. Jc--

DECISION CTA CASE NO. 8960 Pursuant to Section 112(A) of the 1997 NIRC, the application for refund or tax credit of unutilized excess input VAT must be filed within two (2) years after the close of the taxable quarter when the zero- rated or effectively zero-rated sales were made. The present claim covers the first quarter to fourth quarter of calendar year 2012, which respectively closed on March 31, 2012, on June 30, 2012, on September 30, 2012, and on December 31, 2012. Counting two years from the said dates, petitioner had until March 31, 2014, June 30, 2014, September 30, 2014, and December 31, 2014, within which to file its administrative claim for refund or issuance of tax credit certificate. Thus, petitioner's administrative claim filed on March 31, 2014 was seasonably filed, as shown below: CY 2012 Close of the Last Day to File Date of Filing of Taxable Quarter Administrative Administrative 1st Quarter 2nd Quarter March 31_L 2012 Claim Claim 3rd Quarter June 30, 2012 March 31, 2014 4th Quarter September 30, 2012 June 30, 2014 March 31, 201437 December 31, 2012 September 30, 2014 December 31, 2014 On the other hand, Section 112(C) of the 1997 NIRC states the time requirements for filing 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 Court of Tax Appeals. 38 It must be noted 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. 39 Je- 37 Exhibits "P-5", "P-6", "P-7", "P-8", and "P-9", inclusive of sub-markings, Docket, Vol. II, pp. 564 to 570 and 573. 38 Rohm Apollo Semiconductor Philippines vs. Commissioner ofInternal Revenue, G.R. No. 168950, January 14, 2015. 39 Silicon Philippine~ Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue, G.R. No. 182737, March 2, 2016.

DECISION CTA CASE NO. 8960 In this case, petitioner submitted several documents in support of its application for refund on March 31, 2014. On July 28, 2014, or 119 days after filing its application, petitioner submitted additional and complete documents as evidenced by the letter captioned "Annex B".40 Applying Section 112(C) of the 1997 NIRC, petitioner's judicial claim for the four quarters of calendar year 2012 was timely filed within the "120+30" day periods, as shown below: Date of Filing of Date of End of 120 End of 30 Date of Filing Administrative Submission days days of Petition for of Complete Claim Documents Nov. 25, 2014 Dec. 25, 2014 Review March 31, 2014 July 28, 2014 Dec. 23, 2014 The Court shall now proceed to discuss the remaining requisites. Petitioner alleges that it is a VAT-registered entity which rendered services to DIOM, a non-resident foreign corporation engaged in business conducted outside the Philippines; and that it was paid for such services in acceptable foreign currency accounted for in accordance with the rules and regulation of the Bangko Sentral ng Pilipinas(BSP). Petitioner submits that the revenues it generated from rendering said services are subject to zero percent (0�/o) VAT pursuant to Section 108(8)(2) of the 1997 NIRC, which reads as follows: "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: ~ 40 Exhibits "P-10" and "P-10-A", Docket, Vol. II, pp. 571 to 572.

DECISION CfA CASE NO. 8960 (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.4\ the Supreme Court held that in order for the sale of services to be VAT zero-rated under Section 108(8)(2) of the 1997 NIRC, 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 BSP rules and regulations; and 3. the recipient of such services is doing business outside the Philippines. Petitioner satisfied the first and third requisites. It is duly registered with the BIR as a VAT taxpayer with TIN No. 004-500-132- 000 per Certificate of Registration No. OCN 9RC0000306674 dated January 1, 1996.42 Petitioner is likewise licensed by the Securities and Exchange Commission (SEC) to carry on the business of a shipmanager and to set as agents, brokers, ship chandler or representatives of any foreign shipping corporation and individual for the purpose of managing operating, supervising, administering and developing the operation of vessels belonging to or which are or may be leased or~ 41 G.R. No. 153205, January 22, 2007. 42 Exhibit "P-11", Docket, Vol. II, p. 574.

DECISION CTA CASE NO. 8960 operated by said foreign shipping corporation and individual and for such purpose, to act as principal in and hire the services of a local manning agent for the overseas employment for seamen and to equip any and all kinds of ships, barges and vessels of every class and description owned by any foreign shipping corporation.43 Pursuant to the Service Agreement44 and Addendum No. 1 to Service Agreement45 entered into between petitioner and its affiliate- client DIOM, the former shall provide crewing services, commercial and technical representation services to the latter for a period of five (5) years effective January 1, 2009. These services clearly fall within the category of "services other than processing, manufacturing or repacking of goods" contemplated by the afore-mentioned provision. It was likewise established that petitioner's affiliate-client, DIOM, is a non-resident foreign corporation doing business outside the Philippines as shown by the following documents: SEC Certificates of Non-Registration of Company certifying Exhibit that the following companies are not registered as a corporation or partnership and not licensed and/or authorized "P-12" to transact or to do business in the Philippines as a corporation "P-13" or partnership: "P-14" "P-15" Dahle (IOM) Limited "P-16" Doehle (IOMJ Limited "P-17" Dahle (IOM) Limited "P-18" Dahle (IOM) Ltd. "P-19" Doehle (IOM) Ltd. "P-20" Dahle (IOM) Ltd. Authenticated Certificate of Incorporation of Midocean Maritime Limited Authenticated Memorandum of Association of Midocean Maritime Limited with attached Articles of Association Authenticated Certification of Change of Name of Midocean Maritime Limited to Dahle (IOM) Limited In relation to the second requisite, Sections 113(A)(2), (B)(1), (2)(c) and (3) of the 1997 NIRC, as implemented by Sections 4.113- JL- 43 Exhibits "P-2", "P-2-A", and "P-2-B", Docket, Vol. II, pp. 543 to 558. 44 Exhibit "P-3", Docket, Vol. II, pp. 559 to 561. 45 Exhibit "P-4", Docket, Vol. II, pp. 562 to 563.

DECISION CTA CASE NO. 8960 1(A)(2), (8)(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, as amended, provide 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; XXX XXX XXXj:r-

DECISION CTA CASE NO. 8960 (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: XXX XXX XXX pt--

DECISION CfA CASE NO. 8960 (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) Pursuant to the foregoing provisions, the foreign currency remittances referred to under Section 108(B)(2) of the 1997 NIRC must likewise be supported by VAT zero-rated official receipts. For services rendered to DIOM for the four quarters of CY 2012, petitioner received US dollar payments with peso equivalent of P225,805,159.32 as evidenced by the various sales invoices46 and VAT zero-rated official receipts47 issued by petitioner to DIOM, and by bank certifications of inward remittances issued by Rizal Commercial Banking Corporation (RCBC)48 and Metropolitan Bank and Trust Company (Metrobank)49; which are summarized as follows: Exhibit Invoice Description Amount in Amount in Traced to VAT Official No. US Dollars Philippine Pesos Zero-Rated Receipt (Exhs. P-36-I & Official Traced to For the month of January Receipt P-36-H} Bank P-36-L-5 001/12 Crewing Services -Jan. 2012 165 000.00 OR No. 0011 Certificate P-36-L-6 002/12ACT Commercial and Technical 270 000.00 7 282 110.00 (Exh. P-36-K-1) issued by Representation - Jan. 2012 11 916 180.00 2 737.25 OR No. 0012 RCBC P-36-L-10 019/12 Courier Charges - Jan. 2012 117 316.00 (Exh. P-36-K-2) (Exh. P-39-a) 165 000.00 19315606.00 subtotal 270 000.00 OR No. 0014 RCBC 7 081 635.00 (Exh. P-36-K-4) (Exh. P-39-b) For the month of February 3_L_150.00 11 588 130.00 3L_896.94 RCBC P-36-L-7 020/12 Crewing Services -Feb. 2012 135 194.85 (Exh. P-39-c) P-36-L-8 021_Ll2ACT Commercial and Technical 92.92 166 457.60 Representation - Feb. 2012 9.41 3 969.08 P-36-L-9 0221_12 Advances 111.05 401.95 3 150.00 P-36-L-17 046/12ACT Courier Charges - Feb. 2012 4 743.50 165 000.00 134 552.25 P-36-L-18 047/12ACT Travel Expenses 19115084.23 P-36-L-19 048/12ACT Travel Expenses 7 049 130.00 P-36-L-20 049/12ACT Travel Expenses P-36-L-21 050/12 Advances subtotal For the month of March P-36-L-15 051/12 Crewing Services-Mar. 2012 46 Exhibits "P-36-L-1" to "P-36-L-78", Docket, Vol. II, pp. 644 to 721. 47 Exhibits "P-36-K-1" to "P-36-K-13". 48 Exhibit "P-39", inclusive of submarkings. 49 Exhibit "P-40", inclusive of submarkings.

DECISION CTA CASE NO. 8960 Commercial and Technical 270 000.00 11 534 940.00 P-36-L-16 052/12ACT Representation- Mar. 2012 7 026.72 301 741.20 86.77 135 216.90 P-36-L-24 074/12ACT Courier Charges - Mar. 2012 3,150.00 3 708.68 P-36-L-25 076/12ACT Travel Expenses 19 024 736.78 57,455,427.01 P-36-L-26 075/12 Advances subtotal Total for the First Quarter of 2012 OR No. 0015 RCBC (Exh. P-36-K-5) (Exh. P-39-d) For the month of April P-36-L-22 077/12 Crewinq Services -Apr. 2012 165 000.00 7 084 110.00 Commercial and Technical 270 000.00 P-36-L-23 078/12ACT Rep_resentation -Apr. 2012 11 592 180.00 P-36-L-30 106/12ACT Courier Charges - Apr. 2012 4 389.64 187 262.00 P-36-L-31 Advances 3 150.00 134 167.95 107/12 subtotal 165 000.00 18997.719.95 For the month of May OR No. 0016 RCBC P-36-L-28 108/12ACT Crewinq Services -May 2012 270 000.00 6 967 785.00 (Exh. P-36-K-6) (Exh. P-39-e) 5 174.50 P-36-L-29 109/12ACT Commercial and Technical 6 300.00 11 401 830.00 P-36-L-41 142/12ACT Representation - May 2012 224 273.00 P-36-L-42 143/12ACT Courier Charges - May 2012 165,000.00 274 528.80 Advances 270 000.00 18868416.80 subtotal 105.99 54.80 For the month of June 131.95 P-36-L-35 144/12ACT Crewing Services- June 2012 191.10 7 198 950.00 OR No. 0017 RCBC P-36-L-36 145/12ACT Commercial and Technical 4 922.52 (Exh. P-36-K-7) (Exh. P-39-f) Representation- June 2012 3 150.00 11 780 100.00 4 624.34 OR No. 0018 Metrobank P-36-L-37 149/12ACT Travel Expenses 73.53 2 390.92 (Exh. P-36-K-8) ( Exh. P-40-a) 119.08 5 756.98 P-36-L-38 147/12ACT Travel Expenses 8 337.69 P-36-L-39 148/12ACT Travel Expenses 209 222.00 133 456.05 P-36-L-40 146/12ACT Travel Expenses 3 136.79 P-36-L-45 178/12ACT Courier Charqes - June 2012 5 079.95 19351 054.72 P-36-L-46 179/12ACT Advances 57 217 191.47 P-36-L-47 183/12ACT Travel Expenses P-36-L-48 182/12ACT Travel Expenses subtotal Total for the Second Quarter of 2012 For the month of Jul\f 165 000.00 6 975J540.00 P-36-L-43 186/12ACT Crewing Services - July 2012 270 000.00 P-36-L-44 187/12ACT Commercial and Technical 4 298.52 11 414 520.00 P-36-L-51 217/12ACT Representation -July 2012 3 150.00 181152.53 P-36-L-52 218/12ACT Courier Charges - July 2012 129.38 132 092.10 P-36-L-53 219/12ACT Advances 5 425.42 Travel Expenses 165 000.00 18 708 730. OS OR No. 0019 RCBC subtotal 270 000.00 (Exh. P-36-K-9) (Exh. P-39-g) 1 036.94 For the month of August 6 902 445.00 P-36-L-49 220/12ACT Crewing_ Services -Auq. 2012 P-36-L-50 221/12ACT Commercial and Technical 11 294 910.00 RCBC P-36-L-56 254/12ACT Representation -Aug. 2012 431719.60 Courier Charges - Aug. 2012

DECISION CTA CASE NO. 8960 P-36-L-57 255/12ACT Advances 3 150.00 132 810.30 ( Exh. P-39-h) 110.09 4 599.89 P-36-L-58 256/12ACT Travel Expenses 165 000.00 18 378 484.79 OR No. 0020 subtotal (Exh. P-36-K-10) 270 000.00 For the month of S~tember 7 004.43 6 959 370.00 3 150.00 P-36-L-54 258/12ACT Crewinq Services-Sept. 2012 123.65 11 388 060.00 P-36-L-55 259_L_12ACT Commercial and Technical 38.81 292 302.00 Representation-Se_Q_t. 2012 130.71 131 452.65 170.56 5 160.04 P-36-L-61 292/l2ACT Courier Charges -SeQt. 2012 124.55 1 619.58 289.62 5 454.66 P-36-L-62 293/12ACT Advances 7 117.64 5 197.60 OR No. 0021 P-36-L-63 294/12ACT Travel Expenses 12 086.02 ( Exh. P-36-K-11) P-36-L-64 295/12ACT Travel Expenses 1880:1820.19 55,895,035.03 P-36-L-65 296/12ACT Travel Expenses P-36-L-66 297/12ACT Travel Expenses P-36-L-67 298/12ACT Travel Expenses Metrobank ( Exh. P-40-b) P-36-L-68 299/12ACT Travel Expenses subtotal Total for the Third Quarter of 2012 For the month of October P-36-L-59 301/12ACT Crewing Services -Oct. 2012 165 000.00 6 886 935.00 P-36-L-60 302/12ACT Commercial and Technical 270 000.00 ReQresentation -Oct. 2012 11 269 530.00 6 869.91 283 473.00 P-36-L-71 336/12ACT Courier Charges -oct. 2012 3 150.00 129 978.45 3 778.45 P-36-L-72 337/12ACT Advances 91.57 3 535.00 OR No. 0022 85.67 P-36-L-73 339/12ACT Travel Expenses 1857:1229.90 (Exh. P-36-K-12) 165 000.00 P-36-L-74 338/12ACT Travel Expenses 270 000.00 Metrobank (Exh. P-40-C) subtotal 4 605.83 6 300.00 For the month of November 165 000.00 P-36-L-69 342/12ACT Crewing Services -Nov. 2012 270 000.00 6 799 320.00 P-36-L-70 343/12ACT Commercial and Technical Representation - Nov. 2012 11 126 160.00 188 429.00 P-36-L-77 383/12ACT Courier Charges - Nov. 2012 257 739.30 P-36-L-78 384/12ACT Advances 18371 648.30 OR No. 0023 (Exh. P-36-K-13) subtotal Metrobank 6J46 685.00 ( Exh. P-40-d) For the month of December P-36-L-75 387/12ACT Crewing Services -Dec. 2012 11 040 030.00 P-36-L-76 388/12ACT 417/12ACT Commercial and Technical 236,590.0050 - 418/12ACT Representation- Dec. 2012 - 419/12ACT Courier Charges - Dec. 259,509.6051 - - 420/12ACT 2012 - FALK Salaries for Dec. 4,.587.9652 - 2012 FALK Travel Expenses- 1,225.0553 MOL Generosity 1828862:161 FALK Travel Recharges MV Adelina subtotal 50 Exhibit "P-36-J-8". 51 /d. 52 /d. 53 Id.

DECISION CTA CASE NO. 8960 Total for the Fourth Quarter of 2012 I I 55 237 505.81 Total for the Four Quarters of CY 2012 I 225,805 159.3254 However, the Court noted that part of the revenues for the month of December included courier charges, salaries, and travel expenses in the total amount of P501,912.61 55 for which petitioner failed to submit the corresponding invoices, VAT zero-rated official receipts, and proof of inward remittance. Hence, the same shall be denied VAT zero-rating. Accordingly, out of the total amount of P225,805,159.32 sales/receipts derived by petitioner from services rendered to DIOM in CY 2012 per the above schedule, only the amount of P225,303,246.71 qualifies for VAT zero-rating under Section 108(8)(2) of the 1997 NIRC: 1st Quarter 2nd Quarter 3rd Quarter 4th Ouarter Total Zero-Rated p 57 455 427.01 p 57 217 191.47 p 55 895 035.03 p 55 237,505.81 p 225 805 159.32 Sales/ Receipts per schedule - - - 501 912.61 501 912.61 Less: P57,455,427.01 P57,217,191.47 P55,895,035.03 P54,735,593.20 P22~303 246.71 Sales/Receipts without sales invoices, VAT zero-rated official receipts and proof of foreign currency remittance Valid Zero-Rated Sales/Receipts After resolving that petitioner had VAT zero-rated sales/receipts for the four quarters of CY 2012 in the total amount of P225,303,246.71, the Court shall proceed to determine whether 54 This amount is PO.OS lower than the total amount of P225,805,159.40 zero-rated receipts reflected per petitioner's 2012 Quarterly VAT Returns: Exhibit Taxable Quarter Amount of Zero- P-26" Covered- CY 2012 Rated Receiots "P-28" "P-30" First Quarter ~ 57 455 427.10 "P-32" Second Quarter 57 217 191.47 Third Quarter 55 895 035.02 Fourth Quarter 55 237 505.81 Total P225,805, 159.40 55 Sum of P236,590.00, P259,509.60, P4,587.96, and P1,225.05.

DECISION CTA CASE NO. 8960 petitioner incurred or paid input taxes in connection thereto and if said input taxes were not applied against any output VAT liability of petitioner. In its Quarterly VAT Returns for the four quarters of CY 2012, petitioner reflected the following input taxes totaling P11,595,472.96 arising from its amortization of input VAT on purchases of capital goods exceeding PlMillion, domestic purchases of capital goods other than capital goods, and domestic purchases of services, broken down as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter CY 2012 (Exh. "P-26'/ (Exh. "P-28") (Exh. "P-30") (Exh. "P-32") p 1 282 772.18 p 1 409 857.35 Input Tax Deferred on p 1 298 891.95 p 1187 926.65 p 1 282 772.18 Capital Goods exceeding 228 186.97 - P1Million from Previous p 1 510 959.15 _Quarter p 1 409 857.35 1409 857.35 Add: p 101101.80 1 298 892.01 p 110965.34 Input Tax on Capital 339444.39 1 647.526.09 243085.35 Goods exceeding 3067.041.26 P1Million Purchased this Quarter - - 228 186.97 Total Unamortized Input p 1 298 891.95 p 1187 926.65 p 1 510 959.15 Tax on Capital Goods exceeding P1Million Less: Input Tax on Purchases of Capital Goods exceeding P1Million deferred for the succeeding period 1187 926.65 1 076 961.30 1 076 961.30 Amortization of Input p 110 965.30 p 110 965.35 p 433 997. 7!1'6 Tax on Capital Goods exceedinq P1Million Add: Input Tax on - Domestic Purchases of 226879.01 211933.46 1021342.21 Goods other than Capital 3114838.37 2,310 727.24 10 140 132.96 Goods Domestic Purchases of Services Total P2 088 072.28 P3,421,091.95 P3 452 682.68 P2 633 626.05 P11,595,472.96 In support of the said input VAT, petitioner presented its Jc- Schedule of Input Tax57, Schedule of Input VAT Deferred58, Schedule 56 The difference between P1,510,959.15 and Pl,076,961.30 is P433,997.85, which is higher by P.06 when compared with P433,997.79 representing the sum of P101,101.80, P110,965.34, Pll0,965.30 and Pl10,965.35. The P.06 difference was due to the amount of Input Tax Deferred on Capital Goods exceeding PlMillion carried over from the second quarter (P1,298,892.01) to the third quarter (Pl,298,891.95). 57 Exhibit "P-36-D". 58 Exhibit "P-36-E".

DECISION CTA CASE NO. 8960 of PPE Acquired in 2012 with Amortized Input Tax59, and the related invoices, official receipts, and other documents60; which were all examined by the Court-commissioned Independent Certified Public Accountant (CPA), Ms. Myra Celeste 0. Dabalos. After careful scrutiny of the Independent CPA Report61 and petitioner's supporting documents, the Court finds that out of the P1,021,342.21 input VAT claim on domestic purchases of goods other than capital goods and P10,140,132.96 input VAT claim on domestic purchases of services totaling P11,161,475.17, the amount of P1,094, 126.24 should be disallowed for not being properly substantiated by VAT invoices or receipts as prescribed under Sections 110(A) and 113(A) and (B) of the 1997 NIRC, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations No. 16-05, as amended. Below is the breakdown of the disallowed input VAT of P1,094, 126.24: Exhibit Findings Disallowed Input VAT Input taxes claimed on domestic purchases of services supported by VAT ORs but without OR P-36-F-11 date p 4,017.60 P-36-F-15 1,732.62 P-36-F-17 Input taxes claimed on domestic purchases of 9,910.29 P-36-F-18 8,770.72 P-36-F-21 goods supported by VAT invoices with alterations 1,340.92 in the name of the petitioner without counter signature Input taxes claimed on domestic purchases of goods supported by VAT invoices but with correction in the invoice amount without counter signature Input taxes claimed on domestic purchases of services supported by VAT ORs but with correction in the OR amount without counter signature Input taxes claimed on domestic purchases of goods supported by VAT Invoices but the TIN indicated is incorrect and supported by VAT ORs with TIN and address 59 Exhibit "P-36-E-1". 60 Exhibits "P-36-D-010001" to "P-36-0010278", "P-36-0020001" to "P-36-D-020332", "P-36-D- 030001" to "P-36-D-030369", "P-36-D-040001" to "P-36-D-040251", "P-36-D-050001" to "P-36- D-050252", "P-36-D-060001" to "P-36-D-060331", "P-36-D-070001" to "P-36-D-070320", "P-36- D-080001" to "P-36-D-080304", "P-36-D-090001" to "P-36-D-090246", "P-36-D-100001" to "P- 36-D-100268", "P-36-D-110001" to "P-36-D-110335", and "P-36-D-120001" to "P-36-D-120284". 61 Exhibit "P-36".

DECISION CTA CASE NO. 8960 P-36-F-22 Input taxes claimed on domestic purchases of 14,512.42 P-36-F-23 services supported by VAT ORs issued in the name 7,478.36 P-36-F-24 of the petitioner but the TIN of the petitioner 1L578.64 P-36-F-25 indicated is incorrect and supported by VAT Invoices with TIN and address 22,462.58 P-36-F-26 Input taxes claimed on domestic purchases of P-36-F-27 goods supported by VAT Invoices issued in the 6L506.11 P-36-F-28 petitioner's name but without the petitioner's TIN 3_L591.31 P-36-F-29 and/or address and supported by VAT ORs with 3,635.25 P-36-F-30 TIN and address 2,211.72 P-36-F-31 Input taxes claimed on domestic purchases of P-36-F-32 services supported by VAT ORs issued in the 573.18 petitioner's name but without the petitioner's TIN 621.43 and/or address and supported by VAT Invoices 139.25 with TIN and address Input taxes claimed on domestic purchases of goods supported by VAT invoices not issued in the complete name of the petitioner but with TIN and address of the petitioner Input taxes claimed on domestic purchases of services supported by VAT ORs not issued in the complete name of the petitioner but WITH TIN and address of the petitioner Input taxes claimed on domestic purchases of goods supported by VAT Invoices not issued in the name of the Company but within TIN and address of the Company Input taxes claimed on domestic purchases of services supported by VAT ORs not issued in the name of the petitioner but with TIN and address of the petitioner Input taxes claimed on domestic purchases of goods supported by VAT invoices bearing the incomplete name of the petitioner and without TIN and/or address of the _Q_etitioner Input taxes claimed on domestic purchases of goods supported by VAT Invoices not issued in the name/in the complete name of the petitioner (e.g. DOHLE) and without TIN and/or address of the petitioner Input tax claimed on domestic purchase of services supported by a VAT OR not issued in the complete name and/or not issued in the name of the petitioner or named after DOHLE, and without TIN and/or address of the petitioner Input tax claimed on domestic purchase of goods supported by TIN #only; TIN-V; TAN-V; TAN-VAT; TIN-NV/NON VAT Invoice; stamped/handwritten TIN-V/VAT

DECISION CTA CASE NO. 8960 Input taxes claimed on domestic purchases of services supported by TIN OR only; OR only; OR P-36-F-33 with stamped TIN VAT; stamped TIN VAT OR 171 468.16 P-36-F-34 2,280.27 Input tax claimed on domestic purchase of goods P-36-F-35 102,867.97 P-36-F-36 supported by tape receipt without the petitioner's 307.50 P-36-F-37 name and/or TIN 358,531.85 P-36-F-38 P-36-F-39 Input tax claimed on domestic purchases of 146,117.86 P-36-F-40 2,137.29 P-36-F-42 services supported by a VAT ORs issued in the P-36-F-43 13,265.81 P-36-F-44 name of the petitioner, but the TIN of the 1521613.14 P-36-F-45 P-36-F-46 petitioner indicated is incorrect (i.e., Supported by 720.00 32,740.40 VAT OR or any other document without TIN and/or 20,334.41 address) 1,659.18 Input tax claimed on domestic purchase of goods 1,094,126.24 supported by a VAT Invoice but not dated within the VAT taxable year Input taxes claimed on domestic purchases of services supported by VAT ORs not dated within the VAT-taxable year Input taxes claimed on domestic purchases of services supported by VAT ORs. However, the sentence "THis is not a source of input tax." is printed in the VAT ORs Input taxes claimed on domestic purchases of services supported by VAT ORs without BIR Permit to Print Input taxes claimed on domestic purchases of goods supported by documents other than VAT Invoices Input taxes claimed on domestic purchases of services supported by documents other than VAT ORs Input taxes claimed on domestic purchases of goods and services without supporting documents Over-claimed portion of input taxes on domestic purchases of goods/services due to erroneous computation (i.e arithmetical error) Over-claimed portion of input taxes arising from forex rates used on foreign currency denominated purchases of goods and services Total p With regard to the claimed P433,997.79 amortization of input VAT on purchases of capital goods exceeding P1Million, petitioner's r-- Schedule of Input VAT Deferred62 shows that said amount arose from calendar years 2008 to 2012 purchases,.as follows: 62 Exhibit "P-36-E". \

DECISION CTA CASE NO. 8960 Amortization for the ear 2012 2nd Particulars Input VAT 1st Quarter Quarter 3rd_Quarter 4th Quarter Total Purchases for CY 2008 P188 893.14 (P 2 257.30) p -p -p - (P 2 257.30) 71 units Dell O_ptiplex Purchases for CY 2009 208 097.70 10 404.89 10 404.89 10 404.89 10 404.89 41 619.56 Grandia Purchases forCY 2010 180 000.00 9 000.00 9 000.00 9 000.00 9 000.00 36 000.00 Montero 117 321.43 5 866.07 5 866.07 5 866.07 5 866.07 23 464.28 Mitsubishi Fuzion Purchases forCY 2011 867.86 72.32 72.32 72.32 72.32 289.28 1 unit Dell LCD 215 550.00 17 962.50 17 962.50 17 962.50 17 962.50 71 850.00 42 units Dell LCD Typewriter 744.64 62.05 62.05 62.05 62.05 248.20 Computer set 185 217.86 15 434.82 15 434.82 15 434.82 15 434.82 61 739.28 Various Purchases 145 111.63 12 092.64 12 092.64 12 092.64 12 092.64 48 370.56 Davies Car 573 214.29 28 660.71 28 660.71 28 660.71 28 660.71 114 642.84 subtotal 97.298.70 99556.00 99556.00 99556.00 395966.70 Purchases for CY2012 99 615.54 Furniture Cliff, BSS & 128 571.43 1 660.26 4 980.78 4 980.78 4 980.78 16 602.60 CMBP 6 428.57 6 428.57 21 428.57 Roof Deck Furniture 2 142.86 6 428.57 11409.35 11409.35 38031.17 subtotal 3803.12 11,409.35 PllO 965.35 PllO 965.35 P433,997 .8763 Total P101,101.82 P110,965.35 However, petitioner failed to submit before this Court VAT invoices/official receipts in support of its claimed amortization of input tax from previous years in the amount of P395,966.70. In addition, the sales invoice supporting the purchase of "Furniture Cliff, BSS & CMCP" during the CY 2012 reflects an input VAT of only P49,807.77, which is lower than the claimed amount of P99,615.54. Consequently, only the properly supported amount of P178,379.20 represents petitioner's valid input tax on purchases of capital goods exceeding P1Million and only the amount of P29,729.87 is creditable for CY 2012, computed as follows: Payee Input Tax Monthly Input Tax Input Tax Creditable for the Four Credit Quarters of CY 2012 Athens Interior and Design Studio (Invoice No. 57,Z dated Feb. 29, 2014 Exhibit P-36- D-030367)_ p 49,807.77 p 830.13 p 8_[301.30 63 Difference of PO.OB due to rounding off.

DECISION CTA CASE NO. 8960 Philippine & Scandinavian Design Filtra 128 571.43 2 142.86 2t428.57 Inc. (Invoice No. 1983, dated Mar. 15, 201Z P178,379.20 Exhibit P-36-D-030182) P2,972.99 P29,729.87 Total In sum, petitioner's properly substantiated input VAT amounted to P10,097,078.72, as computed below: Input VAT per Quarterly VAT Returns arising from: p 433,997.79 Amortization of Input VAT from Purchases of Capital Goods exceeding P1Million 1,021,342.21 Domestic Purchases of Goods Other than Capital Goods Domestic Purchases of Services 10,140,132.96 Total Input VAT per Quarterly VAT Returns Less: Disallowances P11,595,472.96 a) Input VAT claimed on Domestic Purchases of Goods p 1,094,126.24 Other than Capital Goods and Domestic Purchases of Services 395,966.70 8,301.30 b) Claimed Amortization of Input Tax on Purchases of Ca_Qital Goods exceeding P1Million p 1,498,394.24 From CYs 2008 to 2011 Purchases P10,097,078.72 From CY 2012 Purchases Total Disallowances Properly Substantiated Input VAT The substantiated input VAT of P10,097,078.72 is not entirely attributable to petitioner's declared zero-rated sales/receipts since petitioner had also reported VATable and exempt sales/receipts in its Quarterly VAT Returns for CY 2012 as follows: VATable Sales/Receipts 1st Qtr 2"d Qtr (Exh. 3rd Qtr 4th Qtr CY 2012 Zero-Rated p 23 973,999.22 Sales/Receipts (Exh. "P-26") "P-28") (Exh. ''P-30") (Exh. ''P-32") Exempt Sales/Receipts P4,605 702.92 p 6 073,353.91 P6,091 810.92 p 7 203,131.47 Total Sales/Receipts 57 455 427.10 57 217,191.47 55 895 035.02 55 237 505.81 225 805 159.40 81110.75 65J071.48 44L307.67 - 190 489.90 P62,142,240.77 P63,355,616.86 P62,031,153.61 P62,440,637 .28 P249,969,648.52 Allocating the substantiated input VAT of P10,097,078.72 based on the percentage of each type of sales/receipts to total sales/receipts would show that the amount of P9,120,997.22 is attributable to petitioner's declared zero-rated sales/receipts, while the rest of the input VAT pertains to VATable sales/receipts and exempt.;k-

DECISION CTA CASE NO. 8960 sales/receipts, i.e., input VAT attributable to VATable sales/receipts in the amount of P968,387.00 and input VAT attributable to exempt sales/receipts in the amount of P7,694.SO, as shown below: VATable Sales/Receipts Amount Allocation Factor Zero-Rated Sales/Receipts p 23 973,999.22 {Percentage to Total Exempt Sales/Receipts 225 805,159.40 Total Sales/Receipts Sales/Receipts) 190 489.90 p 9.5907641% Properly Substantiated Input VAT P249 969 648.52 90.3330307% Allocated as follows: 0.0762052% VATable Sales/Receipts Zero-Rated Sales/ReceiQts 100.0000000% Exempt Sale~ReceiQ_ts Total 10 097,078.72 968,387.00 9,120,997.22 7_L694.50 P10,097,078. 72 After deducting the input VAT attributable to VATable sales in the amount of P968,387.00 from petitioner's output VAT liability of P2,876,879.9164, petitioner still has a net output VAT payable of P1,908,492.91 for CY 2012, computed as follows: Output VAT Payable p 2,876,879. 91 Less: Input VAT Attributable to VATable sales 968,387.00 Net Output VAT Payable P1,908,492.91 Thus, by deducting the net amount ofP1,908,492.91 output VAT payable from its total input VAT attributable to zero-rated sales/receipts of P9,120,997.22, petitioner's excess input VAT attributable to zero-rated sales/receipts amounts to P7,212,504.31; while the excess input VAT attributable to the properly substantiated 64 Taxable Quarter Ou~utVAT Covered - CY 2012 Exhibit p 552 684.35 P-26" First Quarter 728 802.47 "P-28" Second Quarter 731 017.31 "P-30" Third Quarter 864 375.78 "P-32" Fourth Quarter P2,876,879.91 Total

DECISION CTA CASE NO. 8960 zero-rated sales/receipts amounts only to P7,196,472.58, computed as follows: Net Output VAT Payable p t908 492.91 9,120 997.22 Less: Input VAT Attributable to Declared Zero-Rated Sales/Receipts P 7J212L504.31 Excess Input VAT Attributable to Declared Zero-Rated Sales/Receipts 16 031.73 Less: Excess InQut VAT Attributable to Disallowed Zero-Rated Sales/Receipts P7,196,472.58 Disallowed Zero-Rated Sales/Receipts p 501,912.61 Total Declared Zero-Rated Sales/Receipts P225 805,159.40 Excess Input VAT Attributable to Properly Substantiated Zero-Rated Sales/ Receipts Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns65, the same remained unutilized until it was deducted in its Quarterly VAT Return for the first quarter of 2014 as "VAT Refund/TCC claimed"66 from the total available input tax of P14,479,994.9867� Thus, the claimed input taxes for the four quarters of CY 2012 could not have been carried over/utilized in the succeeding second quarter of 2014.68 WHEREFORE, premises considered, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of 1'7,196,472.58 representing unutilized excess input VAT attributable to petitioner's zero-rated sales/receipts for the four quarters of calendar year 2012. SO ORDERED. ~"c�~~--~ iOANITO C. CASTANEDA, JR. Associate Justice 65 Exhibits "P- 36-B-15" to "P-36-B-19". 66 Exhibit "P-36-B-19-a". 67 Exhibit "P-36-B-19", line 22. 68 Exhibit "P-36-B-20".

DECISION CfA CASE NO. 8960 !CONCUR: CAESAR~SANOVA 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. Q.~r~ cc..CCAJtS-T'.A-N.,ELD~ ~,~J�R. 1UANITO Associate Justice Chairperson 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. Presiding Justice