NICHIMEN CORPORATION - PHIL. BRANCH v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY NICH I MEN CORPORATION - C.T.A. CASE NO. 5470 PHILIPPINE BRANCH, Promulgated: , Petitioner~, _E~~ 1_5_19~9-~ ver~sus- THE COMM ISSIONER OF INTERNAL REVENUE, Re spondent. X- - - - - - - - - - - DECISION This is a petition for review seeking for the refund or~ issuance of a tax credit certificate in favor~ of petitioner Nichimen Corporation Philippine Branch in the amoun t of P 100,182.66 representing excess in p ut value-added tax payments on purchases of taxable goods and services for taxable year 1995. The factual backdrop of the case are as follows: Petitioner~ is a r~esident for~eign cor~por~at ion organized under the laws of Japan, with license to do business in the Philippines. It is pt~imar~ily "engaged in t h e business of indenting, wh o 1 e sa 1 i n g , buying and selling lumber~, abaca, sugar~, minet~al or~es, mach i net~y, steel pr~oduc t s, cement and sundt~y goods in the Philippines; manufacturing and engineering activities; in the business of buying and selling of industr~ial matet~ials, textiles, foodstuff to include oilseed, feeds, canned goods, etc., chemicals, steel pr~oducts of fer~r~ous and non-ferrous metal products and products a l lied to those mentioned above " <Exhibit "A"). On June 25, 1997,

DECISION - C.T.A. CASE NO. 5470 2 petitioner also filed with the Securities and Exchange Commission a petition requesting that its license be amended so as to reflect the expansion of its activity to include additional purposes, thus: "To engage in the business of purchase, acquisition, import and export, sale on wholesale basis and indenting of all kinds of merchandise or goods; to engage in the manufacturing activities; to engage in the business of commercial agency in the Philippines, and to acquire equities and invest as may from time to time be considet~ed nec essat~y." <Exh. A-1) Petitioner is registered as a value-added tax entity and was issued VAT Registration Certificate No. 000-1EA- 832-V on June 17' 1'3'34 <Exhibit "C"). Accot~d i ng to petitioner, its sales of services are subject to value- added tax at zero-rate (0~) provided for under Section 102(a) (2) [now (b) (2)J of the Tax Code, considering that its sales are paid for in acceptable foreign currency inwardly remitted to the Philippines and accounted fat~ in accot~dance with the and regulations of the Central Bank. In compliance with the VAT provisions of the Tax Code and its implementing t~egulat ions, petitioner filed its value added tax returns for the quat~tet~s ending Mar~ch 31, 1'3'35 <Exhibit "D-2"), June 30, 1'3':35 <Exhibit "E-2"), Septembet~ 30, 1'3'35 <Exhibit "F-2"), and December 31, 1'3'35 <Exhibit "G-2"). / A (,~ ) \_!/

DECISION - C.T.A. CASE NO. 5 470 - 3- amended on March 3, 1997 showing a refundable amount totalling ~100, 182.66, broken down as follows: E><h 1995 Refundab l e Input Tax D F i 1�~s t Quat~t et~ ~ 30,389.78 E Second Quat~t er~ 2(), 573. 13 F Th i r~d Quat~t et~ G 21, r:355. 22 Four~th Quar~t er~ 27,264.53 Total ~1oo, 18c~. 66 On Mar~ch 5, 1997, petitioner filed an application for tax credit/refund of the above-stated excess input value added tax paid fm~ the yeat~ 1995. <Exhibit "H"). Respondent failed to act immediately upon said claim and so in order to forestall the ru n ning of the two-year~ prescriptive period prov ided by law, Petitioner filed the instant petition on Mat~ch 19, 1997. Respondent, in his Answet~, claimed by way of Special and Affirmative Defenses that: "3. Assuming without admitting that petitioner filed with the Bureau of Internal Revenue an application for credit/refund of value-added ta x on March 5, 1997, the same is subject to ad ministrative investigation and r~esolution. Undet~ Section 106 (e) of the NI RC, respondent has sixty (60) days from the date the application for refund wa s filed within which to refund input taxes . Hence, the filing of the instant petition is premature. 4. Petitioner has not presented before respondent sufficient evidence to prove that its sales of services are zero-rated for value- added tax purposes pursuant to Section 102 of t he NIRC and that it has complied with the pr~ovisions of Section 106 of the NIRC."

DECISION - C.T.A. CASE NO. 5470 - 4- The sole issue to be resolved is whether or not Petitioner is entitled to the refund of input taxes on its purchases covering the period from Januar y 1' 1995 t 0 Decembet~ 31, 1995 on the basis of the evidence pt~esented. The governing provisions on zero-rated sales and refunds of input taxes upon which Petitioner anchors its claim are quoted hereunder: "Sec. 102. Value-added tax on sale of' services and use or lease of' properties. (a) Rate and base or tax. -xxx (b) Tr~ansactions subject to zero - rate.-The following services performed in the Philippines by VAT-registered persons shall be subject to 0~: (1) Processing, manufactur i ng 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 sub- pat~agt~aph, the considet~ation fat~ which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng :..P-=i:..:l:..:.i.c:P-=i:..:n.:.;a:::.::s___( BSP ) � " supplied) XXX XXX XXX "Sec. 106. Refunds or tax credits of' input tax.-(a) Any VAT - registered person, whose sales are zero-rated or effectively zero- rated, may, within two (2) yeat~s aftet~ the

DECISION - C.T.A. CASE NO. 5470 5- 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 out put tax: xxx" Verily from the aforequoted provisions, petitionet~ is subject to value-added tax at 0% rate. In suppot~t of its claim, petitioner submitted photocopies of the invoices and receipts evidencing payments of the input taxes paid, as well as the statements from the Rizal Commercial Bank Corporation [an accredited agent bank of the Central Bank] to the effect that the acceptable foreign currency has been inwardly remitted and accounted for in accordance with applicable banking regulations. Respondent, on his part, alleged that he did not give due course to petitioner's claim for refund as the latter was uncooperative in submitting the required documents. After an examination of the evidence presented by both pat~ties, We find that the documents submitted by Petitioner have clearly substantiated its claim for refund. We have already upheld Petitioner's privilege to claim a refund of excess input taxes paid in CTA Case Nos. 4431, 5159 and 5221, the facts of which are on all fot.ws with the instant

DECISION - C.T.A. CASE NO. 5470 - 6- Petition, except for the periods and the amounts involved. In view, however, of the fact that some purchases allegedly made by Petitioner were not supported by receipts evidencing the input taxes paid, Petitioner's claim as follows: Total amount of Input Taxes claimed P100, 182.66 Less: Input Taxes not supported by receipts Suppl i el"~ Invoice Amount KLine Air Service P 1,390.60 P 139.06 Constellation Auto Repai l"~ 1,020.00 102.00 Topstitch l'r1anila 8,727.20 872.80 Second Qual"~t el"~ 850.50 85.05 Makati Auto Center 575.50 Amount Refundable 57.50 1,256.91 p 98,925.75 WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the respondent to refund or issue the corresponding tax credit certificate to petitioner the reduced amount of P 98,925.75 representing input taxes covet~i ng the pel"~i od fl"~om Janual"~y 1, 1995 to December 31, 1995.

DECISION - C.T.A. CASE NO. 5470 - 7- SO ORDERED. L-Q.~- ERNESTO D. ACOSTA Pr~ e siding Judge WE CERTIFICATION I hereby certify that this decision was reached after due consultation with the members of the Court of Tax Appeals in accordance with Section 13, Article VIII of the Constitution. ~Q~ ERNESTO D. ACOSTA Pr~esiding Judge Court of Tax Appeals