MANULIFE DATA SERVICES, INC. v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with Case Nos. 8117 and 8139)

REPUBliC OF THE PHiliPPINES Coon II Tax IPPIIIS QUEZON CITY SECOND DIVISION MANULIFE DATA SERVICES, CTA CASE NO. 8054 INC., Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. CTA CASE NO. 8117 X----------------------------------------X MANULIFE DATA SERVICES, INC., Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. CTA CASE NO. 8139 Members: x----------------------------------------x MANULIFE DATA SERVICES, INC ., Petitioner, -versus - CASTANEDA, JR., Chairperson CASANOVA, and COTANGCO-MANALASTAS, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, MAY 08 1013 / V -- - - Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~:-~ ~ �~- .- X DECISION CASTANEDA, JR., J_.: This case is a consolidation of three (3) separate Petitions for Review filed by Manulife Data Services, Inc. to seek the issuance of a fJ-

DECISION CTA CASE Nos. 8054, 8117 and 8139 tax credit certificate in the aggregate amount of P15,908,004.93, allegedly representing unutilized input value-added tax (VAT) paid for the four quarters of taxable year 2008, broken down as follows: CTA Case Year2008 Amount No. p 4,355,695.62 8054 1st Quarter 8117 2nd Quarter 3,047,596.00 3rd Quarter 8,504,713.31 8139 4th Quarter 11!15,908,004.93 TOTAL Manulife Data Services, Inc. (petitioner) is a foreign corporation duly registered with and authorized by the Securities and Exchange Commission (SEC) to operate as a Regional Operating Headquarter (ROHQ) under SEC Certificate of Registration and License No. FS200603505. 1 Petitioner is a VAT-registered taxpayer as evidenced by Certificate of Registration No. OCN3RC0000330824. 2 It was established for the purpose of engaging in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 3 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), with authority, among others, to decide, approve and grant claims for refund or tax credit of internal revenue taxes. She holds office at the BIR National Office Building, Agham - Road, Diliman, Quezon City. Petitioner duly filed its original and amended Quarterly VAT Returns for taxable year 2008.4 Alleging that it has unapplied/excess input VAT from its zero- rated sales, petitioner filed administrative claims for refund or issuance of tax credit certificate5 before the BIR Revenue Districtjc-- 1 Exhibit " A" 2 Exhibit "B" 3 Exhibit " A-3" 4 Exhibits " D", " E", " F", " G", " H", and " I " 5 Exhibits " C" and " C-4"

DECISION erA CASE Nos. 8054, 8117 and 8139 Office (RDO) No. 38 on the following dates and for the following amounts: PERIOD COVERED DATE FILED AMOUNT CLAIMED First Quarter of 2008 December 4, 2009 p 4,356,925.62 Second to Fourth February 26, 2010 p 11,552,309.31 Quarters of 2008 Due to inaction on the part of respondent, petitioner elevated its refund claims before this Court on the following dates: PERIOD COVERED DATE FILED CASE DESIGNATION CTA Case No. 8054 First Quarter of 2008 March 30, 2010 CTA Case No. 8117 Second Quarter of 2008 June 29, 2010 CTA Case No. 8139 July 26, 2010 Third and Fourth Quarters of 2008 In her Answer6 in CTA Case No. 8054, respondent alleged the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 4. He reiterates and re-pleads the preceding paragraphs of this Answer as part of his Special and Affirmative Defenses. 5. Petitioner's claim for the issuance of tax credit certificate is subject to administrative investigation/examination by respondent's Bureau. 6. Taxes paid and collected are presumed to have been paid in accordance with law and regulations, hence, not refundable. 7. Moreover, in order to validly claim for tax credit/refund, it is imperative for petitioner to prove its p compliance with the following, viz: 6 erA Case No. 8054, docket, pp. 58-62

DECISION CTA CASE Nos. 8054, 8117 and 8139 a. The registration requirements of a value- added taxpayer under the pertinent provision of the 1997 NIRC, as amended, and its implementing revenue regulations. b. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT pursuant to the provisions of Sections 113 and 114 of the 1997 NIRC, as amended. Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of the claim for input tax of the taxpayer claimant (Revenue Memorandum Circular No. 42-2003). c. The submission of complete documents in support of the administrative claim for tax refund pursuant to Section 112 (C) of the 1997 NIRC, as amended, otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for tax credit/refund which is a condition sine qua non prior to the filing of such claim. d. That the input taxes of P4,355,695.62 allegedly representing unutilized input VAT from its purchases of goods and services were: i. paid by petitioner; ii. attributable to its zero-rated or effectively zero-rated sales; and, iii. such input taxes paid should not have been applied against any output tax. e. That petitioner's claim for tax credit/refund allegedly representing unutilized input VAT r in the amount of P4,355,695.62 was filed within two (2) years after the close of the

DECISION CTA CASE Nos. 8054, 8117 and 8139 taxable quarter when the sales were made in accordance with Section 112 (A) of the 1997 NIRC, as amended. 8. In an action for tax credit/refund, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for tax credit/refund. 9. Finally, basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the entity claiming the same (Philippine Geothermal, Inc. vs. Commissioner ofInternal Revenue, G.R. No. 154028, July 27, 2005). Moreover, statutes in derogation of sovereignty such as those containing exemption from taxation should be strictly construed in favor of the State. In this regard, taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea-Land Service, Inc. vs. Court of Appeals, 357 SCRA 444)." Respondent employed the same arguments in her Answer in CTA Case No. 8117. In her Answer7 in CTA Case No. 8139, respondent interposed the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 4. Claims for refund are strictly construed against the taxpayer as the same partakes the nature of a tax exemption; 5. The taxpayer has the burden to show that the taxes were erroneously or illegally paid. Failure on the r part of the Petitioner to prove the same is fatal to its cause of action. In the instant case, the Petitioner failed 7 CTA Case No. 8139, docket, pp. 74-76

DECISION CTA CASE Nos. 8054, 8117 and 8139 to present proof that the input VAT it is claiming as refund remained unutilized. 6. In addition, Petitioner must prove that the compensation or consideration which it received for the services rendered were actually paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; 7. The Petitioner should prove its legal basis for claiming the amount being refunded." On September 9, 2010, petitioner filed a Motion for Consolidation of erA Case No. 8117 with erA Case No. 8054.8 Likewise, on October 18, 2010, petitioner filed a Motion for Consolidation of erA Case No. 8139 with erA Case No. 8054. Both Motions were granted on November 4, 20109 and November 11, 201010, respectively. During trial, petitioner presented its documentary and testimonial evidence. On the other hand, respondent, through counsel, manifested that she has no witness to present. The case was submitted for decision on August 29, 2012, considering petitioner's Memorandum11 filed on August 23, 2012 and respondent's Memorandum12 filed on August 17, 2012. The parties submitted the following issue13 for this Court's disposition: "Whether or not petitioner is entitled to its claim for refund or issuance of a tax credit certificate for its unutilizedjexcess input VAT payments for the 1st to 4th Quarters of 2008 amounting to Php15,908,004.93."/z-- 8 CTA Case No. 8117, docket, pp. 537-539 9 CTA Case No. 8054, docket, p. 631 10 CTA Case No. 8054, docket, pp. 650-651 11 CTA Case No. 8054, docket, pp. 919-929 12 CTA Case No. 8054, docket, pp. 935-978 13 CTA Case No. 8054, docket, p. 660

DECISION CTA CASE Nos. 8054, 8117 and 8139 Section 112(A) of the National Internal Revenue Code (NIRC) of 1997 provides the basis for refunds or tax credits of input tax attributable to zero-rated or effectively zero-rated sales, to wit: "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 against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the 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 or 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: Provided, final/~ That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." Based on the afore-quoted provision, the refund/tax credit of unutilized input VAT attributable to zero-rated or effectively zero- rated sales is allowed subject to the taxpayer's compliance with the following requisites: 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 ~

DECISION CfA CASE Nos. 8054, 8117 and 8139 5. that the claim for refund was filed within the two-year prescriptive period. The Court reckons it appropriate to discuss first the fifth requisite pertaining to the two-year prescriptive period for filing of refund claim. As explicitly stated under Section 112(A) of the NIRC of 1997, the application for tax credit certificate/refund of unutilized input VAT must be filed within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the four taxable quarters of 2008 which closed on March 31, 2008; June 30, 2008; September 30, 2008 and December 31, 2008. Counting two years from the said dates, petitioner had until March 31, 2010; June 30, 2010; September 30, 2010 and December 31, 2010, respectively, within which to file its administrative claim for tax credit certificate/refund. Thus, petitioner's administrative claims for refund were seasonably filed on December 4, 2009 and February 26, 2010, as shown below: CTA YEAR 2008 CLOSE OF THE LAST DAY TO FILE DATE OF FILING EXHIBIT CASE NO. 1st Quarter TAXAB LE ADMINISTRATIVE OF "C-1" 2nd Quarter Q UARTER 8054 3rd Quarter CLAIM ADMINISTRATIVE 8117 4th Quarter Mar. 31, 2008 Mar. 31, 2010 CLAIM 8139 Jun. 30 2008 Jun. 30 2010 Dec. 4 2009 Sep. 30 2008 Sep. 30 2010 Feb. 26, 2010 "C-4" Dec. 31 2008 Dec. 31 2010 As to the timeliness of petitioner's judicial appeal, Section 112(C) of the NIRC of 1997, as amended, provides that the Commissioner of Internal Revenue (CIR) has 120 days from the date of the submission of the complete documents in support of the application for tax refund/credit within which to grant or deny the claim . In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before this Court within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to this Court within 30 days. ~

DECISION CTA CASE Nos. 8054, 8117 and 8139 Applying Section 112(C) of the NIRC of 1997, as amended, the following are the pertinent dates to petitioner's claim for refund: CTACASE YEAR 2008 DATE OF FI LING OF END OF 120 DAYS END OF 30 DATE OF NO. 1st Quarter AD MI NISTRATIVE FOR BIR DAYS FROM FILING OF 8054 2nd Quarter EXPIRATION JUDICIAL 8117 3rd Quarter CLAIM COMMISSIONER OF 120 DAYS 4th Quarter December 4 2009 TO DECIDE ON May 3 2010 CLAIM 8139 March 30 2010 February 26, 2010 THE CLAIM July 26, 2010 April 3 2010 June 29 2010 June 26, 2010 July 26, 2010 Clearly from the foregoing table, petitioner's judicial claims for the second, third and fourth quarters of 2008 (CTA Case Nos. 8117 and 8139) were timely filed within the "120-30-day" period required under Section 112(C) of the NIRC of 1997, as amended. On the other hand, petitioner's judicial claim for the first quarter of 2008 (CTA Case No. 8054) was prematurely filed on March 30, 2010 or 4 days short of the lapse of the 120-day period. However, in the consolidated case of Commissioner of Internal Revenue vs. San Roque Power Corporation Taganito Mining Corporation vs. Commissioner ofInternal Revenue/ and Phi/ex Mining Corporation vs. Commissioner ofInternal Revenue4, promulgated on February 12, 2013, the Supreme Court En Bane ruled that the mandatory and jurisdictional nature of the 120-30-day period does not apply on claims for refund that were filed during the period of December 10, 2003 to October 6, 2010. The Supreme Court En Bane held that BIR Ruling No. DA-489-03, expressly stating that the "taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review", is a general interpretative rule which can be relied upon by all taxpayers from the time of its issuance on December 10, 2003 up to its reversal by the Supreme Court in the case of Commissioner of Internal Revenue vs. Aiehi Forging Company of Asia/ Inc.15 on October 6, 2010. Accordingly, petitioner's judicial claim for the first quarter of 2008 shall also be considered as timely filed. The Court will now proceed to discuss the remaining requisites. 1-- 14 G.R. Nos. 187485, 196113, and 197156, February 12, 2013 15 G.R. No. 184823, October 6, 2010

DECISION CTA CASE Nos. 8054, 8117 and 8139 Anent the first requisite, petitioner alleges that its sales of services to its foreign affiliates which are all engaged in business conducted outside the Philippines, and which services were paid for in United States Dollars inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) qualify for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended, which states that: "SEC. 108. Value-added Tax on Sale ofServices and Use or Lease ofProperties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0�/o) rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.16, the Supreme Court held that in order for the supply of services to be VAT r zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended, the following conditions must be satisfied: 16 G.R. No.153205, January 22, 2007

DECISION CTA CASE Nos. 8054, 8117 and 8139 1. the services 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. Corollary to the second requisite, Sections 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), B(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, 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 VAT Invoice 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: ~

DECISION XXX XXX CTA CASE Nos. 8054, 8117 and 8139 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 XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx"(Emphasis supplied) "SEC. 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: Jv (1) A statement that the seller is a VAT-registered person, followed by his TIN;

DECISION CTA CASE Nos. 8054, 8117 and 8139 (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 (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 prov1s1ons, the foreign currency remittances referred to under Section 108(8)(2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts. It is undisputed that petitioner is duly registered with the BIR as a VAT taxpayer. 17 As Regional Operating Headquarters (ROHQ), petitioner is authorized to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 18 Such services are not in the same category as "processing, manufacturing or repacking of goods". For the four taxable quarters of 2008, petitioner rendered services to its affiliates, namely: Manulife (International) Limited, John Hancock Life Insurance Company (U.S.A.), and The Manufacturers Life Insurance Company. 19 It was established that Manulife (International) Ltd. and John Hancock Life Insurance Company (U.S.A.) are non-resident foreign tz.- entities doing business outside the Philippines as shown by the SEC 17 Par. 3, Stipulation of Facts, Consolidated Joint Stipulation of Facts and I ssue, CTA Case No. 8054, docket, p. 658 18 Exhibit " A-3" 19 Exhibits " Y", " Z", " BB", and " HHH ", page 2

DECISION CTA CASE Nos. 8054, 8117 and 8139 Certifications of Non-Registration of Company20, by Manulife Financial Corporation Annual Report for 200821 as certified by the Philippine Stock Exchange, by the authenticated and certified copy of Certified Documents of Manulife (International) Limited22, by the authenticated and certified copy of Certificate of Registration of Change of Name of Oversea Company of Manulife (International) Limited23, and by the authenticated and certified copy of Amended Articles of Redomestication of John Hancock Life Insurance Company (U.S.A.).24 However, as regards petitioner's client-affiliate, The Manufacturers Life Insurance Company, records show that it is a corporation organized under the laws of the Dominion of Canada but duly licensed and registered with the SEC to do business in the Philippines though its branch, The Manufacturers Life Insurance Co. (Phils.), Inc., as evidenced by the Certificate of Filing of Amended General By-Laws of a Foreign Corporation25 issued by the SEC and by the 2008 General Information Sheet of The Manufacturers Life Insurance Co. (Phils.), Inc.26 � Evidently, it did not satisfy the second requisite; thus, petitioner's reported sales of services to The Manufacturers Life Insurance Company in the amount of P176,070,408.09, detailed below, cannot qualify for VAT zero-rating. Summary Exhibit Exhibit Client Amount of Sales Reference (Invoice) (OR) The Manufacturers Life Insurance Company p! 931 626.11 First Quarter 2008 MM -4 The Manufacturers Life Insurance Company 416 308.81 MM - 6 The Manufacturers Life Insurance Company 472 806.84 January MM-7 The Manufacturers Life Insurance Company 900 100.97 MM-10 The Manufacturers Life Insurance Company 548 137.45 MM - 1 MM -4a MM-11 The Manufacturers Life Insurance Company 374 752 .15 MM-12 The Manufacturers Life Insurance Company 273 887.37 MM - 1 MM-6a MM-13 The Manufacturers Life Insurance Company 509 430.46 MM-15 The Manufacturers Life Insurance Company 821 334.66 MM-1 MM-7a MM-16 The Manufacturers Life Insurance Company 136 943.69 MM- 17 The Manufacturers Life Insurance Company MM-1 MM- 10a MM-18 The Manufacturers Life Insurance Company 1 989 092.73 MM-19 792 504.33 MM-1 MM- 11a The Manufacturers Life Insurance Company MM-26 The Manufacturers Life Insurance Company 929 443.51 MM-1 MM- 12a MM-27 The Manufacturers Life Insurance Company 1 226 215.42 MM-28 The Manufacturers Life Insurance Company MM-1 MM-13a MM - 29 398 938.74 500 197.59 MM-1 MM- 15a MM-1 MM- 16a MM -1 MM - 17a MM-1 MM-18a MM - 1 MM - 19a February MM - 2 MM-26a MM - 2 MM - 27a MM - 2 MM-28a MM - 2 MM - 29a 20 Exhibits "CC" and "DD" 21 Exhibit "EE", page 115, Principal Subsidiaries (Exhibit "EE-l ") 22 Exhibit "HH" 23 Exhibit "HH-1" 24 Exhibit "II" 25 Attached to Exhibit "GG" 26 Exhibit "FF"

DECISION CTA CASE Nos. 8054, 8117 and 8139 MM - 2 MM - 32a MM-32 The Manufacturers Life Insurance Company 859 150.02 MM - 2 MM-33a MM - 33 The Manufacturers Life Insurance Company 490 777.55 MM-2 MM - 34a MM-34 The Manufacturers Life Insurance ComQany 534 090.96 MM-2 MM - 35a MM-35 The Manufacturers Life Insurance Company 289 640.45 MM - 2 MM-38a MM - 38 The Manufacturers Life Insurance Company 511 513.83 MM - 2 MM - 39a MM - 39 The Manufacturers Life Insurance Company 747 886 .33 MM - 2 MM -40a MM -40 The Manufacturers Life Insurance Company 110 664.51 MM - 2 MM -41a MM-41 The Manufacturers Life Insurance Company 2 205 629.15 MM - 2 MM-42a MM -42 The Manufacturers Life Insurance Company 844 184.60 March MM - 3 MM-48a MM -48 The Manufacturers Life Insurance Company 859 763.65 MM - 3 MM -49a MM -49 The Manufacturers Life Insurance Company 1135 892.44 MM - 3 MM - 50a MM-50 The Manufacturers Life Insurance Company MM - 3 MM - 51a MM-51 The Manufacturers Life Insurance Company 444 244.64 MM - 3 MM - 54a MM - 54 The Manufacturers Life Insurance Company 540 402.17 MM - 3 MM - 55a MM-55 The Manufacturers Life Insurance Company 948 239 .22 MM - 3 MM - 56a MM-56 The Manufacturers Life Insurance Company 531 598.48 MM - 3 MM - 57a MM-57 The Manufacturers Life Insurance Company 544 896.59 MM-3 MM - 60a MM - 60 The Manufacturers Life Insurance Company 282 144.52 MM - 3 MM - 61a MM-61 The Manufacturers Life Insurance Company 497 883 .18 MM - 3 MM - 62a MM-62 The Manufacturers Life Insurance Company 812 698.95 MM-3 MM - 63a MM - 63 The Manufacturers Life Insurance Company MM - 3 MM - 64a MM-64 The Manufacturers Life Insurance Company 84 618.03 Subtotal 863 709 .57 668 385 .92 P26,029,735.59 Second Quarter 2 008 April MM -4 MM - 72a MM - 72 The Manufacturers Life Insurance Company p 923 963.86 MM - 75 The Manufacturers Life Insurance Company MM -4 MM -75a MM-76 The Manufacturers Life Insurance Company 433 915 .95 MM-79 The Manufacturers Life Insurance Company MM -4 MM-76a MM-80 The Manufacturers Life Insurance Company 539 532 .99 MM-81 The Manufacturers Life Insurance Company MM-4 MM-79a MM-82 The Manufacturers Life Insurance Company 903 542.45 MM-85 The Manufacturers Life Insurance Company MM-4 MM - 80a MM-86 The Manufacturers Life Insurance Company 538 712.95 MM-87 The Manufacturers Life Insurance Company MM-4 MM-81a MM - 88 The Manufacturers Life Insurance Company 555 194.3 1 MM-89 The Manufacturers Life Insurance Company MM-4 MM -82a 372 669.44 MM-4 MM - 85a 608 361.14 MM-4 MM - 86a 710 808.3 1 MM-4 MM - 87a 85 641.31 MM -4 MM - 88a 2 339 934.42 MM -4 MM-89a 1 328 202.56 May MM -4 MM -95a MM -95 The Manufacturers Life Insurance Company 865 102.16 MM -9 8 The Manufacturers Life Insurance Company 449 161.78 MM -4 MM -98a MM -99 The Manufacturers Life Insurance Company 566 130.98 MM -102 The Manufacturers Life Insurance Company 940,125.09 MM -4 MM -99a MM-103 The Manufacturers Life Insurance Company 530 843.1 7 MM - 104 The Manufacturers Life Insurance Company 444 888.06 MM-4 MM-102a MM - 105 The Manufacturers Life Insurance Company 455 909.82 MM - 108 The Manufacturers Life Insurance Company 537 826.19 MM-4 MM - 103a MM - 109 The Manufacturers Life Insurance Company 743 943.75 MM - 110 The Manufacturers Life Insurance Company MM-4 MM - 104a MM-111 The Manufacturers Life Insurance Company 71 764.57 MM-112 The Manufacturers Life Insurance Company 1 898 555.60 MM-5 MM - 105a 1 301 768.13 MM-5 MM - 108a MM -5 MM - 109a MM-5 MM - 110a MM - 5 MM - 111a MM - 5 MM-112a

DECISION CTA CASE Nos. 8054, 8117 and 8139 MM-5 MM-115a MM-115 The Manufacturers Life Insurance Company 245 157.21 June MM-124a MM-124 The Manufacturers Life Insurance Company_ 1 052 011.49 MM-5 MM-127a MM-127 The Manufacturers Life Insurance Company 413 311.68 MM-5 MM-128a MM-128 The Manufacturers Life Insurance Company 663 158.18 MM-5 MM-131a MM-131 The Manufacturers Life Insurance Company 967 388.91 MM - 5 MM-132a MM-132 The Manufacturers Life Insurance Company 544 539.57 MM-5 MM-133a MM-133 The Manufacturers Life Insurance Company 365 727.11 MM-5 MM-134a MM-134 The Manufacturers Life Insurance Company 653,904.74 MM-5 MM-137a MM-137 The Manufacturers Life Insurance Company 555 137.76 MM-5 MM-138a MM-138 The Manufacturers Life Insurance Company MM-5 MM-139a MM-139 The Manufacturers Life Insurance Company 1193,360.73 MM-5 MM-140a MM-140 The Manufacturers Life Insurance Company 1186 120.61 MM-5 MM-142a MM-142 The Manufacturers Life Insurance Company 3 373 259.32 MM-5 MM-144a MM-144 The Manufacturers Life Insurance Company MM-5 287,544.54 1 678 245.71 Subtotal P31,325 366.55 Third Quarter 2008 July MM-6 MM-152a MM - 152 The Manufacturers Life Insurance Company p 920 221.10 MM-153 The Manufacturers Life Insurance Company MM-6 MM-153a MM- 156 The Manufacturers Life Insurance Company 1 921 222.13 MM-158 The Manufacturers Life Insurance Company MM -6 MM-156a MM-159 The Manufacturers Life Insurance Company 857 798.30 MM-160 The Manufacturers Life Insurance Company MM-6 MM- 158a MM-161 The Manufacturers Life Insurance Company_ 453 400.19 MM-162 The Manufacturers Life Insurance Company MM-6 MM-159a MM-165 The Manufacturers Life Insurance Company 910 298.83 MM- 166 The Manufacturers Life Insurance Company MM - 6 MM-160a MM - 167 The Manufacturers Life Insurance Company 539 762.89 MM-168 The Manufacturers Life Insurance Company MM-6 MM-161a MM-170 The Manufacturers Life Insurance Company 425 537.13 MM-172 The Manufacturers Life Insurance Company MM-6 MM-162a MM - 174 The Manufacturers Life Insurance Company 623 688.95 MM-6 MM-165a 6 2 1 4 6 8 .6 5 MM-6 MM-166a 1 089 736.35 MM-6 MM-167a 1 190 404.97 MM-6 MM-168a 2 068 460.17 MM-6 MM- 170a 337 527.63 MM-6 MM-172a 1 647 176.46 MM-6 MM-174a 665 084.87 August MM-6 MM-179a MM - 179 The Manufacturers Life Insurance Company 944 824.67 MM-180 The Manufacturers Life Insurance Company 1 088 354.99 MM -6 MM- 180a MM - 181 The Manufacturers Life Insurance Company MM-182 The Manufacturers Life Insurance Company 447 697.11 MM-6 MM-181a MM-183 The Manufacturers Life Insurance Company 691149.21 MM-184 The Manufacturers Life Insurance Company 875 574.36 MM-6 MM-182a MM-185 The Manufacturers Life Insurance Company 3 260/333.32 MM-186 The Manufacturers Life Insurance Company 1111 274.32 MM-6 MM-183a MM -187 The Manufacturers Life Insurance Company 500 971.94 MM-188 The Manufacturers Life Insurance Company 858 660.18 MM-6 MM - 184a MM -189 The Manufacturers Life Insurance Company 661 744.35 MM-191 The Manufacturers Life Insurance Company 1 476 576.47 MM-7 MM-185a MM-192 The Manufacturers Life Insurance Company 220 740.81 566 823.34 MM - 7 MM-186a MM-7 MM-187a MM-7 MM - 188a MM-7 MM-189a MM-7 MM-191a MM-7 MM-192a

DECISION CTA CASE Nos. 8054, 8117 and 8139 MM-7 MM-193a MM-193 The Manufacturers Life Insurance Company 589 239.79 MM-204a MM-204 The Manufacturers Life Insurance Company 1 913 106.91 MM-7 September MM-209a MM-209 The Manufacturers Life Insurance Company 967 969.53 MM-210a MM-210 The Manufacturers Life Insurance Company 1121 667.77 MM-7 MM-211a MM - 211 The Manufacturers Life Insurance Company MM-7 MM-212a MM-212 The Manufacturers Life Insurance Company 514 820.63 MM-7 MM-213a MM-213 The Manufacturers Life Insurance Company 702 218.90 MM-7 MM-214a MM-214 The Manufacturers Life Insurance Company 3 741 382.59 MM-7 MM-215a MM-215 The Manufacturers Life Insurance Company 808 166.09 MM-7 MM-216a MM-216 The Manufacturers Life Insurance Company 739 968.99 MM-7 MM-217a MM-217 The Manufacturers Life Insurance Company 3 443 008.43 MM-7 MM-218a MM-218 The Manufacturers Life Insurance Company 1154 137.44 MM-7 MM-219a MM-219 The Manufacturers Life Insurance Company 1 000 480.14 MM-7 MM-220a MM-220 The Manufacturers Life Insurance Company 677 954 .74 MM-7 MM-222a MM-222 The Manufacturers Life Insurance Company 1 553 003.35 MM-7 MM-223a MM-223 The Manufacturers Life Insurance Company 1 008 991.48 MM-7 MM-224a MM-224 The Manufacturers Life Insurance Company 580 736.27 MM-7 MM-235a MM-235 The Manufacturers Life Insurance Company 536 821.21 MM-7 2 220 859.75 MM-8 Subtotal 5150, 251,047.70 Fourth Quarter 2008 October MM-9 MM-240a MM-240 The Manufacturers Life Insurance Company p 1 020 458.75 MM-241 The Manufacturers Life Insurance Company MM-9 MM-241a MM-242 The Manufacturers Life Insurance Company 1 064 558.89 MM-243 The Manufacturers Life Insurance Company 532 820.20 MM-9 MM-242a MM-244 The Manufacturers Life Insurance Company 33 462.23 MM-245 The Manufacturers Life Insurance Company MM-9 MM-243a MM-246 The Manufacturers Life Insurance Company 2 082 897.95 MM-247 The Manufacturers Life Insurance Company 923 544 .99 MM-9 MM-244a MM-248 The Manufacturers Life Insurance Company 829 832.92 MM-249 The Manufacturers Life Insurance Company MM-9 MM-245a MM-250 The Manufacturers Life Insurance Company 5 160 212.56 MM-9 MM-246a MM-251 The Manufacturers Life Insurance Company 1 169 429.90 MM-9 MM-247a MM-253 The Manufacturers Life Insurance Company MM-9 MM-248a MM-254 The Manufacturers Life Insurance Company 620 186.34 MM-9 MM-249a MM-255 The Manufacturers Life Insurance Company 1 052 486.91 MM-9 MM-250a MM-267 The Manufacturers Life Insurance Company 1 594 876.17 MM-9 MM-251a 1 022 224.43 MM-9 MM-253a MM-9 MM-254a 590 564.68 544 946.23 MM-9 MM-255a 2 526 933.04 MM-9 MM-267a November MM-9 MM-272a MM-272 The Manufacturers Life Insurance Company 1 007 264.36 MM-273 The Manufacturers Life Insurance Company 1 066 054.06 MM - 9 MM - 273a MM-274 The Manufacturers Life Insurance Company MM-275 The Manufacturers Life Insurance Company 519 185.09 MM-9 MM-274a MM-276 The Manufacturers Life Insurance Company 734 871.24 MM-277 The Manufacturers Life Insurance Company 2 037 442.12 MM-10 MM-275a MM-278 The Manufacturers Life Insurance Company 907 747.18 MM-279 The Manufacturers Life Insurance Company 879 203.12 MM-10 MM-276a 5 360 024.31 MM-10 MM-277a MM-10 MM-278a MM-10 MM-279a

DECISION CTA CASE Nos. 8054, 8117 and 8139 MM - 10 MM-280a MM - 280 The Manufacturers Life Insurance Company 1 183 650.94 MM-10 MM-281a MM-281 The Manufacturers Life Insurance Company 828 427.80 MM-10 MM - 282a MM -282 The Manufacturers Life Insurance Company 999 424.89 MM - 10 MM-283a MM -283 The Manufacturers Life Insurance Company MM - 10 MM-285a MM-285 The Manufacturers Life Insurance Company 1 639 123.59 MM - 10 MM-286a MM - 286 The Manufacturers Life Insurance Company 1 005 971.82 MM - 10 MM - 287a MM-287 The Manufacturers Life Insurance Company MM-10 MM - 300a MM - 300 The Manufacturers Life Insurance Company 593 778.56 MM-301a MM-301 The Manufacturers Life Insurance Company 825 414.19 MM-10 907 414.75 December MM - 306a 3 148 043.45 MM - 307a MM - 10 MM - 308a MM - 306 The Manufacturers Life Insurance Company 977 638.94 MM-10 MM - 309a MM - 307 The Manufacturers Life Insurance Company 1 036 957.83 MM -10 MM - 310a MM-308 The Manufacturers Life Insurance Company MM -10 MM - 311a MM - 309 The Manufacturers Life Insurance Company 487 866.69 MM -10 MM - 312a MM - 310 The Manufacturers Life Insurance Company 693 547.19 MM -10 MM - 313a MM -311 The Manufacturers Life Insurance Company 2 601 238.79 MM - 10 MM -314a MM -312 The Manufacturers Life Insurance Company 867 888. 35 MM - 10 MM-315a MM-313 The Manufacturers Life Insurance Company 1 029 724.66 MM - 10 MM-316a MM -314 The Manufacturers Life Insurance Company 6 472 093.32 MM - 10 MM-317a MM -315 The Manufacturers Life Insurance Company 1111 526.51 MM - 10 MM-319a MM -316 The Manufacturers Life Insurance Company 1 071 966.50 MM - 10 MM-320a MM-317 The Manufacturers Life Insurance Company 9 7 1 4 3 0 .90 MM - 11 MM - 321a MM-319 The Manufacturers Life Insurance Company 1 581 374.55 MM - 11 MM-334a MM-320 The Manufacturers Life Insurance Company 973 833.06 MM-11 MM - 335a MM - 321 The Manufacturers Life Insurance Company 576 314.48 MM-11 MM - 334 The Manufacturers Life Insurance Company 497 729 .23 MM - 11 MM-335 The Manufacturers Life Insurance Company 627 604.93 2 473 044.66 Subtotal p 68,464,258.25 TOTAL P176,070,408.09 For services rendered for the four taxable quarters of 2008, petitioner received foreign currency payments, which were accounted for in accordance with the BSP rules and regulations, as evidenced by the Summary of Service Invoices and Official Receipts Issued 27 VAT , zero-rated sales invoices and official receipts28, Schedule of Sales29 Summary of Bank Remittances30, Customer Advices - Bank Credit Memos31 issued by Citibank and report32 of the Court-commissioned Independent Certified Public Accountant (CPA), Nila N. Mendiola.r- 27 Exhibits "MM" to "MM-11" 28 Exhibits "MM-1" to "MM-336a" 29 Exhibits "0", "NN", "WW", and "XX" 30 Exhibits "PP" and "RR" to "RR-11" 31 Exhibits "T-1" to "T-61", "QQ-1" to "QQ-54", " AAA-1" to " AAA-43", and "BBB-1 " to "BBB-82" 32 Exhibit "CCC"

DECISION CTA CASE Nos. 8054, 8117 and 8139 However, petitioner failed to substantiate with VAT zero-rated official receipts its sales of services in the amount of P756,087.59, detailed as follows: YEAR EXHIBIT CLIE NT AMOUNT OF 2008 SALES MM-91 Manulife (International) Ltd. p 486,514.72 May June MM-141 John Hancock Life Insurance Co. 269,572.87 TOTAL P756,087 .59 In sum, out of the P462,946,245.39 zero-rated sales declared by petitioner for the four taxable quarters of 2008, only the amount of P286,119,749.71 qualifies for VAT zero-rating, computed as follows: 1STQTR 2NDQTR 3RD QTR 4TH QTR TOTAL 80 203 327.92 462 946 245.39 Zero-Rated Sales Per 97 528 227.59 126 062 828.90 159 151 860.98 Returns Less: Disallowances 26 029 735.59 31,325 366.55 50 251 047.70 68 464,258.25 176 070 408.09 Sales to the Manufacturer's - 756 087.59 - - 756 087.59 Life Insurance Company 32 081 454.14 176 826 495.68 No Supporting Official 26 029 735.59 50,251 047.70 68 464 258.25 Receipts Total Disallowances 54 173,59 2.33 65,446,773.45 75,811,781.20 90 687 602.73 286 119 749.71 Va lid Zero Rated Sales After finding that petitioner had VAT zero-rated sales of services for the four taxable quarters of 2008 in the amount of P286,119,749.71, the Court shall determine the amount of input VAT incurred by petitioner in connection thereto. In support of its claimed input VAT for the first, second, third and fourth quarters of 2008, petitioner submitted various suppliers' invoices and official receipts which were examined by the Independent CPA. In her report dated May 9, 2011, the Independent CPA recommended a downward adjustment to petitioner's claim in the amount of P1,827,838.5233 for being unsupported by VAT invoices or official receipts, broken down as follows: YEAR 2008 I NPUT VAT p 93,284.19 1st Quarter 2nd Quarter 236,378.27 3rd Quarter 652,061.85 33 Exhibits "SS-1" to "SS-6"

DECISION CTA CASE Nos. 8054, 8117 and 8139 4th Quarter 846,114.21 ll1,827,838.52 TOTAL The Court finds that aside from the disallowance recommended by the Independent CPA in the amount of P1,827,838.52, petitioner's claim should be further reduced by P5,219.22, representing the discrepancy between the claimed input VAT vis-a-vis the input VAT per summary, as shown below: Per Claim 1STQTR 2ND QTR 3RDAND4TH TOTAL Per Summary P3 047 596.00 QUARTERS p 15,908,004.93 Difference ~ 355,695.62 3 042 376.78 p 8,504 713.31 17,048,479.78 4 355,695.62 ~ 5,219.22 9,650 407.38 ~ (1,140,474.85) - ~ (1,145,694.07) Thus, out of the total claimed input VAT of P15,908,004.93, only the input VAT of P14,074,947.19 was properly substantiated in accordance with Sections 110(A) and 113(A) of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations No. 16-2005. Below is the computation of the amount of P14,074,947.19: Input VAT Claim lSTQTR 2ND QTR 3RD AND 4TH TOTAL p 4 355,695.62 p 3 047 596.00 QTRS p 15 908 004.93 Less: Disallowances 93 284.19 236 378.27 p 8 504 713.31 1 827 838.52 Per !CPA's Findings 5 219.22 5 219.22 Discrepancy between input VAT per - 1 498 176.06 claim and input VAT per Summary ~,262,411.43 ll2,805!998.51 ll14,074,947 .19 Valid Input VAT - ll7!006 537.25 A portion, however, of the afore-mentioned substantiated input VAT shall be applied against petitioner's reported output VAT liabilities for the third and fourth quarters of 2008 in the respective amounts of P947,032.73 and P8,691.58 totalling P955,724.31. Hence, for the four taxable quarters of 2008, only the remaining input VAT of P13,119,222.88 can be attributed to the entire zero- rated sales declared by petitioner in the amount of P462,946,245.39 JY and only the input VAT of P8,294,312.44 is attributable to the valid zero-rated sales of P286,119,749.71, as computed below:

DECISION CTA CASE Nos. 8054, 8117 and 8139 Valid Input VAT 1ST QUARTER 2ND 3RDAND 4TH TOTAL Less: Output VAT QUARTER QUARTERS p 14 074 947.19 Excess Input VAT p 4 262,411 .43 p 2 805,998.5 1 p 7 006 537.25 955 724.31 - - 955 724.31 p 13 119 222.88 p 4 262 411 .43 p 2 805 998.5 1 p 6 050 812.94 Valid Zero-Rated Sales p 54 173 592 .33 p 65 446 773.45 p 66 499 383. 93 P286 119 749.71 Divide by Total Declared Zero-Rated 462/946 245.39 Sales 80 203 32 7. 92 97 528 227. 59 285 214 689.88 13,119 222.88 4 262 411.43 2 805 998.51 6 050 812.94 Multiplied by Excess Input VAT li 8 294 312.44 Excess Input VAT Attributable to li2,879,059.33 li1,882,978.43 li 3,532,274.68 Valid Zero-Rated Sales Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns 34 the same , remained unutilized until it was deducted as "VAT Refund/TCC claimed"35 in its Quarterly VAT Return for the first quarter of 2010. Therefore, the excess input VAT of P34,307,534.3636 as of the end of the first quarter of 2010, which was to be carried over to the succeeding second quarter of 2010, no longer included the subject claim. WH EREFORE, premises considered, petitioner's claim for issuance of tax credit certificate is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO ISSU E A TAX CREDIT CE RTIFICATE in the amount of P8,294,312.44 in favor of petitioner, representing unutilized input VAT attributable to its zero- rated sales for the four quarters of 2008. SO ORDERED . ~~�~c. ~--o.! . 'l JtJAN ITO C. CASTAN EiiA,'JR. Associate Justice WE CONCUR: ~ ~A/.4-~- c AESAR A. CASANOVA AMELIA R. COTANGCO-MANALASTAS Associate Justice Associate Justice 34 Exhibits "J-2"I "K-2"I " L-2"I " N-2"I and " DDD-2" 35 Exhibit " DDD-5" 36 Exhibit " DDD-6"

DECISION CTA CASE Nos. 8054, 8117 and 8139 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. ~~Vo c.QY-~~ /h_. fUANITO C. CASTANEDA, JR. Associate Justice Chairperson 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 ./ J before the case was assigned to the writer of the opinion of the Court. R~ki{IO Presiding Justice