AIR DRILLING ASSOCIATES PTE LTD., v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No.8 (For DCC) lllllllllllllllllll llllllllllllllllllllllllllll lllllllllllllllll\111 22-000394-0047 REPUBLIC OF THE PHlLIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION CTA CASE N0.10957 AIR DRILLING ASSOCIATES PTE LTD., Petitioner, - versus - NOTICE OF RESOLUTION COMMISSIONER OF INTERNAL REVENUE, Respondent To: OFFICE OF THE SOLICITOR GENERAL 134 Amorsolo Street. Lcgazpi Village Makati City ATTY. ALBERT C. ARPON ATTY. CARL FITRI A. HUSS IN ATTY. JOEL VINCE T D. SALAZAR Bureau of lntemal Revenue Legal Division, Revenue Region o. 8A 36th Floor, Export Bank Plaza Building Sen. Gil Puyat Avenue comer Chino Races Avenue Makati City AGA ' MO TENEGRO MALASAGA & CO. 7th Floor, Electra House Building 115-117 Esteban Street. Legazpi Village 1229 Makati City GREETIN GS: You are hereby notified by these presents that on September 15, 2025, a Resolution was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, September 16, 2025. Chan-Te

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION AIR DRILLING ASSOCIATES CTA Case No. 10957 PTE LTD., Members: Petitioner, DEL ROSARIO, EJ., Chairperson, -versus- BACORRO-VILLENA, and CUI-DAVID, JL_ COMMISSIONER OF INTERNAL REVENUE, Promulgated: X----- ----------R--e-sp-o-n-d--en-t-.-----S-E--e--1~5-~ ~!/-:-to-?~ M--------- X RESOLUTION BACORRO-VILLENA, L.: For the Court's resolution are the following: (1) Petitioner Air Drilling Associates Pte Ltd.'s (petitioner's) "Partial Motion for Reconsideration"l (PMR), filed on 31 March 2025, without respondent Commissioner of Internal Revenue's (respondent's/CIR's) comment despite due notice; and (2) Respondent's "Motion for Partial Reconsideration"3 (MPR), filed on 03 April 2025, with petitioner's "Comment to Respondent's Partial Motion . for Reconsideration"4 (Comment), filed on 16 May 2025.t Division Docket, Volu me II, pp. 763-767. See Records Verification dated 20 May 2025; id. , p. 789. Id., pp. 769-777 . ld. , pp. 783-787.

RESOLUTION CTA Case No. 10957 Air Drilling Associates Pte Ltd. v. Commissioner of Internal Revenue X---------------------------- -------------------X Both petitioner and respondent seek the reconsideration of this Court's Decision5 promulgated on 07 March 2025 (assailed Decision). The dispositive portion of which reads as follows: WHEREFORE, premises considered, the instant Petition for Review filed on 15 August 2022 by petitioner Air Drilling Associates Pte Ltd. is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in the amount of 'f'3,s66,817�96, representing petitioner's unutilized excess input Value-Added Tax for the 2"c1, 3'c1 and 4th quarters of CY 2020 which is attributable to its zero-rated sales for the same period. SO ORDERED. I. PETITIONER'S PARTIAL MOTION FOR RECONSIDERATION (PMR) In its PMR, petitioner contests the disallowance of its zero-rated sales amounting to f'99,617,333�98 for the second (2nd) to fourth (4th) quarters of calendar year (CY) 2020. It asserts that it sufficiently established its entitlement to the entire amount of value-added tax (VAT) refund claimed, i.e., f>I3,071,974�37. pursuant to Section 15(g)6 of Republic Act (RA) No. 95137, having rendered aerated drilling services~ U to Energy Development Corporation (EDC) and Philippine Geothermal ,, ld .. pp. 711-753. Sec. 15. lncentin,s_l(;r Reneu�ahle En.:r;'-(1' Projects and.-l.cth�ities.- REDevelopers of renewable energy facilities. including hybrid systems. in prop01tion to and to the extent of theRE component, for both power and non-power applications. as duly certified by the DOE. in consultation with the BOI. shall be entitled to the following incentives: (g) Zero Percent Value-Added Ta.-.: Rate. -The sale of fuel or power generated from renewable sources of energy such as. but not limited to. biomass. solar. wind. hydropower, geothermal, ocean energy and other emerging energy sources using technologies such as fuel cells and hydrogen fuels. shall be subject to zero percent (0%) value-added tax (VAT). pursuant to the National Internal Revenue Code (NIRC) of 1997. as amended b; Republic Act No. 9337. All RE Developers shall be entitled to zero-rated value-added tax on its purchases of local supply of goods. properties and services needed for the development. construction and installation of its plant facilities. This provision shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power. including but not limited to the services performed by subcontractors and/or contractors. AN ACT PROMOTING THE DEVELOPMENT. UTILIZATION AND COMMERCIAI.IZATION OF RENEWABLE ENERGY RESOURCES AND FOR OTHER PURPOSES.

RESOLUTION CTA Case No. 10957 Air Drilling Associates Pte Ltd. v. Commissioner of Internal Revenue X-----------------------------------------------------X Production Company (PGPC), both registered renewable energy (RE) developers with requisite Certificates of Registrations (CORs) from the Department of Energy (DOE) and Board of Investments (BOI). The PMR lacks merit. At the outset, We observe that the present PMR is a complete rehash of petitioner's arguments that the assailed Decision has thoroughly addressed and passed upon.8 Thus, discussing the same merits would be an exercise in futility. In Ortigas and Company Limited Partnership v. judge Tirso Velasco, et a/.9 , the Supreme Court declared: The filing of a motion for reconsideration, authorized by Rule 52 of the Rules of Court, does not impose on the Court the obligation to deal individually and specifically with the grounds relied upon therefor, in much the same way that the Court does in its judgment or final order as regards the issues raised and submitted for decision. This would be a useless formality or ritual invariably involving merely a reiteration of the reasons already set forth in the judgment or final order for rejecting the arguments advanced by the movant; and it would be a needless act, too, with respect to issues raised for the first time, these being, as above stated, deemed waived because not asserted at the first opportunity. It suffices for the Court to deal generally and summarily with the motion for reconsideration, and merely state a legal ground for its denial (Sec. 14, Art. VIII, Constitution); i.e., the motion contains merely a reiteration or rehash of arguments already submitted to and pronounced without merit by the Court in its judgment, or the basic issues have already been passed upon, or the motion discloses no substantial argument or cogent reason to warrant reconsideration or modification of the judgment or final order; or the arguments in the motion are too unsubstantial to require consideration, etc. Nonetheless, to lay petitioner's concerns to rest, this Court finds t it proper to clarifY the grounds for the disallowance of the claimed zero- rated sales. Division Docket. Volume II. pp. 7.:20-752. G.R. No. 109645.04 March 1996.

RESOLUTION CTA Case No. 10957 Air Drilling Associates Pte Ltd. v. Commissioner of Internal Revenue x-----------------------------------------------------x It must be emphasized that the disallowance was anchored on two main grounds: first, petitioner failed to establish that all EDC projects it serviced were duly registered with DOE and BOI and there was no showing that the services were rendered exclusively to EDC's DOE and HOI-registered projects in Tongonan, Leyte and Palinpinon, Negros Oriental; and second, the transactions were not supported by official receipts (ORs), nor was the nature of the services rendered clearly indicated. However, notably, the present PMR, failed to directly controvert these factual findings and instead advanced broad assertions, which warrant minimal consideration. II. RESPONDENT'S MOTION FOR PARTIAL RECONSIDERATION (MPR) An examination of the records of the case warrants the dismissal of the MPR due to its belated filing. Pursuant to Section 110 Rule 15 of the Revised Rules of Court ofTax , Appeals (RRCTA), an aggrieved party shall have fifteen (15) days from the date of receipt of notice of the decision, resolution or order of the Court in question, otherwise the said decision, resolution or order (being contested) shall become final and executory. Here, based on the Notice of Decision dated 12 March 2025", respondent, through his or her Legal Division, received the assailed Decision on 18 March 2025. Counting 15 days therefrom, respondent had until 02 April2025 to file the MPR. However, the MPR was filed only on 03 April 2025, thus it was filed out of time. Consequently, the assailed Decision had already attained finality with respect to respondent. Granting, for argument's sake, that We brush aside the foregoing procedural fa.ux. pas, respondent's MPR still deserves scant consideration.t 10 SEC. I. Who m<~l� and lrhento.file motion. - An: aggrieved party may seek a reconsideration or new trial of an) decision: resolution or order of the Court by filing a motion for reconsideration or new trial within fifteen da) s from the date of receipt of notice of the decision, resolution or order of the Court in question. II Division Docket. Volume II. p. 710.

RESOLUTION CTA Case No. 10957 Air Drilling Associates Pte Ltd. v. Commissioner of Internal Revenue Page5of7 X-----------------------------------------------------X Respondent, in his or her MPR, argues that petitioner failed to prove it was engaged in zero-rated or effectively zero-rated sales during the 2nd to 4th quarters of CY 2020. Respondent highlights that the only document relied upon, i.e., the Contract for Aerated Fluids Drilling Works, had expired on 01 January 2017 and petitioner failed to present any evidence of its extension, amendment or continued validity. Absent competent evidence of ongoing contractual engagement or actual zero- rated transactions during the relevant period, petitioner's claim necessarily fails to meet the 4th requisite under Section n2(A)'z of the National Internal Revenue Code (NIRC) of 1997, as amended, which requires that input VAT be attributable to valid zero-rated sales. Even assuming arguendo that petitiOner had valid zero-rated sales, respondent contends that the claim must still be denied for failure to comply with the invoicing requirements under Section 113(B)(2)(c)'3~ U of the NIRC of 1997, as amended, since the phrase "zero-rated sale," was 12 SEC. 112. Rejimds or Tax Credits of'Jnplll Tax.-- (A) Zero-Rated or EJI'ectin!(\' Zero-Rated Sales. - Any VAT-registered person. whose sales are zero-rated or effectively zero-rated ma:. within two (1) 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)(l). (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): frumled. fur! her. That where tl1e taxpayer is engaged in zero-rated or etlectively zero-rated sale and also in taxable or exempt sale or 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 proportionate!: on the basis of the volume of sales: Provided jinal~r. That for a person making ~ales that are Lero-rated under Section 108(8)(6), the input taxes shall be allocated ratabl~ between his Lero-rated and non-zero-rated sales. I~ SEC. 113. lnroicing and Accounling Requirementsj(;r fAT-Registered Person.';.- (8) li?f'ormotion Contained in the f :~ T lnroice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (I) A statement that the seller is a VAT-registered person, followed by his Taxpayer�s Identification Number (Til\;): {2) The total amount \\�hich the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: (a) rhe amount of the tax shall be shown as a separate item in the invoice or receipt; (b) Ifthe sale is exempt from value-added tax. the term �vAT-exempt sale' shall be written or printed prominent!~ on the invoice or receipt: (c) If the sale is subject to zero percent (0%) value-added tax, the term �zero-rated sale� shall be written or printed prominently on the invoice or receipt: (d) If the sale involves goods. properties or services some of which are subject to and some oCV~�hich are VAT zero-rated or VAT-exempt. the invoice or receipt shall clearly indicate the breakdon'n of the sale price between its taxable. exempt and zero-rated components. and the calculation of the value-added tax on each pm1ion of the sale shall be shown on the invoice or receipt: Prm�ided. That the seller may issue separate invoices or receipts for the taxable. exempt. and zero-rated components of the sale. 1Emphasis supplied I

RESOLUTION CTA Case No. 10957 Air Drilling Associates Pte Ltd. v. Commissioner of Internal Revenue Page 6 of? x-----------------------------------------------------x not prominently imprinted in petitioner's ORs and a mere 'breakdown' in the invoices or ORs does not suffice. In the Comment, petitioner counters that: (1) it has sufficiently established that EDC and PGPC are REdevelopers and its sale of services to the same entities qualifies as zero-rated sales pursuant to Section 15(g)'4ofRA No. 9513; and (2) a 'breakdown' conspicuously showing that the said sale transaction is zero-rated substantially complies with the imprinting requirement. As to respondent's first ground, We clarify that the assailed Decision did not rely solely on the alleged expired Contract for Aerated Fluids Drilling Works. Rather, it also gave weight to the ORs and invoices issued by petitioner, which clearly specify the nature of the services petitioner rendered. A judicious review of the ORs and corresponding invoices reasonably convinces this Court that "aerated fluids drilling services", as explicitly described therein, satisfy the statutory requirement that the services must be "needed for the development, construction, and installation of the RE Developer's plant facilities and the whole process of exploration and development of RE sources up to its conversion into power" under Section 15(g)'5 of RA No. 9513. Indeed, jurisprudence recognizes that an invoice or OR may sufficiently reflect the nature of services rendered for tax purposes.'6 Regarding respondent's second ground, We have tersely addressed this in the assailed Decision, where We held that a 'breakdown' in the ORs, clearly identifying the transaction as a zero- rated sale, constitutes substantial compliance with the imprinting requirements.'7 o In sum, this Court finds no cogent reason to modify or overturn the assailed Decision.'8 . ' " Supra at note 6. I~ I d. 16 See Cmnmissiofler o(lmernol Ren.:llllt' ,._ :\foni/u Ahning Corporation, G.R. No. 153204, 31 August 2005. 17 Division Docket. Volume II. pp. 739� 7-!1. 18 Supra at note 5.

RESOLUTION CTA Case No. 10957 Air Drilling Associates Pte Ltd. v. Commissioner of Internal Revenue Page 7 of7 X-----------------------------------------------------X WHEREFORE, premises considered, the Court, hereby, RESOLVES to: 1. DENY petitioner's "Partial Motion for Reconsideration", filed on 31 March 2025, for lack of merit; and, 2. DENY respondent's "Motion for Partial Reconsideration", filed on 03 April 2025, for being filed out of time and lack of merit. SO ORDERED. WE CONCUR: ileA+:1 OMAN G. DE OSARIO /J)T/~"Jtt&Jr.ld; d~~)t1r;-- U Presiding Justice LA NEE~:~ Associate Justice