LANTRO PHILS. INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No. 8 111111111111111111111111111 11111 11111 11111111111111 111111111111111111111 11111111 19-000355-0073 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE NO. 10130 LANTRO PIDLS. INC., NOTICE OF DECISION Petitioner, -versus- COMMISSIONER OF INTERNAL REVENUE, Respondent. To: OFFICE OF THE SOLICITOR GENERAL 134 Arnorsolo Street, Legazpi Village, Makati City ATTY. LIEZL G. BOHOL Bureau of Internal Revenue Revenue Region No. 7B- East NCR 25th Floor, The Podium West Tower ABD Avenue, Ortigas Center Mandaluyong City ESCALANTE PIOQUINTO-ENRIQUEZ ENRIQUEZ QUIAMBAO GUILLERMO & SANCHEZ 7th Floor, The Athenaeum Building 160 L.P. Leviste Street, Salcedo Village Makati City GREETINGS: You are hereby notified by these presents that on April 29, 2024, a Decision was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, April30, 2024. Atty. Maria J~F. Chan-Te Executiv~ Court II

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION LANTRO PHILS. INC. , CTA Case No. 10130 Petitioner, Members: -versus- DEL ROSARIO, P.J., Chairperson, MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. X - - - - - - - - - - - - - - - - - - - - - - - - - -!7'"=- --~ - - - - - - - - - - - X DECISIO MANAHAN,J.: THE CASE This is a Petition for Review posted on July 18, 20 19 by petitioner Lantro Phils. Inc. against respondent Commissioner of Internal Revenue (CIR) , praying for the refund or issuance of a tax credit certificate in the aggregate amount of P3,949,107.91, 1 representing petitioner's unutilized input value-added tax (VAT) for the period covering January 1, 2017 to March 31, 20 17. THE PARTIES Petitioner Lantro Phils. Inc. is a corporation duly organized and existing under and by virtue of th e laws of the Philippines.2 It is registered with the Bureau of Internal Revenu e (BIR) as a VAT taxpayer with principal office address at 420 D Francisco Legaspi St., Maybunga, Pasig City, under Tax Identification Number (TIN) 20 2-950-644-000.3 1 Statement of the Case, Pre -Tria l Order dated Fe bruary 3, 2 020 , Docket - Vol. I, p. 252. 2 Exhibit "P-3", Docket - Vol. II, pp. 496 to 504. 3 Exhibit "P-55", USB (which is marked as Exhibit "P-50-2"). ~

DECISION CTA Case No. 10130 Respondent CIR is duly appointed to perform the duties of his office, including, inter alia, the power to decide disputed assessments subject to the exclusive appellate jurisdiction of this Honorable Court, pursuant to Section 4 of the Tax Code and Section 7 of Republic Act (RA) No. 1125, as amended by RA No. 9282. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City.4 ANTECEDENTS (ADMINISTRATIVE LEVEL) On April 1, 20 19, petitioner filed an Application for Tax Credits I Refunds (BIR Form No. 1914) for VAT refund with the BIR,5 covering the period from January 1, 20 17 to March 31, 2017, in the amount of P3 ,949,107 .91. Thereafter, on June 18, 2019, petitioner received the Notice of Denial for VAT Refund/ Credit dated May 31, 2019, issued by Regional Director (RD) Romulo L. Aguila, Jr.,6 on the ground that the BIR Form No. 1914 - Application for Tax Credits/Refunds was filed beyond the prescriptive period of two (2) years from the taxable quarter when the zero-rated sales were made pursuant to Section 112(A) of the 1997 National Internal Revenue Code (NIRC), as amended. PROCEEDINGS BEFORE THIS COURT On July 18, 20 19,7 petitioner filed the present Petition for Review. Within the extended time granted by the Court,8 on October 23, 2019, respondent filed his Answer,9 interposing the following special and affirmative defenses, to wit: 4 Par. 1, Stipulated Facts, Joint Stipulation of Facts and Issues (JSFI) , Docket- Vol. I, p . 160 . s Exh ibit "P- 1", Docket - Vol. I, p. 495. 6 Exhibit "P-2", Docket - Vol. I, p. 34. 7 Docke t - Vol. I, pp. 13 to 28. s Motion f or Extension of Time to File A ns wer to the Petition f or Review filed on Augu st 23, 2 01 9, a n d Order dated Augu st 30, 2 01 9; Motion fo r Extension of Time to File Ans w er to the Petition for Review filed on Septem ber 23, 2 01 9, a nd Resolution d a ted October 2, 2 019, Docket - Vol. I, pp. 89 to 92 and 97 to 102. 9 Docket - Vol. I, pp. 103 to 109. ~

DECISION CTA Case No. 10130 "SPECIAL AND AFFIRMATIVE DEFENSES The Honorable Court has no jurisdiction over Petitioner's judicial claim for refund or tax credit certificate. 10. The Petitioner failed to file its Petition for Review within the prescribed period. Perusal of the records show that the period to elevate Petitioner's case to the Honorable Court of Tax Appeals had already prescribed. 11. Perusal of the records show that Petitioner received the Letter of Denial issued by the Revenue District Office No . 43 Pasig City dated May 14, 2019 on May 15, 2019. Thus, on the said date Petitioner was notified of the denial of their claim for refund or tax credit certificate. 12. Section 112 of the National Internal Revenue Code of 1997, as amended provides for the procedure of refund or tax credit of input tax, which provides to wit: XXX XXX XXX 13. The foregoing provision provides that the Bureau of Internal Revenue has a period of one hundred twenty (120) days to act on Petitioner's administrative claim for refund as well a thirty (30) day period for the taxpayer to seek judicial recourse with the Honorable Court of Tax Appeals on two instances, first, upon full or partial denial of its claim for refund; or second upon the inaction of the CIR for a period of 120 days from the submission of complete documents in support of its refund claim. 14. In this case, a decision denying Petitioner's claim for refund was issued on May 14, 2019 which was received by Petitioner on May 15, 2019. This fact of receipt was written on the receiving copy of the said Letter of Denial. 15. Thus, upon receipt of such decision denying Petitioner's claim of refund on May 15, ~

DECISION CTA Case No. 10130 2019, Petitioner has only thirty (30) days therefrom to appeal the said decision to the Honorable Court of Tax Appeals. 16. Hence, this Honorable Court clearly has no jurisdiction over Petitioner's case. 17. The Supreme Court has held in numerous cases that the right to appeal is a mere statutory privilege. In this case, the NIRC has provided for the prescriptive period within which the Petitioner may appeal the decision of the CIR denying the claim for refund, which is thirty (30) days from receipt thereof. Being a statutory privilege, there must be strict compliance with the prescriptive period laid down by the law. 18. The Supreme Court also held in the case of Fenequito et al. v. Vergara the nature of an appeal, to wit: 'It is a settled rule that the right to appeal is neither a natural right nor a part of due process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of law. An appeal being a purely statutory right, an appealing party must strictly comply with the requisites laid down in the Rules of Court. Deviations from the Rules cannot be tolerated. The rationale for this strict attitude is not difficult to appreciate as the Rules are designed to facilitate the orderly disposition of appealed cases. In an age where courts are bedeviled by clogged dockets, the Rules need to be followed by appellants with greater fidelity. Their observance cannot be left to the whims and caprices of appellants.' 19. There must be strict compliance with procedural rules. Procedural rules are tools designed to facilitate the adjudication of cases. Courts and litigants alike are thus enjoined to abide strictly by the rules. ~

DECISION CTA Case No. 10130 Petitioner is still not entitled to its claim of refund or tax credit certificate. 20. Even assuming arguendo, and without admitting that their application for refund should be given due course, Petitioner is still not entitled to refund or issuance of tax credit certificate under Section 112 of the NIRC. 21. Upon evaluation of Petitioner's submitted documents in support of their claim of refund or tax credit certificate by the concerned revenue officers, it revealed that Petitioner is not entitled thereto. 22. Based on such evaluation, there were disallowed input taxes due to the following: first, due to non-submission of supporting documents; second, due to non-compliance with invoicing requirements; third, due to incorrect information; fourth, for claiming out of period input taxes on local purchases; and lastly due to non-submission of secondary supporting documents on Petitioner's big ticket purchases. 23. Hence, even if the evaluation is based on the merits of Petitioner's claim for refund or tax credit certificate, Petitioner is still not entitled thereto. 24. Furthermore, the Supreme Court held that tax refund are in the nature of tax exemptions which must be construed strictissimi juris against the taxpayer and liberally 1n favor of the government, as pronounced in the case of Commissioner of Internal Revenue v. Rosemarie Acosta, to wit: 'Tax r efunds are 1n the nature of tax exemptions which are construed strictissimi juris against the taxpayer and liberally in favor of the government. As tax refunds involve a return of revenue from the government, the claimant must show indubitably the specific provision of la w from which h er right arises; it cannot ~

DECISION CTA Case No. 10 130 be allowed to exist upon a mere vague implication or inference nor can it b e extended beyond the ordinary and reasonable intendment of the language actually used by the legislature in granting the refund. To repeat, strict compliance with the conditions imposed for the return of r evenue collecte d 1s a doctrine consistently applied 1n this j u r i s d i c t i o n . "' On November 22, 2019, respondent filed his Respondent's Pre-Trial Brief 10 On November 26, 201 9, petitioner filed its Pre-Trial Brief (For the Petitioner).11 On November 28, 2019 ,12 the Court set the case for Pre-Trial Conference. On December 17, 201 9 , the parties submitted th eir Joint Stipulation of Facts and Issu es ,l3 which wa s approved in the Resolution d a ted January 16, 202 0 .14 On February 3 , 2 020,15 the Court issued the Pre-Trial Order. In the meantime, on January 2, 2020, respondent transmitted the BIR Records for the case, consisting of one (1) folder, with 2146 pages .l6 During the hearing, p etitioner pre sented the following witnesses: (1) Ms. Claire Gla diola Eclarinal,17 p etition er 's Assistant Finance Mana ger; and (2 ) Ms. Thea May F. Vicer a, 18 the Court-commissioned Independen t Certified Public Accountant (ICPA) .19 10 Docket- Vol. I, pp. 1 14 to 116. 11 Docket- Vol. I, pp. 137 to 143. 12 Notice of Pre-Trial Conference dated October 30, 2019, Docket- Vol. I, pp. 110 to 11 1; Minutes of t h e h earing h eld on, and Order dated, November 28, 2019, Docket - Vol. I, pp. 144 to 15 1. 13 Docket - Vol. I, pp. 160 to 166. 14 Docket - Vol. I, pp. 20 1 to 202. 1s Docket - Vol. I, pp. 252 to 261. 16 Docket - Vol. I, p. 172. 17 Exhibit "P-49", Docket - Vol. I, pp. 218 to 228; Minutes of the hearing held on, and Order dated, September 15, 2020, Docket - Vol. I, pp. 331 to 335; Exhibit "P-79", Docket - Vol. I, pp. 445 to 449; Order dated July 13, 2 02 1, Docket - Vol. I, pp. 475 to 476. 18 Exh ibit "P-5 1", Docket - Vol. I, pp. 366 to 394; Minutes of the hearing held on, and Orde r d a t e d , Novembe r 26, 2020, D oc k e t - Vol. r, pp. 407 to 409. 19 Oath of Commission d a ted January 23, 2020 , Docket- Vol. I, pp. 206; Minutes of the h earing h eld on , a n d Order, dated J a nuary 23, 2 020 , Docket - Vol. I, pp. 204 to 205, and 207 to 208, respectively. c;,.,-

DECISION CTA Case No. 10130 The ICPA Report was submitted on June 30, 2020.20 An Amended Report was later submitted on September 25, 2020.21 On July 29, 2021, petitioner filed its Formal Offer of Evidence,22 to which respondent filed his Comment [Re: Petitioner's Formal Offer of Evidence} on November 25, 2021.23 In the Resolution dated March 30, 2022,24 the Court resolved to admit petitioner's offered exhibits, except for several exhibits on such grounds as specified therein. On the other hand, respondent offered the testimony of Revenue Officer Mariz A. Pernia.25 Noting respondent's failure to file his Formal Offer of Evidence, the Court issued the Resolution dated August 5, 2022,26 directing the parties to file their respective memorandum within thirty (30) days from notice. However, on August 16, 2022, respondent filed a Motion to Admit Respondent's Formal Offer of Evidence with the attached Respondent's Formal Offer of Evidence.27 In the Resolution dated September 9, 2022,28 the Court admitted Respondent's Formal Offer ofEvidence. In the meantime, in compliance with the Court's Resolution dated August 5, 2022, petitioner filed its Memorandum on September 12, 2022 .29 On September 30, 2022, petitioner filed a Manifestation,30 expressing no objection to Respondent's Formal Offer of Evidence. Thus, in the Resolution dated November 18, 2022,31 the Court admitted all of respondent's offered exhibits. 2o Docket- Vol. I, pp. 296 to 313. 2 1 Exhibit "P-50", Docket- Vol. I, pp. 341 to 358 and 376 to 394. 22 Docket- Vol. I, pp. 481 to 493. 23 Docket - Vol. II, pp. 599 to 600. 24 Docket- Vol. II, pp. 604 to 610. 25 Exhibit "R-9" Docket - Vol. I, pp. 119 to 124; Minutes of the hearing held on, and Order dated, February 23, 2021, Docket- Vol. I, pp. 421 to 427 . 26 Docket- Vol. II, p. 639. 27 Docket- Vol. II, pp. 640 to 649 . 28 Docket- Vol. II , p. 651. 29 Docket- Vol. II, pp . 652 to 665. 30 Docket- Vol. II , pp. 667 to 669. _ ___.- 31 Docket- Vol. II , pp. 677 to 678. ~

DECISION CTA Case No. 10130 The case was submitted for decision on May 9, 2023, taking into consideration petitioner's Memorandum sans respondent's Memorandum. 32 THE STIPULATED ISSUE The parties submitted the following issue for this Court's resolution: "Whether or not the Petitioner is entitled to its claim for VAT refund for the first quarter of taxable year (TY) 2017 in the amount of Three Million Nine Hundred Forty[-]Nine Thousand One Hundred Seven Pesos and 91/100 (Php3,949 , 107.91)."33 Petitioner's arguments: Petitioner argues that the claim for refund was filed on time; that the requirements of Revenue Memorandum Circular (RMC) No. 17-18 were fulfilled; and that the refund is justified by law and regulations. Respondent's counter-arguments: Respondent contends that this Court has no jurisdiction over petitioner's judicial claim for refund or tax credit certificate; and that petitioner is not entitled to its claim for refund or tax credit certificate. THE COURT'S RULING The present Petition for Review must be denied. Section 112 (A) and (C) of the 1997 NIRC , as amended, provides: "SEC. 112. Refunds or Tax Credits of Input Tax.- 32 Minute Resolution d a te d May 9 , 2023, Docket- Vol. II, p. 68 0 . 33 Stipulated Issue, J SFI, Docket - Vol. I, p . 160. ~

DECISION CTA Case No. 10130 (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(B)( 1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(B)(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 of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial. In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act~

DECISION CTA Case No. 10130 on the application within the ninety (90)-day period shall be punishable under Section 269 of this Code." Based on the above-quoted provisions, jurisprudence has laid down the following requisites which the taxpayer- applicant must satisfy to successfully obtain a credit/refund of input VAT: As to the timeliness of the filing of the administrative and judicial claims: 1. the refund claim is filed with the BIR within two (2) years after the close of the taxable quarter wh en the sales were made;34 2 . in case of full or partial denial of the refund claim r endered within a period of ninety (90) days from the date of submission of the official receipts or invoices and other documents in support of the application, the judicial claim shall be filed with this Court within thirty (30) days from receipt of the decision'�35 With reference to the taxpayer's registration with the BIR: 3. the taxpayer is a VAT-registered person;36 In relation to the taxpayer's output VAT: 4. the taxpayer is engaged 1n zero-rated or effectively zero-rated sales;37 5 . for zero-rated sales under Section 106(A)(2)(1) 34 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007 ; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; a n d AT&T Communications Services Philippines, Inc. vs. Com missioner of Internal Revenue, G.R. No. 182364, August 3, 20 10. 35 Refer to Energy Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 203367, March 17, 202 1; Commissioner of Internal Revenue vs. CE Casecnan Water And Energy Company, Inc. , G.R. No . 2 12727, February 1, 2023; and Commissioner of Internal Revenue us. Vestas Services Philippines, Inc., G.R. No. 255085, Ma rch 29 , 20 23. 36 Intel Technology Philippines, Inc. us. Commissioner of Internal Re venue, s upra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, supra. 37 Ibid. ~

DECISION CTA Case No. 10130 and (2); 106(8);38 and 108(B)(l) and (2) , the acceptable foreign curren cy exchange proceeds have been duly a ccounted for in a ccordance with the Bangko Sentral ng Pilipinas (BSP) rules and r e g u l a t i o n s ;39 As regards the taxp ayer's input VAT being refunded: 6 . the input taxe s a re not transitional input taxes;4o 7. the input taxes are due or paid;41 8 . the input taxes claimed are attributable to zero- rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxa ble or exempt sales, and the input taxes cannot b e directly and entirely attributable to any of these sale s , the input taxes shall b e proportionately allocated on the basis of sales volume;42 and 38 Section 106(B) cited in Section 112(A) of RA No. 8424 was later a m ended by RA No. 9337 to pertain to Section 106(A)(2)(b). Accordingly, Section 112(A), as amended by RA No. 9337, reads as follows: "SEC. 112. Refunds or Tax Credits ofInput Tax. - (A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT- registered person, whose sales are zero-rated or effectively zero-rated may, with in two (2) years a fter the close of t he taxable quarter when th e 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 th e extent that such in put tax h as not been a p plied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) a nd (b) and Section 108(B)(l ) and (2), the acceptable foreign currency exchange proceeds thereof h ad been duly accounted for in accordance with t h e rules a nd regula tion s of t h e Bangko Sentral ng Pilipin as (BSP): Provided, further, That whe re 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, a n d the a m oun t of creditable input tax du e or paid cannot be dir ectly and e ntirely a ttributed to any one of th e transactions, it sh a ll b e allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated u n der Section 108(B)(6), th e input taxes sh all b e a llocated ratably between his zero- rated and n on -zero-rated sales." (Emp hasis s upplied) However , in view of the amendmen ts introduced by RA No. 10963, Section 106(A)(2)(b) is now deleted. 39 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, sup ra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; a n d AT&T Com munications Services Philippines, Inc. vs. Commissioner ofInternal Revenue, supra. 40 Ibid. 41 Ibid . 42 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, s up ra; a n d San Roque Power Corporation vs. Commissioner ofInternal Revenue, sup ra. ~

DECISION CTA Case No. 10 130 9. the input taxes have not been applied against output taxes during and in the succeeding quarters. 43 The Court shall now proceed to determine whether petitioner satisfied the above requisites. The refund claim was timely filed The Court shall first determine whether the present claim was timely filed. Respondent denied petitioner's claim for refund on the ground that it was filed out of time, thus: "Verification disclosed that you filed an Application for Tax Credit/Tax Refund - BIR Form No. 1914 to claim for tax refund on your unutilized input taxes for the taxable period January 1, 2017 to March 3 1, 2017 on April 1, 20 19 together with the required documents, which is beyond the prescriptive period of two (2) years from the taxable quarter when the zero-rated sales was made pursuant to Section 112(A) of the NIRC of 1997, as amended, x x x" Petitioner, on the other hand, asserts that it timely filed its administrative claim for refund. Accordingly, the last day of the two (2)-year period to file the administrative claim for refund from the close of the taxable quarter March 31, 20 17 is on March 31, 2019, which fell on a Sunday . As such, it had until the next working day or until April 1, 2019 within which to file its claim. The Court agrees with petitioner. Section 112(A) of the 1997 NIRC , a s amended, provide s that any VAT-registered person, whose sales are zero-rated or effectively zero-rated m ay, within two (2) years after the 43 Intel Tech nology Philippines, Inc. us. Commissioner of Internal Revenue, supra; San Roque Power Corporation us. Commissioner of Internal Revenu e, sup ra; and AT&T Communications Services Philippines, Inc. us. Commissioner of Internal Revenue, supra. ~

DECISION CTA Case No. 10130 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. Petitioner's administra tive claim for refund covers the taxable quarter January to March 2017. Considering that the close of said taxable quarter is on March 31, 2017, the two (2) - year prescriptive period within which to file the administrative claim for refund falls on March 31, 20 19 . However, petitioner filed its claim on April 1, 20 19.44 On its face, petitioner appears to h ave filed its claim one (1) day beyond the due date of March 31, 20 19. However, Section 28, Chapter VII, Book I of the Administrative Code of 1987,4 5 provides that where the day, or the last day, for doing any act required or permitted by law falls on a regular holiday or special day, the act may be done on the n ext succeeding business day. The reason for this provision is that, as a rule, public and private offices are closed for the transaction of business on Sundays and holidays, and to include these days in th e computation of the requisite period would, in effect, result in the corresponding shortening of the period without any fault on the part of the party required or permitted to make full use thereof. On the other hand, the resulting extension of the period is more apparent than real because, generally, no one is supposed to transact any business on Sundays or holidays. Besides, such a result cannot be attributed to the will or desire of the obligor concerned.46 In this case, the close of the taxable quarter on March 31, 2019 fell on a Sunday, a non-working day. As such, the last day for the filing of the administrative claim for refund is on the next working day, or on April 1, 2019, a Monday. Considering the foregoing, petitioner timely filed its administrative claim for refund . 44 Exhibit "P- 1" (BIR Form No. 19 14 - Application for Tax Credits/Refunds), Docket- Vol. I, p. 495. 45 Executive Order No. 292. 46 Galang u. The Workmen's Compensation Commission, G.R. No. L-33928, March 29, 1972 . ~

DECISION CTA Case No. 10130 With respect to petitioner's judicial claim, the same must be filed within thirty (30) days from receipt of respondent's decision or after the expiration of the ninety (90)-day period under Section 112(C) of the 1997 NIRC, as amended. Thus, from the filing of petitioner's administrative claims, respondent had ninety (90) days to act on the said claim. Counting ninety (90) days from petitioner's submission of its administrative claim with its supporting documents on April 1, 2019, respondent had until July 1, 201947 to act on the administrative claim. On June 18, 2019,48 petitioner, through a certain Mary Grace Dela Cruz, received the Notice of Denial for VAT Refund/ Credit issued by respondent through RD Romulo L. Aguila, Jr.. As such, the decision denying petitioner's administrative claim was issued well-within the ninety (90)- day period. Counting thirty (30) days from petitioner's receipt of respondent's denial of its administrative claim on June 18, 2019, petitioner had until July 18, 2019 to file its judicial claim. Considering the present Petition for Review was filed on July 18, 2019,49 petitioner thus timely filed its judicial claim. Petitioner is a VAT- registered person. In this regard, petitioner proved that it is a VAT- registered taxpayer with TIN No. 202-950-644-000, as evidenced by BIR Certificate of Registration No. OCN 3 R C 0 0 0 0 7 9 9 7 7 5 . so Petitioner is engaged in zero- rated or effectively zero- rated sales in 1st quarter of 2017. With respect to output VAT, the taxpayer must prove that it is engaged in zero-rated or effectively zero-rated sales. 47 The last day July 3 0 , 2 01 9 fell on a S unday. The n ext working d ay is July 1, 2019 . 48 Exhibit "P- 2", Dock et - Vol. I, p. 3 4 . 49 Docke t- Vol. I, pp. 13 to 28. so Exhibit "P-55", USB (w hic h is m arked as Ex hibit "P-5 0-2"). ~

DECISION CTA Case No. 101 30 Petitioner reported a total sales amounting to P104,969,217.22 in its Amended 1st Quarterly VAT Return for TY 2017,51 which is comprised of VATable and zero-rated sales, broken down as follows: VATable sales p 77,935,734.89 Zero-rated sales 27 ,03 3 ,482.33 Total sales P104,969,217.22 Petitioner claims that its zero-rated sales arose from its sale of services to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects its sales to zero- rating, pursuant to Section 108(8)(3) of the 1997 NIRC, as amended. It provides: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered p ersons shall be subject to zero percent (0�/o) rate: XXX XXX XXX (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippine s is a signatory effectively subjects the supply of such services to zero percent (0�/o) rate;"(Emphasis supplied) In relation thereto , Section 24 of RA No. 7916, as amended, otherwise known as The Special Economic Zone Act of 1995, provides: 5 1 Exhibit "P-6- 1", Docket - Vol. II , p . 506. ~

DECISION CTA Case No. 101 30 Page 16 of 4 5 "SECTION 24. Exemption from Taxes Under the National Internal Re venue Code. -Any provision of existing laws, rules and regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu of paying taxes, five percent (5�/o) of the gross income earned by all businesses and enterprises within the ECOZONE shall be remitted to the national government . This five percent (5�/o) shall be shared and distributed as follows :" (Emphasis and underscoring supplied) Implementing the foregoing prov1s1ons, Section 4 . 108- 5(b)(3) of Revenue Regulations (RR) No. 16-2005 provides: "SECTION 4.108-5. Zero-Rated Sale of Services.- XXX XXX XXX (b) Transactions Subject to Zero Percent (0%) VAT Rate. - The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0�/o) VAT rate: XXX XXX XXX (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0�/o) rate;"(Emphasis supplied) Petitioner asserts that the zero-rated sales for the 1st quarter of TY 2017 amounting to P27,033,482.33 arose from its sale of services to the following Philippine Economic Zone Authority (PEZA) -registered entities , supported with their respective PEZA Certification qualifying them for the purpose of VAT zero-r a ting of trans actions with local suppliers of goods, properties and services in connection with their PEZA- r egistered activities: ~

DECISION CTA Case No. 10130 Page 17 of 4 5 Customer Amount Exhibit PEZA Year of No.52 Certification Validity Accentu re Inc. p 4,643, 118.10 Acquire Asia Pacific Inc. 3 00,700.00 "P-66" No. 20 17 Acquire Asia Pacific Ma nila 6 77,900.00 "P-66-42" 20 17- 1173 2017 2 Inc. P-66 -46 20 17 Acquire Asia Pacific Ma nila 2017- 1299 Inc . 2017- 1087 201 7 Acquire Asia Pacific Ph ilip p ines In c. 562 ,550 .00 (none) 2017 Axiem Corpora tion 2017 CAC Philippine s Inc. 724,000.00 "P-66-48" 2017-1090 Citigroup Business Process 201 7 Solution s 4 ,320 .00 (none) Convergys Philippines Inc. 58 1,000 .00 "P-66-33" 2017-0131 201 7 Diversified Technology 2 47,43 1.06 "P-66-32" 2017- 126 1 2017 Solutions Interna tiona l Inc . 2017 Diversify Intelligent Sta ffing 9,967 ,055.70 (non e) 2017 Solution 2017 Internationa l Digita l 1,807,450 .00 "P-66-49" 2017-1920 2017 Sys tems IBM Busines s Services Inc. 29,475.00 (none) 20 17 IBM Solution s Delivery Inc . 26,64 3.46 (none) 20 17 Integreon Ma n aged 253,930 .0 0 "P-66-22" 2 01 7-0172 Solution s Phils. In c. or "P- 19"53 2 017-0 293 JPMorgan Ch a s e Ba nk NA Phil. Global Services Cen ter 4 1,235. 00 "P-66-2 1" 2017-0701 Navita ire Philippines In c. or "P-2 0"54 Sta nda rd a nd Poors 2017- 1141 Philippines Inc. 32, 500 .00 "P-66- 17" 2 017 -2309 Sykes Asia Inc. Phils. or "P- 22"55 2 0 17 - 1189 Teleph ilippines In c. 3,8 18 ,7 18 .96 "P-66-50" (none) Tyco Fire Security a n d or "P-77"56 2017-0839 Services Pte Ltd Lufthansa Germa n Airlines 66,76 1.00 "P-66- 15" (none) NCR Cebu Development 654 ,75 0.00 "P-66-9" Center Inc. Vishay Philippines Inc. or "P-26"57 Ra kuten Inc. 1,969,462 .2 5 Total 19 1,54 0 .7 0 "P-66-4" o r "P-28"58 209, 144.42 19 ,652.00 "P-66 - 14" (none) 135,6 55.00 or "P-23"59 2017- 1952 40 ,000.00 (none) 28,489.68 (none) P27,033,482.33 52 As found in USB m a rked a s Exhibit "P-50-2". 53 Docket - Vol. II , p. 519. 54 Id. a t 520 . 55 Id. at 522 . 56 Id. a t 590 . 57 Id . a t 525. 58 Id . a t 527. 59 Id. a t 523 . ~

DECISION CTA Case No. 10130 Based on the foregoing table, petitioner's sales to the following entities amounting to P12,856,792.51 must be disallowed outright for its failure to prove that said entities are entitled to VAT zero-rating under Section 108(B)(3) of the 1997 NIRC, as amended, and its implementing regulations: Custo mer Amount Acquire Asia Pacific Ma nila Inc. Axiem Corporation p 562,550.00 Convergys Philippines Inc. Diversify Intelligent Staffing 4,320.00 Solution International Digital Systems 9,967,055.70 Sykes Asia Inc. Phils. Tyco Fire Security and Services Pte 29,475.00 Ltd Lufthansa German Airlines 26,643.46 Vishay Philippines Inc. 1,969,462.25 Rakuten Inc. Total 209,144.42 19,652 .00 40,000 .00 28,489.68 P12,856,792.51 With respect to petitioner's sales to entities duly registered with PEZA, it is mandatory for petitioner to comply with the invoicing requirements containing all the required information under Section 113(A) and (B) of the 1997 NIRC, as amended, thus: "SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. - (A) Invoicing Requirements. -A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:~

DECISION CTA Case No. 10130 (1) A statement that the seller 1s a VAT- registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value- added tax: Provided, That: (a) The amount of the tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from value-added tax, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0�/o) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT- exempt, the invoice or receipt shall clearly indicate the break-down of the sale price b etween its taxa ble , exempt and zero-rated components, and the calculation of the value- added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) The date of transaction , quantity, unit cost and description of the goods or properties or nature of the service; and (4) In the case of sales in the amount of one thousand p esos (Pl ,OOO) or more where the sale or transfer is made to a VAT-register ed person, the name , business style, if any, a ddress a nd Taxpayer Identification Number (TIN) of the purchaser, customer or client." ~

DECISION CTA Case No. 101 30 In relation thereto, Section 4.113-1 (A) and (B) of RR No. 16-2005, as amended, provides: "SEC. 4.113-1. Invoicing Requirements. - (A) A VAT-registered person shall issue:- (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are r equired 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: (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from VAT, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt; ~

DECISION CTA Case No. 10130 (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; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT- exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale. (3) In the case of sales in the amount of one thousand pesos (P1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) of this Section." In addition to the above requirements, the sales invoices and official receipts (ORs) must be duly registered with the BIR as prescribed under Section 237 in relation to Section 238 of the NIRC of 1997, as amended, thus: "SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale and transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service xxx. SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All p ersons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or coc:;t2-�_ _

DECISION CTA Case No. 10130 commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." (Emphasis supplied) Petitioner submitted VAT sales invoices6o supporting its sales to entities proven to be duly registered with PEZA. However, a scrutiny of these invoices shows that petitioner did not only sell goods but also services. Since petitioner's reported sales comprise of both sales of goods and services to PEZA-registered entities, its zero-rated sales apparently arose not only from Section 108(B)(3) of the 1997 NIRC, as amended, but also from Section 106(A)(2)(c) of the same law, as follows: "SEC. 106. Value-added Tax on Sale of Goods or Properties. - (A) Rate and Base of Tax. - There shall be levied, assessed and collected on every sale, barter or exchange of goods or properties , a value-added tax equivalent to ten percent (10�/o) of the gross selling price or gross value in money of the goods or properties sold, bartered or exchanged, such tax to be paid by the seller or transferor: x x x XXX XXX XXX 60 Exhibits "P-68", "P-68- 17" to "P-68- 26", "P-68-29", "P-68-35" to "P-68-4 1", "P-68-43", "P-68-46" to "P-68-48", "P-68-52", "P-68-59", "P-68-6 1" to "P-68-65", "P-68-67" to "P- 68-87", "P-68- 104" to "P-68- 119", "P-68- 12 1", "P-68- 125", "P-68- 142" to "P-68- 14 7", "P-68- 152" to "P-68- 156", "P-68- 162", "P-68- 164" to "P-68- 167", "P-68-1 69", "P-68- 17 1" to "P-68-1 80", "P-68-1 82" to "P-68-2 14", "P-68-2 18" to "P-68-221", "P-68-264" to "P-68-267", a nd "P-68-279", USB marked as Exh ibit "P-50-2" . ~

DECISION CTA Case No. 10130 (2) The following sales by VAT-registered persons shall be subject to zero percent (0�/o) rate: XXX XXX XXX (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." (Emphasis supplied) The same is accordingly implemented by Section 4.106- S(c) of RR No. 16-2005, which provides that the sales of goods or property to persons or entities who are tax-exempt under special laws, e.g., sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to RA No. 7227, sales to enterprises duly registered and accredited with the PEZA or international agreements to which the Philippines is a signatory, such as, Asian Development Bank (ADB), International Rice Research Institute (IRRI) , etc., shall be effectively subject to VAT at zero-rate. Nevertheless, both Sections 106(A)(2)(c) and 108(B)(3) of the 1997 NIRC, as amended, and their implementing regulations, provide for the same basis for effectively subjecting a taxpayer's sales to zero-rating. The only difference between the two (2) provisions is that Section 106(A)(2)(c) deals with the sale of goods, while Section 108(B)(3) deals with the sale of services. At any rate, whether it be sale of goods or services, the same set of evidence is required from petitioner to prove that its sales transactions to the PEZA-registered entities qualify for zero-rating. In this case, an examination of the invoices presented by petitioner shows that the zero-rated sales amounting to P7,576,538.22 must be disallowed for failure to comply with the invoicing requirements under Sections 113(A) and (B), and Section 237, in relation to Section 238 of the 1997 NIRC, as amended, with its implementing regulations, on the following grounds:~

DECISION CTA Case No. 10130 Page 24 of45 Exhibit Customer Document Document Amount No. Reference Date61 (i n Php) No. 57,661.00 133,000.00 Sale of services supported by VAT sale s i nvoices and not by ORs 380,598.40 101,799.70 " P-68" Accenture Inc. 15811 10 January 2017 110,754 .60 106,454.20 " P-68- Accenture Inc. 15804 10 January 2017 894,000.00 17" Accen ture Inc. 15805 10 January 20 17 Accenture Inc. 15806 10 January 2017 39,889.20 " P-68- Accenture Inc. 15807 10 J anuary 2017 21,120.00 18" Accen ture Inc. 15808 10 January 2017 Accen ture Inc. 15809 10 January 2017 7,500.00 " P-68- Accenture Inc. 1581 0 10 January 2017 18,500.00 19" Accenture Inc. 15834 18 January 2017 10,320.80 Accenture Inc. 15915 31 January 2017 12,560.20 "P-68- Accenture Inc. 15916 31 January 20 17 40,307.50 20" Accenture Inc. 159 17 31 January 2017 50,000.00 Accenture Inc . 15963 15 February 2017 3 1,051.00 " P-68- Accenture Inc. 15964 15 February 2017 16,443.80 21" Accenture Inc. 15965 15 February 2017 150,022.80 Accenture Inc. 15966 15 February 2017 41,310.00 "P-68- Accenture Inc. 15967 15 February 2017 36,354.50 22" Accenture Inc. 15968 15 February 2017 Accenture Inc. 15969 15 February 2017 6,881.00 " P-68- Accenture Inc. 16064 960,000.00 23" Accenture Inc. 16063 14 March 2017 Accenture Inc. 16079 14 March 2017 4,370.00 "P-68- Accenture Inc. 16152 20 March 20 17 11,953.60 24" Accenture Inc. 16153 31 Ma rch 20 17 22,755.60 Accenture Inc. 16150 31 March 2017 36,513.40 "P-68- Accenture Inc. 16154 31 March 2017 25" Accenture Inc. 16155 3 1 March 2017 9,690.00 Accenture Inc. 16156 31March 2017 32,652.70 " P-68- Accenture Inc. 16157 31 March 20 17 12,335. 10 26" 3 1 March 2 017 " P-68- 29" " P-68- 35" " P-68- 36" "P-68- 37" ' 'P-68- 38" "P-68- 39" " P-68- 40" " P-68- 41" " P-68- 46" " P-68- 47" "P-68- 48" " P-68- 52" " P-68- 59" " P-68- 61" " P-68- 62" "P-68- 63" " P-68- 64" " P-68- 65" 61 Expressed in day-month-year. ~

DECISION CTA Case No. 10130 " P-68- CAC Philippines Inc. 16205 3 1 March 2017 458,500.00 121" 15803 10 J anuary 2017 351,806.25 JPMorgan Ch ase Bank NA 15850 23 January 2017 546,470.80 " P-68- Phil. Global Services Center 1585 1 23 January 2017 259,657.05 166" JPMorgan Chase Bank NA 15901 31 January 2017 Phil. Global Services Center 15828 17 J anuary 2017 83,544.86 '' P-68- JPMorgan Chase Bank NA 15829 17 January 2017 1,408.00 169" Phil. Global Services Center 15852 23 January 2017 JPMorgan Chase Bank NA 16133 10,503.00 " P-68- Phil. Global Services Center 26-Mar-20 17 33,350.00 171" Navitaire Philippines Inc. 72,655.00 " P-68- Navitaire Philippines Inc . 180" Navitaire Philippines Inc. " P-68- 212" NCR Cebu Development " P-68- Center Inc. 213" '' P-68- 214" " P-68- 279" Subtotal 5,174, 694.06 Sale of services supported by billing statement and not by OR " P-68- JPMorgan Ch ase Bank NA 3925 10 January 2017 381,600.00 167" Phil. Global Services Center Sale of goods supported with VAT sales invoice but the sales amount is labelled as VAT Exemt]t "P-68- JPMorgan Chase Bank NA 15868 26 January 2017 68, 940. 00 173" Phil. Global Services Center Sales without supporting_documents 1,293,200.00 Accenture Inc. CAC Philipp ines Inc. 122,500.00 Citigroup Busin ess Process 74, 104.16 Solutions 34,650.00 IBM Solution s Delivery Inc. Integreon Managed 9,000.00 Solutions Phils. Inc. 332,500.00 JPMorgan Chase Bank NA 21,500.00 Phil. Global Services Center Navitaire Philippines Inc. Telephilippines Inc. 850.00 NCR Cebu Development 63,000.00 Center Inc. Subtotal 1, 951,304.16 TOTAL 7,576,538.22 Hence, petitioner has shown that it is engaged in zero- rated or effectively zero-rated sales , but only to t h e extent of P6,600,151.60, as computed below: Tota l zero- rated sales per Amended 1st Quarterly VAT Return P27,033,482 .33 Less: 20,433,330.73 P6,600,151.60 Disallowed zero-rated sales to clients without PEZA Certification P1 2,856,792 .5 1 Disallowed zero-rated sales for 7 ,576,538.22 failure to comply with invoicing requirements Valid zero-rated sales for the tst Quarter of 2017

DECISION CTA Case No. 10130 Accordingly, only said amount qualifies as valid zero- rated sales under Sections 106(A)(2)(c) and 108(B)(3) of the 1997 NIRC, as amended. The input VAT being claimed do not appear to be transitional input taxes. On this score, petitioner must show that the claimed input taxes do not appear to be transitional input taxes, pursuant to Section 111 (A) of the 1997 NIRC , as amended, to wit: "SEC. 111. Transitional/Presumptive Input Tax Credits.- (A) Transitional Input Tax Credits. - A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to two percent (2�/o) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax." Transitional input tax credit operates to benefit newly VAT-registered persons, wheth er they previously paid taxes in the acquisition of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer.62 In this case, records show that petitioner is not a newly VAT-registered entity. Thus, in the absence of any indication that the claimed input taxes are transitional input taxes, the Court holds that petitioner has complied with the foregoing requisite. 62 Fort Bonifacio De velop ment Corporation v. Commissioner of Internal R evenue, et al., G.R. Nos. 158885 and 170 680, October 2, 2 009 ~

DECISION CTA Case No. 101 30 The input taxes being claimed were due or paid To continue, it is also incumbent upon petitioner to provide supporting documents to prove that the input taxes claimed during the 1st quarter of TY 20 17 were actually due or paid in accordance with Section 110{A) of the 1997 NIRC, as amended, which provides: "SEC. 110. Tax Credits.- (A) Creditable input Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: (a) Purchase or importation of goods: (1) For sale; or (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies 1n the course of business; or (iv) For use as materials supplied in the sale of service; or (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code. (b) Purchase of services on which a value- added tax has actually been paid. (2) The input tax on domestic purchase or importation of goods or properties by a VAT- registered person shall be creditable: (a) To the purchaser upon consummation of sale and on importation of goods or properties; and e�-

DECISION CTA Case No. 10 130 (b) To the importer upon payment of the value- added tax prior to the release of the goods from the custody of the Bureau of Customs. Provided, That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,000 ,000): Provided, however, That if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, finally, That in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee." The above provisions are implemented by Sections 4.110- 1 to 4.110-3 of RR No. 16-2005, which provide as follows: "SECTION 4 .110-1. Credits For Input Tax. - (Input tax' m eans the VAT due on or paid by a VAT- registered person on importation of goods or local purchases of goods, properties, or services, including lease or use of properties, in the course of his trade or business. It shall also include the transitional input tax and the presumptive input tax determined in accordance with Sec. 111 of the Tax Code. It includes input taxes which can be directly attributed to transactions subject to the VAT plus a ratable portion of any input tax which cannot b e directly attributed to either the taxable or exempt activity. Any input tax on the following transactions evidenced by a VAT invoice or official receipt issued by a VAT-registered person in accordance with Sees. 113 and 237 of the Tax Code shall be creditable against the output tax: ~

DECISION CTA Case No. 10 130 (a) Purchase or importation of goods (1) For sale; or (2) For conversion into or intended to form part of a finished product for sale, including packaging materials; or (3) For use as supplies in the course of business; or (4) For use as raw materials supplied in the sale of services; or (5) For use in trade or business for which deduction for depreciation or amortization is allowed under the Tax Code, (b) Purchase of real properties for which a VAT has actually been paid; (c) Purchase of services 1n which a VAT has actually been paid; (d) Transactions 'deemed sale' under Sec. 106 (B) of the Tax Code; (e) Transitional input tax allowed under Sec. 4.111 (a) of these Regulations; (f) Presumptive input tax allowed under Sec. 4 . 111 (b) of these Regulations; (g) Transitional input tax credits allowed under the transitory and other provisions of these Regulations. SECTION 4.110-2. Persons Who Can Avail of the Input Tax Credit. - The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT-registered person shall be creditable: (a) To the importer upon payment of VAT prior to the release of goods from customs custody; ~

DECISION CTA Case No. 10130 (b) To the purchaser of the domestic goods or properties upon consummation of the sale; or (c) To the purchaser of services or the lessee or licensee upon payment of the compensation, rental, royalty or fee. SECTION 4.110-3. Claim for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (P1 ,000,000 .00), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner: (a) If the estimated useful life of a capital good is five (5) years or more - The input tax shall be spread evenly over a period of sixty (60) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 60 and the quotient will be the amount to be claimed monthly. (b) If the estimated useful life of a capital good is less than five (5) years - The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (P1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition; Provided, however, that the total amount of input taxes (input tax on depreciable capital goods plus other allowable input taxes) allowed to be claimed against the output tax in the quarterly VAT Returns shall be subject to the~

DECISION CTA Case No. 101 30 Page 3 1 of45 limitation prescribed under Sec. 4.110-7 of these Regulations. The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired in installment for an acquisition cost of more than P1,000,000.00 will be subject to the amortization of input tax despite the fact that the monthly paymentsI installments may not exceed P1,000,000.00. XXX XXX XXX If the depreciable capital good is sold/transferred within a p eriod of five (5) years or prior to the exhaustion of the amortizable input tax thereon, the entire unamortized input tax on the capital goods sold/transferred can be claimed as input tax credit during the month/ quarter when the sale or transfer was made but subject to the limitation prescribed under Sec. 4.110-7 of these Regulations ." In addition, Section 4.110-8 of RR No. 16-2005 provides for the substantiation requirements of input tax credits, as follows : "SECTION 4.110-8. Substantiation of Input Tax Credits.- (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the 5�/o Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau:~

DECISION CTA Case No. 10130 (1) For the importation of goods- import entry or other equivalent document showing actual payment of VAT on the .imported goods. (2) For the domestic purchase of goods and properties invoice showing the information required under Sees. 113 and 237 of the Tax Code. (3) For the purchase of real property - public instrument i.e., deed of absolute sale, deed of conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller. (4) For the purchase of services - official receipt showing the information required under Sees. 113 and 237 of the Tax Code. A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code. (b) Transitional input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the BIR. (c) Input tax on 'deemed sale' transactions shall be substantiated with the invoice required under Sec. 4 .113-2 of these Regulations. (d) Input tax from payments made to non- residents (such as for services, rentals and royalties) shall be supported by a copy of the Monthly Remittance Return of Value Added Tax Withheld (BIR Form 1600) filed by the resident payor in behalf of the non-resident evidencing remittance of VAT due which was withheld by the payor. (e) Advance VAT on sugar shall be supported by the Payment Order showing payment of the advance VAT."~

DECISION CTA Case No. 10130 Thus, in order to be entitled to input tax credits, the same must be evidenced by a VAT sales invoice or an OR issued in accordance with Sections 113 and 237 of the 1997 NIRC, as amended. To prove entitlement to credits for input taxes due and paid, petitioner must not only present the supporting documents prescribed under Section 4.110-8 of RR No. 16- 2005, but it must also comply with the invoicing requirements under Sections 113(A) and (B), 237 and 238 of the 1997 NIRC, as amended, as implemented by Sections 4.113-l(A) and (B) of RR No. 16-2005. In its Amended 1st Quarterly VAT Return forTY 2017 ,63 petitioner declared total input VAT from current purchases amounting to P12,200, 143.55, broken down as follows : Domestic purchases of goods other than p 10,192,322.55 capital goods exceeding P1million 2,007,82 1.00 Importation of goods other than capital goods P12,200,143.55 Total current input VAT Accordingly, petitioner submitted the following pieces of evidence: (1) VAT sales invoices and 0Rs64 to support its input taxes from domestic purchases of goods; (2) Certification of petitioner's r emittances of duties, taxes and other charges for the period January to March 20 17, issued by the Bureau of Customs (BOC) ;6s and, (3 ) Import Entry and Internal Revenue Declaration (IEIRD)66 to support its importation of goods. Upon examination of the foregoing documents, it is found that out of the input VAT from domestic purchases of goods amounting to P10,192,322.55, the amount of P4,132,978.11 must be disallowed for failure to comply with the invoicing and 63 Exhibit "P-6-1 ", Doc ket- Vol. II, p. 506. 64 Exhibits "P-70- 1" to "P-70-5", "P-70-7" to "P-70-68", "P-70-70" to "P-70-78", "P-70-80" to "P-70-90", "P-70 -92" to "P-70 - 103", "P-70- 105 to "P-7 0- 118", "P-70- 121" to "P-70- 142", "P-70- 145 " to "P-70- 147", "P-70- 149" to "P-70- 15 2", "P-7 0- 154", "P-70- 156" to "P-70- 15 9", "P-7 0- 16 1" to "P-70- 183", "P-70- 186", "P-70- 189", "P-70-201 " to "P-70- 205", "P-70-2 07" to "P-70-222", "P-70-224" to "P-70-227", "P-70-2 29" to "P-70-2 3 5", "P-70-246" to "P-7 0 -259", "P-70 -26 1" to "P-70 -2 62", "P-7 0-264" to "P-70-268", "P-70- 2 7 2", "P-7 0 -2 7 4" to "P-7 0 -3 26 ", "P-7 0-330" to "P-70-350", "P-70 -352" to "P-70-35 4", "P-70-357" to "P-70 -360", "P-70 -364 " to "P-70-393", "P-7 0-39 5" to "P-70-403", "P-70- 408" to "P-70 -4 09 ", "P-70 -4 18" to "P-7 0-42 1", "P-70 -423" to "P-70-43 4", and "P-70- 441" to "P-70 -4 5 1", USB ma rked as Exhibit "P-50-2". 6s Exhibit "P-75", USB marked Exhibit "P-5 0 -2". 66 Exhibits "P-76" to "P-7 6 -6", USB m a rked Exhibit "P-50 -2". ~

DECISION CTA Case No . 101 30 substantiation requirements under the 1997 NIRC, a s amended, and its implementing rules , thus: Exhibit Supplier SI/OR No. Sales invoice Input VAT No. /OR Date67 Amount (in Pesos) Domestic purchase of goods supported with billing statement " P-70- Top Logistics 0007485 18 Februa ry 1, 806.00 16 1" Intern ational 20 17 C o rp o r a tio n Domestic purchase of services supported with billing statement " P-70- RML Courier Expre ss 00 15646 20 March 2017 258. 13 1,975.26 360" int'l Corp " P-70- Top Logistics 0007737 28 March 20 17 4 24" Intern ation a l Corpor ation Subtotal 2 ,233.39 Domestic purchase of services supported with VAT sales invoice " P-70- Federal Express Pacific, 7 40294 20 7 3 Fe brua ry 20 17 313.10 145" LLC Domestic purchase of goods supported with NON-VAT sales invoice " P-70- GEDS Enterprises 005 1 14 March 20 17 23,040.00 324" Domestic purchase of goods supported with VAT sales invoice BUT the date and description ofgoods purchased are unreadable " P-7 0- MEC Networks 0206 13 2 ,4 4 2 .85 164" Corpora tion " P-7 0 - MEC Networks 0 20663 13 ,928.57 176" Cor poration " P-70- MEC Ne tworks 0209 14 1,206.1 3 225" Corporation " P-70- MEC Networks 02 1044 5 , 15 1.64 421 " Corpora tion Subtotal 22,729.19 Domestic purchase of goods supported with VAT sales invoice BUT the description of goods purchased is unreadable " P-7 0 - MEC Ne tworks 020728 14 February 5 ,880.21 192" Corpora tion 20 17 " P-70- MEC Networks 020956 21 Februa ry 1,4 9 3 . 5 7 2 19" Corporation 2017 " P-7 0- MEC Networks 020972 24 February 3 ,42 8.57 24 6" Corporation 2017 Subtotal 10,802.35 Domestic purchase ofgoods supported with VAT sales invoice BUT date, description of goods purchased and petitioner's name and TIN are unreadable " P-70-33" Greenlee Facilitie s 12262 14 ,899 .29 Solu tions Inc. " P-70-34" Greenlee Facilities 1226 3 2,447.14 Solutions In c. " P-70-3 5" Greenlee Facilities 12264 7,376.79 Solutions In c . " P-70-36" Green lee Facilities 12266 2 ,003.46 Solution s Inc. " P-7 0-37" Green lee Facilitie s 12268 2,555.36 Solutions Inc. " P-70 -38" Greenlee Facilities 12 269 6 ,3 81.43 Solutions Inc. 67 Expressed in d ay -m onth -year . ~

DECISION CTA Case No. 10 130 " P-70-39" Greenlee Facilities 12270 11,167.50 " P-70-40" Solutions Inc. 12271 3,00 1.50 Greenlee Facilities 12272 1,928.57 " P-70-4 1" Solutions Inc. 12402 1,923.57 "P-70- Green lee Facilities 190" Solutions Inc. Greenlee Facilities Solut ions Inc. Subtotal 53,684.61 Domestic purchase of goods and services supported with VAT sales invoice/OR BUT with wrong address ofpetitioner " P-70- 11" Banbros Commercial 202694 27 January 20 17 1,200.00 Inc. "P-70-1 3" Ban bros Commercial 202499 25 Jan uary 2017 160.7 1 Inc. " P-70- Top Logistics 0005442 3 March 2017 5 ,504 .98 102" International Corporation " P-70- Gen tec Electrik Corp. 0732 17 Ma rch 20 17 14,2 12.80 374 " "P-70- Ardent Networks Inc. 0257 21 March 2017 6 ,716.79 379" " P-70- Greenlee Facilities 12645 21 March 20 17 2,892.86 380" Solu t ions Inc . " P-7 0- Arden t Networks Inc. 0259 2 1 March 20 17 3,92 1.43 381" "P-70- Arden t Networks Inc. 0258 21 March 2 0 17 1,062 .86 382" " P-70- Gr eenlee Facilities 12644 2 1 March 20 17 2,442.86 383" Solutions Inc. " P-70- Ardent Networks Inc. 094225 22 March 20 17 8,400.00 384" " P-70- Alph a Office Equipments 14803 23 March 20 17 1,1 03 .57 389" Center Subtotal 47,618.86 Domestic purchase of goods and services supported with VAT sales invoice/OR BUT with incomplete address ofpetitioner ''P-70-14" Capital Worldwide 13629 20 January 2017 1,039.41 Express Cargo Corporation " P-70-15" Capital Worldwide 13615 6 January 2017 1,145.14 Express Cargo Corporation " P-70 -32" Gentec Electrik Corp. 0642 31 Jan uary 2017 1,196.25 " P-70-43" Hitech Hardward & 32408 3 January 2017 500. 14 " P-70-44" Electrical Supply Inc. 0 0 0 42 01 20 January 2017 10,120.43 " P-70 -45" Industech Automation 0004200 20 January 20 17 " P-70-55" ~ystems Inc. 30 January 2017 1,970 .52 lndus tech Au tomation 0037 5,137.50 " P-7 0-56" Systems Inc. 28 January 2017 " P-70-57" Lucky Triumph 0036 34,739.46 Electrical Ente rprises 26 January 2017 " P-70-58" Inc. 0033 3,685.7 1 Lucky Triumph 26 January 2017 Electrica l Enterprises 0034 8,258.04 In c. Lucky Triumph Electr ical Enterprises Inc. Lucky Triumph Electrical Enterprises Inc.

DECISION CTA Case No. 10130 "P-70-80" RML Courier Express 0020088 1 27 January 2017 3,205.14 int'l Corp 13 January 2017 407. 14 " P-70-8 1" 00 150 11 St. Michael Medical 098845 25 January 20 17 14,142.86 "P-70- Clinic & Diagn ostic 66,696.43 105" Cen ter Inc. 0031 26 J anuary 2017 Lucky Triumph 9,545.21 " P-70- Electrical Enterprises 0035 28 January 2017 2,883.28 106" Inc. 24 March 20 17 Lucky Triumph 32683 1,066.38 " P-70- E lectrical Enterprises 13693 2 February 2017 302.14 109" Inc. 3 February 2017 956.25 Hitech Hardward & 0036756 8 February 2017 130.71 "P-70- Electrical Supply Inc. 1581 1 8 February 20 17 11 8 " Capital Worldwide 32870 25,639.29 Express Cargo 32869 11 February 8,486.25 "P-70- Corporation 0042 2017 136" Puregold Price Club Inc. 12,009 .64 0043 15 February 113 .32 " P-70- Freshwind Sales & 2017 146" Marketing 33031 1 0 , 2 6 3 .7 5 Hitech Hardward & 0020762 17 February 3,187.50 " P-70 - E lectrical Supply Inc. 20 17 13,272.10 162" Hitech Hardward & 33206 407. 14 Elect rical Supp ly Inc. 33208 24 March 2017 " P-70- Lucky Triumph 33 150 27 February 4,121.79 163" Electrical Enterprises 120762 2017 152.04 Inc. 27 February "P-70- Lucky Triumph 0059 1,162.50 179" Electr ical Enterpr ises 2017 Inc. 0075 1,692.86 "P-70- Hitech Hardward & 27 February 197" Electrical Supply Inc . 0076 2017 3,300.96 RML Courier Express "P-70- int'l Corp 0077 10 March 2017 24,176.78 20 1" Hitech Hardward & 4,135.72 " P-70- Electrical Supply Inc. 0078 7 March 2017 235" Hitech Hardward & " P-70- Electrical Supply Inc. 0731 10 March 2017 248" Hitech Hardward & 54158 "P-70- Electrical Supply Inc. 14 March 2017 252" St. Michael Medical "P-70- Clinic & Diagnostic 15 March 2017 253" Center Inc. "P-70- Lucky Triumph 16 March 2017 272" E lectrical Enterprises Inc. 17 Ma rch 2017 " P-70- Lu cky Triumph 17 March 20 17 Electr ical Enterpr ises 294" Inc. Lucky Triumph "P-70- Elect r ical Enterprises 296" Inc. Lucky Triumph "P-70- Electrical Enterprises 338" Inc. Lucky Triumph " P-70- Electrica l Enterprises 339" Inc. Gentec Electrik Corp. " P-70- 357" Genius Hardware Inc. " P-70- 375" " P- 7 0 - 377"

DECISION CTA Case No. 10130 " P-70- Lucky Triumph 008 1 24 March 20 17 3,053.68 387" Electrical En terprises 33665 23 March 2017 3 10.71 Inc. " P-70- Hitech Hardward & 393" Electrical Supply Inc. Subtotal 2 8 2 , 6 1 4. 1 7 Domestic purchase of goods and services supported with VAT sales invoice/OR BUT with incomplete address and without business style of petitioner " P-70- Cath ay Hardware Inc. 6041 2 March 2017 3,153.73 276" " P-70- Cath ay Hardware In c. 330 14 2 March 20 17 1,007.92 280" " P-70- Cathay Hardware Inc. 6043 6 March 2017 40 1.79 285" " P-70- Puregold Price Club Inc. 0037682 6 March 2017 1,080.04 305" " P-70- Globe Telecom Inc. PNC3337817 27 March 2017 192.75 399" " P-70- Innove Communications ABS0842123 27 March 2017 825.00 402" Inc. Subtotal 6,661 .23 Domestic purchase of services supported with VAT OR BUT with incomplete address and without description of service rendered '' P-70 -76" R Square Consolidated 0005283 6 J anuary 2017 32,357.05 Services Corporation " P-70- RML Courier Express 0020078 6 January 20 17 2,669.93 112" int'l Corp Subtotal 35,026.98 Domestic purchase of goods supported with VAT sales invoice BUT with incomplete address and without TIN ofpetitioner " P-70- Nikoy Gen. Merch a ndise 102897 23 February 1,089.64 227" Ha rdwa re & E lectrical 20 17 Domestic purchase of goods supported with VAT sales invoice BUT issued to Lantrovision, Inc. " P-70- Electromark Multi Sales 0016689 28 February 1,285.7 1 258" Inc. 2017 " P-70- Electromark Multi Sales 0016712 28 February 2,518.92 259" Inc. 2017 Subtotal 3 , 8 0 4. 6 3 Domestic purchase of goods and services supported with VAT sales invoice/OR BUT without address, TIN and business style ofp etitioner " P-70- Axn Tyre Medic Center 40554 1 February 20 17 750.00 172" " P-70- Richmar Screw Center 3372 13 February 1,285.72 182" 2017 "P-70- Lucky Triumph 0058 5 March 2017 3,617.11 295" Electrical Enterprises Inc. Subtotal 5,652.83 Domestic purchase of goods and services supported with VAT sales invoice/ OR BUT without business style ofpetitioner " P-70-22" Electrotrade Indus tries 0581 3 J anuary 2017 267,379.29 Inc. " P-70-25" Electrotrade Indus tries 0630 27 January 201 7 2 12,190.00 Inc. " P-70-27" Electrotrade Industries 0632 25 January 2017 67,928.57 Inc. " P-70-54" Jobstreet.com 2 1067589 15 February 3, 132.00 Philippines Inc. 2017 " P-70-94" Yu Eng Kao Electrical 69605 4 January 2017 420.00 Supply a nd Hardware Inc. -.....

DECISION CTA Case No. 10130 " P-70-95" Yu Eng Kao Electrical 70184 18 January 2017 1,162.55 Supply and Hardware " P-70-96" Inc . 70185 18 January 2017 463 .39 Yu Eng Kao Electrical " P-70-97" Supply and Ha rdware 70632 27 January 2017 2 ,992.50 Inc . 5, 108.57 " P-70-98" Yu Eng Kao Electrical 70384 21 January 2017 Supply a nd Hardware 1,291.07 " P-70-99" Inc. 70483 24 J anuary 2017 Yu Eng Kao Electrical 234.64 " P-70- Supply and Ha rdware 70 277 19 J a nuary 2017 152,678.50 100" Inc. Yu Eng Kao Electrical 152702 6 February 2017 17,500.00 " P-70- Supply and Ha rdware 3,737.40 154" Inc. HOM- 1000908827 8 Februa ry 2017 2,3 16.43 Yu Eng Kao Electrical " P-70- Supply and Hardware HOM- 1000909787 10 February 8 ,301.50 161" Inc. 71340 2017 30,728. 57 Diamond Motor 10,364.79 " P-70- Corpora tion 14 February 171" Prudential Guarantee 2017 1,01 5.04 and Assurance, Inc. 9 ,979.07 " P-70- Prudentia l Gua ra ntee 3918 15 February 1,07 4.65 194" and As surance , Inc. 0700 2017 16,788.21 Yu Eng Kao Electrical 71 501 " P-70- Supply and Hardware 15 February 18,34 6.0 7 195" Inc. 2017 Acura Realty Corp. 17,284.29 " P-70- 17 Fe bruary 196" Electrotrade Industries 2017 1,0 6 1.40 Inc. 1,533.60 " P-70- 759 17 2 0 February 13,358 .5 5 205" Yu Eng Kao Electrical 7 1728 2017 2,562.43 Supply a nd Ha rdware 10,689.64 " P-70- Inc . 22 February 2 1,758.0 4 2 15" Washington E lectrical & 2017 " P-70- Ind'l Supply Inc. ......, 226" Yu Eng Kao Electrical RX00034702 24 February Supply a nd Ha rdwa re 7 192 1 2017 " P-70- Inc . 233" Canon Marketing 27 February " P-70- (Philippines) Inc. 2017 254" Yu Eng Kao Ele ctrical Supply and Hardware 7 1922 27 February " P-70- Inc. 2017 255" Yu Eng Ka o Electrica l Supply and Ha rdwar e 7 1923 27 February " P-70- I nc . 201 7 2 5 6" Yu Eng Kao Electrical Supply a nd Ha rdware HOM- 100 09282 10 8 Ma rc h 201 7 " P-70- Inc. 284" Prudential Gua rantee HOM- 10009282 12 8 March 2017 " P-70- and Assurance, Inc. 288" 007695 7 Ma rch 2 01 7 " P-70- Prudentia l Gua ra ntee 297" a nd Assurance, Inc. 017038 9 Ma rc h 201 7 " P-70- MEC Networks 298" Cor por ation 72 106 3 March 2 01 7 " P-7 0- MEC Networks 3 13 " Corporation 72247 7 March 201 7 Yu Eng Kao Electrical " P-70- Supply a nd Ha rdware 3 14" Inc . Yu En g Ka o Electrical Supply and Hardware Inc.

DECISION CTA Case No. 10130 " P-70- Yu Eng Kao Electrical 72541 14 March 2017 185.36 334" Supply and Hardware 9,932. 14 Inc. 72623 15 March 2017 4,516.07 " P-70- Yu Eng Kao Electrical 92,678.57 335" Supply and Hardware 72760 17 March 2017 19,208.57 Inc. 5,826.01 " P-70- Yu Eng Kao Electrical 0889 18 March 20 17 14,603.57 364" Supply and Hardware 139125 22 March 2017 1, 108.93 Inc. 006222A 24 March 20 17 22, 181.79 " P-70- Electrotrade Industries 72947 22 March 2017 21,850.71 371" Inc. 18,685.7 1 " P-70- Malackku Industrial 73072 23 March 2017 1,34 1.60 385" Sales " P-70- Anixter Philippines, Inc. 73246 28 March 2017 386" " P-70- Yu Eng Kao Electrical 73247 28 March 20 17 408" Supply a n d Hardware Inc. 73248 28 March 2017 " P-70- Yu Eng Kao Electrical 409" Supply a n d Ha rdware HOM-1000943406 29 March 20 17 Inc. "P-7 0- Yu Eng Kao Electrical 418" Supply and Hardware Inc. " P-70- Yu Eng Kao Electrical 419" Supply and Hardware Inc. " P-70- Yu Eng Kao Electrical 420" Supply and Hardware Inc. " P-70- Prudential Guarantee 427" and Assurance, Inc. Subtotal 1,115,499. 79 Domestic purchase of goods supported with VAT sales invoice BUT without TIN and business style of petitioner " P-70- Electromark Multi Sales 0016877 13 March 2017 26, 700.00 322" Inc. Domestic purchase of services supported with VAT OR BUT without description of service rendered " P-70-1 9" Eastwood Richmonde 060763 20 January 2017 5 ,552.23 Hotel 0020088 1 27 January 2017 113.02 " P-70-80" RML Courier Express int'l Corp 0015137 " P-70-9 0" Top Logistics 0005373 27 January 20 17 1,884.36 In terna tio n a l Corporation '' P-70-92" Top Logistic s 0005336 13 January 201 7 7 ,046 .65 Interna tional Corporation " P-70 - Ric hmonde Hotel Ortiga s 163423 14 February 7,453.30 193" 20 17 " P-70- Federal Express Pacific, A00707729 24 March 2017 313.10 403" LLC Subtotal 22,362.66 Domestic purchase of services supported with VAT OR BUT without TIN of oetitioner " P-70- Smart Communications unrea da ble 28 Marc h 20 17 138.93 430" Inc. Domestic purchase of goods supported with VAT sales invoice BUT without separate VAT amount " P-70-20" EINK Enterprises 4898 11 J a nuary 2 01 7 10,339. 29

DECISION CTA Case No. 10130 Domestic purchase of goods supported with VAT sales invoice BUT with incomplete address ofpetitioner and without separate VAT amount " P-70- Ad-Ryan Enterprises 2638 I I 21 March 2017 1, 714.29 378" Domestic purchase of goods and services supported with VAT sales inv oice/ OR BUT dated outside the period of claim " P-70- 10" Axn Tyre Medic Center 39393 26 October 2016 1,422.33 " P-70- JOB Geotechnica l and 0045 21April2017 900.00 293" Materials Testing Co. 21 April 2017 6,759.64 " P-70- CSS Image Design 0971 26 May 2017 323" 26 May 2017 535.72 " P-70- Smart Communications SBEOR008546 127 28 June 2017 535.72 443" Inc. 28 June 20 17 535.72 " P-70- Smart Communications SBEOR008546128 24 April 2017 535.72 4 44" Inc. 164.67 " P-70- Smart Communications SBEOR008793313 28 June 20 17 445" Inc. 652.28 "P-70- Smar t Communications SBEOR008793312 446" Inc. " P-70- Smart Communication s SBEOR008268232 447" Inc. SBEOR008268233 SBEOR008268234 " P-70- Smart Commun ications SBEOR008793305 448" Inc . SBEOR008793311 SBEOR008793306 SBEOR008793307 SBEOR008793308 SBEOR008793309 SBEOR008793310 " P-70- Sm a rt Commun ications SBEOR0085461 34 26 May 2017 406.79 449" Inc. SBEOR008546133 24 April 2017 5,006.35 SBEOR008546 132 " P-70- Smart Communications SBEOR008546 130 450" Inc. SBEOR008546 135 SBEOR008546 129 SBEOR008268193 SBEOR008268194 SBEOR008268195 SBEOR008268 196 SBEOR008268 198 SBEOR008268203 SBEOR008268210 SBEOR008268211 SBEOR008268212 SBEOR008268213 SBEOR008268214 SBEOR008268215 SBEOR008268216 SBEOR008268217 SBEOR008268219 SBEOR008268221 SBEOR008268222 SBEOR008268218 SBEOR008268204 SBEOR008268205 SBEOR008268206 SBEOR008268209 SBEOR008268225

DECISION CTA Case No. 10130 " P-70- Hansmar Real Estate & 19480 1 April2017 1,768.42 451" Development Corporation Subtotal 19,223.36 Domestic purchase ofgoods supported with VAT sales invoice BUT dated outside the period of claim and without separate VAT amount a nd address, TIN and business style of petitioner " P-70- Kalrej Corporation 002394 9 June 20 17 5,456.19 268" Unsupported input VAT 2,434,466.63 TOTAL 4,132,978.11 On the other hand, out of the input VAT from importation of goods amounting to P2,007,821.00, only the amount of P1,971,260.00 is certified by the BOC as remitted by petitioner to the Bureau of Treasury in compliance with the substantiation requirements under the 1997 NIRC, as amended, and its implementing regulations. As for the remaining amount of P36,561.00, petitioner did not present any proof of payment of VAT and as such, must be disallowed. While IEIRDs were presented , the same pertain merely to import declarations , but are not sufficient to prove payment of VAT on importations. In sum, the Court finds that out of the total current input VAT of P12,200,143.55 for the 1st quarter of TY 2017, only the amount of P8,030,604.44 pertains to validly substantiated input VAT, as computed below: Total current input VAT declared per Amended 1st , 12 ,200,143.55 Quarterly VAT Return 4,169,539.1 1 Less: P8,030,604.44 Disallowed input VAT from P4, 132 ,978.11 domestic purchases Disallowed input VAT from 36,561.00 importations Valid input VAT for the 1st Quarter o f2017 The input taxes are attributable to zero-rated sales, but only to the extent amounting to P504,940.48. The law requires that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero- rated sales and taxable or exempt sales, and the input taxes CH\....

DECISION CTA Case No. 10130 cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. As mentioned earlier, petitioner reported a total sales in the aggregate amount of P104,969,217.22 comprised of VATable and zero-rated sales for TY 2017. Therefore, the valid input VAT of P8,030,604.44 shall be allocated on the basis of volume of sales, thus: Total Taxable Sales per VAT Returns r 77,935,734.89 Divided by the Reported Total Sales per Quarterly VAT 104,969,2 17.22 Returns 8 ,030,604.44 Multiplied by Total Valid Input VAT Valid input VAT allocated to total sales subject to 12% p 5,962,424.75 VAT Total Zero-Rated Sales p er VAT Returns r 27,033 ,482.33 Divided by the Reported Total Sales per Quarterly VAT Returns 104,969,2 17.22 Multiplied by Total Valid Input VAT 8,030 ,604.44 Valid input VAT allocated to total zero-rated sales p 2,068,179.69 Based on the foregoing computation, it is notable that the valid input VAT allocated to total sales subject to 12�/o VAT amounting to P5,962,424.75 is insufficient to cover the output VAT liability of petitioner for the 1st quarter of TY 2017 amounting to r9,352,288.19.68 However, the remaining output VAT liability of P3,389 ,863.44,69 which cannot be covered by the valid input VAT allocated to total sales subject to 12�/o VAT, can well be sufficiently covered by petitioner's input VAT carried over from prevwus quarter amounting to P49,212,611.18. On the other hand, the whole amount of P2,068 ,179.69 representing valid input VAT allocated to total zero-rated sales cannot be immediately available for refund, considering that out of the total reported zero-rated sales amounting to P27,033,482.33, only the amount of P6,600,151.60 qualifies as valid zero-rated sales for purposes of refund. As such, out of the valid input VAT allocated to total zero-rated sales amounting to P2,068, 179.69, only the amount of P504,940.48 68 Exhibit "P-6-1", Docket - Vol. II, p . 506. 69 1'9,352,288.19 output VAT liability for the l 5t quarter of taxable 2017 less P5,962,424.75 valid input VAT allocated to total sales subject to 12% VAT. ~

DECISION CTA Case No. 10130 Page 43 of45 is attributable to valid zero-rated sales of P6,600,151.60, computed as follows: Valid input VAT a llocable to zero-ra ted sales p 2,068,179.69 Multiply by: Va lid zero-rated sales for the 1st Quarter of 2017 6,600,151.60 Divided by : Tota l zero-rated sales for the 1st Quarter of 2017 27,033,482. 33 p 504,940.48 Input VAT allowed for refund Thus, only the amount of P504,940.48 represents valid input VAT attributable to valid zero-rated sales. Petitioner failed to show that the subject input taxes have not been applied against output taxes during and in the succeeding quarters. Finally, after determining that petitioner had valid input VAT attributable to its valid zero-rated sales, the Court shall proceed to determine whether the same was not applied against its output VAT liability during and in the succeeding quarters. Petitioner asserts that the input VAT subject of the present claim amounting to P3,949, 107.91 was not applied against any output VAT liability which can be proved by the Amended 1st Quarterly VAT Return for TY 2017, under Line 23D ( ((VAT R efund/ TCC Claimed'} ,70 where it reported the amount of P5,209,804.13 as being claimed for refund. Accordingly, this effectively d educted the amount being claimed from the input VAT to be carried over to the n ext quarter. However, the Court is not persuaded. Considering that it is a requisite for the successful prosecution of an input VAT refund claim, p etitioner must clearly establish that the specific amount of P3,949, 107.9 1 subject of the claim for refund in this case was not a pplied 70 Exhibit "P-6 - 1", Docke t- Vol. II, p. 506. ~

DECISION CTA Case No. 10130 against its output VAT liability during and in the succeeding quarters. Notably, the amount of P5,209,804.13 declared under Line 23D (((VAT Refund/TCC Claimed'') of the Amended 1st Quarterly VAT Return forTY 2017 is evidently higher than the amount of claim in this case. However, the Court cannot simply assume that the specific amount claimed for refund herein is already included in the said amount declared under Line 23D (((VAT Refund/TCC Claimed'') of the Amended 1st Quarterly VAT Return for TY 20 17, especially considering that petitioner has other sources of input VAT (i.e. those carried over from previous quarters) which are also available and may be subject for refund. On the other hand, petitioner did not present any proof that the specific amount of P3,949,107.91 claimed for refund in this case is already included in the said amount declared under Line 23D (((VAT Refund/ TCC Claimed''). Consequently, due to petitioner's failure to present evidence, the Court cannot verify whether the amount claimed for refund is not yet applied against petitioner's output VAT liability during and in the succeeding quarters. The Court notes petitioner's submission of its 1st and 3rd Quarterly VAT Returns for TY 2019, which reflects ((VAT Refund/TCC Claimed" amounting to P6 ,539,496.09 and P12,798,980.10, respectively.71 However, the Court is faced with the same predicament as earlier noted wherein it cannot be verified if the amount of P3,949,107.91 claimed for refund herein is already included in the said amounts declared as ((VAT Refund/TCC Claimed" in the subsequent returns. To be sure, claims for tax refunds, when based on statutes granting tax exemption or tax refund, partake of the nature of an exemption; thus, the rule of strict interpretation against the taxpayer-claimant similarly applies. As such, the taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative r equirements to be entitled to the tax refund.72 7 1 Exhibits "P-43" a nd "P-45", Docket - Vol. II , pp. 576 a nd 578. 72 Commissioner of Internal Re venue v. Eastern Telecommunications Philippines, Inc., G.R. No. 163835 , J u ly 7, 2 010 . ~

DECISION CTA Case No. 101 30 Considering the foregoing, the present input VAT refund claim amounting to P3,949,107.91 , must be denied in its entirety. WHEREFORE, premises considered, the present Petition for Review is DENIED, for lack of merit. SO ORDERED. ~'7 ~�~ WE CONCUR: CATHERINE T. MANAHAN Associate Justice (With Separate Opinion) ROMAN G. DEL ROSARIO Presiding Justice ~ ~ f.~-ft4~ MARIAN IV#. REY~S-FA'3ARDO Associate Justice 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's Division. ROMAN G. DEL ROSARIO Presiding Justice

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION LANTRO PHILS. INC., CTA CASE NO. 10130 Petitioner, Members: -versus- DEL ROSARIO, P.J. , Chairperson, MANAHAN, and REYES-FAJARDO, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. APR 29 2024 ? :.yo/J .._._ ., I X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - ~- - - - - - - - - - - - - X SEPARATE OPINION DEL ROSARIO, P.J.: I concur with the ponencia in denying the present Petition for Review for lack of merit. However, I wish to stress a point anent the requirement for zero-rating of sales to Philippine Economic Zone Authority (PEZA)-registered enterprise for refund purposes. The ponencia disallowed petitioner's sales to some PEZA- registered entities amounting to P12,856,792.51 for its failure to present their respective PEZA Certification qualifying them for the purpose of VAT zero-rating of transactions with local suppliers of goods, properties and services in connection with their PEZA- registered activities. I submit that a PEZA Certificate of Registration is sufficient to entitle a supplier to value-added tax (VAT) zero-rating with respect to its sales to a PEZA-registered enterprise(!~}

SEPARATE OPINION CTA CASE NO. 101 30 In Commissioner of Internal Revenue vs. Kurimoto (Philippines) Corporation,1 the Court En Bane held that anent sales made to PEZA- registered entities, a PEZA Certificate of Registration is sufficient to entitle a supplier to VAT zero-rating on its sales to a PEZA-registered enterprise, viz .: "To underscore, all sales of goods, property or services by a VAT-reg istered supplier to a PEZA-registered enterprise, regardless of the type of tax exemption availed of by the latter, shall be subject to VAT at zero percent, not at the regular rate of 12%. To enjoy the benefit of VAT zero-rating of its sales, the supplier is not even required to secure a separate certification therefor. RMC No. 74-99's provisions shall be sufficient basis for its entitlement to VAT zero-rating under Section 108(8)(3) of the Tax Code. In the present case, that THPAL is a PEZA-registered enterprise is established by its PEZA Certificate of Registration. This certification, by itself, entitles KPC a VAT zero-rating with respect to its sales of services to THPAL." (Boldfacing supplied) Moreover, a perusal of the records reveals that with respect to petitioner's sales to PEZA-registered entities that were disallowed for fa ilure to present their respective PEZA Certification qualifying them for the pu rpose of VAT zero-rating of transactions with local suppliers, the PEZA Certificate of Reg istration of two (2) of the said PEZA- reg istered entities were presented as evidence, to wit: Customer PEZA Certificate of Registration Acquire Asia Pacific (Manila) Inc. Convergys Philippines, Inc. No. Exhibit No. 2017-0685 P-66-432 2017-0927 P-66-443 00-020-IT P-66-304 Considering the presentation of their PEZA Certificates of Registration , petitioner's alleged zero-rated sales to the above- mentioned PEZA-registered entities amounting to P562,550.00 and P9 ,967,055.70 should not be disallowed . In fine, I submit that presentation of the client's PEZA Certificate of Registration is sufficient to entitle a taxpayer-cla imant to VAT zero- rating with respect to its sales to a PEZA-registered enterprise. 1 CTA EB No. 2666, October 11, 2023. 2 Exhibit Nos. "P-66" to "P-66-51", USB. 3 /d. 4 /d.~

SEPARATE OPINI ON CTA CASE NO. 10130 The foregoing notwithstanding, considering that the Court cannot verify whether the amount claimed for refund was not applied against output taxes during and in the succeeding quarters, the present input VAT refund claim amounting to P3,949,107.91 must be denied in its entirety. All told , I CONCUR in the result. Presiding Justice