FILMINERA RESOURCES CORPORATION v. COMMISSIONER OF INTERNAL REVENUE (Consolidated with 8842)

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY Third Division FILMINERA RESOURCES CTA CASE NO. 8802 CORPORATION, Petitioner, - versus - COMMISSIONER OF INTERNAL REVENUE, Respondent. x-------------------------------------------------------x FILMINERA RESOURCES CTA CASE NO. 8842 CORPORATION, Petitioner, Members: Bautista, Chairperson - versus - Fa bon-Victorino, and Ringpis-Liban, II. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. JAN 1 1 2017 X-------------------------------------------------------------~--t_:_~_.t!:.!::_.:.___X DECISION BAUTISTA, J: The Case Before the Court are two (2) consolidated Petitions for Review1 filed by petitioner Filminera Resources Corporation ("FRC") on April 14, 2014 and on May 26, 2014, pursuant to Section 7(a)(2)2 of Republic 1 Records, CTA Case No. 8802, Vol. 1, Petition for Review ("PFR"), pp. 14-563, with annexes; Records, CTA Case No. 8842, Vol. 1, PFR, pp. 6-810, with annexes. 2 "Sec. 7. Jurisdiction. - The Court of Tax Appeals shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: XXX XXX XXX

DECISION CTA CASE NOS. 8802 and 8842 Page 2of25 Act ('RA") No. 11253, as amended by RA No. 92824 and RA No. 95035, in relation to Section 3(a)(1)6, Rule 4 of the Revised Rules of the Court of Tax Appeals ('~RRCTA")7, both of which seek for the Court to render judgment ordering respondent Commissioner of Internal Revenue ("CIR") to refund or to issue a tax credit certificate ("TCC") in favor of petitioner in the amounts of FIFTY-EIGHT MILLION FIVE HUNDRED EIGHTEEN THOUSAND SIX HUNDRED FORTY-NINE AND 42/100 PESOS (PHP58,518,649.42), and SIXTY-SEVEN MILLION TWO HUNDRED EIGHTY-THREE THOUSAND ONE HUNDRED THIRTY-SEVEN AND 43/100 PESOS (PHP67,283,137.43) representing unutilized or unapplied creditable input Value-Added Tax ("VAT") for the periods October 1, 2011 to December 31,20118 and January 1, 2012 to March 31, 20129, respectively, or the Second and Third Quarters of fiscal year ("FY") ending June 30,201210. The Parties (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;" 3 An Act Creating the Court of Tax Appeals, as amended. 4 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes. 5 An Act Enlarging the Organizational Structure of the Court of Tax Appeals, Amending for the Purpose Certain Sections of the Law Creating the Court of Tax Appeals, and for Other Purposes. 6 "Sec. 3. Cases within the jurisdiction of the Court in Division. -The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: xxx XXX XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; xxx" 7 A.M. No. 05-11-07-CTA, November 22, 2005. 8 Records, CTA Case No. 8802, Vol. 1, PFR, Prayer, pp. 26-27. 9 Records, CTA Case No. 8842, Vol. 1, PFR, Prayer, p. 21. lO Records, CTA Case No. 8802, Vol. 3, Pre-Trial Order ("PTO"), p. 1354.

DECISION CTA CASE NOS. 8802 and 8842 Page 3of25 Petitioner FRC, formerly "Base Metals Mineral Resources Corporation"n, is a domestic corporation duly organized in accordance with Philippine laws,12 with the primary purpose of carrying on the business of "operating coal mines; and of prospecting, exploration and of mining, milling, concentrating, converting, smelting, treating, refining, preparing for market, manufacturing, buying, selling, exchanging and otherwise producing and dealing in all other kinds of ores, metals[] and minerals, hydrocarbons, acids and chemicals, and in the products and by-products of every kind and description and by whatsoever process, the same can be or may hereafter be produced; to purchase, lease, option, locate, or otherwise acquire, own, exchange, sell, or otherwise dispose of pledge, mortgage, deed in trust, hypothecate, and deal in mines, mining claims, mineral[] lands, coal[] lands, timber land, water and water rights, and other property both real and personal."13 It is registered with the Large Taxpayers Excise Audit Division 1 as a VAT-registered entity with Taxpayer's Identification No. ("TIN") 000-153-880-000 and OCN 8RC0000036160 since January 1, 1997.14 It was also issued an Authority to Print("ATP") VAT Official Receipts ("OR") with Serial Nos. 0001 to 1000, and with OCN 9AU0000290062.15 Respondent CIR is empowered to perform the duties of his office, including the duty to act upon claims for refund or issuance of TCC as provided by law, with office address at 4th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City.16 The Facts Philippine Gold Processing and Refining Corp. ("PGPRC"), formerly registered as LFT Processing Corporation,17 is a domestic corporation duly organized in accordance with Philippine laws,1s with the primary purpose of engaging in the "business of processing, milling, crushing, refining, smelting, concentrating, amalgamating 11 Records, CTA Case No. 8802, Vol. 3, Exhibit "P-2," Amended Articles oflncorporation ("AOI"), p.1803. 12 Id., Exhibit "P-2," Certificate of Filing ofAmended AOI, p. 1801. 13 Id., Exhibit "P-2," Amended AOI, p. 1803. 14 Id., Vol. 2, Exhibit "P-3," BIR LTS Certificate of Registration, p. 668. 15 Id., Exhibit "P-29," Authority to Print ("ATP") Official Receipts ("OR"), pp. 784-787. 16 Id., Vol. 3, Joint Stipulation of Facts and Issues ("JSFI"), p. 1336. 17 Records, CTA Case No. 8802, Vol. 4, Exhibit "P-5," LFT Processing Corporation's SEC Certificate of Registration, p. 1816. 18 Id., Exhibit "P-6," PGPRC's Certificate of Filing ofAmended AOI, p. 1844.

DECISION CTA CASE NOS. 8802 and 8842 Page 4of25 and beneficiating mineral resources, and the products or by-products thereof, of every kind and description and by whatsoever process, method, or mode in which such activities can be carried out; and in conjunction with the foregoing[,] to build, construct, operate, purchase, lease or otherwise acquire such processing, milling, refining, and beneficiating plants, machinery, tools and other equipment[] whatsoever, which are necessary and incidental in carrying out the foregoing purpose, and to carry on the business of preparing for market, buying, selling, at wholesale, and exchanging mineral resources and the products or by-products thereof[.]"19 PGPRC is registered with the Board of Investments ("BOI") on a non-pioneer status as a New Producer of Gold and Silver Dore.2o On July 5, 2007, petitioner and PGPRC entered into an Ore Sales and Purchase Agreement, whereby petitioner will exclusively sell to PGPRC Pre-production and ROM Ores mined from the former's facilities. 21 Petitioner filed its Quarterly VAT Returns or BIR Form No. 2550- Q, detailed as follows: EXHIBIT QUARTER PERIOD DATED AMENDED REFUND/TCC VATPAYABLF/ COVERED FILED CLAIMED (OVERPAYMENT) P-1122 Second Oct-Dec-11 25-Jan-12 No Php - Php (475,635,781.01) P-1223 Second Oct-Dec-11 28-Aug-12 Yes 58,518,649.42 (56,377,725.08) P-84124 Third Jan-Mar-12 24-Apr-12 No 67,283,137.43 (56,455,688.13) R-125 Fourth Apr-Jun-12 25-Jul-2012 Yes 76,333,107.78 (56,366,469.78) Petitioner issued to PGPRC VAT Zero-Rated ORs for the "settlement of ore sales" for the period October 2011 to March 2012, as follows: EXHIBIT OR NO. DATE AMOUNT PERIOD P-1426 137 10-Nov-11 USD 4,175,003.67 Oct-11 19 Records, CTA Case No. 8802, Vol. 4, Exhibit "P-6," PGPRC's Amended AOI, p. 1847. 20 Id., Vol. 2, Exhibit "P-7," PGPRC's Board of Investments ("BOI") Certificate of Registration, pp. 738- 745, with annexes. 21 Id., Exhibit "P-4," Ore Sales and Purchase Agreement, pp. 669-692. 22 Id., Vol. 4, Exhibit "P-11," BIR Form No. 2550-Q Second Quarter, pp. 1861-1867, with annexes. 23 Id., Exhibit "P-12," BIR Form No. 2550-Q Second Quarter, pp. 1868-1872, with annexes. 24 Id., Exhibit "P-841," BIR Form No. 2550-Q Third Quarter, pp. 1890-1893, with annexes; for date of filing, see BIR Records, CTA Case No. 8842, p. 124. 25 BIR Records, CTA Case No. 8842, BIR Form No. 2550-Q Fourth Quarter, pp. 114-119, with annexes. 26 Records, CTA Case No. 8802, Vol. 2, Exhibit "P-14," Official Receipt ("OR") No. 137, p. 767. (

DECISION CTA CASE NOS. 8802 and 8842 Page5of25 P-1627 139 12-Dec-11 4,571,323.98 Nov-11 9-Jan-12 4,116,365.70 Dec-11 P-1828 141 9-Feb-12 5,617,382.98 Jan-12 9-Mar-12 5,953,139.62 Feb-12 P-84329 143 11-Apr-12 6,578,119.31 Mar-12 P-84530 145 P-84731 147 On November 14, 2013, petitioner filed its Application for Tax Credits/Refunds or BIR Form No. 1914, asking specifically for a TCC, covering the period October 1, 2011 to December 31, 2011 (Second Quarter), in the amount of Php58,518,649.42.32 On January 30, 2014, the BIR received a Letter33 from petitioner applying for a refund, along with supporting documents including its Application for Tax Credits/Refunds or BIR Form No. 1914, asking specifically for a TCC, covering the period January 1,2012 to March 31, 2012 (3rd Quarter), in the amount of Php67,283,137.43.34 Due to the inaction of respondent on its claims for refund, petitioner filed two (2) separate Petitions for Review with the Court of Tax Appeals ("CTA"), as follows: (1) CTA Case No. 8802 filed on April 14, 2014 covering the Second Quarter of FY 2012,35 and (2) CTA Case No. 8842 filed on June 26, 2014 covering the Third Quarter of FY 2012,36 both raffled to the Third Division. CTA Case No. 8842 On July 3, 2014, the Court issued Summons37 to the CIR, with an order to file an Answer to the Petition for Review within fifteen (15) days from service thereof. The BIR Litigation Division received the same on July 7, 2014.38 27 Records, CTA Case No. 8802, Vol. 2, Exhibit "P-14," OR No. 139, p. 769. 28 Id., Exhibit "P-14," OR No. 141, p. 771. 29 Records, CTA Case No. 8842, Vol. 2, Exhibit "P-14," OR No. 143, p. 993. 3o Id., Exhibit "P-14," OR No. 145, p. 992. 31 Id., Exhibit "P-14," OR No. 147, p. 991. 32 Records, CTA Case No. 8802, Vol. 2, Exhibit "P-8," BIR Form No. 1914 Second Quarter, p. 746. 33 BJR Records, CTA Case No. 8842, pp. 152-153. 34 Records, CTA Case No. 8842, Vol. 2, Exhibit "P-840," BIR Form No. 1914 Third Quarter, p. 976; for clear receiving stamp, see BIR Records, CTA Case No. 8842, p. 154. 35 Records, CTA Case No. 8802, Vol. 1, PFR, pp. 14-563, with annexes. 36 Records, CTA Case No. 8842, Vol. 1, PFR, pp. 6-810, with annexes. 37 Id., Vol. 2, Summons, p. 811. 38 Id. I

DECISION CTA CASE NOS. 8802 and 8842 Page6of25 On July 22, 2014, the CIR filed a Motion for Extension of Time to File Answer39 praying for an extension of thirty (30) days from July 22, 2014 or until August 21,2014, within which to file an Answer. This was granted by the Court in its Resolution40 dated July 23,2014. Thereafter, on August 22, 2014, the CIR filed a Second Motion for Extension of Time to File Answer41 praying for an additional period of twenty (20) days from August 21, 2014 or until September 10, 2014. This was granted by the Court in its Resolution42 dated August 26, 2014. On September 10, 2014, respondent filed an Answer43 raising Special and Affirmative Defenses44, in sum: (1) that entitlement to a claimed refund must be set in a clear and unmistakable manner; and (2) that bare allegations, unsubstantiated by evidence, are not equivalent to proof. On October 17, 2014 and October 20, 2014, petitioner and respondent filed their respective Pre-Trial Briefs.45 On October 29, 2014, petitioner filed its Motion for Consolidation46 of CTA Case No. 8842 with CTA Case No. 8802; which was granted by the Court in its Resolution47 dated November 6, 2014, subject to the conformity of the ponente of CTA Case No. 8802, the case bearing the lower docket number. CTA Case No. 8802 On May 12,2014, the Court issued Summons48 to the CIR, with an order to file an Answer to the Petition for Review within fifteen (15) 39 Records, CTA Case No. 8842, Vol. 2, pp. 813-817. 40 Id. at 818. 41 Id. at 819-823. 42 Id. at 824. 43 Id., Answer, pp. 825-840. 44 Id. at 826-837. 45 Records, CTA Case No. 8842, Vol. 2, Pre Trial Brief [For Petitioner FILMINERA RESOURCES CORPORATION], pp. 842-849; Records, CTA Case No. 8842, Vol. 2, Respondent's Pre-Trial Brief pp. 850-854. 46 Records, CTA Case No. 8842, Vol. 2, Motion for Consolidation, pp. 858-863. 47 Id., Vol. 2, p. 1164. 48 Records, CTA Case No. 8802, Vol. 1, Summons, p. 564. I

DECISION CTA CASE NOS. 8802 and 8842 Page 7of25 days from service thereof. The BIR Litigation Division received the same on May 14,2014.49 On May 29, 2014, the CIR filed a Motion for Additional of Timeso, praying for an extension of thirty (30) days from May 29,2014 or until June 28,2014, within which to file an Answer. This was granted by the Court in its Resolutionsl dated June 3, 2014. On June 30, 2014, respondent filed an Answers2 by registered mail, raising Special and Affirmative Defenses53, in sum: (1) that it is incumbent upon petitioner to prove that it is entitled to the refund sought; and (2) that bare allegations, unsubstantiated by evidence, are not equivalent to proof. On August 20, 2014 and August 22, 2014, petitioner and respondent filed their respective Pre-Trial Briefs.54 On September 8, 2014, the parties filed their Joint Stipulation of Facts and Issues ("JSFI").ss On September 17, 2014, a Pre-trial Order56 was issued by the Court terminating the Pre-Trial Conference. On October 29, 2014, petitioner filed its Motion for Consolidations? of CTA Case No. 8842 with CTA Case No. 8802; which was granted by the Court in its Resolution58 dated November 24,2014. Consolidated CTA Case Nos. 8802 and 8842 On November 28,2014, the Court ordered the parties to file their Consolidated Pre-Trial Briefs.s9 Hence, on January 13, 2015 and 49 Records, CTA Case No. 8802, Vol. 1, Summons, p. 564. 5o Id., Vol. 1, pp. 566-569. 51 Id. at 570. 52 Id., Answer, pp. 596-617. 53 Id. at 597-615. 54 Id., Vol. 2, Pre Trial Brief [For Petitioner FILMINERA RESOURCES CORPORATION], pp. 621-628; Respondent's Pre-Trial Brief, pp. 629-633. 55 Records, CTA Case No. 8802, Vol. 2, Joint Stipulation of Facts and Issues ("JSFI"), pp. 908-912. 56 Id., Pre-Trial Order ("PTO"), pp. 916-921. 57 Id., Vol. 3, Motion for Consolidation, pp. 1253-1258. 58 Id., Vol. 3, p. 1297. 59 Id. at 1298. I

DECISION CTA CASE NOS. 8802 and 8842 Page 8 o�25 January 26, 2015, respondent (by registered mail) and petitioner filed their respective Consolidated Pre-Trial Briefs.6o On February 10, 2015, the parties filed their (Consolidated) JSFI.6t On February 23,2015, a new Pre-trial Order62 was issued by the Court terminating the Pre-Trial Conference. In the course of the proceedings, petitioner presented the following witnesses: (1) Ms. Joy P. Dompor,63 Treasurer of petitioner; and (2) Atty. Clifford E. Chua64, the Court-appointed65 Independent Certified Public Accountant ("ICPA"). On July 6, 2015, petitioner filed its Formal Offer of Evidence ("FOE")66, offering Exhibits "P-1" to "P-36," "P-36-1" to "P-36-39," "P- 37" to "P-2013," "P-2014" to "P-2014-A," and "P-2015" to "P-2015-A." On August 18, 2015, the Court resolved67 to admit all of petitioner's exhibits except for Exhibits "P-9" and P-10," "P-129," "P-161" to "P- 163," "P-190" to "P-192," "P-221" to "P-227," "P-247," "P-299," "P- 655," "P-804," "P-861" to "P-1164," "P-1165" to "P-1199," and "P-1200" to "P-2012." After petitioner filed a Manifestation with Motion for Partial Reconsideration of the Resolution dated 18 August 201568, the Court admitted69 Exhibits "P-9," "P-129," "P-161" to "P-163," "P-190" to "P- 192," "P-221" to "P-227," "P-247," "P-299," "P-655," "P-804," "P-861" to "P-1164," "P-1165" to "P-1199," and "P-1200" to "P-2012," leaving 60 Records, CTA Case No. 8802, Vol. 3, Consolidated Pre-Trial Brieffor the Respondent, pp. 1324-1328; Consolidated Pre-Trial Brief [For Petitioner FILMINERA RESOURCES CORPORATION], pp. 1314- 1323. 61 Id., Consolidated Joint Stipulation of Facts and Issues ("CJSFI"), pp. 1335-1340. 62 Id., Nw PTO, pp. 1354-1360. 63 Id., Exhibit "P-2015," Consolidated Judicial Affidavit ("JA") ofMs. Joy P. Dompor, pp. 1378-1694, with annexes; Records, CTA Case No. 8802, Vol. 3, April 20, 2015 Minutes of Hearing, p. 1697; Transcript of Stenographic Notes ("TSN"), April20, 2015 Hearing, pp. 4-14. 64 Records, CTA Case No. 8802, Vol. 3, Exhibit "P-2014," JA of Atty. Clifford E. Chua, pp. 1745-1760, with annexes; Records, CTA Case No. 8802, Vol. 3, Independent Certified Public Accountant ("ICPA") Report, pp. 1698-1742; Records, CTA Case No. 8802, Vol. 3, May 18, 2015 Minutes of Hearing, p. 1761; TSN, May 18, 2015 Hearing, pp. 6-18. 65 Records, CTA Case No. 8802, Vol. 3, Oath of Commission, p. 1371. 66 Id., Petitioner's Formal Offer of Evidence ("FOE"), pp. 1770-1800. 67 Id., Vol. 3, pp. 1923-1924. 68 Id. at 1925-1931. 69 Id. at 1936-1938. I

DECISION CTA CASE NOS. 8802 and 8842 Page 9of25 only Exhibit ~~P-10" denied70 for failure to present the original for comparison. During the hearing held last January 25, 2016, counsel for respondent manifested that she will no longer present any evidence and in lieu thereof, will just file a memorandum; hence, the parties were granted thirty (30) days or until February 24, 2016 within which to file their respective memoranda.n Petitioner filed its Memorandum [For The Petitioner]72 on February 10, 2016; and on March 3, 2016, the CIR filed a Memorandum73. Thereafter, the Court resolved to submit the case for decision through its Resolution74 dated March 15, 2016; hence, this Decision. The Issues75 WHETHER FRC IS ENTITLED TO RECOVER, BY WAY OF REFUND OR ISSUANCE OF A TCC, ITS ALLEGED UNUTILIZED CREDITABLE INPUT TAXES FOR THE SECOND QUARTER OF FY ENDING JUNE 30, 2012 IN THE AMOUNT OF PHP58,518,649.42 REPRESENTING DOMESTIC PURCHASES; WHETHER FRC IS ENTITLED TO RECOVER, BY WAY OF REFUND OR ISSUANCE OF A TCC, ITS ALLEGED UNUTILIZED CREDITABLE INPUT TAXES FOR THE THIRD QUARTER OF FY ENDING JUNE 30, 2012 IN THE AMOUNT OF PHP67,283,137.43 REPRESENTING DOMESTIC PURCHASES; AND WHETHER FRC COMPLIED WITH THE SUBMISSION OF COMPLETE DOCUMENTS IN SUPPORT OF ITS ADMINISTRATIVE CLAIM FOR REFUND AND THE SUBSTANTIATION REQUIREMENT FOR ZERO-RATED TRANSACTIONS. 70 Records, CTA Case No. 8802, Vol. 3, p. 1924. 71 Id., Vol. 4, Minutes of Hearing dated January 25, 2016, p. 1939; as confirmed in a Resolution dated February 4, 2016, see Records, CTA Case Nos. 8802, Vol. 4, p. 1941. 72 Id., Memorandum [For The Petitioner], pp. 1942-1960. 73 Id., Memorandum, pp. 1967-1977. 74 Id., Vol. 4, p. 1982. 75 Id., Vol. 3, new PTO, p. 1355.

DECISION CTA CASE NOS. 8802 and 8842 Page10of25 Petitioner's Arguments76 Petitioner alleges that it has sufficiently established its entitlement to recover unutilized creditable input taxes; that its domestic purchases of goods and services are subject to VAT at zero percent rate, being export sales pursuant to Section 4.106-5, Revenue Regulations cnRR") No. 16-2005; and that it exclusively sells its ores to PGPRC, which exports the same and receives as payment therefor foreign currency duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas ("BSP"); hence, the revenue obtained by petitioner is subject to VAT at zero percent pursuant to Section 106 of the 1997 National Internal Revenue Code, as amended cn1997 NIRC"). It went on to claim that PGPRC was approved as a bona fide HOI- registered enterprise with a non-pioneer status with pioneer incentives; that it was issued a Certificate of Registration by the BOI; that, therefore, the revenues derived by PGPRC from its export sales of the ores are subject to VAT zero-rating; and that certainly, PGPRC's suppliers for goods and services, like petitioner, are entitled to VAT zero-rating on its sales to PGPRC. In fact, petitioner explains that PGPRC sought confirmation that the input VAT on PGPRC's local purchases and importations of goods and services, among others, attributable to zero-rated sales can be claimed as tax credit or refund, pursuant to Section 112 ofthe 1997 NIRC and 4.112-1 of RR No. 16-05; and that BIR Ruling No. DA (VAT- 073)435-2009 was issued confirming the foregoing. Moreover, petitioner insists that the Second Division of the CTA issued a decision involving petitioner in CTA Case Nos. 8528 and 8576, ruling that the domestic purchases of petitioner are attributable to zero-rated sales; hence, the Second Division ordered the refund and/or the issuance of a TCC in its favor; that just like in the said case, petitioner has fully established the specific requirements for claiming a refund and or issuance of a TCC; and that it has sufficiently complied with the requirements set out in the case of San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 180345, November 25,2009. 76 Records, CTA Case No. 8802, Vol. 4, Memorandum [For The Petitioner], pp. 1950-1959.

DECISION CTA CASE NOS. 8802 and 8842 Page 11 of25 Respondent's Counter-Arguments77 On the other hand, the CIR counters that petitioner failed to prove that its sales are zero-rated; that no proof was shown that PGPRC exports one hundred percent (100%) of its processed gold and silver ores and that the Articles of Incorporation of PGPRC is not enough proof of this claim; that petitioner's reliance on BIR Ruling No. DA (VAT- 073)435-2009 is misplaced since it was issued based on the assumption that the given averments are true; and that it is imperative for petitioner to prove compliance with the registration requirements of a VAT taxpayer, pursuant to Section 6(a)(b) ofRR No. 6-97 in relation to Section 4.107-1(a) ofRR No. 7-95, and Section 236 of the 1997 NIRC. Respondent alleges that petitioner failed to show that its purchases of non-capital goods and services were made in the course of its trade or business; that the said purchases were properly supported by VAT invoices and/or ORs, and other documents such as entries made in its subsidiary purchase journal showing that it actually paid VAT in accordance with Sections 110(A)(2) and 113 ofthe 1997 NIRC, and pursuant to Section 4.104-5(a)(b) of RR No. 7-95; and that the input taxes for the subject periods are attributable to its zero- rated sales and were not applied against any output VAT or carried over in the succeeding taxable quarter/s. Moreover, respondent claims that it is the responsibility of the taxpayer to comply with Section 2(c)(1)(2)(4) of RR No. 3-88; and that there was no proof of compliance with the prescribed checklist of requirements to be submitted pursuant to Revenue Memorandum Order ('RMO") No. 53-98, hence, there was insufficient compliance with the filing of an administrative claim for refund, which is a condition sine qua non prior to the filing of a judicial claim. Lastly, respondent argues that claims for refund are strictly construed against the claimant and liberally in favor of the taxing authority. The Ruling of the Court The Court has jurisdiction over the instant case. 77 Records, CTA Case Nos. 8802, Vol. 4, Memorandum, pp. 1968-1976.

DECISION CTA CASE NOS. 8802 and 8842 Page12of25 The Court must first determine whether it has jurisdiction over the case at bar. Anent the timeliness of filing the administrative claim for refund, Section 112(A) of the 1997 NIRC provides 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, 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. XXX XXX xxx78 As to the timeliness of the judicial claim for refund, Section 112(C) of the 1997 NIRC, in relation toRR No. 16-200579, is instructive, to wit: SEC. 112. Refunds or Tax Credits ofInput Tax. - 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 or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of 78 Underscoring ours. I 79 Consolidated Value-Added Tax Regulations of2005, effective November 1, 2005.

DECISION CTA CASE NOS. 8802 and 8842 Page 13of25 submission of complete documents in support of the application filed in accordance with Subsections (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals. XXX XXX xxx8o Corollary, Section 4.112-1(d) of RR No. 16-2005 states the following: Sec. 4.112-1. Claims for Refund/Tax Credit Certificate of Input Tax. XXX XXX XXX (d) Period within which refund or tax credit certificate/refund of input taxes shall be made In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate/refund for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with subparagraph (a) above. In case of full or partial denial of the claim for tax credit certificate/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirty (30) days from the receipt of said denial, otherwise the decision shall become final. However, if no action on the claim for tax credit certificate/refund has been taken by the Commissioner of Internal Revenue after the one hundred twenty (120) day period from the date of submission of the application with complete documents, the taxpayer may appeal to the CTA within 30 days from the lapse of the 120-day period.st so Italics retained, underscoring ours. slId.

DECISION CTA CASE NOS. 8802 and 8842 Page14of25 Based on Section 112(A) of the 1997 NIRC, petitioner has two (2) years from the close of the taxable quarter when the sales were made to file its administrative claim with the CIR. The latter is given one hundred and twenty (120) days from submission of complete supporting documents to decide on the claim. In case of inaction by the CIR after one hundred twenty (120) days from the date of submission of the application with complete documents, Section 112(C) of the 1997 NIRC, in relation toRR No. 16-2005, grants petitioner thirty (30) days to file its judicial claim with the CTA. The Court finds it important to clarify that while petitioner filed only its Application for Tax Credits/Refunds or BIR Form No. 1914, covering the period October 1, 2011 to December 31, 2011 (Second Quarter),s2 there is no need to submit complete documents required under RMO No. 53-98 in relation to Section 112(C) of the 1997 NIRC. In the Supreme Court case of Commissioner ofInternal Revenue v. Team Sual Corporation (formerly Mirant Sual Corporation)83, it was held that: The CIR's reliance on RMO 53-98 is misplaced. There is nothing in Section 112 o(the [19971 NIRC, RR [No.13-88 or RMO [No.1 53-98 itself that requires submission of the complete documents enumerated in RMO [No.1 53-98 for a grant of a refund or credit of input VAT. The subject of RMO [No.] 53-98 states that it is a "Checklist of Documents to be Submitted by a Taxpayer upon Audit of his Tax Liabilities x x x." In this case, TSC was applying for a grant of refund or credit of its input tax. There was no allegation of an audit being conducted by the CIR. Even assuming that RMO [No.1 53-98 applies, it specifically states that some documents are required to be submitted by the taxpayer "if applicable." Moreover, if TSC indeed failed to submit the complete documents in support of its application, the CIR could have informed TSC of its failure, consistent with [RMC No.1 42-03. However, the CIR did not inform TSC of the document it failed to submit, even up to the present petition. The CIR likewise raised the issue of TSC's alleged failure to submit the complete documents only in its motion for reconsideration of the CTA Special First Division's 4 March 2010 Decision. Accordingly, we affirm the CTA EB' s finding that TSC filed its administrative claim on 21 December 2005, and submitted the complete documents in support of its application for refund or credit of its input tax at the same time. s2 Records, CTA Case Nos. 8802, Vol. 2, Exhibit "P-8," BIR Form No. 1914 Second Quarter, p. 746. 83 G.R. No. 205055, July 18, 2014, 730 SCRA 242.

DECISION CTA CASE NOS. 8802 and 8842 Page 15of25 Under Section 112(C) of the 1997 NIRC, in case of failure on the part of the CIR to act on the application, the taxpayer affected may, within 30 days after the expiration of the 120-day period, appeal the unacted claim with the CTA. The charter of the CTA also expressly provides that if the Commissioner fails to decide within "a specific period" required by law, such "inaction shall be deemed a denial" of the application for tax refund or credit. In Commissioner ofInternal Revenue v. San Roque Power Corporation, we emphasized that compliance with the 120-day waiting period is mandatory and jurisdictional. In this case, when TSC filed its administrative claim on 21 December 2005, the CIR had a period of 120 days, or until20 April2006, to act on the claim. However, the CIR failed to act on TSC's claim within this 120-day period. Thus, TSC filed its petition for review with the CTA on 24 April 2006 or within 30 days after the expiration of the 120-day period. Accordingly, we do not find merit in the CIR's argument that the judicial claim was prematurely filed.B4 In claims for VAT refund, the non-submission of complete supporting documents in the administrative level is not fatal to the taxpayer's judicial claim.8s The CTA is not barred from receiving, evaluating and appreciating evidence submitted before it.86 Once the claim for refund has been elevated to the Court, the admissibility, materiality, relevancy, probative value and weight of evidence presented therein become subject to the Rules of Court.87 The question of whether or not the evidence submitted by a party is sufficient to warrant the grant of a claim for refund lies within the sound discretion and judgment of the Court.88 Records disclose that the subject periods cover October 1, 2011 to December 31, 2011 for CTA Case No. 8802; and January 1, 2012 to March 31, 2012 for CTA Case No. 8842; hence, the taxable quarters close on December 31, 2011 and March 31, 2012, respectively. Therefrom, petitioner had two (2) years or until December 31, 2013 and March 31, 2014, respectively, to file its administrative claims for refund. 84 Underscoring and italics ours. 85 Commissioner of Internal Revenue v. CE Luzon Geothermal POUJer Company, Inc., CTA EB No. 474, September 1, 2009; Commissioner of Internal Revenue v. Toledo POUJer Company, CTA EB No. 589, September 15, 2010; Commissioner of Internal Revenue v. San Roque POUJer Corporation, CTA EB No. 657, April4, 2012. 86 Id. 87 Id. 88 Id.

DECISION CTA CASE NOS. 8802 and 8842 Page16of25 On November 14, 2013 and January 30, 2014, petitioner filed is administrative claims for refund covering the period October 1, 2011 to December 31, 201189 and January 1, 2012 to March 31, 201290, respectively; well within the due dates. Thereafter, petitioner had one hundred and twenty (120) days or until March 14, 2014 and May 30, 2014, respectively, to await the CIR's decision. Finding that no decisions have been made on its claims, petitioner had thirty (30) days from March 14,2014 and May 30,2014 or until April14, 2014 and June 30,2014, respectively, to file its judicial claims with the CTA. On April 14, 2014 and June 26, 2014, petitioner timely filed the present Petitions for Review, for reference: CLOSE OF ADMINISTRATIVE ADMINISTRATIVE LAST DAY JUDICIAL JUDICIAL QUARTER CLAIM DUE DATE CLAIM FILED FORCIR'S CLAIM DUE CLAIM FILED DECISION December 31, 2011 December 31, 2013 November14,2013 March 14,2014 DATE AQril14, 2014 March 31, 2012 March 31, 2014 Ianuan: 30, 2014 May30, 2014 AQril14, 201491 Iune 26, 2014 Iune 30, 201492 Considering that both the administrative and judicial claims for refund were filed on time, the Court has jurisdiction over the cases at bar. Petitioner is entitled to the issuance of a TCC, albeit at a reduced amount. The Court will now proceed to address the issue of whether petitioner is entitled to the issuance of a TCC representing its alleged unutilized input VAT attributable to its zero-rated sales. Under Section 112(A) of the 1997 NIRC, in order to be entitled to a refund/issuance of a TCC of unutilized input VAT, the following requisites must be satisfied: 89 Records, CTA Case Nos. 8802, Vol. 2, Exhibit "P-8," BIR Form No. 1914 Second Quarter, p. 746. 90 BIR Records, CTA Case No. 8842, pp. 152-153; Records, CTA Case Nos. 8842, Vol. 2, Exhibit "P-840," BIR Form No. 1914 Third Quarter, p. 976; for clear receiving stamp, see BIR Records, CTA Case No. 8842, p. 154. 91 The last day, April13, 2014, fell on a Sunday, hence, the next working day is April14, 2014. 92 The last day, June 29,2014, fell on a Sunday, hence, the next working day is June 30,2014. I

DECISION CTA CASE NOS. 8802 and 8842 Page17of25 1. the taxpayer must be VAT-registered; 2. the taxpayer must be engaged in sales which are zero- rated or effectively zero-rated; 3. the claim must be filed within two (2) years after the close of the taxable quarter when such sales were made; and 4. the creditable input tax due or paid must be attributable to such sales, except the transitional input tax, to the extent that such input tax has not been applied against the output tax. Having determined compliance with the third requirement, the Court will move on to the others. Petitioner is a VAT-registered entity, as shown by its Certificate of Registration No. OCN8RC0000036160 dated January 1, 1997, with TIN 000-153-880-000.93 PGPRC, a HOI-registered entity, exports one hundred percent (100%) of its processed gold and silver ores. Its exports are paid for in foreign currency duly accounted for based on the rules and regulations of the BSP. Thus, as the exclusive supplier of Pre- production Ore and ROM Ore of PGPRC, petitioner argues that all its sales thereto are entitled to VAT zero-rating pursuant to Section 106(A)(2)(a)(5) of the 1997 NIRC, and Section 4.106-S(a)(S) of RR No. 16- 2005, which provide: 1997 NIRC SEC. 106. Value-added Tax on Sale ofGoods or Properties. - (A) Rate and Base of Tax.- xxx XXX XXX XXX (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: 93 Records, CTA Case Nos. 8802, Vol. 2, Exhibit "P-3," BIR LTS Certificate ofRegistration, p. 668. I

DECISION CTA CASE NOS. 8802 and 8842 Page 18of25 (a) Export Sales.- The term 'export sales' means: XXX XXX XXX (5) Those considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987, and other special laws. RR No. 16-2005 SECTION 4.106-5. Zero-rated Sales of Goods or Properties- XXX The following sales by VAT -registered persons shall be subject to zero-percent (0%) rate: (a) Export sales.- 'Export Sales' shall mean: XXX XXX XXX (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. XXX XXX XXX For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee: and Provided, finally, that sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered manufacturer/producer whose products are 100% exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently reissued by the BOI. Based on the afore-quoted provisions, petitioner must comply with the following requisites in order for its sales to be considered zero-rated:

DECISION CTA CASE NOS. 8802 and 8842 Page19of25 1. the taxpayer seller must be VAT-registered; 2. the buyer must be a BOI-registered manufacturer/ producer; and 3. the buyer's products must be one hundred percent (100%) exported, as shown by a certification issued by the BOL Petitioner submitted a BOI Certification94 issued on July 17,2012, which certified that based on the information given, PGPRC exported one hundred percent (100%) of its total sales volume for the period July 1,2011 to June 30,2012, and the same has been issued pursuant to the Guidelines on the issuance of BOI Certification per RMO No. 9-2000 entitled uTax Treatment of Sales ofGoods, Properties and Services made by VAT-registered Suppliers to HOI-registered Manufacturers-Exporters with 100% Export Sales." With the submission of the said document, the Court finds petitioner's sales as zero-rated. In its Quarterly VAT Returns for the Second (amended) and Third (original) Quarters of FY ending June 30 2012, petitioner's declared zero-rated sales/receipts amounted to Php1,338,053,276.08, broken down as follows: EXHIBIT PERIOD COVERED ZERO-RATED SALES P-12 Oct. 1, 2011 to Dec. 31, 2011 Php 558,989,521.04 P-841 Jan. 1, 2012 to Mar. 31, 2012 779,063,755.04 TOTAL PHP 1,338,053,276.08 However, scrutiny of petitioner's supporting invoices and summaries of sales transactions discloses that the above amount of Php1,338,053,276.08 is comprised of petitioner's ore sales to PGPRC in the amount of Php1,337,183,276.08 and revenues from lease of land to PGPRC in the amount of Php870,000.00, to wit: PERIOD CUSTOMER AMOUNT EXHIBIT ORE SALES LAND LEASE Oct.2011 Phil. Gold Processing Refining Corp. Php 177,817,581.31 Php 145,000.00 P-25, P-20, P-19 Nov. 2011 Phil. Gold Processing Refining Corp. Dec. 2011 Phil. Gold Processing Refining Corp. 199,748,572.63 145,000.00 P-26, P-22, P-21 Sub-total -2nd Qtr. Jan.2012 180,988,367.10 145,000.00 P-27, P-24, P-23 Phil. Gold Processing Refining Corp. Ph� 558,554,521.04 Ph� 435,000.00 240,811,590.9/'95 145,000.00 P-852, P-853 94 Exhibit "P-36." 95 Records, CTA Case No. 8802, Vol. 3, Exhibit "P-2013," Annex J, p. 1726.

DECISION CTA CASE NOS. 8802 and 8842 Page20of25 Feb.2012 Phil. Gold Processing Refining Corp. 255,365,877.1496 145,000.00 P-850, P-851 Mar.2012 Phil. Gold Processing Refining Corp. Sub-total- 3rd Qtr. 282,451,286.9397 145,000.00 P-848, P-849 Ph� 778,628,755.04 Ph� 435,000.00 TOTAL PHP 1,337,183,276.08 PHP 870,000.00 The amount of Php870,000.00 derived by petitioner from its lease of land to PGPRC cannot be considered as zero-rated export sales under Section 106(A)(2)(a) ofthe 1997 NIRC, and Section 4.106-S(a) ofRR No. 16-05. Thus, the same is disallowed. Therefore, out of the total amount of Php1,338,053,276.08 zero- rated sales/receipts declared by petitioner in its Quarterly VAT Returns for the Second and Third Quarters of FY ending June 30, 2012, only the amount of Php1,337,183,276.08 representing petitioner's ore sales to PGPRC for the same period is subject to zero percent (0%) VAT, or in the percentage forms of 99.92%98 for the Second Quarter and 99.94%99 for the Third Quarter. The Court shall now determine whether petitioner incurred input taxes in connection with its zero-rated sales of Php1,337,183,276.08, and if such input taxes were not applied against any output VAT liability of petitioner. As reflected in its Quarterly VAT Returns for the Second and Third Quarters of FY ending June 30, 2012, petitioner incurred input VAT in the amounts of Php58,518,649.42 and Php67,283,137.43, respectively, totaling Php125,801,786.85, broken down as follows: PERIOD PARTICULARS INPUT VAT EXHIBIT 2nd Quarter Domestics Purchases of Goods Php 973,263.46 "P-12," line 21F 2nd Quarter Domestics Purchases of Services 57,545,385.% "P-12," line 21} Sub-Total PhE 58,518,649.42 3rd Quarter Domestics Purchases of Goods PhE 723,556.43 "P-841," line 21F 3rd Quarter Domestics Purchases of Services 66,559,581.00 "P-841," line 21} Sub-Total PhE 67,283,137.43 TOTAL PHP 125,801,786.85 In support of the aforesaid input VAT, petitioner submitted various suppliers' invoices and ORs, which were all examined by the 96 Records, CTA Case No. 8802, Vol. 3, Exhibit "P-2013," Annex J, p. 1726. 97 Id. 98 Php558,554,521.04/ (Php558,554,521.04+Php435,000.00). 99 Php778,628,755.04/ (Php778,628,755.04+Php435,000.00).

DECISION CTA CASE NOS. 8802 and 8842 Page21 of25 ICPA, Atty. Clifford E. Chua. In his ICPA Reportloo dated April 22, 2015, Atty. Chua accounted for petitioner's input VAT claim but in the higher amount of Php125,801,884.98; and consequently, the difference of Php98.13 (Php125,801,884.98 less Php125,801,786.85) should be denied outright, to wit: ICPA FINDINGS AMOUNT EXHIBITS 2nd Quarter Purchases with supporting documents "P-38" to (No Exceptions noted) Php 47,054,798.19 "P-247" Summary of input VAT from local purchases Php 6,224.70 "P-248" to not in the name of the company "P-292" Summary of input VAT from local purchases 9,835,666.73 "P-293" to with noted alterations in the supporting documents "P-302" Summary of input VAT where the amount 928,614.68 "P-303" to in words is not indicated "P-809" Summary of input VAT where the address of 693,348.43 Ph� 11,463,854.54 "P-810" to the company is not indicated Ph� 58,518,652.73 "P-838" Sub-total 2nd Quarter 3rd Quarter Purchases with supporting documents "P-861" to (No Exceptions noted) Php 59,938,966.74 "P-1164" Summary of input VAT from local purchases Php 4,189,528.94 "P-1165" to without proper supporting documents "P-1199" Summary of input VAT from local purchases 986,305.82 "P-1200" to with noted alterations in the supporting documents "P-1327" Summary of input VAT where the amount 720,937.79 "P-1328" to in words is not indicated "P-1851" Summary of input VAT where the address of 1,447,492.% 7,344,265.51 "P-1852" to the company is not indicated Ph� 67,283,232.25 "P-2012" Sub-total 3'd Quarter TOTAL PHP 125,801,884.98 Upon scrutiny of the ICPA Report, together with petitioner's supporting documents, the Court finds that aside from the input VAT of Php11,463,854.54 and Php7,344,265.51 denied by the ICPA for the Second and Third Quarters of FY 2012, the following input taxes in the amounts ofPhp2,778,114.93 and Php38,711,743.58 for the same taxable quarters, respectively, shall be disallowed for not being properly substantiated by VAT invoices or ORs, in accordance with Sections 100Records, CTA Case No. 8802, Vol. 3, Exhibit "P-2013," p. 1706-1707.

DECISION CTA CASE NOS. 8802 and 8842 Page 22of25 110(A) and 113(A)(B) of the 1997 NIRC, as implemented by Sections 4.110-8 and 4.113-1 ofRR No. 16-2005, detailed as follows: SUPPLIER'S NAME INPUT VAT EXHIBIT 2nd Quarter Nature of the Service Was Not Indicated Php 233,251.01 P-38 Aden Remote Site (Philippines) Inc. St. Francis Square Realty Corp 2,835.52 P-96 Aden Remote Site (Philippines), Inc St. Francis Square Realty Corp 229,808.55 P-99 St. Francis Square Realty Corp St. Francis Square Realty Corp 457.52 P-186 Teleglobal Of Philippine (Toph) Teleglobal Of Philippine (Toph) 262.00 P-187 Aden Remote Site (Philippines), Inc Quantum Hotels And Resorts 247.82 P-188 Sycip Salazar Hernandez & Gatmaitan Sub-total 6,000.00 P-191 6,000.00 P-192 235,770.80 P-193 323.11 P-233 88,242.70 P-247 Php 803,199.02 With Noted Alterations or Additions in the Supporting OR Without Countersignature of the Authorized Representative of the Supplier Sunvar, Incorporated Php 9,737.40 P-97 47.44 P-100 Agatep Associates, Inc. P-101 6,428.57 P-102 Agatep Associates, Inc. 9,000.00 P-103 9,000.00 P-104 Agatep Associates, Inc. 9,000.00 P-130 4,800.00 P-131 Agatep Associates, Inc. 5,400.00 P-132 4,800.00 P-133 Agatep Associates, Inc. 1,065.00 P-134 3,261.85 P-135 Encarline Driver & Car Services 2,983.86 65,524.12 Encarline Driver & Car Services Encarline Driver & Car Services Encarline Driver & Car Services Encarline Driver & Car Services Encarline Driver & Car Services Sub-total Php OR Not Readable Php 380,743.06 P-106 Bradley Drilling Incorporated Bradley Drilling Incorporated 464,177.88 P-107 Sub-total Php 844,920.93 OR Without Authorized Signature Php 416,642.09 P-109 Drillcorp Philippines Inc Drillcorp Philippines Inc 155,735.58 P-110 Drillcorp Philippines Inc Drillcorp Philippines Inc 163,873.28 P-111 Sub-total 322,487.76 P-112 Supported with TIN-V OR Astron Communication System Php 1,058,738.71 Sub-total 2nd Quarter Php 5,732.14 P-197 3rd Quarter Php 2,778,114.93 Nature of the Service Was Not Indicated Php 10,316,640.40 P-907 Leighton Contractors (Phils), Inc. 278.57 P-912 New World International Development

DECISION CTA CASE NOS. 8802 and 8842 Page23 of25 Philippine Gold Limited 164,210.38 P-915 St Francis Square Realty Corp 228.76 P-929 Encarline Driver & Car Services Encarline Driver & Car Services 4,800.00 P-957 Leighton Contractors (Phils.), Inc. 4,800.00 P-958 Santiago & Sons Metal And Services, Inc 14,371,842.21 P-1004 Teleglobal Of Philippine (Toph, Inc.) 3,750.00 P-1008 Leighton Contractors (Phils.), Inc. 6,000.00 P-1033 St Francis Square Realty Corp 13,457,638.70 P-1114 St Francis Square Realty Corp St Francis Square Realty Corp 244.40 P-1151 St Francis Square Realty Corp 303.06 P-1152 St Francis Square Realty Corp 215.07 P-1153 St Francis Square Realty Corp 361.71 P-1154 St Francis Square Realty Corp 361.71 P-1155 St Francis Square Realty Corp 303.06 P-1156 Sub-total 244.40 P-1157 1,085.13 P-1158 Ph_e 38,333,307.56 With Noted Alterations or Additions in the Supporting OR Without Countersignature of the Authorized Representative of the Supplier SGS Philippines, Inc. Php 354,916.73 P-925 439.92 P-1020 St. Francis Square Realty Corp. 457.52 P-1021 723.42 P-1022 St. Francis Square Realty Corp. P-1023 1,085.13 P-1024 St. Francis Square Realty Corp. 1,212.22 P-1037 9,000.00 P-1038 St. Francis Square Realty Corp. 9,000.00 P-1039 P-1040 St. Francis Square Realty Corp. 47.44 P-1041 63.53 P-1069 Agatep Associates, Inc. 650.11 P-1070 24.00 P-1071 Agatep Associates, Inc. 24.00 P-1072 24.00 P-1073 Agatep Associates, Inc. 24.00 P-1074 144.00 Agatep Associates, Inc. 24.00 377,860.02 Agatep Associates, Inc. First United Travel, Inc. First United Travel, Inc. First United Travel, Inc. First United Travel, Inc. First United Travel, Inc. First United Travel, Inc. Sub-total Ph_e Supported by OR with pre-printed TIN only Ph_e 576.00 P-940 Astron Communication Systems Sub-total 3rd Quarter Ph_e 38,711,743.58 TOTAL PHP 41,489,858.51 Therefore, out of petitioner's input VAT claim for the Second and Third Quarters of FY 2012 in the amounts of Php58,518,649.42 and Php67,283,137.43, respectively, only the amounts of Php44,276,676.64 and Php21,227,033.50 represent petitioner's valid input tax. However, as discussed earlier, these input taxes cannot be claimed in full by petitioner since only 99.92% (for the Second Quarter) and 99.94% (for the Third Quarter), of the actual zero-rated sales declared per VAT Returns were found to be valid. Thus, such input tax credits shall be allocated accordingly:

DECISION CTA CASE NOS. 8802 and 8842 Page 24 of25 DETAILS 2ND QUARTER 3RDQUARTER Input VAT Claimed Php 58,518,649.42 Php 67,283,137.43 Less: Disallowances 3.311�1 94.84102 Unaccounted Difference 11,463,854.54 7,344,265.51 Per ICPA Report 38,711,743.58 Per Court Findings 2,778,114.93 21,227,033.50 Valid Input VAT Php 44,276,676.64 Php Multiplied by: Percentage of Zero-rated Sales 99.94% Input VAT Attributable to Zero-rated Sales 99.92% 21,214,297.28 Php 44,241,255.30 Php TOTAL- 2ND & 3RD QUARTERS PHP 65,455,522.58 As to whether or not the said input VAT were applied against any output VAT and/ or carried over to the succeeding taxable quarters, petitioner's Quarterly VAT Returns for the subject period of claim showed that petitioner had no output tax liabilities against which the claimed input VAT may be applied or credited. In addition, the claimed input VAT were not carried-over by petitioner in the succeeding quarters since they were deducted as "VAT Refund/TCC claimed" from the total available input taxes in its Second103 and Third104 Quarterly VAT Returns for FY 2012. Therefore, petitioner is entitled only to the properly substantiated amounts of Php44,241,255.30 and Php21,214,297.28, as claims for refund arising from its unutilized input VAT from zero- rated transactions. In view of the foregoing, petitioner was able to sufficiently prove its entitlement to a TCC of its unutilized excess input VAT attributable to its zero-rated sales for the Second and Third Quarters of FY ending June 30, 2012, albeit in the reduced amount of Php65,455,522.58. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Respondent Commissioner of Internal Revenue is hereby ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner Filminera Resources Corporation in the reduced amount of SIXTY FIVE MILLION FOUR HUNDRED FIFTY-FIVE THOUSAND FIVE 101 Records, CTA Case No. 8802. Vol. 3, Exhibit "P-2013," par. e, p. 1706. 102 Id. 103 Id., Vol. 4, Exhibit "P-12," BIR Fonn No. 2550-Q Second Quarter, line 23D. 104 Id., Exhibit "P-841," BIR Fonn No. 2550-Q Third Quarter, line 23D. (

DECISION AND 58/100 PESOS CTA CASE NOS. 8802 and 8842 Page 25of25 HUNDRED TWENTY-TWO (PHP65,455,522.58). SO ORDERED. LOVELL (BAUTISTA Associate Justice WE CONCUR: ABON-VICTORINO ~. ~ ~- MA. BELEN M. RINGPIS-LIBAN Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. LOVELL~ BAUTISTA Associate Justice Chairperson CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. ROMAN G. DEE OSARIO Presiding Justice