UNISYS PHILIPPINES LIMITED - PHILIPPINE BRANCH v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City SECOND DIVISION ******** UNISYS PHILIPPINES LIMITED� CTA CASE No. 8355 Petitioner, PHILIPPINE BRANCH, Members: -versus- CASTANEDA, JR., Chairperson, CASANOVA, and COTANGCO-MANALASTAS, JJ. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. MAR Z8 2014 )(-------------------------------------------------------------------------------------~--------------)( DEC IS I 0 N I y: ~/ ...,. CASTANEDA, JR., J.: This Petition for Review filed by Unisys Philippines Limited-Philippine Branch seeks the refund or issuance of ta)( credit certificate in the aggregate amount of Eight Million Si)( Hundred Thousand Eight Hundred Ninety-Two Pesos and 14/100 (P8,600,892.14), allegedly representing erroneous payments of value-added ta)( (VAT) for the first three (3) quarters of calendar year (CY) 2010. THE FACTS Petitioner Unisys Philippines Limited-Philippine Branch is a branch office of Unisys Philippines Limited (formerly Unisys Australia Limited), which is a corporation organized and registered under the laws of Michigan, U.S.A. It is licensed to transact business in the Philippines by the Philippine Securities and E)(change Commission. It holds office at Level 9, One Cyberpod, Eton Centris Station, EDSA cor. Quezon Avenue, Quezon City. 1 Petitioner is also a VAT-registered ta)(payer as evidenced by its Certificate of Registration No. OCN8RC0000019521.2 ~ 1 Par. 1, Petition for Review, docket, p. 1; Exhibit " A", docket, p. 275. 2 Exhibit " B", docket, p. 276.

DECISION CTA Case No. 8355 Page2of18 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), with authority, among others, to decide, approve and grant claims for refund or tax credit of internal revenue taxes. She holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner entered into several agreements with different government agencies, to wit: (1) Contract for MIS Computerization Project Implementation Phase3 with the Philippine Ports Authority (PPA) on August 26, 2002; (2) Systems Integration Services Agreement4with the Bureau of Customs (BOC) on December 29, 2004; and (3) Master Agreement for Products and Services5 with the Armed Forces of the Philippines (AFP) on July 24, 2007. Petitioner filed its Quarterly VAT Returns for first, second, and third quarters of taxable year 2010 on April 26, 2010, July 26, 2010, and October 22, 2010, respectively.6 It amended all the aforesaid returns on February 7, 2011 J Petitioner filed its Letters and Application for Tax Credits/Refunds9 for an alleged overpayment of VAT on May 17, 2011. Due to the inaction of respondent on petitioner's administrative claim for refund, 10 the latter filed the instant Petition for Review on October 17, 2011. On November 28, 2011, respondent filed a Motion to Dismiss11 on the ground that petitioner's right to appeal from failure of the former to act on the latter's administrative claim had already prescribed. After considering petitioner's Opposition/Comment (To Respondent's Motion to Dismiss)12, the Court denied the said motion on February 14, 2012; and declared that the administrative claim of petitioner and the instant Petition for Review were filed within the two-year prescriptive period .13 Respondent then filed her Answer14 on March 30, 2012, interposing the following special and affirmative defenses: {V 3 Exhibit "F", docket, pp. 294-335. 4 Exhibit "M", docket, pp. 369-391. 5 Exhibit "E", docket, pp. 284-293. 6 Exhibits "G" to "G-4", "H" to "H-4", and "I" to "I-4", docket, pp. 336 to 350. 7 Exhibits "J" to "J-2", "K" to "K-2", and "L" to "L-2", docket, pp. 351 to 368. 8 Exhibits "C" and "C-1", docket, p. 277. 9 Exhibits "D", "D-1", and "D-2", docket, p. 282. 10 Par. I(3), Joint Stipulation of Facts and Issues (JSFI), docket, p. 139. 11 Docket, pp. 69-74. 12 Docket, pp. 78-83. 13 Resolution, docket, pp. 85-91. 14 Docket, pp. 97-100.

DECISION CTA Case No. 8355 Page3of18 "7. Respondent reproduces and repleads all the foregoing allegations insofar as they are relevant to her defenses which are discussed hereunder and incorporates them herein by way of reference and, in addition thereto, most respectfully avers THAT: 8. Petitioner's alleged claim for issuance of tax credit certificate is still subject to administrative routinary investigation/examination by the respondent's Bureau; 9. Taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable. 10. Petitioner's claim for refund or issuance of tax credit certificate in the amount of 8,600,892.14, representing alleged erroneous VAT payments for the first three (3) quarters of CY 2010, were not fully substantiated by proper documents, such sales invoices, official receipts and others pursuant to Revenue Regulations No. 7-95 in relation to Section 113 and 237 of the 1997 Tax Code. 11 . In an action for refund/credit, the burden of proof is on the petitioner to establish its right to claimed refund and failure to adduce sufficient proof is fatal to the claim for tax refund/credit. 12. It is incumbent upon the latter to show that it has complied with the provisions under Section 204 (c) in relation to Section 229 of the Tax Code. Otherwise, its failure to prove the same is fatal to its claim for refund. 13. Claims for refund are construed strictly against herein petitioner since the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211)." Petitioner filed its Pre-Trial Brief15 on May 7, 2012; while respondent submitted her Pre-Trial Brief16 through registered mail on May 7, 2012, which was received by the Court on May 15, 2012. The parties submitted their Joint Stipulation of Facts and lssues17 to this Court on July 9, 2012. Subsequently, the Pre-Trial Order1B was issued on July 19, 2012. ~ 15 Docket, pp. 105-112. 16 Docket, pp. 116-118. 17 Docket, pp. 138-140. 18 Docket, pp. 142-146.

DECISION CTA Case No. 8355 Page4of18 On September 3, 2012, the Court commissioned Ms. Annalyn B. Artuz as the Independent Certified Public Accountant (CPA) for this case. During trial, petitioner presented Jennifer G. Glinoga, Annalyn B. Artuz, and Veronica Joy R. Catajoy as its witnesses; while respondent's counsel manifested during the hearing on May 27, 2013 that he has no witness to present. Thus, respondent was given thirty (30) days from May 27, 2013 within which to submit her Memorandum and petitioner was granted twenty (20) days from receipt of notice to file its Memorandum.19 On May 29, 2013, petitioner urgently moved for partial reconsideration of the Resolution dated May 7, 2013, which admitted its documentary evidence except Exhibits "E"' "M-1 ", "0-1''J "0-2"J "Ill" and "JJJ", with motion for leave to admit additional evidence.20 The Court partially granted the same on July 19, 2013, admitting Exhibit "E" and including the purposes of Exhibits "0-1 " and "0-2" as part of the purposes of Exhibit "0".21 The Court likewise allowed petitioner to present additional evidence. On August 14, 2013, the Court granted petitioner's oral offer of evidence, admitting Exhibit "MM"; and respondent's counsel manifested anew that he would no longer present evidence and would be submitting this case for decision based on the pleadings .22 The case was submitted for decision on November 7, 2013, considering petitioner's Memorandum23 filed on September 13, 2013 and the Report24 dated November 6, 2013 of this Court's Records Division stating that respondent failed to file a Memorandum.2s THE ISSUES The parties presented the following issues26 to be resolved by this Court: "1. Whether or not Petitioner erroneously computed VAT liability for the first three (3) quarters of CY 2010. 2. Whether or not Petitioner overpaid its VAT liabilities for the first three (3) quarters of CY 2010. ~ 19 Resolution dated May 27, 2013, docket, p. 519 . 20 Docket, pp. 521 -527 . 21 Resolution, docket, pp. 542-544. 22 Resolution, docket, p. 547. 23 Docket, pp. 548-571. 24 Docket, p. 572. 25 Resolution, docket, p. 573. 26 Par. II, JSFI, docket, p. 139.

DECISION CTA Case No. 8355 Page5of18 3. Whether or not Petitioner is entitled to a tax refund and/or tax credit certificate amounting to Pesos: Eight Million Six Hundred Thousand Eight Hundred Ninety-Two and 14/100 (P8,600,892.14) representing the erroneous VAT payments for the first three (3) quarters of CY 2010. 4. Whether or not Petitioner satisfied all the documentary and evidentiary (requirements) for an administrative claim for refund and/or issuance of a tax credit certificate." THE COURT'S RULING As to the timeliness of the filing of the instant Petition for Review, this Court has already ruled in the Resolution27 dated February 14, 2012 that the administrative claim of petitioner filed on May 17, 2011 and the Petition for Review filed before this Court on October 17, 2011 were filed within the two-year prescriptive period. The Court will now determine whether petitioner is entitled to the claimed tax refund . Petitioner filed its original Quarterly VAT Returns for the first three quarters of CY 2010 disclosing the following information: Vatable Sales/Receipt Exhibit "G" Exhibit "H" Exhibit "I" TOTAL Sale to Government 1st qtr 2nd qtr 3rd qtr ~ 02,042,326.62 Zero-Rated Sales/Receipts ~ 181 ,330,631 .26 ~ 46,490,907.10 ~ 74,220,788.26 Total Sales - 582 ,374. 87 287,126.56 933,795.90 1,803,297.33 fit181 ,913,006.13 fit46,778,033.66 fit75,154,584.16 fit303,845,623.95 Output Tax Due 21 '759,676.27 5,578,910.05 8,906,496.57 36,245,082.89 Vatable Sales/Receipt .. 21 ,759,676.27 .. 5,578,910.05 Sale to Government - Total Output Tax .. 8,906,496.57 .. 36,245,082.89 Input Tax Carried Over 807,754.40 807,754.40 Input Tax on: Domestic Purchases of Goods Other 273,872.37 12,645.47 121 ,242.78 407,760.62 than Capital Goods 220,946.00 Importation of Goods Other than Capital 3,245,074.40 305,41 7.00 130,820.00 657,1 83.00 Goods 1,689,228.20 2,348,099.44 7,282,402.04 Domestic Purchases of Service .. 3,739,892.77 1,010,796.08 1,010,796.08 Services Rendered by Non-Residents 4,547,647.17 .. 2,007,290.67 .. 2,600,162.22 .. 8,347,345.66 Total Input Tax for the Period 2,007,290.67 2,600,162.22 9,155,100.06 Total Available Input VAT 27 Docket, pp. 85 to 91.

DECISION I I I P 17,212,029.10 p 3,571 ,619.38 CTA Case No. 8355 p 6,306,334.35 p 27,089,982.83 Page6of18 2,908,108.11 1,919,863.73 791,338.92 5,619,310.76 Net VAT Payable 6,743,232.42 32,829.62 2,714,993.33 9,491,055.37 Tax Credits/Payments Monthly VAT Payments - Previous 2 - months Creditable VAT Withheld 9,651 ,340.53 1,952,693.35 3,506,332.25 15,110,366.13 p 7,560,688.57 p 1,618,926.03 p 2,800,002.10 p 11 ,979,616. 70 Advance Payments made Total Tax Credits Tax Still Payable (Overpayment) Subsequently, petitioner amended its Quarterly VAT Returns for the first three quarters of CY 2010, which reflected a total overpayment of P8,600,892.13, the details of which are herein presented: Vatable Sales/Receipt - Private Exhibit "J" Exhibit "K" Exhibit "L" TOTAL Sale to Government 1st qtr 2010 2nd qtr 2010 3rd qtr 2010 Zero-Rated Sales/Receipts p 81 ,147,413.89 Total Sales p 58,997,060.54 p 10,314,660.46 p 220,894,912.74 122,333,570.72 36,176,246.64 11 ,835,692.89 1,803,297.33 582,374.87 287,126.56 62,385,095.38 P303,845,623.96 P181 ,913,006.13 P46, 778,033.66 933,795.90 P75, 154,584.17 Output Tax Due 7,079,647.26 1,237,759.26 1,420,283.15 9,737,689.67 Vatable Sales/Receipt 14,680,028.49 4,341 ,149.60 7,486,211.45 26,507,389.54 Sale to Government p 21,759,675.75 p 5,578,908.86 p 8,906,494.60 p 36,245,079.21 Total Output Tax Input Tax: 273,872.37 12,645.47 121,242.78 407,760.62 Domestic Purchases of Goods Other than Capital Goods 220,946.00 305,417.00 130,820.00 657,183.00 Importation of Goods Other than Capital 3,245,074.40 1,689,228.20 Goods 2,348,099.44 7,282,402.04 Domestic Purchases of Service . 3,739,892.77 .. 2,007,290.67 Services Rendered by Non-Residents . 1,010,796.08 1,010,796.08 6,048 ,332 .21 9,358,141.74 Total Input Tax for the Current Period p 9, 788,224.98 .. 3,610,958.30 Input Tax on Sale to Government closed to p 11 ,971 ,450. 77 expense 979,979.53 1,369 ,535 .03 8,397,846.77 Total Available Input VAT 2,908,108.11 p 2,987,270.20 p 4,980,493.33 p 17,755,988.51 Net VAT Payable p 2,591 ,638.66 p 3,926,001.27 p 18,489,090.70 6,743,232.42 Less: Tax Credits/Payments 7,560,688.57 Monthly VAT Payments- Previous 2 17,212,029.10 months p (5,240,578.33) 1,919,863.73 791 ,338.92 5,619,310.76 VAT Withheld on Sales to Government 32 ,829 .62 2,714,993.33 9,491 ,055.37 1,618,926.03 2,800,002.10 11 ,979,616.70 Advance Payments made 3,571 ,619.38 6,306,334.35 27,089,982.83 p (979,980.72) P(2,380,333.08) P(8,600,892.13) Total Tax Credits Total Amount Payable (Overpayment) Petitioner claims that the VAT overpayment of P8,600,892.13 constitutes erroneously paid tax which can be claimed as tax refund/credit under Section 229 of the National Internal Revenue Code (NIRC) of 1997, as amended, which provides: "SEC. 229. Recovery of Tax Erroneously or Illegally Collected. - 5Jv No suit or proceeding shall be maintained in any court for the recovery

DECISION CTA Case No. 8355 Page7of1B of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress. In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provided, however, That the Commissioner may, even without a written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid ." For the first three quarters of CY 2010, petitioner generated gross sales in the aggregate amount of P303,845,623.96, broken down as follows : Period Private Sales Sales to Zero-Rated Total (2010) p 58,997,060.54 Government Sales p 181 ,913,006.13 01 10 ,314 ,660.46 Entities p 582,374.87 46 ,778 ,033 .66 02 11 ,835,692.89 p 122,333,570.72 75 ,154,584.17 03 P81,147,413.89 287,126.56 P303,845,623.96 Total 36,176,246.64 933,795.90 62,385,095.38 P1 ,803,297.33 P220,894,912.74 Petitioner derived its gross sales to government of P220,894,912.74 from its various service agreements with the following government agencies: 1. System Integration Services Agreement2B with the Bureau of Customs for the BOC ASYCUDA World (e-Customs) Project, an on- going modernization project of the BOC; 2. Agreement with the Philippine Ports Authority29 for the PPA MIS Computerization Project Implementation Phase; and 3. Master Agreement for Product and Services3o with the Armed Forces of the Philippines .~ 28 Exhibit " M". 29 Exhibit " F" . 30 Exhibit "E".

DECISION CTA Case No. 8355 Page8of18 Petitioner offered in evidence various official receipts31 issued to the BOC, the PPA, and the AFP for the services it rendered, which substantiate the amount of revenues received from the various government agencies. The aforesaid revenues were reported in the corresponding Quarterly VAT Returns of petitioner. The revenues derived by petitioner from BOC, PPA, and AFP were subjected to the corresponding five percent (5%) final VAT and an aggregate amount of P9,491 ,055.37 was withheld by the said government agencies pursuant to Section 114(C) of the NIRC of 1997, as amended , which states: "SEC. 114. Return and Payment of Value-added Tax. - XXX XXX XXX (C) Withholding of Creditable Value-Added Tax. - The Government or any of its political subdivisions, instrumentalities or agencies, including government-owned or controlled corporations (GOCCs) shall, before making payment on account of each purchase of goods from sellers and services rendered by contractors which are subject to the value-added tax imposed in Sections 106 and 108 of this Code, deduct and withhold the value-added tax due at the rate of five percent (5%) of the gross payment thereof: Provided, That the payment for lease or use of properties or property rights to non-resident owners shall be subject to ten percent (10%) withholding tax at the time of payment. For purposes of this Section, the payor or person in control of the payment shall be considered as the withholding agent." In computing its output VAT liability, petitioner credited the actual amount of its input VAT accumulated for the period instead of the seven percent (7%) standard input VAT which is prescribed for payments received from the government, i.e. , BOC, PPA and AFP, even though its actual accumulated input VAT attributable to its government sales was lower than the 7% standard input VAT. Thus, petitioner filed its original Quarterly VAT Returns for the first three quarters of CY 2010 and paid the corresponding tax of P17,598,927.46, broken down as follows : Period Total Amount of 5% Creditable Amount of VAT paid (2010) Output VAT Withholding VAT upon filing of VAT p 17,212,029.10 Q1 3,571 ,619.38 p 6,743,232.42 Returns Q2 6,306 ,334 .35 32 ,829 .62 p 10,468,796.68 Q3 P27,089,982.83 Total 2,7 14,993 .33 3,538,789.76 P9,491 ,055.37 3,591 ,341 .02 P17,598,927.46 31 Exhibits " NN-1" to " NN-17"I "NN-79"1 " PP-1 " to " PP-10"I and " QQ-1" to "QQ-8"I� Annex 1I Exhibit "MM".

DECISION CTA Case No. 8355 Page9of18 Subsequently, petitioner discovered that it erroneously computed its VAT liabilities, as shown above, which resulted in overpayment in the total amount of P8,600,892.14. The erroneously paid VAT is presented below by comparing the original and the amended Quarterly VAT Returns: Particulars Original VAT Amended VAT Difference Output VAT Returns (using Return (using Actual Input) Standard Input) p 26,507,393.22 Private Sales (Line 158 of VAT Returns) p 36,245,082.89 Sales to Government (Line 168 of VAT Returns) p 9,737,689.67 (26 ,507 ,389 .54) Total Output VAT t-36,245,082.89 26,507,389.54 Input VAT t- 3.68 Actual Input VAT: 807,754.40 ~ 36,245,079.21 Carried Over from Previous Period 807,754.40 For 1st to 3rd quarter of CY 2010 (Annex A Table 2 of this 8,347,345.66 2,224,184.71 Court's Findings) 7, 064 ,797 .12 6,123,160.95 9,155,100.06 (7 ,064 ,797 .12) Private Sales 1'27,089,982.83 69,159.91 Sales to Government 8,397,846.77 (69,159.91 ) Zero-Rated Sales 17, 598,927.46 17,755,988.51 Excess of Standard over Actual Input VAT on Sales to 9,491,055.37 tt 18,489,090.70 (8,397,846.77) Government (8,600,888.45) Total Allowable Input VAT 27,089,982.83 17,598,927.46 tt 8,600,892.13 Net VAT Payable Less: VAT Payments . 9,491 ,055.37 - Actual Payments (Table 2 and 23 of Exhibit MM) 27,089,982.83 Creditable VAT Withheld (Line 268 of VAT Returns) t-(8,600,892.13) 9,491 ,055.37 VAT Withheld on Sales to Government (Line 260 of VAT Returns) (9,491 ,055.37) Total VAT Payments . VAT Overpayment p 8,600,892.13 Based on the above comparison , the total allowable input VAT reported in the amended VAT Returns is significantly higher than the amount claimed as deductions against output VAT in the originally filed VAT Returns. It must be noted that the net amount of VAT overpayment is due to the net effect of the following: 1. The use of Actual Input VAT as deduction against output VAT in computing for the Net VAT Payable in the originally filed VAT Returns instead of the 7% Standard Input VAT. Thus, the amount of overpayment is significantly attributable to the excess (difference) of Standard Input VAT over Actual Input VAT which amounted to P8,397,846.77; 2. A lower amount of the total Actual Input VAT reported in the originally filed VAT Return for the third quarter of CY 2010 due to the non-reporting of the input VAT on services rendered by non-resident service provider which r-� amounted to P1 ,010,796.08.32 The lower amount of Actual Input VAT increased the Net VAT Payable in the originally filed VAT Returns ; and 32 Line 21L of Exhibit "L".

DECISION CTA Case No. 8355 Page10of18 3. The exclusion in the amended VAT Returns of the input VAT carry-over from previous period in the amount of P807,754.4033 for the first quarter of CY 2010. However, in order to be entitled to the claimed refund or tax credit certificate, petitioner must be able to establish that it indeed incurred and have enough input tax credits and VAT payments. Based on records, petitioner's VAT payments consisted of the following: 1. Actual VAT payments upon filing of the original VAT Returns which amounted to P17,598,927.46, as detailed below: Actual VAT Payments CY Exhibit No. Amount 2010 uu - First Quarter p 2,908,108.11 January VV-1 February G-3 7,560,688.57 March 10,468,796.68 WW-1 Sub-total XX 1,919,863.73 Second Quarter H-3 - April YY-1 May ZZ-1 1,618,926.03 June 1-3 3,538,789.76 Sub-total Third Quarter 59,267.67 July 732,071.25 August 2,800,002.10 September 3,591,341.02 Sub-total P17,598,927.46 TOTAL 2. Five percent VAT withheld by BOC and PPA in the amount ofP9,491,055.37 for the first to third quarters of CY 2010 and duly substantiated by Certificates of Final Withholding Tax Withheld at Source, as presented below: Payor's Name Exhibit No. Income Payments VAT Withheld Bureau of Customs TTT-1 p 2,875,151.50 p 143,757.57 Bureau of Customs TTT-2 2,593 ,357 .14 Philippine Ports Authority TTT-3 3,291,711.22 129,667.86 Philippine Ports Authority TTT-4 17,467,700.46 164,585.56 Philippine Ports Authority TTT-5 4,095 ,530 .19 873 ,385.02 Philippine Ports Authority TTT-6 319 ,337 .06 204,776.50 Philippine Ports Authority TTT-7 26,190,058.04 15,966.85 Philippine Ports Authority TTT-8 26,190,058.04 1,309,502.90 Philippine Ports Authority TTT-9 22,052,961.37 1,309,502.90 Philippine Ports Authority TTT-10 22,052,961.37 1'1 02,648.07 1' 102 ,648 .07 33 Line 20A of Exhibits "G" and "J".

DECISION TTT-11 7,735,822.33 386,791.12 CTA Case No. 8355 6,743,232.42 Page11 of18 TTT-12 656,592.30 32,829.62 Philippine Ports Authority TTT-13 4,095,530.19 32,829.62 Sub-total TTT-14 24 ,009,458 .65 204,776.51 Bureau of Customs TTT-15 26,190,058.04 1,200,473.43 Sub-total TTT-16 1,309,502.90 Philippine Ports Authority 4,809.86 Philippine Ports Authority 240.49 Philippine Ports Authority 2,714,993.33 Philippine Ports Authority P9,491 ,055.37 Sub-total TOTAL On the other hand, petitioner reported a total of P9,358, 141.74 input VAT incurred for the first, second, and third quarters of CY 2010. In support thereto, petitioner submitted various suppliers' invoices, official receipts, Bureau of Customs Import Entries and Internal Revenue Declarations (IEIRDs), and BOC official receipts.34 Upon verification of the said documents, the Court-commissioned Independent CPA, Ms. Annalyn B. Artuz of Constantino Guadalquiver and Co., summarized her findings as follows: Particulars Annex Amount of Amount of Input 1. Domestic Purchase of goods and services supported by Reference Purchases VAT ~ 13,861,205.81 VAT invoices and VAT ORs 4-1 0-a ~ 1,661,250.77 4-20-a 6,294,868.20 755,384.14 sub-total 4-30-a 8,798,295.82 2. Domestic purchases of services supported by VAT ORs 28,954,369.83 1,055,798.15 4-10-b 1,097,048.12 3,472,433.06 issued to the Petitioner's name but without or with wrong 4-20-b TIN and/or address 4-30-b 287,321 .11 131,645.71 1,227,596.69 34,478.41 sub-total 4-10-c 2,611,965.92 147,281.66 3. Domestic purchases of goods supported by VAT invoices 4-20-c 313,405.78 4-30-c 217,600.70 26,112.09 issued to the Petitioner's name but without or with wrong 17,857.14 2,142.86 TIN and/or address 4-10-d 30,700.00 3,683.99 4-30-d 266,157.84 31,938.94 sub-total 268,740.40 32,248.85 4. Domestic purchases of services supported by documents 4-10-e 159,390.12 19,126.82 4-20-d 428,130.52 51,375.67 other that VAT ORs (e.g. invoices) 4-30-e 8,483,981.54 1,018,079.94 6,568,736.90 788,248.35 sub-total 4-30-f 5,429,538.64 651,544.25 5. Domestic purchases of services supported by VAT ORs not 20,482,257.08 2,457,872.54 4-20-e dated within the VAT taxable quarter but dated within the 4-30-g 34,241 .07 4,108.93 taxable year 34,241.07 4,108.93 sub-total 22,321 .43 2,678.57 6. Domestic purchases of goods supported by VAT invoices 13,392.86 1,607.14 not dated within the VAT taxable quarter but dated within the taxable year sub-total 7. Domestic purchases of services supported by tape receipts without address and TIN 34 Exhibits "RR-1" to "RR-210", "55-1" to "55-171", and "TT-l" to "TT-216". ~

DECISION CTA Case No. 8355 Page12of18 sub-total 4-30-h 35,714.29 4,285.71 8. Domestic purchases of goods and services supported by 377,865.84 4-1 0-f 45,343.90 photocopies of invoices and ORs 4-20-f 377,865.84 sub-total 4-30-i 682,169.49 45,343.90 501,480.34 79,456.64 9. Domestic purchases of services supported by documents 4-20-g 505,317.74 55,162.43 other that VAT ORs with printed notation "NOT VALID 4-30-j 1,688,967.57 56,561 .12 SOURCE OF INPUT TAX" 86,205.74 191,180.19 4-30-k 11,450.18 10,344.69 sub-total 97,655.92 1,374.02 10. Domestic purchases of services supported by NON-VAT 4-10-g 37,539.73 11,718.71 4-20-h 37,539.73 4,504.77 ORs 4-30-1 1,430,587.68 4,504.77 sub-total 458,245.16 171 ,671 .00 4-10-h 1,046,750.48 54,988.00 11 . Domestic purchases of services claimed twice 4-20-i 2,935,583.32 125,608.00 sub-total 410,621 .16 352,267.00 4-30-m 2,086,920.46 49,275.00 12. Importation of goods supported by IERDs and/or SOC ORs 2,497,541.62 250,429.00 299,704.00 sub-total 43,440.43 13. Importation of goods supported by photocopies of IERDs 5,212.00 and/or SOC ORs sub-total 14. Importation of goods supported by documents other than IERDs or SOC ORs (e.g. assessment notice) sub-total 4-30-n 43,440.43 5,212.00 8,423,300.67 1,010,796.08 15. Purchase of services from non-resident service provider supported by SIR Form 1600 sub-total 4-10-i 8,423,300.67 1,010,796.08 16. Domestic purchases of goods/services supported by VAT 4-20-j 439,429.88 52,735.15 4-30-o 107,387.50 12,886.49 invoices/VAT ORs with countersigned changes in the 122,785.27 14,734.21 Company's name and/or TIN and/or address 4-1 0-j 669,602.65 80,355.85 4-20-k 317,576.05 sub-total 2,646,465.54 40,547.73 17. Domestic purchases of goods/services supported by VAT 337,898.06 invoices or VAT ORs stamped "CERTIFIED TRUE COPY" sub-total 4-30-p 3,863,944.59 463,673.26 6,848,308.19 821,797.04 18. Domestic purchases of capital goods exceeding ~1 million 4-1 0-k 1,665,346.43 supported by VAT Invoice (amortization only) 4-20-1 9,992.08 9,992.08 4-30-q 9,992.08 sub-total 1,665,346.43 29,976.24 19. Difference* 0.40 169,865.33 sub-total 0.40 169,865.33 TOTAL ft78,097,989.32 ft9,358,141.74 *The difference of ~169,865.33 in item 19 above pertains to the deferred Input VAT on purchase of capital goods exceeding P1 million (aggregate acquisition cost excluding VAT) in a month as indicated in item 18 of the above table. In accordance with Section 4.110-3 of Revenue Regulations No. 16-2005, the amount of Input VAT for such purchases of capital goods should be amortized for five (5) years which is the estimated useful life of the computer equipment. The amount of allowable Input t- VAT should be equal to amortization of Input VAT for the period 1st to 3rd quarters of CY 2010 covering all periods from January 1 to September 30, 2010.

DECISION CTA Case No. 8355 Page13of18 The difference is accounted for as follows: Input VAT on purchase of capital goods exceeding P1 million p 199,841.57 Useful life of capital goods 60 months Monthly amortization of Input VAT Multiply by 9 months (January 1 to September 30, 2010) p 3,330.69 Amortization if Input VAT claimable for 151 to 3'd quarter of CY 2010 9 months Input VAT reported and claimed in the VAT Returns Difference- item 19 p 29,976.24 199,841 .57 p 169,865.33 Based on the foregoing, the amount of P2,785,663.33 shall not be considered as valid unutilized input VAT for petitioner's failure to meet the substantiation requirements under Sections 110(A) and 113(A) of the NIRC of 1997, as amended , and as implemented by Sections 4.110-1, 4.110-3, 4.110-8, and 4.113-1 of Revenue Regulations No. 16-2005, to wit: Particulars Annex Amount of Amount of Input 1. Domestic purchases of services supported by VAT ORs Reference Purchases VAT ~ 1,097,048.12 issued to the Petitioner's name but without or with wrong 4-1 0-b ~ 131,645.71 TIN and/or address 4-20-b 287,321 .11 34,478.4 1 4-30-b 1,227,596.69 147,281 .66 sub-total 2,611,965.92 313,405.78 2. Domestic purchases of goods supported by VAT invoices 4-10-c 26,112.09 4-20-c 217,600.70 2,142.86 issued to the Petitioner's name but without or with wrong 4-30-c 17,857.14 3,683.99 TIN and/or address 30,700.00 31,938.94 4-1 0-d 266,157.84 32,248.85 sub-total 4-30-d 268,740.40 19,126.82 3. Domestic purchases of services supported by documents 159,390.12 51,375.67 4-30-e 428,130.52 other that VAT ORs (e.g. invoices) 4-20-e 5,429,538.64 651 ,544.25 sub-total 4-30-g 4. Domestic purchases of services supported by VAT ORs not 5,429,538.64 651,544.25 4-30-h 22,321.43 2,678.57 dated within the VAT taxable quarter but dated within the 13,392.86 1,607.1 4 taxable year 4-1 0-f 35,714.29 4,285.71 4-20-f 377,865.84 sub-total 4-30-i 45,343.90 5. Domestic purchases of services supported by tape receipts 377,865.84 4-20-g 682,169.49 45,343.90 without address and TIN 4-30-j 501 ,480.34 79,456.64 505,31 7.74 55,162.43 sub-total 4-30-k 1,688,967.57 56,561 .12 6. Domestic purchases of goods and services supported by 86,205.74 191,180.19 4-10-h 11,450.18 10,344.69 photocopies of invoices and ORs 1,374.02 sub-total 97,655.92 11,718.71 37,539.73 4,504.77 7. Domestic purchases of services supported by documents 37,539.73 4,504.77 other that VAT ORs with printed notation "NOT VALID 410,621 .16 49,275.00 SOURCE OF INPUT TAX" - sub-total 8. Domestic purchases of services supported by NON-VAT ORs sub-total 9. Domestic purchases of services claimed twice sub-total 10. Importation of goods supported by photocopies of IERDs

DEGSION 4-20-i 2,086,920.46 250,429.00 CTA Case No. 8355 4-30-n 2,497,541.62 299,704.00 Page14of18 8,423,300.67 1,010,796.08 1 and/or BOC ORs 8,423,300.67 1,010,796.08 sub-total 0.40 169,865.33 0.40 169,865.33 11 . \ Purchase of services from non-resident service provider supported by BIR Form 1600 fit21 ,894,378.96 fit2 ,785,663.33 sub-total 12. 1 Unamortized Input VAT sub-total TOTAL The foregoing may be broken down per quarter as follows : Period Disallowed Input VAT 1st Quarter p 488,603.62 2nd Quarter 355,235.96 3rd Quarter 1,941,823.75 P2, 785,663.33 Total Upon further examination of the records , the Court finds that an additional input VAT of P1 ,689,390.48 shall also not be considered as valid unutilized input VAT for reasons stated hereunder: Findings Exhibit 1st Quarter Amount of Input VAT TOTAL No. 2nd Quarter 3rd Quarter p 2,541 .86 1. Domestic purchases of goods supported by VAT invoices which are dated outside the period of claim 910.71 Advance Paper Corporation RR-1 p 2,541 .86 1,155.28 6,813.30 Accent Micro Technologies, Inc. RR-2 910.71 8,552.68 19,973.83 lnnovend Corporation RR-4 1,1 55.28 4,108.93 lnnovend Corporation RR-67 6,813.30 4,108.93 lnnovend Corporation RR-68 8,552.68 67.20 sub-total 19,973.83 33.60 - - 37,250.59 8,400.00 2. Domestic purchase of goods supported by VAT invoice wherein the input VAT is not separately indicated 80,368.65 21,667.91 Wellcome Printing Services TT-119 4,108.93 40,881 .69 sub-total 8,449.01 - - 4,108.93 10,016.40 6,510.53 3. Domestic purchases of services supported by VAT ORs wherein the input VAT are not separately indicated 26,601 .55 26,431 .34 DHL Express (Philippines) Corp. RR-85 67.20 15,356.26 27,645.06 DHL Express (Philippines) Corp. RR-86 33.60 7,798.77 7,506.27 Group 4 Systems, Inc. RR-87 37,250.59 569.09 Sycip Salazar Hernandez & Gatmaitan RR-88 8,400.00 GROW, Inc. RR-89 80,368.65 GROW, Inc. RR-90 21,667.91 GROW, Inc. RR-91 40,881 .69 IT Managers, Inc. RR-92 8,449.01 IT Managers, Inc. RR-93 10,016.40 IT Managers, Inc. RR-94 6,510.53 Systems Generators Phils. Inc. RR-95 26,601.55 Systems Generators Phils. Inc. RR-96 26,431.34 Systems Generators Phils. Inc. RR-97 15,356.26 AYC Consultants Inc. RR-98 27,645.06 DHL Exel Supply Chain Phils., Inc. RR-1 01 7,798.77 DHL Exel Supply Chain Phils., Inc. RR-102 7,506 .27 DHL Express (Philippines) Corp. RR-103 569.09

DEG5ION CTA Case No. 8355 Page15of18 DHL Express (Philippines) Corp. RR-104 67.20 67.20 728.96 DHL Express (Philippines) Corp. RR-105 728.96 67.20 DHL Express (Philippines) Corp. RR-106 67.20 33.60 DHL Express (Philippines) Corp. RR-107 33.60 1,579.15 5,962.34 DHL Global Forwarding RR-109 1,579.15 5,962.34 1,100.30 ISS Facility Services RR-111 5,962.34 1,100.30 97,648.80 ISS Facility Services RR-112 5,962.34 108,322.32 Locator International Telecom & Traders Corp. RR-113 1,100.30 23,963.09 53,744.97 Locator International Telecom & Traders Corp. RR-114 1,100.30 79,900.61 6,510.53 MaxiBuild Inc. RR-116 97,648.80 10,758.58 GROW, Inc. RR-117 108,322.32 3,503.09 12,082.22 GROW, Inc. RR-118 23,963.09 31,269 .82 23,338.11 GROW, Inc. RR-119 53,744.97 16,555.50 34,766 .23 GROW, Inc. RR-120 79,900.61 124,879.78 IT Managers, Inc. RR-121 6,510.53 54,792.76 8,449.01 IT Managers, Inc. RR-122 10,758.58 27,139.69 IT Managers, Inc. RR-123 3,503.09 3,954.00 IT Managers, Inc. RR-124 12,082.22 7,787.04 110.42 Systems Generators Phils. Inc. RR-125 31,269.82 805 .81 1,891 .79 Systems Generators Phils. Inc. RR-126 23,338.11 326.18 95,536.94 Systems Generators Phils. Inc. RR-127 16,555.50 1,100.30 4,067.92 Systems Generators Phils. Inc. RR-128 34,766.23 8,609.52 105,372.40 GROW, Inc. SS-64 124,879.78 40,691 .57 54,823.98 GROW, Inc. SS-65 54,792.76 59,162.25 IT Managers, Inc. SS-66 8,449.01 11,536.75 9,728.39 Systems Generators Phils. Inc. SS-68 27,139.69 3,503.09 Crown Worldwide Movers, Inc. SS-70 3,954.00 12,818.91 18,125.76 DHL Exel Supply Chain Phils., Inc. SS-71 7,787.04 23,561 .66 DHL Express (Philippines) Corp. SS-72 110.42 31 ,290.19 22,270.28 DHL Express (Philippines) Corp. SS-73 805.81 1,576,855.57 DHL Express (Philippines) Corp. SS-74 1,891.79 2,396.22 DHL Express (Philippines) Corp. SS-75 326.18 13,394.93 15,791.15 Eton Properties Philippines Inc. SS-76 95,536.94 1,922.00 Locator International Telecom & Traders Corp. SS-77 1,100.30 1,922.00 Superclean Services Corporation SS-78 4,067.92 Sycip Salazar Hernandez & Gatmaitan SS-79 8,609.52 GROW, Inc. SS-80 105,372.40 GROW, Inc. SS-81 40,691 .57 GROW, Inc. SS-82 54,823.98 GROW, Inc. SS-83 59,162.25 IT Managers, Inc. SS-84 11 ,536.75 IT Managers, Inc. SS-85 9,728.39 IT Managers, Inc. SS-86 3,503.09 IT Managers, Inc. SS-87 12,818.91 Systems Generators Phils. Inc. SS-88 18,125.76 Systems Generators Phils. Inc. SS-89 23,561.66 Systems Generators Phils. Inc. SS-90 31,290.19 Systems Generators Phils. Inc. SS-91 22,270.28 sub-total 844,519.18 732,336.39 . 4. Domestic purchases of services supported by VAT Exempt ORs DHL Global Forwarding RR-108 2,396.22 IT Managers, Inc. SS-67 13,394.93 sub-total 2,396.22 13,394.93 . 5. Over-claimed input VAT on importation of goods supported by IEIRD and/or BOC OR Unisys WDC TT-185 1,922.00 sub-total . . 1,922.00 6. Importation of goods supported by IEIRDs and/or BOC ORs which are dated outside the period of claim

DECISION RR-170 1,489.00 1,489.00 CTA Case No. 8355 RR-171 1,202.00 1,202.00 Page16of18 RR-172 RR-173 826.00 826.00 Unisys Corporation RR-174 2,757.00 2,757 .00 Unisys Corporation RR-175 1,502.00 1,502.00 Unisys Corporation RR-176 26,784.00 26,784.00 Unisys Corporation RR-177 Unisys Corporation RR-178 687.00 687.00 Unisys WOC RR-182 1,037.00 1,037.00 Unisys Corporation RR-183 24,499.00 24,499.00 Unisys WOC RR-185 5,521 .00 5,521.00 3,905.00 3,905.00 Unisys woe - . Unisys woe 530.00 530.00 70,739.00 ~7 45,731.32 ~6,030.93 70,739.00 Unisys Corporation ~1 ,689,390.48 Unisys Australia Pty Ltd ~937,628.23 sub-total TOTAL Thus, only the amount of P4,883,087.93, as computed below, represents petitioner's substantiated Actual Input VAT that may be credited against petitioner's output VAT for the first three quarters of CY 2010: Input VAT per Returns 1st Qtr 2nd Qtr 3rd Qtr Total Less: Disallowances p 3,739,892.77 P2 ,007,290.67 p 3,610,958.30 p 9,358,141 .74 Per ICPA Report 488,603 .62 355,235.96 1,941 ,823.75 2,785,663 .33 Per this Courts Findings 937,628 .23 745,731 .32 6,030.93 1,689,390.48 Substantiated Actual Input VAT P2,313,660.92 P906,323.39 P4,883,087.93 P1 ,663, 103.62 Records likewise show that the excess of Standard Input VAT over Actual Input VAT in the amount of P8,397,846.77 was reported as part of the "Non- Operating and Taxable Other lncome"35 and reported as reconciling item as shown in Line 121 of Section E of the Annual Income Tax Return (ITR). The amount was subjected to an income tax rate of thirty percent (30%) in petitioner's Annual ITR for the year ended December 31, 2010 as follows: Excess of Standard over Actual Input VAT per amended VAT Returns p 8,397,846.77 1st to 3rd quarters (Exhibits "J"," K" and "L") (787 ,432.30) 4th quarter (Exhibit "MMM") Net Excess of Standard Over Actual Input VAT36 P7,610,414.47 Considering the above findings, petitioner was able to substantiate erroneous VAT payments in the amount of P4, 125,838.32 only, detailed as follows: Output VAT p 9,737,689.67 Sales to Non-Government (Line 158 of VAT Returns) 26,507,389.54 Sales to Government (Line 168 of VAT Returns) P36,245,079.21 Total Output VAT 35 Line 20, Exhibit "0". 36 Reflected as Income from deficiency input tax on sale to government (Line 121 of Section E of the Annual ITR-Reconciliation of Net Income Per Books Against Taxable Income), Exhibit "0".

DECISION p 4,883,087.93 CTA Case No. 8355 8,397,846.77 Page17of18 P13,280,934. 70 Input VAT P22,964, 144.51 Substantiated Actual Input VAT: Input Tax on Sale to Government closed to expense 17,598,927.46 Total Available Input VAT 9,491 ,055.37 27,089,982.83 Net VAT Payable P(4, 125,838.32) Less: VAT Payments Actual Payments VAT Withheld on Sales to Government Total VAT Payments VAT Overpayment Moreover, based on its Quarterly VAT Returns from the fourth quarter of CY 2010 to the second quarter of CY 2012,37 petitioner was able to prove that it did not carry over the P8,600,892.14 which is the subject matter of the claim. The said amount was not presented as "Input Tax Carried Over from Previous Period" and not claimed or utilized as deduction from output VAT in the subsequently filed returns for the fourth quarter of CY 2010 to the second quarter of CY 2012. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P4,125,838.32 representing erroneous VAT payments for the first three quarters of CY 2010. SO ORDERED. WE CONCUR: Q..~~c. Q.~ Q ~ tflfANITO C. CASTAt:fEDA,tfR: Associate Justice CAESAR A. CASANOVA Associate Justice ~ <"~~ AMELIA R. COTANGCO-MANALASTAS Associate Justice 37 Exhibits "MMM", "NNN'', "000", "PPP", "QQQ", "RRR", an9 "555".

DECISION CTA Case No. 8355 Page18of18 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 . Q_~ c �Q.Y-~"a{._ JI r~t 1 fftiANITO C. CASTANEDA, 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. Presiding Justice

UNISYS PHILIPPINES LIMITED - PHILIPPINE BRANCH CTA CASE NO. 8355 ANNEX "A" TABLE 1. COMPUTATION OF STANDARD INPUT VAT (7�/o) Sale to Standard Input 5% Final VAT Government VAT(7%) Withheld 8 563 349.95 p 6 743 232.42 1st Qtr p 122 333 570.72 p 2 532 337.26 32 829.62 2nd Qtr 4 366 956.68 2 714,993.33 3rd Qtr 36 176 246.64 15 462 643.89 p Total 9 491055.37 62 385 095.38 p 220,894,912.74 p TABLE 2. ALLOCATION OF ACTUAL INPUT VAT TO TOTAL SALES Sales to Non- Sales to Zero-Rated Sales Total Sales Government Government (c) (d)=(a)+{b)+( c) (a) (b) 1st Qtr p 58 997 060.54 p 122 333 570.72 p 582 374.87 p 181 913 006.13 2nd Qtr 3rd Qtr 10 314 660.46 36 176 246.64 287 126.56 46 778 033.66 Total 11 835 692.89 62 385 095.38 933 795.90 75 154 584.17 1st Qtr 2nd Qtr p 81,147,413.89 p 220,894,912.74 p 1,803,297.33 p 303,845,623.96 3rd Qtr Total Total Input VAT Actual Input VAT Actual Input VAT Actual Input VAT (e) attributable to Sales attributable to attributable to to Non-Government Zero-Rated Sales Sales to (h)=(c)/(d)x(e) (f)=(a)/(d)x(e) Government (g)=(b)/(d)x(e) p 3 739 892.77 p 1,212 902.17 p 2/515 017.74 p 11972.86 2 007 290.67 442 612.06 1,552 357.73 12 320.88 3 610 958.30 568 670.48 2 997 421.65 44 866.17 p 9,358/141.74 p 2/224/184.71 p 7/064/797.12 p 69,159.91 TABLE 3. COMPUTATION OF EXCESS STANDARD OVER ACTUAL INPUT VAT ON SALES TO GOVERNMENT Standard Input Actual Input VAT Excess of Standard VAT(7%) attributable to Sales over Actual Input VAT on Sales to to Government Government 1st Qtr p 8 563 349.95 p 2 515 017.74 p 6 048 332.22 2nd Qtr 3rd Qtr 2 532 337.26 1 552 357.73 979 979.53 Total 4 366 956.68 2 997 421.65 1 369 535.02 p 15 462,643.89 p 7 064 797.12 p 8 397 846.77