BW SHIPPING PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION BW SHIPPING PHILIPPINES, CTA Case No. 9448 INC., Petitioner, Members: -versus- DEL ROSARIO, P.J., Chairperson, FABON-VICTORINO, and MANAHAN, JJ. COMMISSIONER OF SE, � 9;.:)0c_ INTERNAL REVENUE, Respondent. . .. X - - - - - - - - - - - - - - - - - - - - - - - - - - --JC - - -~ - - - - - - X DECISION MANAHAN, J.: This involves a Petition for Review1 filed by BW Shipping Philippines, Inc. claiming for the refund and/or issuance of tax credit certificates (TCC) of the unutilized input taxes attributable to petitioner's zero-rated sales/receipts for taxable year 2014 in the amount of Php7,346,268.45, pursuant to Sections 112(A) in relation to Sections 110(B) and 108(B) of the National Internal Revenue Code (NIRC) of 1997, as amended. FACTS BW Shipping Philippines Inc. is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal address a t 5 /F Goodland Building, 377 Sen. Gil Puyat Ave., Makati City as eviden ced by Securities and Exchange Commission (SEC) Company Registration No. 145414.2 Petitioner is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer as eviden ced by the BIR 1 Docket, CTA Case No. 9448, Vol. I, pp. 10-30. 2 Docket, Vol. I, Joint Stipulation of Facts and Issues (JSFI) , p. 4 59.. - - -

DECISION CTA CASE No. 9448 Page 2 of 2I Certificate of Registration No. 9RC0000426666 with Taxpayer's Identification Number (TIN) 000-160-779-000. 3 Respondent Commissioner of Internal Revenue (CIR) is sued in his official capacity, having been duly appointed and empowered to perform the duties of his office, including, among others, the duty to act on and approve claims for refund or tax credit as provided by law.4 As stated in petitioner's Amended Articles of Incorporation, the primary purpose for which petitioner was formed is as follows: To engage in overseas shipping business for the carriage of passengers, freight, mail, livestock, goods and lawful merchandise of every kind and description, by oceans, seas, canals, rivers and other waterway, between any and all parts of the world by means of vessels and other modes of transportation used in the business of overseas shipping which may either be owned by the Corporation or by other shipping corporation, and for such purpose, to hire, purchase, charter, owe or otherwise acquire and work ships and vessels of any class, to establish and maintain lines or regular services of ships or other vessels between any part of the world, to engage in manning and crewing of vessels, and generally to carry on the business of shipping.s Pursuant to its primary purpose, petitioner provides manpower services specifically human resources catered to foreign shipping companies.6 Petitioner filed its quarterly VAT returns for taxable year 2014.7 In taxable year 2014, petitioner rendered manmng services to shipping companies located and doing business outside the Philippines. In consideration for such manning services, petitioner was paid manning fees in foreign currency and duly accounted for in accordance with rules and regulations of the Bangko Sentral ng Pilipinas (BSP). These manning fees for the services rendered to shipping companies 3 Docket, Vol. I, JSFI, p. 460. 4 Docket, Vol. I, Petition for Review (PFR), p. 11. s Docket, Vol. I, PFR, p. 11. 6 Docket, Vol. I, PFR, p. 12. 7 Docket, Vol. I, PFR, p. 12. __.---

DECISION CTA CASE No. 9448 located and doing business outside the Philippines were subjected to zero percent (0%) VAT. 8 In taxable year 2014, petitioner generated purely zero- rated receipts in the aggregate amount ofPhp129,866,272.96.9 During the same taxable year, petitioner incurred/paid input VAT attributable to the aforesaid zero-rated sales in the total amount of Php7,346,268.45.10 Since petitioner's sales are purely zero-rated, these input taxes all relate to zero-rated accounts. 11 Further, these input taxes attributable to petitioner's zero-rated sales/receipts were not utilized in the same quarter and were likewise not used against petitioner's output taxes in the subsequent periods.12 On March 30, 2016, petitioner filed its application for refund13 (dated August 30, 2016) of the unutilized input VAT in the total amount ofP7,346,268.45, for taxable year 2014, along with all supporting documents, with the BIR. 14 On August 22, 2016, petitioner received from the BIR a letter of denial of its administrative claim for refund dated August 16, 2016.15 On August 26, 2016, petitioner filed the instant Petition for Review. On October 28, 2016, within the extended period granted,16 respondent CIR posted his Answer, 17 which was received by the Court on November 16, 2016. Respondent interposes the following special and affirmative defenses: 5. Petitioner's alleged claim for refund or issuance of tax credit certificate is still subject to administrative investigation/ examination by the BIR. B Docket, Vol. I, PFR, p. 12. 9 Id. 10 Jd. 11 Docket, Vol. I, PFR, p. 13. 12 Jd. 13 Docket, Vol. 2, Exhibit "P-9", p. 677. 14 Docket, Vol. I, PFR, p. 13. lSJd. 16 Docket, Vol. I, Resolution dated October 14, 2016, p. 75. 17 Docket, Vol. I, pp. 76-78.__.....-

DECISION CTA CASE No. 9448 Page4 of21 6. Taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable. 7. Petitioner's claim for refund or issuance of tax credit certificate in the amount of P7,346,268.45 representing alleged excess and unutilized input VAT for taxable year 2014 were not fully substantiated by proper documents, such as sales invoices and official receipts, pursuant to Revenue Regulations No. 7-95 in relation to Section 113 and 237 of the 1997 Tax Code. 8. In an action for refund/credit, the burden of proof is on the petitioner to establish its right to claimed (sic) refund and failure to adduce sufficient proof is fatal to the claim for tax refund/ credit. 9. 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. 10. 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 ofInternal Revenue, 124 SCRA 1211).18 On March 3, 2017, the Court received Respondent's Pre- Trial Brief, 19 and petitioner's Pre-Trial Brief.20 The pre-trial conference was held on May 30, 2017.21 The parties filed their Joint Stipulation of Facts and Issues (JSFI)22 on June 9, 2017. The Pre-Trial Order (PT0)23 was subsequently issued on July 10, 2017. The case proceeded to trial with petitioner presenting the following witnesses: (1) Ms. Carmencita Escalante;24 (2) Ms. 18 Docket, Vol. I, Answer, pp. 76-77. 19 Docket, Vol. I, pp. 437-440. 2o Docket, Vol. I, pp. 443-453. 21 Docket, Vol I, Minutes of Hearing on May 30, 2017, p. 456; Order, pp. 457-458. 22 Docket, Vol. I, pp. 459-464. 23 Docket, Vol. I, pp. 466-471. 24 Docket, Vol. I, Exhibit "P-50" Judicial Affidavit of Carmencita Escalante, pp. 373-385; Minutes of Hearing on August 29, 2017, p. 486. _

DECISION CTA CASE No. 9448 Page 5 of21 Herminia Dela Peiia;2s and (3) Independent Certified Public Accountant (ICPA) Enrico T. Pizarro.26 Petitioner filed its Formal Offer of Evidence (FOE)27 on December 19, 2017. On January 31, 2018, the Court resolved petitioner's FOE, admitting several and denying several of petitioner's exhibits,2B prompting petitioner to file its Motion for Reconsideration (With Motion to Set Additional Commissioner's Hearing) on February 20, 2018. 29 The Court only partially granted petitioner's Motion for Reconsideration on May 10, 2018,30 causing petitioner to file its Tender of Excluded Evidence31 on May 25, 2018. On July 12, 2018, respondent CIR filed his Manifestation32 that he will no longer be presenting any evidence or witness, and requesting for a period of thirty (30) days for the parties to file their respective memoranda. Within the extended period granted,33 petitioner filed its Memorandum on October 1, 2018. On October 12, 2018, the Court admitted respondent's Memorandum34 in the interest of justice35, and the case was deemed submitted for decision. ISSUE The parties stipulated the following issue: Whether petitioner is entitled to refund in the amount of Seven Million Three Hundred Forty Six Thousand Two Hundred Sixty Eight and 45/100 Pesos (Php7,346,268.45) representing unutilized input taxes related to zero-rated sales/receipts for the taxable year 2014.36 25 Docket, Vol. I, Exhibit "P-56" Judicial Affidavit of Herminia DeJa Pena, pp. 103-112; Vol. 2, Minutes of Hearing on September26, 2017, p. 513. 26 Docket, Vol. 2, Exhibit "P-60" Judicial Affidavit of Enrico T. Pizarro, pp. 606-629; Minutes of Hearing on December 4, 2017, p. 633. 27 Docket, Vol. 2, pp. 636-650. 28 Docket, Vol. 3, Resolution dated January 31, 2018, pp. 965-968. 29 Docket, Vol. 3, pp. 969-976. 30 Docket, Vol. 3, Resolution dated May 10, 2018, pp. 993-995. 31 Docket, Vol. 3, pp. 997-1001. 32 Docket, Vol. 3, pp. 1019-1020. 33 Docket, Vol. 3, Resolution dated September 5, 2018, p. 1028. 34 Docket, Vol. 3, pp. 1064-1067. 35 Docket, Vol. 3, Resolution dated October 12, 2018, pp. 1070-1071. 36 Docket, Vol. 1, JSFI, p. 460. ~-

DECISION CTA CASE No. 9448 RULING OF THE COURT Petitioner's claim for refund/issuance of TCC of excess or unutilized input VAT finds legal support in Section 108(8)(2), in relation to Sections llO(B) and 112(A) and (C) of the NIRC. These provisions state: SEC. 108. Value-added Tax on Sale of Services and Use or Lease ofProperties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate.- The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate. XXX XXX XXX (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conduced outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed. the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Banqko Sentral nq Pilipinas fBSPJ: XXX XXX XXX SEC. 110. Tax Credits.- XXX XXX XXX (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112. XXX XXX XXX 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,--

DECISION CTA CASE No. 9448 Page 7 of21 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 1OS(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 or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero rated sales. XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate 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 Subsection (A) 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. (Underscoring ours) From the foregoing provisions, in order to be entitled to a refund/TCC of excess input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be complied with: 1. The taxpayer-claimant must be VAT-registered; 2. There must be zero-rated or effectively zero-rated sales; 3. That input taxes were incurred or paid;_.

DECISION CTA CASE No. 9448 4. That such input taxes are attributable to zero-rated or effectively zero-rated sales; 5. That the input taxes were not applied against any output VAT liability during and in the succeeding quarters; and 6. The claim for refund was filed within the prescriptive period both in the administrative and judicial levels. The Court will now look into petitioner's compliance with the foregoing requisites. 6th requisite: Timeliness of the administrative and judicial claims Based on Section 112(C) of the NIRC, as quoted above, the administrative claim must be filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made. The instant claim involves the application for tax credit of input taxes attributable to zero-rated sales for taxable year 2014. Thus, the end of the two-year period to file the administrative claim are as follows: Close of taxable quarter End of two-year period to March 31, 2014 file administrative claim June 30, 2014 March 31, 2016 September 30, 2014 June 30 2016 December 31, 2014 September 30, 2016 December 31, 2016 Considering that petitioner filed its administrative claim and submitted its documents on March 30, 2016,37 said administrative claim is timely filed for all quarters of taxable year 2014. As to the filing of the judicial claim, the taxpayer must await the decision on its administrative claim rendered within the 120-day period, whether full or partial, or the expiration of the 120-day period from the submission of complete documents in support of such claim. Once the taxpayer receives the decision issued within the 120-day period, or upon the 37 Docket, Vol. 2, Exhibits "P-9" and sub-marking "P-9-2", p. 677.~

DECISION CTA CASE No. 9448 Page 9 of21 expiration of the 120-day period, the taxpayer should file its petition for review with this Court within thirty (30) days. In the instant case, petitioner filed its administrative claim on March 30, 2016, together with supporting documents. Counting 120 days from March 30, 2016, respondent had until July 28, 2016 within which to act on petitioner's claim. Due to respondent's failure to act on the claim before or on the 120th day, petitioner had 30 days from the expiration of the 120-day period within which to file its appeal to the Court. Here, the 120- day period expired on July 28, 2016, thus, petitioner had until August 27, 2016 to file its petition for review. On August 26, 2016, petitioner timely filed the subject Petition for Review. 1st requisite: Petitioner must be VAT-registered As stipulated by the parties, petitioner is registered with the BIR as a VAT taxpayer as evidenced by the BIR Certificate of Registration No. 9RC000042666638 with TIN 000-160-779- 000.39 2nd requisite: Petitioner must have zero-rated or effectively zero-rated sales Petitioner submits that it rendered manning and crewing services4o to foreign shipping companies located and doing business outside the Philippines and was paid for in acceptable foreign currency and duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). Such services are allegedly subject to zero percent (0%) VAT pursuant to Section 108(B)(2) of the NIRC. In the case of Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. (Burmeistery, 41 the Supreme Court held that in order for the 38 Docket, Vol. 2, Exhibit "P-2", p. 665. 39 Docket, Vol. 1, JSFI, p. 460. 40 Docket, Vol. 2, Exhibits "P-23" and "P-25" to "P-28", pp. 707-721 and 737-790. 4 1 G.R. No. 153205, January 22, 2007. ~

DECISION CTA CASE No. 9448 Page 10of21 supply of services to be VAT zero-rated under Section 108(B)(2) of the NIRC, the following requisites must be met: 1. the services must be other than processmg, manufacturing or repacking of goods; 2. the recipient of such services is doing business outside the Philippines; and 3. payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations. Services must be other than processing, manufacturing or repacking ofgoods Per Philippine Securities and Exchange Commission (SEC) Certificate of Filing of Amended Articles of Incorporation, petitioner is primarily engaged in: "overseas shipping business for the carriage of passengers, freight, mail, livestock, goods and lawful merchandise of every kind and description, by oceans, seas, canals, rivers and other waterway, between any and all parts of the world by means of vessels and other modes of transportation used in the business of overseas shipping which may either be owned by the Corporation or by other shipping corporations, and for such purpose, to hire, purchase, charter, owe, or otherwise acquire and work ships and vessels of any class, to establish and maintain lines or regular services of ships or other vessels between any part of the world, to engage in manning and crewing of vessels, and generally to carry on the business of shipping."42 Clearly then, the nature of services being offered by petitioner to its clients is other than processing, manufacturing or repacking of goods. Recipients ofsuch services are doing business outside the Philippines In Accenture, Inc. v. Commissioner of Internal Revenue,43 the Supreme Court ruled that it is not enough that the recipient of the service be shown to be a foreign corporation, it must likewise be established that the said recipient is a "non-resident foreign corporation." Moreover, there must not be any indication 42 Docket, Vol. 2, Exhibit "P-1 ", pp. 651-664. 43 G.R. No. 190102, July 11,2012. ~

DECISION CTA CASE No. 9448 Page II of21 that the recipient of the services is doing business in the Philippines, consistent with the ruling in Burmeister. Hence, to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both SEC certificate of non-registration of corporation/partnership and proof of incorporation, association or registration in a foreign country. Petitioner presented the Certificates of Non-Registration of Company issued by the SEC, Certificates of Registration/Articles of Incorporation issued by the foreign government agencies, screenshots of foreign registration per foreign regulatory websites and Consularized Manning Agreements/Purchasing & Infrastructure Support Agreements,44 proving that its customers are non-resident foreign corporations doing business outside the Philippines, summarized as follows: Registered Name SEC Certificate Other BW Gas Foreign Manning AS Certificate of Supporting BW Maritime PTE Ltd. Documents Berge Bulk Maritime PTE Ltd. of Non- Incorporation BW Offshore Global Manning PTE Ltd. Registration P-31 I P-23 BW Fleet Management PTE Ltd. P-30 BW Fleet Management AS P-29 P-33 P-34 P-36 P-32 P-39 P-37 I P-25 P-42 P-40 I P-26 P-35 P-45 P-43 I P-27 P-46 I P-28 P-38 P-41 P-44 Payment for such services must be in acceptable foreign currency Sections 113(A)(2), (B)(l), (2)(c) and (3) of the NIRC, as implemented by Sections 4.113-l(A)(2), (B)(l) and (2)(c) of Revenue Regulations (RR) No. 16-05, as amended, provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information: SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons.- 44 Docket, Vol. 2, Exhibits "P-23" and "P-25" to "P-46", pp. 707-721 and 737-957.,._--

DECISION CTA CASE No. 9448 Pagei2of2I (A) Invoicing Requirements. - A VAT-registered person shall issue: XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of serVIces. (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, following by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obliged to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0%) value- added tax, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx XXX XXX XXX SEC. 4.113-1. Invoicing Requirements.- (A) A VAT-registered person shall issue: - XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoice or official receipts. Said documents shall be considered as a "VAT Invoice" or "VAT Official Receipt". All purchases covered by invoices/ receipts other than VAT Invoice/ VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records.~

DECISION CTA CASE No. 9448 Page 13of21 (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; xxx XXX XXX XXX (c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; xxx Pursuant to the foregoing provisions, the foreign currency remittances referred to under Section 108(B)(2) of the NIRC must likewise be supported by VAT zero-rated official receipts. In its Quarterly VAT Returns for the taxable year 201445 , petitioner declared total zero-rated sales ofPhp129,866,272.86, as follows: Exhibit No. Period Amount P-4 1st Quarter t' 30,324,220.41 P-6 2nd Quarter P-7 3rd Quarter 31,543,977.45 P-8 4th Quarter 32,508,376.99 Total 35,489,698.11 P129,866,272.96 To prove that it rendered services to non-resident foreign corporations doing business outside the Philippines and was paid in foreign currency duly accounted for in accordance with the rules and regulations of the BSP for the four quarters of taxable year 2014 in the amount of Php129,866,272.96 (equivalent to $2,935,899.00), petitioner submitted its List of zero-rated sales,46 Summary of the results of examination of inward remittances,47 List of official receipts,48 and the related official receipts,49 sales invoices,so Certificate of Inward �s Docket, Vol. 2, Line 17 of Exhibits "P-4", "P-6", "P-7", and "P-8", pp. 667,671,673, and 675. 46 Docket, Vol. 2, Exhibits "P-124" and "P-125", pp. 542-549. 47 Docket, Vol. 2, Exhibit "P-126", pp. 550-553. 48 Docket, Vol. 2, Exhibits "P-127", "P-128", and "P-129", pp. 554-558. 49 Exhibits "P-127.1" to "P-127.92", "P-128.1" to "P-128.9", and "P-129.1.1" to "P- 129.1.73". so Exhibits "P-124.1" to "P-124.220".__...----

DECISION CTA CASE No. 9448 Remittances dated October 20, 2017 issued by the Bank of the Philippine Islands,51 and bank credit memos,52 which were examined by the Court-commissioned Independent Certified Public Accountant (ICPA),53 summarized as follows:54 Particular Exhibit Amount Amount a. Sales properly supported No (USD) (Phul by sales invoices P-124 $ 2,935,899.00 p 127,763,523.67 b. Sales with no supporting P-125 - 2,102,749.29 documents $2,935,899.00 P129,866,272.96 Total Upon scrutiny of the documents submitted, together with the ICPA report,55 it was found that there were sales whose purported official receipts were not available. Thus, the amount of Php12,133,147.02 (equivalent to $276,149.00) recognized during the 4th quarter of taxable year 2014 is disallowed for being unsupported by VAT zero-rated official receipts. The disallowed sales are listed below: Sales Reldstered Name Amount Amount Invoice BW Fleet Management As IUSDI !Phul BW Fleet Management As No. BW Offshore Global Manning Pte Ltd $ 19,888.00 p 875,892.76 0719 BW Offshore Global Manning Pte Ltd 19,564.00 859,723.35 0739 BW Offshore Global Manning Pte Ltd 38,020.00 0779 Berge Bulk Maritime Pte Ltd I 0780 BW Fleet Management Pte Ltd 17,423.00 ! 0781 BW Fleet Management As 0782 BW Fleet Management As 29,195.00 1,670,756.58 0783 BW Fleet Management As 0759 BW Fleet Management As 30,354.00 765,293.31 0760 BW Fleet Management As 0761 BW Fleet Management As 1,282,363.46 0784 BW Fleet Management Pte Ltd 0785 BW Fleet Management Pte Ltd 1,333,439.38 0786 BW Fleet Management Pte Ltd 0762 BW Fleet Management Pte Ltd 0763 BW Fleet Management Pte Ltd 0769 BW Fleet Management Pte Ltd 0776 BW Fleet Management As 0787 BW Fleet Management As 0788 BW Fleet Management As 0794 0775 0790 51 Exhibit "P-126.1 ". 52 Exhibits "P-126.2.1" to "P-126.2.132". 53 ETP and Associates Co., through its Partner, Mr. Enrico T. Pizarro. 54 Docket, Vol. 2, Exhibit "P-57", p. 527. 55 Docket, Vol. 2, Exhibit "P-57", pp. 520-599. ~-

DECISION CTA CASE No. 9448 Page 15 of21 0801 BW Fleet Management As 80,769.00 3,547,758.55 0764 BW Fleet Management As 0766 BW Fleet Management As 8,301.00 364,613.42 0770 BW Fleet Management As 0771 BW Fleet Management As 12,237.00 537,507.23 0789 BW Fleet Management As 9,075.00 398,434.79 0791 BW Fleet Management As 497,364.19 0795 BW Fleet Management As 11,323.00 P12,133,147.02 0796 BW Fleet Management As $276,149.00 0768 BW Fleet Management Pte Ltd 0793 BW Fleet Management Pte Ltd 0767 BW Fleet Management As 0772 BW Fleet Management As 0792 BW Fleet Management As 0797 BW Fleet Management As 0765 BW Fleet Management As 0773 BW Fleet Management Pte Ltd 0774 BW Fleet Management Pte Ltd 0798 BW Fleet Management Pte Ltd 0800 BW Fleet Management Pte Ltd Total Consequently, out of the Php129,866,272.96 zero-rated sales declared per Quarterly VAT Returns for taxable year 20 14, only the amount of Php115,630,376.65 qualifies for VAT zero- rating under Section 108(B)(2) of the NIRC, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total p 30 324 220.41 Zero-Rated p 31 543 977.45 p 32 508 376.99 p 35 489 698.11 p 129 866 272.96 Sales 408 275.97 per VAT 126 518.28 513 768.76 I 054 186.28 2 102 749.29 returns P29 915 944.44 - P31417 459.17 P31 994 608.23 P34 435 511.83 P127 763 523.67 Less: Disallowed P29 915 944.44 - - 12 133 147.02 12 133 147.02 Sales per !CPA (Sales with no P31 417 459.17 P31 994 608.23 ,..._ P22 302 364.81 P115 630 376.65 supporting documents) Sales properly supported by Sales Invoices per !CPA (Exhibit P- 124) Less: Disallowed Sales per Court Valid Zero~rated Sales

DECISION CTA CASE No. 9448 Pagel6of21 3rd requisite: Petitioner incurred or paid input taxes In its Quarterly VAT Returns for the four quarters of taxable year 201456, petitioner declared a total amount of Php7,346,268.45 input VAT derived from its domestic purchases of goods other than capital goods and importation of goods other than capital goods, broken down as follows: Exhibit No Period Input VAT P-4 1st Quarter I' 588,737.34 P-6 2nd Quarter P-7 3rd Quarter 2,089,222.07 P-8 4th Quarter 2,797,919.14 Total 1,870,389.90 1'7,346,268.45 Per ICPA report, petitioner's input VAT claim in the amount of Php1,037,238.7257 must be disallowed for not being properly substantiated by VAT invoices or official receipts as prescribed under Sections 110(A) and 113(A) and (B) of the NIRC, in relation to Sections 4.110-2, 4.110-3, 4.110-8 and 4.113-1 of RR No. 16-05. Exhibit 2nd Quarter 3rd Quarter 4th Quarter Total No p - p 12.86 p - p 12.86 A. Domestic Purchase of Services 138.1 1. Input VAT on domestic 138.2 11.303.28 - - ll,303.28 purchase ofservices with 138.3 90.00 incorrect or no VAT and/or 138.4 - - 90.00 VA Table amount indicated - 216.00 216.00 - 38,442.86 138.5 - 38,442.86 - 2. Input VAT on domestic purchase ofservices not 139.1 ll,416.59 - - 11,416.59 named a{tr the Petitioner 3. Excess of claimed input 140.1 15.79 - . 15.79 VAT on purchase of services 140.2 1,170.98 against actual input VAT as 140.3 1,170.98 . . per supporting documents 462.95 . 462.95 . p 63,131.31 Subtotal p 23,996.64 p 39,134.67 p . B. Domestic purchase of goods other than Capital Goods 1. Input VAT on domestic purchase ofgoods with p. . incomplete or no petitioner's 141.1 p p 2,360.96 p 2,360.96 address and no VA Table amount indicated 2. Input VAT on domestic . - purchase ofgoods with 142.1 2,507.14 2,360.96 2,507.14 2,507.14 p noted alterations Subtotal p. p p 4 868.10 56 Docket, Vol. 2, Line 21F or 21H of Exhibits "P-4", "P-6", "P-7" and "P-8", pp. 667, 671, 673, and 675. 57 Docket, Vol. 2, Exhibit "P-57", p. 535. ~

DECISION CTA CASE No. 9448 Page 17 of21 C. Domestic purchase of goods other than Capital goods exceeding !Million 1. Deferred Input VAT on 136.1 p- p - p 427,346.16 p 427,346.16 domestic purchase ofcapital 136.2 - 541,893.15 goods exceeding 1M to be - 541,893.15 amortized in subsequent p 969,239.31 period Pl,037,238.72 Subtotal p- p - p 969,239.31 Total input VAT with p 23,996.64 p 41,641.81 p 971,600.27 exceutions Upon the Court's verification, an additional amount of Php467,413.10 shall likewise be disallowed for failure to meet the substantiation requirements, as listed below: Input ReKistered Name VAT Exhibit Tax Input Amount No Base VAT per Official Receiots I. Input VAT on domestic purchases of services with incorrect or no TIN of the Petitioner. 1st Quarter Falcon Waterfree Phils Inc 134.25 p 5,880.00 p 705.60 Goodwill Trading Co Inc 134.30 94,194.00 11,303.28 Subtotal�lst Quarter p 100,074.00 p 12,008.88 2nd Quarter 134.43 p 9,776.75 p 1,173.21 Tricorn Systems Philippines Inc Tricorn Systems Philippines Inc 134.44 9,776.75 1,173.21 Tricorn Systems Philippines Inc 134.45 9,776.75 1,173.21 Goodwill Trading Co Inc 134.49 94,194.00 11,303.28 A&C Printers 134.50 82,082.75 9,849.93 Tagaytay Highlands International Golf 134.51 123,598.00 14,831.76 Skycable Corp 134.64 9,497.33 1,139.68 Guthrie Jensens Inc 134.77 53,504.00 6,420.48 Tricorn Systems Philippines Inc 134.79 9,776.75 1,173.21 Tricorn Systems Philippines Inc 134.81 9,776.75 1,173.21 Subtotal-2nd Quarter p 411,759.83 p 49,411.18 3rd Quarter Tricorn Systems Philippines Inc 134.99 p 9,776.75 p 1,173.21 Goodland Company Inc 134.101 462,000.00 55,440.00 Subtotal-3rd Quarter p 471,776.75 p 56,613.21 4th Quarter Tricorn Systems Philippines Inc 134.137 p 714.25 p 85.71 Tricorn Systems Philippines Inc 134.138 9,776.75 1,173.21 Goodwill Trading Co Inc 134.149 94,194.00 11,303.28 Tricorn Systems Philippines Inc 134.163 9,776.75 1,173.21 Tricorn Systems Philippines Inc 134.164 9,776.75 1,173.21 Tricorn Systems Philippines Inc 134.185 9,776.75 1,173.21 Tricorn Systems Philippines Inc 134.190 9,776.75 1,173.21 Bulacan Garden Corporation 134.194 27,045.00 3,245.40 Bulacan Garden Corporation 134.195 14,007.00 1,680.40 Bulacan Garden Corporation 134.196 27,045.00 3,245.40 Beyond Borders Kitchen Inc 134.204 58,035.75 6,964.29 Beyond Borders Kitchen Inc 134.205 77,238.50 9,268.62 One 0 One Food Corporation 134.210 165,013.42 19,801.61 Tricorn Systems Philippines Inc 134.217 39,339.28 4,720.71 One 0 One Food Corporation 134.218 165,013.33 Manila Electric Company 134.221 173,908.33 -- 19,801.60 20,869.00

DECISION CTA CASE No. 9448 Page I8 of21 Quantum X Inc 134.241 90,000.00 10,800.00 Subtotal-4th Quarter p 980,437.61 p 117,652.07 Total p 1'964,048.19 p 235,685.34 II. Input VAT on domestic purchases of goods other than capital goods with incorrect or no TIN of the Petitioner. lst Quarter 135.1 p 4,464.25 p 535.70 Mabolo Flower Shop 789.29 Phil Vending Corp 135.2 6,577.42 594.43 Phil Vending Corp 789.29 Phil Vending Corp 135.7 4,953.58 2,708.71 Subtotal�lst Quarter 2nd Quarter 135.10 6,577.42 592.19 Phil Vending Corp 596.66 Phil Vending Corp p 22,572.67 p 490.96 Phil Vending Corp 1,383.72 Phil Vending Corp 135.15 p 4,934.92 p 3,063.53 Subtotal�2nd Quarter 3rd Quarter 135.24 4,972.17 1,383.72 Phil Vending Corp 2,493.75 Tricorn Systems Philippines Inc 135.26 4,091.33 1,383.72 Phil Vending Corp 5,261.19 Subtotal-3rd Quarter 135.30 11,531.00 4th Quarter 8,237.68 Tricorn Systems Philippines Inc p 25,529.42 p 969.64 Tricorn Systems Philippines Inc Phil Vending Corp 135.41 p 11,531.00 p 1,383.72 Phil Vending Corp 802.97 Phil Vending Corp 135.47 20,781.25 1,578.58 135.53 11,531.00 923.39 p 43,843.25 p 13,895.98 24,929.41 135.56 p 68,647.33 p 135.57 8,080.33 135.63 11,531.00 135.69 6,691.42 135.78 13,154.83 Phil Vending Corp 135.79 7,694.92 Subtotal-4th Quarter Total p 115,799.83 p p 207,745.17 p m. Input VAT on domestic purchases of services wherein the amounts per schedule are not traceable or different from the official receipts. 1st Quarter Dhl Worldwide Express Phils Corp 3 593.79 134.8 p 1,885.71 p 226.29 Dhl Worldwide Express Phils Corp 4,410.21 134.27 657.17 78.86 Subtotal-1st Quarter p 2,542.88 2nd Quarter p 305.15 Tnt Express Ltd Phils 2,243.84 134.67 p 2,431.58 p 291.79 Medicard Philippines Inc 200 138.49 134.69 1,481 ,460.92 177,775.31 p 1,483,892.50 p 178,067.10 Subtotal-2nd Quarter 3rd Quarter 15,278.51 134.110 p 111,030.25 p 13,323.63 Medicard Philippines Inc 4,413.11 134.116 2,958.92 355.07 Dhl Worldwide Express Phils Corp Peninsula Manila 3 473.00 134.142 21,000.00 2,520.00 4,001.89 134.144 DW Worldwide Express Phils Corp 659.83 79.18 Subtotal-3rd Quarter p 135,649.00 p 16,277.88 4th Quarter Dhl Worldwide Express Phils Corp 15 140.14 134.168 1,974.08 236.89 8,579.46 134.211 4,159.83 Dhl Worldwide Express Phils Corp 4,383.32 134.213 9,000.00 499.18 Manila Peninsula Hotel 134.236 31,250.00 1,080.00 Bacani & Associates Media Services 5 357.15 134.242 54,851.25 Company 7,417.60 -3,750.00 Sofitel Philippine Plaza 6,582.15

DECISION , 101,235.16 , 12,148.22 CTA CASE No. 9448 p 1,723,319.54 Page 19of21 p 206,798.35 p 3.895.112.90 Subtotal-4th Quarter p 467.413.10 Total Grand Total Thus, out of petitioner's total reported input VAT of Php7,346,268.45 for the four quarters of taxable year 2014, only the amount of Php5,841,616.63 represents its valid input VAT, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Pl,870 389.90 p 7,346,268.45 Input VAT per VAT Returns p 588,737.34 , 2 089,222.07 p 2,797,919.14 p 971 600.27 P I 037 238.72 Less: Disallowed Input VAT p - p 23 996.64 p 41 641.81 p 117652.07 p 235 685.34 oer ICPA Reoort p 12 008.88 p 49 411.18 p 56 613.21 13 895.98 24 929.41 oer Court 2 708.71 3 063.53 5 261.19 12148.22 206 798.35 I. Input VAT on domestic p 143 696.27 p 467,413.10 305.15 178 067.10 16 277.88 P755,093.36 P5.841,616.63 purchases ofservices p 15,022.74 p 230,541.81 p 78,152.28 with incorrect or no P1.834.683.62 P2.678.125.05 TIN of the Petitioner. P573. 714.60 II. Input VAT on domestic purchases ofgoods other than capital goods with incorrect or no TIN ofthe Petitioner. Ill. Input VAT on domestic purchases ofservices wherein the amounts per schedule are not traceable or different from the official receipts. Exceptions per Court Valid lnout VAT 4th and 5th requisites: Petitioner's input taxes are attributable to zero- rated sales and were not applied against any output VAT during and in the succeeding quarters Petitioner had no output tax liability58 for the four quarters of taxable year 2014 against which the subject input VAT claim may be applied or credited. Although the claimed input VAT was carried-over by petitioner in its succeeding Quarterly VAT Returns for taxable year 2015,59 the same remained unutilized 58 Docket, Vol. 2, Line 15B of Exhibits "P-4", "P-6", "P-7" and "P-8", pp. 667, 671, 673, and 675. 59 Docket, Vol. 2, Exhibits "P-ll" to "P-17", pp. 683-696.ar.....---

DECISION CTA CASE No. 9448 Page 20 of21 until it was deducted as "VAT Refund/TCC Claimed" in its Quarterly VAT Return for the 1�1 Quarter of taxable year 20166�; thus, preventing the carry-over or application of the claimed input VAT in the next taxable periods. Proceeding therefrom, only the remaining input VAT of Php5,841,616.63 can be attributed to the declared zero-rated sales of Php129,866,272.96 and only the input VAT of Php5,503,628.95 is attributable to the valid zero-rated sales of Php115,630,376.65, computed as follows: Valid Input 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total VAT PI 834 683.62 , 2,678 125.05 p 5 841,616.63 Divide by: , 573,714.60 , 755 093.36 129 866 272.96 declared 115 630 376.65 Zero-Rated 30 324 220.41 31 543 977.45 32 508 376.99 35 489 698.11 Sales 1'5,503,628.95 29 915 944.44 31417 459.17 31 994 608.23 22 302 364.81 Multiply by: Valid Zero- .. 565,990.28 1'1,827,324.97 1'2,635,799.44 p 474,514.25 Rated Sales Input VAT attributable to Valid Zero-Rated Sales In sum, petitioner has sufficiently proven its entitlement to refund or issuance of a TCC in the reduced amount of Php5,503,628.95 representing its unutilized input VAT attributable to its zero-rated sales for the four quarters of taxable year 2014. WHEREFORE, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED to REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of Php5,503,628.95 representing unutilized input VAT attributable to zero-rated sales for the four quarters of taxable year 2014. SO ORDERED. ~� ?< _4,.,.c..�.".4C/II.i'\,_ __ CATHERINE T. MANAHAN Associate Justice 60 Docket, Vol. 2, Line 230 of Exhibit "P-18", pp. 697-698.

DECISION CTA CASE No. 9448 Page21 of21 WE CONCUR: Presiding Justice ' CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. 0 Presiding Justice -