INTERGRAPH PROCESS & BUILDING SOLUTIONS PHILIPPINES, INC., v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS Quezon City Special Third Division 2 INTERGRAPH PROCESS & BUILDING SOLUTIONS PHILIPPINES, INC., CTA CASE NO. 9454 Petitione1~ - v e r s u s- Members: FABON-VICTORINO, anJ RINGPIS-LIBAN,]J. COMMISSIONER OF INTERNAL REVENUE Promulgated: Respondent. , )0 .9 X' ------------- ------------------------------------------------c-----------------y--.�--2-.-.~--!-"-'-�-------. ----X. DECISION RINGPIS-LIBAN, ].: The Case Before this Court is a Petition for Review1 fi leJ by Intergraph Process anJ Building Solutions Philippines, Inc. on I\ugu st 26, 2016, praying for the refunu of excess inpu t value-added tax ("V1\T") in the aggregate amo unt of Php 15,282,401.06 allegedly attributable to its zero-rated sales for the perioJ covering january 1 to December 31, 2014. The Facts P etitio ner lntergraph Process and Building Solutions Philippines, 1nc. is a domestic corpo ratio n duly organized under and by virtue of th e laws of the Philippines, with principal business audress at 37'" l �'loor, LKC T ower, 6801 <\ yala .\ venue, i\Iakari City, i\Ictro Manila.2 It is a V.\T-regisrered taxpayer, with Taxpayer Iuentification o. 223-836-980-000, as cvidenceJ by its Bu reau ~ Docket, pp. 10-35. 2 !d., Joint Stipulation of Facts and Issues (JSFI), Par. 1, p. 395.

DECISION CTA CASE NO. 9454 Internal Revenue ("BIR") Certificate of Registration No. OCN9RC0000439396 dated April 29, 2003.3 1\s stated in its Articles ofincorporation4, petitioner's primary purpose is: "to engage in the business of designing, manufacturing, assembling, selling (on wholesale), licensing, marketing, and servicing of computer software: to buy, sell, import, export, trade, or otherwise deal in computer spare parts and supplies; to perform system analysis design and programming and maintenance and technical consulting services for computer systems; and to act as technical consulting services for computer systems; and to act as technical consultants to person, corporations, partnerships and associations engaged in enterprises using computer software, including the conduct of feasibility studies and other studies necessary and relevant to computer software."5 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue who has the power to decide on disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code ("NIRC") of 1997, as amended, or other laws or portions thereof administered by the BIR. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. In the course of its trade and business, petitioner sold services to various entities registered with the Philippine Economic Zone Authority ("PEZ:\")c' For the period covering January 1 to December 31, 2014, petitioner allegedly accumulated excess input VAT credits from its domestic purchases of services, which are allocated to its VAT zero-rated transactions in the aggregate amount of Php 15,282,401.06, and which has not been applied against output tax in the succeeding quarters or years. On various dates, petitioner filed with the BIR 1ts Quarterly V,\T Returns 7 On March 31, 2016, petitioner filed with the BIR an administrative claim for tax refund in the total amount of Php 15,282,401.06, allegedly representing 3 !d., Exhibit "P-3", p. 560. /"Y 4 !d., Exhibit "P-2", p. 552. !d., JSFI, Par. 3, JSFI, p. 396. 6 !d., Exhibits "P-4" to "P-14", pp. 561-571. 7 !d., Exhibits "P-17" to "P-24", pp. 574-585.

DECISION CTA CASE NO. 9454 the excess input taxes that are attributable to its V1\T zero-rated sales for the year 20148 Believing that the 120-day period given to respondent to decide on its claim for refund had lapsed on July 29, 2016, petitioner filed the instant Petition for Review before this Court on August 26, 2016. Respondent filed his Answer9 on November 2, 2016 through registered mail and was received by the Court on November 16, 2016. He interposed the following special and affirmative defenses: "2. Taxes paid and collected arc presumed to be made in accordance with the laws and regulations, hence, not refundable; 3. It is incumbent upon the Petitioner to show that it has complied with the provision of Section 204(C) in relation to Section 229 of the 1997 Tax Code, as amended; 4. Petitioner's claim for refund or issuance of tax credit certificate in the amount of Php15,282,401.06 as alleged unutilized input VAT paid on purchases of goods and services attributable to its zero-rated sales for the taxable year 2014 was not fully substantiated by proper documents, such as sales invoices, official rec<:ipts and others. 5. In an action for tax credit or refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to discharge the said burden is fatal to the claim xxx; 6. Claims for refund are construed strictly against the claimant, the same partake the nature of exemption from taxation XXX. " Respondent filed his Pre-Trial Brief1� on February 6, 2017; while petitioner's Pre-Trial Brief1 1 was f!led on March 8, 2017. The pre-trial conference was held on March 14, 2017." j"l' 8 !d., Exhibit "P-59", pp. 652-658. 9 !d., pp. 179-181. 10 !d., pp. 191-193. 11 !d., pp. 194-214. 12 !d., Minutes of the Hearing, p. 380.

DECISION CTA CASE NO. 9454 In compliance with the order of the Court during the pre-trial conference, the parties filed their Joint Stipulation of Facts and Issues13 on March 23, 2017, which the Court adopted in the Pre-Trial Order14 dated May 4, 2017. Petitioner presented Atty. Adan T. Delamide, the Court-commissioned Independent Certified Public Accountant (ICPA), as its witness. 15 After presentation, marking and identification, petitioner formally offered its documentary evidence on August 17, 2017, consisting of Exhibits "P-1" to "P-61" and "P-63" to "P-196", inclusive of submarkings. 16 In a Resolution dated September 28, 2017, the Court admitted petitioner's documentary evidence except for Exhibits "P-188", "P-189", and "P-190" for failure to present the originals for comparison. 17 When it was respondent's turn to present evidence, his counsel manifested that she has no evidence to present. Thus, the parties were granted thirty (30) days to file their respective memoranda. 18 Petitioner ftled its Memorandum19 on March 7, 2018; while respondent filed his Memorandum20 through registered mail on April 13, 2018 and received by the Court on April20, 2018. The Court then declared the case submitted for decision as of April 25, 2018 21 The Issue The parties submitted this lone issue for this Court's resolution: Whether petitioner is entitled for tax refund for the excess unutilized input VAT attributable to its VAT zero-rated sales for the period from January 1, 2014 to December 31, 2014 in the amount of Php15,282,401.06.22 ~ 13 Id., pp. 395-413. 14 Id., pp. 432-440. 15 Id., Minutes of the Hearing dated August 7, 2017, p. 521. 16 Id., pp. 523-549. 17 Id., pp. 665-666. 18 Id., Minutes of the Hearing dated February 12, 2018, p. 674. 19 Id., pp. 676-697. 20 Id., pp. 704-708. 21 Id., p. 711. 22 I d., p. 397.

DECISION CTA CASE NO. 94S4 DiscussionI Ruling Pertinent to the resolution of the case at bench are Sections 112(A) and (C) of the NIRC of 1997, as amended, which read: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Effective!JI Zero-Rated Sales. - Any VAT- registered person, whose sales arc zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1 ), (2) and (b) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, fina!!JI, 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 ofInput 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 tweny

DECISION CTA CASE NO. 94S4 day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." Pursuant thereto, in order to be entitled to a refund or tax credit of unutilized input VAT attributable to zero-rated or effectively zero-rated sales, it is imperative to prove the following: 1. that the taxpayer is VAT-registered; 2. that the claim for refund was filed within the prescriptive period; 3. that there must be zero-rated or effectively zero-rated sales; 4. that input taxes were incurred or paid; 5. that such input taxes are attributable to zero-rated or effectively zero-rated sales; and 6. that the input taxes were not applied against any output VAf liability. 1" Requisite: Petitioner ts a VAT-registered entity. As stated earlier, petitioner is duly registered with the BIR as a VAT entity with Taxpayer Identification No. 223-836-980-000, as evidenced by its BIR Certificate of Registration No. OCN9RC0000439396 dated April29, 2003.'1 2"d Requisite: Petitioner's administrative and judicial claims were seasonably filed. Pursuant to the above-quoted Section 112(A) of the NIRC of 1997, as amended, the administrative claim for the issuance of a tax credit certificate ("TCC") or refund of input VAT must be filed with the BTR within two (2) years after the close of the taxable quarter when the zero-rated or effectively 7.ero-rated sales were made. The present claim covers the four quarters of taxable year (IY) 2014. Counting two years from the end of each taxable quarter, petitioner had until the following dates within which to ftle its administrative claim for refund or issuance ofTCCjw"" 23 Id., Exhibit "P-3", p. 560.

DECISION CTA CASE NO. 9454 Taxable Period 2-Year Prescriptive Period 1st Quarter (January to March 2014) March 31,2016 fune 30, 2016 2nd Quarter (April to fune 2014) 3rd Quarter (luly to S<J>tember 2014) September 30, 2016 4th_Quarter (October to December 2014) December 31, 2016 Evidently, petitioner's administrative claim for refund of unut:ilized input VAT filed on March 31, 201624 was filed within the two-year prescriptive period. As to the timeliness of petitioner's judicial appeal, Section 112(C) of the NIRC of 1997, as amended, provides that respondent has one hundred twenty (120) days from the date of the submission of the complete documents in support of the application for refund or tax credit within which to grant or deny the claim. In case of full or partial denial by respondent, the taxpayer's recourse is to file an appeal before this Court within thirty (30) days from receipt of the decision of respondent. However, if after the 120-day period, respondent fails to act on the application for refund or tax credit, the remedy of the taxpayer is to appeal the :inaction of respondent to this Court within thirty (30) days. Accordingly, from the filing of petitioner's administrative claim on i\Iarch 31,2016, respondent had one hundred twenty (120) days or until july 29,2016 to act on the said claim. Since respondent failed to act on the said claim on or before July 29, 2016, petitioner had thirty (30) days or until [\ugust 29, 2016'' within which to file its judicial claim before this Court. Evidently, petitioner's judicial appeal by way of a Petition for Review was likewise timely filed on August 26, 201626 3'd Requisite: Petitioner had zero-rated sales. Petitioner is a stock corporation duly registered with the Securities and Exchange Commission (SEC) under Company Registration No. C:S200309261 issued on April 22, 2003.27 It is engaged in the business of designing, manufacturing, assembling, selling (on wholesale), licensing, marketing ami servicing of computer software; to buy, sell, import, export, trade or otherwise deal in computer spare parts and supplies; to perform system analysis design and programming and maintenance and technical consulting services for computer systems; and to act as technical consultants to persons, corporations, /V' 24 Exhibit "P-59". 25 August 28, 2016 fell on a Sunday. 26 Docket, p. 10. 27 Id., Exhibit "P-1", p. 550.

DECISION CTA CASE NO. 9454 partnerships and associations engaged in enterprises using computer software, including the conduct of feasibility studies and other studies necessary and relevant to computer software.c8 Petitioner maintains that its sales to its customers registered with the PEZA are subject to zero percent (0%) VAT pursuant to Section 108(B)(3) of the NTRC of 1997, as amended, which provides: "SEC. 108. Vaftte-added Tax on Safe ofServices and Use or Lease ofPropertieJ. - 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 (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;" Section 4.108-5(b)(3) of Revenue Regulations (RR) No. 16-2005, which implements the foregoing provision, states: "SEC. 4.108-5. Zero-RatedSaieofServices.- XXX XXX XXX (b) Transactions Sttbject to Zero Percent (0%) VAT Rate.- The following services performed in the Philippines by a VAT- registered person shall be subject to zero percent (0%) V:\T rate: XXX XXX XXX (3) Services rendered to persons or entlttes whose t h y exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects 28 Id., Exhibit "P-2-a", p. 552.

DECISION CTA CASE NO. 9454 supply of such services to zero percent (0%) rate;" (Emphasz~r supplied) Further, the special law specific to this case is Republic Act (RA) No. 7916, as amended, otherwise known as "The Special Economic Zone Act of 1995". The relevant portions of said law are quoted hereunder for ready reference: "REPUBLIC ACT NO. 7916 (as amended by Republic Act No. 8748) AN ACT PROVIDING FOR THE LEGAL FRAMEWORK AND MECHANISMS FOR THE CRE1\TION, OPERATION, ADMINISTRATION, AND COORDINATION OP SPECIAL ECONOMIC ZONES IN THE PHILIPPINES, CREATING POR THIS PURPOSE, THE PHILIPPINE ECONOMIC ZONE AUTHORITY (PEZA) AND POR OTHER PURPOSES. XXX XXX XXX SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory.- The EC:07:0NE shall be managed and operated by the PEZA as separate customs territory. The PE7:A is hereby vested with the authority to 1ssue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department of Trade and Industry and/or the Department of Finance. XXX XXX XXX SECTION 24. Exemption form National and Lo({/1 Taxes. - Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the EC:OZONE. xxx" Since the Ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the Ecozone are considered exports to a foreign country subject to zero percent (0%) VAT. This was ~

DECISION CTA CASE NO. 9454 elucidated by the Supreme Court in the case of CommiJJioner ofInternal Re1;enue IJJ. ToJhiba Information Equipment (Phi!J.), Inc. 29, to wit: "This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities, not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5%) preferential tax rate on gross income of PEZJ\- registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory. xxx An ECOZONE or a Special Economic Zone has been described as - . . . [S]elected areas with highly developed or which have the potential to be developed into agro- industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds arc fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs), export processing zones (EPZs), free trade zones and tourist/recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory. Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. Given the preceding discussion, what would be the VA'r implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise?/Y" 29 G.R. No. 1501S4, August 9, 2005.

DECISION ITA CASE NO. 9454 The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT; while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10%) VAT30." (Emphasis supplied) Evidently, sales of goods and services by a V r\T-registered taxpayer to entities located in the Ecozones arc considered "export sales" subject to zero percent (0%) VAT rate pursuant to Section 108(B)(3) of the NIRC of 1997, as amended, and as implemented by Section 4.108.5(b)(3) of RR No. 16-05, as amended. To prove that its clients arc duly registered with the PEL\, petitioner submitted the Certifications31 issued by PEZA, as well as, the lettcr32 of the PEZA Director General, Ms. Lilia B. de Lima dated March 30, 2016 to Sycip Gorres Velayo & Co. (SGV), confirming the issuance of VAT zero-rating certifications to the following entities: Client PEZA Exhibit No. PEZA Rcuistration Certificate Certification .\TL\NTIC c;ULF & P.ICJFJC COMPANY 01' P-4; P-15 No . Date l\1.\1'\'11 ,\ 1\JC:. No. P-5; P-15 H,\BCOCK-1 IIT.\<:1 II (PI II!.II'PII\:ES) INC. P-6; P-15 1-.-\u~ R/6/2008 (BIIPI) 2014-0233 P-7;P-15 CJ IIYOD,\ 1'1 IILIPPINES CORPORATION (CPh) P-S;P-15 09-03 1/20/2009 DASJJ I�:NCINI�:I�:RINC; PJJJLIPPINES, INC 2014-0782 P-9; P- 15 09-96-IT 12/22/2009 (DI�:Pl) 2014-0364 P-10; P-15 P-11; P-15 04-24-IT 8/11/2004 1'1 .U< )J{ 1),\Nil�:J,, INC.-PI JJJ .IPPINI�:s____Q'DIP) 2014-0855 P-12; P-15 08-39-IT July 30, 200R as amended on II I'LICII I, J.J'l) (Ill.) P-13; P-14 12-74-IT 2014-0826 07-03-I'J' JulY 5, '1()12 11'1�: l'l�:c:I INO ~LIN ILl, INC. (JI'I�:) 2014-0008 07-14-I'J' J(IC I'IIII.JPI'INI�:S, INC. (JC;q 06-65-1'1' 8/30/2012 2014-0655 06-65-I'J' Jan 30, 2007 as amended on ~dl II Tl�:c:J INICIL SERVICES CORP. (~I'J'SC) 2014-0363 Jan 30, :2012 1\lllPS Tl �:CJ fNIC1\L SERVICI�~S CORP. (i\ITSC) 2014-0199 2/27 ;2mr:: 2014-0199 Nov 7, 2006 as :lmcndl'd nn )icb 27, '01" Nov 7, 2006 as amended nn .\Llr 28. 20 1-l Consequently, only the sales made to the above-enumerated PEZ:\ entities during the four quarters of TY 2014 shall qualify for VAT zcro-rating/v"' 30 Now at 12% VAT rate. 31 Exhibits ''P-4" to "P-14". 32 Docket, Exhibit "P-15", p. 572.

DECISION CTA CASE NO. 9454 In line with this, Sections 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1 (A)(2), (B)(1) and (2)(c) of RR No. 16-05, 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. - (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 Offiaa! Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt: (1) ,\statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (l'IN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: 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; XXX XXX XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and" (Emphasis supplied) "SEC. 4.113-1. Invoicing Requirements.~

DECISION CTA CASE NO. 94S4 (A) A VAT-registered person shall issue: - XXX XXX XXX (2) ,\ 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 'V1\T Invoice' or VAT official receipt. All purchases covered by invoices/ receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. -The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: 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;" (EmphaJis supplied) In its Amended Quarterly VAT Returns for the four quarters ofT'{ 2014, petitioner declared total sales of Php403,149,995.19, which included zero-rated sales in the total amount ofPhp340,059,361.20, to wit:3~ 33 !d., pp. 575 to 576, 578 to 579, 581 to 582, and 584 to 585.

DECISION CTA CASE NO. 9454 101 Quarter znd Quarter J�d Quarter 41b Quarter Total "P-18" "P-20" "P-22" "P-24" l'hp 11,796,453.04 l'hr 12,975,5"18.55 l'hr 16,261,074.41 \'A'I'abk ~ales 83,815,363.06 97,508,408.47 80,256,987.72 Php 22,057,527.99 Jlhp 6J,()lJ(J,6.)J 99 Zero-rated ~ale~ Total Php95,611,816.10 Php110,483,987.02 Php96,518,062.13 78,478,{!01.95 340,05(),3() 1.20 Php100,536,129.94 Php403,149,995.19 In support of its declared zero-rated sales of Php340,059,361.20, petitioner presented its Schedule of Sales34 and the related official receipts35 for the four quarters of TY 2014. Upon verification, the Court finds that the claimed zero-rated sales to MHPS (Philippines), Inc. in the amount of US$60,188.00 with peso equivalent of Php2,706,955.30, supported by official receipt No. 2151 dated November 5, 2014,36 shall be denied VAT zero-rating for petitioner's failure to prove that the said client is duly registered with the PEZA. Thus, only the amount ofPhp337,352,405.90 represents petitioner's valid zero-rated sales, determined as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total : l'hp 83,815,36306 l'hp 97,508,408.47 Php 80,:256.<J87. 7'2 Php 78,478,601.95 l.cro-Ratcd Sales I per \'XI' Returns I,css: l )isallowcd Php _)-l-0Jl59 J(i 1. '0 ~ale to ,\IJ IPS (Phthppincs), Inc. 2,706,955.30 2_70(J,05) ..)0 Valid ZeroMRatcd Sales Php83,815,363.06 Php97 ,508,408.47 Php80,256,987. 72 Php75,771,646.65 Php337,352,405.90 Having resolved that petitioner had valid VAT zero-rated sales for the four quarters ofTY 2014 in the total amount ofPhp337,352,405.90, the Court proceeds to determine the amount of input Vi\T attributable thereto. 4'h and S'h Requisites: Petitioner had input taxes during TY 2014 which are attributable to its zero- rated sales for the same period. For the four quarters of TY 2014, petitioner declared input taxes in the total amount of Php22,853,277.13, out of which the amount of Php15,282,401.06 is the subject of petitioner's claim for refund, to wit~ 34 Exhibits "P-25", "P-27", "P-29", and "P-31"; Annex E of Exhibit "P-64" (!CPA Report). 35 Exhibits "P-66" to "P-186", contained in Exhibit "P-196" (CD). 36 Exhibit "P-169".

DECISION CTA CASE NO. 9454 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total P-18 P-20 P-22 P-24 Donw~tic purchases of l'hp 439.0(J Php 42,990.00 Php 298.40 Php 4,602.53 Php 48,329.t)') scrvtccs St:rvices rendered by non- 4,174,523. 96 4,173,224.03 3, 980,324.96 10,476,874.19 '2,804,947 14 residents Total current input Php4,174,963.02 Php4,216,214.03 Php3,980,623.36 Php10,481,476.72 Php 22,853,277.13 taxes I ,css: Output uxcs on 1,415,574.37 1,557,069.43 1,951,328.92 2,64(J,903.36 7,570,87CJJJ8 \':\Table sales Excess input taxes for Php2,759,388.65 Php2,659,144.60 Php2,029,294.44 Php 7,834,573.36 Phr15,282,401.05 ,- the TY 2014 To support the total current input taxes of Php22,853,277.13, petitioner submitted the official receipts (for domestic purchase of services)38 issued by its suppliers and BIR Form No. 1600 (for services rendered by non-residents).39 Upon examination, the Court finds that out of the declared input VAT of Php22,853,277.13, the amount ofPhp48,213.87, as determined below, should be disallowed for petitioner's failure to meet the substantiation requirements under Sections 11 O(A), 113(A)(2) and (B)(4), and 237 of the NIRC: of 1997, as amended, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of RR No. 16-05, as amended: Exhibit No. Registered Name 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Purchase ofservice.-; .-;upportcd by oflicial receipts which were denied admission by thc Court per Resolution d;aed September 28, 20174� Cl�:O SUITE PI ITLIPPINE 1'-lHH HRt\NCJ I l'hp Php __ Pl!r_ ~'br BS.-'16 Php 1.15.1\(, cEo surn�: PI JJl JPPINE 1'-\WJ HR:\NCJ I W2.10 \IC_111 CJ�:O SUITE PI JILJPPINE P-l<JU HJC\NCJ I 336.14 _)_)(,_]:\ Sub-tom/ Php 336.14 Phv - Php 102.10 Php 13.5.86 Php 574./() Purch11se fJ{services amountin}! to Phpl,OOO.OO and above supported by oflicial receipts without the TIN and addre.-;.<; ofpetitioner Cl�:O SUITE PI IIJ.IPPINE 1'-1 H7 BR..-\NUI Phr l'hr l'hp 1!)(,__)() l'hp l'h) I')(, 11! 1'-19.) CI�:O Sli!TL l'll!LlPPINL --l-,--1(,(,_(,{, -ur.r. r.r. J-m.,\NU I Sub-total Php - Php 196.30 Php 4,466.66 Php 4,662.96 - Php Purchase ofservices mnounting to Phpl,OOO.OO and above supported by oflicial receipts without the TIN and ;1ddrcss ofpetitioner; supported bv invalid OR (without the .-;ienawre ofthe casbierj P-194 sc;v&co Php l'hp 4",%(),7.) Php Pl}p l'hp --l-2,%0.7.'> Sub-total Php Phv 42,960.73 Php Php Purchase.� ofservices without supporting Php 42,960.73 documents - - Difference per VAT Returns vs. Per Documents 16.07 16.07 0.01 0.01 Total Disallowances Phr 336.14 Php 42,976.80 Php 298.40 Php 4,602.53 Php 48,213.87 37 Minimal difference of Php0.01 compared to the amount of claim per Petition amounting to Php15,282,401.06. 38 Exhibits "P-187" to "P-194". 39 Docket, Exhibits "P-33" to "P-56", pp. 624 to 647. 40 Id., p. 665.

DECISION CTA CASE NO. 9454 As such, only the amount of Php22,805,063.26 represents petitioner's valid input VAT forTY 2014, computed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Input VAT per VA"I' Phr 4,174,963.02 l'IJr 4,216,214.03 l'bp 3,980,623.36 Php 10,481 .47(J.72 Php 22,853.27'.1.1 Returns 336.14 42,976.80 298.40 4,602.53 48,213.87 [.c~s: I )isallowanccs Php4,174,626.88 Php4,173,237.23 Php3,980,324.96 Php10,476,874.19 Php22,805,063.26 Valid Input VAT J\ portion, however, of the total valid input VAT of Php22,805,063.26 shall be applied against the reported output Vi\T liability of Php7,570,876.08. Consequently, only the remaining input VAT of Php15,234,187.18 can be attributed to the entire zero-rated sales amounting to Php340,059,361.20 and only the input VAT of Php14,964,108.71 is attributable to the valid zero-rated sales ofPhp337,352,405.90, computed as follows: \'alid Input VAT 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Php 4,174,626.88 l'hp 4,173,237.23 Php 10,476,874.19 Php 22.ROS,(l(J.\26 I.css: ( )utput V.Y r Phr 3,980,324.96 1,415,574.37 1,557,069.43 2,646,903.36 7,S 70,87().()8 Excess Input VAT Php2, 759,052,51 Php2,616,167.80 1,951 ,328.92 Php7,829,970.83 Php15,234,187.18 Divide by Total Declared Php2,028,996.04 /.no-Rated Sales 1\lultiply by \'alid /'.cro- 83,815,363.06 97,508,408.47 80,256,987.72 78,478,601.9.'1 340,059.361 .20 !btcd Sales Excess Input VAT 83,815,363.06 97,508,408.47 R0,256,987.72 75,771 ,646_()5 3J7,352_--I-()')_90 attributable to Zero-Rated Sales Php2,759,052.51 Php2,616,167,80 Php2,028,996,04 Php7,559,892.36 Php14,964,108.71 6'h Requisite: The excess input taxes were not applied against any output VAT liability. Petitioner was able to prove that the claimed input VAT of Php2,759,388.66, Php2,659,144.60, Php2,029,294.43 and Php7,834,573.36, or in the aggregate amount of Php15,282,401.05 for the 1", 2"", 3'" and 4'h quarters of TY 2014, respectively, were not applied against any output VAT in the succeeding quarters and the same remained unutilized as the said amounts were deducted as "VAT Refund/TCC claimed" in the respective Amended Quarterly VAT Returns forTY 2014. Apparently, the subject claim no longer formed part of the excess input VAT of Php40,380,200.61 41 as of the end of the fourth quarter of TY 2014 that was carried over or applied to the succeeding 1" quarter / 41 Id., Line 29 of Exhibit "P-24", p. 585.

DECISION CTA CASE NO. 9454 of TY 2015. 1\s such, it eliminates the possibility that the present claim would be applied to future output VAT liability. WHEREFORE, premises considered, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of Php14,964,108.71 representing petitioner's excess input VAT attributable to its zero-rated sales for the period covering January 1, 2014 to December 31, 2014. SO ORDERED. ~- ~~~<-� MA. BELEN M. RINGPIS-LIBAN Associate ]mtice I CONCUR: ssociate 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. sociate justice Acting Chaitperson

DECISION CfA CASE NO. 9454 CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Acting 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. PreJiding ]11Jtire