WNS GLOBAL SERVICES PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION WNS GLOBAL SERVICES CTA Case No. 8574 PHILIPPINES, INC., Members: Petitioner, BAUTISTA, Chairperson FABON-VICTORINO, and -versus- R I N GPIS- LIB A N ,]]. COMMISSIONER OF INTERNAL REVENUE, Promulgated: Respondent. c- X----------------------------------------------------------------------------------------------X DECISION RINGPIS-LIBAN, J.: This Petition for Review filed by WNS Global Services Philippines, Inc. on November 16,2012, prays for the refund or issuance of a tax credit certificate in the amount of P10,163,064.25, allegedly representing its excess unutilized input value-added tax for the fiscal year ending March 31, 2011. THE FACTS Petitioner WNS Global Services Philippines, Inc. is a corporation o rganized and existjng under Philippine laws since the year 2009. It is "engaged in the business of providing services including but not limited to (i) outsourced customer care, credit collection, billing and billing information services, outsourced contact management services for the customers, employees, and business-channel partners of client, organizations through the medium of telephone, email, and web-medium of telephone, email and web-based interactions, and (ii) other I.T -enabled services (such as outsourccd back-o ffice services) and for this purpose, to do any and all things necessary for or conducive to the attainment of such purpose.? ' 1 Docket, vol. 1, Exhibit "P-18", pp . 286-295.

DECISION CTA Case No. 8574 On the other hand, respondent is the �duly appointed Commissioner of the Bureau of Internal Revenue (BIR) who has the power to decide 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) or other laws or portions thereof administered by the BIR. He holds office at the BIR National Office Building, Agham Road, Dillman, Quezon City. WNS Philippines, Inc. (WPI) was a corporation duly organized and existing under Philippine laws under Company Registration No. CS200810061.2 It was registered with the Board of Investments (BOI) on June 9, 2009 as an ICT Export Service Enterprise under Certificate of Registration No. 2009-078.3 WPI was duly registered with the Bureau of Internal Revenue as a VAT enterprise during the years 2010 and 2011.4 On June 22, 2012, WPI filed its administrative claim 5 for refund of unutilized input VAT for fiscal year ended March 31, 2011 with the Revenue District Office (RDO) No. 47.6 WPI later merged with petitioner, which was approved by the Securities and Exchange Commission (SEC) on August 31, 2012, with petitioner as the surviving entity.7 As the surviving corporation after its merger with WPI, petitioner, by operation oflaw, absorbed all of the assets and liabilities ofWPI, including WPI's input VAT. Likewise, it acquired the legal standing to institute the present claim for refund ofWPI's unutilized input VAT for fiscal year ending March 31, 2011.8 Due to the failure of respondent to resolve the administrative claim for refund, petitioner filed the instant Petition for Review9 on November 16, 2012 before this Court. Within the extended time granted by the Court,10 respondent filed his Answer11 on January 21, 2013, interposing the following special and affirmative defenses: ~ 2 /d., vol. 2, Joint Stipulation of Facts and Issues (JSFI), Par. 1, p. 581. 3 /d. at par. 2. 4 ld. at par. 3. 5 Docket vol. 1, Exhibit "P-21", pp. 330-332. 6 ld. at Note 2, par. 4. 7 /d. at par. 5. 8 /d. at par. 6, p. 582. 9 Docket vol. 1, pp. 6-16. 10 ld. at p. 154. 11 /d. at pp. 155-157.

DECISION CTA Case No. 8574 "SPECIAL AND AFFIRMATIVE DEFENSES 5. Claims for refund are strictly construed against the taxpayer as the same partakes the nature of a tax exemption; 6. The taxpayer has the burden to show that the taxes were erroneously or illegally paid. Failure on the part of the Petitioner to prove the same is fatal to its cause of action. In the instant case, the Petitioner failed to present proof that the input VAT it is claiming as refund remained unutilized and was not carried over to subsequent taxable quarters; 7. It is incumbent for the Petitioner to prove the existence of a valid contract and that said contract is indeed considered zero- rated VAT transaction; 8. Hence, Petitioner failed to prove that the compensation or consideration which it received for the services rendered were actually paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas; 9. The Petitioner failed to prove its personality and legal basis for claiming the amount being refunded." The Pre-Trial Conference was set on March 21, 2013.12 Upon petitioner's motion, 13 the pre-trial conference was deferred via Resolution14 dated March 20, 2013 and petitioner was given ten (10) days from receipt thereof to file a Motion for Commissioning of Independent Certified Public Accountant (CPA). On April 10, 2013, petitioner filed a Motion for Commissioning of Independent Certified Public Accountant Ad Cautelem15� On May 9, 2013, Mr. Emmanuel Y. Mendoza was commissioned as the Independent CPA for the case. 16 ~ 12 /d. at p. 58, Notice of Pre-Trial Conference. 13 td. at pp. 159-162. 14 /d. at p. 167. 15 /d. at pp. 171-174. 16 ld. at pp. 201 and 202, Minutes of the Hearing and Oath of Commission dated May 9, 2013.

DECISION CTA Case No. 8574 Petitioner's Pre-Trial Brie�1 7 was filed through registered mail onJune 17, 2013 and received by this Court on June 27, 2015. On the other hand, respondent's Pre-Trial Brie�1 8 was filed on October 21, 2013. The parties filed their Joint Stipulation of Facts and Issues 19 through registered mail on November 8, 2013 and received by this Court on November 15, 2013. This was adopted by the Court in the Pre-Trial Order 20 dated November 20, 2013, which also terminated the Pre-Trial. On December 2, 2013, petitioner filed a Motion to Amend Pre-Trial Order21 , which was received by the Court on December 6, 2013. This was granted by the Court in the Resolution22 dated January 30, 2014. During trial, petitioner presented the following witnesses: (1) Ms. Jennifer Cuaresma23 , petitioner's Group Manager for Finance; (2) :Mr. Emmanuel Y. Mendoza2\ the Independent CP :\; (3) :Mr. l\!Iichael Garber25, previous Director of \XINS North America, Inc.; and (4) Ms. Anil Patil26, Director ofWNS Global Services (UK) I..imited. Petitioner filed its Formal Offer of Evidence27 on December 5, 2014. In the Resolution28 dated February 9, 2015, the Court admitted petitioner's Exhibits "P-1 and P-1-a", "P-2 to P-2-KI<..K.I<.."' "P-3-A to P-3-AA"' "P-3-BB to P-3- "E""2PPP1E--1"18",71-'"-A"-aPBP"-t'-2"o4"'2P-P"Aa1P-n78-td1-o-bD1PP"-"-C-''24"""2-P'PR--"a-1"P"9'8'-""1""'P'2P"-"--P4PA2---3S1"1'09at"-o-nAPadP"-"1'-'P4"3"--P"2PY'-4-1""1"9P'0' -"--"bP1BP4-t"-6o2'a-5P"nAPd-a1-tnoP19d0--P1d-P-C4"6--""2-a'BP5""--'"P2a"' "0-P"'1-P-a"01-P-76toD---2AaP"6't-to2"oaP0nPP--d-d1-17"1P6'----DA"2dP6"""--''' a", "P-27", "P-29", "P-30", and "P-33 and P-33-a". However, the Court denied the admission of Exhibit "P-3-FF" for petitioner's failure to identify the same before the Court; Exhibit "P-35", for petitioner's failure to identify the same before the Court and for petitioner's failure to present its original for comparison; Exhibits "P-5-A to P-5-B", "P-11-D", and "P-12-B", for failure to correspond with the document described in the Formal Offer of Evidence; and /V' 17 /d. at pp. 379-386. 18 Docket vol. 2, pp. 567-570. 19 Docket vol. 1, pp. 581-584. 20 ld. at pp. 591-597. 21 /d. at Note 18, pp. 598-600. 22 /d. at pp. 614-615. 23 /d. at Note 18, pp. 245-254, Minutes of the Hearing dated January 20, 2014, id. at Note 19, p. 612; Exhibit "P-14", Judicial Affidavit of Jennifer Cuaresma. 24 /d. at Note 18, Minutes of the Hearing dated February 17, 2014, p. 616; id. at Note 19, pp. 333-343, 408- 413, and 1326-1331, Exhibits "P-22", "P-25", and "P-37", Judicial Affidavits. 25 ld. at Note 19, pp. 483-486. 26 ld. at Note 19, pp. 415-418, Exhibit "P-26", Judicial Affidavit. 27 /d. at Note 18, pp. 759-778. 28 Docket vol. 3, pp. 1281-1283.

DECISION CTA Case No. 8574 pErxehsiebnittsth"eP-o2ri8g"i'n"aPls-3fo1r"'co"Pm-p3a2r"is' o"nP.-34"' and "P-36"' for petitioner's failure to Petitioner flied a Motion for Partial Reconsideration (Re: Resolution dated 09 February 2015)29 on March 23, 2015. Thereafter, on May 27, 2015, petitioner filed a Motion to Admit Incorporated Supplemental Motion for Partial Reconsideration and To Set Commissioner's Hearing (Re: Resolution dated 09 February 2015). These were both partially granted by the Court in the Resolution30 dated August 27, 2015, wherein the Court admitted Exhibits "P-28" and "P-34", but still denied the admission of Exhibit "P-3-FF" for failure to present the original during the July 27, 2014 hearing. Petitioner then filed a Manifestation with Consolidated Motion to Clarify and For Production of Documents31 on October 12, 2015. This was later on denied by the Court in the Resolution32 dated December 22, 2015. During the January 18, 2016 hearing, petitioner's Exhibits "P-3-FF", "P- 37", and "P-37-a" were admitted into evidence.33 On March 3, 2016, petitioner filed a Motion to Admit Attached Judicial Affidavit of Mr. Yogendra Goyal 34 � This was granted by the Court in the Resolution35 dated May 19, 2016, and the Judicial Affidavit of Mr. Yogendra Goyal was admitted to form part of the records. The judicial affidavit was marked, identified, and admitted into evidence as Exhibit "P-35" during the August 15, 2016 hearing. During the same August 15, 2016 hearing, counsel for respondent manifested that he would not present any witness, but offered as respondent's evidence, Exhibits "R-1" and "R-1-a"; which were later admitted into evidence.36 Thereafter, the Memorandum for Petitione27 was flied on September 14, 2016; while respondent failed to f:tle his Memorandum as per Records Verification dated September 15, 2016. Thus, in the Resolution38 dated October 12, 2016, the instant case was declared submitted for decision. ~ 29 /d., pp. 1287-1295. 30 /d., pp. 1351-1354. 31 /d., pp. 1373-1378. 32 /d., pp. 1402-1405. 33 /d., pp. 1426-1427. 34 /d., pp. 1437-1441. 35 /d., pp. 1508-1510. 36 /d., pp. 1512-1513, Order dated August 15, 2016. 37 /d., pp. 1514-1530. 38 /d., p. 1533.

DECISION CTA Case No. 8574 THE ISSUES The parties stipulated the following issues to be resolved by this Court:39 1. Whether petitioner is entitled to its claim for refund/issuance of Tax Credit Certificate of the excess unutilized input VAT attributable to WPI's export/zero-rated sales in the amount of P10,163,064.25 for fiscal year ending 31 March 2011. 2. Whether the petition for review should be dismissed for lack of cause of action on the part of the petitioner for non-exhaustion of administrative remedies by filing the instant petition before the expiration of the 120-day period as provided for under Section 112(C) of the NIRC. 3. Whether the Honorable Court has jurisdiction over the instant petition inasmuch as there was no decision or inaction which is tantamount to a denial by the CIR that the Court of Appeals could review simply because respondent was not given an opportunity to reach that decision or to act accordingly on the claim for refund within the 120-day period. 4. Whether WPI sale of services qualify as zero-rated sales under Section 108(B)(2) of the 1997 Tax Code, as amended. 5. Whether petitioner has unutilized VAT input taxes in the amount of P1 0,163,064.25 for the fiscal year ending 31 March 2011. 6. Whether the alleged unutilized VAT input taxes for the fiscal year ending 31 March 2011 were applied against its output taxes or carried-over to the succeeding taxable quarters/years. 7. Whether petitioner's claim for tax refund/tax credit allegedly representing unutilized VAT input taxes for the fiscal year ending 31 March 2011 in the amount P10,163,064.25 is substantiated by documentary evidence. The foregoing issues may be summarized as follows: ~ 39 /d. at Note 18, pp. 582-583.

DECISION CTA Case No. 8574 Whether petitioner is entitled to a tax refund or issuance of tax credit certificate in the amount of P1 0,163,064.25, allegedly representing excess unutilized input taxes for the fiscal year ending March 31, 2011. THE RULING OF THE COURT The pertinent provisions of Section 112(A) and (C) of the National Internal Revenue Code of 1997, as amended, state as follows: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-Rated or Effer:tive!J Zero-Rated Sales. - Any VAT- registered person, whose sales are zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, final!J, 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 ~

DECISION CTA Case No. 8574 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." The Court has jurisdiction over the present case as the administrative and the judicial claims were timely filed The Court of Tax Appeals is a court of special or limited jurisdiction and can only take cognizance of such matters as are clearly within its jurisdiction.40 The jurisdiction of the CTA is conferred by Republic Act (RA) No. 1125, as amended by RA No. 9282. The pertinent provision is quoted hereunder for ready reference: "SEC. 7. Jurisdiction.- The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: (1) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue or other laws administered by the Bureau of Internal Revenue; (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relations thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period of action, in which case the inaction shall be deemed a denial;" (Emphasis supplied) ~ 40 Allied Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 175097, February 5, 2010; Cathay Pacific Airways, Ltd. vs. Commissioner of Internal Revenue, CTA EB No. 717 (CTA Case No. 7876}, April 17, 2012; Rizal Commercial Banking Corporation vs. Commissioner of Internal Revenue, G.R. No. 168498, Resolution dated April 24, 2007.

DECISION CTA Case No. 8574 In relation thereto, Section 3(a)(2) of Rule 4 of the Revised Rules of the Court of Tax Appeals provides: "SEC. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: XXX XXX XXX (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; and Provided, still further, that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration ofthe two-year period under Section 229 of the National Internal Revenue Code;" (Emphasis supplied) Moreover, in the case of Commissioneroflnternal Revenue vs. San Roque Power Corporation41 , the Supreme Court held that: "xxx The charter of the CTA also expressly provides that if the Commissioner fails to decide within 'a specific period' required by law, such 'inaction shall be deemed a denial' of the application for tax refund or credit. It is the Commissioner's decision, or inaction 'deemed a denial,' that the ,....y-" 41 G.R. Nos. 187485, 196113, and 197156, February 12, 2013.

DECISION CTA Case No. 8574 taxpayer can take to the CTA for review. Without a decision or an 'inaction ... deemed a denial' of the Commissioner, the CTA has no jurisdiction over a petition for review." (Emphasis supplied) Based on the foregoing, the Court has jurisdiction over cases involving claims for refund of taxes wherein the Commissioner of Internal Revenue fails to decide within the specific period provided in the NIRC of 1997, as amended. The Commissioner's inaction shall be deemed a denial. This case involves a claim for refund of petitioner's unutilized excess input taxes for the fiscal year ending March 31, 2011. Pursuant to Section 112(A) of the NIRC of 1997, as amended, the application for refund or tax credit of unutilized excess input VAT must be ftled within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made.42 The present claim covers the four quarters of FY ending March 31, 2011, which closed on June 30, 2010, September 30, 2010, December 31, 2010, and March 31, 2011. Counting two years from the said dates, petitioner had until June 30, 2012, September 30, 2012, December 31, 2012, and March 31, 2013 within which to file its administrative claim for refund or issuance of tax credit certificate. Thus, petitioner's administrative claim, together with the supporting documents, was seasonably flied with the Revenue District Office No. 47 on June 22, 201243, as shown below: Fiscal Year Close of the End of 2-year Date of Filing ending March Taxable Quarter Prescriptive Period of 31,2011 Administrative Claim 1st Quarter 2nd Quarter June 30, 2010 June 30, 2012 June 22, 2012 3rd Quarter September 30, 2010 September 30, 2012 4th Quarter December 31, 2010 December 31, 2012 March 31, 2011 March 31, 2013 On the other hand, Section 112(C) of the NIRC of 1997, as amended, states the time requirements for filing a judicial claim for the refund or tax credit of input VAT. The legal provision speaks of two periods: the period of 120 days, which serves as a waiting period to give time for the BIR Commissioner to act ~ 42 Commissioner of Internal Revenue vs. Aichi Forging Company Asia, Inc., G.R. No. 184823, October 6, 2010. 43 ld. at Note 19, pp. 330-332, Exhibit "P-21.

DECISION CTA Case No. 8574 on the administrative claim for a refund or credit; and the period of 30 days, which refers to the period for filing a judicial claim with the CTA.44 In the landmark case of Commissioner ofInternal Revenue vs. San Roque Power Corporation45, the Supreme Court held that the taxpayer can ftle an appeal in one of two ways: (1) file the judicial claim within 30 days after the Commissioner denies the claim within the 120-day waiting period, or (2) ftle the judicial claim within 30 days from the expiration of the 120-day period if the Commissioner does not act within that period.46 Note that the 120-day period begins to run from the date of submission of complete documents supporting the administrative claim. If there is no evidence showing that the taxpayer was required to submit - or actually submitted - additional documents after the filing of the administrative claim, it is presumed that the complete documents accompanied the claim when it was ftled. 47 Respondent presented a letter dated September 13, 201248 as proof that petitioner submitted additional documents after the filing of its administrative claim for refund. However, a perusal of the letter shows that there is nothing in the letter that indicates that the transmittal of additional documents was for its administrative claim for refund. In fact, the subject matter of the letter shows that it relates to Letter of Authority No. 201100014858. The Court cannot give credence to respondent's claim that petitioner submitted additional documents after the filing of its administrative claim for refund on June 22, 2012. Thus, petitioner is deemed to have submitted its complete documents when it filed its administrative claim on June 22, 2012. Counting 120 days from June 22, 2012, respondent had until October 22, 201249 within which to decide on the subject administrative claim. Considering that respondent failed to act on the refund claim, his inaction is deemed a denial of petitioner's administrative claim. Petitioner had 30 days from October 22, 2012 or until November 21, 2012, within which to appeal its claim for tax credit certificate/refund before this Court. The instant petition was timely filed on November 16, 2012. Clearly, both the administrative claim and the judicial claim for refund were timely filed by petitioner. The Court, therefore, has jurisdiction over the instant case~ 44 Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14,2015. 45 G.R. Nos. 187485, 196113, and 197156, February 12, 2013. 46 Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue, G.R. No. 168950, January 14, 2015. 47 Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue, G.R. No. 182737, March 2, 2016. 48 BIR Records, Folder 3, p. 525. 49 October 20, 2012 being a Saturday.

DECISION CTA Case No. 8574 Petitioner may validly file a claim for refund of WPI's unutilizedinput VAT The instant claim pertains to WPI's unutilized input VAT for the four quarters ofFY ending March 31,2011. It is undisputed that on August 31, 2012, the Securities and Exchange Commission approved the merger of WPI and petitioner, with the latter as the surviving entity.50 Section 4.106-8 of Revenue Regulations (RR) No. 16-05, as amended, explicitly provides for the absorption of the unused input tax in the event of a merger, to wit: "SECTION 4.106-8. Change or Cessation of Status as VAT- registered Person. - XXX XXX XXX (3) Merger or consolidation of corporations. The unused input tax of the dissolved corporation, as of the date of merger or consolidation, shall be absorbed by the surviving or new corporation." As admitted by the parties, petitioner, being the surviving corporation in a merger with WPI, and as such has, by operation of law, absorbed all of the assets and liabilities of WPI, including WPI's input VAT, has legal standing to institute the instant claim for refund of WPI's unutilized input VAT for fiscal year ending March 31, 2011.51 Pursuant to the afore-quoted provisions of Section 112(A) and (C) of the NIRC of 1997, as amended, the taxpayer-claimant must comply with the following requisites in order to be entitled to a refund or tax credit of excess input VAT attributable to zero-rated or effectively zero-rated sales: 1. that the taxpayer-claimant must be VAT-registered; 2. that there must be zero-rated or effectively zero-rated sales; 3. that input taxes were incurred or paid; 4. that such input taxes are attributable to zero-rated or effectively zero- rated salesy 50 /d. at Note 7. 51 ld. at Note 8.

DECISION CTA Case No. 8574 5. that the input taxes were not applied against any output VAT liability; and 6. that the claim was flied within the prescriptive period. As earlier resolved, petitioner has complied with the sixth requisite. Both the administrative and the judicial claims for refund were timely flied. The Court shall now proceed to determine petitioner's compliance with the other requisites. WPIis VAT-registered andhad zero-rated sales for the subject period ofclaim Anent the first requisite, petitioner alleges that WPI's sales of services qualify as zero-rated sales under Section 108(B) (2) of the NIRC of 1997, as amended, which is quoted hereunder for easy reference: "SEC. 108. Value-added Tax on Sale ofServices and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Sui?Ject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted 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 Bangko Sentral ng Pilipinas (BSP)~

DECISION CTA Case No. 8574 In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, IncY, the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108(B) (2) of the NIRC of 1997, as amended, the following requisites must be satisfied: 1. the services must be other than processing, manufacturing or repacking of goods; 2. the payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and 3. the recipient of such services is doing business outside the Philippines. As regards the first requisite, it is undisputed that WPI was duly registered with the BIR as a VAT enterprise in 2010 and 2011.53 WPI was also registered with the SEC under Company Registration No. CS200810061 54 to engage in call center business that offers an integrated mix of call center solutions including inbound (customer-initiated) and outbound teleservicing.55 Pursuant to the agreements entered into by WPI with its clients, WNS Global Services (UK) Limited ("WNS UK" for brevity) 56 and WNS North America Inc. ("WNS NA" for brevity) 57 , the former agreed to provide IT- enabled services to the latter within an agreed period, including the subject period of claim. These services clearly fall within the scope of "services other than processing, manufacturing or repacking of goods" contemplated by the afore- mentioned provision. Likewise, petitioner was able to establish that WPI's clients, WNS UK and WNS NA are non-resident foreign corporations doing business outside the Philippines, as shown by the following documents: Document WNS Global WNS North Services (UK) America Inc. SEC Certificate of Non-Registration of Company Agreement dated July 31,2010 by and between WPI vs Limited "P-17 -b" WNSUK "P-17 -a" Agreement dated July 31,2010 by and between WPI vs "P-19-b" to "P- WNSNA "P-19-a" 19-d" Certificate of Incorporation on Registration of a Public Company as a Private Company of Town & Country "P-27" '-Assistance Limited ~ 52 G.R. No. 153205, January 22, 2007. 53 ld. at Note 4. 54 ld. at Note 1. 55 ld. at Note 18, p. 957, Exhibit "P-9", Notes to Financial Statements, March 31, 2011. 56 /d. at Note 19, pp. 296-305, Exhibit "P-19-a". 57 ld. at Note 19, pp. 306-310, Exhibit "P-19-b".

DECISION CTA Case No. 8574 Certificate of Incorporation on Change of Name from "P-28" Town & Country Assistance Limited toWNS Global "P-29" Services _illK} Limited "P-30" Certificate of Residence ofWNS UK for 2010 "P-31" Certificate of Residence ofWNS UK for 2011 "P-32" Financial Statements of WNS UK for 2010 Financial Statements of WNS UK for 2011 "P-34" Certificate of Incorporation of WNS NA "P-35" WNS NA Consolidated Financial Statements for years "P-36" ended March 31, 2010 and 2009 WNS NA Consolidated Financial Statements for years ended March 31, 2011 and 2010 In relation to the third requisite, 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 1ssue: 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, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided, That: XXX XXX X~

DECISION CTA Case No. 8574 (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) "SECTION 4.113-1. Invoicing Requirements.- (A) A VAT-registered person shaDissue:- 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. (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 /}../'

DECISION CTA Case No. 8574 (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;" (Emphasis supplied) Pursuant to the foregoing provisions, the foreign currency remittances referred to under Section 1OS(B) (2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts. For services rendered toWNS UK and WNS NA for the four quarters of FY ending March 31, 2011, WPI received foreign currency payments with peso equivalent of P217,394,130.63. In support thereto, petitioner submitted WPI's billing invoices58, WPI's zero-rated VAT official receipts, and a Statement of Account issued by Hong Kong and Shanghai Banking Corporation (HSBC) 59, which are summarized as follows: O.R. Amount of Amount of Sales Amount of No. Sales in in Pesos Client Date Exhibit60 Foreign Inward I Currency p 10,198,500.00 ! Remittance61 3,443,034.03 First Quarter (Exhibit '1)-8-A '} 990,619.52 WNSUK 21,098,538.43 - T-Mobile 0123 23-Apr-10 "P-3-L" GBP150,000.00 3,150,430.11 GBP150,000.00 "P-3-A" USD73,279.49 WNSUK 1,476,931.80 - "P-3-B" USD21,083.74 - "P-3-M" GBP312,707.79 1,578,328.88 "P-3-C" 22,288,153.44 Travelocity 0131 31-May-10 USD67,853.33 "P-3-D" WNSUK USD31,809.86 "P-3-E" - "P-3-N" USD33,993.73 GBP321,181.43 Travelocity Amex 0132 31-May-10 - - WNSUK - T-Mobile 0134 31-May-10 WNSNA - Travelocity 0036 30-Jun-10 WNSNA - Travelocity USD133,646.91 Premium 0037 30-Jun-10 WNSNA - Travelocity Amex 0038 30-Jun-10 WNSUK - T-Mobile 0039 30-Jun-10 - ~ 58 /d. at Note 18, pp. 306-310, Exhibits "P-4-A" to "P-4-Y". 59 /d. at pp. 924-937, Exhibits "P-5-A" to "P-6-A" and "P-5-B" to "P-6-B". 60 ld. at pp. 867-898. 61 /d. at pp. 924-937, Exhibits "P-5-A" to "P-6-A" and "P-5-B" to "P-6-B".

DECISION CTA Case No. 8574 WNSUK GBP5,660.27 392,790.35 - - T-Mobile 0040 30-Jun-10 "P-3-0" p 64,617,326.56 - Jubtotai p 6,182,968.66 8,352,000.00 GBP120,000.00 Second Quarter (Exhibit '1)-8-B ") 7,667,717.57 GBP107,707.79 9,724,543.33 GBP134,993.73 WNSNA 0138 27-Jul-10 "P-3-F" USD133,656.91 13,241,138.95 GBP186,181.43 5,602,849.27 USD123,696.86 WNSUK 0139 07-Jul-10 "P-3-P" GBP120,000.00 10,484,758.13 GBP1 50,000.00 12,063,578.46 GBP176,534.54 WNSUK 0140 19-Jul-10 "P-3-Q" GBP107,707.79 1,038,056.10 GBP15,000.00 5,624,549.49 USD126,821.86 WNSUK 0414 04-Aug-10 "P-3-R" GBP134,993.73 3,476,115.38 7,257,681.90 GBP50,000.00 WNSUK 0142 11-Aug-10 "P-3-S" GBP186,181.43 GBP1 05,000.00 p 90,715,957.24 WNSNA 0143 24-Aug-10 "P-3-G" USD123,696.86 USD114,645.53 p 4,985,934.10 GBP79,578.34 WNSUK. 0144 01-SeQ:-10 "P-3-T" GBP150,000.00 5,490, 726.79 GBP115,000.00 7,862,290.56 GBP50,000.00 WNSUK 0145 08-Sep-10 "P-3-U" GBP176,534.54 GBP90,000.00 3,403,286.64 GBP46,359.61 WNSUK 0146 16-Sep-10 "P-3-V" GBP15,000.00 6,111,632.43 GBP160,000.00 3,216,769.60 GBP134,837.79 WNSNA 0147 16-Sep-10 "P-3-H" USD126,831.86 11,178,073.60 USD25,970.00 WNSUK. 0148 29-Sep-10 "P-3-W" GBP50,000.00 9 ,326,020. 99 USD85,789.00 p 51,574,734.71 USD80,000.00 WNSUK 0149 24-Sep-10 "P-3-X" GBP1 05,000.00 p 1,134,109.90 Jubtotai 3,724,958.38 5,627,043.84 Third Quarter (Exhibit 'P-8-C'') p 10,486,112.12 WNSNA 0150 07-0ct-10 "P-3-I" USD114,645.53 WNSUK 0151 07-0ct-10 "P-3-Y" GBP79,578.34 WNSUK 0152 20-0ct-10 "P-3-Z" GBP115,000.00 WNSUK "P-3- 0153 22-0ct-10 AA" GBP50,000.00 WNSUK 0154 27-0ct-10 "P-3-BB" GBP90,000.00 WNSUK 0155 10-Nov-10 "P-3-CC" GBP46,359.61 WNSUK 0156 "P-3- 24-Nov-10 DD" GBP160,000.00 WNSUK 0157 09-Dec-10 "P-3-EE" GBP134,837.79 Jubtotai Fourth Quarter (Exhibit 'P-8-D'') WNSNA 0158 23-Feb-11 "P-3-J" USD25,970.00 WNSNA 0159 09-Mar-11 "P-3-K." USD85,789.00 WNSNA 0160 10-Mar-11 "P-3-FF" USD80,000.00 Jubtotai TOTAL P217 ,394,130.63 As can be seen from the above summary, petitioner failed to present proof of foreign currency inward remittances corresponding to WPI's sales/receipts of P54,396,104.43, broken down as follows;,.v--

DECISION CTA Case No. 8574 Client O.R. No. Date Amount of Sales Amount of Sales First Quarter in Foreign in Pesos WNS UK- Travelocity Currency WNS UK - Travelocity Amex WNS UK- T-Mobile 0131 31-May-10 USD73,279.49 p 3,443,034.03 WNS UK- T-Mobile 0132 31-May-10 USD21,083.74 990,619.52 WNS UK- T-Mobile 0134 31-May-10 GBP312,707.79 0039 30-Jun-10 GBP321,181.43 21,098,538.43 Second Quarter 0040 30-Jun-10 22,288,153.44 WNSNA GBP5,660.27 subtotal 392,790.35 ----- -------------------------- P48,213,135. 77 0138 27-Jul-10 USD133,656.91 p 6,182,968.66 subtotal 6,182,968.66 TOTAL P54,396,104.43 Thus, out of the P217,394,130.63 zero-rated sales/receipts declared by WPI for the four quarters of FY ending March 31, 2011, only the amount of P162,998,026.20 (P217,394,130.63less P54,396,104.43) qualifies for VAT zero- rating under Section 108(B) (2) of the NIRC of 1997, as amended. The Court will now proceed to the determination of whether WPI incurred or paid input taxes in connection thereto and if said input taxes were not applied against any output VAT liability of WPI. In its Quarterly VAT Returns for the four quarters of FY ending March 31, 2011, WPI reflected the following input taxes totaling P1 0,224,384.27 arising from amortization of capital goods purchases exceeding P1Million, domestic purchases of goods other than capital goods and domestic purchases of services, detailed as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total (Exh. '7)-16-a'') (Exh. '7)-16-b'') (Exh. '7)-16-c'') (Exh. '7)-16- p 1,417,537.37 p 1,417,537.37 p 1,042,483.93 d'') - Input Tax Deferred on - - p 667,430.49 p 292,377.04 Capital Goods exceeding 1,417,537.37 P1 Million from Previous 1,417,537.37 1,042,483.93 - - Quarter 235,753.32 Add: Input Tax on Capital 1,04?,�~3.93 667,430.49 667,430.49 292,377.04 ~ Goods exceeding 292,377.04 235,753.32 P1Million Purchased this Quarter Total Unamortized Input Tax on Capital Goods exceeding P1Million Less: Input Tax on Purchases of Capital Goods exceeding P1 Million deferred for the succeeding period

DECISION CTA Case No. 8574 Amortization of Input Tax 375,053.44 375,053.44 375,053.45 56,623.72 I on Capital Goods exceeding P1Million 1,562.36 5,828.95 - 18,360.00 1,181,784.05 I 2,002,126.06 4,027,740.81 101,280.63 Add: Input Tax on P2,378,741.86 P4,408,623.20 2,885,701.41 P176,264.35 ! Domestic Purchases P3,260, 754.86 of Goods Other than 25,751.31 Capital Goods Domestic Purchase of 9,016,848.91 I Services P10,224,384.27 Total Input Tax However, WPI's refund claim amounting to P10,163,064.25 is lower than the total declared input VAT by P61 ,320.02 (P1 0,224,384.27 less P1 0,163,064.25). In support ofWPI's input VAT claim, petitioner presented the Schedule of Input Tax 62 and the related invoices, the official receipts and other documents63, which were all examined by the Court-commissioned Independent CPA. In the Independent CPA's report 64 , the input VAT claim of P10,163,064.25 was accounted as follows: Findings Domestic Domestic Amortization of I Purchase of Purchase of Input VAT Input VAT on domestic Goods other Deferred on Total purchases of services, goods, Services than Capital and amortized input VAT on Capital Goods p 9,482,921.08 domestic purchases of capital Goods exceeding 629,959.55 goods exceeding P1M 3,303.57 supported by documents such PlMillion from as VAT ORs and VAT invoices Previous Quarter /V Amortized input VAT on domestic purchases of capital p 8,954,845.02 p 25,751.30 p 502,324.76 goods exceeding P1M supported by documents other - - 629,959.55 than VAT invoices (such as ORs) - - 3,303.57 Amortized input VAT on domestic purchases of capital goods exceeding P1M supported by documents not issued under the Company's name 62 Exhibits "P-A" to "P-7-D". 63 Exhibits "P-2-A" to "P-2-KKKK". 64 /d. at Note 19, pp. 211-241, Exhibit "P-23".

DECISION CTA Case No. 8574 Amortized input VAT on - - 46,196.17 46,196.17 domestic purchases of capital goods exceeding P1M - - P1,181, 784.05 683.87 supported by VAT invoices P10,163,064.24 which pertain to amount of P8,954,845.02 p 25,751.30 excess amortization after estimated useful life of capital goods Input VAT on domestic purchases with no available supporting document Total The Court finds that the above input VAT in the amounts ofP629,959.55, P3,303.57, P46,196.17 and P638.87 totaling P680,143.16 should be disallowed for not being properly substantiated by VAT invoices or receipts as prescribed under Sections 110(A), 113(A) and (B) 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. In addition, petitioner's input VAT claim in the amount of P8,872,815.67, detailed below, shall be disallowed for non-compliance with the substantiation requirements under the afore-mentioned VAT law and regulations: Supplier's Name Exhibit Input VAT Amount of WPI's WPI's WPI's Supported Claim Input VAT TIN was Business registered by Address name was was not not was not incomplete Documents separately indicated indicated other than indicated in the O.R. VAT /Invoice Official Receipt INPUT VAT ON "P-2-A" p 1,044,224.73 X X X DOMESTIC "P-2-B" PURCHASE OF "P-2-C" 923,244.48 X X X X SERVICES "P-2-D" "P-2-E" 269.72 X X X FirJt Quarter "P-2-G" Advanced Contract "P-2-H" 670.74 X X X Solutions, Inc. "P-2-I" Advanced Contract "P-2-J" 272.03 X X X Solutions, Inc. DHL Express "P-2-K" 18,581.55 X X X (Philippines) Corp. DHLExpress 264.32 X X X X (Philippines) Corp. DHL Express 621.73 X X (Philippines) Corp. 4,977.05 X X X Eastwest Healthcare 1,993,126.35 Eastwest Healthcare Oakwood Premier Joy 40,634.92 X X X Nostalg Center Quantum Hotels and Resorts subtotal S e.-ond Quarter Advanced Contract Solutions, Inc. ~

DECISION CTA Case No. 8574 Advanced Contract "P-2-L" 923,244.48 X X X Solutions, Inc. "P-2-1-I" Advanced Contract "P-2-N" 923,244.48 X X Solutions, Inc. "P-2-0" Advanced Contract "P-2-P" 923,244.48 X X X Solutions, Inc. "P-2-Q" "\dvanced Contract 46,590.48 X X X I Solutions, Inc. "P-2-R" I Advanced Contract 22,939.08 X I Solutions, Inc. I Advanced Contract 923,244.48 X I Solutions, Inc. I Bay an 20,635.65 X ! Telecommunications, Inc. X6S X66 Digital Switchover, Inc. "P-2-S" 965.16 X X X ~ Stellar Global Solutions "P-2-V" 59,519.60 X X subtotal 3,884,262.81 Third Quarter Advanced Contract Solutions, Inc. "P-2-W'' 952,108.25 X Advanced Contract Solutions, Inc. "P-2-X" 1,887,678.11 X Eastern Works Marketing "P-2-Z" 1,504.82 X X X Sycip Salazar Hernandez & Gatmaitan "P-2-AA" 30,231.00 Sycip Salazar Hernandez & Gatmaitan "P-2-BB" 12,295.34 subtotal 2,883,817.52 Fourth Quarter "P-2-CC" 30,901.06 X X X Manabat Sanagustin & "P-2-DD" Co., CPAs 46,379.57 X X X Manabat Sanagustin & Co., CPAs subtotal 77,280.63 Total P8,838,487.31 AMORTIZATION "P-2-NN" p 160.71 (Dated outside the period of claim, September 28, 2011) OF CAPITAL GOODS "P-2-YY" 1,181.25 X X EXCEEDING 1M DEFERRED FROM "P-2-ZZ" 3,937.50 X X PRIOR QUARTERS "P-2- First Quarter CCC" 2,109.38 X Adept Corporation Com2, Inc. "P-2-PPP" 123.21 X X X X Com2, Inc. "P-2- QQQ" 177.68 X X X X Com2, Inc. "P-2- Oblation Trading XXX'' 892.36 X Oblation Trading 8,582.09 Vii Clad Marketing Corp. ---- JUbtotal -- 65 Supported by VAT Zero-Rated Official Receipt. 66 Supported by VAT Zero-Rated/Exempt Official Receipt.

DECISION CTA Case No. 8574 S el'ond Quarter 8,582.09 8,582.09 Third Quarter 8,582.09 p 34,328.36 Fourth Quarter P8,872,815.67 Total TOTAL DISALLOWED INPUT VAT PER THIS COURT'S FURTHER VERIFICATION Thus, out of the total input VAT claim of P1 0,163,064.25, only the amount ofP610,105.41 represents WPI's valid input VAT, computed as follows: Total Input VAT per Quarterly VAT Return P1 0,163,064.25 Less: Disallowances 680,143.16 Per !CPA's report 8,872,815.67 Per this Court's further verification Valid Input VAT p 610,105.41 Since WPI had no taxable sales/receipts subject to 12% VAT nor exempt sales but only zero-rated sales/receipts, the net substantiated input VAT of P610,105.41 can be attributed to the entire zero-rated sales/receipts declared in its Quarterly VAT Returns for the subject period amounting to P217,394,130.63. However, only the input VAT of P457,445.55 is attributable to the valid zero- rated sales/receipts of P162,998,026.20, computed as follows: Valid Excess Input VAT p 610,105.41 Multiply by Valid Zero-Rated Sales/Receipts X 162,998,026.20 Divide by Total Declared Zero-Rated Sales/Receipts 217,394,130.63 Input VAT Attributable to Valid Zero-Rated Sales/Receipts p 457,445.55 WPI reported no output VAT liability against which the input VAT claim may be applied or credited.67 Even though the claimed input VAT was carried over by WPI in its succeeding Quarterly VAT Returns68 from the first quarter of FY 2012 to the first quarter of FY 2013, the same remained unutilized until it was deducted in its Quarterly VAT Return for the first quarter ofFY 2011, as ''VAT Refund/TCC claimed" 69 from the total available input tax of P14,602,872.167/ 67 ld. at pp. 276-283, Exhibits "P-16-a" to "P-16-d". 68 /d. at Note 18, pp. 1021-1025, Exhibits "P-11-a" to "P-12-a". 69 ld. at p. 1025, Exhibit "P-12-a", line 230. 70 /d., Exhibit "P-12-a", line 22iliopp-.

DECISION CTA Case No. 8574 Tax refunds, being in the nature of tax exemptions, are construed in strictissimijuris against the taxpayer and liberally in favor of the government.71 The burden of claiming tax refund rests upon the taxpayer. In this case, petitioner was able to prove its entitlement to the claim for refund of its unutilized input VAT attributed to its zero-rated sales for FY ending March 31, 2011 in the reduced amount of P457,445.55. 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 the amount of P457,445.55 in favor of petitioner, representing WPI's unutilized excess input VAT attributable to its zero-rated sales/receipts for the four quarters of fiscal year ending March 31 , 2011. SO ORDERED. WE CONCUR: aA4. ~ ~ ' - MA. BELEN M. RINGPIS-LIBAN Associate 1ustice LOVE$. BAUTISTA Associate Justice .... ATTESTATION I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. LOVELj!'R. BAUTISTA A s s l ; t e 1ustice Chairperson 71 Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183531, March 25, 2015.

DECISION CTA Case No. 8574 CERTIFICATION Pursuant to Section 13 of Article VIII 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's Division. ~~~-~~-~ f(JANITO C. CASTANElfi;JR. Acting Presiding Justice