ACCENTURE INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY SECOND DIVISION ACCENTURE, INC. , C.T.A CASE NO. 7387 -versus- Petitioner, Members: CASTANEDA, JR., Chairperson UY, and PALANCA-ENRIQUEZ, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, JUN 0 3200y Respondent. ~ l:oV ,.IYI � X ------------------------------------------------------------------------------------ X DECISION PALANCA-ENRIQUEZ, J.: THE CASE This is a Petition for Review filed by Accenture, Inc. (hereafter "petitioner") praying for the refund or issuance of a tax credit certificate in the amount of P110,982,729.25, representing petitioner' s unutilized input value-added tax on domestic purchases of goods and services attributable to its zero-rated sale of services to its foreign clients for the period commencing from September I , 2003 until August 31 , 2004. ~

C.T.A. CASE NO. 7387 2 DECISION THE PARTIES Petitioner is a domestic corporation duly registered with the Securities and Exchange Commission, and existing under and by virtue of the Philippine laws, with principal office address at MSE Building, Ayala Avenue, Makati City. It is a value-added tax taxpayer duly registered as such with the Bureau of Internal Revenue (BIR), in accordance with Section 236 of the NIRC of 1997, as amended, with VAT Registration Certificate No. 000-845-543-000. As stated in its Articles of Incorporation, petitioner is primarily engaged in the business of providing management consulting and management information consulting services, including, but not limited to business integration, strategic services, change management services, systems integration, systems management, the development, sale and/or licensing of software, and the sale of hardware and related products, either as principal or agent. Respondent, on the other hand, 1s the duly appointed Commissioner of Internal Revenue vested with authority to act as such, including, inter alia, the power to decide, approve and grant claims for refund or tax credit of overpaid internal revenue taxes, as provided by law, with office address at the BIR National Office Building, Agh~

C .T.A. CASE N O . 7387 3 DECISION Road, Diliman, Quezon City, where she may be served with summons and other court processes. THE FACTS The facts of the case, as culled from the records, are as follows: During the period from September 1, 2003 to August 31, 2004, petitioner filed the fo llowing Monthly and Quarterly VAT Returns on these dates: Month Date Filed Exhibit September 2003 October 24, 2003 October 2003 November 20, 2003 l(D " November 2003 (1 st Quarter) December 22, 2003 December 2003 January 23, 2004 "E " January 2004 February 23, 2004 "F " February 2004 (2"d Quarter) March 23, 2004 "G" March 2004 April 26, 2004 "H " April 26, 2004 (Amended) "! " April2004 May 25,2004 "J" May 2004 (3rd Quarter) June 25, 2004 "K " July 27, 2004 (Amended) "L " June 2004 July 23, 2004 "M " July 29, 2004 (Amended) ''N '' July 2004 August 25, 2004 "0" August 2004 (4th Quarter) September 24, 2004 "P " ''Q " "R " During the four (4) quarters of the period, the Quarterly VAT Returns of petitioner showed the following: lst Quarter 2nd Quarter Ending November 30, 2003 Ending February 29, 2004 Domestic Purchases Amount Input VAT Amount Input VAT Capital Goods Goods other than Capital Goods 23 ,263,529.00 2,326,352.90 52,224,351.50 5,222,435 .15 Services 167, 134,485.50 16,713 ,448.55 123,380,097.40 12,338,009.74 Total Input VAT 58,699,932.10 5,869,993 .21 74,485,137.70 7,448,513 .77 24 ,909 ,794 .66 25 ,008,958.66 Zero-Rated Sales 824, 103 , 109.50 755 ,277,064.27 Total Sales 826, 136,102.44 ~c-;CU 914,601,199.66

C.T.A. CASE NO. 7387 4 DECISION 3rd Quarter 4th Quarter Endine May 31, 2004 Ending August 31, 2004 Domestic Purchases Amount Input VAT Amount Input VAT Capital Goods Goods other than Capital Goods 145,487,625.30 14,548,762.53 250,360,383.90 25,036,038.39 Services 36,414,585.90 3,641 ,458.59 0.00 Total Input VAT 143,242,393. 10 14,324,239.3 1 92,483 ,964.20 9,248,396.42 32,514,460.43 34,284,434.81 Zero-Rated Sales 927,429,478.44 1,362,639,5 42.45 Total Sales 937,802,579.94 I,3 73 ,736, I00.95 Thus, petitioner had a total zero-rated sales of P3,869,449,194.66 and paid a total input VAT ofP116,717,648.56, broken down as follows: Period Zero-rated Sales Input VAT 1st Quarter 824,103, 109.50 24 ,909, 794 .66 2nd Quarter 755 ,277,064.27 25 ,008,958.66 3rd Quarter 927,429,478.44 32,514,460.43 4th Quarter 34 ,2 84,434.81 Total Input VAT 1,362,63 9,542.45 116,717,648.56 3,869,449,194.66 On November 18, 2005, petitioner filed an administrative claim for refund or issuance of tax credit certificate of its unutilized input VAT credit on its domestic purchases of taxable goods, which are directly attributable to its zero-rated sales of services for the period in the total amount ofP110,982,729.25, computed as follows: Period Input VAT 1st Quarter 22,418 ,815.19 2nd Quarter 22,758,152.38 3rd Quarter 31,864,171.22 4th Quarter 33 ,941,590.46 Total Input VAT 110,982,729.25 (Exhibit "C '') I

C.T.A. CASE NO. 7387 5 DECISION For failure of respondent to act on petitioner's claim for refund, on December 20, 2005, petitioner elevated its case to this Court by way of a Petition for Review. On February 10, 2006, respondent filed her Answer alleging that the amount of Pl10,982,729.25 being claimed by petitioner, as alleged unutilized input VAT on domestic purchases of goods and services for the period commencing from 1 September 2003 until 31 August 2004, was not properly documented; petitioner must show that it has complied with the provisions of Sections 204(C) and 229 of the 1997 Tax Code on the prescriptive period for claiming tax refund/credit; and claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation, and as such, they are looked upon with disfavor. Petitioner presented Emmanuel Y. Mendoza, the Court- commissioned Independent CPA; Loida S. Samson, its Country Controller; and Leonardo M. Jose, its Tax and Statutory Specialist, as witnesses; and documentary evidence, marked as Exhibits "A " to "EEE ", inclusive of their submarkings. Except for Exhibits "SS-1353 ", "TT- 936 ", "TT-938 ", " IT-940 ", "TT-943 to "TT-951 ", "TT-953 " to "IT- 956 ", "TT-958 " to "TT-1325 ", -1~32 ", "TT-1334 " to ~

C.T.A. CASE NO. 7387 6 DECISION "TT-1344 ", "TT-1346 ", "TT-1347 ", "TT-1349", "TT-1351 ", "TT- 1352 ", "TT-1355 " to "TT-1361 ", "UU-2419 ", "UU-2423 ", "UU- 2428 ", "UU-2429", "UU-2434 ", "UU-2436", " UU-2439 ", "UU- 2448 ", "UU-2454 ", " UU-2456 ", "UU-2458 " to "UU-2460 ", "UU- 2463 ", "UU-2465 " to " UU-2471 ", "UU-2506 ", " VV-851 ", " VV-857 ", " VV-861 " and " VV-862 ", the Court admitted all the other exhibits in a Resolution dated January 2, 2008. Upon manifestation of counsel for respondent that he will not present any evidence, both parties were granted thirty (30) days from January 14, 2008 to file their simultaneous memoranda. Petitioner was granted an extension of thirty (30) days from February 13 , 2008 to file its memorandum. Both parties having filed their respective memoranda, the case was deemed submitted for decision on March 17, 2008. Hence, this decision. ISSUES As stipulated upon by the parties, the Issues for this Court's consideration are: I WHETHER OR NOT PETITIONER' S SALES OF GOODS AND SERVICES ARE ZERO-RATED FOR VAT~

C.T.A. CASE NO. 7387 7 DECISION PURPOSES UNDER SECTION 108(B)(2)(3) OF THE 1997 TAX CODE. II WHETHER OR NOT PETITIONER'S CLAIM FOR REFUND/TAX CREDIT IN THE AGGREGATE AMOUNT OF P110,982,729.22 (P110,982,729.25) AROSE FROM PETITIONER'S DOMESTIC PURCHASES OF GOODS WHICH ARE ATTRIBUTABLE TO ITS ZERO- RATED SALES DURING THE PERIOD COVERING 1 SEPTEMBER 2003 TO 31 AUGUST 2004. III WHETHER OR NOT PETITIONER HAS CARRIED OVER TO THE SUCCEEDING TAXABLE QUARTERS THE ALLEGED UNUTILIZED INPUT VAT PAID ON ITS DOMESTIC PURCHASES OF GOODS AND SERVICES FOR THE PERIOD COMMENCING FROM 1 SEPTEMBER 2003 UNTIL 31 AUGUST 2004, AND APPLIED THE SAME FULLY TO ITS OUTPUT VAT LIABILITY FOR THE SAID PERIOD. IV WHETHER OR NOT PETITIONER IS PAID FOR IN ACCEPTABLE FOREIGN CURRENCY WHERE PROCEEDS ARE INWARDLY REMITTED TO THE PHILIPPINES AND ACCOUNTED FOR IN ACCORDANCE WITH THE RULES AND REGULATIONS OF THE BSP. v WHETHER OR NOT PETITIONER IS ENTITLED TO v THE REFUND OF THE AMOUNT OF P110,982,729.25, REPRESENTING THE UNUTILIZED INPUT VAT ON DOMESTIC PURCHASES OF GOODS AND SERVICES FOR THE PERIOD COMMENCING FROM

C.T.A. CASE NO. 7387 8 DECISION SEPTEMBER 2003 TO 31 AUGUST 2004, FROM ITS SALES OF SERVICES TO VARIOUS FOREIGN CLIENTS. THE COURT'S RULING The petition is partly meritorious. The above issues boil down to the principal issue of whether or not petitioner is entitled to the refund or issuance of tax credit certificate in the amount of P110,982,729.25 representing alleged unutilized input VAT on domestic purchases of goods and services for the period September 1, 2003 to August 31, 2004. Records reveal that the subject claim in the amount of P110,982,729.25 represents petitioner's unutilized input value-added tax on domestic purchases of goods and services attributable to its zero-rated sales of services to its foreign clients for the period commencing from September 1, 2003 until August 31 , 2004. Petitioner anchors its claim on Section 112(A) ofthe NIRC of 1997, as amended, which provides, as follows: "SEC. 112. Refunds or Tax Credits ofInput Tax.- (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales,~

C.T.A. CASE NO. 7387 9 DECISION 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)(l), (2) and (B) and Section 108(B)(l) 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. xxx xxx. " Pursuant to the aforequoted provision, in order to be entitled to a refund or tax credit of unutilized input VAT paid, petitioner must prove the following: 1) there must be zero-rated or effectively zero-rated sales; 2) input taxes were incurred or paid; 3) such input taxes are directly attributable to zero-rated sales or effectively zero-rated sales; 4) the input taxes were not applied against any output VAT liability during and in the succeeding quarters; and 5) the claim for the refund was filed within the two-year prescriptive period.

C.T.A. CASE NO. 7387 10 DECISION As regards the first requisite, petitioner claims that the bulk of its sales is zero-rated, pursuant to Section 108(B)(2) of the NIRC of 1997, as amended, which provides, as follows: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease ofProperties. - 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. (2) Services other than those mentioned in the preceding paragraph, 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)." The Court finds that petitioner's sales of services are zero-rated, pursuant to the above provision because it renders management consulting and management information consulting services, including, but not limited to, business strategic services, change management services, systems integration, systems management, the development, sale and/or licensing of software, and the sale of hardware and related products, either as principal or agent, and other related business activiti~

C.T.A. CASE NO. 7387 11 DECISION to its various foreign clients, the considerations for which are paid for in accordance with the rules and regulations of the BSP. In support thereof, petitioner submitted its Schedule of Zero-Rated Sales - Local (Annex D of Exhibit "JJ'), Schedule of Billings and Remittances (Annex C of Exhibit "JJ'), Intercompany Payment Requests (Exhibits "WW-1" to "WW-1 1 '), Official Receipts (Exhibits "XX-1" to "XX- 11 '), Billing Statements (Exhibits "YY-1" to "Y-1 1'), Memo Invoices- Receivable (Exhibits "ZZ-1" to "ZZ-90''), Memo Invoices-Payable (Exhibits "AAA-1" to "AAA-73 '), Bank Statements (Exhibits "BBB-1'' to "BBB-11 ''), and presented the testimony of its Country Controller, Loida S. Samson (Exhibit "II'). After exammmg and verifying the documentary evidence presented, the Commissioned Independent CPA, Emmanuel Mendoza, noted that the zero-rated sales contained in the Intercompany Payment Requests (IPR) and General Ledger (GL) amounting to P4,612,647,486.92 are higher than the zero-rated and exempt sales indicated in petitioner's Quarterly VAT Returns by P581,841, 163.93. The difference noted is due to: (1) items included in the IPR as billing, but not reported in the Quarterly VAT Returns; and (2) the different forei~

C.T.A. CASE NO. 7387 12 DECISION exchange rates used. The pertinent portion of the report of the Commissioned Independent CPA reads as follows: "The difference noted is accounted as follows: Reconciling Items Annex Amount Items included in the IPR as billings but not reported in the Quarterly VAT Returns: C-1 P493,236 ,968 .29 Reimbursements of cost incurred C-2 3,178,452.67 Mark up Others C-3 6,562,200.90 P502,977,621.86 Amounts reported in the GL but not reported in the Quarterly VAT Returns D 93, 133,173 .00 Different foreign exchange rate used: 596,110,794.86 Per IPR (booking rate) Per VAT Returns (payment rate) C-4 4,016,536,692 .06 C-4 4,030,806,322 .99 (14,269,630.93) Total P581,841,163.93 The difference mainly represents amounts m the Intercompany Payment Requests and GL that were not reported in the Quarterly VAT Returns amounting to P596, 110,794.86. Also, we noted that the peso/dollar exchange rates used on US dollar denominated zero-rated sales as reported in the Schedule of Billings and Remittances were the exchange rates prevailing at the time the billing statements were issued to Accenture Participations B.V.; while the exchange rates used on the US dollar denominated sales as reported in the Quarterly VAT Returns were the exchange rates prevailing at the time collections were made." {Exhibit "JJ'') Furthermore, the Commissioned Independent CPA found that of the total zero-rated sales contained in the IPR and GL, only the amount of P4,519,514,313.92 was duly substantiated, as these sales were supported by zero-rated official receipts, billing statements, and memo mvmces

C.T.A. CASE NO. 7387 13 DECISION issued by petitioner. On the other hand, the amount of P93, 133, 173.00 in zero-rated sales has no supporting documents. Notwithstanding the above findings, the Commissioned Independent CPA found that the substantiated zero-rated sales contained in the IPR and GL in the amount ofP4,519,514,313.92 is still higher than petitioner's zero-rated sales, as reported in its Quarterly VAT Returns for the period commencing from September 1, 2003 to August 31, 2004. Since petitioner did not file an Amended VAT Return to reflect the zero- rated sales of P4,519,514,313.92, all of petitioner's zero-rated sales amounting to P3,869,449,194.66 reported in its Quarterly VAT Returns fall within those transactions referred to as subject to zero percent (0%) VAT, under Section 108(B)(2) ofthe NIRC of 1997, as amended. Hence, only the allowable input tax attributable to the zero-rated sales of P3,869,449, 194.66 can be the proper subject of a claim for refund. As to the second and third requisites, in determining whether or not petitioner paid input taxes on its purchases of goods and services in the amount ofP116,717,648.56, petitioner submitted a summary list of input VAT {Annexes A-1 to A-48 of Exhibit "JJ") claimed from first quarter to fourth quarter of 2004 and the related suppliers' invoices/official receipts (Exhibits "SS-1 " to "VV-864 '~, which were examined by the Commission~

C.T.A. CASE NO. 7387 14 DECISION Independent CPA. As correctly noted in his Report dated October 10, 2006 {Exhibit "JJ''), the Court finds that out of P116,717,648.56 in input taxes, the following input taxes amounting to P54,435,227.68 should be disallowed from petitioner's claim for the following reasons: Findings Reference (Annex Input VAT Total to Exhibit JJ) Input VAT on domestic purchases of services supported by documents other than ORs. 1st qtr A-3 P 1,882,370.65 2ndqtr A-16 1,094,443 .01 3rd qtr A-31 8,242 , 136.64 4th qtr A-42 6,579,061.42 P 17,798,011.72 2 Input VAT on domestic purchases of goods supported by documents other than sales invoices. lstqtr A-4 778, 119.03 2nd qtr A-17 59,686 .95 3rd qtr A-32 73,915 .76 4th qtr A-43 24 ,867 .89 936,589.63 3 Input VAT on domestic purchases of services supported by ORs with no BIR authority to print. I st qtr A-5 153,634.08 2nd qtr A-24 211 ,657 .90 3rd qtr A-35 1,282,260 .75 1,647,552.73 4 Input VAT on domestic purchases of services supported by sales invoices with no BIR authority to print. lstqtr A-6 2,089,551.37 2ndqtr A-18 771 ,557.31 3rd qtr A-33 2,259,230 .25 4th qtr A-44 425,590 .34 5,545 ,929.27 5 Input VAT on domestic purchases of services supported by ORs with preprinted "TIN" only. 2nd qtr A-25 6,930.00 6,930 .00 6 Input VAT on domestic purchases of goods supported by sales invoices with preprinted "TIN" only. 1st qtr A-9 4,950.00 4,950.00 7 Input VAT on domestic purchases of goods supported by sales invoices with stamped TIN. l st q t r A-10 112,745 .18 4th qtr A-45 87,359.24 200,I 04.42 8 Input VAT on domestic purchases of services supported by ORs with no TIN. 3rd qtr A-36 1,490.90 I ,490.90 9 Input VAT on domestic purchases of goods supported by sales invoices with no TIN. 2nd qtr A-19 132,267.48 132,267.48 10 Input VAT on domestic purchases of services supported by ORs with preprinted "TIN Non- VATINV" lstqtr A-7 45 ,866 .07 2nd qtr A-21 38 ,989 .53 3rd qtr A-34 8,612 .37 93,467.97 11 Input VAT on domestic purchases of goods supported by sales invoices with preprinted "TIN Non- VATINV" 1st qtr A-8 75,707 .27

C.T.A. CASE NO. 7387 15 DECISION 2nd qtr A-22 4,924 .72 87,834.99 3rd qtr A-47 7,203 .00 12 Input VAT on domestic purchases of services supported by photocopied ORs. 2nd qtr A-26 5,500 ,806 .76 3rdqtr A-38 616,899.37 6,117,706.13 13 Input VAT on domestic purchases of goods supported by photocopied /faxed sales invoices. lstqtr A-ll 2,960.73 2nd qtr A-27 I ,925 ,691.59 3rd qtr A-37 810 ,236 .76 4th qtr A-46 169,233.56 2,908, 122.64 14 Input VAT on domestic purchases of goods supported by sales invoices issued not under Company's name. 2nd qtr A-20 5,463 .63 5,463.63 15 Input VAT on domestic purchases of services supported by ORs with preprinted Non-VAT where the word "Non" was crossed out. 2nd qtr A-23 2,915 .00 2,915.00 16 Input VAT on domestic purchases of goods supported by sales invoices dated before the taxable year of claim. lstqtr A-12 2,665,917 .97 2,665,917.97 17 Input VAT on domestic purchases of goods and services with no supporting documents presented. 1st qtr A- 13 2,583,771.87 2nd qtr A-28 4,303,967 . 15 3rdqtr A-39 1,063, 128.86 4th qtr A-48 8,329, I05 .32 16,279,973 .20 TOTAL P 54,435,227.68 Only the input VAT of P62,282,420.88 (P116,717,648.56- P54,435 ,227.68) was properly substantiated, in accordance with the invoicing requirements prescribed under Sections 110(A) and 113(A) of the NIRC of 1997, as amended, and as implemented by Sections 4.104-1, 4.104-5 and 4.108-1 ofRevenue Regulations No. 7-95. Inasmuch as petitioner's input tax cannot be directly or entirely attributed to its zero-rated, taxable, and exempt sales; the refundable amount of input tax shall be allocated proportionately to its zero-rated sales on the basis of its volume of sales, as follows:

C.T.A. CASE NO. 7387 16 DECISION Period Zero-Rated Exempt VAT Sales Total Sales Substantiated Covered Sales Input Tax (B) (C) [D=(A+B+C)) 2004 (A) 90 ,498 ,090 . 16 914,601,199.66 (E) 1st Quarter 824,103,109 .50 70,859,038.17 I0,373, I01.50 826, 136, I02.44 14,514,200.44 2nd Quarter 755 ,277,064 .27 11 ,096,558.50 937, 802 ,579 .94 I 0 ,949,657 .64 3rd Quarter 927,429,478.44 161,357,128.33 21,469,660.00 1,373,736,100 .95 18, 156,548.76 4th Quarter I,362,639,542.45 4,052,2 75,982.99 18,662,0 14.04 3,869,449,194.66 62,282,420.88 Period Substantiated Input Tax Attributable to Total Covered Substantiated Zero-Rated Sales Exempt Sales VAT Sales Output VAT 2004 Input Tax 1st Quarter 2nd Quarter [(A/D) x (E)) [(BID) X (E)) ((C/D) x (E)) 3rd Quarter 13,078,047.26 1,436,153.18 4th Quarter I0,0 I0,487.68 939, 169.96 14,514,200.44 I 0,949 ,657 .64 17,955,7 17.87 200,830.89 18, 156,548.76 1,037,3 10.15 18,662,014.04 I, I09,655 .85 18,511 ,268.83 150,745.21 2,146,966.00 62,282,420.88 59,555,521.65 2,375,323.14 351,576.09 Since petitioner's input tax allocated to taxable sales amounting to P351,576.09 will not entirely cover its output tax liability of P2,146,966.00, petitioner still has to pay output tax in the amount of Pl,795,389.91, computed as follows: Output Tax 2 , 146,966.00 Less: Input Tax Allocated to VAT Sales 351,576.09 Output Tax Payable 1,795,389.91 In petitioner's Quarterly VAT Return for the first quarter of 2004, the excess input VAT carried over from the previous quarter (pertaining to the 4th quarter of 2003) amounts to P161 ,820,406.23 (Exhibit "F "), which can be claimed as tax credit against the current year output tax liability, in addition to the substantiated input VAT. However, the output tax payable of Pl,795,389.91 cannot be offset against its input tax carried-over from previous quarter in the amount of P161,820,406.23 Ql

C.T.A. CASE NO. 7387 17 DECISION because petitioner did not present VAT invoices or official receipts to prove the existence of that amount. Therefore, petitioner's output tax payable must be applied against its substantiated claimed input tax allocated to zero-rated sales, resulting to a refundable input tax of P57,760,131.74 only, computed as follows: Substantiated Input VAT allocated to zero-rated sales 59,555,521.65 Output VAT Payable 1,795,389.91 Refundable Input VAT attributable to zero-rated sales 57,760,131.74 Likewise, petitioner complied with the fourth requisite. Although petitioner carried-over the claimed input VAT of P110,982,729.25 (which included the amount ofP57, 760,131.74 as valid claim) to the succeeding four quarters of 2005 and the first quarter of 2006, as evidenced by its Quarterly VAT Returns for the first (Exhibit "V''), second (Annex E of CTA Case No. 7577), third (Annex F ofC.T.A. Case No. 7637) and fourth (Annex F of C.T.A. Case No. 7679) quarters of 2005 and first quarter of 2006 (Exhibit "EEE ''), the same was not applied against any output VAT for the said periods. Moreover, the same was deducted as "Any VAT Refund/TCC" claimed from the total available input tax of P358,621,638.68, as of the first quarter of 2006. In other words, the subject claim no longer formed part ofthe excess input VAT ofP241,671,616.93 as ofthe first quarter of

C.T.A. CASE NO. 7387 18 DECISION 2006, which was to be carried over/applied to the succeeding second quarter of 2006. As regards the fifth requisite, We rule that the claim for refund or tax credit certificate was filed within the two-year prescriptive period. The reckoning of the two-year prescriptive period for the filing of claim for VAT refund starts from the date of filing of the corresponding Quarterly VAT Return. The earliest quarter covered by the subject claim is the quarter ending November 30, 2003 , for which petitioner filed its VAT Return on December 22, 2003 (Exhibit "F''). Counting from this date, petitioner had until December 22, 2005, within which to file its claim administratively and judicially. Hence, the original administrative claim filed on November 18, 2005 and the Petition for Review filed on December 20, 2005 were both filed within the two-year prescriptive period. In sum, the Court finds that petitioner is entitled to a refund or issuance of a tax credit certificate, but in the reduced amount of P57,760,131.74 only, representing unutilized input VAT on domestic purchase of its goods and services for the period commencing from September 1, 2003 until August 31, 2004.

C.T.A. CASE NO. 7387 19 DECISION WHEREFORE, prem1ses considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED to REFUND or to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of FIFTY SEVEN MILLION SEVEN HUNDRED SIXTY THOUSAND ONE HUNDRED THIRTY ONE AND 74/100 PESOS (P57,760,131.74), representing unutilized input VAT on domestic purchase of its goods and services for the period commencing from September 1, 2003 until August 31 , 2004. SO ORDERED. ~LG~~QUEZ Associate Justice WE CONCUR: E~.UY Q.o-u�~ c.~ota, C)..,, Assoc1ate Justice fuANITO C. CASTANED:{: JR. Associate Justice

C.T.A. CASE NO. 7387 20 DECISION 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. ~~~ C2.a.Y-~~/~. CiuANITO C. CASTANEDA, JR. Associate Justice Chairperson, Second Division CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. t~ Q. a. ~ ERNESTO D. ACOSTA Presiding Justice