cta_decision CTA Case No. EB 2183EB 2183 2023-03-31

COMMISSIONER OF INTERNAL REVENUE v. MANULIFE DATA SERVICES, INC.,

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY ENBANC COMMISSIONER OF CTA EB NO. 2183 (CTA Case No. 9126) INTERNAL REVENUE, Petitioner, -versus- MANULIFE DATA SERVICES, INC., Respondent. X==============================X MANULIFE DATA SERVICES, CTA EB NO. 2191 INC., (CTA Case No. 9126) Petitioner, Members: -versus- DEL ROSARIO , PJ, UY, RINGPIS-LIBAN, MANAHAN , BACORRO-VILLENA, MODESTO-SAN PEDRO, REYES-FAJARDO , CUI-DAVID, and FERRER-FLORES, JJ. COMMISSIONER OF Promulgated: , I I h' �,n INTERNAL REVENUE, MAR 3 1 2023 Respondent, )(----------------------------- _,_-------- DECISION CUI-DAVID, J .: Before the Court En Bane are the Petitions for Review filed by the Commissioner of Internal Revenue ("CIR") 1 and Manulife ~ 1 Dated II December 20 19, received by the Court on 13 December 20 19; Rollo, CTA EB No. 2 183, pp. 5-14.

DECISION CTA EBNos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Internal Revenue Page 2 of26 X------------------------------------------------------------------------------------------X Data Services, Inc. ("MDSI")2 under Section 3(b), Rule 8,3 in relation to Section 2(a)(1), Rule 44 of the Revised Rules of the Court of Tax Appeals5 ("RRCTA"), assailing the Decision dated 5 July 20196 ("assailed Decision") and Resolution dated 7 November 20197 ("assailed Resolution") of the Court's Special Third Division ("Court in Division") in CTA Case No. 9126 entitled Manulife Data Services, Inc. v. Commissioneroflntemal Revenue. THE PARTIES The CIR 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 Bureau of Intemal Revenue ("BIR").B He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. On the other hand, MDSI is a Regional Operating Headquarters ("ROHQ") duly licensed by the Securities and Exchange Commission ("SEC") under SEC Certificate of Registration and License No. FS200603505, 9 issued on 3 March 2006. It is also registered with the BIR as a Value-Added Tax ("VAT") entity under Certificate of Registration No. OCN3RC0000421626 dated 9 March 2006.10 ~ 2 Dated 9 December 2019, received by the Court on 10 December 2019, Rollo, CTA EB No. 2191, pp. 9-21. 3 Section 3. Who !vfay Appeal; Period to File Petition.- (a) x x (b) A party adversely affected by a decision or resolution of a Division of the Court on a motion for reconsideration or new trial may appeal to the Court by filing before it a petition for review within fifteen days from receipt of a copy of the questioned decision or resolution. Upon proper motion and the payment of the full amount of the docket and other lawful fees and deposit for costs before the expiration of the reglementat)' period herein fixed, the Court may grant an additional period not exceeding fifteen days from the expiration of the original period within which to file the petition for review. 4 Section 2. Cases Within the Jurisdiction ofthe Court En Bane.- The Court en bane shall exercise exclusive appellate jurisdiction to review by appeal the following: (a) Decisions or resolutions on motions for reconsideration or new trial of the Court in Divisions in the exercise of its exclusive appellate jurisdiction over: (1) Cases arising from administrative agencies - Bureau of Internal Revenue, Bureau of Customs, Department of Finance, Department of Trade and Industry, Department of Agriculture. 5 A.M. No. 05-11-07-CTA. 6 Division Docket, Vol. 7, pp. 3183-3255; penned by Associate Justice Ma. Belen M. Ringpis-Liban, with Associate Justice Esperanza R. Pabon-Victorino, concurring. 7 !d., pp. 3290-3297. 8 Section 4, NIRC, as amended. 9 Exhibit "P-1", Division Docket, Vol. 4, p. 1735. 10 Exhibit "P-2-a", id., p. 1764.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Intemal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Intemal Revenue Page 6 of26 x------------------------------------------------------------------------------------------x On 13 December 2019, the CIR filed his Petition for Review. 22 On the other hand, MDSI filed a Motion for Extension of Time (Re: Filing of Petition for Review) on 4 December 2019,23 which was likewise granted in a Minute Resolution dated 6 December 2019.24 Accordingly, MDSI was given a final and non-extendible period of fifteen (15) days from 5 December 2019, or until20 December 2019, to file its Petition for Review. On 10 December 2019, MDSI filed its Petitionfor Review.2s On 16 December 2019, the Court issued a Minute Resolution consolidating CTA EB No. 2191 with CTA EB No. 2183.26 On 16 January 2020, the Court issued a Resolution ordering MDSI to submit the original true copy of the Assistant Secretary's Certificate.27 On 28 January 2020, MDSI filed a Motion for Comparison ofDocuments (Re: Resolution dated 16 January 2020),28 stating that it only has one (1) original copy of the Secretary's Certificate, which it will use for future tax refund claims. The Court granted MDSI's motion in its Resolution dated 2 March 2020. 29 The Commissioner's Report dated 13 March 2020 stated that the copy with the Court is a faithful reproduction of the original.3o In a Resolution dated 2 July 2020, both parties were directed to file their respective Comments.31 On 12 April2022, MDSI filed its Comment,32 while the CIR filed his Comment (Re: Petitioner (Manulife Data Services Inc.)'s Petition for Review) on 18 April2022.33 22 !d., pp. 5-13. ~ 23 /d., pp. 1-4. 24 !d., p. 8. 25 !d., pp. 9-18. 26 Rollo, CTA EB Case No. 2183, p. 100. 27 /d., pp. 102-104. 28 !d., pp. I 05-108. 29 !d., pp. 112-114. 30 !d., p. 115. )I !d., pp. 126-128. l2 /d., pp. 142-150. )) !d., pp. 152-156.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Intemal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Intemal Revenue Page 7 of26 x------------------------------------------------------------------------------------------x Thus, on 24 May 2022, this Court issued a Resolution submitting the consolidated Petitions for Review for decision.34 Hence, this Decision. ISSUES MDSI raised the following grounds for the allowance of its Petition for Review before the Court En Bane: Part of the disallowed zero-rated sales were sales made to The Manufacturers Life Insurance Company ("MLIC"), which amounted to !'1,390,561,832.34.40. This amount was disallowed because there was no SEC Certificate of Non- Registration of Company issued to MLIC. Without the SEC Certificate of Non-Registration, the Honorable Division did not consider MLIC a non-resident foreign corporation not doing business in the Philippines. The sales to MLIC were then excluded in the computation of the proper amount of input VAT refund. This Petition invites the Honorable Court en bane to revisit whether a SEC Certificate of Non-Registration should count as the sole proof that a foreign corporation is not doing business in the Philippines, disqualifying the taxpayer from proving, with competent evidence, that the nonresident service recipient is not doing business in the Philippines. On the other hand, the CIR forwards the following grounds in his Petition for Review: THE HONORABLE COURT A QUO ERRED IN RULING THAT RESPONDENT'S ALLEGED INPUT TAX ATTRIBUTABLE TO ITS ZERO-RATED SALES FOR THE PERIOD JANUARY 1, 2013 TO DECEMBER 31, 2013 REMAINED UNUTILIZED DESPITE BEING CARRIED OVER TO THE SUCCEEDING PERIODS. THE HONORABLE COURT A QUO ERRED IN RULING THAT RESPONDENT'S INPUT TAX IN THE AMOUNT OF !"1,305,567.11 IS DIRECTLY ATTRIBUTABLE TO ITS ALLEGED ZERO-RATED SALES. ~ 34 /d., pp. 159�160.

DECISION CTA EBNos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Intemal Revenue Page 8 of26 X------------------------------------------------------------------------------------------X MDSI's Petition for Review CTA EB No. 2191 MDSI'S ARGUMENTS MDSI contends that its sale to MLIC qualifies as a zero- rated transaction under Section 108 of the NIRC of 1997, as amended. It also contends that the consularized Letters Patent of Amalgamation issued by Canadian authorities proves that MLIC is a corporation duly registered and existing under the laws of a foreign jurisdiction.35 It avers that although at one point in time, MLIC established a branch locally,36 zero-rating also applies to sales to "a person engaged in business conducted outside the Philippines." It posits that the law does not ask whether the entity resides or is doing business in the Philippines; all that is required is that the entity is engaged in business outside the P h i l i p p i n e s . 37 Further, MDSI alleges that MLIC has filed with the Insurance Commission for the authority to close its Philippine business and withdraw its license.3B The CIR contends that MDSI failed to exhibit a SEC Certificate of Non-Registration of Company which would have satisfied the requirement that the service-recipient is not engaged in trade or business within the Philippines. He further contends that at one point in time, MLIC established a branch locally, the MLIC-PH and that it would seem that MLIC-PH still had business in the Philippines during the taxable year 2013, bolstered by the fact that MLIC-PH's withdrawal of license was only approved on January 7, 2013. Thus, the alleged dissolution process only started at such time or approximate time. ~ 35 MDS1's Petition for Review, par. 20, Rollo, CTA EB No. 2191, p. 15. 36 ld., par. 21, Rollo, id. 37 !d., par. 22, id. 38 ld., par. 23, id.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Intemal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Intemal Revenue Page 9 of26 x------------------------------------------------------------------------------------------x CIR's Petition for Review CTA EB No. 2183 CIR'S ARGUMENTS The CIR argues that MDSI failed to overcome the burden that the subject input tax being claimed remained unutilized or has not been applied against any output tax for the current and succeeding quarters. He points to MDSI's failure to present all the VAT returns for the taxable year 2015. He contends that it is erroneous for the Court in Division to rule that the input VAT is unutilized based solely on the first quarter VAT return for the taxable year 2015.39 The CIR likewise points to the use of the phrase "directly attributable" in Section 112 ofthe NIRC of 1997, as amended.4o He posits that the Court in Division erred in concluding that since respondent's reported sales were allegedly all zero-rated, the claimed input VAT is entirely attributable thereto. He suggests defining "directly attributable" as "arising from a particular source or cause."41 MDSI counters that under Section 110(B), attributable input taxes can be "refunded or credited ... subject to the provisions of Section 112; that it is the interrelation between Sections 110(B), 110(C), and 112 which requires a taxpayer to prove that it had deducted its claim from its accumulated excess input taxes; that since Section 110(C) requires a taxpayer to reduce its accumulated excess input taxes by the amount of its claim, the returns where the reduction is reported would be relevant; that it discharged this evidentiary obligation by presenting its Quarterly VAT Return for the First Quarter of 2015, where the deduction had been reported; that since MDSI reported the deduction of its entire claim in 2015 First Quarter return, the other returns would not bear a relation to the fact in issue; that if the returns for the second through fourth quarters of2015 would rebut MDSI's claim, it is the CIR's duty and burden to present them; and, that MDSI has no duty to anticipate and preempt all possible rebuttals. ~ 39 C!R's Petition for Review, p. 4, Rollo, CTA EB No. 2183, p. 8. 40 ld., p. 5, Rollo, CTA EB No. 2183, p. 9. 41 ld., p. 6, Rollo, CTA EB No. 2183, p. 10.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Intemal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Intemal Revenue Page 12 of26 x------------------------------------------------------------------------------------------x 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, 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): ... SEC. 108. Value-added Tax on Sale of Services and Use or Lease ofProperties. - (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. (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); .... The following essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%) under Section 108 (B) (2) above, to wit: 1. The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a non-resident person not engaged in business who is outside the Philippines when the services were performed;52 ~ 52 Site/ Philippines Corporation (Formerly Clientlogic Phi/s., Inc.) v. Commissioner of Internal Revenue, G.R. No. 201326, 8 February 2017; Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor

DECISION CTA EBNos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Internal Revenue Page 13 of26 x------------------------------------------------------------------------------------------x 2. The payment for such services were made in acceptable foreign currency accounted for in accordance with the Bangko Sentral ng Pilipinas (BSP) rules;S3 3. The services fall under any of the categories under Section 108 (B) (2),54 or simply, the services rendered should be other than "processing, manufacturing or repacking goods";ss and, 4. The services must be performed in the Philippines by a VAT-registered person.s6 MDSI argues57 in its Petition for Review that: 19. Section 108 (B) (2) qualifies an entity to zero-rating if the service-recipient is either a person engaged in business conducted outside the Philippines or a non resident person not engaged in business who is outside the Philippines when the services are performed. 20. During calendar year 2013, the period subject of this case, MDSI rendered services to MLIC, a foreign corporation incorporated and doing business in Canada. MDSI presented MLIC's consularized charter documents. The consularized Letters Patent of Amalgamation, issued by Canadian authorities, proves MLIC is a corporation duly registered and existing under the laws of a foreign jurisdiction. 21. At one point in time, MLIC established a branch locally, The Manufacturers Life Insurance Company- Philippine Branch (MLIC-PH). A view considers the establishment of a branch as grounds to regard MLIC as a resident or doing business in the Philippines .... 22. However, zero-rating also applies to sales to another category of service-recipient, "a person engaged in business conducted outside the Philippines." As worded, the law does not ask whether the entity resides or is doing business in the Philippines. All that is required is that the entity is "engaged in business conducted outside the Philippines." ~ Mindanao, Inc., G.R. No. 153205, 22 January 2007; Accenture, Inc. v. Commissioner of Internal Revenue, G.R. No. 190102, II July 2012. 53 Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., G.R. No. 153205, 22 January 2007; Commissioner of Internal Revenue v. American Express Intemationa/, Inc. (Philippine Branch}, G.R. No. 152609,29 June 2005. 54 Commissioner ofinternal Revenue v. American Express International, Inc. (Philippine Branch), supra. 55 Commissioner ofInternal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc.. supra. 56 Sec. I08 (B), NIRC of 1997, as amended. 57 Petition for Review, Rollo, CTA EB Case No. 2191, pp. 15 to 17.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Internal Revenue Page 15 of26 x------------------------------------------------------------------------------------------x Philippine business and withdraw its license. The application was approved by the Insurance Commission ... . 7. Based on the foregoing, it would seem that MLIC-PH still had business in the Philippines during the taxable year 2013. This is bolstered by the fact that MLIC-PH's withdrawal of license was only approved on 7 January 2013. Thus, the alleged dissolution process only started at such time or approximate time. 8. Furthermore, Section 52 of the NIRC of 1997, as amended, provides that a dissolving corporation has to submit with the Securities and Exchange Commission a certificate of tax clearance.... 9. In addition, Section 134 of the Revised Corporation Code of the Philippines provides that the dissolution of a corporation takes effect only upon the issuance of a certificate of dissolution.... 10. MLIC failed to secure a SEC Certificate of Non- Registration. This would most probably due to the reason that MLIC-PH was not yet issued a Certificate of Dissolution at such time and it was still considered as doing business in the Philippines. We find that MDSI failed to raise any new or substantial matter persuasive enough to disturb the Court in Division's findings in the assailed Decision and Resolution. The Court in Division correctly ruled in the assailed Decision 59 that to be considered as a non-resident foreign corporation ("NRFC") doing business outside the Philippines, the entity must be supported, at the very least, by both: (1) a SEC Certificate of Non-registration of Corporation /Partnership; and (2) a Certificate/Article of Foreign Incorporation/Association. Parenthetically, it must be emphasized that notwithstanding the said documents' presentation, there must be no indication that the recipient of the services is doing business in the Philippines. The Court in Division further held that: The said basic documents are necessary because the Philippine SEC's negative certification establishes that the recipient of the service has no registered business in ~ the Philippines; while the said certificate/articles of 59 Annex "A" of the Petition for Review, Rollo, CTA EB No. 2183, pp. 19 to 91; Annex "A" oftl1e Petition for Review, Rollo, CTA EB No. 2191, pp. 31-104.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Intemal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of lntemal Revenue Page 16 of26 x------------------------------------------------------------------------------------------x incorporation/ association will prove that the said recipient of the service is indeed a non-resident foreign entity. Furthermore, the former document will tend to satisfy the requirement that the service-recipient is not engaged in trade or business within the Philippines; while the latter document will indicate whether the same service-recipient is engaged in business at all (i.e., a showing of a continuity of conduct and intention to establish a continuous business). [Emphasis supplied] MDSI reiterated in the instant case its arguments before the Court in Division that the consularized Letters Patent of Amalgamation issued by Canadian authorities proves that MLIC is a corporation duly registered and existing under the laws of a foreign jurisdiction; that at one point in time, MLIC established a branch locally, the MLIC-PH; that a view considers the establishment of a branch as grounds to regard MLIC as a resident or doing business in the Philippines; however, zero-rating also applies to sales to another category of service-recipient, " a person engaged in business conducted outside the Philippines;" that as worded, the law does not ask whether the entity resides or is doing business in the Philippines and all that is required is that the entity is "engaged in business conducted outside the Philippines".60 In addition, MDSI asserts61 that: 30. The view that enshrines the Certificate alone as determinative of the character of the service recipient elevates an evidentiary rule over a substantive rule by essentially requiring a taxpayer to possess a specific kind of evidence - and by fiat excluding all other kinds of evidence otherwise relevant. But rules of procedural [sic] cannot impair substantive rights. The arguments do not impress. As correctly found by the Court in Division in the assailed Resolution, the consularized Letters Patent of Amalgamation merely proves that MLIC is a foreign corporation. Such does not prove whether MLIC is not doing business in the Philippines, which is another requirement to qualify for zero- rating under Section 108(B)(2) of the NIRC of 1997, as amended. ~ 60 Annex "'B" of the Petition for Review in CTA EB No. 2191 (CTA Case No. 9126), Motion for Reconsideration, pars. 6 to 8, pp. 106 to 107; pars. 20 to 22 of the Petition for Review, CTA EB No. 2191, p. 15. 61 Petition for Review, CTA EB No. 2191 (CTA Case No. 9126), par. 30, p. 17.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Internal Revenue xP-a-g-e---1-7--o--f-2--6----------------------------------------------------------------------------x In Commissioner of Internal Revenue v. Macquarie Offshore Services Pty., Ltd. (Macquarie),62 the Supreme Court emphasized that for the sale of services to qualify for zero- rating, it must be established that the recipient of the services is not only a foreign corporation but must also be a non- resident corporation or one that is not engaged in trade or business in the Philippines. Accordingly, to argue that it is sufficient to prove that a foreign corporation is engaged in business conducted outside the Philippines without proving that the foreign corporation is not doing business in the Philippines is flawed. In Macquarie, the Supreme Court underscored that there is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. 63 The evidence necessary and sufficient shall be judged in every case depending on its own peculiar surrounding circumstances.64 The Court expounded, to wit: There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. We ruled thus in Commissioner of Internal Revenue v. British Overseas Ainuays Corporation: x x x. There is no specific criterion as to what constitutes or "transacting" business. Each case "doing" or "engaging in" light of its peculiar environmental must be judged in the circumstances. The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some of the functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization. "In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character." [Emphasis and underscoring supplied, citations omitted] ~ 62 G.R. No. 225169 (Notice), 6 October 2021, citing the cases of Commissioner ofInternal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra, Accenture, Inc. v. Commissioner of Internal Revenue, supra, Site/ Phils. Corp. v. Commissioner ofInternal Revenue, supra. 6) !d. 64 /d.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Internal Revenue Page 19 of26 x------------------------------------------------------------------------------------------x As emphasized in Deutsche and Macquarie cases, there must be sufficient proof of the two components of a client's NRFC status, viz.: (1) that their client was established under the laws of a country not the Philippines or, is not a domestic corporation; and (2) that it is not engaged in trade or business in the Philippines. There is no specific criterion as to what constitutes "doing" or "engaging in" or "transacting" business. However, We have consistently held that to be considered as an NRFC doing business outside the Philippines, each entity must be supported, at the very least, by both SEC Certificate of Non-Registration of Corporation/Partnership and proof of incorporation, association, or registration in a foreign country (i.e., certificate/ article of foreign incorporation, association, or registration). 66 MDSI failed to discharge this burden. It tried to prove that MLIC is no longer doing business in the Philippines by exhibiting MLIC-PH's letter with the Insurance Commission for the authority to close Philippine business and withdraw the license. This is insufficient. A SEC Certificate of Non-Registration of Corporation /Partnership establishes that an entity is not doing business in the Philippines. The filing with the Insurance Commission of an application for authority to close business merely evidences that MLIC-PH no longer intends to continue with a specific business in the Philippines. However, this Court cannot simply assume that this intention (1) has been realized by withdrawing its license or (2) includes all aspects of MLIC's business to constitute non-registration. As alleged by the CIR, MLIC's failure to secure the SEC Certificate of Non-Registration was probably because MLIC-PH had not yet been issued a Certificate of Dissolution at that time, and it was still considered as doing business in the Philippines. Nonetheless, as a rule, in the absence of evidence; this Court cannot make assumptions when other possibilities are equally plausible. MDSI's failure to sufficiently prove that rf MLIC is not engaged in trade or business in the Philippines is fatal to its claim. 66 Maxima Machineries, Inc. Ovv.f.fCsChooomrmemmSisiessrsivoiiocnneeser,roPoftyIf.nItnLettrden.ranvla. lRCeRovmeevnmeuniesus.eiCo, nTCeATr AoEfBiEnNBteorN.n2oa4.l 8R25e5v3(eC3nTu(AeC,TCCAaTsAeCEaNsBoe.NN9o8o.3.2849)38, 10225()C,JTullAOy 2022; Ibex Philippines, Inc. November 2022; Macquarie Case No. 9722), 25 January 2023.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Internal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Internal Revenue Page 22 of26 x------------------------------------------------------------------------------------------x This issue has been repeatedly raised and has long been settled. We have consistently held73 that Section 112 (A) of the NIRC of 1997, as amended, does not require that input taxes be directly attributable to the zero-rated sales of the claimant and only requires that the input taxes be attributable to the zero-rated sales. Nothing in the provision states that the input tax needs to be directly attributable or a factor in the chain of production to the zero-rated sale for it to be creditable or refundable. The aforementioned provision allows as a tax credit an allocable portion of a taxpayer's input tax that is not directly and entirely attributable to the zero-rated sales. 74 Input taxes, whether directly or indirectly attributable to the claimant's zero-rated sales, may be the subject of a refund under Section 112 (A) 75 of the NIRC of 1997, as amended. Where the law does not distinguish, neither should we. Section 112 (A) of the NIRC of 1997, as amended, recognizes the situation wherein a claimant's input tax is not directly and entirely attributable to its zero-rated sales by allowing the proportionate allocation of the input taxes based on the total volume of sales. 76 In another case,77 We likewise held: "The CIR's insistence that "to be creditable, the input tax must come from purchases of goods that form part of the finished product of the taxpayer or it must be directly used in tJ! the chain of production" is not entirely consistent with the 73 Commissioner of Internal Revenue v. Carmen Copper Corp., CTA EB Case Nos. 2480 & 2515 (CTA Case No. 10016). 10 January 2023. Revenue v. Deutsche Knowledge Services Pte. Ltd, CTA EB Case No. 2082 (CTA Case 74 Commissioner of Internal No. 9496), 21 July 2020. 75 SEC. 112. Refunds or Tax Credits of Input Tax.- (zitfioeossAnrsoeahfaffsrrf)lantuteoecehhlZsiac-srlegeirnetettanibicdrchBvotoaeeeaicenas-tdtularaaeonyaarllbgfmolrtrzleokieeafenaednocypzztraciaoe,eouSnytrxrret-ewpooredEntcu--aaixtrrftrxttrpcahfaeea,ehtrttidldeencaotaodidtnxPnsittgvgtwasoucdhealernPeoeeulltdyreipieelta(oseiriZx2nprofnou)tieidcSarencnreytnedaoaapeeecttes-ldlaaetrstryii(sarhoodBoSstaotenrSehitancdncePsfrlatt0ueSrtti)neehoafc8:ranounhxe(PotlfBnahrieblthdbno)0easablpv6(soed.cu6ei(i-fldsAt)obodA.cetreso)airtdne(erhxfee2.eynedxto)chfhVi(edifutateanlmuasArty)phltbv(ynpuThelaloot)tee-anl.ttrstrucaidae(.abncxm2xgleToapee)eieesbunshuanotlntoenatesiftardfhtrteegpqaeadswd(poxulalbyllofahlpi)doerbdeeeastrauedsrret.nseeitroaoandProtlginwfrlhaSboar,ophceueivcwprcnectaiotonasdehttaiptrieedooxddtodedshnpaeurt,earnotat1aftispcyis0tteaaneaurae8slnaibtelrwbelol(ystlysBiauyirsaxott,)wrbhsae:(neTeenbeIPettrz)hhrglwvreeeeoaoaairetncfvgomtreoeduife-tndoasrhld(saedre.eh2utsdeaieai)nct,,sn,adrhphandatzzoheopdneserretwarpsrshroeloaaoleeeef-ycc�nvgfrsrcetaae,uafimectrmoleotep,taexairndttTovdkcaisteouahebi.holnnnpnalyieegdsrtttt non-zero-rated sales." v. Commissioner of I~ternal Revenue, G.R. No. 188260, l3 November 2013, 721 SCRA 202� 76 Luzon Hydro Corp. 217. Knowledge Services Pte. Ltd. v. Commissioner ofInternal Revenue, CTA EB Case Nos. 1917 & 1919 (CTA 77 Deutsche Case No. 9079), 5 February 2020.

DECISION CTA EB Nos. 2183 and 2191 (CTA Case No. 9126) Commissioner of Intemal Revenue v. Manulife Data Services, Inc. and Manulife Data Services, Inc. v. Commissioner of Intemal Revenue Page 23 of26 x------------------------------------------------------------------------------------------x above-quoted Section 110. This is so because the said provision, as clearly stated, did not limit itself to purchases or importation of goods which are to be converted into or intended to form part of a finished product for sale, or to be used in the chain of production; but also includes, inter alia, purchases or importation of goods for use as supplies in the course of business, or for use in trade or business for which deduction for depreciation or amortization is allowed; as well as purchase of services for which VAT has been actually paid. Accordingly, provided that the subject input tax is evidenced by a VAT invoice or official receipt issued in accordance with Section 113 of the NIRC of 1997, as amended, the same may be creditable against the output VAT. We likewise do not find merit in the CIR's allegation that for an input tax to be attributable to zero-rated sales, it must be shown that "the connection between the purchases and finished product is 'concrete' and not 'imaginary' or 'remote'." Based from the foregoing, creditable input taxes which cannot be directly or entirely attributable to any sale transaction (i.e., zero-rated or effectively zero-rated sale and taxable or exempt sale of goods of properties or services), shall be allocated proportionally on the basis of the volume of sales. Evidently, contrary to the CIR's allegation, the attribution of the input VAT to the zero-rated sales need not always be direct. Moreover, the word "attribute," the adjective form of which is "attributable," is defined as "to explain as to cause or origin," or simply, to "ascribe." Thus, when Section 112(A) of the NIRC of 1997, as amended, states that the input VAT must be attributable to the zero-rated or effectively zero-rated sales, it simply means that the input VAT must be regarded as being caused by such sales....... In his Petition, the CIR cites the 200778 and 201179 cases of Atlas Consolidated Mining and Development Corp. v. Commissioner ofInternal Revenue (Atlas cases). We find CIR's reliance in these cases misplaced. I 78 G.R. Nos. 141104 & 148763, 8 June 2007, 551 SCRA 519-567. 79 G.R. No. 159471,26 January 2011,655 SCRA 499-512.

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