GENERAL MOTORS AUTOMOBILES PHILIPPINES, INC. v. COMMISSIONER OF INTERNAL REVENUE

Republic of the Philippines COURT OF TAX APPEALS Quezon City SECOND DIVISION GENERAL MOTORS CTA Case No. 8976 AUTOMOBILES PHILIPPINES, INC., Members: Petitioner, CASTANEDA, JR., Chairperson, -versus- and CASANOVA, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, DEC 0 2 2016 ~ Respondent. 17 '1:~1 �"" . x------------------------------------------------------------------------------ ---x DECISION CASANOVA, J.: This Petition for Review, filed by petitioner General Motors Automobiles Philippines, Inc., against respondent Commissioner of Internal Revenue, seeks for a refund in the amount of P4,125,403.72, representing its alleged excess and/or unutilized input value-added tax (VAT) for calendar year (CY) 2012. 1 The factual antecedents of the case are as follow: Petitioner is a corporation duly organized and existing under Philippine laws, with principal office at 37/F LKG Tower, 6801 Ayala Avenue, Makati City. 2 It is a registered taxpayer under Certificate of Registration No. OCN 9RC00003705353 issued on October 15, 1996. Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), who is empowered to perform, amonk 1 Paragraph I, Pre-Trial Order dated July 6, 2015, Docket, p. 392 2 Paragraph I (1.1), Joint Stipulation of Facts and Issue (JSFI), Docket, p. 383 3 Exhibit"P-1"

DECISION CTA CASE NO. 8976 others, the duty to act on and approve claims for refund or the issuance of tax credit certificate. He is represented by his counsel from the Legal Division, BIR Revenue Region 8 (Makati City) with office address at the 2/F BIR Building, 313, Sen. Gill Puyat Avenue, Makati City.4 Petitioner entered into several service agreements with non- resident foreign corporations. 5 Petitioner filed its Pt, 2nd, 3rd, and 4th Quarterly VAT Returns for CY 2012 on April 23, 20126, July 25, 20127, October 22, 20128, and January 23, 20139, respectively. Subsequently, the 1st, 2nd, and 3rd Quarterly VAT Returns for CY 2012 were all amended by petitioner on March 4, 2013; 10 and the 4th Quarterly VAT Returns for CY 2012 was amended on January 24, 2013. 11 On March 31, 2014, petitioner filed its administrative claim together with the supporting documents for a refund of its unutilized input VAT in the amount of P4,125,403.72, covering the four (4) quarters of CY 2012. 12 Thereafter, petitioner submitted additional supporting documents on August 27, 2014. 13 Due to the inaction of respondent on petitioner's administrative claim for refund, the latter filed this Petition for Review14 on January 26, 2015. Respondent interposed the following special and affirmative defenses in the Answer15, filed through registered mail on March 20, 2015: "6. Respondent reproduces and repleads all the foregoing allegations insofar as they are relevant to her defenses which are discussed hereunder anct_ 4 Paragraphs I (1.2) and I (1.3), JSFI, Docket, p. 384 5 Exhibits "P-5", "P-6", "P-9", "P-10", and "P-11", "P-53-B", "P-55-B", "P-57-B", and "P-59-B" 6 Exhibit "P-40" 7 Exhibit "P-42" s Exhibit "P-44" 9 Exhibit "P-46" 10 Exhibits "P-31", "P-32", and "P-33" 11 Exhibit "P-34" 12 Exhibits "P-2" and "P3" 13 Exhibit "P-4" 14 Docket, pp. 7-26 15 Docket, pp. 141-144

DECISION CTA CASE NO. 8976 incorporates them herein by way of reference and, in addition thereto, most respectfully avers THAT: 7. Petitioner's alleged claim for issuance of tax credit certificate is still subject to administrative routinary investigation/examination by the respondent's Bureau. 8. Taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable. 9. Petitioner's claim for refund or issuance of tax credit certificate in the amount of Php4, 125,403.72, allegedly representing excess and unutilized input VAT credits were not fully substantiated by proper documents, such as sales invoices, official receipts and others pursuant to Revenue Regulations No. 7- 95 in relation to Section 113 and 237 of the 1997 Tax Code. 10. In an action for refund/credit, the burden of proof is on the petitioner to establish its right to claimed refund and failure to adduce sufficient proof is fatal to the claim for tax refund/credit. 11. Petitioner failed to comply with the conditions/requirements under Section 112(A)(B)(C) of the 1997 Tax Code. 12. It is incumbent upon the petitioner to show that it has complied with the provisions under Section 204 (c) in relation to Section 229 of the Tax Code. Otherwise, its failure to prove the same is fatal to its claim for refund. 13. Claims for refund are construed strictly against herein petitioner since the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor ( Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211). ~

DECISION CfA CASE NO. 8976 On April 15, 2015, the Court received petitioner's Reply16 to the Answer. Petitioner filed its Pre-Trial Brief17 on May 11, 2015, while the Pre-Trial Brief (for the Respondent)18 was submitted, through registered mail, on May 7, 2015. On May 11, 2015, petitioner moved for the commissioning of Independent Certified Public Accountant (!CPA), 19 which the Court granted on June 25, 2015. 20 Consequently, Mr. Glenn Ian D. Villanueva of Reyes Tacandong & Co. was commissioned as ICPA.21 The parties, thereafter, submitted their Joint Stipulation of Facts and Issue22 on July 1, 2015. As such, the Court issued a Pre-Trial Order23 on July 6, 2015, and terminated the pre-trial. As trial ensued, petitioner presented its witnesses, namely: Ms. Modesty N. Alcala and Mr. Glenn Ian D. Villanueva. Thereafter, petitioner formally offered its documentary exhibits, which the Court admitted on November 12, 2015.24 On the other hand, respondent's counsel manifested during the hearing on December 2, 2015, that this case has no report of investigation and that he has no witness to present. 25 Thus, considering the petitioner's Memorandum26 filed on January 4, 2016, and the Report27 of the Records Division dated January 12, 2016 that no memorandum has been filed by the respondent, the Court considered this case submitted for decision on ! January 18, 2016.2 16 Docket, pp. 148-160 17 Docket, pp. 162-185 18 Docket, pp. 360-361 19 Motion for Commissioning of Independent Certified Public Accountant, Docket, pp. 186-189 20 Minutes of the Hearing dated June 25, 2015, Docket, p. 370 21 Docket, p. 371 22 Docket, pp. 383-390 23 Docket, pp. 392-398 24 Resolution, Docket, pp. 519-520 25 Minutes of the Hearing, Docket, p. 521 26 Docket, pp. 522-547 27 Docket, p. 548 28 Resolution, Docket, p. 549

DECISION CTA CASE NO. 8976 The parties stipulated that the sole issue to be resolved by this Court is whether petitioner is entitled to a tax refund in the amount of P4,125,403.72 representing its unutilized input VAT credits attributable to its zero-rated sales of services to its foreign affiliates for CY 2012. 29 Petitioner anchors its claim on Section 108(8)(2), in relation to Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, viz. "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate.- The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0�/o) rate. XXX XXX XXX (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 Sentra/ ng Pilipinas(BSP);" "SEC. 112. Refunds or Tax Credits of Input Tax. (A) Zero-Ratedor Effectively Zero-RatedSales. - 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&-- 29 Paragraph II, JSFI, Docket, p. 384

DECISION CTA CASE NO. 8976 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(8)(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 Sentra/ 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, finally, That for a person making sales that are zero-rated under Section 108(8)(6), the input taxes shall be allocated ratably between his zero-rated and nonzero- rated sales." Based on the foregoing provisions, in order to be entitled to a tax credit certificate/refund of excess input VAT attributable to zero- rated or effectively zero-rated sales, the following requisites must be complied with: 1. that the taxpayer is VAT-registered; 2. that the claim for refund was filed within the two- year prescriptive period; 3. there must be zero-rated or effectively zero-rated sales; 4. that input taxes were incurred or paid 5. that such input taxes are attributable to zero-rated or effectively zero-rated sales; and 6. that the input taxes were not applied against any output VAT liability. Anent the first requisite, petitioner's Certificate of Registration No. OCN 9RC0000370535 dated October 15, 1996 shows that it is a VAT-registered entity.30 As regards the second requisite, the administrative claim for refund may be filed, pursuant to Section 112(A) of the NIRC of 1997,e!'- 30 Exhibit "P-1"

DECISION CTA CASE NO. 8976 as amended, within two years after the close of the taxable quarter when the sales were made. Then, the Commissioner of Internal Revenue (CIR) has 120 days from the date of the submission of the complete documents in support of the application for tax refund/credit within which to grant or deny the claim, in accordance with Section 112(C) of the same Code. Section 112(C) of the NIRC of 1997, as amended, is hereunder quoted for easy reference: "(C) Period within which Refund or Tax Credit ofInput Taxes shall be Made. -In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty {120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty {30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." (Emphasis Supplied) Taking into consideration the foregoing provisions, petitioner has timely filed its claim for refund both in the administrative and judicial levels, as illustrated below: Period Close of the Last day of Date of Submission Last day Last day Judicial Covered taxable the 2-year Administrative of of the of the Claim (CY 2012) quarter prescriptive 30-day period to file Claim Supporting 120-day 1st Quarter 31-Mar-12 administrative Documents period period to 2nd Quarter 30-Jun-12 31-Mar-1431 judicially 3rd Quarter 30-Sep-12 claim 27-Aug-14 32 25-Dec-14 4th Quarter 31-Dec-12 appeal 31-Mar-14 24-Jan-15 26-Jan-15 33 30-Jun-14 30-Sep-14 31-Dec-14 With regard to the third requisite, petitioner alleges that its sales of services to its affiliates for the first, second, third and fourth quarters of CY 2012 are zero-rated.&- 31 Exhibits "P-2" and "P-3" 32 Exhibit "P-4" 33 January 24, 2015 fell on a Saturday

DECISION CTA CASE NO. 8976 In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandivanian Contractor Mindanao, Inc.34, the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 102(8)(2) [now Section 108(8)(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 regulation; and 3. The recipient of such services must be doing business outside the Philippines. By virtue of the Service Agreements35 presented by petitioner, the same has proven that it rendered services to its affiliates, including, among others, consultancy and administrative services. As such, the said services rendered are not in the same category as processing, manufacturing or repacking of goods. Accordingly, petitioner has complied with the first requisite. In compliance with the third requisite, petitioner has offered in evidence the following documents proving that its clients are non- resident foreign corporations doing business outside the Philippines: i. Chevrolet Sales (Thailand) Ltd. ;;... Certification ofNon-Registration ofCompany issued by the Securities and Exchange Commission (SEC), March 16, 2015 36 - This document confirms that Chevrolet Sales (Thailand) Ltd. is neither registered in the Philippines as corporation nor as a partnership.a, 34 G.R. No. 153205, January 22, 2007, 512 SCRA 124 35 Exhibits "P-53-B", "P-55-B", "P-57-B", "P-59-B", "P-10", and "P-11" 36 Exhibit "P-53-A"

DECISION CTA CASE NO. 8976 >- Consularized Certificate of Residence of Chevrolet Sales (Thailand) Ltd. authenticatedby the Philippine Embassy on June 1;; 201537 - Based on this document, Chevrolet Sales (Thailand) Ltd. is a resident of Thailand since 1999 and has already filed the income tax return for the taxable year 2012. >- Consularized Certificate of Registration of Chevrolet Sales {Thailand) Ltd. authenticatedby the Philippine Embassy on March 3~ 2015 38 - This document states that Chevrolet Sales (Thailand) Ltd. is registered as a Limited Company since July 16, 1999 as certified by the Department of Business Development Ministry of Commerce in Thailand. ii. General Motors (Thailand) Limited >- Certification ofNon-Registration ofCompany issued by the SE4 March 1;; 2015 39 - This document confirms that General Motors {Thailand) Limited is neither registered in the Philippines as corporation nor as a partnership. >- Consularized Certificate of Residence of General Motors {Thailand) Limitedauthenticatedby the Philippine Embassy on June 1;; 2015 40 - Based on this document, General Motors {Thailand) Limited is a resident of Thailand since 1992 and has already filed the income tax return for the taxable year 2012. >- Consularized Certificate of Registration of General Motors (Thailand) Limitedauthenticatedby the Philippine Embassy on March 3~ 2015 41 - This document states that General Motors {Thailand) Limited is registered as a Limited Company since June 8, 1992 as certified by the Department of Business Development Ministry of Commerce in Thailand. iii. General Motors Global Service Operations, Inc.o... 37 Exhibit "P-52" 38 Exhibit "P-53" 39 Exhibit "P-55-A" 40 Exhibit "P-54" 41 Exhibit "P-55"

DECISION CfA CASE NO. 8976 >- Certification ofNon-Registration ofCompany issued by the SE4 March 1~ 2015 42 - This document confirms that General Motors Global Service Operations, Inc. is neither registered in the Philippines as corporation nor as a partnership. >- Original Certificate of Residence of General Motors Global Service Operation~ Inc. issued by the Department of the Treasury Internal Revenue Service in Philadelphia/ PA/ April 2/ 2012 43 - Based on this document, General Motors Global Service Operations, Inc. is a U.S. Corporation and a resident of the United States of America for purposes of U.S. Taxation. >- Consularized Certificate ofIncorporation ofGeneral Motors Global Service Operation~ Inc. authenticated by the Philippine Embassy on March 13, 201544 -This document states that General Motors Global Service Operations, Inc. is duly incorporated under the Laws of the United States of Delaware and is in good standing and has a legal corporate existence since December 20, 2006. iv. Onstar, LLC. >- Certification ofNon-Registration ofCompany issued by the SE4 March 1~ 2015 45 - This document confirms that Onstar LLC is neither registered in the Philippines as corporation nor as a partnership. >- Original Certificate of Residence of Onstar, LLC issued by the Department of the Treasury Internal Revenue Service in Philadelphia/ PA/ February 2~ 2012 46 - Based on this document, Onstar LLC is a Limited Liability Corporation which is a branch, division, or business unit of a U.S. Corporation that is a resident of the United States of America for purposes of U.S. Taxation._c.;;L 42 Exhibit "P-57-A" 43 Exhibit "P-56" 44 Exhibit "P-57" 45 Exhibit "P-59-A" 46 Exhibit "P-58"

DECISION CTA CASE NO. 8976 ~ Consularized Certificate of Incorporation of Onstar, LLC authenticated by the Philippine Embassy on March 13, 2015 47 - Based on this document, the corporation was formed on December 7, 1999 under the name Onstar Corporation which is under the jurisdiction of the State of Delaware of the United States of America. The corporation was then converted to a Limited Liability Company on November 25, 2008, which it was named as Onstar, LLC. v. General Motors Holdings LLC I General Motors North America I Customer Care and Aftersales ~ Certification ofNon-Registration ofCompany issued by the SEC, April 14, 2015 48 - This document confirms that General Motors Holdings LLC is neither registered in the Philippines as corporation nor as a partnership. ~ Certification ofNon-Registration ofCompany issued by the SEC, March 17, 2015 49 - This document confirms that General Motors North America is neither registered in the Philippines as corporation nor as a partnership. ~ Certification ofNon-Registration ofCompany issued by the SEC, ApnJ 1~ 2015 50 - This document confirms that Customer Care and Aftersales is neither registered in the Philippines as corporation nor as a partnership. ~ Original Certificate of Residence of General Motors Holdings LLC, Inc. issued by the Department of the Treasury Internal Revenue Service in Philadelphia, PA, April 9, 2012 51 - Based on this document, General Motors Holdings LLC is a Limited Liability Corporation which is a branch, division, or business unit of a U.S. Corporation that is a resident of the United States of America for purposes of U.S. Taxation. ~ 47 Exhibit "P-59" 48 Exhibit "P-61-A" 49 Exhibit "P-61-B" 50 Exhibit "P-61-C" 51 Exhibit "P-60"

DECISION CTA CASE NO. 8976 ~ Consularized Certificate of Formation of General Motors Holdings LLC authenticated by the Philippine Embassy on May 28, 2015 52 - Based on this document, General Motors Holdings LLC was incorporated on August 11, 2009 under the laws of the State of Delaware. In the Judicial Affidavit53 of Ms. Modesty N. Alcala, petitioner's Finance Manager, she manifested that Customer Care and Aftersales is only a division of General Motors North America, an operating segment of General Motors Holdings LLC. All billings to General Motors North America are addressed directly to Customer Care and Aftersales. All receipts for General Motors North America are likewise in the name of Customer Care and Aftersales since it is the Customer Care and Aftersales which directly transacts with petitioner. To prove this, petitioner has submitted Exhibits "P-29" to "P-29-B". Said exhibits are comprised of internal reports such as Forecasts, Variance Budget/Forecast against actual, and lAS Monthly Statement, of Customer Care and Aftersales to petitioner and vice versa for the months of September 2012 and October 2012. The Court notes that even though the internal reports and billing statements pertain to Customer Care & Aftersales, the Financial Entity indicated in all the reports is GM LLC- GMNA. Accordingly, petitioner has complied with the third requisite. Corollary to the second 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 Revenue Regulations (RR) No. 16-2005, provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.- (A) Invoicing Requirements.- A VAT-registered person shall issue:#.. XXX XXX XXX 52 Exhibit "P-61" 53 Exhibit "P-74"

DECISION CTA CASE NO. 8976 (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 XXX (c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; XXX XXX XXX (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and" (Emphasis Supplied) "SEC. 4.113-1. Invoicing Requirements. - {A} A VAT-registered person shall issue:- XXX XXX XXX (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records-o--

DECISION CfA CASE NO. 8976 (B) Information contained in VAT invoice or VAT official receipt- The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: XXX XXX XXX (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis Supplied) Pursuant to the foregoing provisions, the foreign currency remittances referred to in Section 108(8)(2) of the NIRC of 1997, as amended, must, likewise, be supported by VAT zero-rated official receipts. In its Quarterly VAT Returns for the four quarters of CY 2012, petitioner has declared zero-rated receipts in the total amount of P79,207,236. 90, as follows: Period Covered Zero-Rated Exhibit (CY 2012) Receipts "P-41" "P-43" 1st Quarter p 5,348,879.38 "P-45" "P-47" 2nd Quarter 17' 929,287.49 3rd Quarter 31,148,142.65 4th Quarter 24,780,927.38 TOTAL p 79,207,236.90 In support of the foregoing, petitioner has offered in evidence its official receipts54 issued to its clients. Upon examination of the same, the Court finds that there is a marked discrepancy of P3,366,623.14 between the total zero-rated sales of P75,840,613.76, with US$ equivalent of 1,794,341.90,55 reflected in the official receipts issued by petitioner to its clients and the zero-rated sales of P79,207,236.90 declared by petitioner in its Quarterly VAT Returns for CY 2012. Sine~ 54 Exhibits "P-67", with sub-pages 55 Summarized as per Annex 1 of the Revised ICPA Report, Exhibit "P-63"

DECISION CTA CASE NO. 8976 the difference of P3,366,623.14 is not supported by VAT zero-rated official receipts, the same shall be denied zero-rating. Further, to prove that the payment for such sales are in acceptable foreign currency accounted for in accordance with the BSP rules and regulations, petitioner has presented the funds transfer credit advice56 and the certificate of inward remittances57 issued by Deutsche Bank AG Manila. A verification of the foregoing documents reveals that there is a marked discrepancy of US$617,729.81 between the amounts supported by official receipts and the amount remitted per related bank credit memos, to wit: Particulars Reference Amount {in US$) Total Properly Supported Zero-Rated Sales (Exhibit P-63} 1,794,341.90 Total Remittances per Related Bank Credit 2,412,071. 71 Memos Annex 4 Difference {617,729.81) Annex 4 The ICPA accounted the discrepancy of US$617,729.81, as follows: 58 Particulars Reference Amount {in US$) Inward Remittances Pertaining to Sales (Exhibit P-63} Supported by Collection Receipts and Bank Credit Memo but not Supported by Official Annex 4 541,463.76 Receipts Annex 4 116,813.63 Inward Remittances Pertaining to Sales Supported by Non-VAT Acknowledgement Annex 4 (40,547.88) Receipts and Bank Credit Memo but not Annex 4 0.30 Supported by Official Receipts Payable to Customers netted against 617,729.81 Collections Rounding Off Difference Difference As ascertained by the ICPA, petitioner does not have offsetting agreement with any of its customers in relation to its zero-rated sales.-6.- 56 Exhibit "P-69", with sub-pages 57 Exhibits "P-70", with sub-pages 58 Annex 4, Revised ICPA Report, Exhibit "P-63"

DECISION CTA CASE NO. 8976 Also, petitioner does not have any payables to its customers that may be offset against its receivables from them. Hence, this Court finds that out of the reported zero-rated sales of P79,207,236.90, only the amount of US$1, 753,794.02 or P74, 121,692.81 qualifies as petitioner's substantiated zero-rated sales, determined as follows: Particulars Amount in US$ Amount in Php Gross receipts supported by zero- rated official receipts 1/7941341.90 75L840,613. 76 Less: Payable to Customers netted against collections 40,547.88 1, 718,920.95 Substantiated Zero-Rated Sales 1,753,794.02 74,121,692.81 Having resolved that petitioner has VAT zero-rated sales of P74,121,692.81 for the CY 2012, the Court shall now determine the amount of input VAT attributable thereto. For the CY 2012, petitioner declared in its Quarterly VAT Returns input VAT from domestic purchases of goods and services in the total amount of P4, 125,644.74, broken down as follows: Input VAT on: 1st Quarter 2nd Quarter 3rd Quarter 4th _Quarter Total Domestic Purchase of p 1 861.45 p 44L630,34 p 65 035.68 p 112 726.09 p 224 253.56 Goods other than Capital Goods 78 220.90 325,468.73 2,158 811.38 1 338 890.17 3,901 391.18 Domestic Purchase of Services p 80,082.35 P370,099.07 c..!2t1231~47.()6 p 1l451J616.26 p 4,125,644.74 Total From the declared input VAT of P4,125,644.74, petitioner is claiming the refund of the amount of P4,125,403.72. In support of the foregoing, petitioner has offered various official receipts and invoices59 issued by its supplier's, which were examined by the Court- Commissioned Independent CPA (ICPA), Mr. Glenn Ian Villanueva of Reyes Tacandong & Co. In his Report.60 The ICPA has noted the following exceptions: Reference Nature Total Annex 1Q-Bs Input VAT on domestic purchases of services claimed p 155.94 during the period January to December 2012 but the VAT ORs were not dated within the period January to December 2012 .L 59 Exhibits "P-65", "P-65-A", "P-65-B", and "P-65-C" 60 Exhibit "P-63", pp. 9 to 10

DECISION CTA CASE NO. 8976 Annex 1Q-Bg Input VAT on domestic purchases of goods claimed 551.17 Annex 2Q-Bg during the period January to December 2012 but the 7,860.59 VAT Invoices were not dated within the period Annex 3Q-Cs January to December 2012 58.93 Annex 1Q-Ds Input VAT on domestic purchases of services 364.28 Annex 2Q-Ds supported by TIN VAT ORs but without OR date of 2,092.00 Annex 3Q-Ds incomp_lete OR date 612.35 Annex 4Q-Ds Annex 1Q-Dg Input VAT on domestic purchases of services 27.86 Annex 2Q-Dg supported by TIN VAT ORs not in the name of the 211.43 Annex 3Q-Dg Company (i.e., incomplete/misspelled company 44,841.64 Annex 4Q-Dg name) 24,386.80 Annex 2Q-Es 25,960.21 Annex 3Q-Es Input VAT on domestic purchases of goods supported 9,460.18 Annex 4Q-Es by TIN VAT Invoices not in the name of the Company 3,966.13 (i.e., incomplete/misspelled company name) 1,125.85 Annex 3Q-Eg Input VAT on domestic purchases of services 788.72 Annex 1Q-Fs supported by TIN VAT ORs dated within January to Annex 3Q-Fs December 2012 issued in the name of the Company 55.18 Annex 4Q-Fs but TIN and/or registered address of the Company is 238.29 Annex 3Q-Fg not indicated 538.72 Input VAT on domestic purchases of services 32.14 Annex 4Q-Fg supported by TIN VAT Invoices dated within January to December 2012 issued in the name of the 75,693.60 Annex 1Q-Gg Company but TIN and/or registered address of the Company is not indicated 1,454.31 Annex 2Q-Hs Input VAT on domestic purchases of services supported by TIN VAT ORs dated within January to 124.29 Annex 4Q-Rs December 2012 issued in the name of the Company Annex 4Q-Rg but with erroneous TIN and/or registered address of (24,334.06) Annex 1Q-Xs the Company (747.86) Annex 2Q-Xs Input VAT on domestic purchases of goods supported 332.15 }.nQ_exJ_Q-X_? by TIN VAT invoices dated within January to December 2012 issued in the name of the Company 19,647.29 but with erroneous TIN and/or registered address of 44,713.33 - the Company Input VAT on domestic purchases of goods supported by TIN VAT invoices issued in the name of the Company but with the Company's TIN and/or address added/altered without countersignature or with countersignature but without letter from supplier Input VAT on domestic purchases of services supported by TIN VAT ORs dated within January to December 2012 with transactions subject to VAT clearly presented as "VAT Exempt" or 'VAT Zero- rated" on the face of the document Input VAT on domestic purchases of services claimed in the previous quarters, reversed in the 4th quarter Input VAT on domestic purchases of goods claimed in the previous quarters, reversed in the 4th quarter Input VAT on domestic purchases of services not duly supported by original pre-printed TIN VAT ORS -- -- - - - -- --- -- - ��-- ��-- - - - - -

DECISION CTA CASE NO. 8976 Annex 4Q-Xs Input VAT on domestic purchases of goods not duly 14,648.53 Annex 1Q-Xg supported by original pre-printed TIN VAT invoices 718.63 Annex 2Q-Xg Annex 3Q-Xg Input VAT on domestic purchases of goods and 11,296.64 Annex 4Q-Xg services not supported by any document 985.65 Annex 1Q-Z 938.78 Annex 2Q-Z TOTAL 267.86 Annex 3Q-Z Annex 4Q-Z 12,864.31 5,379.29 12,600.20 ! P 299,911.35 1 Apparently, the foregoing findings are in order. Thus, out of the claimed input VAT of P4,125,403.72, petitioner has been able to substantiate only the amount of P3,825,492.37, and only the input VAT of P3,579,874.53 can be attributed to the zero- rated sales that have been substantiated, computed as follows: Input VAT claimed for Refund p 4 125,403.72 Less: Disallowances per !CPA Report 299,911.35 Substantiated input VAT Divided by Reported Zero-Rated Sales p 3L825,492.37 Multiply by Substantiated Zero-Rated Sales p 79,207,236.90 J!lput VAT ~ttributable to Substantiated Zero-Rated Sales p 74_L121_L692.81 p 3,579,f174,.53 As regards the last requirement under Section 112(A) of the NIRC of 1997, as amended, although the claimed input VAT was carried over by petitioner in the succeeding Quarterly VAT Returns from the first quarter of 201361 to the second quarter of 201462, the same remained unutilized until it was deducted63 from petitioner's total available input tax in the second quarter of 2014. Consequently, the subject claim no longer formed part of the excess input VAT of P2,773,450.7964 as of the second quarter of 2014 which was carried over/applied to the succeeding third quarter of 201465� WHEREFORE, premises considered, this instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND the amount of P3,579,874.53 in favor of petitioner, representing the latter's unutilized input VAT attributable to its zero-rated sales for the CY 2012.~ 61 Exhibits "P-48", pp. 4 to 5; "P-49", pp. 3 to 4; "P-50", pp. 4 to 5; "P-51", pp. 1 to 2 62 Exhibits "P-48", pp. 6 to 7; "P-49", pp. 6 to 7 63 Line 230, Exhibit "P-49", pp. 6 to 7 64 Line 27, Exhibit "P-49", pp. 6 to 7 6S Line 20A, Exhibit "P-50", pp. 7 to 8

DECISION CTA CASE NO. 8976 SO ORDERED. ~ I CONCUR: CAESAR A. CASANOVA Associate Justice (L~ c. a.sr~~.l Q, Joi'NITO C. CASTANEDA/j--R. 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. ~;4C.e::t-~~- Q_ JUANITO C. CASTANE~, 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. -~ Presiding Justice