CTA Case No. 4431 (Decision)

REPUBLIC OF n-E PHILIPPINES COURT OF TAX APPEALS QUEZON CITY NICHUIEN CORPORATION, C.T.A. CASE NO. 4431 PHILIPPINE BRANCH, Petitioner, - YIH"SUS - C[MitiSSIDNER OF INTERNRL REVENUE, Respondent. X- - - - - - - - - - - - DECISION This is a clai11 for refund in the a11ount of P70,S07.15 representing input taKes <VAT> on purchases of taxable goods and services for the period January 1, 1988 to Dece11ber 31, 1988 pursuant to' Sec. lOGCb> of the Tax Code, as a11ended. Petitioner is a resident foreign corporation organized and eK i sting under the laws of .Japan but duly licensed to do business in the Philippines through a Manila branch. It is "engaged in the business of indenting, wholesaling, buying and selling of lu11ber, abaca, sugar, 11ineral ores, �achinery, steel products, ce11~nt and sundry goods in the Philippines; in the business of buy and sell of industrial 11aterials, teKtiles, foodstuffs to include oilseed, feeds, canned 287

JECISION -- C.T.A. CASE NO. 4431. - 2- goods, etc., chemicals, steel products of ferrous and non-ferrous metal products and products allied to those 111ent i oned above" <Annex "A">. Pursuant to Sec. 107 of the National Internal Revenue Code, as amended, petitioner is a registered Value-Added Tax <VAT> taxpayer with VAT Registration No. 32-6-000293 <Exh. "F">. Petitioner alleged that its sales of set~vices at~e subject to 0" rate, pursuant to Section 102 (a) <2> of the Tax Code, as the services rendered by it are paid for in acceptable foreign currency which are inwardly .~ellitted to the Philippines and accounted for in accot~dance with the rules and regulations of the Central Bank <Exh. "A">. For the period January 1, 1988 _to Decem be�~ 31, 1988, petitioner filed on a quarterly basis its VAT returns showing a ni 1 output tax but with a refundable input taxes, as follows: 1988 Exh. Refundable First quarter Input Tax' Second quarter B P49,704.62 Third quarter Fourth quarter c 7,035.57 TOTAL 6, 167. 12 D 7,599.84 P70,507.15 E Believing that it is entitled with the refund of input taxes pursuant to Sec. 106(b) of the Tax Code, petitioner filed its claim for refund with the VAT Division of the Bureau of Internal Revenue on Ma�~ch 15, 288

JECISION -- C.T.R. CRSE NO. 4431. - 3- 1990 <Ex h � "G" ) � However, due to the inaction of the respdndent on said claim, petitioner left with no recour~se but to file the instant petition on March 30, 1990 in order to toll the running of the two-year prescriptive period under Sec. 230 of the Tax Code. Respondent in her answer asserts the following by way of special and affirmative defenses: 6. The instant petition does not state a cause of action; 7. Since the application of petitioner for the credit/refund of value-added tax it allegedly paid is still pending investigation by the Bureau of Internal Revenue, the instant petition is therefore premature; 8. Petitioner, who has the burden of proof to show that it is entitled to tax refund, has failed to establish that the tax subject of its claim for refund was erroneously or illegally collected; 9. Granting, without admitting, that the petitioner had paid the subject tax sought to be refunded, the same is presu11ed to have been collected in accordance with law; 10. The clai11 for refund, being in the nature of an exe11pt ion from taxation, must be construed strictly against petitione�~ <Insular Lumber Co. vs. CTR~ 104 SCRR 710 [19811). 11. It has not been shown that the instant petition was filed within the prescriptive period provided for in Section 230 of the Tax Code. Meanwhile, a Request For Admissions And Interrogatories was served by, the petitioner upon the 289

JECISION -- C.T.A. CASE NO. 4431. - 4- respondent on November 20, 1992 which the latter failed to answer. As a consequence the Court ruled: Confir�ing the order in open court on January 19, 1993, all the matters contained in or subject of petitioner's "Request for Admission and Interrogatories" filed on November 20, 1992, and which are further supported by its "Notation of Admission" filed on Dece�ber 15, 1992, are deemed ADMITTED, there being no opposition or objection interposed thereto by the respondent. <CTA records, p. 104) Since there was no objection on the part of the respondent with regat�d to the factual issues, the only legal issue left for this Cout�t' s resolution is whether or not petitioner is ent it 1ed to the refund of input taxes <VAT) on the purchases it had for the period January 1, 1988 to December 31, 1988. The laws contro 11 i ng in the instant case are Sees. 102(a) (2) and 106(b) of the Tax Code which provide: Sec. 102. Value-added tax on sale of services. <a> Rate and base of ta>e. - There shall be levied, assessed and collected a value-added tax equivalent to 10" percent of gross receipts derived by any person engaged in the sale of services. The phrase 'sale of services' means the performance of all kinds of services for others for a fee, remuneration or consideration, including those performed or rendered by construction and service contractors; stock, real estate commercial, customs and immigration brokers; lessors of personal property; lessors or distributors of cinematographic fil�s; persons engaged in milling, processing, manufactur-ing ot~ repacking goods for others; and similar services regard 1ess of whether or not the performance thereof calls for the exercise or use of the 290

JECISION �- C.T.A. CASE NO. 4431. -� 5 -� physical en~ mental f;:~cu.lties: Pt~ovicled, That the following services performed in the Philippines by WH-t��egistet~ect pet~sons shall be subject to 0'1-: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods .:n"e subsequently f?><pot~tec:l, whet~e the sey�vices a1�"e paid fr.w in acceptable fot"eil~n ct..wrency, inwal�"dly t"emitted to the Philippines and accounted for in accordance with the rules and t'egul<~tions of the Centt'al Bank of the Philippines. (2) Services other than those mentioned in the Pt"'ececlinq subsection, the considet-ation for which is paid for in acceptable foreign currency which is remitted inwardly to the Philippines and accounted for in accordance with tl-.e t'ules and J�"egulations of the Centt��al Bank of the Philippines. XXX X>< X XXX Gee. :I.OF.... Refunds or tax Ct'edi.ts of inp1.1t t.'":l.x. ����(a) Expol�~t ~3ales. x x x. (b) Zet��o�-�t~ated 01��� effectfvely zet"o�-t'ated sales. Any pet"son, exc:ept those r~ovet��ed by p.::n-.:q::waoh (a) above, whose sales at"e zet'o�-t'ated Ot' .::n"e effectively zet'o-t~ated may, within two years after the close of the quarter when such sales wet"e made, apply fot' the :isst_\ance of a tax ct"edit cet"tificate Ot' t'efund of the input taxes attributable to such sales to the extent that such :i.npt.rt tax has not been applied against output tax. (Underlining supplied) Based on the ;:~bove-quot ed pt"ovisos, petitioner in!;tituted the instant case. And to furthel' support its claim, petitioner submitted documentary evidence while the respondent did not. Instead respondent submitted her case fot" decision based on the t'ecorcls .::tnd plear.:lings. "Respondent may thus be considered as not quf.~st:i.oning 291

lECISION - C.T.A. CASE NO. 4431. - 6- seriously petitioner's entitlement to the refund clai�ed especially when petitioner was able to substantiate its claim" <Nestle Philippines, Inc., (f'or�erly FILIPRO Inc.] v. The Co��issioner of' Internal Revenue, CTA Case No. 4114, January 3, 1994>. The records show that petitioner is a VAT registered person subject to value-added taM at 0')( rate pursuant to Sec. 102(a) <2> of the TaM Code, as amended, as the services rendered by it are paid for in foreign currency which are inwardly remitted to the Philippines in accordance with the rules and regulations of the Central Bank of the Philippines CEMh. "A"> � Therefore, Petitioner has the pri vi 1ege to cl ai � refund of input taKes pursuant .to Sec. 106(b) of the TaM Code as aMplified by Revenue Regulations No. 5-87. However, We would like to correct the i�pression Made upon us by both parties that Sec. 230 of TaM Code applies in COIIIputing for the two-year prescriptive period. This Court is convinced that Sec. 106 of the same code applies, on a case to case basis, in applying for the refund as we 11 as in computing for the period within which to claim. With regard to the instant case, Sec. 106 (b) applies. That is, "<w>ithin two years after the close of the quarter when such sales were made MMM". Thus, petitioner made it on time when it filed within two-year period its claim for refund, to wit: 2~92

1ECISION - C.T.A. CASE NO. 4431. - 7- Clost> of Datt> Filt>d tht> IRr. Pt>l~iod Clai� 03-31-88 BJR CTA 01--Q1 -88 to 03-31--88 06-30-88 ott-o1-88 to 06-30-88 09-30-88 03-15-90 03--30-90 07-Q1-88 to 09-30-88 12:-31-88 10-o1-88 to 12-31-88 03-15-90 03-30-90 03-15-90 03-J0-90 03-15-90 03-30-90 WHEREFORE, judg�ent is hereb,Y rendered ordering the respondent to refund to the petitioner the a�ount of P70,S07.1S representing input taKes for the period January 1, 1988 to Dece�ber 31, 1988. SO ORDERED. wQ.,~ ERIESTO D. ACOSTA Presiding Judge WE R: / ~~ ci~~!&fdge RAMON 0. DE , Associate Ju I i L 293

1ECISION - C.T.A. CASE NO. 4431. - 8- C:ERT:IF:IC:AT:ION I hereby certify that this decision was reached after due consul tat ion between the �e�bers of the Court of TaK Appeals in accordance with Section 13, Article VIII of the Constitution. Q .. -,;;a~ Q~ ERIESTO D. ACOSTA Presiding J\.tdge Court of Tax Appeals 294