MONTE SOLAR ENERGY INC. v. COMMISSIONER OF INTERNAL REVENUE

CTA Form No.8 (For DCC) lllllllll lll lllllll l llllllllllllllllll llllllllllllllllllllllllllll 20-000458-0069 REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION CTA CASE N0. 10434 MONTE SOLAR ENERGY INC., Petitioner, -versus- NOTICE OF RESOLUTION COMMISSIONER OF INTERNAL REVENUE, Respondent To: OFFICE OF THE SOLICITOR GENERAL 134 Arnorsolo Street, Legazpi Village Makati City ATTY. BRYAN ANTHONY C. DIEGO Bureau oflntemal Revenue Room 703, Litigation Division, BIR National Office Building Sen. Miriam. P. Defensor-Santiago Avenue Diliman, Quezon City SALVADOR LLANILLO & BERNARDO Units 815-816, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue 1226 Makati City GREETINGS: You are hereby notified by these presents that on May 2, 2024, a Resolution was rendered in the above-entitled case, copy of which is attached hereto. Quezon City, Philippines, May 3, 2024. Atty. Maria~ F. Chan-Te Executi~of Court II

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL FIRST DIVISION MONTE SOLAR ENERGY CTA Case No. 10434 INC., Members: Petitioner, DEL ROSARIO, P.f.t Chairperson, MANAHAN, and -versus- REYES-FAJARDO 11 COMMISSIONER Promulgated: OF INTERNAL REVENUE, Respondent. x------------------------------- RESOLUTI REYES-FAJARDO, J. : For the Court's resolution is respondent Commissioner of Internal Revenue's Motion for Partial Reconsideration (Re: Decision promulgated on 18 January 2024) ("Motion")I filed on February 7, 2024, with petitioner Monte Solar Energy, Inc.'s Comment (Re: Respondent's Motion for Partial Reconsideration)2 posted on March 4, 2024. In the Motion, petitioner prays that the Court reconsider the Decision (assailed Decision)? promulgated on January 18, 2024. The fallo of which reads: WHEREFORE, the Petition for Review filed on December 29, 2020, by Monte Solar Energy Inc. is PARTIALLY GRANTED. Docket- Vol. II, pp. 916 to 929. 2 Id. at unpaged. 3 Id. at pp . 873 to 915.

RESOLUTION CTA Case No. 10434 Accordingly, respondent is ORDERED TO REFUND or ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner the amount of P4,128,580.59, representing the latter's unutilized input VAT attributable to its zero-rated sales for the pt to 4th quarters of CY 2018. SO ORDERED. In the assailed Decision, the Court explained that the following conditions must be present to accord zero percent (0 %) value-added tax (VAT) on petitioner's local purchases of goods, properties and services under Section 15(g) of Republic Act (RA) No. 9513:4 first, the production of the Department of Energy and the Board of Investments Certificates of Registration; and second, the purchases are needed for the development, construction, and installation of the plant facilities of Renewable Energy (RE) Developers and the whole process of exploration and development of RE sources up to its conversion into power. Thus, to refund input VAT on its local purchases of goods, properties, and services, petitioner must show that its local purchases do not fall under Section 15(g) of RA No. 9513. This is because it is only then that its local suppliers may legally shift or pass VAT to petitioner. Following said premise, the Court ruled that petitioner is not entitled to its refund claim of input VAT on local purchases of fuel and spare parts, to the extent of P48,061.49, because it failed to point out if these purchases were not needed for the development, construction, and installation of the plant facilities of RE Developers and the whole process of exploration and development of RE sources up to its conversion into power. On the other hand, petitioner is entitled to refund of unutilized input VAT to the extent of P4,128,580.59, which corresponds to the local purchases of goods, properties and services not needed for the development, construction and installation of its plant facilities and the whole process of exploring and developing renewable energy sources up to its conversion into power. In his Motion, respondent reiterates his arguments that petitioner is not the proper party to seek the refund. For him, no output tax should be shifted to or passed on toRE Developers, such 4 Renewable Energy Act.

RESOLUTION CTA Case No. 10434 as petitioner, on its purchases of local supply of goods and services needed for the development, construction, and installation of their plant facilities. Respondent also contends that petitioner's judicial claim for refund should be denied for its failure to prove that: (1) the input VAT it is claiming as refund remained unutilized and was not carried over to the succeeding periods; and, (2) there was direct attributability between the input VAT on purchases and its zero- rated sales for the 1st to 4th quarters of calendar year 2018. In refutation, petitioner counters that: (1) the BIR erred in arguing its alleged lack of legal standing to pursue the claim for refund; and, (2) it demonstrated compliance with all the requisites for the grant of refund under Section 112(A) and (C) of the 1997 National Internal Revenue Code (NIRC), as amended to the extent of P4,128,580.59. The Motion lacks merit. Save for the issue on direct attributability of input VAT and petitioner's zero-rated sales raised by respondent in his Motion, the contentions the latter advanced therein were already passed upon by the Court in the assailed Decision. There is no need to "cut and paste" pertinent portions of the Decision, or re-write the ponencia in accordance with the outline of the instant motion.s Respondent is mistaken in arguing that petitioner failed to prove that the input VAT sought to be refunded is directly attributable to its zero-rated sales. Section 112(A)6 of the NIRC of 1997, as amended, does not require that the input taxes must be directly attributable to zero-rated 5 See Social Justice Societt; (SJS) Officers, et al. v. Lim, G.R. Nos. 187836 & 187916, March 10, 2015. 6 SEC. 112. Refunds or Tax Credits of Input Tax. - (A) Zero-Rated or Effectively Zero-Rated Sales. - Any VAT-regis tered person, whose sales are zero-rated or effectively zero-rated m ay, w ithin two (2) yea rs after the close of the taxable quarter when the sales were mad e, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such

RESOLUTION CTA Case No. 10434 sales before the same can be a subject of a claim for refund. Commissioner of Internal Revenue v. Cargill Philippines, IncJ ('Cargill") is instructive: Evidently, contrary to petitioner's contention, the law does not require direct attributability of the input VAT from the purchase of goods to the finished product whose sale is zero-rated, in order for such input VAT to be refundable. Ubi lex non distinguit nee nos distinguere debemos . When the law has made no distinction, the courts ought not to recognize any distinction. Thence, it suffices that the purchase of goods, properties, or services upon which the input VAT is based, can be attributed to the zero-rated sales. This conclusion is further bolstered by Section 110(A)(l) of the Tax Code, which explicitly sets forth the sources of creditable input VAT: SECTION 110. Tax Credits. - (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: (a) Purchase or importation of goods: (i) For sale; or (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. Provided, finally, Tha t for a person making sales that are zero-rated under Section 108(B) (6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (Boldfacing supplied) 7 G.R. Nos. 255470-71. January 30, 2023.

RESOLUTION CTA Case No. 10434 (v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts. (b) Purchase of services on which a value-added tax has been actually paid. Verily, the law does not limit itself to purchases 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.a Following Cargill, the grant of refund of valid input VAT, attributable to valid zero-rated sales, to the extent of P4,128,580.59, in petitioner's favor is proper irrespective of whether the input taxes claimed as refund is directly attributable to its zero-rated sales. As such, the Court finds no compelling reason to reconsider, modify or even reverse the assailed Decision. WHEREFORE, respondent's Motion for Partial Reconsideration (Re: Decision promulgated on 18 January 2024), filed on February 7, 2024 is DENIED, for lack of merit. SO ORDERED. ~WF~-f~�~ MARIAN IV1F. REYfS-FAJARDO Associate Justice We Concur: Presiding Justice ~�T� CATHERINE T. MANAHAN Associate Justice 8 Boldfacing supplied .