CTA Case No. 6534 (Decision)

REPUBLIC OF THE PHI LIPPINES COURT OF TAX APPEALS QUEZON CITY ROIII\1 APOLLO SI�~ I\IICONIH I CTOR PIIILII'I'I NES, INC., Pctiti ot1 cr. - ve rsus - C. T.J\ . C/\SE NO. 6534 Promul ga ted: IIONOH.AULE COl\'IMISSIONER OF INTERNAL REVENUE, MAY 27 2001iJt'1fw~ Re spond ent. :\ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION Thi s is a judi cial clain1 for rcl"und or issuance of' a tax credit certificate in the amoun t of P30.359.6 15.40 all eged ly representin g unutili zed input value-added ta xes pai d on ca pital goods purchased for th e month s of .Jul y <md 1\ugust. 2000. Petitioner is a domestic corporation dul y re gistered with th e Securities and L:-.;c lwn ge Co mmi ss ion . On Ma y I 0. 2000. it \\"as reg istered \\ ith the 13urea u or lttt ern;d ReH'nuc (131R) as a \'aluc-addcd ta :-.; (V/\T) ta xpaye r (Lxhihit C). 011 September 18. 2000. petition er was like\Yi sc re gistered with the Philippin e Economic lo ne Auth ori ty (PEl/\) as an "Ecozo nc [:-.;port [nterprise.. pursuant to the pro vision s o f� Republic J\c t No. 79 16. to engage in th e manufac ture o f' semiconductor products. particularly microc hip tran sistors and tantalium capacitors at the Peo pl e"s Technology Co mpl ex -Special Economic Zo ne. I3o. l'vladu ya . C<Irmona. Cav ite (Er:hihits D & E). Petiti oner started its commercial operation s on September 1. 2001. as shown sco in the " No tice or /\pprov;d of' No. 2002 -014 .. iss ued by PEZ/\ Oil .IUIIC 20. 2002 (1:\ hihit F) . llowcve r. prior to sa id date. or on about .June 2000. petitioner contracted

DEC ISION- \TA CASE NO. 653.t I'A <;E 2 th e services o f' Shimi 7.u Philippine Co nt rac tors. Inc. (herein alier reiC rred to as ��~ himi :;. u '") fo r th e co nstru cti on o r it s lilctory huildill !_!. ( 1:\ hihit II) . Fo r se rvices rend ered by Shim i7.ll . petiti oner made initial pay ments on .Jul y ~ , 2000 and /\ ugust 3. 2000 in the respec tiYe amount s o r P l lJ8 .55 1,8 84.2 8 and [> 132 .3G7.923.58 Ibo th inclu sive o r I0% v /\T and net or I% \Yithholdin g tax I (Ex hihits I to L) . lk li ev in g th at th e a foresaid pay ment s qu alify as ca pital good s purchases, petiti oner fil ed an appli cati on for tax credit/refund o f the input V /\T pay ments co rres pondill g th ereto in th e SUill o r P30.359.G15.4 0 \\" ith th e BIR O il Dece mber II . 2000 (F.x hihit X). O n /\ ugust G. 200 1. petiti oner sent a Coll o\'v-up letter to the 81R reiteratin g its request fo r the re rund/tax credit of the all eged unutili zed input V/\T o f P30.359.G15.40 (Erhihit }). /\ga i11. on /\ ugust 29. 200 I. petit ioner se nt another letter to the 131 R info rmin g th e latt er that it \\'as sub mi ttin g th e necessary doc ument s relati ve to its re rund claim (Frhihit %). S ince res pond ent had not ac ted on it s claim <uH.I th e t\vo-ye ar prescripti ve peri od for filin g a j udici al cl aim was about to lapse. ;1ctiti oner instituted the present appea l on September 11. 2002. Respondent. in hi s /\ nswer fil ed on Oc tober II . 2002. interposed by way o f Spec ial <md A rtirm ati ve Dc renses the !"o ll n\Yin g: 4. Petiti oner being all egedl y regist12red \Yith the Philippine Economic 7.on e /\uthority is exe mpt rrom all ta xes. includin g value-add ed tax, pursuant to Secti on 24 o f' Republic /\ct No . 79 1G. li enee, petitioner is not entitl ed to refund of' input tax on capital goods pursuant to Section s 4. 1OG- 1 and 4. 103 -1 o f' Revenue Regulati ons

DECISION- CTi\ Ci\SE NO. (,5J4 l'i\(;I~ J No. 7-95. Its alleged reg istration as a V/\T taxpa yer was. thcrcl'orc. erroneous: 5. Petitioner" s allcg<:d clain1 !'or rcl'und is subject to ml!ninistr<ltivc routitwry in\csti gation /<::\<llllitlation by rcs pond<:nt" s 13urcau: (). The atnoutlt ol' 1'30.359.6 15.40 b<:ing cl: imcd by p<:titiuncr as alleged unutili zcd input taxes paid in the pur<:lwsc of <:apita l good s l<.)r th e peri od Jul y and August 2000 \Ya s not properly do<:umcntcd ; 7. In an action 1<.)1" refund/credit. the burden or proof is on the ta:-;paye r to estab li sh its ri ght to rcl"und. and failure to sustain the burd en is fatal to the claim for re fuml/ncdit: 8. Petitioner must show that it has complied \Yith the provt ston s or Sec tion s 204(C) and 229 of th e 1997 Tax Code on the prcsc ripti\'e period for <:!aiming tax refund /credit: and 9. Claims l<.) r re fund are co nstru ed strictly against the claimant lor the sa me partake the nature of exemption from taxation (Commissioner of Internal Ren�nue vs. Ledesma, 31 SCRA 95) and as such. they are looked upon with di s ravor (\Vestem Minolco Coq>. YS. Commissimtet� of In ternal Revenue, 124 SC RA 1211 ). On October 30. 2002 . petiti o11 er fil ed a Reply to respondent' s /\tJswer, rel'uting the latter' s asse rtions. In their Joint St ipul ation or Fact s and Statement of Iss ues lilcd on December 5. 200 2 and appro ved by this court on December 12. 2002. the parties presented th e l'ollowing iss ues lor reso lution : 1. Whether or not th e purch ase or services by the petitioner from Shim izu rall s within the purview of " purchase or capital goods" 111 relation to Section 11 2( B) or the 1997 Ta:-; f"odc: 2. Whether or nut the petitioner availed or the bcnelits (5 % gross income tax) under Section 24 of Republic /\ct No. 79 16, otherwise known as Special Economi<: Zo ne /\ct or 1995: 3. Whether or nut the petitioner \Yas granted an income ta x holida y under Section 6. Rule ~-: V or the Rules and Regulation s to lmplemetlt R./\ . 7916:

DECISION- CTi\ CASE NO. C.5J.t I';\(; r. .t 4. Whether or tlllt the at1wunt of PESOS: TIIIRTY MILLION Tl IRU : llli NDRFD FIFTY NINI: TIIOl iS J\ ND SIX IIUNDRI~ D FIFTEE N AND 40/ 100 (P 30.35 9.Gl5.40) being claimed by the petitioner as re l'und and /or iss uance of TCC is correct ami properl y doCUillL'IltCd: ;tttd 5. Whether or not the petitioner is entitled to ;1 rcl"und or iss uance of l'CC under th e circutnst;lllces. To support its claim. p~ titioner prese nted documentary and testimonial e\� id etlce . Respondent. on the other hand. submitted hi s case lor dec ision without prese nting any e\�idencc (C '7>1 Records. ;)(tge 13Y). Al'ter the parties had filed th eir respecti\ e metnorandunL the ca se was submitted for deci sion on NoYember 12. 2003 . We lind it nppropriate to fir st di sc uss th e se cond and third iss ues as th e reso Iuti on of the sa me prcdetcrm incs \\ hether or not the other iss ues stiII dese rve our COilS idcra tiOil. In hi s Answer to the Petition for Revie\\' and f'vlemorandum. respondent <trgued tlwt petitioner. heit1g a 1'1 :/.A-rcgistcred et1tcrprisc. is not subject to VAT pursw111t to Section 24 oi' IZ./\. 79 IG.\\ llich pro,�idcs in part. thu s: "Sfi:CTION 24. Exemptiou .fi'om Taxes Uuder tlte Natioua/ luterua/ Ret�euue Code. - An y provi sion of existing laws. rules and re gul<ltions to th e contrary IIOt\Yith st;lllding. no taxes. local ami nationaL sh<tll be impo sed on ],u sitless establi shments operating within the ECOZON I ~ . In li eu of payin g taxes. 11\�e percent (5 %) of th e gross income earned by all businesses and enterprises \Yithin the ECOZONE shall be remitted to the tut ional gow rnmenl. x x x�� According to respondent. petitioner is exempt from VAT because th e exemption from national and local ta xes in the above pro,�ision of Section 24 or R.A . 79 16 includes V/\T. Consequently. petitioner' s t:�ili lsac tions. being exempt !'rom internal rcvctlltc taxes by ,�irtuc of R.i\. 79 I(, l~tll under the phrase "Tr<tnsaction s

DEC ISI ON- CTA CASE NO. 6534 I'AGE 5 \\hich me exempt Llllder special l<m s." under SL�ction 103(q) or the Tax Code Iprior to its amendm ent und er the Ta x Rdorm Act or l lJ<17 1. to \Yit: "Sl~ CT I ON IIU. Exempt Tm 11.wctions . - The followin g sklll be excn1pt r�roln the , � ~ llue-addL�d t ~1 x: (q) Trnn sactio11 S \\ hich arc exempt under special lmYs. except those granted uml er Pres idential Decree Nos. 66. 529. 972. 1491. ami 1590. and non-electric coo pcrati,�cs under Republic Act No. 6938. or iii!cm ~ltion a l ngi-ccnicnts to \\hich th e Philippines is a s ignatory ... Respo ndent averred that since petitioncr� s business is not subject to VAT. th e capita l goods it purch ased arc con sid ered not used in VAT ta xa ble bu siness. and th ere fore. it is not entitled to rcl'uml or input taxes on such capital goods pursuant to Section 4.106-1 and 4.1 OJ - I or RcH~Illle Regulation s No. 7-95. Respondent l"urthcr alleged tlwt pctitioii cr� s V1\T regi stratilln \\ <lS CITonclHIS ami did not confer upon it an y right to reco gni ze input tax credit. llpo11 the other halllL pctitio11er. 111 it s I~eply to rcspollllent' s An swe r. mnintaincd that : 3. xxx . it is a !"act that petitioner-corporation is a VAT re gistered entity as shown in its I3 IR Ce rtificate or Registration attached as 1\nncx "(_'" in the Petition . And it is al so a f~tct that petitioner-corporation is a Phiiippi1tc Lconomic !.tmc Authority (Pl ~7A) regi ste red entity as shm\11 by 1\nncx �'[)" attached to the Petition. ll oweYe r, it is not tru e that petit io ne r a vailed of th e be nefi ts offered by Sec ti on 24 of Repu blic Act No. 79 16 (Th e S pecia l Eco nomic Zo n e Act of 1995). In stead , petiti oner op ted to avai l o f th e benefit s of Secti on 6, Rul e X"V of th e Rules a mi Reg ul a ti ons to Impl em ent Repuhlic Act 79 i 6 in relati on to P EZA IVIc mot�a tu.lum Ci r cu la t� No. 2002-00 7 an d PEZA Board Reso lution No . 0 1- 161: 3 .1 With the ath 'C nt or R.A. 79 16 ''hi ell took crrcct on June 12. I995. newl y regi stered or expanding PEZA enterprises were allotted to m�ai l lirst or the Income Tax llo liday il" qualili ed allll then t h e)<~-;, prclcrcntiai tax which is based on

DECISION- CTA CASE NO. 65.3-t I'A(;E (, gross iiiCOille eamcd <llld IS Ill lieu of <Ill\" llatiollai ur JocaJ taxes: _..l, _7_ or i' <lr<lgr<tph 7 1'1-:l!\ 13uard Res.1lution No. 01-161 st<ltcs that: ��Fo1� LJUI"{Jose.\ o/ (/1'oilment o � lri I incenti1�es l!.J.Il{e_[_thes('__ :SUideline.\. catifit�ution o/the 1'/:Z:I Director Cienerul on the dote of the sturt o/ col!/1/laciu/ operulions (SCO) shu// he _0..J.!}}ic ient.: (italic s ami underscoring supplied): 3.3 or The CertiJication the PEl./\ Director C:ieneral on the or date or the start COllllllerciaJ operations iss ued to the petitioner-corporation is attached in tile Petition as /\1mex -T-�: 3.4 l11 V/\T ruling 037-LJS. 131R ruled that: " x x x. in occonlunce 1rith IJPIJJ �.., FEZ. I Certificufe o/ R.e!!,istmfiun und its cuncumifunt Registrution .-lgreem enl ll 'ith the J)EZA. DPD/Iws been amnted IIICU/11(' rux 1/o/idur ((Jr (/period o/ (imr (-/} 1�eurs. that. ufier this -l-1�eur Income Tux 1/o/idu) �. if shu// hencefiHth he e.rempt ti'olll ullnufiunul und lucul tuxes and in lieu thereof. if shu// he suhiect to tux of the mfe o( ~ercenf (5 %). hosed 011 gross income eurned In riell ', thereof. please he infimned !hut during this -1-reur income Tux Jlolidur. DPJ)f shu// onlr he exempt (i�om income tax. 1/(J\I'I!l'er. f)f)f)J shu// he suhiecl to other intemct! rerenue fares {J/'Ol'ided under the Nutionul lnternul Rerenue Code. such us hut not limited to. mlue-uddi!d tux. x x x" (ita li cs and underscori11 !-'- supplied): 3.5 /\gain in V/\T Ruling 027-LJLJ. L31R ruled that: ".r x x. please be inf(;nned thut since G'OJJ is enfot�ing the income Tux I/o/ida) ' incenlil'l! and not the 5% tinct! tux on gmss /u.wh/e income eumed in lieu o/ all tu.res under Section 2-1 o/R... I. IY/o (/'/:Z, J LUlr). it ((;//ems t!J.v1...J.!..!!.� lu.r tJIII'J)Oses. GOJI is still goJ�emed hr the pro1�ision.l o/the Notional Jntemul Rerenue Code (,\'JRCJ. 7here(iJre. the I A 7' pro 1�isions of the Code ore optJiicuble to it. x x x GUll's purclwse of seJTices (i�om its I ':1?'-registered building con/roc/or. (ur the construction u[its ({teton building comes \l'ifhin the tJIIITiell' of u tmrclwse o( capital ~.?,oods, hence. GO.J/ nun �UJJtJ!r (iJ!� the is.\UWICe o(u tux credit certi(icute or re(imd o/the illtml tuxes {}(tss ed nn hr the said con/rue/or. fJIII'SUWII to Sec/ion 1/ 2(/J}. 1\ '/R C o( IYY I. pm l�ided such upp/icution is I!Wde ll 'ithin fli'(J (2) rears u(ier the close of the tuxuhle lfl/Urf er in lt'hich such tmrclwse li'US mude, urorided. /itrther. tho! such intJUI tuxes hu1�e not heen

I>FCISION - CTA Ci\SF NO. (,5J-t I'At;E 7 applied against (/(}.//'.\ out;mt tuxes ...(italics and umkrscori11 g supplied): _j.(, h-en assumi11g arguendo that petitioner-corporation Pptcd to (1\'ail or the benefit s or Section 24 orR./\. 79 16. and not the bCIICiits or the In co me Ta x lloliday. petitioner can still he considered as engaged in V;\T taxable bu siness. VJ\T is a rorm ol� indirect tax. But I here is no existing pro,�ision under R.J\. 79 1(J that Pl ::/.1\- re gis tcred enterprises. ma ybe considered exempt l'rom �'indirect taxes... The 5% ta x on such enterpri ses. in Iieu or aII taxes othenYise direel Iy due thercrrom. is a direct l<lX in clwractcr. (V J\T Ruling 055-98): J. 7 In other \Yords. as a Pl ~ l.J\- reg i stc red entity. petitioner- corporation \\'as not di,�ested ur it s ch<l!'acter as VAT- regi stered. It is not erroneous to allege therelore. that petitioner is a V1\ T-regi stered entity in contrast with the allegation under Paragrap h 4 of the respondent's "A nswer''. Procecdi11g no\\ to the issue or '' hether or not petitioner availed or the hl'llCiit s (5% gross illCOilll' l<lX) under Scctitlll 2-l ur Republic Act No. 79 I(J. othcnvi se kiHl\\11 as Special Fconomic lPilC Act or 1995. thi s cu�:.rt rules ill the ltegative. Although it is prO\ idcd under Section 24 or RJ\ No. 7916 that PEl./\ re gistered enterprises arc subject to 5';;, l<tx on gruss income i11 li eu or nation al allll local 1<1xcs includin g V1\T. it is incorrect ror the respo ndent to automatically assume that petitioner is subject to the 5% tax Pn gross illCUill C. Thi s court had already ruled un sc \-cra l occasions that there me l\\o se ts or li sc<ll incenti,�es ava il <1hle to a Pl ~ZJ\ re gistered enterprise. 1Wn1ely: I) incenti,�es under Presi dential Decree No. (>6. as amended. and Section 24 orR/\ No 79 IG. \Yhich include the S'Yu prel'crential ta x rate on gro ss income earned in li eu or national and l()e<ll taxes: and 2) incentives under 13ook V I ol� Executive Order (U)) Nu. 22(J. as amended. '' hich include income tax lwliday for 4 to 6 years. depending on \Yhethcr the enterprise is regi stered as pio11ecr tlr llOn-pionccr. These t\\'0 sets or inccnli\'CS arc in the <litcrnativc and cannot be or <I\ ailed <II tile S<l lllC time by a IT/.;\ regi stered enterprise (llitaclii Computer

DECI SION - C TA C A SE NO. 6534 PAG E 8 Pmducts Asia (A sia) Co11Joration vs. Commissioner l~llntemal Revenue, CTA Case N o. 5943, A ugust 6, 2001 as affirmed by tlte Court l~lAppeals in Commissioner of lntemal Revenue I'S. 1/itaclti Computer Produc:ts (Asia) Corporation, CA -G.R. SP�. N o. 66342, April 25, 2003 ). In the present case. petiti oner m�ail ed o f the income tax holiday incenti ve effective Se ptember I. 200 I as can be seen from the No ti ce of Approva l of SCO No. 2002-0 14 dated .June 20. 2002 iss ued by PEZJ\ to petiti oner (Exhibit F). lienee, it is onl y exempt from inco me tax and is still li abl e to pa:v .,ther nati onal internal revenue taxes as may be imposed upon it by la\Y. In as much as petitioner is registered as a VJ\T entity. it is subj ect to VJ\T. Contrary to respo ndent 's claim. petiti oner's VJ\T reg istrati on was not erroneo us and petiti oner may claim refund /tax credit o f' the unutili zed input VJ\T it paid on capital goods purchased upon compli ance with certain requirement s prov ided fo r by law. We now determine wheth er or not petiti oner� s purchase of se rvices from Shimi zu fa ll s within the purview o f' " purchase o f' capital goods" under Secti on li 2( B) ofth e Nati onal Internal Revenue Code (N lRC) o f' 1997 . Secti on 4. 1OG- 1(b) o f' Revenue Regul ati ons No. 7-95 1n impl ementin g sa id Sec ti on 11 2( 11) define s capital goods as foll ows: "Ca pital goods or proprrti es" re fer to goods or properti es with estim ated useful li fe greater tn an one yea r and whi ch are treated as depreciable assets und er Section 29 (f). used directl y or indirectl y in the production or sale of tax able goods or services. (U nder] ining ours.) lt has already been settl ed that the cost of se rvices is within the scope and mea nin g 0 r th e term "capital goods., ir the sa me form s part 0 r th e cost 0 f a ca pital or asse t. In the case 1-/opewe/1 Po11�er (Piti/ippin es) CoqJ. vs. Commission er ~l Iutemal Revenue, CTA Case No. 5389, Jauum:l' 4, 1999 /affirmed by tlte Court lif

I>F.CISION - CTA CASE NO. 653-t I'AGElJ Appeals 111 lite case of Commissio11er of l11temal Rel'e/lue I'S. /-/opeJVe/1 PoJVer (Piii/s.) Corp.� CA-G.R. SP No. 51617, Marclt /7, 200/f. thi s court ruled that the purchases made by llopC\\CII con sistin g mostly o r engineering and structural se rvice�s !( 11� the construction or it s po\\er plant arc considered as capital goods. In determining \\hat con stitutes capital goods. courts \Yill look to the origin and character of th e ex pe nditure to determin e whether it is a capital asset. Thi s court found that llopewe ll cxpcmlcd l�or engineering and structural services l(n the purpose or constructing powe r plant fac iliti es needed in the prod ucti on o r electricit y. \\'hich is ll opewell' s main product. Thu s. it was held that se1 id ex pen ses are necessary and sho uld form part or th e cost or th e power plant facilities. The prese nt petition is no di ITcrcnt from the alorecitcd case. Th e Cottstructiun Letter ol' Intent (Erhihir /!). billin gs dated l'vla y 20 . 2000 and Jul y 24 . 2000 (F~xhihits I & 1\.) as \\ell as the orlicial receipts (Lx hihits.! & U !'rom Shimizu proved that the se rvices paid lor by petitioner to the l(mncr pertained to the construction or its factory building. Undoubtedly. the sa id con struction se rvices shall lorm part of' th e cost ol' the !~1ctory buildin g. Pursuant to Section 4.106.1(b) of Reve nue Reg ulati o ns 7-95. the 1~1C t01'}' building 1~1 11 S \Yithin the de finition or capita l goods becau se: I) it has an estimated use ful life o f more than one year: 2) it is to be used by petitioner in its manul:1c turc Pi' microchip transistors and titalium products (TSN. .Jamtmy 16. 2003. puge I Y) and 3) it is subject to depreciation und er Section 34(f) of the NIRC or 1997. Anent the fo urth and firth iss ues . Sec tion 11 2(13) or the 1997 Tax Code read s as l(>llows: "SEC. J 12. ReJimds or Tax Credits of l11put Tax . -

I>FCISION- CTi\ Ci\SF NO. f�=' .\.1 I'ACF 10 " (L3) C'aJJitul Goods. - !\ VAT-registered perso n may apply lor the issuance p(' a tax credit ce rtific ate or refund or input taxes paid on capital goods imported or locally purcha sed. to the extent that such input taxes have not been applied <tgainst output taxes. The application may be made only within t\Hl (2) years alter the close or the ta xa ble qumter \VItcn the importation or purcha se was made ." Relati\ e thereto. Sections 4. 106-l(b) and 4.104-5 of'Rncnue Regulation s No. "SEC. 4.106-1. Re.fimds or tax credits of input tax. - (a) xxx (h) Capital Goods. - Only a V/\T-rcgistcrcd person may apply lor the issuance or a tax credit certificate or refund or input taxes paid on capital goods imported or locally purchased. The rcl'und shall be allowed to the extent that such input ta xc~. have not been applied against output taxes. The application should be made within two (2) years alter the close or the taxable quarter when the importation or purchase was made. Refund or input taxes on cap ital goods shall be allowed only to the extent that such capital goods arc used in V/\T taxable business. Ir it is <tiso used itt e:-;entpt opcr<~lion s . tlte input l<t'\ refundable slwll on ly be tltc ntl<thlc portion corresponding to tlte ta:-;able operations. "SEC. 4.1 0-'-5. Substantiation of claims for input tax ct�cdit. - (a) Input ta xes sha ll be alllmnl only if' the domestic purchase of goods. properties or se rvices is made in the course or trade or business. The in put tax should be su pportcd by an im oi cc or receipt showing the information as required under Section I08 (a) and 238 or the Code. Input tax on purchases or real property should be supported by a copy or the public instrument i.e. deed or abso lute sale. deed or conditiona l sa le. contract/agreement to sell. etc .. together \Yilh the V/\T rece ipt issued by the se ller. '\XX '\XX (b) Input ta:-; on importation s shall l�e supported with the import entry or other equivalent document shoh ing actual payment or VAT on the imported goods:� C learly. from the foregoing pro vision s. in order to he entitled to a refund/tax credit or input V/\T paid on capital goods purcha sed. peti ti'.� �cr must prove that: I) it is a V/\T registered entity:

DFCISJO N- CTA CASE NO. 6534 I'A<;FJI 2 ) it paid input V/\T on capital goods purchased: 3) its input V/\T pay ments on capital goods arc dul y supported by V/\T in vo ices and/or o f"licial receipts: 4) it did not o l"fsct or app] y the claimed input V/\ T pay ments on ca pital goods aga in st any output Vi\ T li ab ilit y: and 4 5) the claim fo r re l.und \Yas filed \\ ilhin th e 1\\ o-ycar presc ripti ve peri od both in the mlmini strati,�e and judici al le\-cl s (Te/eco1111111111icatio11s Tecltllologies P!tilippilles, l11 c. l'S. Commissio11er l~/"lllfemal Reve/lue, C TA Case N o. 60 I 8, Nol�ember 24, 2003 ). i\s stated earli er. petiti oner is a Vi\T reg istered entit y. Likewi se, it was sho\\ n th at the claim ed input V;\T pay1 ncnt o l" 1'30.359.(, 15.40 was dul y cove red by va lid Vi\T o l"l"i cial rece ipts issued by Shi1ni zu to petiti oner on .lul y 7 and i\ ugust 3, 2000. The factory building. Cor \Vhi ch the sa id in put V/\T of P30.359.6 15.40 was in curred/paid . fall s " �ithin th e definiti on o r ca pital goods under Secti on 4. 106-1 (b) o r Revenu e Regul ati ons No. 7-95. as earli er di scussed. Also. it \\ as establi shed that pe titi oner's claim lo r re fund /tax credit \Yas tim ely filed both in the admini strati ve and In co mpli ance \\i th the fo urth requi site. petit io ner sub1nittcd i11 ev id ence its 1\ lonthl y Va lu e-i\ dded Tax Declarati ons lo r .lul y. i\ ugust. Oc tober and Nove mber, 2000 (Erhihits 0. P. R & S) and Qu arterl y Va lue-Add ed Tax Returns fo r the third and fo urth qu arters o r 2000 (f.rhihits (j & T) whi ch re ll ec ted no output V/\T li ab ility <1ga in sl whi ch the claim ed input V;\T or J> 30.359.6 15AO may be appli ed or credited. ll oweve r. thi s co urt linds the precedin g doc um e!lLS in sul'li cient. It is to be emphas ized that durin g th e a lo resa id peri ods. petiti oner had no output Vi\T li ability simpl y because it had not started its co mm ercial ope rati ons. Petiti oner should have submitted at the ve ry leas t its VAT rd urn Cor the third quarter o r 200 I. considerin g th at the e iTecti vity date o r its commercial operati ons was on September I. 200 I, in order lo r thi s court to ve ri l'y \Yith certainty that it did nut carry-over/appl y the cl aim ed

I>F.CISION - CTA CASE NO. (�53-t I'A<;EJ2 input t<t.\es to the sa id qLwrter or other succeeding quarters. 1\ loreover. thi s court noted that the claimed excess input V;\T for the third quarter ol� 2000 was forwarded ~ to the succeeding Cuurth quarter of' 2000 (l:xhihi/ .1 (j & 7} /\!though under Section 110(13) ol'the NIRC Pi' 1997. petitioner is allo\\ed to cmry-0\er the excess input V/\T ul� a gi \'en qu<trter to the succeedin g quarter( s). petitioner should hcl\'C dcd ucted the claimed input taxes !'rom it s accumu lated input V;\T <lS or the quarter when it opted tu file a claim therel\.1 r as prt1\'ided under Section II O(C) ol' the NlRC of' 1997. to wit: "SEC. II 0. Tax Credits.- :xn XXX XXX "(C) Determination o(Credituh/e Input Tux. - The sum of' the excess input tax carried O\'er f'rom the precedinL'. month or quarter ami the in put tax creditable to a V1\T-reL'.istered person durinL'. the taxable month or quarter shall be reduc ed bv the amount or claim lor rerund or tax credit lor value-added tax ami other adjustments. such as purchase return s or allmYanccs and input t<JX attributable to exempt sa le. "The claim ll.ll� tax credit re!Crred tt' ;,1 the l'oregoing paragraph shall include not on ly those filed \\ith the nurcau or lntemal l~ e\'eJ1Ue but also those filed \\ith other gu,�ernment agencies. such as the 13oard or ln\'Cstment s :111d the Bureau oi' Custom s... (Underlining supp li ed) Th e reaso n 1\.) r the deduction is to assure that the claimed input VAT shall not be applied against any 1\tture output V1\T liability . To grant petitioner' s claim for ref'und. \Yithout proof' ol� deduction or the corresponding amount. would be d<ut ge rou s and tantamount to granting twice the refund herein so ught to be ref'unded. to the prejudic e or th e Govenunent ( IJASF P!tilippines, Inc. I'S. Commissioner (~llntema/ Rel'ei/Ue, CTA Case No. 6175, Marc!t 20, 2002; lnte/1'/tilippines Malll~fiu:turing, In c. vs. Commissiouer of lntemal Re1�enue, CT/-t Case Nos. 5760 & 5902, FebmmJ' 5, 2002; AMI Philippines, Inc. I'S. Commissioner t~f'lntemal Re1�enue, CTA Case

DEC ISION- CTA CASE NO. ()::;_q No. 5304, Ja/ltUII:I' 2 0, /91.)8; AJl/1 1'/tilippilles. /11 c. !'S. Commis.\io11er t~f'lntemal R e l'e /lue, CTA Case Nos. 5187 & 511.)9, October 2, 199 7). IN V IEW OF ALL TilE FOREGOING. th e in stant petiti on !'or rev iew i�s hcrclw DI~ N II~ D !'or lack ol'lllerit. SO ORDERED. Associate .Justice WE CONC ti R: C--.-..~-- 0~ ERNESTO D. ACOSTA Pres idin g .Justice ~c~=\~~-- /\ ssoc i~tte .Ju stice CERTIFICATION I herclw. certil'.\ th at the abl)\'e dec ision \\aS reac hed al'ter due consultation with the members ol' the Court o l' Tn;-; Appeal s in accordance \\ith Sec ti on 13. Articl e V III of the Co nstituti on. L~.~ ERNESTO 0 . ACOSTA Presiding .Justice