YH GREEN ENERGY INCORPORATED v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX API>EALS QUEZON CITY SPECIAL THIRD DIVISION YH GREEN ENERGY CTA CASE NO. 9784 INCORPORATED, Members: Petitioner, RINGPIS-LIBAN, and -versus- MODESTO-SAN PEDRO, JJ COMMISSIONER OF Promulgated: INTERNAL REVENUE, HJ N : II 202lt z.. : Respondent. ?-- -- '2--0 fl � ..,.,. X--- --------------- --- ---------------------------- --X RESOLUTION MODESTO-SAN PEDRO, J.: For the Court's resolution is petitioner's Motion for Reconsideration (of the Decision dated December 7, 2021) , filed on March 29, 2022, 1 with respondent' s Comment/Opposition (to Petitioner's Motion for Reconsideration) filed on January 15, 2024.2 Against this Court's Decision, dated December 7, 2021 ("Assailed Decision"), which denied petitioner's claim for refund of its unutilized input value-added tax ("VAT") for the 4111 quarter of taxable year ("TY") 2015 primarily on the ground that petitioner failed to establish that it is engaged in zero-rated sales, petitioner asset1s that neither the applicable law nor the implementing regulations provide that: 1) there be zero-rated or effectively zero-rated transactions at the time the claimed input VAT was incurred or paid; or 2) there n;tlst be existing zero-rated sales in the same quarter for VAT refund clai m J Docket - Vo l. 3, pp. 11 7 1 to 11 76. ldat 12 14 to 12 17.

R E S O L UT I O CTA Case No. 9784 Page 2 o f 5 Petitioner pleads exception from the application of the ruling in Luzon Hydro Corporation v. Commissioner of Internal Revenue3 ("Luzon Hydro" ) and emphasizes that as a generation company that operates a solar power plant located in Hermosa, Bataan, it is qualified under the EPIRA Law4 entitling companies generating power from renewable sources to zero-rated sales. In this regard, petitioner belatedly submits with the present Motion its Department ofEnergy ("DOE") Certificates ofRegistration and Endorsement. While petitioner has no recorded sale of electricity in the year 2015 as it only started generating electricity in 2016, petitioner already had zero-rated sales when it filed the administrative claims for refund with the BIR for input taxes incurred during the TY 2015. Lastly, petitioner insists that respondent's issuance of a pa11ial disallowance of its administrative claim for refund will undoubtedly show that it was able to comply with the substantiation requirements, albeit incomplete, under the law and existing regulations and that input taxes were indeed incurred and paid in 20 15. On the other hand, in his Comment, respondent points out that petitioner is not entitled to refund for fai lure to prove that it is registered with and endorsed by the DOE and that it has zero-rated sales during the 41h quat1er of TY 2015 . Further, respondent asserts that petitioner cannot rely on the pmtial disallowance of its administrative claim as it was merely a recommendation and was ultimately reversed by respondent himself. After due consideration, the Cowt finds petitioner's Motion for Reconsideration bereft of merit. It must be stressed that claims for refund or tax credits of unutilized input taxes is governed by Section 112 of the National Internal Revenue Code of 1997, as amended, ("the Tax Code'') , which provides in pmt that: SEC. 112. Refunds or Tax Credils 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)( l ), (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 Sentral ng Pilipinas (BSP): Provided, f urther, That where the taxpayer is ~ engaged in zero-rated or effecti vely zero-rated sale and also in taxable or,............ G.R. No. 188260, November 13, 20 13. 4 RepublicActNo.9 163.

RESOLUT ION CTA Case No. 9784 Page 3 of5 exempt sale of goods or 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 l 08(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (Emphases, Ours) The foregoing provision is clear and straightforward. A taxpayer is entitled to a refund or tax credit of its unutilized input taxes attributable to zero-rated or effectively zero-rated sales by filing a claim within two years from the close of the taxable quarter when the sales were made. The phrase "were made" is in the past tense, meaning sales already transpired or took place. Further, "the sales" clearly pet1ains to zero-rated or effectively zero- rated, not any other sales. Consequently, zero-rated or effectively zero-rated sales must have already transpired or took place during the period of claim for a claim for refund or tax credit to prosper. This is the reason why in claims for input tax refund, it is critical to prove,fi.rst andforemost, that zero-rated sales were reported during the taxable quarter of claim upon which the input taxes may be attributed to, and not during any other taxable qua11er. Thus, even without resorting to the ruling in Luzon Hydro, the applicable law itself governing claims for input tax refund or tax credits is already clear on the matter. Further, petitioner cannot take exception from the ruling in Luzon Hydro because it has the same circumstances in said case, where the only difference is the nature of the renewable source of energy (i.e. hydro and solar). The fact that petitioner's nature of operations qualifies for zero-rating pursuant to the EPIRA Law, in relation to the Tax Code, only proves that it is entitled to said tax incentives but does not necessarily prove that such sales indeed existed. In claims for input tax refund, one of the requisites to be proven by the taxpayer-claimant is that it is engaged in zero-rated or effectively zero-rated sales. Proving engagement in zero-rated or effectively zero-rated sales has two components: 1.) The nature of the sales qualify as zero-rated or effectively zero-rated sales under Sections 106(A)(2) and 108(B) of the Tax Code; and 2.) Said sales are properly substantiated in accordance with Section 113, in relation to Section 236, ofthe Tax Code. Unfmtunately, in this case, petitioner failed to prove either. As already discussed in the Assailed Decision, petitioner fai led to submit the complete necessary documentary evidence (i. e. DOE Certificate opfaRrtiecguilsatrrlaytiounn)dteor~ prove that its nature of sales qualifies for zero-rating,

RESOL T I0 1 CTA Case No. 9784 Section 106(A)(2)(a) (5) of the Tax Code in relation to the EPIRA Law and Republic Act No. 95135 and its respective implementing regulations. And equally fatal is petitioner' s failure to substantiate its zero-rated sales. In fact, nothing can be substantiated in the first place since there were no zero-rated sales in the period of claim. The Comi cannot consider the belated submission of petitioner's DOE Certificates of Registration and Endorsement in the present Motion for its failure to submit the same during trials. To this Court's mind, the documents are already forgotten evidence and are thus unacceptable. As held in Office of the Ombudsman v. Coronel,6 forgotten evidence refers to evidence already in existence or available before or during a trial; known to and obtainable by the party offering it; and could have been presented and offered in a seasonable manner, were it not for the sheer oversight or forgetfulness of the party or the counsel. Presentation of forgotten evidence is disallowed, because it results in a piecemeal presentation of evidence, a procedure that is not in accord with orderly justice and serves only to delay the proceedings. A contrary ruling may open the floodgates to an endless review of decisions, whether through a motion for reconsideration or for a new trial, in the guise ofnewly discovered evidence. Neither can the Comi consider the pattial disallowance of its administrative claim for refund as proof that respondent acknowledged, albeit pattially, the substantiation of petitioner' s input taxes in 2015. As already discussed in the Assailed Decision, said pattial disallowance is merely recommendatory and respondent himself already overturned this in his decision, dated January 22, 20 18. As to petitioner's argument that absence of zero-rated sales in 2015 is of no moment as it nevertheless already made zero-rated sales at the time of fil ing the administrative claim for refund in 2017, We find this entirely misplaced. To this Court's mind, petitioner is attempting to stretch the interpretation of Section 112(A) in a manner far from what the provision clearly states. The period covered by the administrative claim is entirely different from the p rescriptive p eriod within which to file the administrative claim. The two-year period to fi le an administrative claim for refund is solely for prescription purposes and is not intended to be utilized as a consideration with respect to the determination of the presence of zero-rated sales in the period of claim. As such, a taxpayer' s revenue-generating status at the time of filing the administrative claim for refund is of no re levance to the claim itself. Since petitioner admitted that it did not generate any zero-rated sales during the 41h quatier of 201 5, or the period of claim, there is nothing to attribute its input taxes to. Consequently, nothing can be refunded Y 5 Otherwise known as the " Renewable Energy Act of 2008". 6 G. R. No. 164460, Jun e 27, 2006.

RESOLUTION CTA Case No. 9784 Page 5 o f 5 Further, even assuming that the Court allows refund of petitioner's input tax for the 41h quarter of 2015 on the basis of zero-rated sales that it is yet to generate in 2016, petitioner nevertheless failed to satisfactorily prove that it did generate and reported zero-rated sales in 2016 or in 2017, when it filed the administrative claim. Petitioner did not submit its VAT Returns for the TYs 2016 and 2017 and its supporting VAT official receipts to show that it already generated and repmied zero-rated sales in those periods. While petitioner submitted its Audited Financial Statements and Income Tax Return for 2016, these are not the documents which accordingly suppmt or prove the existence of zero-rated sales for input tax refund purposes. In summary, petitioner failed to impress the Comt with cogent arguments to justify the reversal, amendment, or modification of the Assailed Decision. The same shall therefore not be disturbed. WHEREFORE, in light of the foregoing considerations, petitioner's Motion for Reconsideration (of the Decision dated December 7, 2021) is DENIED for lack of merit. SO ORDERED. MARIA RO ustice ! CONCUR: ~- ~ ---Y- MA. BELEN M. RINGPIS-LIBAN Associate Justice