MTI ADVANCED TEST DEVELOPMENT CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPlJHLlC OF TH~ l'HlLlPPlNE~ Court of Tax Appeals QUEZON CITY Third Division MTI ADVANCED TEST CTA CASE NO. 9690 DEVELOPMENT CORPORATION, Members: UY, Chairperson, Petitioner, RINGPIS-LIBAN, and MODESTO-SAN PEDRO, JJ -versus- COMMISSIONER OF INTERNAL Promulgated: REVENUE, Respondent. FEB 2 4 2022 X --------------------------------------------------------------------------- ~--- 7-~ LP.. _ e. _�_ ~_: _________ x AMENDED DECISION MODESTO-SAN PEDRO, J. For the Court's resolution are the following: (1) Petitioner's Motion for Partial Reconsideration (of the Decision dated February 23, 2021 ), 1 filed on 22 March 2021 without respondent's Comment despite order;2 and (2) Respondent's Motion for Partial Reconsideration ,3 filed through registered mail on 23 March 2021 and received by this Court on 20 May 2021, with petitioner's Comment/ Opposition (to Respondent's Motion for Partial Reconsideration dated March 22, 2021 ), filed on 15 November 2021.4 Both Motions seek partial reconsideration of the Court's Decision, dated 23 February 2021 ("Assailed Decision"), which partially granted petitioner's claim for refund for the period 1 July 2015 to 30 September 201 ~ 1 Division Records Vol. I, pp. 494 -50 I. 2 !d., pp. 509-5 10. !d. I, pp. 502-508 . 4 !d., pp. 513-515.

(2 11u Quarter) and tor tile penoc1 1 January LUlb ana Jl JVtarcn LVJo ~'+ Quarter) in the aggregate amount of-P957 ,300.81. Petitioner's Motion for Partial Reconsideration In its Motion, petitioner explains that "Microchip Technology Ireland" and "Microchip Technology Ireland Limited" are one and the same entity, the former being subsequently re-registered as a limited company. Petitioner further explains that since the period of claim covers sales to "Microchip Technology Ireland" prior to its re-registration as a limited company, the supporting documents such as the billing invoices and otlicial receipts would only show the name of "Microchip Technology Ireland". However, since the application for VAT Refund took place after the customer's re-registration as a limited company, the Certificate of Incorporation only showed its name as a limited company which the SEC adopted when it issued the SEC Certificate of Non-Registration. As such, petitioner submits that the SEC Certificate of Non- Registration of ''Microchip Technology Ireland Limited" is sufficient compliance to qualify for VAT zero-rated the sales to "Microchip Technology Ireland". Petitioner also attached the original SEC Certification of Non-Registration of ''Microchip Technology Ireland" as an annex to its Motion for Patiial Reconsideration. Petitioner thus prays that the Assailed Decision be set aside a new one be rendered granting the refund and ordering respondent to refund or issue a tax credit certificate in its favor in the amount of P6,027 ,683.09 representing unutilized input VAT attributable to zero-rated sales for the 2nd and 4111 quarters of fiscal year ending 31 March 2016. Respondent's Motion for Partial Reconsideration Meanwhile, in its Motion, respondent prays that the Court's Decision, dated 23 February 2021, be set aside and another one be rendered denying petitioner's claim for refund of its excess and/or unutilized input VAT for the periods 1 July 2015 to 30 September 2015 and 1 July 2016 to 31 March 2016. Respondent argues that services rendered by petitioner to its customer, ''Microchip Technology Incorporated", is not VAT zero-rated, considering that the customer is an entity doing business in the Philippines")!,

ln Uppos1t10n, petltloner ms1sts mm me Loun correcuy JuuHu uJaL "Microchip Technology Incorporated" is not doing business in the Philippines. The Ruling of the Court After a thorough review of the records and consideration of the arguments of the parties, the Court finds merit in petitioner's Motion for Partial Reconsideration but none in respondent's Motion for Partial Reconsideration. The sales to '"Microchip Technology Ireland" qualify for VAT zero-rating The Assailed Decision did not consider the sales to "Microchip Technology Ireland" as VAT zero-rated for petitioner's failure to present the SEC Certification or Non-Registration which establishes that the customer is a non-resident foreign corporation. It held: --However. a perusal of the records reveals that only Microchip Technology Incorporated and Microchip Technology Ireland Limited have both the SEC Certificate of Non-Registration and proof of incorporation/ registration in a foreign country. We summarize the proofs as follows: ~--~~--~- ~~-~--- ~~--~----------~.~~-�--~�---- ---~- Customer 1 SEC Intragroup Services Agreement/ Certificate of Articles of Non- Incorporation/ Association/ Registration [ Certificate of Incorporation/ , Memorandum of Association of Customers Issued in Their I Respective Countries Clearly. then. it being shown that Microchip Technology Ireland did not ha\'e an SEC Certificate of Non-Registration. the sales to it cannot qualify for VAT zero-rating purposes..:� As earlier discussed, petitioner insists that "Microchip Technology Ireland" and "Microchip Technology Ireland Limited" are the same entity. and, thus, the SEC Certificate of Non-Registration of the latter also pertain~

and refers to the tonner. Pet1t10ner reters to the Lerttttcate ot lncorporatton� that was examined by the ICPA which would show that "Microchip Technology Ireland Limited" was formerly registered as "ULC- Private Unlimited Company." In its Motion for Partial Reconsideration, petitioner also attached as an annex, the original Certification of Non-Registration of "Microchip Technology Ireland" ,6 issued by the Securities and Exchange Commission ("SEC") on 15 March 2021. Seeking the relaxation of procedural rules, petitioner cites BPI-Fami(~' Savings Bank v. Court ofAppea/:o,} where it was held that in the interest of substantial justice, equity, and fair play, technicalities and legalisms, however exalted, should not be misused by the government to keep money not belonging to it and thereby enrich itself at the expense of its law-abiding citizens. The Court finds petitioner's explanation tenable. Proceedings before the Court of Tax Appeals are not governed strictly by technical rules of evidence.s The paramount consideration remains the ascertainment of truth.9 In Commissioner of Internal Revenue v. De La Salle University, 10 the Supreme Court recognized that the CTA may consider evidence attached to the motion for reconsideration: ��second. the CTA is not governed strictly by the technical rules of evidence. The CTA Division's admission of the formal offer of supplemental e\�idencc. without prompt objection from the Commissioner, was thus justified. Notably. this Court had in the past admitted and considered evidence attached to the taxpayers' motion for reconsideration. In the case of BP1-Fomily So1�ings Bonk\'. ('our! o/Appeols. the tax refund claimant attached to its motion for reconsideration with the CT!\its Final /\djustmcnt Return. The Commissioner. as in the present case. did not oppose the taxpayer's motion for reconsideration and the admission of the Final Adjustment Return. We thus admitted and gave weight to the Final Adjustment Return although it \Vas only submitted upon motion for reconsideration. We held that v\hile it is true that strict procedural rules generally frown upon the submission of documents after the triaL the law creating the CTA specifically provides that proceedings before it shall not be governed strictly by the technical rules of evidence and that th~ Exhibit ''ICPA-Pll-13". /d. p, :'\00. G.R. No. 1:?:?480. 1:? April :?000. ' Section 8. Republic Act No. 11:?5 (An Act Creating the Court ofTax Appeals). as amended by Republic Act No. 9:?8:?. Filinvcst De\elopmcnt Corp.\. Commissionct�or Internal Revenue. G.R. No. 146941. 9 August :?007. 111 (i.R. Nos. 196596. 198841. and 198941. 9 Nove111ber 2016.

paramount consHJcranon rcmams tne ascertammcnt 01 trurn. we rL!leo that procedural rules should not bar courts from considering undisputed facts to arrive at a just determination of a controversy. We applied the same reasoning in the subsequent cases of Fi/invest De1�e!opmenr ( 'orporotion 1'. ('om missioner of Internal Revenue and ( 'ommissioncr of!nrenwl Rnenuc 1'. PERF Rculty ( '01pororion. \\here the taxpayers also submitted the supplemental supporting document only upon filing their motions for reconsideration .... �� (Citations omitted. Emphasis. Ours.) In the present case, a fUJiher perusal of Exhibit "ICPA-P 11-13" shows that ""Microchip Technology Ireland Limited" was, indeed, formerly registered as "ULC- Private Unlimited Company." Respondent interposed no objection to the attached SEC Certification of Non-Registration for ""Microchip Technology Ireland". Meanwhile, the SEC Certification of Non-Registration of "'Microchip Technology Ireland" attached to the Motion for Reconsideration indicates that ""Microchip Technology Ireland" is foreign corporation. All these, taken together, remove any doubt in the Court's mind that "'Microchip Technology Ireland" and "Microchip Technology Ireland Limited" are the same entity and that the latter, similar to the former. is a non-resident foreign corporation. The Cowi also takes into consideration that the SEC Certification of Non-Registration of "'Microchip Technology Ireland" pertains to a document obtained from the SEC. As such, it is considered as a public document which may be admitted \vithout further proof of their due execution and authenticity. 11 From the foregoing, the Court shall consider the sales to "Microchip Technology Ireland Limited" as the same sales of'"Microchip Technology Ireland", which qualify for VAT zero-rating. Respondent's Motion for Partial Reconsideration is bereft of merit. In its Motion for Partial Reconsideration, respondent avers that "'Microchip Technology Incorporated" is an entity doing business in the Philippines and thus, sales to this customer do not qualify for VAT zero- rating...... . This issue has been considered and passed upon by this Court in the Assailed Decision. The Intragroup Services Agreement, Articles of Incorporation/Association, Certi ficatc of Incorporation, and Memorandum of~ 11 Ci.R. No. 174461. II Scptember2013.

Association of Customers Issued in Their Kespect1ve Lountnes'"' arc pnma fc7cie evidence that the clients are not doing business Philippines 13 which have not been contradicted by respondent's evidence. Re-computation of refundable amount. The Court affirms its findings in the Assailed Decision on petitioner's compliance with the remaining requisites to be entitled to refund or tax credit of input tax attributable to zero-rated sales particularly on the timely filing of the administrative and judicial claims and that the input taxes were not applied against any output VAT liability. The Court reiterates and clarifies that petitioner's Quarterly VAT Returns for the 2nd and 4th Quarters of fiscal year ending 31 March 2016 show that petitioner had no output tax liability against which the claimed input VAT may be applied or credited. 14 The input VAT claimed for the 2nd and 4th quarters of fiscal year ending 31 March 2016 in the amount ofP3,717,193.03 and P2,601,068.29 was reflected in the column ''VAT Refund/TCC Claimed" in the subsequent VAT returns of petitioner immediately after the subject period of claim (i.e. Jid Quat1er of fiscal year ending 2016 and 1st Quarter of fiscal year ending 20 17). 15 With the finding of petitioner's compliance with the requisites for VAT refund, the Court shall proceed with the re-computation of the refundable amount. For the 2nd and 4th quarters of fiscal year ending 31 March 2016, petitioner repm1ed sales of PI 03,892,434.81 and P 78,293,277.70, in the --- aggregate amount of P 182,185,712.51: ~----------- -~-p; Second Quarter Fourth Quarter (1 .July 2015 to (1 January 2016 to 30 j. September 2015) 16 31 March 2016) 17 ------ - ---- ---- ------� ---------- ------- --------------------�� -----------------------~------------ vi\Tabk Sales/ Receipts 1 r - P - ~,:---- - - - - - - - - - -- ---- - ---------- ~ale to Government _ - _ - I 1- Zero--~ate~ Sales/ R~ceipts 103.892.43~.81 78293277.70 , . ~"xempt Sales/ Recctpts - - , ~-Total &ties/ R~~eipt;- -- j P 103,892,.B4.81 P-7s:293,2-TI.70~ --] - ---~------------------ - - - - L__ --- ---- -- 1' s�ec ICP/\ Report. p 10. id.. p. 175. 1 Commissioner of Internal Revenue v. Deutsche !<.nO\\ ledge Services Pte. Ltd .. Ci.R. No. 234445. I5 ' Juh 2020 11 Sc'c bhibits ��J>-1 .. and "P-2." id. pp. 340-350 ancl355-356. 1 E:-.:hibits "P-12" and "P-12-a"'. id .. p. 176: f-.:-.:hibits '�P-lY' and "P-13-a". Answer 19. 1d. p. 418: Folder ' 5. pp. 568-569 and 565-564. 1 F:-.:hibit "P-1". Division Records Vol. I. pp. 349-350. " 1 hhibit "P-2". id. pp. 355-356. -

Meanwhlie, the substanttated mput VA 1 was determmed m the Assailed Decision to be as follows: -~ p 6,318261.32 504,325.06 Input VAT Claim Less: Disallovvances 213,746.83 I P6,027,683.09 Add: Reclassification of Input VAT Incorrectly I c:lassificd as Dcl~rred Input~�~ T ~i�om ,ciP- Capital l1oods Instead o t Purchase ot Serv1ces 1x ~~--~ 1 Substantiated Input VAT Claim However, the substantiated input VAT claim was prorated based on the valid zero-rated sales as follows: r---V--al.id Zero-Rated Sales per the Court's Verification P28,934,256.89 182,185,712.51 Divided by: Total Receipts per Return 6,027,683.09 .Multiplied c-------~ ~ by: Substantiated Input VAT P 9~7,300.81 ~-- ~-- i_L~I?ll_t VAT att~ib_u_!~IJI~_to Zero:gatcdS~Ies �~ Accordingly, the Assailed Decision only ordered the refund of P957,300.81. With our finding that "Microchip Technology Ireland Limited" is also qualified for VAT zero-rating, the total substantiated input VAT claim of P6,027,683.09 should now be granted to petitioner. WHEREFORE, in light of the foregoing considerations, petitioner's Motion for Partial Reconsideration is GRANTED. Meanwhile, respondent's Motion for Pmiial Reconsideration is DENIED for lack of merit. Accordingly, the assailed Decision dated 23 February 2021 is hereby amended to read: "'WHEREFORE, premises considered, the instant Petition for Review filed by MTI Advanced Test Development Corporation, is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of Six Million Twenty-Seven Thousand Six Hundred Eighty-Three Pesos 09/100 (P6,027,683.09) representing its unutil ized input VAT for the periods 1 July 2015 to 30 September 2015 and I January 2016 to 3 1 March 2016. SO ORDERED.~ 1' See Annex r�- JCPA ReporL id. p. 2TJ..

SO ORDERED. /.-�"')' ... " ' v/~ 0-SAN PEDRO WE CONCUR: ER~UY Associate Justice '12vf.~ ,./I ~ MA. BELEN M. RINGPIS-LIBAN Associate Justice ATTESTATION I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion ofthe Court's Division. ER~UY Associate Justice Chairperson 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 Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice