CTA Case No. 4987 (Decision)

REPUBLIC Of THE PHILIPPINES COURT Of TAX APPEALS QUEZON CITY INTEL PHILIPPINES C.T.A. CASE NO. 4987 MANUFACTURING, INC., Petitioner, - versus - COMMISSIONER Of INTERNAL REVENUE, Respondent. X- - - - - - - - - - - - - - - - - - - - - - - - - - X DECISION This oase Involves a olalm tor tax oredlt of value added tax <VAT) paid by petitioner on domeatlo purohase ot taxable goods and aervloes In the amount ot P3,423,428.36 for the period ooverlng June 1, 1991 to August 31, 1991. Petitioner alleged In Ita petition tor review, that It Ia a corporation duly organized and existing under and by virtue of the laws of the Republ lo of the Philippines with prlnolpal otfloe at 1321 Apollnarlo Street, Bangkal, Makatl, Metro Manila. It Is engaged primarily In the business ot designing, developing, manufacturing and exporting advanced and large-aoale Integrated olroult components, commonly referred to In the Industry as �vLsl� components or "IC's". As suoh, It registered as a VAT entity and

DECISION C.T.A. CASE NO. 4987 - 2- was Issued a VAT Registration Certlfloate No. 32A-3- 002649. For the quarter period from June 1, 1991 to August 31, 1991, 1t generated and reoorded �zero-rated export sales In the amount of P238,837,648.17. This amount was paid to petitioner In acceptable foreign ourrenoy and was Inwardly remitted In accordance with Central Bank regulations pursuant to Sec. 100(a) (1) of the Tax Code and Seo. 8(b) (1) of Revenue Regulations No. 8-87. For the same quarter, It flied Its VAT return (p. 18, CTA reo.) on September 20, 1991 whloh was stamped "received" by the Development Bank of the Philippines. Subsequently, petitioner amended auoh return <p. 19� ~� > which was flied and received by United Coconut PI ant era Bank�, Makat 1 Branch on March 20, 1992. Petitioner alleged that of the P3,831,087.86 VAT Input taxes 'paId whIch are d 1reot 1y attrIbutable to zero- rated sales, P3,423,428.36 had not been applied to any VAT output tax liability of petitioner during said taxable quarter or any succeeding quarters In aocordanoe with Sec. 106(a) of the Tax Code and Seo. 18(a) of Revenue Regulations No. e-87. As petitioner's export sales of P238,837,848.17 for �the period from June 1, 1991 to August 31, 1991 are not subject to 10' VAT but tb 0% rate of VAT, petitioner

DECISION C.T.A. CASE NO. 4987 - 8- fl led with the BIR on April 16, 1992, a olalm for tax oredlt of all Its VAT Input taxes paid for the period In the total amount of P8,377,047.92. Then on July 24, 1992, It flied with respondent an amended application for tax credit, adding the amount of P48,380.44 to the original amount of P3,377,047.92, thus Increasing the total amount claimed to P3,423,428.38. Considering that the two-year period within whloh a olalm for tax credit may be flied Is about to expire, petitioner flied on May 11, 1993 the Instant petition for review. The sole factual Issue confronting the Court In this oase Is whether or not petitioner Is entitled to the tax oredlt olatmed In the amount of P3,423,428.38 as VAT Input taxes paid during the period from June 1, 1991 to August 31, 1991. The Court rules In favor of petitioner on two grounds. First, In the hearings conducted� petitioner has submitted substantial evidence to prove Its olalm for tax credit. Among the most Important ones were the reoelpta or Invoices proving payments of VAT Input taxes for the period Involved (Exhs. "K" to "K-4229", lnoluslve), VAT registration oertlflcate of petitioner <Exh. "A"), VAT returns fl led for the subject quarter <Exh. "B" and "B-

DECISION C.T.A. CASE NO. 4987 - 4- 1">, applications for VAT refund/tax credit flied with the BIR <Exhs. "C", "C-1" and "C-2"), and the sates Invoices, airway btlls and bank credit memos for the same subject quarter (Exhs. "L" to "L-777", Inclusive). All of these documents or exhibits were properly Identified by Mrs. Nentta Sallgumba and Mr. Luletto Reyes, the witnesses presented by petitioner. Second, while the case was pending hearing. before this Court, respondent has acted favorably upon petitioner's olatm. Thus, on May 28, 1993 respondent Issued to petitioner Tax Credit Certificate with Serial Number 001899 In the amount of P850,516.54 <Exh. "H", Pet., p. 182, CTA reo. and Exh. "2", Reap., p. 270, BIR reo.). Then on February 28, 1994, respondent's examiner, Crlsoela A. Manalo, came out with a memorandum report of her t nvest 1gat 1on ( Exh. "I", Reap. ; p. 277, CT.A reo. ) stating therein that the amount allowable, per verification Is P2,630,246.27, details of which are contained In the following schedule <Exh. "1-.A", Reap., p. 276, BIR reo.), to wlta 1 '(.~ ~,..1, .r� �.)

DECISION C.T.A. CASE NO. 4987 - 6- 'SCHEDULE TO ACCOIPARY PROGRESS REPORT AIIOIId 81ullottd Total ill!L.TU 11pat Tu lnpvt Tu 810011d Quarter A to C p 832,121 .It Pt84,145.11 p 121,211.91 371,891.83 160,476.81 121,8&1.&0 o to F 903,046.11 131,718.01 864,188.87 t,038,82t.t1 8 to I - 711,286.00 II to Z Ptaa 1t87.17 1,on ,4et.81 n1s3o,24e.2l TOTAL Pl,483,433.t4' During the dlreot examination of her witness, oonduoted on ~anuary 31, 1995 by Atty. Abad, Ms. Manalo explained that the Input tax In the total amount of PB33,187.87 was disallowed due to violation of the Invoicing requirements. Thusa "Atty. Abad Q. Miss Witness, on page 2 of this report there Is a figure appearing under the head 1ng d Isa I 1owed 1nput tax .In the total amount of P833,1B7.87. WII I you Inform this Honorable Court why did you disallow this Input tax? A. disallowed these Input taxes as being olatmed by the petitioner by reason of violation of the Invoicing requirements. XXX XXX Q. x x x Will you explain to this Honorable Court what partloular violation of the lnvotolng regulation of the Bureau was violated by petitioner? A. For having no VAT registration number, others have no BIR permit, that's all. x x xft (pp. 11-12, ~. hearing of ~an. 31' 1995) 1 ' �,' ~'.'!'u[ (

DECISION C.T.A. CASE NQ. 4987 - 8- In the cross-examination done by Atty. Ong, Ms. Manalo further testified as follows. "Q. Are there any other violations aalde from these two? A. There are lnvoloes which are not In the name of the company. Q. In whose name were the lnvoloea Issued? A. It was Issued In general, sold to oaah. Q. Could you please tell us how muoh wll I be the disallowed Input taxes for each violation? A. I have no copy of the disallowances with me. Q. Where Is the copy of your disallowances? A. It Ia right there with the main docket. X X X" (p. 12, Ibid.) As respondent's examiner personalty examined all the original ooptes of petitioner's purchase Invoices, sates Invoices, official receipts, journal vouchers and general ledgers <see TSN, 1-31-95, pp. 16-18), the Court oould not find any Irregularity In the Investigation conducted relative to petitioner's olalm. It, therefore, adopts the faotual findings of respondent's examiner following the welt-entrenched rule that. "Findings of administrative or quasi- judicial agenoles whloh have aoqulred experttae/speolal knowledge because their jurisdiction Is oonflned to speolflo matters are aooorded not only respect but also finality." (Latohme Motoomul va.

l' DECISION C.T.A. CASE NO. 4987 - 7- Del a Paz, 187 SCRA 743; VI I tanueva va. Court of Appeals, 205 SCRA 837; Seabreno vs. Ala, 208 SCRA 359, VI I lanueva vs. Leodegarlo, Jr., 216 SCRA 838). However, considering that the amount of P2,830,246.27 whtoh was recommended as allowable Input tax has not been diMinished by P850~518.54, the amount of tax credit certificate earlier Issued to petitioner, the Court grants to petitioner a tax credit In the reduced amount of P1,779,729.73. This fact has been confirmed by no less than the counsel for petitioner, Atty. Ong, when he stated during the hearing of January 31, 1995 thata "Atty. Ong The 2.8 million, your Honor, Is the total amount at towable without deducting first the tax credit oertlfloate which was previously Issued." <p. 38, TSN, 1-31-951 underscoring supplied) WHEREFORE, In view of at I the foregoing, the Court grants petitioner's olalm for tax oredlt but only In the amount of P1,779,729.73 <P2,830,246.27 less P850,&16.54). The Court hereby ORDERS respondent to Issue In favor of petitioner a Tax Credit Certlfloate In the amount of P1,779,729.73 as VAT Input taxes paid on domestlo purchase of goods and services for the period from June 1, 1991 to August 31, 1991. {J ;�: .. '~, 1 l .� t.}U

'; DECISION - 8- C.T.A. CASE NO. 4987 ~lC_.~ SO ORDERED. ERNESTO D. ACOSTA Presiding Judge ~, f'~l..J.VIl~t RAMON 0. DE A Aasoofate Ju ge CERT IF I CA.T I ON I hereby certify that this deolslon was reached after due consultation with the member of the Court of Tax Appeals In accordance with Section 13, Article VIII of the Constitution. ~62.-~ ERNESTO D. ACOSTA Presiding Judge Court of Tax Appeals