American Express International, Inc.-Philippine Branch v. Commissioner of Internal Revenue

[C.T.A. CASE NO. 5308. December 29, 1997.] AMERICAN EXPRESS INTERNATIONAL, INC. PHILIPPINE BRANCH , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . D E C I S I O N This is a judicial action for the refund of the sum of P1,980,102.28, representing value-added taxes paid on domestic purchases of taxable goods and services for the period January 1, 1994 to December 31, 1994. The antecedent facts of the case are as follows: Petitioner is a Philippine branch of American Express International, Inc., [AMEX, for brevity] (Hongkong Branch), a corporation duly organized and existing under and by virtue of the laws of Hongkong, with office address at Ground Floor, ACE Building, corner Rada and De La Rosa Streets, Legaspi Village, Makati City. 1 Its primary function is to facilitate collection of AMEX receivables from card members situated in the Philippines and payment to service establishments in the Philippines. Pursuant to Section 107 of the National Internal Revenue Code, as amended, petitioner registered itself as a value-added tax entity with VAT Registration No. 32A-3-004868 effective March 1988 (Exh. A, Petitioner, p. 51, CTA records). Later, on June 30, 1994, it re-registered itself as a VAT taxpayer with Tax Identification Number 047-000-106-198-V/NV (Exh. A-1, Petitioner, p. 52, CTA records). For the period January 1, 1994 to December 31, 1994, petitioner alleges that it earned revenues in the amount of P61,341,088.62, which were paid for in acceptable foreign currency inwardly remitted to the Philippines in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (formerly Central Bank of the Philippines). Petitioner further avers that these revenues were zero-rated based on Section 102(a)(2) of the National Internal Revenue Code, as amended. Also, for the same period, petitioner further alleges that it incurred and paid VAT input taxes on its domestic purchases of taxable goods and services in the sum of P1,980,102.28 which were all directly attributable to its zero-rated revenues. On December 8, 1995, petitioner filed an application for the refund of VAT input taxes with the Bureau of Internal Revenue in the amount of P1,980,102.28, representing unutilized input taxes for the year 1994 (Exhs. E and E-1, Petitioner, pp. 66-69, CTA records). Without waiting for an action from the respondent, petitioner filed the instant petition for review on December 27, 1995 in order to preserve its right to judicially claim the refund of unapplied input value-added tax. The issue presented before Us is whether or not petitioner is entitled to the amount of P1,980,102.28 representing VAT input taxes paid for the period January 1, 1994 to December 31, 1994. At this juncture, it is noteworthy to point out that parties herein are not in dispute that petitioner's sales of services during the year 1994 are zero-rated pursuant to Section 102(a)(b) of the National Internal Revenue Code, as amended, since the consideration received by petitioner from AMEX is paid for in acceptable foreign currency inwardly remitted to the Philippines in accordance with the rules and regulations of Bangko Sentral ng Pilipinas. Thus, what remains for Us to determine is the accuracy of the amount sought to be refunded. In support of its claim for refund, petitioner presented various documentary exhibits which consist, among others, of: 1. Monthly VAT declarations (Exhs. C to C-7, Petitioner, pp. 54-61, CTA records); 2. Value-Added Tax (VAT) Returns (Exhs. D to D-3, Petitioner, pp. 62-65, CTA records); 3. Certification by Punongbayan & Araullo with respect to petitioner's Schedule of Input Taxes paid and Schedule of Zero-rated Revenues for the period January 1, 1994 to December 31, 1994 (Exhs. F and F-1, Petitioner, pp. 82-83, CTA records); and 4. Photocopy of supplier's sales invoices and/or official receipts for the subject period (Exhs. G to G-770, 4 separate folders). On the other hand, respondent presented in evidence the following documents: 1. Letter of Authority No. 86190, dated February 1, 1996 (Exh. 1 to 1-b, Respondent, p. 127, CTA records); and 2. Memorandum report of investigation conducted by Revenue Officer, Andres J. Gabagat, Jr., dated January 6, 1997, recommending the amount of P1,002,582.47 as rightful refund for the petitioner together with the attachment of working paper for disallowed input taxes (Exhs. 2 to 2-j, Respondent, pp. 128-137, CTA records). A scrutiny of the evidence presented by both parties, reveals that petitioner is entitled only to the reduced amount of P1,449,814.05, computed as follows: VAT Input Taxes Per CPA Schedule Disallowances Refundable Period Covered (Exhs. F-1-1) (See Annex A) Input Taxes 01-01-94 to 03-31-94 P370,627.19 P118,021.40 P252,605.79 04-01-94 to 06-30-94 723,427.04 54,351.40 669,075.64 07-01-94 to 09-30-94 339,501.17 54,316.57 285,184.60 10-01-94 to 12-31-94 361,621.12 118,673.10 242,948.02 TOTAL P1,795,176.52 P345,362.47 P1,449,814.05 =========== ========= =========== This amount was arrived at after individual examination of petitioner's pre-marked invoices in support of its claim for refund (Exhs. G to G-770, inclusive) as well as the worksheet prepared by Mr. Gabagat, the revenue officer who examined petitioner's claim for refund (Exhs. 2-c to 2-j, inclusive). The schedule of Disallowed Input Taxes for the calendar year 1994 is hereto attached as Annex "A". LLjur WHEREFORE, in view of the foregoing, respondent is hereby ORDERED TO REFUND in favor of petitioner the sum of P1,449,814.05, representing VAT input taxes paid on domestic purchases of goods and services for the period January 1, 1994 to December 31, 1994. SO ORDERED. AMANCIO Q. SAGA Associate Judge WE CONCUR: ERNESTO D. ACOSTA Presiding Judge RAMON O. DE VEYRA Associate Judge AMERICAN EXPRESS INTERNATIONAL, INC. PHILIPPINE BRANCH SCHEDULE OF DISALLOWED INPUT TAXES ANNEX "A" For the Year 1994 JANUARY 1, 1994 TO MARCH 31, 1994: INVOICE/ AMOUNT OF INPUT SUPPLIER O.R. NO. Exh. TAX CLAIMED REMARKS Asia Pacific Computer Tech. Center Inc. 23 G P4,075.00 No BIR permit to print Chinese Telephone Directory 164 G-3 1,963.64 Statement of account Collector of Customs 16174365 37,257.00 No document D'Robe Security Agency, Inc. 6309 G-36 747.95 Not in the name of petitioner GC Emery Sales, Inc. 61335 318.18 No document JRS Business Corporation 180451 G-60 3.09 Charge service job order and not in the name of petitioner JRS Business Corporation 223632 G-60 3.09 -do- JRS Business Corporation 223661 G-61 3.09 -do- JRS Business Corporation 180550 G-61 3.09 -do- JRS Business Corporation 223672 G-62 3.09 -do- JRS Business Corporation 223668 G-62 3.09 -do- JRS Business Corporation 223682 G-63 3.09 -do- JRS Business Corporation 223676 G-63 3.09 -do- JRS Business Corporation 223701 G-64 3.09 -do- JRS Business Corporation 223684 G-64 3.09 -do- JRS Business Corporation 223764 G-65 3.09 -do- JRS Business Corporation 223729 G-65 3.09 -do- JRS Business Corporation 223782 G-66 3.09 -do- JRS Business Corporation 223774 G-66 3.09 -do- JRS Business Corporation 223802 G-67 3.09 -do- JRS Business Corporation 223801 G-67 3.09 -do- JRS Business Corporation 223814 G-68 3.09 -do- JRS Business Corporation 180432 G-70 3.09 -do- JRS Business Corporation 180418 G-70 3.09 -do- JRS Business Corporation 180445 G-71 3.09 -do- JRS Business Corporation 180436 G-71 3.09 -do- JRS Business Corporation 223539 G-72 3.09 -do- JRS Business Corporation 223523 G-72 3.09 -do- JRS Business Corporation 223551 G-73 3.09 -do- JRS Business Corporation 223541 G-73 3.09 -do- JRS Business Corporation 223571 G-74 3.09 -do- JRS Business Corporation 223561 G-74 3.09 -do- JRS Business Corporation 223580 G-75 3.09 -do- JRS Business Corporation 223573 G-75 3.09 -do- JRS Business Corporation 223589 G-76 3.09 -do- JRS Business Corporation 180358 G-77 2.73 -do- JRS Business Corporation 180246 G-78 2.73 -do- JRS Business Corporation 180237 G-78 2.73 -do- JRS Business Corporation 180233 G-79 2.73 -do- JRS Business Corporation 180232 G-79 2.73 -do- JRS Business Corporation 180329 G-80 2.73 -do- JRS Business Corporation 180328 G-80 2.73 -do- JRS Business Corporation 180327 G-81 2.73 -do- JRS Business Corporation 180314 G-81 2.73 -do- JRS Business Corporation 180224 G-82 2.73 -do- JRS Business Corporation 180221 G-82 2.73 -do- JRS Business Corporation 180220 G-83 2.73 -do- JRS Business Corporation 180216 G-83 2.73 -do- JRS Business Corporation 180294 G-84 2.73 -do- JRS Business Corporation 180202 G-84 2.73 -do- JRS Business Corporation 180282 G-85 2.73 -do- JRS Business Corporation 180281 G-85 2.73 -do- JRS Business Corporation 180280 G-86 2.73 -do- JRS Business Corporation 180275 G-86 2.73 -do- JRS Business Corporation 180272 G-87 2.73 -do- JRS Business Corporation 180267 G-87 2.73 -do- JRS Business Corporation 180260 G-88 2.73 -do- JRS Business Corporation 180181 G-88 2.73 -do- JRS Business Corporation 180170 G-89 2.73 -do- JRS Business Corporation 180169 G-89 2.73 -do- JRS Business Corporation 180168 G-90 2.73 -do- JRS Business Corporation 180145 G-90 2.73 -do- JRS Business Corporation 180141 G-91 2.73 -do- JRS Business Corporation 180129 G-91 2.73 -do- JRS Business Corporation 180127 G-92 2.73 -do- JRS Business Corporation 180124 G-92 2.73 -do- JRS Business Corporation 180476 3.09 No document JRS Business Corporation 180487 3.09 No document Ogilvy & Mather 2603 3,115.64 No document Ogilvy & Mather 2871 2,500.00 No document Ogilvy & Mather 2603 65,814.34 No document One-on-one 0078 1,986.14 No document The Love Garden 36720 G-155 60.00 Order slip TOTAL P118,021.40 ========= FEBRUARY 1, 1994 TO JUNE 30, 1994: INVOICE/ AMOUNT OF INPUT SUPPLIER O.R. NO. Exh. TAX CLAIMED REMARKS Collector of Customs 1614374 P40,477.00 No document Delta Plumbing & Construction 86398 G-189 13.64 Pay to cash DHL Philippines Construction 3880 52.84 No document Equicom Computer Services, Inc. 8584 80.00 No document Hanover Hardware 107997 G-224 571.91 Not in the name of petitioner JC Carpenters Treasure House 326 727.27 No document JRS Business Corporation 223833 G-244 3.09 Charge service job order and not in the name of petitioner JRS Business Corporation 223832 G-244 3.09 -do- JRS Business Corporation 223853 G-245 3.09 -do- JRS Business Corporation 223852 G-245 3.09 -do- JRS Business Corporation 223879 G-246 3.09 -do- JRS Business Corporation 223859 G-246 3.09 -do- JRS Business Corporation 223892 G-247 3.09 -do- JRS Business Corporation 223908 G-247 3.09 -do- JRS Business Corporation 223956 G-248 3.09 -do- JRS Business Corporation 223910 G-248 3.09 -do- JRS Business Corporation 223988 G-249 3.09 -do- JRS Business Corporation 223940 G-249 3.09 -do- JRS Business Corporation 314286 G-250 3.09 -do- JRS Business Corporation 314053 G-251 3.09 -do- JRS Business Corporation 314232 G-254 3.09 -do- JRS Business Corporation 314231 G-254 3.09 -do- JRS Business Corporation 331501 G-624 3.09 -do- JRS Business Corporation 314472 G-624 3.09 -do- JRS Business Corporation 314467 G-625 3.09 -do- JRS Business Corporation 314367 G-625 3.09 -do- JRS Business Corporation 331501 G-624 3.09 -do- JRS Business Corporation 314472 G-624 3.09 -do- JRS Business Corporation 314467 G-625 3.09 -do- JRS Business Corporation 314366 G-626 3.09 -do- JRS Business Corporation 314499 G-626 3.09 -do- JRS Business Corporation 314309 G-627 3.09 -do- JRS Business Corporation 314218 G-628 3.09 -do- JRS Business Corporation 314135 G-628 3.09 -do- JRS Business Corporation 314079 G-629 3.09 -do- JRS Business Corporation 314078 G-629 3.09 -do- JRS Business Corporation 314260 G-631 3.09 -do- Kimberly Clark Philippines, Inc. 212780 99.49 No document Organization Management and Dev. 65 1,650.00 No document Rubicon Graphics and Printing Services 2572 77.27 No document Sparks 995 6,754.55 No document Tamaraw Reinforced Armored Car Ser. Inc. 8104 G-354 1,355.00 Statement of account Tamaraw Reinforced Armored Car Ser. Inc. 8010 G-355 500.00 Statement of account The Wyatt Company (Phils.) Inc. 6113 1,700.00 No document Whalecard Enterprises 7431 196.64 Statement of account TOTAL P54,351.40 ======== JULY 1, 1994 TO SEPTEMBER 30, 1994 INVOICE/ AMOUNT OF INPUT SUPPLIER O.R. NO. Exh. TAX CLAIMED REMARKS Anchor Umbrella Industries 2193 P45.00 No document Collector of Customs 16174383 40,073.00 No document Equicom Computer Services, Inc. 8822 75.00 No document Equicom Computer Services, Inc. 8839 145.45 No document Equicom Computer Services, Inc. 8892 347.73 No document Equicom Computer Services, Inc. 8872 22.73 No document Equicom Computer Services, Inc. 8610 75.00 No document Equicom Computer Services, Inc. 8632 102.73 No document Equicom Computer Services, Inc. 8662 80.00 No document Equicom Computer Services, Inc. 0009543 1,773.09 No document Equicom Computer Services, Inc. 8611 22.73 No document Equicom Computer Services, Inc. 0009394 15.00 No document Equicom Computer Services, Inc. 8834 22.73 No document Equicom Computer Services, Inc. 0009515 1,395.45 No document JRS Business Corporation 334624 3.09 No document not in the name of petitioner JRS Business Corporation 331619 3.09 No document JRS Business Corporation 446130 G-439 3.09 Charge service job order JRS Business Corporation 446119 G-439 3.09 -do- JRS Business Corporation 446181 G-440 3.09 -do- JRS Business Corporation 446146 G-440 3.09 -do- JRS Business Corporation 331726 G-441 3.09 -do- JRS Business Corporation 331624 G-442 3.09 -do- JRS Business Corporation 331619 G-442 3.09 -do- JRS Business Corporation 331570 G-443 3.09 -do- JRS Business Corporation 331516 G-443 3.09 -do- JRS Business Corporation 331928 G-444 3.09 -do- JRS Business Corporation 331958 G-445 3.09 -do- JRS Business Corporation 331931 G-446 3.09 -do- JRS Business Corporation 331930 G-446 3.09 -do- JRS Business Corporation 331886 G-447 3.09 -do- JRS Business Corporation 331909 G-447 3.09 -do- JRS Business Corporation 331773 G-448 3.09 -do- JRS Business Corporation 331768 G-448 3.09 -do- Lane Moving & Storage 34145 487.60 No document Modern Business Methods, Inc. 48012 G-658 568.91 The same item in Exh. 649 One-on-One 0113 389.90 No document One-on-One 0112 688.52 No document One-on-One 0114 55.84 No document Robbie Stylographic 0185 1,045.45 No document Robbie Stylographic 6704 1,932.73 No document Tamaraw Reinforced Armored Car Ser. Inc. G-757 1,518.00 Statement of account Tamaraw Reinforced Armored Car Ser. Inc. 8529 G-533 500.00 Statement of account Tamaraw Reinforced Armored Car Ser. Inc. 8443 G-534 500.00 Statement of account Tamaraw Reinforced Armored Car Ser. Inc. 8530 G-535 500.00 Statement of account U-Bix Corporation 100798 G-542 827.27 Debit/Credit memo The Wyatt Company (Phils.) Inc. 6487 1,048.00 No document TOTAL P54,316.57 ======== OCTOBER 1, 1994 TO DECEMBER 31, 1994 INVOICE/ AMOUNT OF INPUT SUPPLIER O.R. NO. Exh. TAX CLAIMED REMARKS AD-Cubes, Inc. 3813 P6,390.00 No document Anhawan Company 010182 3,357.95 No document BCD-Pinpoint 1385 450.00 No document Collector of Customs 16174392 24,318.00 No document Collector of Customs 16174392 22,621.00 No document Computech 419 204.55 No document Computer Systems 409 194.68 No document JRS Business Corporation 446316 G-450 3.09 Charge service job order not in the name of petitioner JRS Business Corporation 446208 G-450 3.09 -do- JRS Business Corporation 446523 G-452 3.09 -do- JRS Business Corporation 446481 G-452 3.09 -do- JRS Business Corporation 446372 G-453 3.09 -do- JRS Business Corporation 446356 G-453 3.09 -do- Mode Matrix 0725 1,500.00 No document Mode Matrix 0650 7,424.30 No document Ogilvy & Mather 4487 2,910.48 No document Ogilvy & Mather 4488 3,181.14 No document One-on-One 0127 380.82 No document Rapid Lithographics & Publishing Inc. 405 1,022.73 No document Richie 2130 1,236.36 No document Robbie Stylographic 5980 16,817.27 No document Robbie Stylographic 6034 3,328.73 No document Robbie Stylographic 6041 782.73 No document Role Manufacturing 2328 1,272.73 No document Santis Delicatessen 0132 5,275.64 No document Sarabia Optical 43151 100.00 No document Sarabia Optical 43072 72.27 No document Tamaraw Reinforced Armored Car Ser. Inc. 10415 G-536 1,195.00 Statement of account Tamaraw Reinforced Armored Car Ser. Inc. 8556 G-537 500.00 Statement of account Time Globe, Inc. 255 4,100.00 No document Time Globe, Inc. 351 4,100.00 No document U-Bix Corporation 101618 G-538 827.27 Debit/Credit Memo Wiley Multi Sales 1797 5,090.91 No document TOTAL P118,673.10 ========= Footnotes 1. Later petitioner stated in its memorandum that it is a Philippine branch of American Express International, Inc., a corporation duly organized and existing under and by virtue of the laws of State of Delaware, U.S.A.