Deutsche Knowledge Services Pte. Ltd. v. Commissioner of Internal Revenue

SPECIAL SECOND DIVISION [C.T.A. CASE NO. 8065. September 20, 2017.] For: Refund or issuance of a Tax Credit Certificate DEUTSCHE KNOWLEDGE SERVICES PTE. LTD. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION MINDARO-GRULLA , J p : This is a Petition for Review, filed by Deutsche Knowledge Services Pte. Ltd. as petitioner, against the Commissioner of Internal Revenue (CIR) as respondent, for the Court in Division, pursuant to Section 7 (a) (2) of Republic Act (RA) No. 1125, An Act Creating the Court of Tax Appeals, as amended, 1 as well as Rule 4, Section 3 (a) (2), in relation to Rule 8, Section 4 (a), of the Revised Rules of the Court of Tax Appeals (RRCTA). 2 It involves a claim for refund or issuance of a tax credit certificate (TCC) in the amount of P34,310,264.27, allegedly representing its excess and unutilized input value-added tax (VAT) on purchases of goods and services attributable to its zero-rated sales for the first (1st) quarter of calendar year (CY) 2008. Petitioner is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines by the Securities and Exchange Commission (SEC) on April 25, 2005, pursuant to the Omnibus Investments Code of 1987, as amended, and its implementing rules and regulations, to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 3 Petitioner is a VAT-registered taxpayer under Certificate of Registration No. OCN9RC0000270209 with Taxpayer Identification No. (TIN) 238-763-115-000. 4 On the other hand, respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR) who has the power to decide disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties imposed in relation thereto or other matters arising under the National Internal Revenue Code (NIRC) or other laws or portions thereof administered by the BIR. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner filed its 1st Quarterly VAT Return for CY 2008 on April 17, 2008, 5 and amended the same on May 19, 2008. 6 Also, petitioner's 2nd, 3rd, and 4th Quarterly VAT Returns for CY 2008 were filed on July 18, 2008, 7 October 14, 2008, 8 and January 19, 2009, 9 respectively. On March 29, 2010, petitioner submitted with respondent its administrative claim for refund or issuance of a TCC in the amount of P34,310,264.27, representing alleged unutilized input VAT attributable to zero-rated sales for the 1st quarter of CY 2008. 10 Due to the inaction of respondent on petitioner's claim for refund, petitioner filed the instant Petition for Review 11 before this Court on March 31, 2010. Respondent then submitted his Answer 12 on June 10, 2010. Petitioner's Pre-Trial Brief 13 and Respondent's Pre-Trial Brief 14 were filed on June 22, 2010 and July 5, 2010, respectively. Thereafter, the parties submitted their Joint Stipulation of Facts and Issues 15 on August 12, 2010, which the Court approved via Resolution 16 dated August 16, 2010. On even date, the pre-trial was terminated. Upon motion of petitioner, 17 the Court commissioned on December 9, 2010, Mr. Romeo A. De Jesus, Jr. as the Independent Certified Public Accountant (CPA) for the case. 18 To prove its claim, petitioner presented the testimonies of Mr. George Francisco and Mr. Romeo A. De Jesus, Jr. as its testimonial evidence. Then, petitioner formally offered its documentary exhibits, which the Court admitted except for Exhibits "TTT-980" and "TTT-981". 19 The documentary exhibits offered by the petitioner are as follows: Exhibit Description A Certificate of Registration and License of Deutsche Knowledge Services, Pte. Ltd. dated April 25, 2005 issued by the Securities and Exchange Commission (SEC). B Petitioner's Bureau of Internal Revenue (BIR) Certificate of Registration dated June 16, 2005. C Petitioner's Original Quarterly value-added tax (VAT) Return for the 1st Quarter of calendar year (CY) 2008 filed on April 17, 2008. D Petitioner's Amended Quarterly VAT Return for the 1st Quarter of CY 2008 filed on May 19, 2008. E Petitioner's letter claim for refund for the 1st Quarter of CY 2008 filed on March 29, 2010. F Petitioner's Application for Tax Credits/Refunds (BIR Form No. 1914) filed on March 29, 2010. G SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Asia Pacific. H SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Inlandsbank. I SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale New York. J SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale London. K SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Asia Pacific Holdings, Pte. Ltd. L SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Group Services PTY Limited. M SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Securities, Inc. N SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Hong Kong. O SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Jakarta. P SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Singapur. Q SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank (China) Co., Ltd. Shanghai Branch. R SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Asset Management (Asia) Limited. S SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Real Estate (Japan) Y.K. T SEC Certification of Non-Registration of Corporation/Partnership of DBOI Global Services Private Limited. U SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Bangkok. V SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Mumbai. W SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Seoul. X SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Filiale Taipei. Y SEC Certification of Non-Registration of Corporation/Partnership of Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office. Z SEC Certification of Non-Registration of Corporation/Partnership of DB Finance, Inc. AA SEC Certification of Non-Registration of Corporation/Partnership of DB Trust Company Limited Japan. BB Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office. CC Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale London. DD Intra-Group Service Agreement with Deutsche Asia Pacific Holdings Pte. Ltd. EE Intra-Group Service Agreement with Deutsche Group Services Pty Limited. FF Intra-Group Service Agreement with Deutsche Securities, Inc. GG Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Hongkong. HH Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Jakarta. II Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Singapur. JJ Intra-Group Service Agreement with Deutsche Bank (China) Co., Ltd., Shanghai Branch. KK Intra-Group Service Agreement with Deutsche Asset Management (Asia) Limited. LL Intra-Group Service Agreement with Deutsche Bank Real Estate (Japan) Y.K. MM Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Bangkok. NN Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Mumbai. OO Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Seoul PP Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale Taipei. QQ Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Inlandsbank. RR Intra-Group Service Agreement with Deutsche Bank Aktiengesellschaft, Filiale New York. SS Intra-Group Service Agreement with DBOI Global Services Private Limited. TT Intra-Group Service Agreement with DB Finance, Inc. UU Intra-Group Service Agreement with DB Trust Company Limited Japan. VV Authenticated Articles of Association of Deutsche Bank Aktiengesellschaft. WW Authenticated Certificate of Registration of Foreign Company of Deutsche Bank Aktiengesellschaft issued by the Acting Registrar of Companies, Singapore. XX Authenticated Certificate of Registration of Foreign Company of Deutsche Bank (Asia) Aktiengesellschaft from the Assistant Registrar of the Registrar of Companies and Businesses, Singapore. YY Authenticated Certification from Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office in One Raffles Quay, #15-00 South Tower, Singapore that it is a segment of Deutsche Bank AG and that it does not have a separate entity. ZZ Authenticated License and Change Location issued by the Banking Department of the State of New York to Deutsche Bank AG, New York Branch. AAA Authenticated Certification from the Registrar of Companies for England and Wales that Deutsche Bank Aktiengesellschaft have established a branch and continues to maintain a branch in England and Wales. BBB Authenticated Certificate of Incorporation on change of Name of Company of Deutsche Asia Pacific Holdings Pte. Ltd. from the Assistant Registrar of Companies and Businesses, Singapore. CCC Authenticated Certificate of Registration of a Foreign Company of Deutsche Group Services Pty Limited. DDD Authenticated Certified Copy of All Historical Registered Matters of Deutsche Securities, Inc. based in 11-1, Sanno Park Tower, Nagatacho 2-chome, Chiyoda-ku, Tokyo. EEE Authenticated Certificate of Registration of Oversea Company of Deutsche Bank Aktiengesellschaft, from the Registrar of companies Hong Kong. FFF Authenticated Business Registration (NO.D.15.6.2.30) of Deutsche Bank Aktiengesellschaft, Filiale Jakarta from the Menteri Keuangan, Indonesia. GGG Authenticated Certificate of Incorporation on change of Name of Deutsche Asset Management (Asia) Limited issued by the Assistant Registrar of Companies and Businesses, Singapore. HHH Authenticated Articles of Incorporation confirming that Deutsche Bank Aktiengesellschaft, Inlandsbank has its domicile in Frankfurt Main, Germany. III Authenticated Articles of Incorporation confirming that Deutsche Asia Pacific Holdings Pte. Ltd. is registered in the Registrar of Companies & Business of Singapore. JJJ List of Shareholdings 2008 (Verzeichnis des Anteilsbesitzes 2008) KKK Petitioner's Quarterly VAT Return for the 2nd Quarter of CY 2008 filed on July 18, 2008. LLL Petitioner's Quarterly VAT Return for the 3rd Quarter of CY 2008 filed on October 14, 2008. MMM Petitioner's Quarterly VAT Return for the 4th Quarter of CY 2008, filed on January 19, 2009. NNN Petitioner's Quarterly VAT Return for the 1st Quarter of CY 2009, filed on April 22, 2009. OOO Petitioner's Quarterly VAT Return for the 2nd Quarter of CY 2009 filed on July 17, 2009. PPP Petitioner's Quarterly VAT Return for the 3rd Quarter of CY 2009, filed on October 19, 2009. QQQ Petitioner's Quarterly VAT Return for the 4th Quarter of CY 2009, filed on January 25, 2010. RRR Petitioner's Quarterly VAT Return for the 1st Quarter of CY 2010, filed on April 21, 2010. SSS Sworn Statement of Mr. George Francisco to Questions propounded by Atty. Marie Francesca Luz O. Dela Cruz dated September 8, 2010. SSS-1 Signature of Mr. George Francisco TTT-1 to TTT-758 Suppliers' invoices and suppliers' official receipts for the 1st Quarter of CY 2008. TTT-759 to TTT-865 Petitioner's service invoice relating to its zero-rated sales for the 1st Quarter of CY 2008. TTT-866 to TTT-918 Petitioner's fund transfer credit advice and bank statements for the 1st Quarter of CY 2008. TTT-919 to TTT-973 Petitioner's official receipts relating to its zero-rated sales for the 1st Quarter of CY 2008. TTT-974 to TTT-979, TTT-982 to TTT-999 Petitioner's VAT Returns. TTT-1000 to TTT-1031 Petitioner's audited financial statements as of and for the year ended December 31, 2008. TTT-1032 to TTT-1033 Certifications issued to petitioner by the SEC and Board of Investments certifying the registered activities of petitioner. TTT-1034 to TTT-1039 Petitioner's BIR Form 1600 (Monthly Remittance Return of VAT) and other percentage taxes withheld. UUU Sworn Statement of Mr. Romeo A. De Jesus to Questions propounded by Atty. Marie Francesca Luz O. Dela Cruz dated February 2, 2011. UUU-1 Signature of Mr. Romeo A. De Jesus. VVV Petitioner's Independent CPA Report dated January 19, 2011. VVV-1 Signature of Mr. Romeo A. De Jesus On the other hand, respondent presented Mr. Gerard Yap as his witness. On January 26, 2012, respondent moved for the dismissal of the instant case on the ground of lack of jurisdiction. 20 In the Resolution 21 dated March 26, 2012, the Court, following the ruling of the Supreme Court in Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. , 22 dismissed the instant Petition for Review for lack of jurisdiction. Consequently, petitioner moved for the reconsideration of the said dismissal. 23 In the Resolution 24 dated June 25, 2012, the Court denied petitioner's motion for reconsideration. Thus, petitioner appealed the said denial of the motion for reconsideration by filing a Petition for Review before the Court of Tax Appeals (CTA) En Banc on July 30, 2012. 25 The Petition for Review was docketed as CTA EB No. 918. On August 30, 2013, the CTA En Banc rendered a Decision, 26 reversing and setting aside the Resolutions dated March 26, 2012 and June 25, 2012. In the same Decision, the CTA En Banc applied the Supreme Court's ruling in the case of Commissioner of Internal Revenue vs. San Roque Power Corporation; Taganito Mining Corporation vs. Commissioner of Internal Revenue; Philex Mining Corporation vs. Commissioner of Internal Revenue 27 (San Roque case) , stating that petitioner may be excused from complying with the 120+30-day periods as its refund claim was filed within the period from December 10, 2003 until October 6, 2010, and pursuant to BIR Ruling No. DA-489-03. The CTA En Banc further ruled that the Court in Division has jurisdiction to entertain the Petition for Review filed in the latter. Accordingly, CTA Case No. 8065 was remanded to the Court of origin for further proceedings to determine whether petitioner fully complied with other legal requirements in relation to its claim for refund or issuance of a tax credit certificate of alleged unutilized input VAT for the 1st quarter of CY 2008. As a result, respondent moved for the reconsideration of the CTA En Banc's Decision on September 30, 2013. On March 17, 2014, the CTA En Banc denied respondent's motion for reconsideration for lack of merit. 28 Thus, respondent elevated the said denial before the Supreme Court by filing a Petition for Review on Certiorari , which was docketed as G.R. No. 211767. 29 In the Resolution dated July 9, 2014, 30 the Supreme Court denied respondent's Petition for Review on Certiorari. The High Tribunal likewise denied respondent's motion for reconsideration via Resolution dated December 3, 2014. 31 The Resolution dated July 9, 2014 became final and executory on February 9, 2015 and the same was recorded in the Book of Entries of Judgments. 32 Accordingly, the Court in Division set the instant case for further presentation of petitioner's evidence. 33 Petitioner presented Ms. Rachel Concepcion as witness. Petitioner then formally offered its supplemental documentary evidence, which was later admitted in the Resolution dated April 27, 2016. 34 The supplemental documentary evidence offered by petitioner are as follows: Exhibit Description WWW-1 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Inlandsbank WWW-2 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale New York WWW-3 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale London WWW-4 AMInet Company Profile Fact Sheet of Deutsche Group Services Pty Limited WWW-5 AMInet Company Profile Fact Sheet of Deutsche Asia Pacific Holdings Pte. Ltd. WWW-6 AMInet Company Profile Fact Sheet of Deutsche Securities, Inc. WWW-7 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Hongkong WWW-8 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Jakarta WWW-9 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Singapur WWW-10 AMInet Company Profile Fact Sheet of Deutsche Bank China Co. Ltd. Shanghai Branch WWW-11 AMInet Company Profile Fact Sheet of Deutsche Asset Management (Asia) Limited WWW-12 AMInet Company Profile Fact Sheet of Deutsche Bank Real Estate (Japan) YK WWW-13 AMInet Company Profile Fact Sheet of DBOI Global Services Private Limited WWW-14 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Bangkok WWW-15 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Mumbai WWW-16 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Seoul WWW-17 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Filiale Taipei WWW-18 AMInet Company Profile Fact Sheet of Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office WWW-19 AMInet Company Profile Fact Sheet of DB Finance, Inc. WWW-20 AMInet Company Profile Fact Sheet of Deutsche Trust Company Limited Japan XXX Supplemental Sworn Statement of Ms. Rachel Concepcion to Questions Propounded by Atty. Dikki Jean Y. Sian dated October 14, 2015 XXX-1 Signature of Ms. Rachel Concepcion In its Resolution 35 dated April 27, 2016, the Court directed respondent to submit a manifestation whether the latter would continue with the presentation of his evidence. However, respondent failed to submit such manifestation. 36 After the Court considered petitioner's Memorandum 37 filed through registered mail on September 9, 2016 and received by the Court on September 15, 2016, and the Report 38 dated October 6, 2016 of the Records Division that no memorandum was filed for the respondent, the instant case was considered submitted for decision on October 11, 2016. 39 As stipulated by the parties, the following is the main issue to be resolved by this Court: Whether petitioner is entitled to a refund or issuance of tax credit certificate in the amount of P34,310,264.27, representing alleged unutilized input VAT arising from its purchases of goods and services attributable to zero-rated sales for the 1st quarter of CY 2008. 40 Petitioner's claim for refund or tax credit finds legal basis on Section 112 (A) and (C) of the National Internal Revenue Code of 1997, as amended, which provides: "SEC. 112. Refunds or Tax Credits of Input 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)(1), (2) and (b) and Section 108(B)(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, further , That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of 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 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. xxx xxx xxx (C) Period within which Refund or Tax Credit of Input Taxes shall be Made . In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one-hundred-twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals." Pursuant to the above-quoted provision and as laid down by the Supreme Court in a number of cases, 41 a taxpayer engaged in zero-rated or effectively zero-rated sales is entitled to a claim for refund or tax credit of excess input taxes attributable to such sales upon compliance with the following requisites: 1. that there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input taxes are attributable to zero-rated or effectively zero-rated sales; 4. that the input taxes were not applied against any output VAT liability during and in the succeeding quarters; and 5. that the claim for refund was filed within the prescriptive period both in the administrative and judicial levels. Petitioner's administrative and judicial claims were timely filed Petitioner's compliance with the fifth requisite has already been discussed and settled by the Court of Tax Appeals En Banc , in the following manner: 42 "Admittedly in respondent's Motion to Dismiss filed in CTA Case No. 8065, petitioner's administrative claim for refund pertaining to its alleged input VAT for the 1st quarter of 2008 ( i.e. , from January 1 to March 31, 2008) was filed on March 29, 2010 and that its judicial claim was filed two (2) days thereafter or on March 31, 2010. Clearly, while petitioner timely filed its administrative claim, it never complied with the 120+30-day periods under the earlier quoted Section 112 (C) of the NIRC of 1997, as amended by RA 9337. Nevertheless, in view of BIR Ruling No. DA-489-03 vis--vis the above-quoted jurisprudential pronouncements, petitioner may be excused from complying with the 120+30-day periods as its refund claim was filed within the period from December 10, 2003 until October 6, 2010. Correspondingly, petitioner's Petition for Review in CTA Case No. 8065 is considered timely filed, pursuant to the San Roque case; and thus, the Court in Division has jurisdiction to entertain the same." With the timely filing of petitioner's claim for refund or tax credit of its unutilized excess input VAT for the first quarter of 2008 before the administrative and the judicial levels, petitioner has complied with the fifth requisite. The Court shall now proceed to determine petitioner's compliance with the other requisites. Petitioner had zero-rated sales Petitioner submits that its sales of services to entities engaged in business conducted outside of the Philippines constitute zero-rated sales pursuant to Section 108 (B) (2) of the NIRC of 1997, as amended, quoted as follows: "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties . xxx xxx xxx (B) Transactions Subject to Zero Percent (0%) Rate . The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: (1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);" In the case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , 43 the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108 (B) (2) of the NIRC of 1997, as amended, the following requisites must be satisfied: 1. the services must be other than processing, manufacturing or repacking of goods; 2. the payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and 3. the recipient of such services is doing business outside the Philippines. On the first requisite, it is undisputed that petitioner is registered as a VAT taxpayer and is licensed to do business as a regional operating headquarters (ROHQ) in the Philippines engaged in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development; technical support and maintenance; data processing and communication and business development. 44 These services clearly fall within the scope of "services other than processing, manufacturing or repacking of goods" as contemplated by the afore-mentioned provision. In relation to the second requisite, Section 113 (A) (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, as implemented by Section 4.113-1 (A) (2), (B) (1) and (2) (c) of Revenue Regulations (RR) No. 16-05, provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties and for every sale, barter or exchange of services issue a VAT official receipt which must contain the following information: "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons . (A) Invoicing Requirements . A VAT-registered person shall issue: xxx xxx xxx (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services . (B) Information Contained in the VAT Invoice or VAT Official Receipt. The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided , That: xxx xxx xxx (c) If the sale is subject to zero percent (0%) value-added tax, the term ' zero-rated sale ' shall be written or printed prominently on the invoice or receipt; xxx xxx xxx (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and" (Emphasis supplied) "SECTION 4.113-1. Invoicing Requirements . (A) A VAT-registered person shall issue : xxx xxx xxx (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services . Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts . Said documents shall be considered as a 'VAT Invoice' or VAT official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt . The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: xxx xxx xxx (c) If the sale is subject to zero percent (0%) VAT, the term ' zero-rated sale ' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) In fine, the foreign currency remittances referred to under Section 108 (B) (2) of the NIRC of 1997, as amended, must likewise be supported by zero-rated VAT official receipts. For the first quarter of CY 2008, petitioner has established that it was paid in Euros for the services rendered to its affiliates which were duly accounted for in accordance with the BSP rules and regulations as evidenced by the Service Invoices, 45 Zero-rated VAT Official Receipts, 46 and Fund Transfer Credit Advices and Bank Statements. 47 However, a comparison of the amounts of zero-rated sales/receipts as reflected in the zero-rated VAT official receipts (ORs) and as declared in petitioner's amended Quarterly VAT Return for the first quarter of CY 2008, shows the following discrepancy of P278,273.18: Zero-Rated Sales/Receipts per Quarterly VAT Return 48 P517,369,339.93 Zero-Rated Sales/Receipts per Official Receipts 49 517,091,066.75 Difference P278,273.18 Since the amount of P278,273.18 is not covered by zero-rated VAT official receipts, the same shall be denied VAT zero-rating. Moreover, petitioner's sales/receipts in the amount of P47,058,000.23 (equivalent to 711,181.20) are supported by zero-rated VAT official receipts which are dated outside the period of claim, hence, shall be denied VAT zero-rating, to wit: Exhibit OR No. Date Client Amount in Euro Phil. Peso Equivalent TTT-927 0132 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 24,000.00 1,588,049.40 TTT-928 0133 6/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 12,000.00 794,024.70 TTT-929 0134 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 12,000.00 794,024.70 TTT-930 0135 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 12,000.00 794,024.70 TTT-931 0136 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 36,000.00 2,382,074.10 TTT-932 0137 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 36,000.00 2,382,074.10 TTT-933 0138 9/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 12,000.00 794,024.70 TTT-934 0139 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 12,000.00 794,024.70 TTT-935 0140 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 84,000.00 5,558,172.90 TTT-936 0141 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 84,000.00 5,558,172.90 TTT-937 0142 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 18,285.71 1,209,942.12 TTT-938 0143 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 60,000.00 3,970,123.50 TTT-939 0144 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 9,498.22 628,531.42 TTT-940 0146 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 27,612.33 1,827,072.67 TTT-941 0147 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 36,800.00 2,435,009.08 TTT-942 0148 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 36,000.00 2,382,074.10 TTT-943 0149 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 25,032.26 1,656,352.73 TTT-944 0150 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 46,967.74 3,107,795.47 TTT-945 0151 12/14/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 12,783.33 845,856.65 TTT-946 0152 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 11,750.00 777,482.52 TTT-947 0153 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 24,000.00 1,588,049.40 TTT-948 0154 9/13/2007 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 78,451.61 5,191,043.67 Total 711,181.20 47,058,000.23 In compliance with the third requisite of proving that its clients are non-resident foreign corporations doing business outside the Philippines, petitioner presented the following documents: 1. Securities and Exchange Commission Certifications of Non-Registration of Corporation/Partnership; 50 2. Intra-Group Service Agreements; 51 3. Authenticated Articles of Association, Certificate of Incorporation on Change of Name of Company, Certificate of Registration of Oversea Company, and Certified Copy of all Historical Registered Matters; 52 and 4. AMInet Company Profile Fact Sheets. 53 However, each of the aforesaid documents, standing alone, is inadequate proof that petitioner's client is a non-resident foreign corporation doing business outside the Philippines. While the Authenticated Articles of Association, Certificate of Incorporation on Change of Name of Company, Certificate of Registration of Oversea Company and Certified Copy of all Historical Registered Matters prove that the named entities therein were incorporated/organized abroad, these documents do not necessarily establish that such entities are not doing business in the Philippines. The same holds true for the SEC Certificates of Non-Registration which show that the named entities are not registered corporations/partnerships in the Philippines. However, they do not prove that such entities are non-resident foreign corporations doing business outside the Philippines. Likewise, the Service Agreements only indicate the names and addresses of petitioner's customers to whom it renders services but they do not establish that such customers are non-resident foreign corporations doing business outside the Philippines. In the case of Sitel Philippines Corporation (formerly Clientlogic Phils., Inc.) vs. Commissioner of Internal Revenue , 54 the Supreme Court held that while Sitel's documentary evidence, which included Certifications issued by the Securities and Exchange Commission and Agreements between Sitel and its foreign clients, may have established that Sitel rendered services to foreign corporations and received payment therefor through inward remittances, the said documents failed to specifically prove that such foreign clients were doing business outside the Philippines or have a continuity of commercial dealings outside the Philippines. Therefore, in order to be considered as non-resident foreign corporation doing business outside the Philippines, each entity must be supported at the very least by both SEC Certificate of Non-Registration of Corporation/Partnership and proof of foreign incorporation/association/business registration and that there is no other indication that the recipient of the services is doing business in the Philippines. In this regard, the Court cannot give credence or probative value to the AMInet Company Profile Fact Sheets as the information contained therein were retrieved from the AMInet database set-up and maintained by Deutsche Bank Global, Head Office. 55 The said documents are self-serving and can be easily manipulated to favor petitioner in view of its affinity with the entity that maintains or keeps the said database. 56 A careful scrutiny of the documents submitted shows that only the following clients of petitioner shall be considered as non-resident foreign corporations doing business outside the Philippines: Client SEC Certification of Non-Registration (Exhibit) Authenticated Certificate of Foreign Incorporation/ Registration (Exhibit) Deutsche Asia Pacific Holdings Pte. Ltd. "K" "BBB" and "III" Deutsche Bank Aktiengesellschaft, Filiale Hongkong "N" "EEE" Deutsche Bank Aktiengesellschaft, Filiale Jakarta "O" "FFF" Deutsche Bank Aktiengesellschaft, Filiale New York "I" "ZZ" Deutsche Bank Aktiengesellschaft, Filiale Singapur "P" "WW" Deutsche Sank Aktiengesellschaft, Filiale London "J" "AAA" Deutsche Securities, Inc. "M" "DDD" Accordingly, out of the P517,369,339.93 57 zero-rated sales/receipts declared per petitioner's Quarterly VAT Return for the first quarter of CY 2008, only the amount of P440,922,979.00 (equivalent to 6,663,614.23), broken down below, qualifies for VAT zero-rating under Section 108 (B) (2) of the NIRC of 1997, as amended: Exhibit OR No. Date Client Amount in Euro Peso Equivalent TTT-925 0130 1/22/2008 Deutsche Bank Aktiengesellschaft, Filiale Jakarta 13,500.00 893,277.79 TTT-926 0131 1/23/2008 Deutsche Asia Pacific Holdings Pte. Ltd. 15,000.00 992,530.87 TTT-921 0126 2/6/2008 Deutsche Bank Aktiengesellschaft, Filiale Hongkong 309,738.46 20,494,996.98 TTT-919 0124 2/20/2008 Deutsche Securities, Inc. 594,889.41 39,363,095.58 TTT-957 0170 3/3/2008 Deutsche Bank Aktiengesellschaft, Filiale Singapur 23,500.03 1,554,965.70 TTT-951 0159 3/17/2008 Deutsche Bank Aktiengesellschaft, Filiale New York 1,185,787.72 78,462,061.50 TTT-950 0158 3/24/2008 Deutsche Asia Pacific Holdings Pte. Ltd. 15,000.00 992,530.87 TTT-922 0127 2/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 158,500.00 10,487,742.91 TTT-920 0125 2/7/2008 Deutsche Bank Aktiengesellschaft, Filiale London 3,624,447.61 239,825,075.72 TTT-958 0171 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 24,936.00 1,649,968.77 TTT-959 0172 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 32,224.00 2,132,231.58 TTT-960 0173 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 27,961.00 1,850,140.41 TTT-961 0174 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 57,321.00 3,792,872.70 TTT-962 0175 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 35,204.00 2,329,424.31 TTT-963 0176 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 100,750.00 6,666,504.99 TTT-964 0177 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 114,212.00 7,557,252.49 TTT-965 0178 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 62,735.00 4,151,119.71 TTT-966 0179 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 66,904.00 4,426,982.79 TTT-967 0180 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 76,466.00 5,059,651.77 TTT-968 0182 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 50,901.00 3,368,085.16 TTT-969 0183 3/5/2008 Deutsche Bank Aktiengesellschaft, Filiale London 73,637.00 4,872,466.40 Total 6,663,614.23 440,922,979.00 The rest of petitioner's declared zero-rated sales/receipts in the amount of P29,110,087.55 (equivalent to 439,936.91), detailed below, shall be denied VAT zero-rating for petitioner's failure to prove that the entities to whom it rendered services are non-resident foreign corporations doing business outside the Philippines: Exhibit OR No. Date Client Amount in Euro Peso Equivalent SEC Certification of Non-Registration (Exhibit) Authenticated Certificate of Foreign Registration (Exhibit) TTT-952 0160 3/26/2008 DB Operations International Pvt. Ltd. 2,250.00 148,879.63 None None TTT-973 0187 1/9/2008 DB Trust Company Limited Japan 1,125.00 74,439.82 "AA" None TTT-971 0185 1/2/2008 Deutsche Bank Aktiengesellschaft, Asia Pacific Head Office 35,249.93 2,332,442.92 "Y" None TTT-949 0157 3/31/2008 Deutsche Bank Aktiengesellschaft, Filiale Bangkok 15,000.00 992,530.87 "U" None TTT-954 0162 3/27/2008 Deutsche Bank Aktiengesellschaft, Filiale Guangzhou 7,500.00 496,265.44 None None TTT-970 0184 1/2/2008 Deutsche Bank Aktiengesellschaft, Filiale Seoul 15,000.00 992,530.87 "W" None TTT-956 0164 3/28/2008 Deutsche Bank Aktiengesellschaft, Filiale Seoul 15,000.00 992,530.87 TTT-923 0128 2/1/2008 Deutsche Group Services 336,062.98 22,236,859.55 None None TTT-953 0161 3/25/2008 Deutsche Group Services Pty Limited 124.00 8,227.42 "L" None TTT-972 0186 1/9/2008 DTB Corporation 1,125.00 74,439.82 None None TTT-955 0163 3/28/2008 DWS Holdings & Service GmbH 10,000.00 661,687.25 None None TTT-924 0129 1/15/2008 PT Deutsche Securities Indonesia 1,500.00 99,253.09 None None 439,936.91 29,110,087.55 Input taxes were incurred or paid and are attributable to zero- rated sales Having resolved that petitioner had valid VAT zero-rated sales/receipts for the first quarter of CY 2008 in the amount of P440,922,979.00, the Court proceeds to determine whether petitioner incurred input taxes in connection therewith and if said input taxes were not applied against any output VAT liability of petitioner. In its amended Quarterly VAT Return 58 for the first quarter of CY 2008, petitioner reflected a total amount of P34,310,264.27 input VAT arising from its current purchases of capital goods exceeding P1Million, domestic purchases of goods other than capital goods, domestic purchases of services and services rendered by non-residents, detailed as follows: Purchases of Capital Goods exceeding P1Million P2,041,110.00 Domestic Purchases of Goods other than Capital Goods 1,860,076.08 Domestic Purchases of Services 27,951,218.70 Services Rendered by Non-residents 2,457,859.49 Total P34,310,264.27 In support thereof, petitioner presented its suppliers' invoices, official receipts, and other documents, 59 which were all examined by the Court-commissioned Independent CPA. In the report 60 dated January 19, 2011, the Independent CPA found unallowable input VAT credits in the total amount of P7,862,422.85, broken down as follows: Findings Input VAT Reference to ICPA Report (Exh. "VVV") Purchases of goods/services not within the 1st quarter of 2008 P2,103,490.27 Annex A.1 Purchases of goods not supported by suppliers' sales invoices 156,394.27 Annex A.2 Purchases of services not supported by official receipts 5,587,389.70 Annex A.3 Purchases of goods and services with invalid supporting documents 15,148.61 Annex A.4 Total P7,862,422.85 The Court agrees with the above findings. The input VAT of P7,862,422.85 shall be disallowed for not being properly substantiated by VAT invoices or official receipts as prescribed under Sections 110 (A) and 113 (A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations No. 16-05, as amended. In addition, the following input VAT amounting to P21,539,366.41 shall be disallowed for non-compliance with the substantiation requirements under the afore-mentioned VAT law and regulations: Exhibit OR/Invoice No. Date Supplier Input VAT 61 SUPPORTED BY OFFICIAL RECEIPT/INVOICE BUT THE AMOUNT OF VAT IS NOT SEPARATELY INDICATED TTT-29 406 1/22/2008 Flowers by Sylvia P214.29 TTT-39 PRF 1/23/08 1/23/2008 Mercury Drug Store 3,061.47 TTT-39 28354650 2/28/2008 Mercury Drug Store 81.56 TTT-256 0148 1/28/2008 6-3 Property Holdings, Inc. 734,520.96 TTT-257 0149 1/28/2008 6-3 Property Holdings, Inc. 136,022.40 TTT-258 0150 1/28/2008 6-3 Property Holdings, Inc. 8,100.00 TTT-259 0254 2/5/2008 6-3 Property Holdings, Inc. 734,520.96 TTT-260 0217 2/6/2008 6-3 Property Holdings, Inc. 144,122.40 TTT-261 0230 2/29/2008 6-3 Property Holdings, Inc. 878,643.36 TTT-262 0264 3/27/2008 6-3 Property Holdings, Inc. 144,122.40 TTT-263 0265 3/27/2008 6-3 Property Holdings, Inc. 734,520.96 TTT-264 1790 2/23/2008 Atlantica Fire Safety Systems, Inc. 41,785.72 TTT-265 1791 2/29/2008 Atlantica Fire Safety Systems, Inc. 75,298.00 TTT-266 1836 2/13/2008 Atlantica Fire Safety Systems, Inc. 2,138.40 TTT-275 9293 3/14/2008 Ambassador Home and Electronics Centre, Inc. 4,558.93 TTT-276 4218 2/7/2008 Alecto General Technology Corporation 7,500.00 TTT-277 0253 2/22/2008 Agilys, Inc. 20,544.55 TTT-278 0236 1/18/2008 Agilys, Inc. 8,064.00 TTT-279 0235 1/18/2008 Agilys, Inc. 11,844.00 TTT-280 0231 1/11/2008 Agilys, Inc. 7,650.00 TTT-281 26045 1/18/2008 ACCRALAW 37,200.00 TTT-282 19187 3/4/2008 A. Soriano Corporation 432,476.35 TTT-283 to TTT-396 Various Various Bayan Telecommunications, Inc. 25,545.08 TTT-398 15805 1/23/2008 CIBI Information, Inc. 1,560.00 TTT-399 3310A 2/18/2008 Chittick Fire & Security Corporation 205,200.00 TTT-400 3298A 2/13/2008 Chittick Fire & Security Corporation 266,400.00 TTT-401 00068 3/4/2008 Career Management Consulting & Business Solution, Inc. 19,200.00 TTT-402 00069 3/14/2008 Career Management Consulting & Business Solution, Inc. 19,800.00 TTT-404 25685 3/19/2008 CWC International Corp. 1,022,142.86 TTT-405 0058 1/15/2008 CWC International Corp. 1,022,142.86 TTT-406 25540 2/15/2008 CWC International Corp. 17,417.41 TTT-408 822 1/4/2008 CRV Aircon & Plumbing Services 6,557.14 TTT-409 A2625 1/30/2008 Computer Support Center, Inc. 17,873.85 TTT-410 A2624 1/30/2008 Computer Support Center, Inc. 11,209.83 TTT-411 7264 1/23/2008 DB Wizards, Inc. 31,821.43 TTT-419 7471 3/5/2008 DB Wizards, Inc. 134,710.71 TTT-420 7522 3/12/2008 DB Wizards, Inc. 35,003.57 TTT-416 3305 2/29/2008 Design & Creative Logic, Inc. 1,872.32 TTT-417 3296 2/15/2008 Design & Creative Logic, Inc. 1,872.32 TTT-418 3298 2/20/2008 Design & Creative Logic, Inc. 1,872.32 TTT-421 to TTT-432 Various Various DHL Express (Philippines) Corp. 18,416.25 TTT-433 412 3/12/2008 Electric Skye, Inc. 27,164.73 TTT-452 to TTT-493 Various Various Exclusive Cars International Holdings, Inc. 83,212.71 TTT-494 to TTT-500 Various Various Facilities Managers, Inc. 95,776.74 TTT-502 69072 3/7/2008 Fuji Xerox Philippines, Inc. 27,926.45 TTT-541 1270 3/27/2008 Goudie Associates Manila Ltd. Co. 262,971.43 TTT-542 3252 2/8/2008 Great Year Industries Corp. Manila 1,783.47 TTT-543 223 3/5/2008 Green Marbles Events, Strategies and Communications 45,852.75 TTT-544 30881 3/7/2008 Guthrie-Jensen Consultants, Inc. 5,760.00 TTT-545 81553 1/21/2008 Hewlett-Packard Phils. Corporation 3,095.35 TTT-546 81739 2/28/2008 Hewlett-Packard Phils. Corporation 4,071.43 TTT-547 2003 3/12/2008 Hizon's Restaurant & Catering Services, Inc. 8,571.43 TTT-548 653 3/7/2008 I. Systems Integrators, Inc. 185,246.68 TTT-573 216469 3/26/2008 International Elevator & Equipment, Inc. 638,263.39 TTT-575 31235 2/26/2008 JobStreet.com Philippines, Inc. 10,500.00 TTT-576 to TTT-581 Various Various Jones Lang LaSalle (Philippines), Inc. 722,075.90 TTT-583 1037 2/6/2008 Kapient Philippines, Inc. 7,560.00 TTT-584 1038 2/22/2008 Kapient Philippines, Inc. 58,140.00 TTT-585 1040 2/27/2008 Kapient Philippines, Inc. 11,340.00 TTT-586 1045 3/19/2008 Kapient Philippines, Inc. 18,900.00 TTT-587 38157 3/10/2008 KLG International, Inc. 3,280.93 TTT-588 79192 1/30/2008 Lane Moving & Storage 540.00 TTT-589 19329 3/5/2008 Lane Moving & Storage 540.00 TTT-590 5143 2/20/2008 Leaves & Branches Enterprises 2,394.64 TTT-591 5030 1/18/2008 Leaves & Branches Enterprises 2,394.64 TTT-592 5242 3/18/2008 Leaves & Branches Enterprises 2,394.64 TTT-594 11218A 2/29/2008 Manila Mandarin Hotel, Inc. 56,548.80 TTT-595 9956A 1/29/2008 Manila Mandarin Hotel, Inc. 2,142.86 TTT-596 8328A 1/11/2008 Manila Mandarin Hotel, Inc. 90,843.75 TTT-597 11217A 2/29/2008 Manila Mandarin Hotel, Inc. 91,677.60 TTT-598 143013 2/28/2008 Manila Bulleting Publishing Corporation 38,121.84 TTT-599 255017 2/15/2008 Mapecon Philippines, Inc. 937.50 TTT-600 255018 2/15/2008 Mapecon Philippines, Inc. 1,162.50 TTT-601 1119271 3/7/2008 Mapfre Insular Corporation 114.56 TTT-606 4874 2/13/2008 MC Engineering, Inc. 643,430.58 TTT-607 4880 3/18/2008 MC Engineering, Inc. 3,631,894.81 TTT-608 1597 1/11/2008 Metro Parking Management (Philippines), Inc. 81.56 TTT-609 8080 3/26/2008 MGE UPS Systems Philippines, Inc. 516,331.36 TTT-610 23627 2/29/2008 Micro-D International, Inc. 55,177.39 TTT-611 23628 2/29/2008 Micro-D International, Inc. 9,287.96 TTT-612 23625 2/29/2008 Micro-D International, Inc. 58,856.56 TTT-613 23674 1/23/2008 Micro-D International, Inc. 226.72 TTT-614 23626 2/29/2008 Micro-D International, Inc. 9,017.41 TTT-629 to TTT-697 Various Various PLDT 216,915.89 TTT-698 236 3/19/2008 Ragojos Heritage Corporation 1,365,250.66 TTT-700 to TTT-711 Various Various Regus Centres, Inc. 346,037.27 TTT-712 0054 2/18/2008 Roadmaps & Beyond, Inc. 27,983.23 TTT-713 0052 2/18/2008 Roadmaps & Beyond, Inc. 35,880.00 TTT-714 0053 2/18/2008 Roadmaps & Beyond, Inc. 20,760.00 TTT-735 23015 1/25/2008 Sofitel Philippine Plaza Manila 43,392.57 TTT-738 3035 3/10/2008 Starmaker, Inc. 1,607.14 TTT-740 36852 1/25/2008 Tempo Services, Inc. 1,206.46 TTT-741 36853 1/25/2008 Tempo Services, Inc. 1,126.46 TTT-742 37095 3/4/2008 Tempo Services, Inc. 1,726.46 TTT-743 37094 3/4/2008 Tempo Services, Inc. 2,300.92 TTT-744 37096 3/4/2008 Tempo Services, Inc. 1,126.46 TTT-745 37376 3/19/2008 Tempo Services, Inc. 1,126.46 TTT-746 37396 3/27/2008 Tempo Services, Inc. 1,073.80 TTT-747 8388 2/6/2008 The Baron Travel Corporation 1,416.84 TTT-748 2564 3/5/2008 Total Ventures, Inc. 19,847.41 TTT-749 7000871 1/24/2008 AJA Enterprises Pte. Ltd. 458,118.78 TTT-750 to TTT-751 Various Various Esco Audio Visual Pte. Ltd. 1,176,922.20 Subtotal P18,187,038.74 SUPPORTED BY OFFICIAL RECEIPT DATED OUTSIDE THE PERIOD OF CLAIM TTT-438 3208 4/11/2008 ePLDT, Inc. P957.60 TTT-439 3209 4/11/2008 ePLDT, Inc. 235.71 TTT-440 3210 4/11/2008 ePLDT, Inc. 13,476.84 TTT-441 3207 4/11/2008 ePLDT, Inc. 110,931.72 TTT-447 3206 4/11/2008 ePLDT, Inc. 264,000.00 Subtotal P389,601.87 SUPPORTED BY OFFICIAL RECEIPT DATED OUTSIDE THE PERIOD OF CLAIM AND THE AMOUNT OF VAT IS NOT SEPARATELY INDICATED TTT-397 16554 4/11/2008 CIBI Information, Inc. P1,950.00 TTT-407 971 4/18/2008 CRV Aircon & Plumbing Services 4,307.14 TTT-571 218124 7/6/2008 International Elevator & Equipment, Inc. 334,501.07 TTT-572 218125 7/16/2008 International Elevator & Equipment, Inc. 504,771.43 TTT-752 250 4/2/2008 Executive International Movers, Inc. 37,018.93 TTT-540 1276 4/1/2008 Goudie Associates Manila Ltd. Co. 32,871.43 TTT-593 10664 6/11/2008 Manabat San Agustin & Co. 36,000.00 TTT-699 4406 9/3/2008 RCW Construction & Development Corporation 3,935.76 TTT-728 1084 4/4/2008 Sinclair Knight Merz (Philippines), Inc. 268,209.79 TTT-739 8477 4/1/2008 Sun Microsystems Phils., Inc. 8,815.71 Subtotal P1,232,381.26 SUPPORTED BY UNDATED OFFICIAL RECEIPT TTT-274 9298 - Ambassador Home and Electronics Centre, Inc. P18,307.50 TTT-715 24431 - Rudolf Lietz, Inc. 12,855.00 Subtotal P31,162.50 SUPPORTED BY DOCUMENT OTHER THAN VAT OFFICIAL RECEIPT TTT-582 926 3/28/2008 J-Rinc Enterprises Corp. P966.43 Subtotal P966.43 SUPPORTED BY SALES SUMMARY REPORT WITH ATTACHED RETAIL INVOICE BUT WITH INCOMPLETE/INCORRECT REGISTERED NAME OF THE PETITIONER AND/OR THE AMOUNT OF VAT IS NOT SEPARATELY INDICATED TTT-40 Various 1/6/2008 National Book Store P5,335.98 TTT-58 Various 1/14/2008 National Book Store 5,310.05 TTT-86 Various 2/3/2008 National Book Store 5,330.73 TTT-98 Various 2/9/2008 National Book Store 5,299.29 TTT-112 Various 2/17/2008 National Book Store 5,300.01 TTT-127 Various 2/25/2008 National Book Store 5,324.68 TTT-140 Various 2/27/2008 National Book Store 6,431.79 TTT-142 Various 2/29/2008 National Book Store 5,300.80 TTT-145 Various 3/2/2008 National Book Store 5,180.06 TTT-159 Various 3/5/2008 National Book Store 5,351.52 TTT-164 Various 3/6/2008 National Book Store 5,350.80 TTT-177 Various 3/7/2008 National Book Store 5,357.13 TTT-185 Various 3/3/2008 National Book Store 5,339.09 TTT-197 Various 3/4/2008 National Book Store 5,318.12 Subtotal P75,530.05 NO SUPPORTING DOCUMENTS - 0199 2/26/2008 Kapient Philippines, Inc. P40,824.00 - 1006 12/12/2007 Lantro Phils., Inc. 1,434,905.28 SSR Dated 2/5/08 2/5/2008 National Book Store 5,195.68 - 08-002786 1/1/2008 Reuters Limited 16,796.97 - 08-002789 1/1/2008 Reuters Limited 16,535.34 - 08-002787 1/1/2008 Reuters Limited 16,535.34 - 08-002788 1/1/2008 Reuters Limited 16,308.14 - 08-002784 1/1/2008 Reuters Limited 16,739.48 - 08-002785 1/1/2008 Reuters Limited 17,712.00 - 08-002783 1/1/2008 Reuters Limited 17,175.75 - 4810 10/18/2007 Sandoval Distributors, Inc. 642.86 - 4925 11/5/2007 Sandoval Distributors, Inc. 19,017.86 - 5086 11/17/2007 Sandoval Distributors, Inc. 1,071.43 - 5044 11/15/2007 Sandoval Distributors, Inc. 1,607.14 - 23949 1/29/2008 Ultralight Electrical Components 1,618.29 Subtotal P1,622,685.56 Total P21,539,366.41 Thus, out of the P34,310,264.27 input VAT claim for the first quarter of CY 2008, only the amount of P4,908,475.01 represents petitioner's valid input VAT, computed as follows: Input VAT Claim P34,310,264.27 Less: Disallowances Per Independent CPA Report 7,862,422.85 Per this Court's further examination 21,539,366.41 Valid Input VAT P4,908,475.01 However, included in the said input VAT of P4,908,475.01 is the amount of P278,055.64 62 pertaining to petitioner's purchases of capital goods exceeding P1Million. Pursuant to Section 110 (A) (2) of the NIRC of 1997, as amended, as implemented by Section 4.110-3 of RR No. 16-05, input VAT on capital goods purchases attributable to zero-rated sales may be claimed either in full during the month of acquisition, or spread over a period of time, depending on the aggregate acquisition cost of the capital goods in the calendar month. If the aggregate acquisition cost exceeds P1Million, the claim for input tax should be spread over 60 months or the estimated useful life of the capital goods, whichever is shorter. On the other hand, if aggregate acquisition cost does not exceed P1Million, the total input taxes shall be allowed as credit/refund in the month of acquisition. Applying the cited provisions to the present case, out of the P278,055.64 input VAT related to petitioner's purchases of capital goods exceeding P1Million, only the amount of P11,714.79 is creditable for the first quarter of CY 2008, computed as follows: Supplier Exhibit Month Acquired Input VAT Useful Life Monthly Input Tax Allowable Input Tax for the 1st Quarter of CY 2008 Accent Micro Technologies, Inc. TTT-3 January P19,875.00 60 P331.25 P993.75 Accent Micro Technologies, Inc. TTT-9 January 4,178.57 60 69.64 208.93 Accent Micro Technologies, Inc. TTT-10 January 2,785.71 60 46.43 139.29 Accent Micro Technologies, Inc. TTT-8 January 1,834.07 60 30.57 91.70 Accent Micro Technologies, Inc. TTT-2 January 439.29 60 7.32 21.96 Accent Micro Technologies, Inc. TTT-1 January 1,512.86 60 25.21 75.64 Accent Micro Technologies, Inc. TTT-6 January 27,895.71 60 464.93 1,394.79 Accent Micro Technologies, Inc. TTT-7 January 1,157.14 60 19.29 57.86 Accent Micro Technologies, Inc. TTT-12 January 698.36 60 11.64 34.92 Accent Micro Technologies, Inc. TTT-16 January 8,892.86 60 148.21 444.64 Accent Micro Technologies, Inc. TTT-4 January 14,563.50 60 242.73 728.18 Accent Micro Technologies, Inc. TTT-14 January 1,285.71 60 21.43 64.29 Accent Micro Technologies, Inc. TTT-18 January 12,483.00 60 208.05 624.15 Accent Micro Technologies, Inc. TTT-5 January 31,135.50 60 518.93 1,556.78 Accent Micro Technologies, Inc. TTT-17 January 26,839.29 60 447.32 1,341.96 Accent Micro Technologies, Inc. TTT-21 January 439.29 60 7.32 21.96 Accent Micro Technologies, Inc. TTT-11 February 5,571.43 60 92.86 185.71 Accent Micro Technologies, Inc. TTT-13 February 964.29 60 16.07 32.14 Accent Micro Technologies, Inc. TTT-15 February 698.36 60 11.64 23.28 Accent Micro Technologies, Inc. TTT-19 February 27,895.71 60 464.93 929.86 Accent Micro Technologies, Inc. TTT-20 February 75,000.00 60 1,250.00 2,500.00 Accent Micro Technologies, Inc. TTT-22 February 1,157.14 60 19.29 38.57 Accent Micro Technologies, Inc. TTT-23 February 1,512.86 60 25.21 50.43 Accent Micro Technologies, Inc. TTT-24 March 2,875.71 60 47.93 47.93 Accent Micro Technologies, Inc. TTT-25 March 4,735.71 60 78.93 78.93 Accent Micro Technologies, Inc. TTT-26 March 1,628.57 60 27.14 27.14 P278,055.64 P11,714.79 In sum, petitioner's net substantiated input taxes amounted to P4,642,134.16, as computed below: Properly Substantiated Input VAT P4,908,475.01 Less: Unamortized Input VAT on Purchases of Capital Goods Exceeding P1Million Input VAT on Purchases of Capital Goods Exceeding P1Million P278,055.64 Less: Input VAT Creditable for the First Quarter of CY 2008 11,714.79 266,340.85 Net Substantiated Input VAT P4,642,134.16 Since petitioner had no taxable sales subject to 12% VAT nor exempt sales 63 for the first quarter of CY 2008, the net substantiated input VAT of P4,642,134.16 is entirely attributable to the zero-rated sales/receipts declared by petitioner for the same quarter amounting to P517,369,339.93. 64 However, only the input VAT of P3,956,213.61 is attributable to the valid zero-rated sales/receipts of P440,922,979.00, computed as follows: Net substantiated Input VAT P4,642,134.16 Multiply by Valid Zero-Rated Receipts x 440,922,979.00 Divide by Total Zero-Rated Receipts Declared Per Return 517,369,339.93 Excess Input VAT Attributable to Valid Zero-Rated Receipts P3,956,213.61 Input taxes were not applied against any output VAT liability Petitioner had no output tax liability 65 for the first quarter of 2008 against which the subject input VAT claim may be applied or credited. Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns, 66 the same remained unutilized until it was deducted as "VAT Refund/TCC Claimed'' 67 in its Quarterly VAT Return for the first quarter of CY 2010, thus, preventing the carry over or application of the claimed input VAT in the next taxable quarters. In fine, petitioner has sufficiently proven its entitlement to a refund or issuance of TCC in the amount of P3,956,213.61, representing its unutilized excess input VAT for the first quarter of CY 2008 attributable to its zero-rated sales/receipts for the same period. WHEREFORE , premises considered, the instant Petition for Review is PARTIALLY GRANTED . Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in the reduced amount of P3,956,213.61, representing petitioner's unutilized excess input VAT attributable to zero-rated sales for the first quarter of CY 2008. SO ORDERED. (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Juanito C. Castaeda, Jr. and Caesar A. Casanova, JJ. , concur. Footnotes 1. Sec. 7. Jurisdiction. The CTA shall exercise: (a) Exclusive appellate jurisdiction to review by appeal, as herein provided: xxx xxx xxx (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code provides a specific period for action, in which case the inaction shall be deemed a denial; xxx xxx xxx 2. Rule 4, Sec. 3. Cases within the jurisdiction of the Court in Division. The Court in Division shall exercise: (a) Exclusive original over or appellate jurisdiction to review by appeal the following: xxx xxx xxx (2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided , that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one-hundred-eighty-day period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further , that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one-hundred-eighty-day period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3 (a), Rule 8 of these Rules; and Provided, still further , that in the case of claims for refund of taxes erroneously or illegally collected, the taxpayer must file a petition for review with the Court prior to the expiration of the two-year period under Section 229 of the National Internal Revenue Code; xxx xxx xxx Rule 8, Sec. 4. Where to appeal; mode of appeal. (a) An Appeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected; the decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and the Regional Trial Court in the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal. 3. Par. 1, Joint Stipulation of Facts and Issues (JSFI), Docket, vol. 1, pp. 96 to 97; Exhibit "A". 4. Par. 3, JSFI, Docket, vol. 1, p. 97; Exhibit "B". 5. Exhibit "C". 6. Exhibit "D". 7. Exhibit "KKK". 8. Exhibit "LLL". 9. Exhibit "MMM". 10. Exhibits "E" and "F". 11. Docket, vol. 1, pp. 1 to 7. 12. Docket, vol. 1, pp. 45 to 55. 13. Docket, vol. 1, pp. 57 to 65. 14. Docket, vol. 1, pp. 67 to 72. 15. Docket, vol. 1, pp. 96 to 99. 16. Docket, vol. 1, p. 100. 17. Motion for Commissioning of Independent Certified Public Accountant, Docket, vol. 1, pp. 148 to 151. 18. Minutes of the Hearing dated December 9, 2010 and Oath of Commission, Docket, vol. 1, pp. 162 and 161, respectively. 19. Resolutions dated July 15, 2011 and September 8, 2011, Docket, vol. 1, pp. 219 to 220 and pp. 281 to 282, respectively. 20. Motion to Dismiss, Docket, vol. 1, pp. 305 to 312. 21. Docket, vol. 1, pp. 342 to 349. 22. G.R. No. 184823, October 6, 2010. 23. Motion for Reconsideration (Re: Resolution dated March 26, 2012), Docket, vol. 1, pp. 355 to 383. 24. Resolution, Docket, vol. 1, pp. 420 to 426. 25. Docket, vol. 1, pp. 439 to 474. 26. Docket, vol. 1, pp. 604 to 617. 27. G.R. Nos. 187485, 196113, and 197156, February 12, 2013. 28. Resolution, Docket, vol. 1, pp. 623 to 639. 29. Docket, vol. 2, pp. 644 to 738. 30. Docket, vol. 2, p. 907. 31. Docket, vol. 2, p. 908. 32. Entry of Judgment dated June 4, 2015, Docket, vol. 2, pp. 910 to 911. 33. Resolution dated September 2, 2015, Docket, vol. 2, pp. 919 to 921. 34. Docket, vol. 2, pp. 1035 to 1036. 35. Ibid. 36. Order dated June 27, 2016, Docket, vol. 2, p. 1038. 37. Docket, vol. 2, pp. 1068 to 1095. 38. Docket, vol. 2, p. 1098. 39. Resolution, Docket, vol. 2, p. 1099. 40. JSFI, Docket, vol. 1, p. 98. 41. Commissioner of Internal Revenue vs. Toledo Power Company , G.R. Nos. 195175 and 199645, August 10, 2015; Luzon Hydro Corporation vs. Commissioner of Internal Revenue , G.R. No. 188260, November 13, 2013; Southern Philippines Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 179632, October 19, 2011; Silicon Philippines, Inc. (Formerly Intel Philippines Manufacturing, Inc.) vs. Commissioner of Internal Revenue , G.R. No. 172378, January 17, 2011; AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 182364, August 3, 2010; San Roque Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 180345, November 25, 2009; Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 166732, April 27, 2007. 42. Deutsche Knowledge Services, Pte. Ltd. vs. Commissioner of Internal Revenue , CTA EB No. 918 (CTA Case No. 8065), August 30, 2013. 43. G.R. No. 153205, January 22, 2007. 44. Par. 1, JSFI, Docket, vol. 1, pp. 96 to 97; Exhibit "A". 45. Exhibits "TTT-759" to "TTT-865". 46. Exhibits "TTT-919" to "TTT-973". 47. Exhibits "TTT-866" to "TTT-918". 48. Exhibit "D", line 17. 49. Exhibit "VVV", Annex C. 50. Exhibits "G" to "AA". 51. Exhibits "BB" to "UU". 52. Exhibits "VV" to "III". 53. Exhibits "WWW-1" to "WWW-20". 54. G.R. No. 201326, February 8, 2017. 55. Exhibit "XXX", Q&A Nos. 9 and 10, Docket, vol. 2, pp. 998 and 999. 56. Commissioner of Internal Revenue vs. Deutsche Knowledge Services Pte. Ltd. , CTA EB No. 1244, March 30, 2017 (CTA Case No. 8443); Deutsche Knowledge Services Pte. Ltd. vs. Commissioner of Internal Revenue , CTA EB No. 1345 (CTA Case No. 8443), March 30, 2017. 57. Exhibit "D", line 17. 58. Exhibit "D", lines 21D, 21F, 21H, 21J, and 21L. 59. Exhibits "TTT-1" to "TTT-757". 60. Exhibit "VVV", pp. 4 and 5. 61. Exhibit "VVV", Annex B. 62. Exhibit "VVV", Annex D. 63. Exhibit "D", lines 15, 15A, 16, and 16A. 64. Exhibit "D", line 17. 65. Exhibit "D", line 15B. 66. Exhibits "KKK" to "RRR". 67. Exhibit "RRR", line 23D.