New York Bay Philippines, Inc. v. Commissioner of Internal Revenue

THIRD DIVISION [C.T.A. CASE NO. 9022. March 26, 2018.] NEW YORK BAY PHILIPPINES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION FABON-VICTORINO , J p : This Petition for Review 1 filed by New York Bay Philippines, Inc. on March 31, 2015, prays for the refund or issuance of a tax credit certificate (TCC) in the amount Thirty-One Million Two Hundred Thirty-Two Thousand Three Hundred Ninety-Nine Pesos and Fifty-Two Centavos (P31,232,399.52),representing its excess and unutilized input value-added tax (VAT) on purchases of goods and services attributable to its zero-rated sales for the year 2013. Petitioner New York Bay Philippines, Inc. is a domestic corporation with principal place of business at Unit 2102, 21st Floor Antel Global Corporate Center, Julia Vargas Avenue, Pasig City. 2 It is registered with the Securities and Exchange Commission (SEC),and is engaged in financial holding activities, specifically, as a remittance service provider, either through electronic bank transfers, door-to-door, and other kinds of fund transfer. 3 Petitioner is a VAT registered taxpayer of Revenue District Office (RDO) No. 43A, Bureau of Internal Revenue (BIR) with Taxpayer Identification No. (TIN) 000-217-994-000, as indicated in its Certificate of Registration No. 3RC0000682520. 4 On the other hand, respondent is the Commissioner of Internal Revenue (CIR), 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 5th Floor, BIR National Office Building, Agham Road, Diliman, Quezon City. During the four quarters of calendar year (CY) 2013, petitioner allegedly rendered services in the Philippines to non-resident foreign corporations not engaged in business in the country, the consideration for which were paid in acceptable foreign currency and accounted for in accordance with the rules and regulations of Bangko Sentral ng Pilipinas (BSP). 5 Petitioner accumulated input VAT credits on its domestic purchases of goods and services attributable to its zero-rated sales of services for the four quarters of CY 2013 amounting to P31,232,399.52. 6 Subsequently, petitioner filed an administrative claim for refund/issuance of a tax credit certificate with the BIR RDO No. 43A, of its alleged excess and unutilized input VAT for the four quarters of CY 2013 in the total amount of P31,232,399.52. 7 Due to respondent's inaction to the said administrative claim for refund, 8 petitioner filed the instant Petition for Review before this Court on March 31, 2015. In his Answer 9 filed on May 21, 2015, respondent registered its opposition to petitioner's judicial action for refund/TCC on account of failure to substantiate its claim and to comply with all the requisites for entitlement thereto under the NIRC of 1997, relevant regulations, and jurisprudence. On October 12, 2015, a Pre-Trial Order was issued terminating the Pre-Trial Conference. 10 Trial ensued during which petitioner presented as witnesses its Assistant Head of Accounting Ma. Victoria Cruz, and the Court-commissioned Independent Certified Public Accountant (ICPA) Madonna Mia S. Dayego. Witness Ma. Victoria Cruz testified 11 that she oversees the entire accounting operations of petitioner, including tax compliance, filing of returns, and dealing with the BIR and external auditors, consultants and counsel of petitioner. She is also the custodian of petitioner's documents in relation to her functions. Petitioner is engaged in financial holding activities particularly providing remittance services. It is a VAT-registered taxpayer as of January 1, 1997 with TIN 000-217-994-000. For the CY 2013, petitioner's sales consisting of local sales subjected to 12% VAT and zero-rated sales amounted to P409,451,230.96, for which petitioner paid output VAT on its VAT-able sales in the total amount of P8,055.22. As a remittance service provider, which renders services to non-resident clients who are not engaged in business in the Philippines, petitioner incurred input VAT on its domestic purchases of goods and services for the CY 2013 in the amount of P31,232,399.52. Petitioner did not carry over and/or apply its excess VAT credits for the TY 2013 against any output VAT for the succeeding periods. In support thereof, the witness presented petitioner's VAT Returns filed and paid through the BIR's Electronic Filing and Payment System (EFPS) for which a Filing Reference Number was provided. On November 7, 2014, petitioner filed an administrative claim for refund of its excess and unutilized input VAT for the CY 2013 with the BIR RDO No. 43A, with a Sworn Certification of submission of complete documents to substantiate its claim. Respondent however failed to act on the said claim for refund prompting petitioner to elevate the matter to this Court on March 31, 2015. The Court-commissioned ICPA Madonna Mia S. Dayego declared 12 that she audited the supporting documents pertinent to petitioner's claim for refund of excess and unutilized input VAT on purchases of goods and services attributable to zero-rated sales for CY 2013. Per her ICPA Report submitted to the Court, petitioner's zero-rated sales for CY 2013 were properly reported in its quarterly VAT Returns and traceable in its General Ledger (GL) and Audited Financial Statements (AFS).Documents also revealed that the payments to petitioner for the zero-rated sales were remitted to its bank accounts which inward remittances were adequately supported by pertinent documents. Petitioner's VATable sales were also reported in its quarterly VAT Returns, GL, and AFS, and adequately supported by VAT ORs. This is also true with regard to petitioner's input taxes, including the input taxes on capital goods not exceeding P1M, and the input taxes on domestic purchases of services and goods other than capital goods. Finally, her audit showed that the total input taxes for CY 2013 were not applied against any output VAT liability for the same year. Thus, out of the P31,232,399.52 being claimed for refund by petitioner, the substantiated amount of P30,959,767.63 may be refunded as excess unutilized input VAT on purchases of goods and services. Petitioner rested after all of its formally offered exhibits were admitted by the Court in the Resolution 13 dated May 2, 2016. On February 7, 2017, respondent's counsel manifested that he would no longer present any evidence for respondent. 14 The case was submitted for decision on April 3, 2017. 15 THE ISSUE The parties submitted the following issue for the Court's resolution: Whether petitioner is entitled to its claim for refund/TCC for the amount of P31,232,399.52, representing its excess and unutilized input VAT for the four quarters of CY 2013. 16 DISCUSSION/RULING Section 112 (A) and (C) of the National Internal Revenue Code of 1997, as amended, pertinently 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." Thus, to be entitled to refund/TCC of input tax due or paid attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied: 1. the taxpayer is VAT-registered; 2. the claim was filed within the prescriptive periods, both in the administrative and judicial levels; 3. the taxpayer is engaged in zero-rated or effectively zero-rated sales; 4. the input taxes were incurred or paid; 5. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; and 6. the input taxes have not been applied against any output VAT liability. Petitioner is a VAT- registered taxpayer. Petitioner's Certificate of Registration No. 3RC0000682520 with Tax Identification No. 000-217-994-000 sufficiently established that it is a duly registered VAT taxpayer. 17 Petitioner's administrative and judicial claims were seasonably filed. The second requisite was likewise satisfied. Pursuant to Section 112 (A) of the NIRC of 1997, as amended, petitioner had two (2) years to file a claim for refund/TCC of input VAT attributable to zero-rated or effectively zero-rated sales reckoned from the close of the taxable quarter when the relevant sales were made. Shown below are the dates of the last day of the two-year period for petitioner to file its administrative claim for the four taxable quarters of CY 2013: PERIOD COVERED LAST DAY OF THE TWO-YEAR PRESCRIPTIVE PERIOD January to March 2013 (1st Quarter) March 31, 2015 April to June 2013 (2nd Quarter) June 30, 2015 July to September 2013 (3rd Quarter) September 30, 2015 October to December 2013 (4th Quarter) December 31, 2015 Evidently, petitioner's administrative claim 18 was timely filed on November 7, 2014, or well within the two-year prescriptive period. As to the judicial claim, Section 112 (C) of the NIRC of 1997, as amended, provides that the CIR has one hundred twenty (120) days from the date of submission of the complete documents in support of the application for refund/TCC within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer may file an appeal with this Court within thirty (30) days from receipt of the adverse decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for refund/TCC, the taxpayer may assail such inaction on the part of the CIR to the Court within 30 days. Significant to the reckoning of the 120-day period is the declaration of the Supreme Court that the application for VAT refund/TCC must be accompanied by complete supporting documents with a statement under oath attesting to the completeness of said supporting documents pursuant to Revenue Memorandum Circular (RMC) No. 54-2014. The affidavit shall also state that these documents are sufficient to support the claim, and no other documents shall be accepted from the taxpayer in order for the CIR to render his decision. The requirement is explicitly mandated by the High Court as follows: As it now stands, RMC 54-2014 dated June 11, 2014 mandates that: The application for VAT refund/tax credit must be accompanied by complete supporting documents as enumerated in Annex 'A' hereof. In addition, the taxpayer shall attach a statement under oath attesting to the completeness of the submitted documents (Annex B).The affidavit shall further state that the said documents are the only documents which the taxpayer will present to support the claim. If the taxpayer is a juridical person, there should be a sworn statement that the officer signing the affidavit ( i.e. ,at the very least, the Chief Financial Officer) has been authorized by the Board of Directors of the company. Upon submission of the administrative claim and its supporting documents, the claim shall be processed and no other documents shall be accepted/required from the taxpayer in the course of its evaluation. A decision shall be rendered by the Commissioner based only on the documents submitted by the taxpayer. The application for tax refund/tax credit shall be denied where the taxpayer/claimant failed to submit the complete supporting documents. For this purpose, the concerned processing/investigating office shall prepare and issue the corresponding Denial Letter to the taxpayer/claimant. Thus, under the current rule, the reckoning of the 120-day period has been withdrawn from the taxpayer by RMC 54-2014, since it requires him at the time he files his claim to complete his supporting documents and attest that he will no longer submit any other document to prove his claim. Further, the taxpayer is barred from submitting additional documents after he has filed his administrative claim. 19 Since RMC No. 54-2014 took effect on June 11, 2014, the same applies to the instant case which administrative claim for refund was filed on November 7, 2014. Thus, the 120-day period shall be reckoned from November 7, 2014 on which date petitioner was already obliged to submit complete supporting documents. The record shows that petitioner submitted supporting documents per the Checklist of Mandatory Requirements for Claims for VAT Credit/Refund labeled as Annex "A" 20 upon the filing of its administrative claim on November 7, 2014 and executed a Sworn Certification 21 attesting to the completeness of the submitted documents. Accordingly, respondent had 120 days from November 7, 2014, or until March 9, 2015 22 to decide on petitioner's claim. But as earlier stated, respondent failed to act on the claim within the allowable period of 120 days. Thus, petitioner had 30 days or until April 8, 2015, to appeal such inaction to the Court. Evidently, petitioner's judicial claim for refund/TCC was as well timely filed on March 31, 2015. Petitioner had zero-rated sales. Regarding the third requisite, petitioner claims that it rendered services in the Philippines to Trans-Fast Remittance LLC and Trans-Fast International FZ-LLC, both non-resident foreign corporations not engaged in business in the Philippines. The consideration for the services rendered were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). In view thereof, the services rendered qualify as zero-rated sales under Section 108 (B) (2) of the NIRC of 1997, as amended, which reads: 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 a number of cases, the Supreme Court held that 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 complied with: 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. 23 Again, it was established that petitioner is a remittance service provider conducted either by electronic bank transfers, door-to-door, and other kinds of fund transfer. These services are certainly not in the same category as "processing, manufacturing or repacking of goods." Further, petitioner was able to establish that its clients, Trans-Fast Remittance LLC and Trans-Fast International FZ-LLC, are non-resident foreign corporations doing business outside the Philippines through the following documents: 1. SEC Certificate of Non-registration of Company, certifying that Trans-Fast Remittance LLC is not registered as a corporation or partnership in the Philippines; 24 2. SEC Certificate of Non-registration of Company, certifying that Trans-Fast International FZ-LLC is not registered as a corporation or partnership in the Philippines; 25 3. Authenticated copy of Trans-Fast Remittance LLC's Articles of Incorporation, License to Transact Business issued by the State of New York, Certificate of Formation from Delaware, and State of Delaware Certificate of Amendment; 26 and 4. Authenticated copy of Trans-Fast International FZ-LLC's Amended Memorandum of Association and Articles of Association. 27 As to whether the payment for the services rendered by petitioner was in acceptable foreign currency duly accounted for in accordance with the BSP rules, Section 113 (A) (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, and 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 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; (Emphasis supplied) SEC. 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) To comply with the foregoing provisions, the foreign currency remittances referred to under Section 108 (B) (2) of the NIRC of 1997, as amended, must be supported by VAT zero-rated official receipts (ORs). In petitioner's Quarterly VAT Returns for the four quarters of CY 2013, petitioner reported zero-rated sales of P409,384,104.16, as shown below: EXHIBIT PERIOD COVERED ZERO-RATED SALES/RECEIPTS "P-4" 1st Quarter 2013 P91,546,498.51 "P-6" 2nd Quarter 2013 103,399,672.97 "P-8" 3rd Quarter 2013 102,256,361.81 "P-10" 4th Quarter 2013 112,181,570.87 Total P409,384,104.16 To prove that it had rendered services to Trans-Fast Remittance LLC and Trans-Fast International FZ-LLC for the four quarters of CY 2013 and the same were paid for in acceptable foreign currency duly accounted for in accordance with the rules and regulations of the BSP, petitioner presented its VAT zero-rated ORs, 28 and various schedules, supported by bank advices, credit advices, credit memoranda, bank certifications, passbooks and bank statements, 29 all examined and reviewed by ICPA Madonna Mia S. Dayego. Verification by the ICPA 30 revealed that petitioner charges the Parent Company (Trans-Fast LLC) and Affiliate Company (Trans-Fast International FZ LLC) on a per transaction rate amounting to USD2.00 to USD2.55 based on the Addenda to the Service Agreement effective January 2012 to July 2013. 31 For the first eight (8) months ( i.e. ,January to August) of CY 2013, petitioner collected the service revenue earned, which was evidenced by OR, by deducting the amount against the funding received for Payment Orders from Parent Company and Affiliate Company. Petitioner implemented the change in procedure in the collection of service revenue for the succeeding months. It collected the service fees for the months of September to December 2013 separately from the funding received for Payment Orders from the Parent and Affiliate Companies. For the months of September to December 2013, petitioner's sales of services were duly substantiated as can be gleaned from the VAT zero-rated ORs 32 and ICPA's Summary of Comparison of Schedule of Collections of Zero-rated Sales with Bank Advices and Passbooks for September to December 2013. 33 However, for the months of January to August 2013, while the sales of services were supported by VAT zero-rated ORs, 34 the ICPA noted unsubstantiated remittances amounting to $13,887,311.08 out of the total funding of $874,716,033.40 and that there was funding by International Crew Center S De R L and Ving Go Manpower Co. Ltd. without service agreement with the parent or affiliate companies amounting to $172,477.46. 35 The summary of these exceptions is presented hereunder: Amount Exhibit/ Reference Unsubstantiated Inward Remittances from Affiliate Company No bank advices, credit advices, credit memo or bank certifications $837,583.22 P-36, Note 10.2, p. 48 of 48 Bank certifications with insufficient details 8,564,727.86 P-36, Notes 7 & 8, p. 48 of 48 Remitter was not a Partner 4,485,000.00 P-36, Note 9, p. 48 of 48 Subtotal $13,887,311.08 Funding without Service Agreement From Parent Company and/or Parent Company's Partners $54,456.00 P-35, Note 3, p. 38 of 38 From Affiliate Company and/or Affiliate Company's Partners 118,021.46 P-36, Note 5, p. 48 of 48 Subtotal $172,477.46 Total Exceptions on funding found by ICPA $14,059,788.54 Accordingly, the service revenues of P19,063.48, related to the transactions consisting the exceptions of $14,059,788.54, shall be denied zero-rating, the details of which are as follows: 36 Amount Reference Service revenue from unsubstantiated remittances No bank advices, credit advices, credit memo or bank Certifications P2,285.20 Annex A Bank certifications with insufficient details No remitter name in the bank certification 12,538.18 Annex B.1 Bank certifications with insufficient details Remitter name is "New York Bay Philippines" instead of a Partner 1,423.31 Annex B.2 Remitter was not a Partner 1,356.69 Annex C Subtotal P17,603.38 Service revenue from funding without service agreement From Parent Company and/or Parent Company's Partners P521.80 Annex D From Affiliate Company and/or Affiliate Company's Partners 938.30 Annex E Subtotal P1,460.10 Total P19,063.48 Hence, out of the P409,384,104.16 sales reported by petitioner to have been generated from services rendered to its non-resident affiliates for CY 2013, only the amount of P409,365,040.68 (P409,384,104.16 less P19,063.48) qualifies for VAT zero-rating under Section 108 (B) (2) of the NIRC of 1997, as amended. Petitioner incurred and paid input taxes which are attributable to its zero-rated sales. As to the fourth and fifth requisites, in its Quarterly VAT Returns for the four quarters of CY 2013, petitioner reflected input VAT in the total amount of P31,232,399.62, 37 broken down as follows: 1st Quarter (Exhibit P-4) 2nd Quarter (Exhibit P-6) 3rd Quarter (Exhibit P-8) 4th Quarter (Exhibit P-10) Total Purchase of Capital Goods not exceeding P1M (Line 21B) P7,607.14 P88,322.98 P116,570.36 P54,589.28 P267,089.76 Domestic Purchases of Goods Other than Capital Goods (Line 21F) - 6,058.93 4,892.14 18,982.04 29,933.11 Domestic Purchase of Services (Line 21J) 6,778,174.50 7,469,931.93 7,941,686.64 8,745,583.68 30,935,376.75 Total Input Taxes for the period P6,785,781.64 P7,564,313.84 P8,063,149.14 P8,819,155.00 P31,232,399.62 To prove that it incurred/paid the afore-mentioned input VAT, petitioner submitted various suppliers' invoices 38 and ORs. 39 Upon examination of these documents, the ICPA noted exceptions in the amount of P272,631.89, to wit: 40 Exhibit Particulars 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Input taxes on Capital goods not exceeding P1M P-54 Supported by original VAT invoices without the TIN of the Petitioner - P348.00 P3,375.00 - P3,723.00 P-50 Not supported - 23,153.54 - - 23,153.54 Input taxes on Domestic Purchases of Goods other than Capital Goods P-51 Not supported - - - P728.11 728.11 Input taxes on Domestic Purchases of Services P-45 Input VAT not traced to GL/CVs/EDGE Pro Journal Entry Print-outs - 188.04 - 21.42 209.46 P-48 Input VAT per OR is lower than the amount per claim - - - 176.78 176.78 P-49 Supported by original VAT ORs in the name of the petitioner not dated or issued within the taxable year - - 2,842.50 36,072.87 38,915.37 P-53 Supported by original VAT ORs not in the name of the petitioner P1,448.57 1,011.43 840.00 - 3,300.00 P-55 Supported by original VAT ORs without/invalid TIN of the petitioner 10,144.29 - - - 10,144.29 P-57 Supported by non-VAT acknowledgement receipt in the name of the petitioner - - - 2,012.22 2,012.22 P-56 Supported by original VAT ORs without the address of the petitioner 420.00 - - 6,375.51 6,795.51 P-52 Not supported 48,817.75 89,597.20 44,460.16 598.50 183,473.61 Total Downward Adjustment per ICPA P60,830.61 P114,298.21 P51,517.66 P45,985.41 P272,631.89 The Court finds the above findings of the ICPA in order. The aforesaid input taxes of P272,631.89 shall be disallowed from petitioner's claim as they were not properly substantiated by VAT invoices or ORs as prescribed under Sections 110 (A) and 113 (A) and (B) of the NIRC of 1997, as amended, and as implemented by Sections 4.110-1, 4.110-2, 4.110-8, and 4.113-1 (A) and (B) of Revenue Regulations (RR) No. 16-05. In addition to the disallowance of P272,631.89 input VAT, the amount of P143,415.73, broken down below, should likewise be disallowed for failure to meet the substantiation requirements under the aforesaid VAT law and regulations, thus: Supplier Invoice/ OR No. Amount Exhibit Input taxes on Capital goods not exceeding P1M 1. Supported by VAT invoices w/ATP dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation of RMC No. 52-2013 41 Zenshin Systems Corporation 224617 P7,607.14 P-46-1 Integrated Computer Systems, Inc. 210066388 5,217.86 P-46-2 J.P. Mactal Enterprises 3399 1,821.43 P-46-3 J.P. Mactal Enterprises 0343 803.57 P-46-10 2. Supported by VAT invoice but undated Safe One Enterprises 8174 1,028.57 P-46-4 Subtotal P16,478.57 Input taxes on Domestic Purchases of Goods other than Capital Goods 3. Supported by VAT invoice w/ATP dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation of RMC No. 52-2013 Integrated Computer Systems, Inc. 210066388 P4,339.29 P-46-2 4. Supported by VAT invoice with notation "NOT VALID FOR CLAIMING INPUT TAXES" Intertech Forms Manufacturing Corporation 10063 4,285.71 P-47-2 Subtotal P8,625.00 Input taxes on Domestic Purchases of Services 5. Supported by VAT ORs w/ATP dated between Jan. 1, 2011 to Jan. 17, 2013 not stamped "valid until October 31, 2013 only" in violation of RMC No. 52-2013 Airfreight 2100, Inc. 1858140A P210.63 P-48-1 Bernaldo Directo & PO Law Offices 9293 1,440.00 P-48-3 Bernaldo Directo & PO Law Offices 9542 1,440.00 P-48-4 CIS Bayad Center, Inc. 16792 424.29 P-48-8 CIS Bayad Center, Inc. 17042 1,607.15 P-48-9 Deeconcrete, Incorporated 19985 7,114.97 P-48-10 Deeconcrete, Incorporated 19986 7,114.97 P-48-11 Deeconcrete, Incorporated 19987 7,114.97 P-48-12 JobsDB. Philippines, Inc. 60997 720.00 P-48-16 Philrem Services Corp. 3324 10,130.89 P-48-23 Philrem Services Corp. 3328 10,399.29 P-48-24 Pronto Express Distribution, Inc. 89329 216.96 P-48-25 Pronto Express Distribution, Inc. 89657 216.96 P-48-26 Pronto Express Distribution, Inc. 89736 216.96 P-48-27 Airfreight 2100, Inc. 1878550A 37.65 P-48-30 Airfreight 2100, Inc. 1878549A 66.60 P-48-31 Airfreight 2100, Inc. 1881614A 16.65 P-48-32 Airfreight 2100, Inc. 1881615A 67.32 P-48-33 Airfreight 2100, Inc. 1880740A 16.65 P-48-34 Airfreight 2100, Inc. 1865045A 65.43 P-48-35 Airfreight 2100, Inc. 1885970A 97.56 P-48-36 Bernaldo Directo & PO Law Offices 9546 1,440.00 P-48-37 Bernaldo Directo & PO Law Offices 9767 1,440.00 P-48-38 Deeconcrete, Incorporated 19988 7,114.97 P-48-45 Deeconcrete, Incorporated 19989 7,114.97 P-48-46 Deeconcrete, Incorporated 20153 7,470.72 P-48-47 I.T. Citi Services, Inc. 2887 10,530.00 P-48-54 JobsDB. Philippines, Inc. 64633 1,440.00 P-48-56 Philrem Services Corp. 3386 13,420.71 P-48-63 Pronto Express Distribution, Inc. 90213 216.96 P-48-64 Pronto Express Distribution, Inc. 90649 216.96 P-48-65 Pronto Express Distribution, Inc. 91026 216.96 P-48-66 Airfreight 2100, Inc. 1889704A 33.30 P-48-69 Airfreight 2100, Inc. 1889705A 93.06 P-48-70 Airfreight 2100, Inc. 1889748A 16.65 P-48-71 Airfreight 2100, Inc. 1889749A 34.02 P-48-72 Airfreight 2100, Inc. 1893948A 46.44 P-48-74 Airfreight 2100, Inc. 1893947A 43.65 P-48-75 Bernaldo Directo & PO Law Offices 9844 1,440.00 P-48-80 Deeconcrete, Incorporated 20153 14,941.44 P-48-47 JobsDB. Philippines, Inc. 65491 720.00 P-48-100 JobsDB. Philippines, Inc. 66344 720.00 P-48-101 Pronto Express Distribution, Inc. 91498 216.96 P-48-111 Pronto Express Distribution, Inc. 91738 216.96 P-48-112 6. Supported by VAT ORs wherein input VAT per OR is lower than amount per claim (overclaim) Federal Express Pacific, Inc. (1,539.42 less 1,511.93) A00031012 27.49 P-48-50 ZMG Ward Howell, Inc. (22,464.00 less 22,062.86) 1027 401.14 P-48-68 Airfreight 2100, Inc. (59.40 less 58.33) 2005462A 1.07 P-48-73 Airfreight 2100, Inc. (44.28 less 43.49) 2005463A 0.79 P-48-76 Airfreight 2100, Inc. (41.49 less 40.75) 2007156A 0.74 P-48-77 Airfreight 2100, Inc. (16.65 less 16.35) 2005479A 0.30 P-48-78 Subtotal P118,312.16 Grand Total P143,415.73 Out of petitioner's input VAT claim of P31,232,399.52, only the amount of P30,816,351.90 represents petitioner's valid input VAT, computed as follows: Input VAT per petitioner's claim P31,232,399.52 Disallowances: Per ICPA's findings P272,631.89 Per Court's further verification 143,415.73 416,047.62 Valid input VAT P30,816,351.90 However, a portion of the valid input VAT of P30,816,351.90 shall be applied against petitioner's total reported output VAT liability of P8,055.22. 42 Consequently, only the remaining input VAT of P30,808,296.68 can be attributed to the entire zero-rated sales declared by petitioner in the amount of P409,384,104.16 and only the input VAT of P30,806,862.05 is attributable to the valid zero-rated sales of P409,365,040.68, as computed below: Valid input VAT P30,816,351.90 Less: Output VAT 8,055.22 Excess Valid Input VAT P30,808,296.68 Divide by Total Declared Zero-Rated Sales 409,384,104.16 Multiply by Valid Zero-Rated Sales 409,365,040.68 Excess Valid Input VAT attributable to Valid Zero-Rated Sales P30,806,862.05 Petitioner's excess input taxes were not applied against any output VAT liability. As to the sixth and last requisite, petitioner's input VAT claim of P31,232,399.52 remained unutilized until it was deducted as "VAT Refund/TCC claimed" 43 in its Amended Quarterly VAT Return for the fourth quarter of CY 2013. Further, the same was not reflected as carry-over in petitioner's Monthly and Quarterly VAT returns 44 of the succeeding CY 2014. WHEREFORE ,the instant Petition for Review is hereby PARTIALLY GRANTED .Accordingly, respondent is ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P30,806,862.05 ,representing its excess and unutilized input value-added tax on purchases of goods and services attributable to its zero-rated sales for the four quarters of CY 2013. SO ORDERED. (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Lovell R. Bautista and Ma. Belen M. Ringpis-Liban, JJ. ,concur. ANNEX A No Bank Advices, Credit Advices, Credit Memo or Bank Certifications (Exhibit P-36, p. 48 of 48, Note 10.2) ANNEX B.1 Bank Certifications with Insufficient Details No Remitter Name in the Bank Certification (Details picked up from Exhibit "P-36") ANNEX B.2 Bank Certifications with Insufficient Details Remitter Name is "New York Bay Philippines" Instead of a Partner (Details picked up from Exhibit "P-36") ANNEX C Remitter was not a Partner (Details picked up from Exhibit "P-36") ANNEX D Funding from Parent Company and/or Parent Company's Partner without Service Agreement (Details picked up from Exhibit "P-35") ANNEX E Funding from Affiliate Company and/or Affiliate Company's Partner without Service Agreement (Details picked up from Exhibit "P-36") Footnotes 1. Docket, vol. 1, pp. 10-21. 2. Par. 1, Petition for Review, docket, vol. 1, pp. 10-11. 3. Exhibit "P-1",docket, vol. 2, pp. 945-958, also Judicial Affidavit dated August 25, 2015, docket volume 1, p. 214. 4. Exhibit "P-2",docket, vol. 3, p. 959. 5. Par. 5, Petition for Review, docket, vol. 1, p. 12. 6. Pars. 10-11, Petition for Review, docket, vol. 1, pp. 13-14. 7. Par. 3, Stipulation of Facts, Joint Stipulation of Facts and Issues (JSFI),docket, vol. 1, pp. 232-233. 8. Par. 4, Stipulation of Facts, JSFI, docket, vol. 1, p. 233. 9. Docket, vol. 1, pp. 72-75. 10. Docket, vol. 1, pp. 246-253. 11. See Exhibit P-19, Judicial Affidavit dated August 25, 2015, docket volume 1, pp. 213-226; no cross examination, see TSN dated December 1, 2015, p. 22. 12. See Judicial Affidavit dated February 3, 2016, docket volume 2, pp. 867-886; no cross examination, see TSN dated February 9, 2016, p. 8. 13. Docket, vol. 3, pp. 1043-1044. 14. Docket, vol. 3, p. 1065. 15. Docket, vol. 3, p. 1113. 16. Stipulated Issue for Resolution, JSFI, docket, vol. 1, p. 233. 17. Docket, vol. 2, p. 959. 18. Exhibits "P-14" to "P-14-b",docket, vol. 2, pp. 984-988. 19. Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue ,G.R. No. 207112, December 8, 2015. 20. Docket, vol. 2, p. 987. 21. Exhibit "P-14-a",docket, vol. 2, p. 986. 22. March 7, 2015 being a Saturday. 23. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , G.R. No. 153205, January 22, 2007. 24. Exhibit "P-15",docket, vol. 2, p. 989. 25. Exhibit "P-16",docket, vol. 2, p. 990. 26. Exhibit "P-17",docket, vol. 2, pp. 991-1020. 27. Exhibit "P-18",docket, vol. 2, pp. 1021-1037. 28. Exhibits "P-28-9" to "P-28-32". 29. Exhibits "P-29" to "P-39-8". 30. Exhibit "P-20",ICPA Report, docket, vol. 2, pp. 687-688. 31. Exhibits "P-59-4" to "P-59-7". 32. Exhibits "P-28-25" to "P-28-32". 33. Exhibit "P-39". 34. Exhibits "P-28-9" to "P-28-24". 35. Exhibit "P-20",ICPA Report, docket, vol. 2, p. 693. 36. The amounts were computed on a per transaction basis using the applicable rates per Service Agreements and were converted to peso using the exchange rate used by ICPA per its Schedule of Zero-rated sales. 37. With a difference of 0.10 compared to the amount of claim due to typographical error on carry over from 3rd Quarter to 4th Quarter VAT Returns. 38. Exhibits "P-46-1" to "P-46-20","P-47-1",to "P-47-15",and "P-54-1" to "P-54-2". 39. Exhibits "P-48-1" to "P-48-156","P-49-1" to "P-49-23","P-53-1" to "P-53-5","P-55-1" to "P-55-3","P-56-1" to "P-56-2",and "P-57-1". 40. Exhibit "P-20",ICPA Report, docket, vol. 2, p. 703. 41. Clarifying the Validity of Unused/Unissued Principal and Supplementary Receipts/Invoices Printed Prior to January 18, 2013 and other matters. xxx xxx xxx II. Receipts with Authority to Print dated January 1, 2011 to January 17, 2013. All Principal and Supplementary Receipts/Invoices with ATP dated January 1, 2011 to January 17, 2013 may be used until October 31, 2013 provided that new ATP was issued on or before August 30, 2013. x x x In all principal and supplementary receipts/invoice which can still be used until October 31, 2013, the term "valid until October 31, 2013 only" shall be stamped prominently on the face of the receipts or invoices (original and duplicate copies).Otherwise, no deduction and input tax may be claimed using these receipts/invoices. 42. Total of the amounts in Line 19B of Exhibits "P-4", "P-6", "P-8", and "P-10". 43. Line 23D of Exhibit "P-10",docket, vol. 2, p. 977. 44. Exhibits "P-58-1" to "P-58-10".