Maxima Machineries, Inc. v. Commissioner of Internal Revenue

SECOND DIVISION [C.T.A. CASE NO. 9268. June 1, 2020.] MAXIMA MACHINERIES, INC. , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION MINDARO-GRULLA , J p : Submitted for decision on March 9, 2020 is a Petition for Review filed by the petitioner Maxima Machineries, Inc. against respondent Commissioner of Internal Revenue, on February 24, 2016, praying for the issuance of a tax credit certificate in the aggregate amount of P32,299,209.56, representing its alleged unutilized input value-added tax (VAT) allocable and directly attributable to its zero-rated sales for the period July 1, 2013 to September 30, 2013. 1 Petitioner Maxima Machineries, Inc. is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal business address at 871 Quezon Avenue, Quezon City. 2 It is registered with the Bureau of Internal Revenue (BIR) under Tax Identification Number (TIN) 006-618-023-00000. 3 On the other hand, respondent Commissioner of Internal Revenue is empowered to perform the duties of his office, including acting upon on protests cases and approval of claims for refund or tax credit as provided by law and implementing regulations. He can be served with notices at BIR National Office Bldg., BIR Road, Diliman, Quezon City. 4 On September 28, 2015, petitioner filed administrative claim for the issuance of tax credit certificates totalling P32,299,209.56, representing the excess input VAT, which are allocable and directly attributable to its VAT zero-rated sales for the 2nd quarter of FY 2014. 5 The BIR issued the Letter of Authority No. eLA201200042211 (Letter of Authority No. AUDM 04/1005098/2015) dated November 10, 2015, authorizing Revenue Officers Ferly Ann Paez, Jennifer Almedilla and Group Supervisor Marivic Bautista to examine petitioner's books of accounts and other accounting records for VAT for the period from July 1, 2013 to September 30, 2013. 6 DETACa Petitioner filed the instant Petition for Review with this Court on February 24, 2016. 7 The case was initially raffled to this Court's First Division. On May 25, 2016, respondent filed his Answer , 8 interposing the following special and affirmative defenses, to wit: "4. On the basis of the foregoing allegations and in further support of the Specific Denials herein set forth, respondent respectfully alleges as her defense that: Claims for refund are construed strictly against the taxpayer and in favor of the Government. 5. It is said that taxes are essential to government's very existence hence, the dictum that 'taxes are the lifeblood of the government.' And because taxes are the lifeblood of the nation, the court has always applied the doctrine of strict interpretation in construing tax exemptions. A claim for exemption from tax payments must be clearly shown and be based on language in the law too plain to be mistaken. Else wise stated, taxation is the rule, exemption therefrom is the exception. 6. For this reason, the right of taxation cannot easily be surrendered, statutes granting tax exemptions are considered as a derogation of the sovereign authority. Since tax refunds are regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption. 7. Audit and verification of petitioner's claim, resulted to the denial of the claimed refund, to wit: VERIFICATION AND EVALUATION OF REFUND/TCC CLAIM Verification of Submitted Documents Submitted documents were evaluated. Noted from the said evaluation are the following: 1. Zero-rated sales invoices were not submitted. 2. Some line items of the submitted zero-rated sales schedule have no invoice number indicated. Input Tax Verification Verification of Input Tax on Importations aDSIHc Schedule of Input Tax on Importation was scrutinized. Comparison as made against the generated BOC Importation Listing from AITEID and compared against the Importation Listing submitted. Out-of-period items and those items which were not in the BOC date were disallowed. Computation is as follows: Total VAT on Importation per return P81,271,468.41 Allowable Input Tax per investigation Total Input VAT on Importation per schedule P264,866,546.97 Less: Out of period Importations 201,084,353.97 Importation within the prescribed period 45,782,193.00 Less: Importation data not BOC 8,751,775.00 37,030,418.00 Disallowed Input Tax on Importation P44,241,050.41 =========== Verification of Input Tax on Local Purchases Invoices/Official Receipts in support of the input claim were scrutinized. Disallowances were either due to out-of-period claims, non-compliance with invoicing requirements, unsupported claims and invalid supporting document. Listed below are the allowable input taxes for the period with valid supporting documents. xxx xxx xxx Allowable Input Tax 66,232.41 Disallowed Input Tax 8,708,107.31 Evaluation was made on the submitted documents and noted are the following: 1. Zero-rated sales invoices were not submitted. 2. Some line items of the submitted zero-rated sales schedule have no invoice number indicated. These items are crucial to the tax credit/refund claim since the unutilized input tax subjected to refund claim are related to zero-rated sales. 8. Thus, the application for Refund/Tax Credit Certificate (TCC) of unutilized input tax related to zero-rated sales for the period July 1, 2013 to September 30, 2013 of Maxima Machineries, Inc. was denied for failure to submit complete documents that will fully substantiate its claim. 9. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implication. The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. ETHIDa 10. To reiterate, claims for refund are construed strictly against the claimant for the same partake of the nature of exemption from taxation and as such, they are looked upon with disfavor. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon vague implications. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted." The pre-trial conference case was initially scheduled on August 4, 2016. 9 However, upon the parties' separate Motions to Reset , 10 the said pre-trial conference was reset to, and held on, October 13, 2016. 11 Respondent's Pre-Trial Brief was filed on October 6, 2016; 12 while the Pre-Trial Brief for the Petitioner was submitted on October 10, 2016. 13 Respondent transmitted the BIR Records for the instant case on October 10, 2016. 14 The parties submitted their Joint Stipulation of Facts and Issues (JSFI) on October 21, 2016. 15 In the Resolution dated November 8, 2016, 16 the parties' JSFI was approved, and the Court terminated the Pre-Trial. Thereafter, the Pre-Trial Order dated November 29, 2016 was issued. 17 The trial of the case then ensued. During trial, petitioner presented documentary and testimonial evidence. As for its testimonial evidence, petitioner offered the testimonies of the following individuals: (1) Mr. Yusuke Yamada, 18 petitioner's Chief Financial Officer; (2) Mr. Neil U. Sison, 19 Court-commissioned Independent Certified Public Accountant (ICPA); 20 and (3) Ms. Marlene G. Manuel, 21 petitioner's Chief for Government Compliance. On August 7, 2017, petitioner filed its Formal Offer of Evidence . 22 Respondent filed his Comment (Re: Petitioner's Formal Offer of Evidence) on August 17, 2017. 23 In the Resolution dated December 15, 2017, 24 the Court admitted petitioner's exhibits, except for the following: 1. Exhibits "P-43-M-1614" to "P-43-M-2410","P-43-O-37" to "P-43-O-341","P-43-AE-71" to "P-43-AE-72",and "P-43-BJ-639" to "P-43-BJ-2340",for not being found in the records of the case; 2. Exhibit "P-43-BE-1",for failure of the exhibit formally offered and identified to correspond with the document actually marked. cSEDTC In view of the foregoing denied exhibits, petitioner filed a Motion for Reconsideration to the Resolution dated December 15, 2017 on January 5, 2018. 25 Thus, in the Resolution dated April 16, 2018, 26 the Court resolved to admit the above-stated "P-43-M-1614" to "P-43-M-2410","P-43-O-37" to "P-43-O-341","P-43-AE-71" to "P-43-AE-72","P-43-BJ-639" to "P-43-BJ-2340",and "P-43-BE-1". For his part, respondent likewise presented his documentary and testimonial evidence. He presented his lone witness, Ms. Ferly Ann Paez-Montalban, Revenue Officer III of the BIR. 27 The Respondent's Formal Offer of Evidence was filed on July 2, 2018. 28 In the Resolution dated September 17, 2018, 29 the Court admitted respondent's exhibits, and gave the parties a thirty (30) days from receipt thereof to file their respective memorandum. The instant case was transferred to this Court's Second Division by virtue of the Order dated September 27, 2018. 30 On October 22, 2018, respondent filed a Manifestation , 31 manifesting that he is adopting the arguments he raised in his Answer dated May 25, 2016, as his Memorandum .On the other hand, the Memorandum for the Petitioner was filed on October 24, 2018. 32 Thus, in the Resolution dated November 6, 2018, 33 the Court considered this case submitted for decision. However, on April 2, 2019, petitioner filed a Motion for Suspension of the Rendition of Decision and to Allow the Continuance of the ICPA Audit and to Schedule the Presentation of the ICPA and Yusuke Yamada. 34 Respondent filed his Opposition to the said Motion on May 31, 2019. 35 Nevertheless, in the Resolution dated July 15, 2018, 36 the Court granted petitioner's Motion for Suspension ,thereby recalling the Court's Resolution dated November 6, 2018. Petitioner's witnesses, namely, Mr. Yusuke Yamada, 37 and Mr. Neil U. Sison, 38 were recalled to testify anew for petitioner. 39 On October 30, 2019, petitioner filed its Supplemental Formal Offer of Evidence . 40 In the Resolution dated December 27, 2019, the Court admitted petitioner's exhibits, except for Exhibits "P-43-CC","P-43-CD-6","P-43-CD-37","P-43-CD-467","P-43-CD-483","P-43-CD-609","P-43-CD-801","P-43-CD-831","P-43-CD-834","P-43-CD-836","P-43-CD-838","P-43-CD-868","P-43-CD-876" to "P-43-CD-886","P-43-CD-888" to "P-43-CD-893","P-43-CD-1017","P-43-CD-1077" to "P-43-CD-1079","P-43-CD-1169","P-43-CD-1239","P-43-CD-1461" to "P-43-CD-1475","P-43-CD-1716" to "P-43-CD-1718","P-43-CD-1726","P-43-CD-1729","P-43-CD-1732" to "P-43-CD-1733","P-43-CD-1745","P-43-CD-1749","P-43-CD-1759","P-43-CD-1768","P-43-CD-1875","P-43-CD-1966","P-43-CD-2096","P-43-CD-2279" to "P-43-CD-2287","P-43-CD-2328" to "P-43-CD-2337, "P-43-CD-2341","P-43-CD-2345","P-43-CD-2354" to "P-43-CD-2358","P-43-CD-2362" to "P-43-CD-2363","P-43-CD-2381" to "P-43-CD-2382","P-43-CD-2384" to "P-43-CD-2428","P-43-CD-2667" to "P-43-CD-2672","P-43-CD-2689","P-43-CD-2697" to "P-43-CD-2698","P-43-CD-2731","P-43-CD-2733" to "P-43-CD-2734","P-43-CD-3401" to "P-43-CD-4331","P-43-CD-4510","P-43-CD-4542","P-43-CD-4564" to "P-43-CD-4566","P-43-CD-4586" to "P-43-CD-4587","P-43-CD-4861" to "P-43-CD-4863","P-43-CD-4878","P-43-CD-4921" to "P-43-CD-4922","P-43-CD-4941" to "P-43-CD-4942","P-43-CD-4944","P-43-CD-4969","P-43-CD-5002" to "P-43-CD-5005","P-43-CD-5085","P-43-CD-5106","P-43-CD-5165" to "P-43-CD-5166","P-43-CD-5203","P-43-CD-5326" to "P-43-CD-5347","P-43-CD-5376" to "P-43-CD-5380","P-43-CD-5431","P-43-CD-5487","P-43-CD-5489" to "P-43-CD-5509","P-43-CD-5681" to "P-43-CD-5682","P-43-CD-5686","P-43-CD-5739","P-43-CD-5744","P-43-CD-5760","P-43-CD-5798","P-43-CD-5814","P-43-CD-5823","P-43-CD-5859","P-43-CD-5972" to "P-43-CD-5977","P-43-CD-5993","P-43-CD-6061","P-43-CD-6076","P-43-CD-6084" to "P-43-CD-6085","P-43-CD-6120","P-43-CD-6167","P-43-CD-6396","P-43-CD-6496","P-43-CD-6507" to "P-43-CD-6508","P-43-CD-6533","P-43-CD-6679","P-43-CD-6718" to "P-43-CD-6719","P-43-CD-6723" to "P-43-CD-6729","P-43-CD-6737","P-43-CD-6761" to "P-43-CD-6763","P-43-CD-6990","P-43-CD-6999" to "P-43-CD-7004","P-43-CD-7007" to "P-43-CD-7020","P-43-CD-7109" to "P-43-CD-7112","P-43-CD-7156" to "P-43-CD-7157","P-43-CD-7163" to "P-43-CD-7168","P-43-CD-7173" to "P-43-CD-7174","P-43-CD-7183" to "P-43-CD-7187","P-43-CD-7211","P-43-CD-7602","P-43-CD-7881","P-43-CD-8288" to "P-43-CD-8297","P-43-CD-8374" to "P-43-CD-8377","P-43-CD-8380" to "P-43-CD-8381","P-43-CD-8395" to "P-43-CD-8396","P-43-CD-8433","P-43-CD-8564","P-43-CD-8698" to "P-43-CD-8702","P-43-CD-8894","P-43-CD-8896" to "P-43-CD-8898","P-43-CD-9333","P-43-CD-9625","P-43-CD-9731","P-43-CD-9737","P-43-CD-9791","P-43-CD-10531","P-43-CD-10533" to "P-43-CD-10534","P-43-CD-10636" to "P-43-CD-640","P-43-CD-10758","P-43-CD-10780" to "P-43-CD-10782","P-43-CD-10790" to "P-43-CD-10794","P-43-CD-10951" to "P-43-CD-10953","P-43-CD-11105" to "P-43-CD-11110","P-43-CD-11139" to "P-43-CD-11142","P-43-CD-11355","P-43-CD-11370" to "P-43-CD-11371","P-43-CD-11388","P-43-CD-11566","P-43-CD-11670" to "P-43-CD-11672","P-43-CD-11795","P-43-CD-11891" to "P-43-CD-11892","P-43-CD-11941" to "P-43-CD-11957","P-43-CD-11971","P-43-CD-11976" to "P-43-CD-11980","P-43-CD-12002" to "P-43-CD-12008","P-43-CD-12040","P-43-CD-12082","P-43-CD-12215" to "P-43-CD-12216","P-43-CD-12271","P-43-CD-12335" to "P-43-CD-12341","P-43-CD-12681" to "P-43-CD-12688","P-43-CD-12732" to "P-43-CD-12734","P-43-CD-12738" to "P-43-CD-12739","P-43-CD-12784" to "P-43-CD-12785","P-43-CD-13544","P-43-CE-1-170","P-43-CE-1-187","P-43-CE-1-200" to "P-43-CE-1-201","P-43-CE-1-225" to "P-43-CE-1-226","P-43-CE-2-445","P-43-CE-2-511" to "P-43-CE-2-539","P-43-CE-2-771" to "P-43-CE-2-774","P-43-CE-2-776" to "P-43-CE-2-777","P-43-CE-2-990" to "P-43-CE-2-991","P-43-CE-2-1081" to "P-43-CE-2-1083","P-43-CE-2-1172" to "P-43-CE-2-1173","P-43-CE-2-1802" to "P-43-CE-2-1803","P-43-CE-2-1805" to "P-43-CE-2-1806","P-43-CE-2-1938","P-43-CE-2-1943" to "P-43-CE-2-1944","P-43-CE-2-2093","P-43-CE-2-2129","P-43-CE-2-2295" to "P-43-CE-2-2299","P-43-CE-2-2307" to "P-43-CE-2-2309","P-43-CE-2-2419","P-43-CE-2-2765","P-43-CE-2-3462" to "P-43-CE-2-3463","P-43-CE-3-1" to "P-43-CE-3-15","P-43-CE-3-76" to "P-43-CE-3-93","P-43-CE-3-98" to "P-43-CE-3-116","P-43-CE-3-119" to "P-43-CE-3-123","P-43-CE-3-130" to "P-43-CE-3-132","P-43-CE-3-143" to "P-43-CE-3-145","P-43-CE-3-155" to "P-43-CE-3-158","P-43-CE-3-160" to "P-43-CE-3-161","P-43-CE-3-300",and "P-43-CE-3-333" to "P-43-CE-3-343",for not being found in the records of the case. Subsequently, petitioner filed its Motion for Reconsideration to the Resolution dated December 27, 2019 on January 21, 2020, allegedly resubmitting the scanned copies of the above-mentioned documentary exhibits which are saved in USB. In the Resolution dated January 24, 2020, the Court ordered respondent to comment on the said Motion .Respondent then filed, on February 10, 2020, a Motion for Extension of Time to File Comment ,which was denied by the Court in the Resolution dated February 13, 2020. In the Resolution dated March 9, 2020, the Court denied with finality the said Motion for Reconsideration ,thereby finding that the USB attached thereto was found defective, as it can neither be opened nor recognized by the computer. As a consequence, the instant case was submitted anew for decision. THE ISSUE The main issue raised by parties for this Court's resolution is as follows, to wit: "4.1 Whether Petitioner is entitled for the issuance of tax credit certificate for the excess unutilized input Value Added Tax (VAT) allocable and directly attributable to its VAT zero-rated sales for the period July 1, 2013 to September 30, 2013 amounting to P32,299,209.56." 41 AaCTcI Petitioner's arguments: Petitioner argues that it is a VAT-registered taxpayer whose sales are entitled to zero-rating; that the input taxes being claimed are due or paid; that petitioner had unutilized and unapplied input tax credits for the period July 1, 2013 to September 30, 2013, that is allocable and directly attributable to its VAT zero-rated sales amounting to P32,299,209.56; that petitioner timely filed its administrative claim for the issuance of tax credit within the two-year prescriptive period; and that petitioner seasonably filed the instant Petition for Review to this Court against the "deemed denial decision" due to the inaction of the respondent after the lapse of the mandatory 120-day period under Section 112 (C) of the Tax Code. Respondent's counter-arguments: Respondent states that claims for refund are construed strictly against the taxpayer and in favor of the Government; that since tax refunds are regarded as tax exemptions, therefore, these are to be construed strictissimi juris against the person or entity claiming the exemption; that audit and verification of petitioner's claim, resulted to the denial of the claimed refund; that the application for Refund/Tax Credit Certificate (TCC) of unutilized input tax related to zero-rated sales for the period July 1, 2013 to September 30, 2013 of petitioner was denied for failure to submit complete documents that will fully substantiate its claim; and that the taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. THE COURT'S RULING: The Court finds no merit in the instant Petition for Review . Requisites for the grant of the refund or issuance of TCC under the law. Section 112 of the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act (RA) No. 9337, 42 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. EcTCAD 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, jurisprudence has laid down certain requisites which must be complied with by the taxpayer-applicant to successfully obtain a credit/refund of input VAT. Said requisites are classified into certain categories, to wit: Timeliness of the filing of the administrative and judicial claims: 1. the claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made; 43 2. in case of full or partial denial of the refund claim, or the failure on the part of the Commissioner to act on the said claim within a period of 120 days from the date of submission of complete documents in support of the application, the judicial claim must be filed with this Court, within 30 days from receipt of the decision or after the expiration of the said 120-day period; 44 Taxpayer's registration with the BIR: 3. the taxpayer is a VAT registered; 45 Taxpayer's output VAT: 4. the taxpayer is engaged in zero-rated or effectively zero-rated sales; 46 5. for zero-rated sales under Section 106(A)(2)(1) and (2);106(B);and 108(B)(1) and (2),the acceptable foreign currency exchange proceeds have been duly accounted with BSP rules and regulations; 47 Taxpayer's refund claim for input VAT : 6. the input taxes are not transitional input taxes; 48 7. the input taxes are due or paid; 49 8. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volumes; 50 and 9. the input taxes have not been applied against output taxes during and in the succeeding quarters. 51 Timeliness of the filing of petitioner's administrative and judicial claims. The first requisite pertains to the filing of the refund for tax credit or refund of input VAT before the BIR, within two (2) years from the close of the quarter when the sales were made. The instant claim covers the period July 1, 2013 to September 30, 2013, or the 2nd quarter of petitioner's FY 2014. Counting two (2) years from the close of the said quarter, the following table indicates the pertinent last day for the filing of an administrative claim therefor, to wit: Period (FY 2014) Close of the Taxable Quarter Last Day to File Administrative Claim July 1 to September 30, 2013 September 30, 2013 September 30, 2015 Considering that petitioner's administrative claim and its Application for Tax Credits/Refunds (BIR Form No. 1914) covering the subject quarter, was filed with the BIR on September 28, 2015, 52 the same was timely made within the 2-year prescriptive period. The second requisite is to the effect that the judicial claim must have been filed within thirty (30) days from receipt of respondent's decision or after the expiration of the 120-day period under Section 112 (C) of the NIRC of 1997, as amended. Considering that there is no indication that respondent issued a decision relative to petitioner's administrative claim, the determination of the 120+30-day period, as applied to this case, is shown as follows: AScHCD Period Covered Date of Filing of Administrative Claim End of 120 days for BIR Commissioner to decide the claim End of 30 days from expiration of the 120 days Date of Filing of Petition for Review 2nd quarter of FY 2014 September 28, 2015 January 26, 2016 February 25, 2016 February 24, 2016 Notably, the instant Petition for Review covering the n was filed on February 24, 2016. 53 Thus, petitioner's judicial claim was likewise timely made. Such being the case, petitioner fulfilled the above-stated first and second requisites. Petitioner's Registration with the BIR. As for its compliance with the third requisite ,petitioner has fulfilled the same by presenting its Certificate of Registration with OCN8RC0000019980, issued by BIR with TIN 006-618-023-000, indicating that it is liable to VAT. 54 Petitioner had zero-rated or effectively zero-rated sales during the 2nd quarter of FY 2014. Petitioner claims that during the 2nd quarter of FY 2014, it had VAT zero-rated sales transactions to entities registered with the Philippine Economic Zone Authority (PEZA), Subic Bay Metropolitan Authority (SBMA), Clark Development Authority (CDA), Cagayan Economic Zone Authority (CEZA) and Board of Investments (BOI). In its Quarterly VAT Return for the 2nd quarter of FY 2016, 55 petitioner reported total sales in the amount of P1,216,043,325.65, which include zero-rated sales in the amount of P403,798,185.05, as shown below: Vatable Sales P739,941,096.77 Sale to Government 72,304,043.83 Zero-Rated Sales 403,798,185.05 Total Sales P1,216,043,325.65 In support of its zero-rated sales, petitioner presented its Schedule of Zero-Rated Sales 56 and various sales invoices, official receipts (ORs) and other related documents, 57 which were examined by the Court-commissioned ICPA, Mr. Neil U. Sison of Sison Corillo Parone & Co. According to the ICPA, 58 petitioner's zero-rated sales were as follows: 1) sale of goods and services to export entities subject to zero percent (0%) VAT as evidenced by Certifications of VAT zero-rating from PEZA, SBMA, CDA, CEZA, Clark Development Corporation (CDC) and BOI; and 2) sale of goods to entities which are not among the registered corporations in the Philippines as evidenced by Certification of Non-Registration of Company issued by the Securities and Exchange Commission (SEC) and were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) as supported by invoices and inward remittances from banks. AcICHD 1) Sales to entities registered with PEZA, SBMA, CDA/CDC, CEZA and those registered with BOI whose products are 100% exported. Anent the VAT zero-rating of sales to entities registered with PEZA, SBMA, CDA/CDC, CEZA and those registered with BOI whose products are 100% exported, the pertinent provisions of Sections 106 (A) (2) (a) (5) and (c) and 108 (B) (3) of the NIRC of 1997, as amended, state: "SEC. 106. Value-Added Tax on Sale of Goods or Properties . (A) Rate and Base of Tax . x x x (2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export Sales . The term 'export sales' means: xxx xxx xxx (5) Those considered export sales under Executive Order No. 226, otherwise known as the 'Omnibus Investment Code of 1987,' and other special laws. (c) Sales to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects such sales to zero rate." "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties . (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: xxx xxx xxx (3) Services rendered to persons or entities whose exception under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate;" Furthermore, Sections 4.106-5 and 4.108-5 of Revenue Regulations (RR) No. 16-2005, as amended, which implement the foregoing, also provide: "SEC. 4.106-5. Zero-Rated Sales of Goods or Properties . x x x The following sales by VAT-registered persons shall be subject to zero percent (0%) rate: (a) Export sales. "Export Sales" shall mean: xxx xxx xxx (5) Transactions considered export sales under Executive Order No. 226, otherwise known as the Omnibus Investments Code of 1987, and other special laws. TAIaHE 'Considered export sales under Executive Order No. 226' shall mean the Philippine port F.O.B. value determined from invoices, bills of lading, inward letters of credit, landing certificates, and other commercial documents, of export products exported directly by a registered export producer, or the net selling price of export products sold by a registered export producer to another export producer, or to an export trader that subsequently exports the same; Provided ,That sales of export products to another producer or to an export trader shall only be deemed export sales when actually exported by the latter, as evidenced by landing certificates or similar commercial documents; Provided, further ,That pursuant to EO 226 and other special laws ,even without actual exportation, the following shall be considered constructively exported: (1) sales to bonded manufacturing warehouses of export-oriented manufacturers; (2) sales to export processing zones pursuant to Republic Act (RA) Nos. 7916, as amended, 7903, 7922 and other similar export processing zones ;(3) sale to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority pursuant to RA 7227 ;(4) sales to registered export traders operating bonded trading warehouses supplying raw materials in the manufacture of export products under guidelines to be set by the Board in consultation with the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC);(5) sales to diplomatic missions and other agencies and/or instrumentalities granted tax immunities, of locally manufactured, assembled or repacked products whether paid for in foreign currency or not. For purposes of zero-rating, the export sales of registered export traders shall include commission income. The exportation of goods on consignment shall not be deemed export sales until the export products consigned are in fact sold by the consignee: and Provided, finally ,that sales of goods, properties or services made by a VAT-registered supplier to a BOI-registered manufacturer/producer whose products are 100% exported are considered export sales. A certification to this effect must be issued by the Board of Investment (BOI) which shall be good for one year unless subsequently re-issued by the BOI . xxx xxx xxx (c) "Sales to Persons or Entities Deemed Tax-exempt under Special Law or International Agreement" Sales of goods or property to persons or entities who are tax-exempt under special laws, e.g. , sales to enterprises duly registered and accredited with the Subic Bay Metropolitan Authority (SBMA) pursuant to R.A. No. 7227, sales to enterprises duly registered and accredited with the Philippine Economic Zone Authority (PEZA) or international agreements to which the Philippines is signatory, such as, Asian Development Bank (ADB),International Rice Research Institute (IRRI),etc., shall be effectively subject to VAT at zero-rate ." (Emphasis supplied) "SEC. 4.108-5. Zero-Rated Sale of Services . xxx xxx xxx (b) Transactions Subject to Zero Percent (0%) VAT Rate . The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: cDHAES xxx xxx xxx (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate ;" (Emphasis supplied) In connection therewith, the special laws specific to this case are Republic Act (RA) No. 7227, as amended by RA No. 9400 ,otherwise known as " Bases Conversion and Development Act of 1992 ," RA No. 7916 ,as amended, otherwise known as "The Special Economic Zone Act of 1995" and RA No. 7922 ,otherwise known as " Cagayan Special Economic Zone Act of 1995 ." The relevant portions of said laws are quoted hereunder for easy reference: RA No. 7227, as amended by RA NO. 9400: "SEC. 12. Subic Special Economic Zone . x x x (b) The Subic Special Economic Zone shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital within, into and exported out of the Subic Special Economic Zone, as well as provide incentives such as tax and duty-free importations of raw materials, capital and equipment. However, exportation or removal of goods from the territory of the Subic Special Economic Zone to the other parts of the Philippine territory shall be subject to customs duties and taxes under the Tariff and Customs Code of the Philippines, as amended, the National Internal Revenue Code of 1997, as amended, and other relevant tax laws of the Philippines. (c) The provision of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed within the Subic Special Economic Zone .x x x." (Emphasis ours) "SEC. 15. Clark Special Economic Zone (CSEZ) and Clark Freeport Zone (CFZ) . Subject to the concurrence by resolution of the local government units directly affected, the President is hereby authorized to create by executive proclamation a Special Economic Zone covering the lands occupied by the Clark military reservations and its contiguous extensions as embraced, covered and defined by the 1947 Military Bases Agreement between the Philippines and the United States of America, as amended, x x x. The CFZ shall be operated and managed as a separate customs territory ensuring free flow or movement of goods and capital equipment within, into and exported out of the CFZ, as well as provide incentives such as tax and duty-free importation of raw materials and capital equipment. x x x. The provisions of existing laws, rules and regulations to the contrary notwithstanding, no national and local taxes shall be imposed on registered business enterprises within the CFZ. x x x. xxx xxx xxx Duly registered business enterprises that will operate in the Special Economic Zones to be created shall be entitled to the same tax and duty incentives as provided for under Republic Act No. 7916, as amended : Provided , That for the purpose of administering these incentives, the PEZA shall register, regulate, and supervise all registered enterprises within the Special Economic Zones." (Emphasis ours) Sections 8 and 24 of RA No. 7916, as amended by RA No. 8748: "SECTION 8. ECOZONE to be Operated and Managed as Separate Customs Territory . The ECOZONE shall be managed and operated by the PEZA as separate customs territory . The PEZA is hereby vested with the authority to issue certificates of origin for products manufactured or processed in each ECOZONE in accordance with the prevailing rules of origin, and the pertinent regulations of the Department of Trade and Industry and/or the Department of Finance." (Emphasis ours) ASEcHI "SECTION 24. Exemption from National and Local Taxes . Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE .x x x" (Emphasis ours) Sections 3 and 4 of RA No. 7922 "SEC. 3. The Cagayan Special Economic Zone and Free Port . In accordance with the foregoing declared policy, there is hereby established a special economic zone and free port, to be known as the Cagayan Special Economic zone ,hereinafter known as the Zone, which shall cover the entire area embraced by the Municipality of Santa Ana and the islands of Fuga, Barit, and Mabbag in the Municipality of Aparri, Province of Cagayan." (Emphasis ours) "SEC. 4. Governing Principles . x x x: (b) Business establishments operating within the Zone shall be entitled to the existing fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority (EPZA),or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987; (c) Any provision of existing law, rules or regulations to the contrary notwithstanding, no taxes, local and national, shall be imposed on business establishments operating within the Zone .x x x" (Emphasis ours) Since the ecozone is viewed as a foreign territory by legal fiction, sales of goods and services made by a VAT-registered person in the Philippine customs territory to an entity registered and operating within the ecozone are considered exports to a foreign country subject to zero percent (0%) VAT. This was elucidated by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.), Inc. , 59 to wit: "This Court agrees, however, that PEZA-registered enterprises, which would necessarily be located within ECOZONES, are VAT-exempt entities , not because of Section 24 of Rep. Act No. 7916, as amended, which imposes the five percent (5%) preferential tax rate on gross income of PEZA-registered enterprises, in lieu of all taxes; but, rather, because of Section 8 of the same statute which establishes the fiction that ECOZONES are foreign territory . x x x An ECOZONE or a Special Economic Zone has been described as x x x [S]elected areas with highly developed or which have the potential to be developed into agro-industrial, industrial, tourist, recreational, commercial, banking, investment and financial centers whose metes and bounds are fixed or delimited by Presidential Proclamations. An ECOZONE may contain any or all of the following: industrial estates (IEs),export processing zones (EPZs),free trade zones and tourist/recreational centers. The national territory of the Philippines outside of the proclaimed borders of the ECOZONE shall be referred to as the Customs Territory. Section 8 of Rep. Act No. 7916, as amended, mandates that the PEZA shall manage and operate the ECOZONES as a separate customs territory; thus, creating the fiction that the ECOZONE is a foreign territory. As a result, sales made by a supplier in the Customs Territory to a purchaser in the ECOZONE shall be treated as an exportation from the Customs Territory. Conversely, sales made by a supplier from the ECOZONE to a purchaser in the Customs Territory shall be considered as an importation into the Customs Territory. ITAaHc Given the preceding discussion, what would be the VAT implication of sales made by a supplier from the Customs Territory to an ECOZONE enterprise? The Philippine VAT system adheres to the Cross Border Doctrine, according to which, no VAT shall be imposed to form part of the cost of goods destined for consumption outside of the territorial border of the taxing authority. Hence, actual export of goods and services from the Philippines to a foreign country must be free of VAT ;while, those destined for use or consumption within the Philippines shall be imposed with ten percent (10%) VAT. 60 (Emphasis supplied) Pursuant to the afore-quoted provisions of Sections 106 (A) (2) (a) (5) and (c) and 108 (B) (3) of the NIRC of 1997, as amended, and as implemented by Sections 4.106-5 and 4.108.5 of RR No. 16-2005, as amended, it is evident that the sales of goods and services by a VAT-registered taxpayer, such as herein petitioner, to entities located within the ecozones, as well as, to BOI-registered entities whose products are 100% exported are considered "export sales" subject to zero percent (0%) VAT rate. To prove that its clients are duly registered with the PEZA, SBMA, CDA/CDC and CEZA or are 100% BOI-registered exporters, petitioner submitted various Certifications issued by such agencies. Likewise, petitioner presented the letters of the PEZA Director General, BGen. Charito B. Plaza, dated October 6, 2016 61 addressed to petitioner's Chief Financial Officer, Mr. Yusuke Yamada and Certification issued by the BOI Director, Incentive Service, Ms. Erlinda F. Arcellana, on June 7, 2016 62 confirming the issuance of VAT zero-rating certifications to certain clients of petitioner. Listed below are petitioner's clients for the subject period of claim with the corresponding proof of VAT zero-rating: Name of Customer Proof of VAT zero-rating Exhibit No. Validity Period ADNAMA MINING RESOURCES, INCORPORATED BOI Certification issued Jun. 7, 2016; BOI Certificate No. 2013-098 "P-5";"P-43-L-1" May 20, to December 31, 2013; ASIA INTERNATIONAL AUCTIONEERS, INC. SBMA Certificate of Tax Exemption "P-6";"P-43-L-2" May 24, 2013 to May 23, 2014 BERONG NICKEL CORPORATION BOI Certification issued Jun. 7, 2016; BOI Certificate No. 2013-040 "P-5";"P-43-L-3" January 1 to December 31, 2013 BIGLIFT PROPERTIES & DEVELOPMENT CORPORATION SBMA Certificate of Tax Exemption "P-7";"P-43-L-4" Oct. 16, 2013 to Oct. 15, 2014; July 27, 2012 to July 26, 2013 RIO TUBA NICKEL MINING CORPORATION BOI Certification issued Jun. 7, 2016; BOI Certification No. 2013-043 "P-5";"P-43-L-5" January 1 to December 31, 2013 CAGDIANAO MINING CORPORATION BOI Certification issued Jun. 7, 2016; BOI Certification No. 2013-037 "P-5";"P-43-L-6" January 1 to December 31, 2013 CARMEN COPPER CORPORATION BOI Certification issued Jun. 7, 2016; BOI Certification 2013-016 "P-5";"P-43-L-7" January 1 to December 31, 2013 CORAL BAY NICKEL CORPORATION Confirmation Letter from PEZA; PEZA Certification No. 2013-0301 "P-4";"P-43-L-8" For the year 2013 C.T.P. CONSTRUCTION AND MINING CORPORATION BOI Certification issued Jun. 7, 2016; BOI Certificate No. 2013-086 "P-5";"P-43-L-9" March 5 to December 31, 2013 FCF MINERALS CORP. BOI Certification issued Jun. 7, 2016; BOI Certificate No. 2013-027 "P-5";"P-43-L-10" January 1 to December 31, 2013 HHIC-PHIL.,INC. SBMA Certificate of Tax Exemption "P-43-L-11" March 5, 2013 to March 4, 2014 HINATUAN MINING CORPORATION BOI Certification issued Jun. 7, 2016; BOI Certificate No. 2013-036 "P-5";"P-43-L-12" January 1 to December 31, 2013 HOUSE TECHNOLOGY INDUSTRIES PTE.,LTD. (HTIPL) Confirmation Letter from PEZA; PEZA Certificate No. 2013-0059 "P-4";"P-43-L-13" For the year 2013 HYS-YACHT PHILS LTD. CO.,INC. SBMA Certificate of Tax Exemption "P-8";"P-43-L-14" July 15, 2013 to July 14, 2014 INTEVALUE SERVICES, INC. CEZA Certification "P-12";"P-43-L-15" September 9, 2013 to August 15, 2014 JAMJLE EQUIPMENTS & GENERAL MERCHANDISE, INC. SBMA Certificate of Tax Exemption "P-43-L-16" October 3, 2012 to October 2, 2013 MAJESTIC LANDSCAPE CORPORATION (MLC) Confirmation Letter from PEZA; PEZA Certificate No. 2013-0047 "P-4";"P-43-L-17" For the year 2013 JAMLJLE PROPERTIES (SUBIC) AND DEVELOPMENT CORPORATION (formerly: JAMJLE EQUIPMENTS & GENERAL MERCHANDISE, INC.) SBMA Certificate of Tax Exemption "P-9";"P-43-L-18" November 27, 2013 to November 26, 2014 SCAD SERVICES (S) PTE.,LTD. (PHIL. BRANCH) (SSPL) Confirmation Letter from PEZA; PEZA Certificate No. 2013-0046 "P-4";"P-43-L-19" For the year 2013 ST. LUKE'S MEDICAL CENTER (GLOBAL CITY),INC. (SLMCGCI) Confirmation Letter from PEZA; PEZA Certificate No. 2013-1014 "P-4";"P-43-L-20" July 10 to December 31, 2013 NORTHEAST FREIGHT FORWARDERS, INC. SBMA Certificate of Tax Exemption "P-43-L-22" March 4, 2013 to March 3, 2014 TAGANITO MINING CORPORATION BOI Certificate No. 2013-011 "P-5";"P-43-L-23" January 1 to December 31, 2013 SUBIC CONSOLIDATED PROJECTS, INC. SBMA Certificate of Tax Exemption "P-10";"P-43-L-21" January 4, 2013 to January 3, 2014 PHILIPPINE ASSOCIATED SMELTING AND REFINING CORPORATION (PASAR) Confirmation Letter from PEZA; PEZA Certification No. 2013-0334 "P-4";"P-43-L-24" For the year 2013 PLATINUM GROUP METALS CORPORATION (PGMC) BOI Certification issued Jun. 7, 2016; BOI Certificate No. 2013-057 "P-5";"P-43-L-25" January 17 to December 31, 2013 SUNWEST WATER AND ELECTRIC CO.,(SUWECO) INC. BOI Certificate of Registration issued Nov. 24, 2010 (as RE Developer under RA 9513) "P-43-L-26" TRANS ASIA CONSTRUCTION DEVELOPMENT CORP. CDC Certificates of Registration and Tax Exemption "P-11";"P-43-L-27" April 1, 2013 to March 31, 2016; April 1, 2013 to March 31, 2014 VISAYAS SLAKED LIME CORPORATION Confirmation Letter from PEZA; PEZA Certificate No. 2013-0908 "P-4";"P-43-L-28" For the year 2013 WU KONG SINGAPORE PTE. LTD. (PHIL. BRANCH) Confirmation Letter from PEZA; PEZA Certificate No. 2013-0055 "P-4";"P-43-L-29" For the year 2013 REDONDO QUARRY AND DEVELOPMENT CORPORATION SBMA Certificate of Tax Exemption "P-43-L-30" August 24, 2012 to August 23, 2013 TAGANITO HPAL NICKEL CORPORATION Confirmation Letter from PEZA; PEZA Certificate No. 2013-1288 "P-4";"P-43-L-31" For the year 2013 PHILIPPINE MAKOTO CORPORATION (PMC) Confirmation Letter from PEZA; PEZA Certificate No. 2013-0073 "P-4";"P-43-L-32" For the year 2013 PHIL. BATTERIES, INCORPORATED (PBI) Confirmation Letter from PEZA; PEZA Certificate No. 2013-1364 "P-4";"P-43-L-33" For the year 2013 PHILIPPINE SINTER CORPORATION (PSC) Confirmation Letter from PEZA; PEZA Certificate No. 2013-0860 "P-4";"P-43-L-34" For the year 2013 Thus, petitioner's sales to the aforementioned entities for the 2nd quarter of FY 2014 qualify for VAT zero-rating pursuant to Sections 106 (A) (2) (a) (5) and (c) and 108 (B) (3) of the NIRC of 1997, as amended, provided that the same are properly supported by VAT zero-rated sales invoices [for sales of goods] and official receipts (ORs) [for sales of services] in accordance with Sections 113 (A) (1) and (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1 (A) (1) and (2), (B) (1) and (2) (c) of RR No. 16-2005 which are all quoted hereunder: CHTAIc "Sec. 113. Invoicing and Accounting Requirements for VAT-registered Persons . (A) Invoicing Requirements . A VAT-registered person shall issue: (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (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; x x x (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and x x x" "Sec. 4.113-1. Invoicing Requirements . (A) A Vat-registered person shall issue: x x x (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (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 invoice/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: EATCcI (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: x x x (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; x x x" (Emphasis supplied) In addition to the above requirements, the invoices and ORs must be duly registered with the BIR as prescribed under Section 237 in relation to Section 238 of the NIRC of 1997, as amended, to wit: "SEC. 237. Issuance of Receipts or Sales or Commercial Invoices . All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: x x x" "SEC. 238. Printing of Receipts or Sales or Commercial Invoices . All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner." 2) Sale of goods to entities which are not among the registered corporations in the Philippines and were paid for in accordance with the rules and regulations of the BSP With respect to the alleged sales to entities not registered in the Philippines, which were allegedly supported by Certifications of Non-Registration of Company issued by the Securities and Exchange Commission (SEC) and were paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) per the supporting invoices and inward remittances from banks, the related schedules 63 submitted by the ICPA show that the same are actually classified by the latter as sales of services (and not goods) to Hyundai Corporation, Bomag Fayat Group and Marubeni Corporation. DHITCc Pertinent to the VAT zero-rating of such sales to the said entities, Section 108 (B) (2) of the NIRC of 1997, as amended, provides: "SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties . (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: xxx xxx xxx (2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a non-resident 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); Based on the foregoing provision, certain essential elements must be present for a sale or supply of services to be subject to the VAT rate of zero percent (0%) under Section 108 (B) (2) of the NIRC of 1997, as amended, to wit: 1) The payment for such services should be in acceptable foreign currency accounted for in accordance with the BSP rules; 64 2) The recipient of the services is a foreign corporation, and the said corporation is doing business outside the Philippines, or is a nonresident person not engaged in business who is outside the Philippines when the services was performed; 65 3) The services fall under any of the categories under Section 108 (B) (2), 66 or simply, the services rendered should be other than " processing, manufacturing or repacking goods "; 67 4) The services must be performed in the Philippines 68 by a VAT-registered person; and Relative to the first essential element and in relation to the fifth requisite for the granting of input VAT refund, petitioner was able to present only the Certifications of Inward Remittances 69 issued by BDO Unibank, Inc. showing the remittances of Bomag Fayat Group and Marubeni Corporation to petitioner. Considering that the certifications attest to the fact of payment " in acceptable foreign currency ...and accounted for in accordance with the rules and regulations of the BSP ," 70 petitioner is considered to have complied with the above-stated first essential element but only insofar as Bomag Fayat Group and Marubeni Corporation is concerned. As to the second , third and fourth essential elements, the same have not been established for Hyundai Corporation, Bomag Fayat Group and Marubeni Corporation as petitioner failed to adduce evidence to prove that it rendered services to non-resident foreign corporations not doing business in the Philippines; that the nature of such services was other than processing, manufacturing or repacking of goods ;and that the same were performed in the Philippines. Thus, the sales of services to Hyundai Corporation, Bomag Fayat Group and Marubeni Corporation failed to qualify as subject to zero percent (0%) VAT under Section 108 (B) (2) of the NIRC of 1997, as amended. Meanwhile, based on the Final Report of the ICP, 71 the zero-rated sales in the amount of P32,895,316.42, as detailed below, shall be denied VAT zero-rating on the basis of the following findings: Exhibit Reference Description Amount "P-43-T" Zero-rated sales properly supported by charge sales invoice but occurring beyond the term of zero-rating certificates [sale of goods] P127,750.96 "P-43-U" Zero-rated sales w/o certificates of zero-rating from Customers [sale of goods and services] 15,499,190.41 "P-43-W" Zero-rated sales properly supported by official receipt, but not properly classified as zero-rated sales (w/o stamp "Zero-rated sales") [sale of services] 1,399,408.57 "P-43-X" Zero-rated sales properly supported by charge sales invoice, dated outside the covered fiscal period. [sale of goods] 5,427,378.17 "P-43-Y" Zero-rated sales not properly supported by charge sales invoice or OR (Bills and Debit/credit notes).[sale of goods and services] 6,988,088.16 "P-43-Z" Zero-rated sales with stamped "Zero-rated" in the photocopy not verified with the original document [sale of goods and services] 634,370.92 "P-43-AA" Zero-rated sales without stamped "Zero-rated" and not verified with the original document [sale of services] 942,691.43 "P-43-AB" Zero-rated sales properly supported by charge sales invoice, dated outside the covered fiscal period, not verified with original document [sale of goods] 2,712.00 "P-43-AC" Zero-rated sales supported by improper documents (Bills),not verified with original document [sale of services] 86,490.00 "P-43-BX" Zero-rated sales without supporting documents 1,787,235.80 Total P32,895,316.42 In addition, petitioner's claimed zero-rated sales in the amount of P17,356,607.78 shall also be denied VAT zero-rating due to the following reasons: Exhibit No. Customer Name Amount 1. Sales of goods supported by VAT zero-rated invoices but dated outside the validity period of the Certificate of VAT zero-rating "P-43-R-41" INTEVALUE SERVICES, INC. P8,760.00 "P-43-BZ-1" BIGLIFT PROPERTIES AND DEV'T CORPORATION 393,520.00 "P-43-BZ-59" INTEVALUE SERVICES, INC. 1,980.00 "P-43-BZ-60" INTEVALUE SERVICES, INC. 13,320.00 2. Sales of services supported by documents other than VAT zero-rated ORs "P-43-BZ-10" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-11" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-12" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-13" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-14" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-15" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-16" CTP CONSTRUCTION & MINING CORP. 50,500.00 "P-43-BZ-17" CTP CONSTRUCTION & MINING CORP. 30,000.00 3. Sales of services, which as stated earlier, failed to qualify for VAT zero-rating under Section 108 (B) (2) of NIRC of 1997, as amended "P-43-V-1" HYUNDAI CORPORATION 346,350.14 "P-43-BV-1" BOMAG FAYAT GROUP 369,869.12 "P-43-BV-2" BOMAG FAYAT GROUP 703,442.82 "P-43-BV-3" MARUBENI CORPORATION 2,014,687.68 "P-43-BV-4" MARUBENI CORPORATION 13,121,178.02 Total P17,356,607.78 In sum, out of the reported zero-rated sales of P403,798,185.05, only the amount of P353,546,260.85, as computed below, qualify for VAT zero-rating for the 2nd quarter of FY 2014: IAETDc Total Reported Zero-Rated Sales P403,798,185.05 Less: Sales denied of VAT zero-rating Per ICPA Report P32,895,316.42 Per Court's further verification 17,356,607.78 50,251,924.20 Valid Zero-Rated Sales P353,546,260.85 Thus, for purposes of the fourth requisite, the Court finds that petitioner had VAT zero-rated sales in the said amount of P353,546,260.85 for the 2nd quarter of FY 2014. As for the fifth requisite, which is to the effect that petitioner must prove that the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations under Sections 106 (A) (2) (a) (1),(2) and (b),and 108 (B) (1) and (2) , all of the NIRC of 1997, as amended, since the legal basis for petitioner's zero-rated sales of P353,546,260.85 is Section 106 (A) (2) (a) (5) and (c) of the NIRC of 1997, as amended, the instant case need not comply with the said fifth requisite. Parenthetically, in this connection, while petitioner alleges that it has sales of services to certain non-resident foreign corporations, We need not determine whether there was compliance with the same fifth requisite, since it was not duly proven, as above shown, that the said sales of services qualify for VAT zero-rating under Section 108 (B) (2) of the NIRC of 1997, as amended. The Court shall then proceed to determine whether petitioner complied with the remaining requisites pertaining to the input VAT being claimed for refund or issuance of a tax credit certificate. The input VAT being claimed do not appear to be transitional input taxes The claimed input taxes do not appear to be transitional input taxes, as understood under Section 111 (A) of the NIRC of 1997, as amended, to wit: "SEC. 111. Transitional/Presumptive Input Tax Credits . (A) Transitional Input Tax Credits . A person who becomes liable to value-added tax or any person who elects to be a VAT-registered person shall, subject to the filing of an inventory according to the rules and regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax." Transitional input tax credit operates to benefit newly VAT-registered persons, whether or not they previously paid taxes in the acquisitions of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact of the VAT on the taxpayer. 72 Since there is no showing that the claimed input VAT are transitional input VAT, petitioner has complied with the sixth requisite for the grant of an input VAT refund. Not all of the input VAT being claimed are due or paid For the 2nd quarter of FY 2014, petitioner declared input taxes in the total amount of P90,241,023.59, out of which the amount of P32,299,209.56 is the subject of petitioner's claim, to wit: Input taxes as declared per VAT returns . 73 Input Tax Deferred on Capital Goods exceeding P1Million from Previous Quarter (Line 20B) P3,122,141.02 Less: Input Tax on Purchases of Capital Goods exceeding P1Million deferred for the succeeding period (Line 23A) 2,926,925.56 Input tax Amortized for the period P195,215.46 Add: Current Input Taxes On Domestic Purchases of Goods Other than Capital Goods (Line 21F) 2,124,710.68 On Importation of Goods Other than Capital Goods (Line 21H) 81,271,468.41 On Domestic Purchase of Services (Line 21J) 6,649,629.04 Total Current Input Tax P90,045,808.13 Total Input Taxes for the period P90,241,023.59 Input taxes as per subject claim : 74 Total Input Taxes for the period P90,241,023.59 Less: Input tax on machineries purchased during the quarter and sold to VATable entities in the same quarter 3,267,163.89 Input tax on machineries purchased during the quarter but not sold within the same quarter 21,947,192.48 Net Input tax for allocation P65,026,667.22 Multiply by zero-rated sales 403,798,185.05 Divide by total sales 1,216,043,325.65 Input tax allocated to zero-rated sales P21,592,693.00 Add: Input tax directly attributable to VAT zero-rated sale of machineries imported in prior years but sold only during the quarter 10,706,516.56 Input VAT claim P32,299,209.56 In support of its input taxes due or paid, petitioner submitted various sales invoices, ORs, Import Entry and Internal Revenue Declarations (IEIRDs),Statements of Settlement of Duties and Taxes (SSDTs),Bureau of Customs (BOC) ORs and other related documents, 75 which were examined by the ICPA. SaCIDT Based on the ICPA's Final Report, 76 the input VAT in the amount of P8,541,035.44 shall be disallowed for failure to meet the substantiation requirements under Sections 110 (A), 113 (A) and (B), and 237 of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-2005, as amended: Exhibit Reference Description Amount A. Input tax on domestic purchases of goods and services "P-43-AH" Domestic purchase of goods and services with no supporting documents P4,817,177.36 "P-43-AI" Domestic purchase goods supported by documents other than VAT invoices 520,970.49 "P-43-AJ" Domestic purchase of services supported by documents other than VAT ORs 465,273.72 "P-43-AK" Domestic purchase of goods and services supported by VAT invoices claimed outside the taxable period/year 811,911.25 "P-43-AL" Domestic purchase of goods and services supported by VAT invoice and ORs with missing/outdated ATP 452,560.20 "P-43-AM" Domestic purchase of goods supported by VAT invoices issued in the name of the Petitioner wherein VAT amount was not separately disclosed 53,266.21 "P-43-AN" Domestic purchase of services supported by VAT ORs issued in the name of the Petitioner wherein VAT amount was not separately disclosed 725,032.43 "P-43-AO" Domestic purchase of goods and services supported by VAT invoices/VAT ORs issued in the name of the Petitioner but without or with incorrect name, TIN and/or address of the Petitioner 511,594.67 "P-43-AP" Domestic purchase of services supported by VAT official receipt with unreadable date or with no date indicated 219.64 "P-43-AQ" Domestic purchase of goods and services supported by VAT sales invoice and ORs with unreadable details 34,148.48 "P-43-AR" Domestic Purchases of goods and services supported by a Non-VAT sales invoice and OR 18,189.50 Disallowed input tax P8,410,343.95 B. Input tax on Importation of goods "P-43-AW" Importation of goods supported by Import Entry Declarations only P4,821.00 "P-43-AX" Importation of goods with no supporting document 842.00 Disallowed input tax P5,663.00 C. Amortization of Deferred Input tax on capital goods exceeding 1 Million "P-43-AZ" Input tax deferred on purchase of capital goods exceeding 1M supported by sale invoices but did not comply with the invoicing requirements P77,355.62 "P-43-BA" Deferred input tax from purchase of capital goods exceeding 1 Million supported by unreadable tape receipt/invoice 110.73 "P-43-BB" Input tax on purchases of goods other than capital goods classified as Input tax on purchase of capital goods exceeding 1 Million 959.40 "P-43-BC" Input tax on purchases of service classified as input tax on Purchase of capital goods exceeding 1 Million 1,682.59 "P-43-BD" Deferred input tax from purchase of capital goods exceeding 1 Million supported by documents other than sales invoice 12,631.38 "P-43-BW" Deferred Input tax from Purchase of Capital Goods Exceeding 1 Million without Supporting Document 32,288.77 Disallowed Input Tax P125,028.49 Total Disallowances per ICPA findings P8,541,035.44 In addition to the above disallowances, the following claimed input VAT on importations, in the total amount of P10,498,007.00, shall likewise be disallowed for failure to prove the VAT payment thereof: Exhibit No. Supplier Name Amount Supported by IEIRDs (without machine validation),Assessment Notices or other documents proving that the VAT were actually paid. "P-43-AV-1" Bomag GMBH P1,218,945.00 "P-43-AV-2" Bomag (China) Construction Machinery Co. Ltd. 1,225,554.00 "P-43-AV-3" Bomag Fayat Group 590,774.00 "P-43-AV-4" Komatsu Diesel Co. Ltd. 395,254.00 "P-43-AV-5" Bangkok Komatsu Co. Ltd. 4,729.00 "P-43-AV-6" Clark Airport Support Services Corp. 10,606.00 "P-43-AV-7" Clark Airport Support Services Corp. 7,288.00 "P-43-AV-8" Pt. Komatsu Reman Indonesia 114,591.00 "P-43-AV-9" Hensley Industries, Inc. 90,649.00 "P-43-AV-10" Bomag GMBH 89,807.00 "P-43-AV-11" Bomag GMBH 25,836.00 "P-43-AV-12" Hensley Industries, Inc. 8,265.00 "P-43-AV-13" Daewoo International Corporation 192,252.00 "P-43-AV-14" Komatsu Diesel Co. Ltd. 667,324.00 "P-43-AV-15" Clark Airport Support Services Corp. 45,330.00 "P-43-AV-16" Komatsu Ltd. 6,714.00 "P-43-AV-17" Komatsu Ltd. 309,220.00 "P-43-AV-18" Hyundai Corporation 2,439,884.00 "P-43-AV-19" Hyundai Mobis 41,080.00 "P-43-AV-20" Komatsu Ltd. 34,279.00 "P-43-AV-21" Hyundai Mobis 10,713.00 "P-43-AV-22" Hyundai Mobis 7,150.00 "P-43-AV-23" Hyundai Mobis 34,212.00 "P-43-AV-24" Daewoo International Corporation 2,920,201.00 "P-43-AV-25" Cargotec 7,350.00 Total P10,498,007.00 In sum, out of the reported input VAT of P90,241,023.59, petitioner was able to substantiate input VAT due or paid only in the amount of P71,201,981.15, computed as follows: cHECAS Input VAT per Return P90,241,023.59 Less: Disallowances Per ICPA findings P8,541,035.44 Per Court's further verification 10,498,007.00 19,039,042.44 Substantiated Input VAT due or paid P71,201,981.15 Furthermore, as can be gleaned from petitioner's computation of its refund claim, it excluded from the reported input VAT of P90,241,023.59 the "Input tax on machineries purchased during the quarter and sold to VATable entities in the same quarter" and "Input tax on machineries purchased during the quarter but not sold within the same quarter" in the respective amounts of P3,267,163.89 and P21,947,192.48. Since the said amounts of P3,267,163.89 and P21,947,192.48 do not form part of the input VAT being claimed for refund and were not specifically identified by petitioner to determine whether it is already included in the disallowances noted, the same shall be deducted from the substantiated input VAT due or paid of P71,201,981.15 for purposes of computing the proper amount that may be subject for refund. Moreover, petitioner also included in its refund claim the amount of P10,706,516.56 pertaining to " Input tax directly attributable to VAT zero-rated sale of machineries imported in prior years but sold only during the quarter ." As aptly found by the ICPA, " the input tax directly attributable to zero-rated sales were properly supported by invoices and/or import documents, summarized in Exhibit P-43-K ,except for the purchases amounting to P74,143.09 ." 77 Hence, only the input VAT paid of P10,632,373.47 (P10,706,516.56 less P74,143.09) shall be included in the amount that may be refunded. Based on the foregoing, petitioner complied with the seventh requisite, i.e. ,the input VAT was due or paid. However, out of the P71,201,981.15 substantiated input VAT due or paid, only the claimed amount of P56,619,998.25, as computed below, may be the proper subject for refund: Substantiated Input VAT due or paid P71,201,981.15 Less: Input tax on machineries purchased during the quarter and sold to VATable entities in the same quarter 3,267,163.89 Input tax on machineries purchased during the quarter but not sold within the same quarter 21,947,192.48 Net Amount (common input tax for allocation) 45,987,624.78 Add: Input tax directly attributable to VAT zero-rated sale of machineries imported in prior years but sold only during the quarter 10,632,373.47 Valid input VAT claim P56,619,998.25 A portion of petitioner's valid input taxes due or paid are attributable to its zero-rated or effectively zero-rated sales To reiterate, the eighth requisite is to the effect that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume. Based on the findings above, out of the P56,619,998.25 valid input VAT claim, the amount of P45,987,624.78 pertain to common input tax available for allocation. Considering that petitioner had other kinds of sales, i.e. ,sales to private entities and sales to government and its valid common input taxes due or paid in the amount of P45,987,624.78 cannot be directly or entirely attributed to any of the transactions, the same shall be allocated proportionately on the basis of the volume of its sales, thus: AHDacC Vatable Sales to Private entities (a) Sales to Government (b) Zero-Rated Sales (c) Total Sales (d = a+b+c) P739,941,096.77 P72,304,043.83 P403,798,185.05 P1,216,043,325.65 Valid input VAT due or paid attributable to: Vatable Sales to Private entities (a/d x P45,987,624.78) P27,982,665.42 Sales to Government (b/d x P45,987,624.78) 2,734,352.61 Zero-Rated Sales (c/d x P45,987,624.78) 15,270,606.75 Total P45,987,624.78 Thus, for purposes of the eighth requisite, the input VAT attributable to petitioner's valid zero-rated or effectively zero-rated sales only amounted to P25,902,980.22, as computed below: Common input VAT due or paid allocable to zero-rated sales P15,270,606.75 Input tax directly attributable to VAT zero-rated sale of machineries imported in prior years but sold only during the quarter 10,632,373.47 Total valid input VAT attributable to valid zero-rated sales P25,902,980.22 Petitioner had no unutilized input taxes available for refund. Having determined that petitioner had valid input VAT attributable to its zero-rated sales, We now determine whether the same was not applied against its output VAT liability. After deducting the input tax attributable to VATable sales to private entities in the amount of P31,249,829.31 from its output VAT liability of P88,792,931.61 on the said sales, petitioner still has a net output VAT payable of P57,543,102.30, as computed below: Output VAT per Return 78 P88,792,931.61 Less: Input VAT attributable to VATable sales to private entities Input tax on machineries purchased during the quarter and sold to VATable entities in the same quarter P3,267,163.89 Common input VAT allocable to Vatable Sales to private entities 27,982,665.42 31,249,829.31 Net Output VAT Payable P57,543,102.30 Since the input VAT attributable to VATable sales to private entities is not enough to cover its output VAT liability, the valid input VAT attributable to zero-rated sales shall be utilized against the remaining output VAT liability. However, the input VAT attributable to zero-rated sales of P25,902,980.22 is lower than the net output VAT payable of P57,543,102.30. Consequently, petitioner still has net output VAT still due of P31,640,122.08 (P57,543,102.30 less P25,902,980.22). Although petitioner's Quarterly VAT Return for the 2nd quarter of FY 2014 reflected the amount of P327,769,120.22 79 as "Input Tax Carried Over from Previous Period," still, petitioner failed to fully substantiate the same. IDSEAH As ascertained by the ICPA, out of the reported input VAT from the 1st quarter of calendar year (CY) 2010 up to the 4th quarter of FY 2013 in the aggregate amount of P1,860,368,815.38, 80 only the input VAT on importations in the amount of P822,673,657.10 81 were verified. Even assuming that the amount of P822,673,657.10 were valid input VAT attributable to VATable sales to private entities and zero-rated sales, still, the same is not enough to cover its reported output VAT on VATable sales to private entities for the same period in the aggregate amount of P1,441,804,826.90, 82 thereby resulting to net output VAT payable of P619,131,169.80 (P1,441,804,826.90 less P822,673,657.10).Needless to say, petitioner failed to prove that it has excess input VAT carried over from previous period. Accordingly, the input tax carry over of P327,769,120.22, cannot be validly applied against petitioner's output tax pursuant to Section 110 (A) in relation to Section 110 (B) of the NIRC of 1997, as amended, which states: "SEC. 110. Tax Credits . (A) Creditable Input Tax . (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with Section 113 hereof on the following transactions shall be creditable against the output tax: xxx xxx xxx (B) Excess Output or Input Tax . If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the Vat-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters: Provided, however ,that any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112." 83 Verily, in claiming excess or unutilized input VAT from zero-rated transactions, it is the excess over the output VAT which should be refunded to the taxpayer or credited against other internal revenue taxes. Hence, it is important for the taxpayer to prove that it has enough prior year's excess input VAT credits to cover its output VAT liability for the current taxable year. Consequently, petitioner failed to fulfill the ninth requisite, i.e. ,that the input taxes have not been applied against output taxes during and in the succeeding quarters. Accordingly, the instant claim for refund/issuance of TCC on petitioner's alleged unutilized input VAT must necessarily fail. It bears stressing that a claimant has the burden of proof to establish the factual basis of his or her claim for tax credit or refund. 84 Tax refunds are in the nature of tax exemptions. As such, they are regarded as derogation of sovereign authority and to be construed strictissimi juris against the person or entity claiming the refund. 85 The pieces of evidence presented entitling a taxpayer to an exemption are also strictissimi scrutinized and must be duly proven. 86 Hence, an applicant for a claim for tax refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements. 87 WHEREFORE ,in light of the foregoing considerations, the instant Petition for Review is DENIED for lack of merit. AHCETa SO ORDERED. (SGD.) CIELITO N. MINDARO-GRULLA Associate Justice Juanito C. Castaeda, Jr. and Jean Marie A. Bacorro-Villena, JJ. ,concur. Footnotes 1. Statement of the Case, Pre-Trial Order dated November 29, 2016, Docket Vol. II, pp. 790 to 798. 2. Exhibits "P-1" and "P-2",Docket Vol. III, pp. 1001 to 1015. 3. Exhibit "P-3",Docket Vol. III, p. 1016. 4. Par. A.1, Joint Stipulation of Facts and Issues (JSFI),Docket Vol. II, p. 747. 5. Par. B.2, JSFI, Docket Vol. II, pp. 747 to 748. 6. Par. B.3, JSFI, Docket Vol. II, p. 748. 7. Docket Vol. I, pp. 10 to 48. 8. Docket Vol. I, pp. 308 to 315. 9. Notice of Pre-Trial Conference dated May 30, 2016, Docket Vol. I, pp. 317 to 318. 10. Petitioner's Motion to Reset the Pre-Trial Conference ,Docket Vol. I, pp. 321 to 323; Respondent's Motion to Reset Pre-Trial Conference Scheduled on August 4, 2016 ,Docket Vol. I, pp. 327 to 330. 11. Order dated July 25, 2016, Docket Vol. I, p. 325; Order dated August 1, 2016, Docket Vol. I, p. 332; Minutes of the hearing held on, and Order dated, October 13, 2016, Docket Vol. II, pp. 723 to 726. 12. Docket Vol. I, pp. 343 to 346. 13. Docket Vol. II, pp. 702 to 717. 14. Respondent's Compliance ,Docket Vol. II, pp. 719 to 721. 15. Docket Vol. II, pp. 747 to 760. 16. Docket Vol. II, p. 781. 17. Docket Vol. II, pp. 790 to 798. 18. Exhibit "P-37",Docket Vol. II, pp. 351 to 367; Minutes of the hearing held on, and Order dated, January 26, 2017, Docket Vol. II, pp. 808 to 813, and 815 to 816, respectively. 19. Exhibit "P-43",Docket Vol. II, pp. 874 to 901; Exhibit "P-44",Docket Vol. II, pp. 913 to 927; Minutes of the hearing held on, and Order dated, July 18, 2017, Docket Vol. II, pp. 956 to 960. 20. Oath of Commission dated January 26, 2017, Docket Vol. II, p. 814; Minutes of the hearing held on, and Order dated, January 26, 2017, Docket Vol. II, pp. 808 to 813, and 815 to 816, respectively. 21. Exhibit "P-42",Docket Vol. II, pp. 625 to 633; Minutes of the hearing held on, and Order dated, March 7, 2017, Docket Vol. II, pp. 818 to 821. 22. Docket Vol. III, pp. 972 to 999. 23. Docket Vol. III, pp. 1393 to 1394. 24. Docket Vol. III, pp. 1402 to 1404. 25. Docket Vol. III, pp. 1406 to 1407. 26. Docket Vol. III, pp. 1418 to 1419. 27. Docket Vol. I, pp. 338 to 342; Minutes of the hearing held on, and Order dated, June 21, 2018, Docket Vol. II, pp. 1421 to 1424. 28. Docket Vol. III, pp. 1426 to 1428. 29. Docket Vol. III, pp. 1436 to 1437. 30. Docket Vol. III, p. 1438. 31. Docket Vol. III, pp. 1440 to 1441. 32. Docket Vol. III, pp. 1443 to 1494. 33. Docket Vol. III, p. 1497. 34. Docket Vol. IV, pp. 1498 to 1501. 35. Docket Vol. IV, pp. 1577 to 1581. 36. Docket Vol. IV, pp. 1584 to 1588. 37. Exhibit "P-54",Docket Vol. IV, pp. 1599 to 1607. 38. Exhibit "P-56",Docket Vol. IV, pp. 1681 to 1685. 39. Minutes of the hearing held on, and Order dated, September 2, 2019, Docket Vol. IV, pp. 1656 to 1657; and Minutes of the hearing held on, and Order dated, October 28, 2019, Docket Vol. IV, pp. 1701 to 1702. 40. Docket Vol. IV, pp. 1703 to 1708. 41. Par. C.4, JSFI, Docket Vol. II, p. 748. 42. AN ACT AMENDING SECTIONS 27, 28, 34, 106, 107, 108, 109, 110, 111, 112, 113, 114, 116, 117, 119, 121, 148, 151, 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES. 43. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 180345, November 25, 2009; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue ,G.R. No. 182364, August 3, 2010. 44. Steag State Power, Inc. (Formerly State Power Development Corporation) vs. Commissioner of Internal Revenue ,G.R. No. 205282, January 14, 2019; Rohm Apollo Semiconductor Philippines vs. Commissioner of Internal Revenue ,G.R. No. 168950, January 14, 2015. 45. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra ;and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, supra . 46. Id . 47. Id . 48. Id . 49. Id . 50. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra . 51. Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra ;and AT&T Communications Service Philippines, Inc. vs. Commissioner of Internal Revenue, supra . 52. Exhibits "P-20" and "P-21",Docket Vol. III, pp. 1085 to 1209. 53. Docket Vol. I, pp. 10 to 48. 54. Exhibit "P-3",Docket Vol. III, p. 1016. 55. Exhibit "P-17",Docket Vol. III, p. 1032. 56. Exhibit "P-36",Docket Vol. III, pp. 1268 to 1298. 57. Exhibits "P-43-O-1" to "P-43-AC-6","P-43-BV-1" to "P-43-BV-4","P-43-BX" and "P-43-BY-1" to "P-43-CB-4". 58. Exhibit "P-43",Docket Vol. II, p. 882, par. 6.b. 59. G.R. No. 150154, August 9, 2005. 60. Now at 12% VAT rate. 61. Exhibit "P-4",Docket Vol. III, pp. 1017-1019. 62. Exhibit "P-5",Docket Vol. III, p. 1020. 63. Exhibits "P-43-V" and "P-43-BV". 64. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch) , G.R. No. 152609, June 29, 2005. 65. Sitel Philippines Corporation (Formerly Clientlogic Phils., Inc.) vs. Commissioner of Internal Revenue , n G.R. No. 201326, February 8, 2017; Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , G.R. No. 153205, January 22, 2007; Accenture, Inc. vs. Commissioner of Internal Revenue ,G.R. No. 190102, July 11, 2012. 66. Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra . 67. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra . 68. Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc., supra; Commissioner of Internal Revenue vs. American Express International, Inc. (Philippine Branch), supra . 69. Exhibits "P-43-BV-1" (page 2 of 2),"P-43-BV-2" (page 2 of 2),"P-43-BV-3" (page 2 of 2) and "P-43-BV-4" (page 2 of 2). 70. Refer to Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue , G.R. No. 166732, April 27, 2007. 71. Exhibit "P-43",Docket Vol. II, pp. 883 to 884. 72. Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue ,G.R. Nos. 158885 and 170680, April 2, 2008. 73. Exhibit "P-17",Docket Vol. III, p. 1032. 74. Petition for Review, Docket Vol. I, p. 37, 2nd to 3rd pars. 75. Exhibits "P-43-AD-1" to "P-43-AD-17","P-43-AE-1" to "P-43-AE-84","P-43-AF-1" to "P-43-AF-26","P-43-AG-1" to "P-43-AG-487","P-43-AI-1" to "P-43-AI-111","P-43-AJ-1" to "P-43-AJ-262","P-43-AK-1" to "P-43-AK-321","P-43-AL-1" to "P-43-AL-117","P-43-AM-1" to "P-43-AM-48","P-43-AN-1" to "P-43-AN-336","P-43-AO-1" to "P-43-AO-309","P-43-AP-1" to "P-43-AP-2","P-43-AQ-1" to "P-43-AQ-89","P-43-AR-1" to "P-43-AR-4","P-43-AS-1" to "P-43-AS-95","P-43-AT-1" to "P-43-AT-108","P-43-AU-1" to "P-43-AU-18","P-43-AV-1" to "P-43-AV-25","P-43-AW-1","P-43-AY-1" to "P-43-AY-32","P-43-AZ-1" to "P-43-AZ-118","P-43-BA-1" to "P-43-BA-4","P-43-BB-1" to "P-43-BB-11","P-43-BC-1" to "P-43-BC-6" and "P-43-BD-1" to "P-43-BD-25". 76. Exhibit "P-43",Docket Vol. II, pp. 888 to 891. 77. Id. ,p. 880, (page 6 of ICPA final report, no 2. 4th paragraph). 78. Exhibit "P-17" (Line 15B),Docket Vol. III, p. 1032. 79. Exhibit "P-17" (Line 20A),Docket Vol. III, p. 1032. 80. Exhibit "P-55",Supplemental ICPA Report (page 4 of 8),Docket Vol. IV, p. 1690. 81. Id. ,p. 1691. (page 5 of 8 of the Supplemental ICPA Report) 82. 1st Qtr. of CY 2010 (Exh. "P-43-CF") P52,640,777.43 2nd Qtr. of CY 2010 (Exh. "P-43-CF") 71,522,135.13 3rd Qtr. of CY 2010 (Exh. "P-43-CF") 78,336,870.69 4th Qtr. of CY 2010 (Exh. "P-43-CF") 47,832,180.71 1st Qtr. of CY 2011 (Exh. "P-43-CG") 69,676,945.07 2nd Qtr. of CY 2011 (Exh. "P-43-CG") 120,097,334.92 3rd Qtr. of CY 2011 (Exh. "P-43-CG") 160,439,307.09 4th Qtr. of CY 2011 (Exh. "P-43-CG") 124,291,358.13 1st Qtr. of CY 2012 (Exh. "P-43-CH") 164,412,835.64 2nd Qtr. of CY 2012 (Exh. "P-43-CH") 86,132,883.79 2nd Qtr. of FY 2013 (Exh. "P-43-CI") 84,819,335.25 3rd Qtr. of FY 2013 (Exh. "P-43-CI") 125,260,567.74 4th Qtr. of FY 2013 (Exh. "P-43-CI") 256,342,295.31 Total output tax on VAT sales to private entities P1,441,804,826.90 83. NIRC of 1997, as amended by R.A. 9361, November 21, 2006. 84. Citibank N.A. vs. Court of Appeals and the Commissioner of Internal Revenue ,G.R. No. 107434, October 10, 1997. 85. Commissioner of Internal Revenue vs. S.C. Johnson & Son, Inc. ,G.R. No. 127105, June 25, 1999. 86. Kepco Philippines Corporation v. Commissioner of Internal Revenue ,G.R. No. 179961, January 31, 2011 citing Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue , G.R. No. 159490, February 18, 2008. 87. Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue ,G.R. No. 183531, March 25, 2015 citing J.R.A. Philippines, Inc. v. CIR ,G.R. No. 171307, August 28, 2013. n Note from the Publisher: Copied verbatim from the official copy. n Note from the Publisher: Written as Intel Philippines Corporation (Formerly Clientlogic Phils.,Inc.) vs. Commissioner of Internal Revenue in the original document.