MSCI Hong Kong Limited v. Commissioner of Internal Revenue

FIRST DIVISION [C.T.A. CASE NO. 9661. October 14, 2019.] MSCI HONG KONG LIMITED , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . DECISION FABON-VICTORINO , J p : In this Petition for Review 1 filed on August 24, 2017, petitioner MSCI Hong Kong Limited prays for the refund or issuance of tax credit certificate (TCC) in the amount of P7,958,036.61, representing its alleged excess and unutilized input value-added tax (VAT) on its purchases of goods and services attributable to its zero-rated sales for the four (4) quarters of calendar year (CY) 2015. The facts as established during the trial are as follows: Petitioner is the Philippine Branch of MSCI Hong Kong Limited, a multinational company, organized and existing under the laws of Hong Kong. 2 It is licensed by the Securities and Exchange Commission (SEC) to transact business in the Philippines as a regional operating headquarters (ROHQ) under SEC Registration No. FS201404144 3 dated March 3, 2014. Petitioner, with office address at the 29th Floor Zuellig Building, Makati Avenue corner Paseo de Roxas, Makati City, 4 is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer under Certificate of Registration No. 9RC0000442793 5 and with Taxpayer Identification No. (TIN) 008-724-942. 6 Respondent, on the other hand, is the Commissioner of Internal Revenue (CIR) with the authority to, inter alia , act upon and approve claims for refund or tax credit, pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and other tax laws. For the four (4) quarters of CY 2015, petitioner filed with the BIR, through Electronic BIR Forms (eBIR) and its Electronic Filing and Payment System (eFPS), its original and amended quarterly VAT returns as follows: VAT Quarter VAT Return Date of Filing First (1st) Original VAT Return 7 April 27, 2015 Amended VAT Return 8 July 31, 2015 Second (2nd) Original VAT Return 9 July 24, 2015 Amended VAT Return 10 February 22, 2017 Third (3rd) Original VAT Return 11 October 24, 2015 Amended VAT Return 12 February 22, 2017 Fourth (4th) Original VAT Return 13 January 20, 2016 1st Amended VAT Return 14 March 31, 2016 2nd Amended VAT Return 15 February 22, 2017 During the same period, petitioner claimed to have paid and incurred excess input taxes amounting to P7,958,036.61 on its purchases of goods and services, broken down as follows: 16 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter TOTAL Purchase of capital goods not exceeding P1 Million P116,287.78 P116,287.78 Amortization of input tax on capital goods exceeding P1 Million 223,018.75 P228,643.73 P237,759.80 P221,606.89 911,029.17 Domestic purchases of goods Other than capital goods 78,517.09 40,594.41 30,366.99 9,626.30 159,104.79 Domestic purchase of services 1,762,132.16 1,662,923.25 1,733,977.26 1,612,582.20 6,771,614.87 TOTAL P2,179,955.78 1,932,161.39 2,002,104.05 1,843,815.39 P7,958,036.61 On March 27, 2017, petitioner simultaneously filed with BIR Revenue District Office (RDO) No. 50-South Makati City a letter re: administrative claim for refund 17 dated March 7, 2017 and an Application for Tax Credits/Refunds (BIR Form No. 1914), 18 for its alleged unutilized input VAT for the four (4) quarters of CY 2015 in the total amount of P7,958,036.63, with complete supporting documents as listed in the Checklist of Requirements under Revenue Memorandum Circular (RMC) No. 54-2014. On April 18, 2017, petitioner received Letter of Authority (LOA) No. AUDMO3/011083/2017 19 dated April 3, 2017 from Regional Director Glen A. Geraldino of BIR Revenue Region No. 8 informing it that revenue officer (RO) Raymond Pasco/group supervisor (GS) Tadjudin Guiling of RDO No. 50-South Makati City, were authorized to examine its books of accounts and other accounting records for VAT for the period of January 1, 2015 to December 31, 2015. On July 27, 2017, petitioner received a letter 20 dated July 6, 2017 from BIR Assistant Commissioner Erlinda A. Simple, Assessment Service partially granting its administrative claim for refund/TCC in the reduced amount of P6,678.80. On August 24, 2017, filed the instant Petition for Review before the Court. In his Answer 21 filed on October 23, 2017, respondent, praying for the dismissal of the case invokes the presumption in his favor that taxes paid and collected are in accordance with law, hence, not refundable. Moreover, petitioner has the burden of proving its right to refund and failure to adduce sufficient proof is fatal to its cause. It is therefore incumbent upon petitioner to show compliance with Section 204 (C), in relation to Section 229 of the NIRC of 1997, as amended. Further, petitioner's claim for tax refund/TCC in the amount of P7,958,036.63, was not fully substantiated by proper documents, i.e. , sales invoices and official receipts, as mandated under Revenue Regulations (RR) No. 7-95, in relation to Sections 113 and 237 of the NIRC of 1997, as amended. After the pre-trial conference on November 23, 2017, the parties filed their Joint Stipulation of Facts and Issues, 22 on the basis of which a Pre-Trial Order 23 was issued on January 9, 2018. To substantiate its allegations, petitioner presented as witnesses, its Senior Associate for Finance, Nerissa Tolentino and the Court-commissioned Independent Certified Public Accountant (ICPA), Katherine O. Constantino. Nerissa Tolentino testified 24 that she is petitioner's Senior Associate for Finance since May 2014. As such, she reviews and safekeeps petitioner's corporate and financial documents, including its tax returns and financial statements, ensures petitioner's compliance with BIR requirements, and coordinates and consults with petitioner's external auditors and counsel regarding tax matters, including assessment protests and claims for refund. She also alleged that petitioner is the Philippine branch of a multinational company organized and existing under the laws of Hong Kong. 25 It has been issued Registration No. FS201404144 26 by the SEC authorizing it to transact business in the Philippines as a ROHQ, performing index bench marketing, portfolio risk and performance analytics, and research support services. In CY 2015, petitioner rendered services to two entities namely, MSCI, Inc., a corporation established and doing business under the laws of Delaware, United States of America (USA) 27 and Investment Property Databank Limited (IPD UK), a corporation established and doing business under the laws of United Kingdom. 28 Per its Service Agreements with MSCI, Inc. dated April 1, 2014 29 and with IPD UK dated January 1, 2015, 30 petitioner's services include administration, sales support and marketing analytics, management and index research, and production. For services rendered, MSCI, Inc. and IPD UK paid petitioner service fees equivalent to the amount of actual costs and expenses it incurred plus a ten percent (10%) mark-up. Petitioner billed MSCI, Inc. and IPD UK in US Dollars (USD) and was paid service fees denominated in the same currency inwardly remitted in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP). For the 1st to 4th quarters of CY 2015, petitioner generated sales amounting to P302,856,610.91. As a consequence, it incurred excess and unutilized input taxes during the four (4) quarters of CY 2015 for its services rendered in the Philippines to the two foreign entities, MSCI, Inc. and IPD UK. During the same period, petitioner paid and incurred excess input taxes on its purchases of goods and services amounting to P7,958,036.61. The witness further testified that the said excess and unutilized input taxes was incurred since per petitioner's Quarterly VAT Returns (BIR Form No. 2550Q), 31 it did not have any sales subject to twelve percent (12%) VAT, as well as any exempt sales, during the 1st to 4th quarters of CY 2015. Thus, petitioner could not have applied its excess input taxes from CY 2015 against any output taxes in CY 2015. Petitioner likewise removed the said input taxes when it filed its Amended Quarterly VAT Return for the 1st quarter of CY 2016. 32 Further, the amount of P7,958,036.61 was reported in Line 23D of petitioner's Amended Quarterly VAT Return for the 1st Quarter of CY 2016 as "VT Refund/TCC Claimed." On March 27, 2017, petitioner filed with the BIR-RDO No. 50 a letter and Application for Tax Credits/Refund (BIR Form No. 1914) 33 together with complete supporting documents for its unutilized input VAT for the 1st to 4th quarters of CY 2015 in the total amount of P7,958,036.61. On April 13, 2017, petitioner received from the BIR LOA AUDMO3/011083/2017 (eLA201500047989) dated April 3, 2017 34 authorizing the named revenue examiners to examine its books of accounts and other accounting records for VAT for the period of January 1, 2015 to December 31, 2015. On July 27, 2017, petitioner received a Letter dated July 6, 2017 signed by Revenue District Officer of BIR-RDO No. 50, 35 Rosita U. Meniano, partially granting its administrative claim for refund of excess input taxes for the 4 quarters of CY 2015 but only in the amount of P6,678.80, hence, the instant Petition for Review filed on August 24, 2017. The Court-commissioned ICPA Katherine O. Constantino declared 36 that she audited and evaluated petitioner's documents and record pertinent to its claim for tax refund/TCC in the amount of P7,958,036.61, representing its alleged excess and unutilized input VAT for the 1st to 4th quarters of CY 2015. As stated in her ICPA Report dated February 28, 2018 37 submitted after examination and verification of petitioner's supporting documents, petitioner is entitled to its claim for excess and unutilized input VAT refund in the reduced amount of P6,295,591.43. After its Formal Offer of Evidence, 38 petitioner rested as shown in the Resolution dated July 4, 2018. 39 Respondent, on the other hand, manifested 40 that it would not to present any evidence in support of his defense. In view thereof and as prayed for, the parties were granted a period of thirty (30) days, within which to submit their respective memoranda. 41 On August 22, 2018, respondent filed his Memorandum 42 through registered mail, while petitioner filed its own 43 on September 12, 2018. Accordingly, the instant case was deemed submitted for decision on October 16, 2018. 44 THE ISSUE Whether petitioner is entitled to the refund of or the issuance of a TCC for its excess and unutilized input VAT attributable to its zero-rated sales of service for the four (4) quarters of CY 2015 in the amount of P7,958,036.61. 45 The parties also submitted the following sub-issues, 46 to wit: (a) Whether petitioner paid and incurred input taxes on its purchases of goods and services attributable to zero-rated sales of services in CY 2015. (b) Whether the excess input taxes paid and incurred by petitioner in CY 2015 is duly supported by VAT invoices and official receipts. (c) Whether the input taxes paid and incurred by petitioner in CY 2015 amounting to P7,958,036.61 were applied against any output taxes or carried over to succeeding taxable periods. (d) Whether Petitioner's administrative and judicial claims for refund or issuance of TCC for its excess and unutilized input taxes were filed within the period prescribed by law. THE COURT'S RULING Petitioner claims that it is entitled to the tax refund/TCC in the amount of P7,958,036.61, representing its alleged excess and unutilized input VAT on its purchases of goods and services attributable to its zero-rated sales for four (4) quarters of CY 2015. Paragraphs (A) and (C) of Section 112 of the National Internal Revenue Code of 1997, as amended, pertinently provide as follows: "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 unutilized/excess input VAT attributable to zero-rated or effectively zero-rated sales, the following requisites must be satisfied, to wit: 1. the taxpayer is VAT-registered; 2. the claim for refund was filed within the prescriptive period; 3. there must be zero-rated or effectively zero-rated sales; 4. input taxes were incurred or paid; 5. such input taxes are attributable to zero-rated or effectively zero-rated sales; and 6. the input taxes were not applied against any output VAT liability. Petitioner is a VAT- registered taxpayer. Undeniably, petitioner is a VAT-registered taxpayer as shown in the Certificate of Registration No. 9RC0000442793 47 dated March 13, 2014 and TIN 008-724-942 48 issued in its favor by the BIR. Petitioner's administrative and judicial claims were both seasonably filed. The second requisite was likewise satisfied. Per Section 112 (A) of the NIRC of 1997, as amended, petitioner had two (2) years to file a claim for tax refund/TCC of its unutilized and excess input VAT attributable to its zero-rated or effectively zero-rated sales reckoned from the close of the taxable quarter when the relevant sales were made. The table below indicates the dates of the last day of the two-year period for petitioner to file its administrative claim for the 1st to 4th quarters of CY 2015: Taxable quarters for CY 2015 Close of taxable quarter when sales were made End of the 2-year prescriptive period for refund Date of filing of the administrative claim 1st March 31, 2015 March 31, 2017 March 27, 2017 2nd June 30, 2015 June 30, 2017 3rd September 30, 2015 September 30, 2017 4th December 31, 2015 December 31, 2017 Evidently, petitioner's administrative claim for refund was timely filed on March 27, 2017. As to the timeliness of petitioner's judicial claim for refund/TCC, Section 112 (C) of the NIRC of 1997, as amended, speaks of two periods for filing judicial claim for refund, to wit: (1) the period of 120 days for respondent to act on the administrative claim for refund/TCC; and (2) the 30-day period from notice of respondent's adverse ruling or the lapse of the 120-period without any action from respondent within which to file a judicial claim with the Court of Tax Appeals. 49 In the landmark case of Commissioner of Internal Revenue v. San Roque Power Corporation , 50 the Supreme Court held that the taxpayer can seek judicial review of its claim for refund/TCC in either of the following ways: (1) file the judicial claim within 30 days after the respondent denies the claim within the 120-day waiting period, or (2) file the judicial claim within 30 days from the expiration of the 120-day period if respondent does not act within that period. 51 Relative to the foregoing, it must be emphasized that pursuant to Section 112 (C) of the NIRC of 1997, as amended, the 120-day period begins to run from the date of submission of complete documents supporting the administrative claim. 52 As to when the supporting documents are "deemed complete," the same has long been settled in the case of Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue , 53 in which the Supreme Court ruled, thus: "It bears mentioning at this point that the foregoing summation of the rules should only be made applicable to those claims for tax credit or refund filed prior to June 11, 2014 , such as the claim at bench. 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. " (Emphasis supplied) Further, in the recent case of Team Energy Corp. v. Commissioner of Internal Revenue , 54 the Final Arbiter ruled that "resort with the CTA should be made within 30 days either from receipt of the decision denying the claim or the expiration of the 120-day period given to the CIR to decide the claim." As earlier stated, petitioner's administrative claim was timely filed on March 27, 2017. Following Section 112 (C) of the NIRC of 1997, as amended, respondent had 120 days from March 27, 2017, or until July 25, 2017, within which to act on the said claim. Given that petitioner received the letter 55 dated July 6, 2017 from respondent through BIR Assistant Commissioner Erlinda A. Simple on July 27, 2017, partially granting its administrative claim for refund/TCC but only in the amount of P6,678.80, petitioner had thirty (30) days or until August 26, 2017, within which to seek judicial intervention with this Court. In fine, the Petition for Review was as well timely instituted on August 24, 2017. Consequently, the Court validly acquired jurisdiction over the present case. Petitioner is engaged in zero-rated sales of services to non-resident foreign entities. Petitioner claims that during the four (4) quarters of CY 2015, it rendered services to MSCI, Inc., 56 and IPD UK, 57 a US and UK corporations, respectively. The services rendered to MSCI, Inc. and IPD UK were paid in acceptable foreign currencies and duly accounted for in accordance with the rules and regulations of the BSP, hence, are subject to VAT at zero percent (0%), pursuant to Section 108 (B) (2) of the NIRC of 1997, as amended, which provides as follows: 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 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); Further, in the case of Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. , 58 the Supreme Court laid down the parameters for VAT-zero rating of services performed in the Philippines to foreign entities pursuant to Section 108 (B) (2) of the NIRC of 1997, as amended, as follows: 1. The services must be other than processing, manufacturing or repacking of goods; 2. Payment for such services must be in acceptable foreign currency duly accounted for in accordance with the BSP rules and regulations; and 3. The recipient of such services is doing business outside the Philippines. Anent the first requisite, evidence show that petitioner is a Philippine branch of a multinational company organized and existing under the laws of Hong Kong. It was licensed to transact business in the Philippines as an ROHQ as indicated in SEC Registration No. FS201404144 59 dated March 3, 2014. As ROHQ, it was authorized to perform index benchmarking, portfolio risk and performance analytics, and research support services. Evidently, the services rendered by petitioner to MSCI, Inc. and IPD UK were not in the same category as "processing, manufacturing or repacking of goods" contemplated in the cited provision. We proceed with the third requisite. The Court consistently held that to be considered as a non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both a Certificate of Non-Registration of Corporation/Partnership issued by the SEC and proof of Incorporation/Association/Business Registration in a foreign country and that there is no other indication that the recipient of the services is doing business in the Philippines. 60 To prove that MSCI, Inc. and IPD UK are non-resident foreign corporations doing business outside the Philippines, petitioner adduced the following documents, viz. : i. Third Amended and Restated Certificate of Incorporation of MSCI, Inc.; 61 ii. Amended and Restated By-laws of MSCI, Inc.; 62 iii. Certification of the US Internal Revenue Services (IRS) dated February 22, 2016 certifying that MSCI, Inc. is a US Corporation and a US resident for purposes of taxation; 63 iv. Certification of Non-registration issued by the SEC stating that MSCI, Inc. is not registered as a corporation in the Philippines; 64 v. Articles of Association of IPD UK dated September 26, 2017; 65 and vi. Certification of Non-registration issued by the SEC stating that IPD UK is not registered as a corporation in the Philippines. 66 A scrutiny of the above-cited documents reveals that petitioner's clients were non-resident foreign clients doing business outside the Philippines, thereby complying with the third requisite. As regards the second requisite, Sections 113 (A) (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1 (A) (2), B (1) and (2) (c) of Revenue Regulations (RR) No. 16-2005, 67 as amended, provide that a VAT taxpayer, 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, thus: SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. (A) Invoicing Requirements . A VAT-registered person shall issue: xxx xxx xxx (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt . The following information shall be indicated in the VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his Taxpayer's Identification Number (TIN); (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax: Provided , That: xxx xxx xxx (c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx xxx xxx (3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and x x x 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; Per the foregoing provisions, the foreign currency remittances referred to under Section 108 (B) (2) of the NIRC of 1997, as amended, must be further supported by VAT zero-rated official receipts. In the present case, petitioner declared zero-rated sales in the aggregate amount of P302,856,610.91 for the four (4) quarters of 2015, broken down as follows: Exhibit Period Covered Zero-rated Sales P-13 1st Quarter P70,685,344.17 P-15 2nd Quarter 76,696,041.77 P-17 3rd Quarter 76,631,465.19 P-20 4th Quarter 78,843,759.78 Total P302,856,610.91 To prove that the subject services were paid in acceptable foreign currency in accordance with the rules and regulations of the BSP, petitioner submitted zero-rated official receipts (ORs), 68 invoices, 69 Schedule of Bank Credit Memos, 70 Certificate of Bank Inward Remittance 71 and Transaction Credit Advices from Bank of America, 72 showing payment in favor or petitioner in US dollars for the 4 quarters of CY 2015 in the amount of US$6,669,765.96 73 (equivalent to P302,856,610.91). As ascertained and verified by the ICPA, the said zero-rated sales of US$6,669,765.96 were backed-up by sufficient documents. However, as per Transaction Credit Advices from Bank of America, only the amount of US$6,654,911.13 74 was inwardly remitted. In explaining the difference of US$14,854.83, petitioner posits that the same pertains to travel expenses payable to MSCI, Inc. However, nothing in the record supports petitioner's claim. Thus, the Court finds that the unsupported difference of US$14,854.83, with peso equivalent of P664,493.69, 75 should be disallowed as zero-rated sales. Hence, out of the reported zero-rated sales of P302,856,610.91 for the four (4) quarters of CY 2015, only the amount of P302,192,117.22 actually qualifies for VAT zero-rating under Section 108 (B) (2) of the NIRC of 1997, as amended, computed below: Total Zero-rated sales for CY 2005 P302,856,610.91 Less: Invalid portion 664,493.69 Valid Zero-rated Sales P302,192,117.22 Petitioner incurred input taxes that are attributable to its zero-rated sales. In its Quarterly VAT Returns for CY 2015, petitioner reported a total input VAT of P7,958,036.61 76 consisting of the P7,047,007.44 coming from input VAT arising from current domestic purchases of capital goods not exceeding P1 million, and domestic purchases of goods other than capital goods and domestic purchase of services; and P911,029.17 arising from input VAT amortization from domestic purchase of capital goods exceeding P1 million. Thus: Exhibit "P-13" Exhibit "P-15" Exhibit "P-17" Exhibit "P-20" Input tax on: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Domestic purchases of capital goods not exceeding P1 million P116,287.78 P- P- P- P116,287.78 Domestic purchases of goods other than capital goods 78,517.09 40,594.41 30,366.99 9,626.30 159,104.79 Domestic purchase of services 1,762,132.16 1,662,923.25 1,733,977.26 1,612,582.20 6,771,614.87 Total current input VAT P1,956,937.03 P1,703,517.66 P1,764,344.25 P1,622,208.50 P7,047,007.44 Domestic purchase of capital goods exceeding P1million P- P135,000.00 P- P- P135,000.00 Add: Input tax deferred on capital goods exceeding P1 million from previous quarters 2,616,516.77 2,393,498.00 2,299,854.24 2,062,094.41 9,371,963.42 Less: Input tax deferred on capital goods exceeding P1 million deferred for the succeeding period 2,393,498.02 2,299,854.27 2,062,094.44 1,840,487.52 8,595,934.25 Amortized input tax on capital goods exceeding P1 million P223,018.75 P228,643.73 P237,759.80 P221,606.89 P911,029.17 Total available input tax P2,179,955.78 P1,932,161.39 P2,002,104.05 P1,843,815.39 P7,958,036.61 For the amount of P7,047,007.44, representing input VAT on its current domestic purchases of capital goods not exceeding P1 million, domestic purchases of goods other than capital goods and domestic purchase of services, petitioner presented various suppliers' invoices and official receipts 77 to prove the same. Correspondingly, the ICPA in her Report summarized her findings as follows, viz. : 78 Annex (ICPA Report) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Properly Supported by VAT Invoices/Official Receipts 1 Domestic purchase of goods other than capital goods properly supported by VAT REG TIN invoices Annex 5-1Q-a Annex 5-2Q-a Annex 5-3Q-a Annex 5-4Q-a P48,784.25 P37,558.51 P19,779.54 P4,651.26 P110,773.56 2 Domestic purchase of services properly supported by VAT REG TIN official receipts (OR) Annex 5-1Q-b Annex 5-2Q-b Annex 5-3Q-b Annex 5-4Q-b 1,677,543.71 1,642,921.64 726,554.87 1,527,546.57 5,574,566.79 3 Domestic purchase of capital goods not exceeding P1 million properly supported by VAT REG TIN invoices Annex 5-1Q-c 60,707.42 60,707.42 TOTAL PROPERLY SUPPORTED P1,787,035.38 P1,680,480.15 P746,334.41 P1,532,197.83 P5,746,047.77 Other Findings Purchase of Goods Other Than Capital Goods 1 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with alteration on Petitioner's name Annex 5-3Q-c P P P5,995.42 P P5,995.42 2 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with alteration on Petitioner's address Annex 5-1Q-d 69.43 69.43 3 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with alteration of date Annex 5-2Q-c Annex 5-3Q-d 3,035.90 2,528.03 5,563.93 4 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with inserted petitioner's TIN Annex 5-1Q-e 216.54 216.54 5 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with inserted petitioner's name, TIN and address Annex 5-1Q-f Annex 5-4Q-d 3,279.91 1,643.54 4,923.45 6 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with alteration of petitioner's TIN Annex 5-1Q-g 25,217.14 25,217.14 7 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with inserted petitioner's TIN and inserted abbreviated address Annex 5-1Q-h 949.82 949.82 8 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with inserted petitioner's name and inserted abbreviated address Annex 5-4Q-c 152.79 152.79 9 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices with date written on a computer printed invoice, inserted petitioner's name, TIN and address Annex 5-3Q-f 680.97 680.97 10 Domestic purchase of goods other than capital goods supported by VAT REG TIN invoices without date indicated, inserted petitioner's name, TIN and address Annex 5-3Q-g 1,383.03 1,383.03 11 Domestic purchase of goods other than capital goods supported invoices without TIN in the supporting document Annex 5-4Q-e 3,178.71 3,178.71 SUBTOTAL P29,732.84 P3,035.90 P10,587.45 P4,975.04 P48,331.23 Purchase of Services 1 Domestic purchase of services supported by VAT REG TIN OR with incomplete/ abbreviated petitioner's address Annex 5-3Q-i P P P2,475.00 P2,475.00 2 Domestic purchase of services supported by VAT REG TIN OR with inserted petitioner's address Annex 5-3Q-k Annex 5-4Q-i 38,630.58 5,202.94 43,833.52 3 Domestic purchase of services supported by VAT REG TIN OR with alteration on VAT breakdown Annex 5-1Q-j Annex 5-3Q-n 19,248.55 26,442.30 45,690.85 4 Domestic purchase of services supported by VAT REG TIN OR with inserted petitioner's address and alteration on VAT breakdown Annex 5-2Q-f Annex 5-3Q-m 10,913.86 32,629.32 43,543.18 5 Domestic purchase of services supported by VAT REG TIN OR with incomplete petitioner's address and with alteration on VAT breakdown Annex 5-4Q-h 61,292.69 61,292.69 6 Domestic purchase of services supported by VAT REG TIN OR with alteration on petitioner's TIN Annex 5-1Q-q Annex 5-3Q-j 4,724.85 432.00 5,156.85 7 Domestic purchase of services supported by VAT REG TIN OR with alteration on petitioner's TIN and incomplete address Annex 5-3Q-l 3,816.62 3,816.62 8 Domestic purchase of services supported by VAT REG TIN OR with alteration on petitioner's name Annex 5-1Q-k Annex 5-3Q-h 3,990.37 895,796.57 899,786.94 9 Domestic purchase of services supported by VAT REG TIN OR with alteration on abbreviated petitioner's name Annex 5-1Q-l 14,209.50 14,209.50 10 Domestic purchase of services supported by VAT REG TIN OR with alteration on petitioner's name and address Annex 5-1Q-m 6,225.00 6,225.00 11 Domestic purchase of services supported by VAT REG TIN OR with incomplete petitioner's name and alteration of VAT breakdown Annex 5-1Q-n 25,034.07 25,034.07 12 Domestic purchase of services supported by VAT REG TIN OR with alteration of date, petitioner's address and VAT breakdown Annex 5-2Q-e 900.00 900.00 13 Domestic purchase of services supported by VAT REG TIN OR with abbreviated petitioner's name and alteration on petitioner's TIN Annex 5-1Q-o 103.46 103.46 14 Domestic purchase of services supported by VAT REG TIN OR with wrong petitioner's TIN Annex 5-1Q-p 2,833.56 2,833.56 15 Domestic purchase of services supported by VAT REG TIN OR with alteration on petitioner's TIN and abbreviated petitioner's address Annex 5-4Q-f 17,640.00 17,640.00 16 Domestic purchase of services supported by VAT REG TIN OR with inserted petitioner's TIN and address and VAT amount per support is less than the schedule Annex 5-1Q-r 31.34 31.34 17 Domestic purchase of services supported by VAT REG TIN OR with no petitioner's address indicated and VAT breakdown not shown Annex 5-4Q-g 900.00 900.00 18 Domestic purchase of services supported by VAT TIN No. OR Annex 5-1Q-s Annex 5-2Q-d 8,187.75 8,187.75 16,375.50 19 Domestic purchase of services supported by VAT invoice only Annex 5-3Q-e 7,200.00 7,200.00 SUBTOTAL P84,588.45 P20,001.61 P1,007,422.39 P85,035.63 P1,197,048.08 Purchase of Capital Goods Not Exceeding P1 million 1 Domestic purchase of capital goods not exceeding P1 million supported by VAT REG TIN invoices with alteration on petitioner's TIN Annex 5-1Q-i P55,580.36 P P P P55,580.36 SUBTOTAL P55,580.36 P P P P55,580.36 TOTAL OTHER FINDINGS P169,901.65 P23,037.51 P1,018,009.84 P90,010.67 P1,300,959.57 GRAND TOTAL P1,956,937.03 P1,703,517.66 P1,764,344.25 P1,622,208.50 P7,047,007.44 Upon further verification of the supporting documents, the Court finds the ICPA Report to be in order. However, out of the P1,300,959.67 input VAT excluded by the ICPA under Other Findings, the amount of P16,375.50, 79 representing petitioner's domestic purchase of service supported by "VAT TIN No." official receipt should be allowed. Accordingly, only the remaining input VAT of P1,284,584.178 80 shall be disallowed for petitioner's failure to meet the substantiation requirements under Sections 110 (A) and 113 (A) and (B) of the NIRC of 1997, as amended, and Sections 4.110-2, 4.110-8 and 4.113-1 of RR No. 16-2005, as amended. With regard to the P911,029.17 input VAT amortization from domestic purchases of capital goods exceeding P1 million, the ICPA examined petitioner's sales invoices and official receipts 81 and summarized her findings as follows: 82 A. Current Year Domestic Purchases of Capital Goods Exceeding P1 million Annex Reference Allowable Input VAT for CY 2015 TOTAL Allowable Input VAT 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Properly Supported Input tax 1 Domestic purchase of capital goods exceeding P1 million properly supported by VAT REG TIN invoice Annex 8-A-a P5,625.00 P16,875.00 P16,875.00 P39,375.00 TOTAL Properly supported - 5,625.00 16,875.00 16,875.00 39,375.00 B. Previous Year Domestic Purchases of Capital Goods Exceeding P1 million Annex Reference Allowable Input VAT for CY 2015 TOTAL Allowable Input VAT 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Properly Supported by VAT Invoices 1 Domestic purchase of capital goods exceeding P1 million properly supported by VAT REG TIN invoice Annex 8-B-1Q-a Annex 8-B-2Q-a Annex 8-B-3Q-a Annex 8-B-4-Q-a P106,052.76 P106,052.76 P106,052.76 P106,052.76 P424,211.02 2 Domestic purchase of capital goods (services) exceeding P1 million supported by VAT REG TIN OR Annex 8-B-1Q-b Annex 8-B-4Q-b 21,489.41 21,489.41 21,489.41 21,489.41 85,957.64 TOTAL Properly supported 127,542.17 127,542.17 127,542.17 127,542.17 510,168.66 Other Findings 1 Domestic purchase of capital goods exceeding P1 million supported by VAT REG TIN invoice with altered name and TIN of Petitioner Annex 8-B-1Q-c 25,178.57 25,178.57 25,178.57 25,178.57 100,714.29 2 Domestic purchase of capital goods exceeding P1 million supported by VAT REG TIN invoice with altered name of Petitioner Annex 8-B-3Q-b 1,072.00 1,072.00 1,072.00 1,072.00 4,288.00 3 Domestic purchase of capital goods exceeding P1 million supported by VAT REG TIN invoice with altered TIN of Petitioner Annex 8-B-4Q-c 4,148.21 4,148.21 4,148.21 4,148.21 16,592.86 4 Domestic purchase of capital goods exceeding P1 million supported by VAT REG TIN invoice without Petitioner's TIN Annex 8-B-1Q-d Annex 8-B-2Q-b 14,948.21 14,948.21 14,948.21 14,948.21 59,792.84 5 Domestic purchase of capital goods exceeding P1 million supported by VAT REG TIN invoice without Petitioner's TIN and incomplete address Annex 8-B-4Q-d 491.42 491.42 491.42 491.42 1,965.66 6 Domestic purchase of capital goods exceeding P1 million supported by VAT REG TIN invoice with wrong Petitioner's TIN Annex 8-B-1Q-e 12,504.46 12,504.46 12,504.46 12,504.46 50,017.86 7 Domestic purchase of capital goods (services) exceeding P1 million with supporting documents other than invoice (goods)/OR (services) Annex 8-B-1Q-f Annex 8-B-4Q-e 37,133.72 37,133.72 34,999.79 18,846.81 128,114.05 Total Other findings 95,476.60 95,476.60 93,342.67 77,189.68 361,485.55 GRAND TOTAL (in P) 223,018.77 223,018.77 220,884.83 204,731.85 871,654.22 In addition, the input VAT of P424,211.02 83 pertaining to petitioner's domestic purchases of capital goods exceeding P1 million for the previous year, which was found by the ICPA to be properly supported by VAT invoices, must be reduced by P638.64 84 (which represents the input VAT on petitioner's purchase from Function Smith Sales and Services) on the ground that the supporting VAT invoice does not contain petitioner's TIN, in violation of Section 113 (B) (4) of the NIRC of 1997, as amended, and implemented by Section 4.113-1 (B) (3) of RR No. 16-05, as amended. Hence, out of petitioner's claimed unutilized input VAT of P7,958,036.31, only the amount of P6,311,327.95 represents petitioner's valid input VAT for the four quarters of CY 2015, as computed below, to wit: Input VAT claimed for refund P7,958,036.31 Less: Disallowances 1) Exceptions noted per ICPA Report: Input VAT on current purchases other than capital goods P1,284,584.17 Amortized input VAT on capital goods exceeding P1M 361,485.55 1,646,069.72 2) Exceptions noted per Court: Input VAT amortization of an improperly supported purchase of capital goods exceeding P1M P638.64 638.64 Valid Input VAT P6,311,327.95 Petitioner's input taxes were not applied to any output tax liability. Since petitioner reported 100% zero-rated sales for CY 2015, the substantiated input VAT in the amount of P6,311,327.95 is wholly attributable thereto. However, only the amount of P6,297,480.35 can be attributed to the valid zero-rated sales in the amount of P302,192,117.22, computed as follows: Substantiated Input VAT P6,311,327.95 Divide by total reported zero-rated sales 302,856,610.91 Multiply by substantiated zero-rated sales 302,192,117.22 Input VAT allowable for refund/issuance of Tax Credit Certificate P6,297,480.35 As to the issue of applying input taxes against output tax liabilities in the succeeding periods, the Court finds that although the claimed input VAT was carried-over by petitioner to its amended quarterly VAT return for the 1st Quarter 85 of CY 2016, it remained unutilized since petitioner had no output tax liability for the period, and that it was eventually deducted from total available input tax under Line 23D as a "VAT Refund/TCC Claimed." 86 Consequently, the subject claim no longer formed part of the excess input VAT of P2,127,740.88 87 as of the end of the 1st Quarter of CY 2016 which can be carried over or applied to the succeeding quarters. Therefore, it eliminates the possibility that the present claim will be applied to future output VAT liability. All stated, petitioner has sufficiently established that it is entitled to a refund or issuance of TCC corresponding to its excess input VAT attributable to its zero-rated sales for the four (4) quarters of CY 2015 but in the reduced the amount of P6,297,480.35. WHEREFORE , the instant Petition for Review filed by petitioner MSCI Hong Kong Limited, is PARTIALLY GRANTED . Accordingly, respondent Commissioner of Internal Revenue is hereby DIRECTED to REFUND or to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner MSCI Hong Kong Limited in the reduced amount of P6,297,480.35, representing its unutilized and excess input VAT attributable to its zero-rated sales for the four (4) quarters of calendar year 2015. SO ORDERED. (SGD.) ESPERANZA R. FABON-VICTORINO Associate Justice Roman G. del Rosario, P.J. and Catherine T. Manahan, J. , concur. Footnotes 1. Vol. I docket, pp. 10-19. 2. Exhibit "P-2-1". 3. Exhibit "P-1". 4. Paragraph 1, Stipulated Facts, Joint Stipulation of Facts and Issues (JSFI), vol. II docket, p. 493. 5. Exhibit "P-3". 6. Par. 2, Stipulated Facts, JSFI, vol. II docket, p. 493. 7. Exhibit "P-12". 8. Exhibit "P-13". 9. Exhibit "P-14". 10. Exhibit "P-15". 11. Exhibit "P-16". 12. Exhibit "P-17". 13. Exhibit "P-18". 14. Exhibit "P-19". 15. Exhibit "P-20". 16. Exhibit "P-33" (ICPA Report). 17. Exhibit "P-21". 18. Exhibit "P-22". 19. Exhibit "P-23". 20. Exhibit "P-24". 21. Vol. I docket, pp. 199-201. 22. Vol. II docket, pp. 493-504. 23. Ibid. , pp. 291-295. 24. Exhibits "P-31" and "P-31-a", Sworn Statement of Ms. Nerissa Tolentino dated November 16, 2017; and, Exhibits "P-32" and "P-32-a", Supplemental Sworn Statement of Ms. Nerissa Tolentino dated January 24, 2018. 25. Exhibits "P-2" and "P-2-a". 26. Exhibit "P-1". 27. Exhibits "P-6" to "P-8". 28. Exhibit "P-9". 29. Exhibit "P-4". 30. Exhibit "P-5". 31. Exhibits "P-12" to "P-20". 32. Exhibit "P-25-a". 33. Exhibits "P-21" and "P-22". 34. Exhibit "P-23". 35. Exhibit "P-24". 36. Exhibits "P-448" and "P-448-a"; Sworn Statement of Ms. Katherine O. Constantino dated March 15, 2018. 37. Exhibits "P-33" and "P-33-a". 38. Formal Offer of Evidence (with Omnibus Motion), vol. II docket, pp. 593-622; Supplemental Formal Offer of Evidence, vol. II docket, pp. 878-881. 39. Vol. II docket, pp. 925-926. 40. Ibid. , pp. 929-930. 41. Resolution dated July 19, 2018, Vol. II docket, p. 932. 42. Vol. II docket, pp. 937-940. 43. Ibid. , pp. 944-971. 44. Ibid. , p. 975. 45. Par. 4, Issue, JSFI, vol. II docket, p. 494. 46. Par. 5, ibid. 47. Exhibit "P-3". 48. Ibid. 49. Rohm Apollo Semiconductor Philippines v. Commissioner of Internal Revenue , G.R. No. 168950, January 14, 2015. 50. G.R. Nos. 187485, 196113, and 197156, February 12, 2013. 51. Supra , Note 49. 52. Silicon Philippines, Inc. (formerly Intel Philippines Manufacturing, Inc.) v. Commissioner of Internal Revenue , G.R. No. 182737, March 2, 2016. 53. G.R. No. 207112, December 8, 2015. 54. G.R. Nos. 197663 and 197770, March 14, 2018. 55. Exhibit "P-24". 56. Exhibit "P-4". 57. Exhibit "P-5". 58. G.R. No. 153205, January 22, 2007. 59. Exhibit "P-1". 60. Deutsche Knowledge Services Pte. Ltd. v. Commissioner of Internal Revenue , CTA EB Nos. 1244 and 1345 (CTA Case No. 8443), March 30, 2017. 61. Exhibit "P-6". 62. Exhibit "P-7". 63. Exhibit "P-8". 64. Exhibit "P-10". 65. Exhibit "P-9". 66. Exhibit "P-11". 67. Consolidated Value-Added Tax Regulations of 2005. 68. Exhibits "P-69" to "P-87". 69. Exhibits "P-46" to "P-68". 70. Exhibit "P-89". 71. Exhibit "P-90". 72. Exhibits "P-91" to "P-109". 73. Exhibit "P-33", ICPA Report, Annex 2. 74. Exhibit "P-33", ICPA Report, p. 14. 75. P44.733 conversion rate on January 21, 2015. Exhibit "P-33", ICPA Report, Annex 2. P19,682,968.93 divided by US$440,014.95 equals P44.732500407 or P44.733 multiplied with US$14,854.83. 76. Amount prayed for is lower by P0.30. 77. Exhibits "P-116" to "P-391". 78. Exhibit "P-33" (ICPA Report), pp. 20-25. 79. Purchase of Services No. 18 (Domestic purchase of services supported by VAT TIN No. OR). 80. P1,300,959.67 less P16,375.50 81. Exhibits "P-392" to "P-448". 82. Exhibit "P-33" (ICPA Report), pp. 32-34. 83. Exhibit "P-33" (ICPA Report), p. 33. 84. Exhibit "P-423"; Exhibit "P-33" (ICPA Report), Annex 8-B-3Q-a. 85. Exhibit "P-25-a". 86. Ibid. 87. Ibid. , Line 29.