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

SPECIAL THIRD DIVISION [C.T.A. CASE NO. 9896. September 12, 2022.] NEW YORK BAY PHILIPPINES, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . AMENDED DECISION UY , J p : For this Court's resolution are the following: 1) petitioner's MOTION FOR PARTIAL RECONSIDERATION (RE: DECISION DATED JANUARY 26, 2022) filed on March 10, 2022 without respondent's comment despite notice; and 2) respondent's MOTION FOR RECONSIDERATION (Decision dated 26 January 2022) filed on March 16, 2022 with petitioner's COMMENT (RE: RESPONDENT'S MOTION FOR RECONSIDERATION DATED MARCH 16, 2022) filed on April 26, 2022. CAIHTE In both Motions , the parties pray for the reconsideration of the Court's Decision dated January 26, 2022, the dispositive portion of which reads: " WHEREFORE , in light of the foregoing considerations, the Petition for Review is GRANTED . Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P12,445,765.78 representing the latter's unutilized input VAT attributable to its zero-rated sales for the four quarters of the CY 2016. SO ORDERED. " Petitioner's Motion for Partial Reconsideration Petitioner argues that the service agreement (Exhibits P-29-1) and the addendums to the service agreement (Exhibits P-29-2 to P-29-8) cover petitioner's sales of services to both Trans-Fast Remittance LLC (TF Remittance) and Trans-Fast International FZ-LLC (TF International). Allegedly, the Service Agreements and the Addendums show that the terms and conditions of the same shall likewise apply to petitioner's sales of services to TF International. Moreover, even assuming for the sake of argument that the Service Agreement and Addendums to the Service Agreement apply only to petitioner's transaction with TF Remittance, petitioner argues that the evidence on record sufficiently proves that: (i) the nature of services rendered by petitioner to TF International were not in the same category as "processing, manufacturing or repacking of goods"; and (ii) the services rendered in favor of TF International were performed in the Philippines. As mentioned earlier, respondent failed to file the required Comment to petitioner's Motion for Partial Reconsideration as directed in the Resolution dated March 17, 2022 despite due notice. Respondent's Motion for Reconsideration Respondent claims that the Court erred in giving due course to the Petition for Review filed by petitioner. According to respondent, Section 112 (C) of the NIRC of 1997, as amended, provides that he has one hundred twenty (120) days from the date of the submission of complete documents in support of the application for tax credit/refund within which to grant or deny the claim. Respondent insists that petitioner failed to submit the complete supporting documents upon submission of the administrative claim for VAT from the date of the filing of the application/submission of documents and petitioner did not comply with the invoicing and accounting compliance required by the NIRC of 1997, as amended. Lastly, respondent argues that in an action for tax refund/credit, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for refund/credit, and failure to adduce sufficient proof is fatal to the action for tax refund/credit. Petitioner's comment on respondent's Motion for Reconsideration Petitioner contends that there is no basis for respondent's argument that petitioner failed to submit complete supporting documents together with its administrative claim. It is established that petitioner complied with the requirements under Revenue Memorandum Circular No. 54-2014 when it filed with the BIR, RDO No. 43A its administrative claim for refund of excess and unutilized input VAT for the four (4) quarters of CY 2015 together with complete supporting documents and the requisite sworn attestation. Likewise, petitioner counter-argues that it was able to comply with all the requisites for the refund of its excess and input VAT for the four quarters of CY 2016. THE COURT'S RULING Petitioner's Motion for Partial Reconsideration is meritorious. While, respondent's Motion for Reconsideration lacks merit. The Court did not err in giving due course to the Petition for Review. In her Motion for Reconsideration , respondent argues that petitioner failed to submit complete supporting documents at the administrative level. Hence, its claim for refund should be denied. We do not agree. Section 112 (C) of the NIRC of 1997, as amended, 1 is clear that the CIR has 120 days from the date of submission of complete documents in support of the administrative claim for refund within which to grant or deny the same: "SEC. 112. Refunds or Tax Credits of Input Tax. 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 Subsections (A) and (B) 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." (Emphasis supplied) Relative thereto, for purposes of determining whether "complete" documents have already been submitted and the 120-day period commences to run, the case of Pilipinas Total Gas, Inc. v. Commissioner of Internal Revenue, 2 is instructive as to when the taxpayer should complete the submission of documents in support of its application. "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 rules, 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." Based on the foregoing, the standing rule is that the reckoning point of the 120-day period for administrative claims filed on or after June 11, 2014 begins from the filing of the administrative claim with the BIR. The taxpayer is barred from submitting any additional submission of documents thereafter. Likewise, in the case of Zuellig-Pharma Asia Pacific Ltd. Phils. ROHQ v. Commissioner of Internal Revenue , 3 the Supreme Court held that upon effectivity of RMC No. 54-2014, or on June 11, 2014, the reckoning point should be the date of submission of complete supporting documents which should coincide with the date of filing of the administrative claim. The pertinent portion of the decision is quoted below: "As a final note, the Court clarifies that the above disquisition only finds application to those claims for refund made prior to June 11, 2014 ( i.e. , the date that RMC No. 54-2014 was issued). Under this new circular, the taxpayer is now required to submit complete documents upon its filing of an administrative claim for VAT refund/tax credit , as no other documents shall be accepted thereafter. For this purpose, the taxpayer shall also execute a statement under oath attesting to the completeness of said documents which shall also be submitted upon filing. Thus, under the auspices of RMC No. 54-2014, there is no more need to delineate between verbal or written requests for additional documents because the submission thereof is not allowed anymore. To reiterate, the prevailing rule now is that all complete documents are to be submitted upon the filing of the taxpayer's administrative claim for refund. " (Emphases supplied) Applying the foregoing jurisprudence in this case, since the administrative claim for refund was filed after June 11, 2014, the 120-day period shall be reckoned from the date petitioner filed with the BIR an Application for Tax Credits/Refund (BIR Form No. 1914), 4 together with Cover Letter , 5 requesting for the refund of its excess and unutilized input VAT for the four quarters of CY 2016 in the amount of P45,183,477.36. Petitioner attached to its administrative claim for refund a Sworn Certification 6 attesting that the documents submitted in support of its administrative claim are complete. Hence, it is on such date that petitioner is deemed to have already submitted complete supporting documents together with its application for refund. Notably, respondent made a judicial admission in the parties' Joint Stipulation of Facts and Issues with regard to the filing of petitioner's administrative claim, to wit: "3. On March 28, 2018, petitioner filed with the BIR, VAT Credit Audit Division, an administrative claim for refund, with attached Application for Tax Credits/Refunds (BIR Form No. 1914), requesting the refund of or issuance of a tax credit certificate (TCC) for its excess and unutilized input Value-Added Tax (VAT) for the four quarters of calendar year (2016) in the amount of Php45,183,477.36. Petitioner attached to its administrative claim for refund the complete supporting documents as required by law and pertinent regulations." 7 As a rule, a party who judicially admits a fact cannot later challenge the fact, as judicial admissions are a waiver of proof. Production of evidence is dispensed with. A judicial admission also removes an admitted fact from the field of controversy. 8 From the foregoing judicial admission by respondent, it is apparent that respondent concedes to the fact that petitioner's administrative claim for refund filed on March 28, 2018 was complete. The said admission is fully binding upon respondent as the subject matter has already been passed upon by this Court in the Resolution dated March 26, 2019. 9 Thus, respondent cannot escape the binding effect of said judicial admission. As held in the case of Toshiba Information Equipment (Phils.), Inc. v. Commissioner of Internal Revenue , 10 a stipulated fact at pre-trial is categorized as a judicial admission, and does not require proof, to wit: "The admission having been made in a stipulation of facts at pre-trial by the parties, it must be treated as a judicial admission. Under Section 4, Rule 129 of the Rules of Court, a judicial admission requires no proof. The admission may be contradicted only by a showing that it was made through palpable mistake or that no such admission was made. The Court cannot lightly set aside a judicial admission especially when the opposing party relied upon the same and accordingly dispensed with further proof of the fact already admitted. An admission made by a party in the course of the proceedings does not require proof." (Emphasis supplied) It is well-settled that a judicial admission conclusively binds the party making it. 11 A judicial admission also removes an admitted fact from the field of controversy. Consequently, an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to such party, and all proofs to the contrary or inconsistent therewith should be ignored, whether objection is interposed by the party or not. The allegations, statements, or admissions contained in a pleading are conclusive as against the pleader. A party cannot subsequently take a position contrary of or inconsistent with what was pleaded. 12 In this case, considering respondent's judicial admission with regard to the filing of the administrative claim, the same is conclusively binding upon respondent, and the issue relating thereto is effectively removed from the field of controversy. Reconsideration of petitioner's sales to TF International for VAT zero-rating. In the assailed Decision, the Court partially granted petitioner's claim for refund in the amount of P12,445,765.78 and denied the amount of P32,737,711.58 pertaining to the input VAT attributable to petitioner's zero-rated sales of services to its affiliate TF International. Petitioner submits that this Court erred in denying its refund claim of input VAT related to its sales to TF International on the ground that it was not shown that petitioner's services rendered to TF International were not in the same category as "processing, manufacturing or repacking of goods" and that said services were performed in the Philippines. According to petitioner, the Service Agreements and its Addenda between petitioner and TF Remittance show that the terms and conditions of the said agreement and addendums apply also to petitioner's sales of services to TF International; and that even assuming for the sake of argument that the Service Agreement and the Addendums to the Service agreement apply only to petitioner's transaction with TF Remittance, the records of this case is replete with evidence showing that: (1) the services rendered by petitioner to TF International were not in the same category as "processing, manufacturing or repacking of goods" ; and (2) the services rendered in favor of TF International were performed in the Philippines. After a second hard look at this Court's findings and ruling in the assailed Decision, We find merit in petitioner's Motion for Partial Reconsideration. A reading of the Addenda 13 to the Service Agreement between petitioner and TF Remittance reveal that said addenda refer to the extension of the Service Agreement to TF International. Exhibit "P-29-8" clarifies the complete name of TF International, which initially referred to the Agreement as Trans Fast FZE, to wit: "Addendum to the Agreement for Payments to the Philippines xxx xxx xxx The undersigned parties hereby clarifies that the complete name of Trans-Fast FZE is Trans-Fast International FZ LLC. In this regard, the parties hereby agree to revise the name "Trans Fast FZE" in the original agreement to reflect "Trans-Fast International FZ LCC" as the true and actual name of the company" 14 Moreover, the rest of the Addenda to the Service Agreement set out the service fees to be paid by TF Remittance and TF International to petitioner for the money remittance services that it will render pursuant to the Service Agreement, listed as follows: Exhibit Name Contents Exhibit "P-29-4" "Effective July 2011, for each order originating from the Middle East and paid out in the Philippines in local currency or in US dollars by New York Bay Philippines, TransFast Remittance LLC and Trans-Fast FZE , shall pay NYBP a fee of USD 2.30." Exhibit "P-29-5" "Effective January 2012, for each order originating from the USA, Canada, Europe, Israel and paid out in the Philippines in local currency or in US dollars by New York Bay Philippines, Inc., (NYBP), Trans-Fast Remittance LLC and Trans-Fast FZE , shall pay NYBP a fee of USD 2.55." Exhibit "P-29-6" "Effective July 2013, for each order originating from the USA, Canada, Europe, Israel and paid out in the Philippines in local currency or in US dollars by New York Bay Philippines, Inc., Trans-Fast Remittance LLC and Trans-Fast FZE , shall pay NYBP a fee of USD 2.25." Exhibit "P-29-7" "Effective July 2013, for each order originating from the Middle East and paid out in the Philippines in local currency or in US dollars by New York Bay Philippines, TransFast Remittance LLC and Trans-Fast FZE , shall pay NYBP a fee of USD 2.00." Based on the foregoing exhibits, the Court finds that that the Service Agreement to TF Remittance extends to TF International pursuant to the above-mentioned Addenda. As such, the relevant provisions in the Service Agreement, insofar as it proves that the services rendered are not in the same category as "processing, manufacturing or repacking of goods," and that the services were performed in the Philippines, means to apply to TF International. Re-computation of petitioner's refundable amount With the foregoing consideration, the Court finds that petitioner's sales to TF International in the amount of P451,659,770.65 qualify for VAT zero-rating under Section 108 (B) (2), in relation to Section 113 (A) (2), (B) (1), (2) (c) and (3) of the NIRC of 1997, as amended, broken down as follows: Exhibits Date Remittance Official Receipt Name of Customer Amount in USD Conversion Rate Amount in PHP 01/27/2016 "P-36-3" "P-35-3" Trans-fast International FZ LLC 1,070,644.00 47.2303 50,566,837.31 02/26/2016 "P-36-5" "P-35-5" Trans-fast International FZ LLC 703,622.00 47.5111 33,429,855.20 03/30/2016 "P-36-7" "P-35-7" Trans-fast International FZ LLC 888,866.00 47.6361 42,342,109.66 04/29/2016 "P-36-8" "P-35-8" Trans-fast International FZ LLC 983,740.00 46.7240 45,964,267.76 05/25/2016 "P-36-11" "P-35-11" Trans-fast International FZ LLC 889,850.00 46.2845 41,186,262.33 06/24/2016 "P-36-13" "P-35-13" Trans-fast International FZ LLC 1,008,190.00 46.8023 47,185,610.84 07/26/2016 "P-36-15" "P-35-15" Trans-fast International FZ LLC 948,038.00 46.4645 44,050,111.65 09/01/2016 "P-36-17" "P-35-17" Trans-fast International FZ LLC 857,906.00 47.0581 40,371,426.34 09/10/2016 "P-36-19" "P-35-19" Trans-fast International FZ LLC 819,012.00 46.6809 38,232,217.27 11/24/2016 "P-36-21" "P-35-21" Trans-fast International FZ LLC 797,484.00 47.4294 37,824,187.63 11/22/2016 "P-36-23" "P-35-23" Trans-fast International FZ LLC 425,090.00 48.3482 20,552,336.34 12/09/2016 "P-36-24" "P-35-24" Trans-fast International FZ LLC 171,950.00 47.5111 8,169,533.65 12/15/2016 "P-36-25" "P-35-25" Trans-fast International FZ LLC 36,314.00 49.1550 1,785,014.67 GRAND TOTAL 9,600,706.00 451,659,770.65 =========== ============ ============ Consequently, petitioner's valid zero-rated sales now amount to P628,569,036.47 (P176,909,265.82 15 plus P451,659,770.65). Again, for the subject period of claim, petitioner reported zero-rated sales and vatable sales in its Quarterly VAT Returns for the first to fourth quarters of CY 2016, in the following amounts: Period Exhibit Vatable Sales Zero-Rated sales 1Q 2016 Line 17, "P-3-a" 16 - P229,120,891.77 2Q 2016 "P-4-a" 17 P45,769.65 18 168,286,494.02 3Q 2016 Line 17, "P-5-a" 19 - 164,926,715.37 4Q 2016 Line 17, "P-6-a" 20 - 66,234,935.32 Total P45,769.65 P628,569,036.48 TOTAL SALES P628,614,806.13 ================================= Meanwhile, as determined in the Assailed Decision, petitioner's substantiated input VAT amounted to P44,231,831.01 , to wit: Input VAT 1st Quarter P11,390,917.36 2nd Quarter 11,455,643.88 3rd Quarter 10,919,144.21 4th Quarter 11,423,264.27 P45,188,969.72 Less: Disallowances Per ICPA Report P943,183.29 Per Court's further verification 13,955.42 957,138.71 Valid Input VAT P44,231,831.01 Considering that petitioner's input VAT cannot be directly or entirely attributed to any of the transactions, the valid input VAT of P44,231,831.01 shall be allocated proportionately on the basis of the volume of its total sales, in accordance with Section 112 (A) of the NIRC of 1997, as amended, computed as follows: Vatable receipts per Quarterly VAT Return P45,769.65 Divided by Total Sales/Receipts per VAT Return 628,614,806.13 Multiply by total valid Input VAT 44,231,831.01 Input VAT Attributable to Total VATable Sales P3,220.53 Valid Zero-Rated Sales/Receipts P628,569,036.47 Divided by Total Sales/Receipts per VAT Return 628,614,806.13 Multiply by total valid Input VAT 44,231,831.01 Input VAT Attributable to valid zero-rated sales P44,228,610.47 Consequently, only the remaining excess input VAT of P44,228,610.47 can be attributed to the substantiated zero-rated sales of P628,569,036.47 . Further, petitioner incurred output VAT liability in the amount of P5,492.36. 21 Considering that petitioner's valid input VAT allocated to Vatable sales in the amount of P3,220.53 is not enough to cover the output VAT liability, the input VAT attributable to petitioner's valid zero-rated sales in the amount of P44,228,610.47 shall then be utilized against the remaining output VAT liability in the amount of P2,271.83. As a result, only the remaining input VAT of P44,226,338.64 can be allocated to the entire valid zero-rated sales of petitioner, as shown below: Output VAT due P5,492.36 Input VAT Attributable to Total Vatable Sales 3,220.53 Output VAT still due P2,271.83 Input VAT Attributable to valid zero-rated sales P4,228,610.47 Less: remaining balance of output VAT 2,271.83 Excess Input VAT attributable to valid zero-rated sales P44,226,338.64 Hence, the Court's findings in the assailed Decision shall be modified from P12,445,765.78 to P44,226,338.64 representing unutilized excess input VAT attributable to petitioner's zero-rated sales for the four quarters of 2016. WHEREFORE , in light of the foregoing consideration, respondent's Motion for Reconsideration is DENIED for lack of merit. On the other hand, petitioner's Motion for Partial Reconsideration is GRANTED . Accordingly, the assailed Decision dated January 26, 2022 is hereby MODIFIED to read as follows: " WHEREFORE , in light of the foregoing consideration, the Petition for Review is GRANTED . Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the amount of P44,226,338.64 representing petitioner's unutilized input VAT attributable to its zero-rated sales for the four quarters of the CY 2016." SO ORDERED. " SO ORDERED. (SGD.) ERLINDA P. UY Associate Justice Ma. Belen M. Ringpis-Liban and Maria Rowena Modesto-San Pedro , JJ. , concur. Footnotes 1. Section 112 (C) was amended by Republic Act No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion or TRAIN Law which took effect on January 1, 2018. The amendment pertains to the 120-day period, which was shortened to a period of 90 days from the date of submission of complete documents in support of the refund application for the Commissioner of Internal Revenue to act on a taxpayer's claim for refund. However, the TRAIN Law is inapplicable to the instant case since the subject refund claim of input VAT incurred during calendar year 2016. 2. G.R. No. 207112, December 8, 2015. 3. G.R. No. 244154, July 15, 2020. 4. Exhibit "P-8", Docket Vol. 2, p. 536. 5. Exhibit "P-7", Docket Vol 2, pp. 532 to 534. 6. Exhibit "P-7-a", Docket Vol. 2, p. 535. 7. Par. 3, Admitted Facts, JSFI, Docket Vol. 1, p. 268. 8. Joshua S. Alfelor v. Josefina M. Halasan , G.R. No. 165987, March 31, 2006. 9. Docket Vol. 1, p. 283. 10. G.R. No. 157594, March 9, 2010. 11. Viola Cahilig, et al. v. Hon. Eustaquio G. Terencio, et al. , G.R. No. 164470, November 28, 2011. 12. Oscar Constantino, et al. v. Heirs of Constantino , G.R. No. 181508, October 2, 2013. 13. Exhibits "P-29-2" to "P-29-8". 14. Exhibit "P-29-8". 15. Zero-rated sales to TF Remittance. 16. Docket Vol. 2, pp. 518 to 519. 17. Docket Vol. 2, pp. 522 to 523. 18. Line 15A, Docket Vol. 2, p. 522. 19. Docket Vol. 2, pp. 526 to 527. 20. Docket Vol. 2, pp. 530 to 531. 21. Line 15B, Exhibit "P-4-a", Docket, p. 522.