Chartis Technology & Operations Management Corp. (Philippines) v. Commissioner of Internal Revenue

SPECIAL SECOND DIVISION [C.T.A. CASE NOS. 8432, 8498, 8534 & 8581. February 22, 2017.] CHARTIS TECHNOLOGY & OPERATIONS MANAGEMENT CORPORATION (PHILIPPINES) , petitioner , vs. COMMISSIONER OF INTERNAL REVENUE , respondent . AMENDED DECISION CASANOVA , J p : For resolution is petitioner's Motion for Reconsideration with Motion for New Trial , 1 filed on November 24, 2015, without respondent's comment despite notice per Records Verification 2 dated January 12, 2016. Petitioner seeks reconsideration of this Court's Decision 3 promulgated on November 6, 2015, which dismissed petitioner's claim for refund or issuance of tax credit certificates (TCC) of its alleged excess and unutilized Input Value Added Tax (VAT) in the total amount of P56,815,398.78 for fiscal year (FY) 2010 ended November 30, 2010. In the assailed Decision, the Court denied petitioner's claim for VAT refund for its failure to submit sufficient documents to prove that its clients are non-resident foreign corporations doing business outside the Philippines. In the Motion for Reconsideration with Motion for New Trial, petitioner manifests that it has fifty-one (51) non-resident foreign clients for FY ended November 30, 2010 in different territories scattered around the world. Petitioner requested its clients to furnish it with their consularized copies of incorporation documents, but the requests went unheeded. Petitioner was allegedly constrained to finish the presentation of its documentary and testimonial evidence without relevant incorporation documents. Petitioner avers that despite reasonable diligence and repeated reminders to its foreign clients, petitioner failed to receive the consularized copies of their incorporation papers. Moreover, petitioner does not have absolute control over these foreign affiliates, at most, it can only request, but it does not have the authority to procure the documents from its source. Since the consularized documents remain unavailable, petitioner has gathered printed screenshots of the official online websites of the foreign government company registries, which are attached to its motion. Petitioner learned that, in recent cases, this Court has accepted printed screenshots as evidence to prove the fact that a non-resident foreign corporation is doing business outside the Philippines. Petitioner argues that the said printed screenshots are akin to newly discovered evidence that shall materially alter the outcome of the case. Thus, petitioner prays that the Court grant its Motion for New Trial and admit these documents into evidence so that petitioner's claim for VAT refund may be granted in its entirety. CAIHTE In the Resolution 4 dated February 12, 2016, the Court granted petitioner's Motion for New Trial and held in abeyance the resolution of petitioner's Motion for Reconsideration. Consequently, petitioner recalled its witness, Ms. Mary Cris Barayuga, petitioner's Senior Manager for Finance and Accounting. 5 Thereafter, petitioner filed its Supplemental Formal Offer of Evidence 6 on August 1, 2016. In the Resolution 7 dated September 20, 2016, the Court admitted as evidence Exhibits "M-1-a", "M-2-a", "M-3-a", "M-4-a", "M-6-a", "M-6-b", "M-7-a", "M-8-a", "M-8-b", "M-8-c", "M-9-a", "M-9-b", "M-9-c", "M-9-d", "M-10-a", "M-11-a", "M-11-b", "M-12-a", "M-12-b", "M-13-a", "M-14-b", "M-15-a", "M-16-a", "M-17-a", "M-17-b", "M-17-c", "M-18-a", "M-18-b", "M-18-c", "M-18-d", "M-20-a", "M-20-b", "M-21-a", "M-21-b", "M-21-c", "M-23-a", "M-23-b", "M-23-c", "M-24-a", "M-24-b", "M-24-c", "M-24-d", "M-24-e", "M-25-a", "M-26-a", "M-27-a", "M-29-a", "M-31-a", "M-31-b", "M-31-c", "M-32-a", "M-32-b", "M-33-a", "M-33-b", "M-33-c", "M-34-a", "M-35-b", "M-36-a", "M-37-a", "M-38-a", "M-39-a", "M-40-a", "M-41-a", "M-43-a", "M-44-a", "M-44-b", "M-47-a", "M-48-a", "M-49-a", "M-50-a", "M-51-a", "M-60", "M-61", and "M-61-a" . Petitioner filed the Supplemental Memorandum (in support of Petitioner's Motion for Reconsideration dated 23 November 2015) 8 on October 27, 2016, while respondent failed to file his supplemental memorandum despite notice per Records Verification 9 dated November 21, 2016. In the Supplemental Memorandum, petitioner asserts that its witness, Ms. Barayuga reiterated that petitioner's clients are foreign corporations existing, operating and doing business in foreign countries. In support of her testimony, Ms. Barayuga presented the consularized Certificates and Articles of Incorporation and similar documents, as well as printouts of the websites of various foreign government registries, showing that petitioner's clients are existing, operating and doing business in foreign countries. Petitioner maintains that it duly substantiated its claim for refund. Thus, taking into account the additional evidence presented, petitioner submits that it is entitled to the refund or issuance of a tax credit certificate for its unutilized/excess input VAT for the 1st to 4th quarters of FY 2010 amounting to P56,815,398.78. To reiterate, the denial of the claim was mainly due to petitioner's failure to prove that it rendered zero-rated sales of services in accordance with Section 108 (B) (2) of the National Internal Revenue Code (NIRC) of 1997, as amended. More particularly, petitioner failed to present proof of its foreign clients' incorporation, association or registration in a foreign country which should have satisfied the 2nd requisite to establish that the supply of services are considered VAT zero-rated as laid down in Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. 10 These requisites are as follows: 1. the services must be other than processing, manufacturing or repacking of goods; 2. the recipient of such services is doing business outside the Philippines; and 3. payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations. Hence, in the Supplemental Formal Offer of Evidence, petitioner presented consularized foreign incorporation/registration documents and/or screenshots from various foreign government websites to prove its clients' foreign incorporation or registration. 11 With the admission of these documents, 12 the Court will now proceed in verifying petitioner's refundable claim. As stated in the assailed Decision, in order to be entitled to a refund or issuance of a tax credit certificate of input VAT paid, petitioner must prove the following: 1. the taxpayer is VAT registered; 2. the taxpayer is engaged in zero-rated or effectively zero-rated sales; 3. the input taxes are due or paid; 4. the input taxes are not transitional input taxes; 5. the input taxes have not been applied against output taxes during and in the succeeding quarters; 6. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; 7. for zero-rated sales under Sections 106 (A) (2) (1) and (2); 106 (B); and 108 (B) (1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; DETACa 8. 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; and 9. the claim is filed within two years after the close of the taxable quarter when such sales were made. 13 The first and ninth requisites were already passed upon in the Decision dated November 6, 2015. 14 We now proceed with the re-evaluation of the remaining requisites. Second and Seventh Requisites: Petitioner had zero- rated sales which were paid for in acceptable foreign currency duly accounted for in accordance with BSP rules and regulations. For the fiscal year 2010, petitioner allegedly rendered services to the following non-resident foreign corporations which are either covered with individual Master Service Agreements or included in an Intercompany Service Agreement as listed by Ms. Maria Juvy M. Vargas and Ms. Mary Cris Barayuga, petitioner's Chief Financial Officer and Senior Manager for Finance and Accounting, respectively, in their Sworn Statements dated September 11, 2013 15 and June 15, 2016, 16 respectively: 1 AIG Global Reinsurance Division 2 AIG Kazakhstan 3 AIG Travel Assist, Inc. 4 AIU Insurance Company-Japan 5 American Home Assurance Australia 6 American Home Assurance Company Australia 7 American Home Assurance Company UAE 8 American Home Assurance Korea 9 American Home Assurance Singapore 10 Chartis Azerbaijan Insurance Co. 11 Chartis Chile Compania Seguros Generales S.A. 12 Chartis China 13 Chartis Claims 14 Chartis Europe S.A. 15 Chartis Europe S.A. Branch Office of Hungary 16 Chartis Europe S.A. Bulgaria Branch 17 Chartis Europe S.A. Czech Republic Branch 18 Chartis Europe S.A. Finland Branch 19 Chartis Europe S.A. Georgia Branch 20 Chartis Europe S.A. Poland Branch Office 21 Chartis Europe S.A. Slovak Republic Branch 22 Chartis Insurance Claims 23 Chartis Insurance Hong Kong 24 Chartis Insurance Indonesia 25 Chartis Insurance Ireland Limited 26 Chartis Insurance UK Ltd. 27 Chartis International O and S HO 28 Chartis Intl F&A 29 Chartis Malaysia Insurance Berhad 30 Chartis Romania Insurance Company SA 31 Chartis Southeast Asia Limited 32 Chartis Taiwan Insurance, Co. Ltd. 33 Chartis Technology and Operations Management (M) SDN BHD 34 Chartis Technology and Operations Management-Ireland 35 Chartis UK Services, Ltd. 36 Chartis Ukraine Insurance Company CJSC 37 Chartis Uzbekistan 38 Chartis Vietnam Insurance Company Limited 39 CJSC Chartis 40 Direct DME, Inc. 41 Guam Insurance Adjusters, Inc. 42 Intercompany Clearing House NY Chartis Intl F&A 43 Lexington 44 New Hampshire Insurance Thailand 45 UBB Chartis Insurance Company Bulgaria 46 Alico AIG GID 47 Chartis MEMSA Insurance Co.-Oman Branch 48 Chartis MEMSA Insurance Company Limited 49 Chartis South Africa Ltd. 50 Health Direct, Inc. 51 Tata AIG Gen Insurance Co. Ltd.-India Petitioner presented SEC Certifications of Non-Registration of Company, 17 Master Agreements for Professional Services, 18 Intercompany Services Agreement 19 and consularized foreign incorporation/registration documents and/or screenshots from various foreign government websites 20 to prove that its clients are non-resident foreign corporations doing business outside the Philippines. In Deutsche Knowledge Services, Pte. Ltd. vs. Commissioner of Internal Revenue , 21 this Court discussed the documentary requirements to prove that the recipients of services are non-resident foreign corporations doing business outside of the Philippines, to wit: "To prove that its clients are non-resident foreign corporations doing business outside the Philippines, petitioner presented the following documents: 1. SEC Certifications of Non-Registration of Company; 2. Certifications from different government agencies in the country of origin of petitioner's clients, all duly authenticated by the nearest consulate of the Philippines; 3. Intragroup Service Agreements; and, 4. Deutsche Bank List of Shareholdings 2008. However, the Court finds that the aforesaid documents per se do not constitute sufficient proof that petitioner's clients are non-resident foreign corporations doing business outside the Philippines. While the SEC Certificates of Non-Registration show that the named entities therein are not registered corporations/partnerships in the Philippines, the same do not prove that such entities are non-resident foreign corporations doing business outside the Philippines. Likewise, the Intra-Group Service Agreements only show the names of petitioner's customers to whom it rendered services but the same do not establish that such customers are non-resident foreign corporations doing business outside the Philippines. Moreover, the Articles of Association and Certificates of Registration/Incorporation of Foreign Company only prove that the named entities therein were incorporated/organized abroad. However, they also do not establish that such entities are not doing business in the Philippines. To be considered as non-resident foreign corporation doing business outside the Philippines, each entity must be supported, at the very least, by both SEC certificate of non-registration of corporation/partnership and certificate/articles of foreign incorporation/association/registration. xxx" (Emphasis and underscoring supplied) As to the validity of screenshots of foreign government websites, this Court ruled in Chevron Holdings, Inc. [formerly Caltex (Asia) Limited] vs. Commissioner of Internal Revenue 22 that "[B]eing official government registry of corporations, the Court is inclined to accept the printed screenshots of the official websites of other foreign government's registry of companies as sufficient proof in lieu of the Certificates/Articles of Foreign Incorporation/Association." After a thorough examination of these documents presented, the Court finds that out of petitioner's 51 foreign clients, only the following entities can be considered non-resident foreign corporations doing business outside the Philippines: 1 AIG Kazakhstan 2 AIG Travel Assist, Inc. 3 American Home Assurance Company UAE 4 Chartis Chile Compania Seguros Generales S.A. 5 Chartis Claims 6 Chartis Europe S.A. 7 Chartis Europe S.A. Branch Office of Hungary 8 Chartis Europe S.A. Bulgaria Branch 9 Chartis Europe S.A. Czech Republic Branch 10 Chartis Europe S.A. Finland Branch 11 Chartis Europe S.A. Poland Branch Office 12 Chartis Europe S.A. Slovak Republic Branch 13 Chartis Insurance Ireland Limited 14 Chartis Malaysia Insurance Berhad 15 Chartis Southeast Asia Limited 16 Chartis Technology and Operations (M) SDN BHD 17 Chartis UK Services, Ltd. 18 Chartis Ukraine Insurance Company OSC 19 Chartis Uzbekistan 20 Direct DME, Inc. 21 Guam Insurance Adjusters, Inc. 22 New Hampshire Insurance Thailand 23 Chartis South Africa Ltd. 24 Health Direct, Inc. 25 Tata AIG Gen Insurance Co. Ltd.-India The names of the above-enumerated entities matched with those shown in both the Philippine SEC Certificates of Non-Registration of Company and consularized foreign incorporation/registration documents and/or screenshots from various foreign government websites. In its amended Quarterly VAT Returns 23 for the FY 2010, petitioner reported an amount of P1,356,544,794.50 total sales, where P1,326,963,237.76 pertains to zero-rated sales, to wit: Quarter VATable Zero-Rated TOTAL 1st P7,276,101.73 P402,399,346.27 P409,675,448.00 2nd 7,153,406.38 214,520,912.15 221,674,318.53 3rd 7,548,669.02 389,793,750.70 397,342,419.72 4th 7,603,379.61 320,249,228.64 327,852,608.25 TOTAL P29,581,556.74 P1,326,963,237.76 P1,356,544,794.50 ============ ============== ============== Petitioner submitted its VAT official receipts and sales invoices 24 to support its zero-rated sales which were scrutinized by the Court-commissioned Independent Certified Public Accountant (ICPA), Ms. Mary Ann Capuchino. The Court finds it proper to disallow zero-rated sales amounting to P640,937,776.58 due to the following findings by the ICPA, as summarized in her report: 25 ICPA Report Annex Reference Findings Amount D Export sales pertaining to ICH IT transactions supported by VAT OR issued in the name of Chartis Int'l F&A stamped with zero-rated sales and with Certificate of Inward Remittance P589,846,852.10 D Adjustments made to export sales with Chartis Int'l F&A (8,440,887.79) E Export sales pertaining to ICH IT transactions supported by VAT ORs issued in the name of Chartis Int'l F&A stamped with zero-rated sales and with Certificate of Inward Remittance with noted difference in the amount per invoice and per schedule of collection report 21,652,333.73 E Adjustments made to export sales with Chartis Int'l F&A with noted difference in the amount per invoice and per schedule of collection report (518,892.61) F Export sales not properly supported by VAT OR stamped with zero-rated sale but supported with Certificate of Inward Remittance 21,809,283.34 G Export sales supported by VAT OR with no CAS permit number indicated but supported with Certificate of Inward Remittance 8,323,122.78 H Export sales properly supported by VAT OR stamped with zero-rated sale but not supported with original Certificate of Inward Remittance 6,552,908.05 I Export sales pertaining to ICH IT transactions supported by VAT OR issued in the name of Chartis Int'l F&A and with Certificate of Inward Remittances but not supported by VAT invoices 7,291,152.22 Other adjustments (5,578,095.24) TOTAL P640,937,776.58 ============ In addition to the ICPA's findings, the Court finds that P454,989,141.77 of petitioner's zero-rated sales must likewise be disallowed due to the following: ICPA Report Annex Amount in Reference Exh. No. Client OR No. Date USD Amount in PHP Sales supported by VAT zero-rated OR without date and without Certificate of Inward Remittance C P-3-0142 Chartis Europe SA, Branch Office of 259 $19,231.96 P907,844.63 Hungary Sales supported by VAT zero-rated OR but without Certificate of Inward Remittance B P-3-0010 Guam Insurance Adjusters, Inc. 257 12/1/2009 3,114.55 147,000.53 B P-3-0012 New Hampshire Insurance Thailand 271 12/1/2009 89,948.96 4,246,040.66 B P-3-0017 Chartis Europe SA, Bulgaria Branch 283 2/25/2010 15,471.26 719,568.31 B P-3-0020 Chartis Europe SA, Czech Republic 286 2/25/2010 46,001.06 2,137,648.90 Branch B P-3-0021 Chartis Europe SA, Finland Branch 288 2/25/2010 88,224.97 4,097,762.14 B P-3-0023 Chartis Insurance Hongkong 290 2/25/2010 164,686.86 7,612,120.54 B P-3-0024 Chartis Europe SA, Branch Office of 291 2/25/2010 34,411.12 1,594,880.00 Hungary B P-3-0028 Chartis Malaysia Insurance Berhad 296 2/25/2010 173,711.47 8,051,607.01 B P-3-0029 Chartis Europe SA, Poland Branch 298 2/25/2010 47,663.88 2,211,265.86 B P-3-0031 Chartis Europe SA, Slovak Republic 301 2/25/2010 38,022.04 1,768,405.09 Branch B P-3-0032 New Hampshire Insurance Thailand 303 2/25/2010 32,082.10 1,480,685.15 B P-3-0033 AIG Travel Assist, Inc. 304 2/25/2010 111,609.09 5,190,938.78 B P-3-0051 Direct DME, Inc. 0000051 6/15/2010 10,552.00 487,502.40 B P-3-0056 Chartis Claims 0000062 7/5/2010 476,821.50 22,029,153.30 B P-3-0061 Direct DME, Inc. 0000068 7/12/2010 10,552.00 489,190.72 B P-3-0066 Chartis Claims 0000079 7/30/2010 5,276.00 244,595.36 B P-3-0069 Chartis Claims 0000082 8/6/2010 494,193.46 22,500,628.23 B P-3-0072 Chartis Claims 0000085 8/19/2010 5,276.00 240,216.28 B P-3-0073 Chartis Claims 0000088 8/20/2010 502,870.43 22,895,690.68 B P-3-0075 Direct DME, Inc. 0000093 8/25/2010 18,089.29 828,724.64 B P-3-0086 American Home Assurance 0000586 8/27/2010 254,865.88 11,604,043.54 Company, UAE B P-3-0091 Chartis Europe SA 0000102 9/2/2010 6,934.08 314,668.55 B P-3-0123 Chartis Technology and Operations 0000167 11/24/2010 3,500.00 154,255.50 (M) SDN BHD C P-3-0139 Chartis Europe SA, Bulgaria Branch 254 12/1/2009 1,971.91 93,084.01 C P-3-0146 Chartis Malaysia Insurance Berhad 264 12/1/2009 135,613.70 6,401,644.72 C P-3-0150 Chartis Europe SA, Slovak Republic 269 12/1/2009 11,412.50 538,727.06 Branch SUBTOTAL 2,782,876.11 128,080,047.96 Sales supported by VAT zero-rated OR but petitioner failed to prove that client is a non-resident foreign corporation not doing business in the Philippines B P-3-0003 Chartis Insurance UK Ltd. 312 2/4/2010 3,886.44 180,758.32 B P-3-0005 Chartis Insurance UK Ltd. 314 2/18/2010 45,600.00 2,120,856.00 B P-3-0008 Chartis Insurance UK Ltd. 317 2/25/2010 45,600.00 2,120,856.00 B P-3-0009 Chartis Azerbaijan Insurance Co. 253 12/1/2009 9,387.37 443,131.26 B P-3-0011 American Home Assurance Korea 263 12/1/2009 124,024.10 5,854,557.64 B P-3-0013 Chartis International O&S HO 272 12/1/2009 410,760.63 19,389,955.55 B P-3-0014 AIG Global Reinsurance Division 274 12/1/2009 1,672.85 78,946.96 B P-3-0015 Chartis Vietnam Insurance 280 1/22/2010 7,440.91 342,467.88 Company Limited B P-3-0018 Chartis International O&S HO 284 2/25/2010 573,180.15 26,658,608.80 B P-3-0019 Chartis China 285 2/25/2010 102,985.99 4,789,878.39 B P-3-0022 Chartis Europe SA, Gerogia Branch 289 2/25/2010 12,325.82 573,273.90 B P-3-0025 Chartis Insurance Indonesia 292 2/25/2010 66,575.92 3,096,446.04 B P-3-0026 AIU Insurance Company-Japan 293 2/25/2010 25,616.50 1,191,423.41 B P-3-0027 American Home Assurance Korea 295 2/25/2010 227,147.14 10,564,613.49 B P-3-0030 Chartis Romania Insurance 299 2/25/2010 39,944.52 1,857,819.63 Company SA B P-3-0031 Chartis Taiwan Insurance Co. Ltd. 302 2/25/2010 247,861.54 11,321,494.28 B P-3-0034 AIG Global Reinsurance Division 305 2/25/2010 8,430.63 392,108.60 B P-3-0035 Chartis Vietnam Insurance 309 2/25/2010 3,480.76 161,013.00 Company Limited B P-3-0036 Lexington 0000034 4/28/2010 39,819.74 1,799,454.05 B P-3-0039 Chartis Insurance UK Ltd. 0000037 5/7/2010 45,600.00 2,027,376.00 B P-3-0040 Chartis Insurance UK Ltd. 0000040 5/14/2010 2,041.08 90,746.42 B P-3-0042 Lexington 0000043 5/18/2010 39,438.68 1,753,443.71 B P-3-0046 CJSC Chartis 0000419 3/31/2010 20,538.67 928,758.66 B P-3-0047 Chartis Vietnam Insurance 0000420 3/31/2010 9,490.00 429,137.80 Company Limited B P-3-0049 Chartis Vietnam Insurance 0000476 5/31/2010 5,544.36 246,502.24 Company Limited B P-3-0050 Chartis Vietnam Insurance 0000478 5/31/2010 13,898.71 617,936.64 Company Limited B P-3-0052 Chartis Insurance UK Ltd. 0000052 6/15/2010 45,600.00 2,106,720.00 B P-3-0053 Lexington 0000054 6/18/2010 35,771.70 1,652,652.54 B P-3-0054 Chartis Insurance UK Ltd. 0000056 6/24/2010 42,120.00 1,945,944.00 B P-3-0055 AIG Global Services Malaysia 0000057 6/9/2010 25,269.59 1,062,325.11 B P-3-0058 Chartis Insurance UK Ltd. 0000065 7/8/2010 2,013.12 93,328.24 B P-3-0060 Chartis Insurance UK Ltd. 0000067 7/13/2010 2,097.00 97,216.92 B P-3-0062 AIG Global Services Malaysia 0000069 7/14/2010 3,500.00 162,260.00 B P-3-0063 AIG Global Services Malaysia 0000070 7/14/2010 2,663.00 123,456.68 B P-3-0064 Chartis Insurance UK Ltd. 0000073 7/20/2010 45,600.00 2,114,016.00 B P-3-0065 Lexington 0000074 7/22/2010 40,592.00 1,881,845.12 B P-3-0068 Chartis Insurance UK Ltd. 0000081 7/27/2010 1,230.24 57,033.93 B P-3-0070 AIG Global Services Malaysia 0000083 8/16/2010 2,663.00 121,246.39 B P-3-0071 AIG Global Services Malaysia 0000084 8/16/2010 3,500.00 159,355.00 B P-3-0076 Chartis Insurance UK Ltd. 0000094 8/25/2010 45,600.00 2,076,168.00 B P-3-0077 Lexington 0000095 8/26/2010 40,592.00 1,848,153.76 B P-3-0079 Chartis Vietnam Insurance 0000495 6/17/2010 17,648.14 815,344.07 Company Limited B P-3-0082 Chartis Vietnam Insurance 0000516 6/29/2010 18,843.22 870,556.76 Company Limited B P-3-0083 Chartis Vietnam Insurance 0000549 7/30/2010 5,142.53 238,407.69 Company Limited B P-3-0084 CJSC Chartis 0000550 7/30/2010 71,900.66 3,333,314.59 B P-3-0088 CJSC Chartis 0000591 8/31/2010 29,377.40 1,337,553.03 B P-3-0089 UBB Chartis Insurance Company, 0000592 8/31/2010 198.90 8,986.10 Bulgaria B P-3-0090 Chartis Insurance UK Ltd. 0000101 9/2/2010 1,453.92 65,978.89 B P-3-0095 Lexington 0000109 9/17/2010 40,592.00 1,842,064.96 B P-3-0097 Chartis Insurance UK Ltd. 0000111 9/21/2010 1,118.40 50,752.99 B P-3-0100 Lexington 0000122 10/13/2010 40,229.56 1,765,273.09 B P-3-0107 Chartis Insurance UK Ltd. 0000131 10/19/2010 1,202.28 52,756.05 B P-3-0122 Chartis Insurance UK Ltd. 0000166 11/23/2010 1,537.80 66,156.16 B P-3-0124 Alico AIG Cid 0000616 9/22/2010 14,462.50 656,308.25 B P-3-0130 Chartis Vietnam Insurance 0000666 10/29/2010 17,078.88 749,421.25 Company Limited B P-3-0131 CJSC Chartis 0000706 11/30/2010 25,753.00 1,107,894.06 B P-3-0132 CJSC Chartis 0000711 11/30/2010 42,762.20 1,839,629.85 B P-3-0133 CJSC Chartis 0000714 11/30/2010 24,807.64 1,067,224.67 B P-3-0135 UBB Chartis Insurance Company, 0000673 10/31/2010 312.00 13,690.56 Bulgaria B P-3-0136 CJSC Chartis 0000716 11/30/2010 3,747.90 161,234.66 C P-3-0138 Chartis Insurance Australia 248 12/1/2009 1,307,721.08 61,730,973.60 C P-3-0140 Chartis China 255 12/1/2009 20,497.50 967,584.49 C P-3-0141 Chartis Insurance Hongkong 258 12/1/2009 176,701.96 8,341,216.02 C P-3-0143 Chartis Insurance Indonesia 260 12/1/2009 35,933.45 1,696,238.51 C P-3-0144 AIU Insurance Company-Japan 261 12/1/2009 11,674.00 551,071.17 C P-3-0145 Chartis Kazakhstan Insurance Co. 262 12/1/2009 142.67 6,734.74 JSC C P-3-0147 Chartis New Zealand (RO030) 265 12/1/2009 2,372.50 111,993.86 C P-3-0148 Chartis Romania Insurance 266 12/1/2009 88,380.17 4,171,985.90 Company SA C P-3-0149 Chartis Singapore Insurance PTE. 268 12/1/2009 247,645.75 11,690,117.65 LTD. C P-3-0151 Chartis Taiwan Insurance Co. Ltd. 270 12/1/2009 101,020.60 4,768,677.43 C P-3-0152 Chartis International O&S HO 2 273 12/1/2009 112,940.13 5,331,338.84 C P-3-0153 Chartis Technology & Operations 256 12/1/2009 268,816.63 12,689,489.03 Management-Ireland C P-3-0155 Chartis Vietnam Insurance 250 12/14/2009 9,220.84 435,269.76 Company Limited C P-3-0157 Chartis Vietnam Insurance 278 12/31/2009 2,869.14 135,437.76 Company Limited C P-3-0158 CJSC Chartis 277 12/31/2009 286,747.57 13,535,919.07 C P-3-0159 Chartis Insurance Australia 282 2/25/2010 386,405.83 17,971,735.15 C P-3-0160 Chartis Technology & Operations 287 2/25/2010 704,027.42 32,744,315.29 Management-Ireland C P-3-0161 Chartis Kazakhstan Insurance Co. JSC 294 2/25/2010 2,173.60 101,094.15 C P-3-0162 Chartis New Zealand (RO030) 297 2/25/2010 104.00 4,837.04 C P-3-0163 Chartis Singapore Insurance PTE. 300 2/25/2010 125,489.21 5,836,503.16 LTD. SUBTOTAL 6,720,157.14 313,398,366.66 Sales supported by VAT zero-rated OR but issued to International Banking & Finance Center C P-3-0154 Chartis Uzbekistan 275 12/1/2009 3,902.29 184,207.60 C P-3-0164 Chartis Uzbekistan 306 2/25/2010 3,468.10 161,301.34 SUBTOTAL 7,370.39 345,508.94 Sales supported by VAT zero-rated OR but issued to AIU Searo C P-3-0156 Chartis Southeast Asia Limited 251 12/29/2009 262,788.26 12,257,373.58 GRAND TOTAL $9,792,423.86 P454,989,141.77 ============= ============= To summarize, out of the total P1,326,963,237.76 zero-rated sales declared by petitioner in its amended Quarterly VAT Returns, only P231,036,319.41, as computed below, can be considered as valid zero-rated sales: Total declared zero-rated sales P1,326,963,237.76 Less: Disallowances Per ICPA report P640,937,776.58 Per the Court's further verification 454,989,141.77 1,095,926,918.35 Valid zero-rated sales for refund/issuance of TCC purposes P231,036,319.41 ============= Third and Fourth Requisites: Input taxes were incurred or paid and were not transitional input taxes. For FY 2010, petitioner incurred a total of P61,686,917.40 input taxes, broken down in each quarter 26 as follows: 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Purchase of capital P282,015.99 P417,350.00 P626,004.36 P364,275.98 P1,689,646.33 goods not exceeding 1M Purchase of capital - - 121,050.52 226,234.88 347,285.40 goods exceeding 1M Domestic purchases of 891,712.42 1,749,426.26 2,957,929.30 2,656,960.13 8,256,028.11 goods other than capital goods Importation of goods - - - - - other than capital goods Domestic purchase of 12,550,606.39 10,556,192.89 12,574,935.56 15,712,222.72 51,393,957.56 services Services rendered by - - - - - non-residents Total available current input tax P13,724,334.80 P12,722,969.15 P16,279,919.74 P18,959,693.71 P61,686,917.40 ============= ============ ============ ============ ============ However, petitioner only prayed for a refund/issuance of TCC on unutilized input VAT attributable to zero-rated sales amounting to P56,815,398.78. This amount is lower than the total declared current input VAT by P4,871,518.62 (P61,686,917.40 - 56,815,398.78). The difference can be accounted for as follows: 27 Period Covered 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Input VAT credited to output VAT for the Period P873,132.21 P858,408.77 P905,840.28 P912,405.55 P3,549,786.81 Total local sales 7,276,101.73 7,153,406.38 7,548,669.02 7,603,379.61 ) Total declared sales 409,675,448.00 221,674,318.53 397,342,419.72 327,852,608.25 x ) Excess input VAT (P13,724,334.80 - 873,132.21) 12,851,202.59 (P12,722,969.15 - 858,408.77) 11,864,560.38 (P16,279,919.74 - 905,840.28) 15,374,079.46 (P18,959,693.71 - 912,405.55) 18,047,288.16 Input VAT allocated to Local Sales P228,245.70 P382,868.09 P292,075.13 P418,542.90 P1,321,731.81 Input VAT not available for refund/issuance of TCC P1,101,377.90 P1,241,276.85 P1,197,915.41 P1,330,948.46 P4,871,518.62 ============ ============ ============ ============ ============ Petitioner submitted various suppliers' official receipts and invoices to substantiate the amount of P61,686,917.40 input VAT declared in its Quarterly VAT Returns. cSEDTC Upon scrutiny of the ICPA Report 28 and the related supporting documents, the Court finds that the input taxes in the amount of P22,127,813.82 should be disallowed for non-compliance with the substantiation requirements under Sections 110 (A) and 113 (A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110-2, 4.110-3, 4.110-8 and 4.113-1 of Revenue Regulations (RR) No. 16-05. Below is the detailed breakdown of the disallowed input VAT of P22,127,813.82: ICPA Report Annex Reference Findings Amount U Domestic purchases of services properly supported with original VAT ORs P51,493.34 but do not bear company's TIN V Domestic purchases of goods properly supported with original VAT invoice but the amount of input VAT claimed was not separately indicated 75,522.83 W Domestic purchases of services properly supported with original VAT ORs but the amount of input VAT claimed was not separately indicated 14,059,593.90 X Overclaimed input VAT from domestic purchases of goods supported with original VAT invoices 145,071.43 Y Overclaimed input VAT from domestic purchases of services supported with original VAT ORs 128,388.84 Z Domestic purchases of goods supported only with photocopies of VAT invoices 339,721.78 AA Domestic purchases of goods supported by original VAT invoices but have no Authority to Print 1,137.60 BB Domestic purchases of goods not supported with VAT invoices but supported with VAT ORs 91,318.39 CC Domestic purchases of services not supported with VAT ORs but supported only with original VAT invoices 183,429.86 DD Domestic purchases of services supported with original VAT invoices/ORs but not in the name of company 10,189.77 EE Domestic purchases of services supported with original VAT ORs but no dates were indicated 789,540.51 FF Domestic purchases of goods supported with VAT ORs not dated within the quarter 35,133.51 HH Domestic purchases of goods and services supported with VAT invoices and VAT ORs not dated within the quarter and not within the taxable year 3,367,287.75 II Domestic purchases of services supported with acknowledgment receipt 3,214.29 JJ Domestic purchases of services supported only with "zero- rated" official receipts 11,459.91 KK Domestic purchases of goods supported with original VAT invoices with imprinted "not a valid source of input tax" 394,922.40 LL Domestic purchases of services supported with receipts with imprinted not a valid source of input tax 84,346.52 MM Domestic purchases of goods and services supported only with Non-VAT sales invoices and ORs 61,329.37 PP Domestic purchases of capital goods exceeding P1 million supported with VAT invoices not dated within the quarter 53,789.65 QQ Domestic purchases of capital goods exceeding P1 million supported only with photocopies of original VAT official invoice 126,300.52 RR Domestic purchases of capital goods exceeding P1 million properly supported with original VAT invoice but the amount of input VAT claimed was not shown separately 17,541.97 SS Domestic purchases of capital goods exceeding P1 million supported with invoices imprinted "Not a Valid Source of Input Tax" 103,835.96 TT Unsupported domestic purchases of goods and services 1,993,243.72 TOTAL P22,127,813.82 ============ In addition, petitioner's claimed input VAT incurred on domestic purchases of goods and services totaling P5,791,198.01, as detailed below, should also be disallowed for non-compliance with the substantiation requirements under the VAT law and regulations: ICPA Report Annex Amount in Ref. Exh. No. Client Invoice/OR No. Date PHP Exhibit denied admission by the Court Q P-6-0175 MEDEXPRESS 17397 1/9/2010 P345.01 Purchase of capital goods exceeding P1M supported with VAT invoice but amount of input VAT was not separately indicated NN P-6-3224 INTEGRATED COMPUTER SYSTEMS, INC. 210039536 3/31/2010 65,939.42 NN P-6-3225 INTEGRATED COMPUTER SYSTEMS, INC. 210039537 3/31/2010 121,501.56 SUBTOTAL 187,440.98 Purchase of goods supported with VAT invoice but amount of input VAT was not separately indicated GG P-6-2789 FILES SYSTEMS MANUFACTURING & 55213 5/21/2010 2,208.75 SUPPLY CORP. GG P-6-2805 ROBINSON HANDYMAN, INC. 8414 5/26/2010 748.66 Q P-6-0199 ACE HARDWARE PHILS., INC. 2903 4/6/2010 4,959.43 Q P-6-0230 HALCYON INCORPORATED 659 4/17/2010 3,264.00 Q P-6-0345 ROBINSON HANDYMAN, INC. 8452 6/8/2010 320.09 SUBTOTAL 11,500.93 Purchase of goods supported with VAT invoice with alteration on petitioner's name but the countersignor's authority cannot be ascertained Q P-6-0262 to 0263 PURPLE TAG, INC. 2168/2167 4/22/2010 16,232.15 Purchase of goods supported with VAT invoice with alteration on the input VAT amount but the countersignor was different from the preparer Q P-6-0252 JJED PHILIPPINES, INC. 87201 4/13/2010 307.50 Purchase of goods supported with VAT invoice with alteration on the input VAT amount but the countersignor's authority cannot be ascertained Q P-6-0206 AMERICAN TECHNOLOGIES, INC. 82806 3/16/2010 771.43 Purchase of goods supported with VAT invoice with alteration on the input VAT amount without authorized countersignature Q P-6-0302 GEM STATIONERY, INC. 218528 6/23/2010 2,667.86 Purchase of services supported with CAS-generated VAT OR but no imprinted CAS or POS Permit No. or supporting BIR CAS Permit of supplier Y P-6-2421 PLDT PKPOR000424315 3/26/2010 11,137.25 Y P-6-2422 PLDT PKPOR000441158 5/7/2010 11,164.46 Y P-6-2433 PLDT PKPOR000468292 7/14/2010 11,137.25 Y P-6-2434 PLDT PKPOR000475211 7/30/2010 11,137.25 Y P-6-2447 PLDT PWKOR001051169 10/5/2010 11,137.20 Y P-6-2448 PLDT PKPOR000516899 11/9/2010 11,137.20 Y P-6-2449 PLDT PKPOR000516884 11/9/2010 156.54 Y P-6-2450 PLDT PWKOR001049120 9/30/2010 11,137.20 GG P-6-2631 PLDT PWKOR00133540 9/8/2010 26,878.53 GG P-6-2675 to 2707 PLDT various receipts 3/31/2010 50,676.07 GG P-6-2774 PLDT PQGOR008864819 6/2/2010 10,497.94 GG P-6-2838 to 2886 PLDT various receipts 9/6/2010 43,736.97 R P-6-0679 to 0769 PLDT various receipts 31,524.18 R P-6-0838 to 0915 PLDT various receipts 26,457.91 R P-6-0911 to 0924, PLDT various receipts 52,625.74 1021 to 1033, 1044 to 1180 SUBTOTAL 320,541.69 Purchase of services supported with VAT OR but amount of input VAT was not separately indicated Y P-6-2423 SKYHAWK SECURITY FORCE AND 13980 5/28/2010 1,777.92 ALLIED SERVICE Y P-6-2428 TOWER CLUB 93284 5/24/2010 294.64 Y P-6-2451 SYSTEMS GENERATORS PHILIPPINES, INC. 1171 9/17/2010 8,629.94 GG P-6-2559 ANSCOR CASTO TRAVEL CORPORATION 40188 3/4/2010 334.02 GG P-6-2576 DATACRAFT PHILIPPINES, INC. 1695 3/10/2010 293,868.28 GG P-6-2579 FIRE SOLUTIONS, INC. 1256 4/21/2010 5,885.41 GG P-6-2594 SQME PROFESSIONALS, INC. 934 6/11/2010 55,129.83 GG P-6-2603 KFORCE GLOBAL SOLUTIONS, INC. 1571 9/3/2010 1,801,390.31 GG P-6-2615 KING OF TRAVEL, INC. 109457 9/3/2010 97.34 GG P-6-2632 FIRE SOLUTIONS, INC. 128 1/5/2010 4,071.56 GG P-6-2637 CASA MEDICA, INC. 267565 3/19/2010 75.00 GG P-6-2639 CASA MEDICA, INC. 267566 3/19/2010 750.00 GG P-6-2641 CORPORATE EXECUTIVE SEARCH, INC. 34158 3/19/2010 24,925.51 GG P-6-2645 CORPORATE EXECUTIVE SEARCH, INC. 34157 3/19/2010 2,323.16 GG P-6-2647 FUJI XEROX PHILIPPINES, INC. 107293 4/23/2010 12,455.48 GG P-6-2666 INFORMATION PROFESSIONALS, INC. 17093 3/4/2010 16,710.37 GG P-6-2667 INTEGRATED COMPUTER SYSTEMS, INC. 423027 3/12/2010 180.00 GG P-6-2669 JAGUAR SECURITY AND 40205 4/18/2010 24,201.26 INVESTIGATION AGENCY GG P-6-2671 JAGUAR SECURITY AND 40305 4/28/2010 24,980.04 INVESTIGATION AGENCY GG P-6-2708 PRIME TECHNOLOGY SPECIALISTS, INC. 3500 3/5/2010 4,488.45 GG P-6-2713 PUNONGBAYAN & ARAULLO 114020 3/24/2010 6,908.40 GG P-6-2715 RCG INFORMATION TECHNOLOGY, INC. 3090 3/5/2010 838,229.28 GG P-6-2722 SPECIALIZED CLEANING SERVICES 2547 3/19/2010 12,228.67 2000, INC. GG P-6-2727 SUPERIOR MAINTENANCE SERVICES, INC. 187429 3/26/2010 12,554.81 GG P-6-2729 SUPERIOR MAINTENANCE SERVICES, INC. 187430 3/26/2010 11,996.82 GG P-6-2731 SYSTEMS GENERATORS PHILIPPINES, INC. 3484 3/2/2010 9,780.68 GG P-6-2738 SYSTEMS GENERATORS PHILIPPINES, INC. 3498 3/12/2010 9,782.67 GG P-6-2745 to 2746 TOWER CLUB 90496/60568 3/9/2010 214.29 GG P-6-2751 INFORMATION PROFESSIONALS, INC. 17399 6/1/2010 13,675.76 GG P-6-2778 PUNONGBAYAN & ARAULLO 116104 6/21/2010 7,167.60 GG P-6-2782 SPECIALIZED CLEANING SERVICES 2975 7/30/2010 2,221.80 2000, INC. GG P-6-2783 SPECIALIZED CLEANING SERVICES 3052 7/30/2010 964.29 2000, INC. GG P-6-2785 SUPERIOR MAINTENANCE SERVICES, INC. 188907 6/10/2010 11,990.04 GG P-6-2808 ANCILLA ENTERPRISE DEVELOPMENT 7160 9/3/2010 15,360.00 CONSULTING, INC. GG P-6-2811 ANCILLA ENTERPRISE DEVELOPMENT 7161 9/3/2010 6,034.29 CONSULTING, INC. GG P-6-2815 ARKIGRAFIX CORPORATION 3332 10/7/2010 3,750.00 GG P-6-2817 CASA MEDICA, INC. 279973 9/9/2010 5,550.00 GG P-6-2819 CORPORATE EXECUTIVE SEARCH, INC. 34654 9/17/2010 3,999.20 GG P-6-2822 CORPORATE EXECUTIVE SEARCH, INC. 34653 9/17/2010 2,268.30 GG P-6-2826 HYU BUILDERS 232 11/4/2010 1,795.29 GG P-6-2828 INFORMATION PROFESSIONALS, INC. 17764 9/3/2010 15,462.18 GG P-6-2832 KREATIVO KONCEPTO, INC. 370 9/24/2010 10,368.00 GG P-6-2834 MANDARIN ORIENTAL MANILA 29477 9/3/2010 9,654.75 GG P-6-2836 MANILA PENINSULA HOTEL, INC. 32992 10/14/2010 3,420.00 GG P-6-2887 REYNALDO MASTER KEY & LOCK 10696 9/3/2010 235.18 SERVICE GG P-6-2889 RICHVILLE HOTEL MANAGEMENT, INC. 106784 10/8/2010 51,150.00 GG P-6-2892 SPECIALIZED CLEANING SERVICES 3132 10/1/2010 2,729.06 2000, INC. GG P-6-2895 SPECIALIZED CLEANING SERVICES 3180 10/22/2010 1,446.43 2000, INC. GG P-6-2898 SYSTEMS GENERATORS PHILIPPINES, INC. 1150 9/3/2010 11,250.57 GG P-6-2906 TOWER CLUB 97026 9/14/2010 294.64 GG P-6-2913 VALLEY SPORTS CORPORATION 44584 9/4/2010 281.25 GG P-6-2928 MGE UPS SYSTEM 20831 10/29/2010 548.46 Q P-6-0197 to 0198 WINNER ADVERTISING 3154 12/18/2009 5,850.00 Q P-6-0273 SEAGULL GLASS WORKS, INC. 15693 4/23/2010 2,266.93 Q P-6-0380 COLORLUX PHILIPPINES, INC. 189 9/21/2010 3,766.44 Q P-6-0383 COLORLUX PHILIPPINES, INC. 196 11/9/2010 3,766.44 Q P-6-0440 SYSTEMS CONNECTIVITY SOLUTION, INC. 492 11/9/2010 3,589.29 R P-6-0602 METRO PARKING MANAGEMENT 0007 2/10/2010 7,885.71 (PHILIPPINES), INC. R P-6-0613 SOFTWARE LABORATORIES, INC. 11702 1/22/2010 25,707.43 R P-6-0835 MARK'S FITNESS PLACE, INC. 47719 7/25/2010 997.50 R P-6-0974 FUNCTIONAL, INC. 146936 10/1/2010 2,830.71 R P-6-0983 HYU BUILDERS 234 11/12/2010 1,556,810.59 R P-6-1005 MR. SUN KIDDIEPARTYCOM, INC. 2092 10/22/2010 3,732.00 SUBTOTAL 4,983,084.27 Purchase of Services supported with VAT OR but dated outside the period of claim Q P-6-0381 COLORLUX PHILIPPINES, INC. 198 12/1/2010 3,766.44 Purchase of Services supported with VAT OR but not in the name of petitioner R P-6-0598 MAYNILAD 902334351 3/8/2010 285.64 R P-6-0600 MAYNILAD 900935526 1/5/2010 237.78 R P-6-0641 MAYNILAD 903730910 5/14/2010 195.38 R P-6-0673 MAYNILAD 904223845 6/3/2010 89.08 R P-6-0675 MAYNILAD 903042471 4/13/2010 201.90 SUBTOTAL 1,009.78 Purchase of Services supported with VAT OR but total amount paid only pertains to E-VAT but the true nature of payment cannot be ascertained due to lack of supporting documents R P-6-0595 JE BURTON PROPERTIES, INC. 0018 12/11/2009 197,052.63 Purchase of services supported with VAT OR with alteration on the input VAT amount without authorized countersignature R P-6-0951 SYSTEM GENERATORS PHILIPPINES, INC. 1123 8/6/2010 10,028.91 Purchase of services without supporting VAT OR Q P-6-0188 to 0189 NEW RIALTO PHOTO & OPTICAL SUPPLY 139488 1/11/2010 1,590.75 R P-6-0967 CHARTIS PHILIPPINES INSURANCE, INC. A100000246 10/11/2010 2,404.00 SUBTOTAL 3,994.75 Supporting documents not found in the records OO INTEGRATED COMPUTER SYSTEMS, INC. 210040657 5/13/2010 6,374.57 OO INTEGRATED COMPUTER SYSTEMS, INC. 210040658 5/13/2010 6,375.04 OO INTEGRATED COMPUTER SYSTEMS, INC. 210040659 5/13/2010 6,374.57 OO INTEGRATED COMPUTER SYSTEMS, INC. 210040660 5/13/2010 6,374.57 R FUJI XEROX PHILIPPINES, INC. 117709 8/27/2010 11,648.91 R FUJI XEROX PHILIPPINES, INC. 112650 6/22/2010 15,306.02 SUBTOTAL 52,453.68 TOTAL P5,791,198.01 =========== Further, as noted by the ICPA, petitioner did not amortize its incurred input VAT from its domestic purchases of capital goods exceeding P1 million in accordance with Section 110 29 of the NIRC of 1997, as amended, and as implemented by Section 4.110-3 30 of RR No. 16-05, as amended. As such, the Court deems it proper to disallow the unamortized portion of the valid input VAT from these type of purchases amounting to P3,508,915.12, as detailed and computed below: SDAaTC No. of Months Input VAT ICPA Input VAT Lapsed Amortization Report Amortization during for the Annex Total Input per Month Period Period of Unamortized Ref. Exh. No. Client Invoice Date VAT (60 mos.) of Claim Claim Input VAT NN P-6-3213 INTEGRATED 310085879/ 12/29/2009 P117,072.09 P1,951.20 12 P23,414.42 P93,657.67 to 3217 COMPUTER 210037038/ 12/11/2009 SYSTEMS, INC. 210037288/ 12/22/2009 210037289/ 12/22/2009 210037287 12/22/2009 NN P-6-3219 INTEGRATED 210039237 3/22/2010 70,798.24 1,179.97 9 10,619.74 60,178.50 COMPUTER SYSTEMS, INC. NN P-6-3220 INTEGRATED 210039528 3/31/2010 15,331.20 255.52 9 2,299.68 13,031.52 COMPUTER SYSTEMS, INC. NN P-6-3221 INTEGRATED 210038228 2/9/2010 12,243.17 204.05 10 2,040.53 10,202.64 COMPUTER SYSTEMS, INC. NN P-6-3223 INTEGRATED 210039941 4/16/2010 42,637.98 710.63 8 5,685.06 36,952.92 COMPUTER SYSTEMS, INC. NN P-6-3226 INTEGRATED 210040241 4/27/2010 82,355.20 1,372.59 8 10,980.69 71,374.51 COMPUTER SYSTEMS, INC. NN P-6-3228 INTEGRATED 310089766 3/4/2010 1,306.79 21.78 9 196.02 1,110.77 COMPUTER SYSTEMS, INC. NN P-6-3229 INTEGRATED 210038781 3/3/2010 5,393.88 89.90 9 809.08 4,584.80 COMPUTER SYSTEMS, INC. NN P-6-3231 NEXUS 52671 4/12/2010 46,017.70 766.96 8 6,135.69 39,882.01 TECHNOLOGIES, INC. NN P-6-3232 COMPUTER 4021 6/1/2010 24,148.22 402.47 6 2,414.82 21,733.40 NETWORK SYSTEMS CORP. NN P-6-3234 COMPUTER 4068 7/15/2010 13,016.62 216.94 5 1,084.72 11,931.90 NETWORK SYSTEMS CORP. NN P-6-3236 INFORMATION 4487 6/15/2010 8,434.90 140.58 6 843.49 7,591.41 WORKTOOLS CORP. NN P-6-3237 INFORMATION 4499 6/17/2010 4,006.75 66.78 6 400.68 3,606.08 WORKTOOLS CORP. NN P-6-3239 INTEGRATED 210041954 7/5/2010 8,816.14 146.94 5 734.68 8,081.46 COMPUTER SYSTEMS, INC. NN P-6-3240 INTEGRATED 210041370 6/11/2010 25,384.67 423.08 6 2,538.47 22,846.20 COMPUTER SYSTEMS, INC. NN P-6-3241 INTEGRATED 210041369 6/11/2010 25,384.67 423.08 6 2,538.47 22,846.20 COMPUTER SYSTEMS, INC. NN P-6-3243 INTEGRATED 310100170 8/23/2010 9,197.09 153.28 4 613.14 8,583.95 COMPUTER SYSTEMS, INC. NN P-6-3244 INTEGRATED 210041955 7/5/2010 28,123.92 468.73 5 2,343.66 25,780.26 COMPUTER SYSTEMS, INC. NN P-6-3245 INTEGRATED 210041956 7/20/2010 106,532.98 1,775.55 5 8,877.75 97,655.23 COMPUTER SYSTEMS, INC. NN P-6-3247 INTEGRATED 210041966 7/6/2010 95,465.48 1,591.09 5 7,955.46 87,510.02 to 3248 COMPUTER SYSTEMS, INC. NN P-6-3249 INTEGRATED 210042953 8/19/2010 37,971.14 632.85 4 2,531.41 35,439.73 COMPUTER SYSTEMS, INC. NN P-6-3250 NEXUS 53319 6/1/2010 31,253.66 520.89 6 3,125.37 28,128.29 TECHNOLOGIES, INC. NN P-6-3252 NEXUS 53452 6/17/2010 17,702.00 295.03 6 1,770.20 15,931.80 TECHNOLOGIES, INC. NN P-6-3253 NEXUS 53784 7/16/2010 39,019.30 650.32 5 3,251.61 35,767.69 TECHNOLOGIES, INC. NN P-6-3254 NEXUS 53794 7/16/2010 1,582.91 26.38 5 131.91 1,451.00 TECHNOLOGIES, INC. NN P-6-3255 NEXUS 53679 7/5/2010 120,603.54 2,010.06 5 10,050.30 110,553.25 TECHNOLOGIES INC. NN P-6-3256 NEXUS 53678 7/5/2010 120,647.36 2,010.79 5 10,053.95 110,593.41 TECHNOLOGIES, INC. NN P-6-3257 NEXUS 54166 8/19/2010 52,769.98 879.50 4 3,518.00 49,251.98 TECHNOLOGIES, INC. NN P-6-3258 NEXUS 53490 6/21/2010 53,430.50 890.51 6 5,343.05 48,087.45 TECHNOLOGIES, INC. NN P-6-3259 NEXUS 54189 8/20/2010 40,972.38 682.87 4 2,731.49 38,240.89 TECHNOLOGIES, INC. NN P-6-3260 NEXUS 54188 8/20/2010 102,281.64 1,704.69 4 6,818.78 95,462.86 TECHNOLOGIES, INC. NN P-6-3261 NEXUS 54187 8/20/2010 102,281.64 1,704.69 4 6,818.78 95,462.86 TECHNOLOGIES, INC. NN P-6-3262 NEXUS 53680 7/5/2010 29,382.61 489.71 5 2,448.55 26,934.06 TECHNOLOGIES, INC. NN P-6-3264 COMPUTER 4202 10/4/2010 358,439.95 5,974.00 2 11,948.00 346,491.95 NETWORK SYSTEMS CORP. NN P-6-3266 CREATIVE 59881 11/3/2010 36,541.42 609.02 1 609.02 35,932.40 TECHNOLOGIES, INC. NN P-6-3267 CREATIVE 59869 11/2/2010 22,531.47 375.52 1 375.52 22,155.95 TECHNOLOGIES, INC. NN P-6-3269 INFORMATION 4587 9/17/2010 2,655.87 44.26 3 132.79 2,523.08 WORKTOOLS CORP. NN P-6-3270 INTEGRATED 210044138 10/4/2010 63,488.82 1,058.15 2 2,116.29 61,372.53 COMPUTER SYSTEMS, INC. NN P-6-3272 INTEGRATED 210044497 10/26/2010 7,855.70 130.93 2 261.86 7,593.84 COMPUTER SYSTEMS, INC. NN P-6-3273 INTEGRATED 210044511 10/26/2010 62,465.49 1,041.09 2 2,082.18 60,383.31 COMPUTER SYSTEMS, INC. NN P-6-3274 INTEGRATED 210044512 10/26/2010 62,465.49 1,041.09 2 2,082.18 60,383.31 COMPUTER SYSTEMS, INC. NN P-6-3276 INTEGRATED 210043266 9/2/2010 7,682.94 128.05 3 384.15 7,298.79 COMPUTER SYSTEMS, INC. NN P-6-3278 INTEGRATED 210043447 9/8/2010 14,922.09 248.70 3 746.10 14,175.99 COMPUTER SYSTEMS, INC. NN P-6-3279 INTEGRATED 210043701 9/21/2010 226,234.86 3,770.58 3 11,311.74 214,923.12 COMPUTER SYSTEMS, INC. NN P-6-3281 NEXUS 55130 11/15/2010 116,232.74 1,937.21 1 1,937.21 114,295.53 TECHNOLOGIES, INC. NN P-6-3282 NEXUS 54508 9/23/2010 2,361.49 39.36 3 118.07 2,243.42 TECHNOLOGIES, INC. NN P-6-3283 NEXUS 54507 9/23/2010 2,361.49 39.36 3 118.07 2,243.42 TECHNOLOGIES, INC. NN P-6-3285 ABENSON 6780181 4/14/2010 4,583.57 76.39 8 611.14 3,972.43 VENTURES, INC. NN P-6-3287 CARLGIN 10341 3/12/2010 187.50 3.13 9 28.13 159.38 ENTERPRISES NN P-6-3288 EXPERT 1939 4/5/2010 6,090.00 101.50 8 812.00 5,278.00 INTERIOR PRODUCTS, INC. NN P-6-3290 ICON 2998 3/4/2010 10,454.40 174.24 9 1,568.16 8,886.24 INTERIORS, INC. NN P-6-3291 ICON 2997 3/4/2010 982.14 16.37 9 147.32 834.82 INTERIORS, INC. NN P-6-3292 ICON 3122 5/19/2010 7,020.00 117.00 7 819.00 6,201.00 INTERIORS, INC. NN P-6-3294 ACE HARDWARE 2945 7/27/2010 535.69 8.93 5 44.64 491.05 PHILS., INC. NN P-6-3296 CITIMEX, INC. 30513 7/21/2010 21,750.00 362.50 5 1,812.50 19,937.50 NN P-6-3298 COSMOTECH 12604 8/6/2010 5,250.00 87.50 4 350.00 4,900.00 PHILIPPINES, INC. NN P-6-3300 ABENSON 1727200 9/20/2010 726.43 12.11 3 36.32 690.11 VENTURES, INC. NN P-6-3302 ACE HARDWARE 3831 11/16/2010 1,424.62 23.74 1 23.74 1,400.88 PHILS., INC. NN P-6-3304 CITIMEX, INC. 30877 10/19/2010 46,553.57 775.89 2 1,551.79 45,001.78 NN P-6-3305 CITIMEX, INC. 30878 10/19/2010 55,071.43 917.86 2 1,835.71 53,235.72 OO P-6-3307 INTEGRATED 310088720 2/17/2010 52,992.48 883.21 10 8,832.08 44,160.40 COMPUTER SYSTEMS, INC. OO P-6-3308 INTEGRATED 210038039 2/1/2010 18,786.40 313.11 10 3,131.07 15,655.33 COMPUTER SYSTEMS, INC. OO P-6-3309 NEXUS 52214 2/25/2010 45,154.25 752.57 10 7,525.71 37,628.54 TECHNOLOGIES, INC. OO P-6-3310 NEXUS 52220 2/25/2010 16,386.81 273.11 10 2,731.14 13,655.68 TECHNOLOGIES, INC. OO P-6-3311 NEXUS 52215 2/25/2010 138,970.98 2,316.18 10 23,161.83 115,809.15 TECHNOLOGIES, INC. OO P-6-3312 NEXUS 52219 2/25/2010 74,022.67 1,233.71 10 12,337.11 61,685.56 TECHNOLOGIES, INC. OO P-6-3313 NEXUS 52218 2/25/2010 25,368.46 422.81 10 4,228.08 21,140.38 TECHNOLOGIES, INC. OO P-6-3314 NEXUS 52217 2/25/2010 18,120.59 302.01 10 3,020.10 15,100.49 TECHNOLOGIES, INC. OO P-6-3315 NEXUS 52196 2/24/2010 22,903.32 381.72 10 3,817.22 19,086.10 TECHNOLOGIES, INC. OO P-6-3317 COMPUTER 4005 5/14/2010 36,112.69 601.88 7 4,213.15 31,899.54 NETWORK SYSTEMS CORP. OO P-6-3318 COMPUTER 4007 5/14/2010 36,112.69 601.88 7 4,213.15 31,899.54 NETWORK SYSTEMS CORP. OO P-6-3319 COMPUTER 4006 5/14/2010 36,112.69 601.88 7 4,213.15 31,899.54 NETWORK SYSTEMS CORP. OO P-6-3320 COMPUTER 4015 5/26/2010 20,770.81 346.18 7 2,423.26 18,347.55 NETWORK SYSTEMS CORP. OO P-6-3322 INFORMATION 4457 5/26/2010 7,128.17 118.80 7 831.62 6,296.55 WORKTOOLS CORP. OO P-6-3324 INTEGRATED 210039535 3/31/2010 43,184.34 719.74 9 6,477.65 36,706.69 COMPUTER SYSTEMS, INC. OO P-6-3325 INTEGRATED 210038613 2/25/2010 102,658.84 1,710.98 10 17,109.81 85,549.03 COMPUTER SYSTEMS, INC. OO P-6-3326 INTEGRATED 210039529 3/31/2010 16,068.85 267.81 9 2,410.33 13,658.52 COMPUTER SYSTEMS, INC. OO P-6-3328 INTEGRATED 210040653 5/13/2010 31,873.32 531.22 7 3,718.55 28,154.77 COMPUTER SYSTEMS, INC. OO P-6-3329 INTEGRATED 210040654 5/13/2010 31,873.32 531.22 7 3,718.55 28,154.77 COMPUTER SYSTEMS, INC. OO P-6-3330 INTEGRATED 210040656 5/13/2010 6,374.57 106.24 7 743.70 5,630.87 COMPUTER SYSTEMS, INC. OO P-6-3331 INTEGRATED 210040652 5/13/2010 31,873.32 531.22 7 3,718.55 28,154.77 COMPUTER SYSTEMS, INC. OO P-6-3332 INTEGRATED 210040655 5/13/2010 31,873.32 531.22 7 3,718.55 28,154.77 COMPUTER SYSTEMS, INC. OO P-6-3334 INTEGRATED 210040591 5/12/2010 17,851.71 297.53 7 2,082.70 15,769.01 COMPUTER SYSTEMS, INC. OO P-6-3335 INTEGRATED 210040804 5/20/2010 12,803.45 213.39 7 1,493.74 11,309.71 COMPUTER SYSTEMS, INC. OO P-6-3336 INTEGRATED 210040349 4/29/2010 20,827.07 347.12 8 2,776.94 18,050.13 COMPUTER SYSTEMS, INC. OO P-6-3338 INTEGRATED 210040421 5/20/2010 16,019.85 267.00 7 1,868.98 14,150.87 to 3339 COMPUTER SYSTEMS, INC. OO P-6-3340 INTEGRATED 210040240 5/20/2010 33,035.63 550.59 7 3,854.16 29,181.47 to 3341 COMPUTER SYSTEMS, INC. OO P-6-3343 INTEGRATED 210040977 5/27/2010 8,848.47 147.47 7 1,032.32 7,816.15 COMPUTER SYSTEMS, INC. OO P-6-3344 NEXUS 53062 5/14/2010 18,609.08 310.15 7 2,171.06 16,438.02 TECHNOLOGIES, INC. OO P-6-3346 NEXUS 53228 5/27/2010 7,934.80 132.25 7 925.73 7,009.07 TECHNOLOGIES, INC. OO P-6-3347 NEXUS 53234 5/27/2010 1,628.44 27.14 7 189.98 1,438.46 TECHNOLOGIES, INC. OO P-6-3348 COMPUTER 4046 6/21/2010 21,606.39 360.11 6 2,160.64 19,445.75 NETWORK SYSTEMS CORP. OO P-6-3350 INTEGRATED 499413 7/20/2010 2,808.84 46.81 5 234.07 2,574.77 COMPUTER SYSTEMS, INC. OO P-6-3352 INTEGRATED 210042152 7/20/2010 7,583.81 126.40 5 631.98 6,951.83 COMPUTER SYSTEMS, INC. OO P-6-3353 INTEGRATED 210041670 6/24/2010 114,513.25 1,908.55 6 11,451.33 103,061.93 COMPUTER SYSTEMS, INC. OO P-6-3355 INTEGRATED 210040800 8/27/2010 25,865.33 431.09 4 1,724.36 24,140.97 COMPUTER SYSTEMS, INC. OO P-6-3356 ICON 2953 2/12/2010 1,964.29 32.74 10 327.38 1,636.91 INTERIORS, INC. OO P-6-3358 ICON 2938 2/8/2010 17,424.00 290.40 10 2,904.00 14,520.00 INTERIORS, INC. OO P-6-3360 ICON 2880 1/19/2010 11,785.72 196.43 11 2,160.72 9,625.00 INTERIORS, INC. OO P-6-3361 CITIMEX, INC. 30245 5/25/2010 49,714.29 828.57 7 5,800.00 43,914.29 TOTAL P3,873,982.83 P365,067.71 P3,508,915.12 =========== ========== =========== In sum, out of the P61,686,917.40 reported input VAT for FY 2010, only the amount of P30,258,990.45 represents petitioner's valid input VAT, computed as follows: AaCTcI Total declared input VAT P61,686,917.40 Less: Disallowances Per ICPA report P22,127,813.82 Per the Court's further verification: Domestic purchases of goods and services 5,791,198.01 Unamortized input VAT from purchases of capital goods exceeding P1M 3,508,915.12 31,427,926.95 Valid input VAT P30,258,990.45 =========== Fifth, Sixth and Eighth Requisites: Petitioner's claimed input taxes remained unutilized but were not properly allocated to its zero-rated sales. The input VAT claimed herein for refund/issuance of TCC amounting to P56,815,398.78 was the subject of separate administrative claims as follows: Period Exhibit No. Amount of Claim 1st Quarter E-1 P12,622,956.90 2nd Quarter E-2 11,481,692.29 3rd Quarter E-3 15,082,004.33 4th Quarter E-4 17,628,745.26 Total P56,815,398.78 ============ These amounts were accordingly carried over to petitioner's subsequent VAT returns until they were separately deducted as VAT Refund/TCC Claimed as follows: Period Exhibit No. VAT Refund/TCC FY 2011 3rd Quarter VAT Return F-15 P12,622,956.90 FY 2012 1st Quarter VAT Return F-18 26,563,696.63 FY 2012 2nd Quarter VAT Return F-20 17,628,745.26 P56,815,398.79 ============ Hence, it can be ascertained that the claimed amount of P56,815,398.78 will no longer be utilized as credit for any future VAT liability. However, since petitioner also reported VATable sales in FY 2010, a proportionate allocation based on the volume of zero-rated and VATable sales must be made for the allowable unutilized input taxes. As such, only P4,650,314.29 unutilized excess input VAT can be allowed for refund/issuance of TCC, to wit: Total valid zero-rated sales P231,036,319.41 1,326,963,237.76 x Excess unutilized input VAT: Total valid input VAT P30,258,990.45 Less: Output VAT liability for the period 3,549,786.81 26,709,203.64 Unutilized excess input VAT for refund/issuance of TCC P4,650,314.29 ============ Based on the foregoing, petitioner's Motion for Reconsideration shall be partially granted in the reduced amount of P4,650,314.29 , representing petitioner's unutilized excess input taxes attributable to zero-rated sales for the FY 2010. WHEREFORE , premises considered, petitioner's Motion for Reconsideration is PARTIALLY GRANTED . Accordingly, the dispositive portion of the Decision dated November 6, 2015 is modified to read as follows: WHEREFORE , the instant Petition for Review is PARTIALLY GRANTED . Accordingly, respondent is ORDERED to REFUND or to ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount of P4,650,314.29 representing petitioner's unutilized excess input taxes attributable to its zero-rated sales for the FY 2010. SO ORDERED. SO ORDERED. (SGD.) CAESAR A. CASANOVA Associate Justice Juanito C. Castaeda, Jr., J. , concurs. Footnotes 1. CTA Case No. 8432, Docket (Vol. V), pp. 2350-2360. 2. CTA Case No. 8432, Docket (Vol. V), p. 2527. 3. CTA Case No. 8432, Docket (Vol. V), pp. 2318-2349. 4. CTA Case No. 8432, Docket (Vol. V.), pp. 2529-2531. 5. Minutes of the Hearing dated July 20, 2016, CTA Case No. 8432, Docket (Vol. V), p. 2607; Exhibit "M-61". 6. CTA Case No. 8432, Docket (Vol. V), pp. 2610-2628. 7. CTA Case No. 8432, Docket (Vol. VI), pp. 3083-3084. 8. CTA Case No. 8432, Docket (Vol. VI), pp. 3085-3099. 9. CTA Case No. 8432, Docket (Vol. VI), p. 3100. 10. G.R. No. 153205, January 22, 2007. 11. Exhibits "M-1-a" to "M-61-a". 12. Resolution dated September 20, 2016, CTA Case No. 8432, Docket (Vol. VI), pp. 3083-3084. 13. San Roque Power Corporation vs. Commissioner of Internal Revenue , G.R. No. 180345, November 25, 2009. 14. Decision dated November 6, 2015, CTA Case No. 8432, Docket (Vol. V), pp. 2342-2344. 15. CTA Case No. 8432, Docket (Vol. III), pp. 1282-1283. 16. Exhibit "M-61". 17. Exhibits "L-1" to "L-51". 18. Exhibits "M-2" to "M-58". 19. Exhibit "M-59". 20. Exhibits "M-1-a" to "M-61-a". 21. CTA Case No. 7808, December 16, 2014. 22. CTA Case No. 8241, August 11, 2015. 23. Exhibits "F-1", "F-3", "F-7" and "F-8". 24. Exhibit "P-3", with submarkings. 25. Exhibit "P-1", Part 1 of 2, pp. 11-12. 26. Exhibits "F-1", "F-3", "F-7" and "F-8". 27. Exhibit "P-1", Part 1 of 2, p. 8. 28. Exhibit "P-1", Part 1 of 2, pp. 24-26. 29. SEC. 110. Tax Credits. (A) Creditable Input Tax. xxx xxx xxx Provided , That the input tax on goods purchased or imported in a calendar month for use in trade or business for which deduction for depreciation is allowed under this Code, shall be spread evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos (P1,000,000): Provided, however , That if the estimated useful life of the capital good is less than five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a shorter period: Provided, finally , that in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee. 30. SECTION 4.110-3. Claim for Input Tax on Depreciable Goods. Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (P1,000,000.00), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner: (a) If the estimated useful life of a capital good is five (5) years or more The input tax shall be spread evenly over a period of sixty (60) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 60 and the quotient will be the amount to be claimed monthly. (b) If the estimated useful life of a capital good is less than five (5) years The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (P1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition. xxx xxx xxx xxx xxx xxx Capital goods or properties refers to goods or properties with estimated useful life greater than one (1) year and which are treated as depreciable assets under Sec. 34 (F) of the Tax Code, used directly or indirectly in the production or sale of taxable goods or services. The aggregate acquisition cost of depreciable assets in any calendar month refers to the total price, excluding the VAT, agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired on installment for an acquisition cost of more than P1,000,000.00, excluding the VAT, will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1,000,000.00. xxx xxx xxx