Provision of Group Home/Foster Home for Neglected, Abandoned, Abused, Detached and Poor Older Persons and Persons with Disabilities

SPECIAL FIRST DIVISION [C.T.A. CASE NO. 7550. September 20, 2011.] PILIPINAS TOTAL GAS, INC. , petitioner , vs . COMMISSIONER OF INTERNAL REVENUE , respondent . AMENDED DECISION ACOSTA , P.J p : For resolution is petitioner's " Motion for Reconsideration " filed on April 8, 2011, seeking reconsideration of this Court's Decision dated March 26, 2010, sans petitioner's Comment despite notice. The petitioner assails the Decision of the Court, the dispositive portion of which states that: WHEREFORE, premises considered, the Petition for Review and the Amended Petition for Review are hereby DENIED for lack of merit. SO ORDERED. The denial of the Petition for Review and the Amended Petition for Review was based on petitioner's failure to sufficiently substantiate its reported zero-rated sales and to prove that no amount of the unutilized input VAT was applied against any output tax liability in the succeeding quarters. Thus, petitioner filed on April 8, 2010 an "Omnibus Motion (Motion for Reconsideration with Motion to Re-open the Case)" seeking the re-opening of the case; allowance for the recall of witnesses; submission of supplemental offer of evidence; and, ultimately granting its claim for refund. On May 19, 2010, the Court granted petitioner's "Motion to Re-open the Case" but held in abeyance the resolution of petitioner's "Motion for Reconsideration" pending the presentation of petitioner's additional evidence and the filing of its Supplemental Formal Offer of Evidence. TcEaAS Petitioner's presentation of additional evidence ensued and it filed its Supplemental Formal Offer of Evidence on June 25, 2010 and its Second Supplemental Formal Offer of Evidence on April 19, 2011. The Court resolved said Offers in the Resolution dated August 26, 2010 and May 13, 2011, respectively. With the filing of petitioner's Supplemental Memorandum (In Support of Petitioner's Omnibus Motion Filed on April 8, 2010) on June 17, 2011, sans respondent's Memorandum, this instant Motion for Reconsideration was deemed submitted for resolution. THE COURT'S RULING Petitioner's Motion for Reconsideration is partially meritorious. On the outset, Sections 112 (A) and 112 (D) of the 1997 NIRC provide the requisites for refunds or tax credits of input tax due or paid attributable to zero-rated or effectively zero-rated sales, viz. : "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 or 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. D) 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 . Put differently, to be entitled to the issuance of a tax credit certificate, petitioner should comply with the following requisites: 1. that there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input taxes are attributable to zero-rated sales or effectively zero-rated sales; aITDAE 4. that the input taxes were not applied against any output VAT liability; and 5. that the claim for refund was filed within the two-year prescriptive period. The Court deems it essential to determine first and foremost petitioner's compliance with the fifth requisite as it boils down to prescription. The Supreme Court, in the cases of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia, Inc. 1 (Aichi Forging Case) and Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation 2 (Mirant Case) has already pronounced that the two-year period to file a refund for input tax arising from zero-rated sales should be reckoned from the close of the taxable quarter when the sales were made, to wit: The pivotal question of when to reckon the running of the two-year prescriptive period, however, has already been resolved in Commissioner of Internal Revenue v. Mirant Pagbilao Corporation , where we ruled that Section 112(A) of the NIRC is the applicable provision in determining the start of the two-year period for claiming a refund/credit of unutilized input VAT, and that Sections 204(C) and 229 of the NIRC are inapplicable as "both provisions apply only to instances of erroneous payment or illegal collection of internal revenue taxes." We explained that: The above proviso [Section 112 (A) of the NIRC] clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied the aforequoted Sec. 112 (A), "[P]rescriptive period commences from the close of the taxable quarter when the sales were made and not from the time the input VAT was paid nor from the time the official receipt was issued." Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the quarter when the pertinent sales or transaction was made, regardless when the input VAT was paid. Be that as it may, and given that the last creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC's claim for refund or tax credit filed on December 10, 1999 had already prescribed. IcESDA xxx xxx xxx In view of the foregoing, we find that the CTA En Banc erroneously applied Sections 114(A) and 229 of the NIRC in computing the two-year prescriptive period for claiming refund/credit of unutilized input VAT. To be clear, Section 112 of the NIRC is the pertinent provision for the refund/credit of input VAT. Thus, the two-year period should be reckoned from the close of the taxable quarter when the sales were made . (Emphasis provided) Further, as to the periods to file the administrative and judicial claim for refund or tax credit of unutilized input VAT attributable to zero-rated sales before the Commissioner of Internal Revenue (CIR) and the Court of Tax Appeals (CTA), respectively, the Supreme Court, in the same Aichi Forging Case , applied Sections 112 (A) and (D) of the 1997 NIRC in ascertaining whether the taxpayer timely filed its claim, to wit: In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA premature . Respondent's assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive period has no legal basis. There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A) of the said provision states that "any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two 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." The phrase "within two (2) years . . . apply for the issuance of a tax credit certificate or refund" refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA . This is apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has "120 days from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)" within which to decide on the claim. EaHcDS In fact, applying the two-year period to judicial claims would render nugatory Section 112(D) of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA . (Emphasis provided) Simply put, the claim for refund/credit must be filed with the CIR within two (2) years reckoned from the close of the taxable quarter when the relevant zero-rated sales were made. As to the filing with the CTA, the claim for refund/credit must be filed within thirty (30) days from the receipt of the decision of the CIR or after the expiration of the 120 day period provided for the CIR to act on the claim. The failure of the taxpayer to await the decision of the CIR or the lapse of the 120 day period amounts to premature filing of the judicial claim. Applying the foregoing in petitioner's claim for refund of its unutilized input VAT on zero-rated sales incurred for the period of 1st to 4th quarters of 2005, pivotal to state the pertinent dates and period as follows: Quarter Filing of VAT End of the Date of Filing of End of the 120-day Filing of Judicial End of the 30-day Claimed Returns Two-Year Administrative Period Under Section Claim Period Under Section Period Claim 112 (D) of the NIRC 112 (D) of the NIRC 1st Qrt. 3 April 21, 2005 March 31, 2007 July 25, 2006 November 22, 2006 December 21, 2006 December 22, 2006 2nd Qrt. 4 July 23, 2005 June 30, 2007 July 25, 2006 November 22, 2006 December 21, 2006 December 22, 2006 3rd Qrt. 5 October 21, 2005 September 30, 2007 July 25, 2006 November 22, 2006 December 21, 2006 December 22, 2006 4th Qrt. 6 January 23, 2006 December 31, 2007 July 25, 2006 November 22, 2006 December 21, 2006 December 22, 2006 As it appears, the administrative claim for refund on July 25, 2006 was filed by petitioner within the two (2)-year period required under Section 112 (A) of the 1997 NIRC. As to petitioner's judicial claim for refund filed on December 21, 2006, the judicial claim was filed within 30 days after the 120 days required to await the decision of the CIR, thus, petitioner's judicial claim was compliant with Section 112 (D) of the 1997 NIRC. cIHSTC With petitioner's compliance with both Sections 112 (A) and (D) of the 1997 NIRC, the requirement to file the claims within the prescriptive period was accordingly met. The Court shall now proceed petitioner's compliance with the other requisites. Anent the first requisite, the Court already ruled in the assailed Decision that petitioner's sales transactions with PEZA-registered and CDC-registered entities are deemed zero-rated, viz. : Petitioner claims that under the afore-quoted laws, its sales to PEZA-registered and CDC-registered entities are deemed zero-rated; that as a result, it is entitled to the refund of its unutilized input taxes. This Court agrees with petitioner that sales transactions with PEZA-registered and CDC-registered entities are deemed zero-rated. Section 23 of R.A. No. 7916, otherwise known as "The Special Economic Zone Act of 1995", provides as follows: "SECTION 23. Fiscal Incentives . Business establishments operating within the ECOZONES shall be entitled to the fiscal incentives as provided for under Presidential Decree No. 66, the law creating the Export Processing Zone Authority, or those provided under Book VI of Executive Order No. 226, otherwise known as the Omnibus Investment Code of 1987. Furthermore, tax credits for exporters using local materials as inputs shall enjoy the same benefits provided for in the Export Development Act of 1994." Section 24 of R.A. No. 7916, as amended by R.A. No. 8748, states thus: "SEC. 24. Exemption from National and Local Taxes . Except for real property taxes on land owned by developers, no taxes, local and national, shall be imposed on business establishments operating within the ECOZONE. In lieu thereof, five percent (5%) of the gross income earned by all business enterprises within the ECOZONE shall be paid and remitted as follows: a. Three percent (3%) to the National Government; b. Two percent (2%) which shall be directly remitted by the business establishments to the treasurer's office of the municipality or city where the enterprises is located." In the case of Pilipinas Total Gas, Inc. vs. Commissioner of Internal Revenue , which is similar to the present case, this Court declared as follows: cCEAHT "Among the measures adopted by the government to implement the policy of promoting preferential use of Filipino labor, domestic materials and locally produced goods and to help make them internationally competitive is the establishment of special economic zones or freeports. In pursuit of these social and economic objectives, enterprises registered and authorized to conduct business operations in designated economic zones enjoy fiscal incentives, among which is relief or exemption from payment of national and local taxes, in lieu of which they pay a flat rate on gross income. Although an ecozone is undeniably a sovereign geographical territory of the Philippines, treating the zone as a special customs territory is necessary to give meaningful effect to the objectives expressed in the special law creating a particular economic zone. In effect, what is created is a fiction of a foreign territory. The entity that manages this fiction of foreign territory is the Philippine Economic Zone Authority (PEZA). In the context of the fiction of foreign territory, the destination principle as a basis for jurisdiction of the Philippines to impose VAT, as well as the situs of the transaction as criteria for determining the place where the transaction occurred as the taxable event will apply. As a result of the destination principle, Revenue Memorandum Circular 74-99 provides that any sale of goods and services made by a VAT-registered supplier in the customs territory to any registered enterprise operating in the economic zone, regardless of the class or type of the latter's PEZA registration, is actually qualified and thus legally entitled to the zero percent (0%) VAT. This was affirmed by the Supreme Court in the case of Commissioner of Internal Revenue vs. Toshiba Information Equipment (Phils.), Inc. when the Supreme Court ruled that the services rendered to a PEZA-registered enterprise effectively subjects the supply of such services to VAT at zero percent (0%). Likewise, in BIR Ruling (DA-736-06), the BIR ruled that sale of industrial gases and equipment by petitioner to its PEZA-registered customers pursuant to contracts entered into prior to the effectivity of Republic Act 9337 is subject to zero percent (0%) VAT and requires no prior approval for zero-rating based on RMC 74-99. HDTcEI The case of Coral Bay Nickel Corporation vs. Commissioner of Internal Revenue , this Court En Banc explained that the sale to an enterprise within the economic zone is actually a sale outside the territory to impose VAT. . . ." (Emphasis supplied) Sales transactions with CDC-registered enterprises are also entitled to zero percent (0%) VAT rate pursuant to R.A. No. 7227, as amended by R.A. No. 9400. Like the PEZA law, R.A. No. 7227 is a special law that effectively subjects sales to CDC-registered enterprises to 0% VAT rate in conjunction with Section 106 (A) (2) (c) of the NIRC of 1997, as amended. In support of its sales to PEZA-registered and CDC-registered entities, petitioner presented various documents to prove its reported zero-rated sales of services for the year 2005 such as sales invoices, 7 Summary 8 of VAT Zero-Rating certificates issued by PEZA to the customers of petitioner, and Certifications issued by PEZA 9 and CDC. 10 A comparative study of the amount of zero-rated sales reflected in petitioner's Quarterly VAT Returns and the monthly Schedules of Sales and Receipts for the same period revealed a discrepancy in the amount of P3,689.37, broken down as follows: Per Schedule of Per Return Sales and Receipts Discrepancy Year 2005 Amount Exh. Amount Exh. January P13,032,988.34 IIII-8-1 February 18,684,228.89 IIII-8-2 March 17,742,686.65 IIII-8-3 Total - 1st Qtr P49,459,903.87 N P49,459,903.88 P(0.01) April P14,205,410.04 IIII-8-4 May 14,089,462.97 IIII-8-5 June 12,115,720.90 IIII-8-6 Total - 2nd Qtr 40,410,693.88 W P40,410,593.91 99.97 July P15,851,908.77 IIII-8-7 August 15,609,989.85 IIII-8-8 September 17,697,447.03 IIII-8-9 Total - 3rd Qtr 49,162,480.40 FF P49,159,345.65 3,134.75 October 20,732,937.83 IIII-8-10 November 15,034,712.97 IIII-8-11 December 115,407,921.80 III-8-12 Total - 4th Qtr 151,176,027.26 OO P151,175,572.60 454.66 Grand Total P290,209,105.41 P290,205,416.04 P3,689.37 ============= ============= ======== Petitioner, regrettably, failed to account for the discrepancy of P3,689.37, hence, the Court shall deny said amount as VAT zero-rated sales transaction. DIETcC Furthermore, after a thorough verification and examination of the records, the Court found lacking with PEZA or CDC certifications the petitioner's claimed zero-rated sales in the amount of P2,219,807.00 which were supported by VAT zero-rated sales invoices, listed as follows: Year 2005 Exh. No. Month Quarter Zero-Rated Sales Sankin Philippines Co., Inc. 5606 Jan. 1st P25,500.00 Suncall Philippines 5614 Jan. 1st 6,000.00 Yield Co., Ltd. 5672 Feb. 1st 11,499.60 Sankin Philippines, Inc. 5681 Feb. 1st 16,300.00 Suncall Philippines 5697 Feb. 1st 4,000.00 Tomoe Shokai Co. Ltd. 5722 Mar. 1st 23,616.00 Suncall Philippines 5792 Mar. 1st 6,000.00 Sankin Philippines, Inc. 5802 Mar. 1st 22,800.00 1st Qtr Total P115,715.60 Yield Co., Ltd. 5830 Apr. 2nd P179,190.00 Yield Co., Ltd. 5832 Apr. 2nd 54,984.40 Fujimoto Int'l. Tech. Corp. 5863 Apr. 2nd 2,800.00 Sankin Philippines, Inc. 5867 Apr. 2nd 11,400.00 Yield Co., Ltd. 5969 May 2nd 179,916.00 Yield Co., Ltd. 5970 May 2nd 164,105.20 Sankin Philippines, Inc. 6004 May 2nd 8,800.00 Suncall Philippines 6026 May 2nd 4,400.00 Suncall Philippines 6077 June 2nd 6,600.00 Sankin Philippines, Inc. 6087 June 2nd 15,800.00 Sankin Philippines, Inc. 6088 June 2nd 450.00 2nd Qtr Total P628,445.60 Yield Co., Ltd. 6124 July 3rd P16,753.50 P. IMES Corporation 6156 July 3rd 31,700.00 Suncall Philippines 6181 July 3rd 4,400.00 Sankin Philippines, Inc. 6186 July 3rd 11,700.00 Yield Co., Ltd. 6211 Aug. 3rd 56,570.10 Yield Co., Ltd. 6212 Aug. 3rd 67,212.00 Suncall Philippines 6277 Aug. 3rd 6,600.00 Fujimoto Int'l. Tech. Corp. 6283 Aug. 3rd 5,600.00 Rohm Mechatech Phils., Inc. 6307 Aug. 3rd 5,500.00 Rohm Mechatech Phils., Inc. 6308 Aug. 3rd 14,100.00 Yield Co., Ltd. 6325 Sept. 3rd 56,080.00 Yield Co., Ltd. 6351 Sept. 3rd 728,442.72 Yield Co., Ltd. 6353 Sept. 3rd 182,110.68 Rohm Mechatech Phils., Inc. 6379 Sept. 3rd 32,900.00 Suncall Philippines 6380 Sept. 3rd 6,600.00 Rohm Mechatech Phils., Inc. 6386 Sept. 3rd 5,500.00 3rd Qtr Total P1,231,769.00 Yield Co., Ltd. 6448 Oct. 4th P16,598.10 IBIDEN Phils., Inc. 6470 Oct. 4th 35,985.70 IBIDEN Phils., Inc. 6471 Oct. 4th 18,993.00 Rohm Mechatech Phils., Inc. 6490 Oct. 4th 47,000.00 Rohm Mechatech Phils., Inc. 6491 Oct. 4th 5,500.00 Suncall Philippines 6492 Oct. 4th 6,600.00 Rohm Mechatech Phils., Inc. 6581 Nov. 4th 47,000.00 Rohm Mechatech Phils., Inc. 6582 Nov. 4th 5,500.00 Suncall Philippines 6583 Nov. 4th 6,600.00 Rohm Mechatech Phils., Inc. 6672 Dec. 4th 37,600.00 Rohm Mechatech Phils., Inc. 6673 Dec. 4th 5,500.00 Suncall Philippines 6675 Dec. 4th 11,000.00 4th Qtr Total P243,876.80 Grand Total P2,219,807.00 =========== Since the Court cannot determine if the sales were really made to PEZA-registered or CDC-registered entities, the amount of P2,219,807.00 shall be disallowed for VAT zero-rating. Consequently, petitioner was able to properly substantiate its reported zero-rated sales for taxable year 2005 but only to the extent of P287,985,609.04, computed as follows: Zero-rated sales per returns P290,209,105.41 Less: Unsupported zero-rated sales 3,689.37 Zero-rated sales supported by VAT zero-rated sales invoices but without PEZA or CDC certifications 2,219,807.00 Substantiated zero-rated sales P287,985,609.04 ============== Consequently, only the portion of the input VAT claim attributable to the substantiated zero-rated sales of P287,985,609.04 will be considered for refund. The rate to be applied is based on the substantiated zero-rated sales over the total amount of reported zero-rated sales, computed as follows: Substantiated Zero-Rated Sales P287,985,609.04 Divided by Total Declared Zero-Rated Sales P290,209,105.41 Rate of Substantiated Zero-Rated Sales to Total Declared Zero-Rated Sales 99.23383% ============= Thus, only 99.23383% of the allowable input tax may be the proper subject of a claim for refund. aHTcDA Proceeding to the second requisite, the Court shall now determine whether petitioner's claimed unutilized input tax for the taxable year 2005 in the total amount of P18,115,604.81 was duly incurred or paid based on documentary evidence submitted. It is worth emphasizing that petitioner's claimed input VAT in the amount of P18,115,604.81 is higher than the excess input VAT of P18,003,084.42, which was declared in its amended Quarterly VAT Returns for taxable year 2005, as shown below: Year Exhibit 2005 VAT Sales Output VAT Input VAT Excess Input VAT "N" 1st Qtr P556,380.64 P55,638.06 P3,815,535.83 P3,759,897.77 "W" 2nd Qtr 206,710.91 20,671.09 3,793,674.71 3,773,003.62 "FF" 3rd Qtr 134,983.85 13,498.38 4,082,660.91 4,069,162.53 "OO" 4th Qtr 113,564.00 11,356.40 6,412,376.90 6,401,020.50 P1,011,639.40 P101,163.93 P18,104,248.35 P18,003,084.42 ============ ========== ============ ============ Considering that petitioner failed to amend its 2005 Quarterly VAT Returns to reflect the higher amount of P18,115,604.81 excess input VAT, the Court shall consider the lower amount of P18,003,084.42 as the actual determinable amount for purposes of computing petitioner's refundable input VAT. Thus, the P112,520.39 discrepancy between the input VAT claim of P18,115,604.81 and the reported input VAT of P18,003,084.42 shall be denied. As to the substantiation of the claimed input taxes, petitioner presented as evidence its Summary Lists 11 of Purchases for the months of January to December 2005 and pertinent official receipts and invoices, 12 which were examined and verified by the Court-commissioned Independent CPA (ICPA). 13 In his Amended Final Report 14 dated May 8, 2008, the ICPA recommended the disallowance of the following input taxes in the amount of P1,937,728.15, 15 thus : TaIHEA Nature Reference Amount 1. Input VAT on purchase of goods without original supporting documents Exhibit IIII-10-1 P495,156.91 2. Input VAT on purchases of goods evidenced by altered supporting documents Exhibit IIII-10-2 343,809.74 3. Input VAT on purchases of goods and services evidenced by tape receipts and other invalid documents Exhibit IIII-10-3 59,288.23 4. Input VAT on purchases of goods and services where no withholding taxes were recognized Exhibit IIII-10-4 51,681.07 5. Input VAT on purchases of goods and services supported by official receipts not in the name of the company Exhibit IIII-10-5 25,709.53 6. Others Exhibit IIII-10-6 962,082.67 Disallowed input VAT claims before allocation P1,937,728.15 =========== The Court concurs with the ICPA's findings insofar as the disallowance of petitioner's input VAT under Nos. 2, 3 and 5, in the amounts of P343,809.74, P59,288.23, and P25,709.53, respectively, for failure to meet the substantiation requirements under existing VAT law and regulations. As to No. 1 of the ICPA's findings, the input VAT of P495,156.91, which pertains to petitioner's purchases of goods without original supporting documents, shall be disallowed except for the amount of P7,272.73 related to petitioner's payment of management fees to Ingasco, Inc. for the second quarter of 2005, because the latter is duly supported by a VAT official receipt marked as Exhibit "2206". 16 As to the input VAT in the amount of P51,681.07 under No. 4 of the ICPA's findings, the same shall not be disallowed because the non-withholding of expanded withholding tax related to such transactions is not a ground to deny the claimed input tax and it does not preclude the petitioner to claim the same. With regard the input VAT in the amount of P962,082.67 under No. 6, only the amount of P923,914.60 shall be disallowed for the various reasons stated below: HDcaAI Month Supplier Exhibit Input VAT 1) Supported by VAT OR issued not in the name of petitioner Feb Wack-Wack Golf & Country Club 809 P466.82 2) Purchases of services supported by VAT ORs dated outside the period of claim January Daniel Merchandising 385 54.55 Nov. Ingasco, Inc. 4684 3,688.64 Nov. PCM Industrial Sales, Inc. 4694 905.50 Nov. Ingasco, Inc. 5073 7,272.73 Dec. Ingasco, Inc. 5154 3,630.68 Dec. Ingasco, Inc. 5155 844,937.60 Dec. Keihin Everett 5157 2,450.00 Dec. Keihin Everett 5158 810.00 Dec. PCM Industrial Sales 5167 205.00 Dec. Airfreight 2100 5168 261.21 Dec. The Richmonde Hotel 5170 1,857.83 Dec. Total Quality Machines, Inc. 5547-16 154.55 Dec. The Linden Suites 5547-22 855.00 Dec. The Richmonde Hotel 5547-23 5,054.25 Dec. The Richmonde Hotel 5547-24 2,810.97 Dec. Quasha Ancheta Pena Nolasco 5547-6 1,000.00 Dec. Somerset Millenium Makati 5547-7 698.90 3) Purchases of services without VAT Ors Feb. Ingasco, Inc. 607 18.18 May Ingasco, Inc. 2044 318.18 June Ingasco, Inc. 2611 45.00 4) Purchases supported by documents other than VAT ORs/Invoices (such as provisional receipt, statement of account, tape receipt) January Joyfoods Corp. 383 13.64 January Jollibee Foods Corp. 384 14.00 Feb. Discovery Tour, Inc. 450 390.09 Feb. Discovery Tour, Inc. 451 3,508.61 March PLDT 1281 954.54 May Ingasco, Inc. 2207 4,609.52 May Discovery Tour, Inc. 2220 1,180.18 June Republic Courier Service, Inc. 2663 199.50 5) Input VAT claim on insurance premium without VAT OR from insurance company July People's General Insurance Corp. 3180 3,420.75 6) Supported by VAT OR but the nature of purchase cannot be determined July C. Suiza Enterprises 3176 1,189.09 7) Without supporting documents August Airlift Asia 3220 8,159.00 Oct. Ingasco, Inc. 4627 7,272.73 Oct. Blackgold Tailoring 4656 3,718.18 Dec. Jollibee Foods Corp. 5547-31 23.27 Dec. Jollibee Foods Corp. 5547-32 23.27 Dec. National Bookstore 5547-33 14.18 Dec. Star Appliance Center 5547-34 599.09 Dec. Western Home Appliance Co. 5547-35 8,758.45 Dec. Jollibee Foods Corp. 5547-36 17.18 Dec. Rustan's Supermarket 5547-37 183.68 Dec. Golden Arches Devt. Corp. 5547-38 9.37 Dec. Groceria Corp. 5547-39 104.73 Dec. Pilipinas Makro 5547-40 2,055.96 Total P923,914.60 ========== The remaining input VAT in the amount of P38,168.07 (P962,082.67 less P923,914.60) represents petitioner's valid claim, as it is duly supported by VAT invoices or official receipts, to wit : Month Supplier Exhibit Input VAT January Airlift Asia Custom Brokerage, Inc. 1 P96.00 March Ingasco, Inc. 1010 2,160.00 April Ingasco, Inc. 1755 4,609.52 May SQ Resources, Inc. 2215 11,183.32 Ingasco, Inc. 1825 318.71 July Ingasco, Inc. 3055 5,126.55 Ingasco, Inc. 3098 6,125.90 August Airfreight 2100, Inc. 3212 312.86 Caloocan Gas Corporation 3217 2,411.91 Republic Courier 3669 192.50 Sept. Ingasco, Inc. 3983 240.71 Dec. Ingasco, Inc. 5180 1,088.25 Ingasco, Inc. 5529 4,301.86 Total P38,168.09 17 ========= In sum, the ICPA's recommended disallowances shall be reduced to P1,840,606.28, computed as follows: Input VAT Disallowances per ICPA's Report P1,937,728.15 Less: Input VAT Claims found to be valid by the Court Per ICPA's Finding No. 1 P7,272.73 Per ICPA's Finding No. 4 51,681.07 Per ICPA's Finding No. 6 38,168.07 97,121.87 Adjusted Input VAT Disallowances per ICPA's Report P1,840,606.28 =========== Additionally, for various reasons stated below, petitioner's claim should be reduced by the following input taxes totaling P62,026.32, viz. : SaETCI Month Supplier Exhibit Input VAT 1) Supported by documents other than VAT invoice/OR (such as statement of account, provisional receipt, Non-VAT OR) January BPI/IMS Insurance Corporation 4 P2,175.00 January BPI/IMS Insurance Corporation 5 18,496.50 April Republic Courier Service, Inc. 1721 5.00 November Quasha Ancheta Pena Nolasco 5122 1,000.00 2) Purchase of goods supported by VAT invoice issued not in the name of petitioner April Fino Leatherware 1725 367.05 3) Purchase of services supported by VAT OR and invoice bearing "TIN-V" instead of "TIN-VAT" April Ed Printing Press 1735 376.36 4) Purchase of services without VAT OR but supported by an invoice with "TIN-V" instead of "TIN-VAT" June Ed Printing Press 2684 240.91 5) Without supporting documents May C. Suiza Enterprises 2230 460.91 December Ingasco, Inc. 5323 2,558.10 December Ingasco, Inc. 5324 2,771.24 December Ingasco, Inc. 5325 2,131.83 December Ingasco, Inc. 5326 2,558.10 December Ingasco, Inc. 5327 2,664.67 December Ingasco, Inc. 5328 852.78 December Ingasco, Inc. 5329 3,410.88 December Ingasco, Inc. 5330 3,525.87 December Ingasco, Inc. 5331 4,836.36 December Ingasco, Inc. 5345 3,051.65 December Ingasco, Inc. 5370 1,835.16 December Ingasco, Inc. 5465 5,077.27 December Ingasco, Inc. 5521 3,630.68 Total P62,026.32 ========== Thus, of the total claimed input VAT of P18,115,604.81, only the input VAT of P16,100,451.82 was properly substantiated in accordance with existing VAT law and regulations. Hence, to illustrate: Input VAT Claim per Petition for Review P18,115,604.81 Less: Disallowances per ICPA's Report, as adjusted 1,840,606.28 Additional Disallowances per this Court's findings 62,026.32 Difference between the input VAT claim per Petition for Review vs. excess input VAT per returns Per Petition for Review P18,115,604.81 Per Returns 18,003,084.42 112,520.39 2,015,152.99 Substantiated Input VAT P16,100,451.82 ============ Anent the third requisite, the substantiated input VAT of P16,100,451.82, being net of petitioner's output VAT liability for taxable year 2005, cannot be wholly attributed to the zero-rated sales declared by petitioner in the amount of P290,209,105.41, thus, only the input VAT of P15,977,094.98 is attributable to the substantiated zero-rated sales of P287,985,609.04, as computed below: cAaTED Substantiated Excess Input VAT attributable to Total Declared Zero-Rated Sales P16,100,451.82 Multiply by Rate of Substantiated Zero-Rated Sales to Total Declared Zero-Rated Sales x 99.23383% Excess Input VAT attributable P15,977,094.98 to Substantiated Zero-Rated Sales ============= Finally as to the fourth requisite, the Court found petitioner's input VAT for the 1st Quarter to 4th Quarter of 2005 was not utilized against the output VAT in the succeeding quarters. It appears from the Quarterly VAT Returns 18 of petitioner that it deducted its VAT claim for the current quarter which in effect prevented the carry-over of the claimed refund to the succeeding quarters. Consequently, the claimed input taxes were not utilized even in the succeeding quarters. 19 In sum, therefore, the Court finds petitioner to have complied with the five (5) requisites in a claim for refund or tax credit and therefor entitled to its claim over its unutilized input VAT attributable to zero-rated sales to PEZA-registered and CDC-registered entities for taxable year 2005 in the reduced amount of P15,977,094.98. WHEREFORE , premises considered, petitioner's Motion for Reconsideration is hereby PARTIALLY GRANTED . Accordingly, the Court's Decision dated March 26, 2010 is hereby RECALLED and SET ASIDE and the instant Petition for Review as well as the Amended Petition for Review is hereby PARTIALLY GRANTED . Respondent Commissioner of Internal Revenue is hereby ORDERED to REFUND or to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner Pilipinas Total Gas, Inc. the reduced amount of FIFTEEN MILLION NINE HUNDRED SEVENTY SEVEN THOUSAND NINETY FOUR PESOS & NINETY EIGHT CENTAVOS (P15,977,094.98) , which represents the unutilized input VAT attributable to zero-rated sales for taxable year 2005. SO ORDERED . (SGD.) ERNESTO D. ACOSTA Presiding Justice Caesar A. Casanova, J., concurs. Lovell R. Bautista, J., with separate opinion. Separate Opinions BAUTISTA , J. : In addressing the fifth essential requirement, I hereby cite the case of Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue , 1 which made the following disquisitions: It is true that unlike corporate income tax, which is reported and paid on installment every quarter, but is eventually subjected to a final adjustment at the end of the taxable year, VAT is computed and paid on a purely quarterly basis without need for a final adjustment at the end of the taxable year. However, it is also equally true that until and unless the VAT-registered taxpayer prepares and submits to the BIR its quarterly VAT return, there is no way of knowing with certainty just how much input VAT the taxpayer may apply against its output VAT; how much output VAT it is due to pay for the quarter or how much excess input VAT it may carry-over to the following quarter; or how much of its input VAT it may claim as refund/credit . It should be recalled that not only may a VAT-registered taxpayer directly apply against his output VAT due the input VAT it had paid on its importation or local purchases of goods and services during the quarter; the taxpayer is also given the option to either (1) carry over any excess input VAT to the succeeding quarters for application against its future output VAT liabilities, or (2) file an application for refund or issuance of a tax credit certificate covering the amount of such input VAT. Hence, even in the absence of a final adjustment return, the determination of any output VAT payable necessarily requires that the VAT-registered taxpayer make adjustments in its VAT return every quarter, taking into consideration the input VAT which are creditable for the present quarter or had been carried over from the previous quarters. Moreover, when claiming refund/credit, the VAT-registered taxpayer must be able to establish that it does have refundable or creditable input VAT, and the same has not been applied against its output VAT liabilities information which are supposed to be reflected in the taxpayer's VAT returns. Thus, an application for refund/credit must be accompanied by copies of the taxpayer's VAT return/s for the taxable quarter/s concerned . Lastly, although the taxpayer's refundable or creditable input VAT may not be considered as illegally or erroneously collected, its refund/credit is a privilege extended to qualified and registered taxpayers by the very VAT system adopted by the Legislature. Such input VAT, the same as any illegally or erroneously collected national internal revenue tax, consists of monetary amounts which are currently in the hands of the government but must rightfully be returned to the taxpayer. Therefore, whether claiming refund/credit of illegally or erroneously collected national internal revenue tax, or input VAT, the taxpayer must be given equal opportunity for filing and pursuing its claim . (Boldfacing supplied.) Pursuant thereto, the Supreme Court ruled that it is more practical and reasonable to count the two (2)-year prescriptive period for filing a claim for refund/credit of input value-added tax ("VAT") on zero-rated or effectively zero-rated sales from the date of filing of the return and payment of the tax due. Based on the records of the case, petitioner filed its VAT Returns for the first (1st) to fourth (4th) quarters of the taxable year 2005 on the following dates, viz. : April 21, 2005 for the first (1st) quarter, July 23, 2005 for the second (2nd) quarter, October 21, 2005 for the third (3rd) quarter, and January 23, 2006 for the fourth (4th) quarter. ScAHTI Counting two (2) years from the afore-stated dates, petitioner had until April 21, 2007, July 23, 2007, October 21, 2007, and January 23, 2008, respectively, within which to file its claims for refund/credit for the said quarters of the taxable year 2005. The foregoing reckoning period is in line with the principle that when there has been justifiable reliance on the Court's decisions, and those who have so relied may be substantially harmed if retroactive effect is given, where the purpose of the new rule can be adequately effectuated without giving it retroactive operation, or where retroactive operation might greatly burden the administration of justice, then it is the Court's duty to apply the new rule prospectively. 2 Further, the Court cannot expect the taxpayer-claimant to observe a prescriptive period that has yet to be set by the Supreme Court at that time. Not even the taxpayer-claimant itself could have foreseen that after it had filed its claims before the administrative and judicial fora, a subsequent ruling, either modifying or overruling a previous one, would be issued that would put to naught its claims. It would be the height of injustice for this Court to impose a ruling that was yet in effect at the time the claims were filed. Considering that when petitioner filed its administrative claims for refund or issuance of tax credit certificate of unutilized input VAT and the subsequent Petition for Review, the then established ruling is that the two (2)-year period is to be reckoned not from the close of the pertinent quarter, 3 but from the date of filing of the relevant return. Further, in not a few instances did this Court rule that the judicial recourse to this Court by a taxpayer-claimant within thirty (30) days, either from the lapse of the one hundred twenty (120)-day period within which the Commissioner of Internal Revenue shall decide on the claim, or after the receipt of the decision denying the same, pursuant to Section 112 (C) 4 of the 1997 National Internal Revenue Code ("NIRC"), as amended, is directory and permissive, and not mandatory nor jurisdictional, as long as it is made within the two (2)-year prescriptive period prescribed under Sections 112 and 229 of the same Code. 5 There is no need to wait for the denial of the claim by the Commissioner of Internal Revenue or even the inaction after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal with this Court, 6 for claims for refund or tax credit, both in the administrative and judicial fora must be filed within the two (2)-year period; 7 otherwise, the Court will be deprived of jurisdiction to entertain the case. 8 aEcTDI In conclusion, I likewise find that the administrative claim filed on July 25, 2006, and the subsequent Petition for Review filed on December 21, 2006, made within the prescribed period. I, therefore, concur with the result of the Amended Decision that petitioner is entitled to a refund or issuance of a tax credit certificate in the amount of P15,977,094.98. Accordingly, I vote that the Motion for Reconsideration filed by petitioner be PARTIALLY GRANTED . Footnotes 1. G.R. No. 184823, October 6, 2010. 2. G.R. No. 172129, September 12, 2008. 3. Exhibit "L". 4. Exhibit "U". 5. Exhibit "DD". 6. Exhibit "MM". 7. Exhibits "Doc. Ref. Nos. 5548 to 6704". 8. Exhibit "IIII-9-A". 9. Exhibits "IIII-9-1" to "IIII-9-33". 10. Exhibits "IIII-9-34" to "IIII-9-36". 11. Exhibits "IIII-5-1" to "IIII-5-12". 12. Exhibits "Doc. Ref. Nos. 1 to 5547-40". 13. Mr. Armando T. Fernando, of DY GO FERNANDO and COMPANY. 14. Exhibit "LLLL". 15. Exhibit "LLLL", p. 4. 16. Docket, p. 622. 17. Difference of P.02 due to rounding-off. 18. Exhibits "N", "W" and "FF", all under line 25A; Exhibit "OO", line 23D. 19. Exhibit "NNNN-2". BAUTISTA, J.: 1. G.R. Nos. 141104 & 148763, June 8, 2007, 524 SCRA 73. 2. Magtoto v. Manguera, et al. , G.R. Nos. L-37201-02, L-37424, and L-38929, March 3, 1975, 63 SCRA 4, Concurring Opinion penned by Justice Felix Q. Antonio, with Justices Antonio P. Barredo and Cecilia Muoz-Palma, concurring. 3. Commissioner of Internal Revenue v. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, Inc.) , G.R. No. 172129, September 12, 2008, 565 SCRA 154. 4. As amended by Republic Act No. 9337. 5. Commissioner of Internal Revenue v. Aichi Forging Company of Asia, Inc. , CTA EB No. 416, February 4, 2009. 6. Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc. , CTA EB No. 426, May 29, 2009. 7. Commissioner of Internal Revenue v. Victorias Milling Co., Inc. , No. L-24108, January 3, 1968, 22 SCRA 12. 8. Commissioner of Internal Revenue v. Accenture, Inc. , CTA EB No. 410 (CTA Case No. 7387), March 18, 2009.