Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

DECISION

FERRER-FLORES, J.:

The Petition for Review filed through registered mail on October 8, 2021, and received by this Court on October 20, 2021, prays for the refund or issuance of a tax credit certificate in the amount of P718,630.38, allegedly representing petitioner's creditable input value-added tax (VAT) paid attributable to its zero-rated sales for the period January 1, 2019 to March 31, 2019 for taxable year (TY) 2019. 1

THE PARTIES

Petitioner Air Drilling Associates Pte. Ltd. is a foreign company organized and existing under the laws of the Republic of Singapore, and was duly licensed by the Philippine Securities and Exchange Commission to establish a branch office in the Philippines to pursue geothermal aerated drilling services and related opportunities therein.2 It is VAT-registered with

Air Drilling Associates Pte Ltd vs. Commissioner of Internal Revenue the Bureau of Internal Revenue (BIR) under Tax Identification Number (TIN) 251-15 6-024-00000.3 Respondent is the duly appointed Commissioner of the BIR vested under the appropriate laws with the authority to carry out the functions, duties, and responsibilities of said office, including, inter alia, the power to decide disputed assessments, grant tax refunds and issue tax credit certificates, pursuant to the provisions of the National Internal Revenue Code (NIRC) of 1997, as amended, and other tax laws, rules and regulations. 4

ANTECEDENTS (ADMINISTRATIVE LEVEL)

On May 6, 2021, petitioner filed with the BIR the letter dated May 5, 2021,5 requesting for the refund of the amount of P718,630.38, allegedly representing the unutilized input VAT credits arising from its local purchases of goods and services, purchases of services rendered by non- residents and importation of non-capital goods attributable to its zero-rated sale of service to the Energy Development Corporation (EDC), for the first quarter of TY 2019, or the period from January 1, 2019 to March 31, 2019. Subsequently, the letter dated July 8, 2021 was issued by the BIR, through Regional Director Maridur V. Rosario,6 denying petitioner's administrative claim, for lack of legal and factual basis.

PROCEEDINGS BEFORE THIS COURT

Petitioner filed through registered mail the present Petition of Review on October 8, 2021.7 Respondent filed his Answer (with Special and Affirmative Defenses) on March 1, 2022.8 On February 17, 2022, respondent transmitted to this Court the BIR Records for this case consisting of 569 pages in one folder.' \

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

The Pre-Trial Conference was set and held on May 23, 2022. 10 Prior thereto, petitioner's Pre-Trial Brief was filed on May 6, 2022, 11 while respondent's Pre-Trial Briefwas submitted on May 18, 2022Y On June 3, 2022, the parties filed their Joint Stipulation of Facts and Issues, 13 which was approved and adopted by this Court in the Pre-Trial Order issued on June 22, 2022,14 thereby terminating the Pre-Trial. Trial then ensued, with the parties presenting their respective documentary and testimonial evidence.

Petitioner offered the testimonies of the following individuals, namely: (¹) Ms. Rose belle Liu, 15 its Office Manager; and, (²) Atty. Adan T. Delamide, 16 the

Court-commissioned

Independent

Certified

Public

Accountant (ICPA)P

The Report of the ICP A was filed through registered mail on October 27,2022. 18 On March 15, 2023, petitioner filed its Formal Offer of Evidence, 19 to which respondent filed his Comment (To Petitioner's Formal Offer of Evidence) on March 28, 2023.20 In the Resolution dated June 23, 2023,21 the Court admitted petitioner's offered exhibits, except Exhibits "P-27" and "P- 285 to P-286", for not being found in the records of the case. For his part, respondent offered the testimony of Revenue Officer Kim Bradelle S. Bayran.22 On March 18, 2024, respondent filed his Formal Offer of Evidence,23 to which petitioner then filed its Comment to Respondent's Formal Offer of~

CT A Case No. I 0609 Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Evidence on March 21,2024.24 In the Resolution dated May 17,2024,25 the Court admitted all of respondent's offered exhibits. The Memorandum for Petitioner was filed on June 19, 2024,26 while respondent's Memorandum was filed through registered mail on June 25, 2024.27 This case was considered submitted for decision on July 3, 2024.28

THE STIPULATED ISSUE

The sole issue to be resolved by the Court as stipulated by the parties is whether petitioner is entitled to its claim for refund of its alleged unutilized input VAT allegedly acquired during the first quarter of TY 2019 amounting to P718,630.38.29 Petitioner's arguments Petitioner argues that its administrative and judicial claims for refund were timely filed in accordance with Section 112 of the NIRC of 1997, as amended; that it is a VAT -registered entity; that it established rendering services subject to VAT zero-rate and substantiated the present claim with relevant supporting documents; that it substantiated its input VAT paid/incurred during the first quarter of TY 2019, which are all attributable to its VAT zero-rated sales; and, that its input VAT acquired during the first quarter of TY 20 19 were not applied against any output VAT in the succeeding periods.

Respondent's counter-arguments Respondent contends that this Court has no jurisdiction to entertain the instant petition for being filed out of time; that assuming this Court has jurisdiction to entertain the instant petition, the same must be denied as petitioner failed to fully substantiate its claim for VAT refund; that petitioner's sales to EDC for the first quarter of TY 2019 are not zero-rated; and that tax refunds are construed strictissimi juris against the taxpayer, hence, entitlement to tax refund must be duly proven. ~~

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

THE COURT'S RULING

The Petition for Review is partly meritorious. Requisites under the law for the refund or issuance of tax credit certificate of input VAT.

Section 112 of the NIRC of 1997, as amended by Republic Act (RA) No. 10963,30 provides, in part, as follows:

SEC. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-Rated or Effectively Zero-Rated Sales. -

Any VAT-

registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(l), (2) and (b) and Section 108(B)(l) 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.

XXX

XXX

XXX

(C) Period within which Refund of Input Taxes shall be Made.- In proper cases, the Commissioner shall grant a refund for creditable input taxes within ninety (90) days from the date of submission of the official receipts or invoices and other documents in support ofthe application filed in accordance with Subsections (A) and (B) hereof: Provided, That should the Commissioner find that the grant of refund is not proper, the Commissioner must state in writing the legal and factual basis for the denial.

In case of full or partial denial of the claim for tax refund, the taxpayer affected may, within thirty (30) days from the receipt of the\

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue decision denying the claim, appeal the decision with the Court of Tax Appeals: Provided, however, That failure on the part of any official, agent, or employee of the BIR to act on the application within the ninety (90)- day period shall be punishable under Section 269 of this Code. Based on the foregoing provision, jurisprudence has laid down certain requisites which the taxpayer-applicant must comply with to successfully obtain a credit/refund of input VAT.

Said requisites are classified into certain categories, to wit:

As to the timeliness of the filing of the administrative and judicial claims:

1. the refund claim is filed with the BIR within two years after the close of the taxable quarter when the sales were made;³ 1

2. in case of full or partial denial of the refund claim rendered within a period of 90 days from the date of submission of the official receipts (ORs) or invoices and other documents in support of the application, the judicial claim shall be filed with this Court within 30 days from receipt of the decision;32 With reference to the taxpayer's registration with the BIR:

3. the taxpayer is a VAT -registered person;33 In relation to the taxpayer's output VAT:

4. the taxpayer is engaged in zero-rated or effectively zero- rated sales·34 '

5. for zero-rated sales under Section 1 06(A)(2)(1) and (2); 106(B);35 and 108(B)(l) and (2), the acceptable foreign"" 31 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007; San Roque Power Corporation vs. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009; AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 2010.

32 Refer to Energy Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 203367, March 17, 2021; Commissioner of Internal Revenue vs. CE Casecnan Water And Energy Company, Inc., G.R. No. 212727, February I, 2023; and Commissioner of Internal Revenue vs. Vestas Services Philippines, Inc., G.R. No. 255085, March 29, 2023. 33 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra.

34 !d.

35 Section 1 06(B) cited in Section 112(A) of RA No. 8424 was later amended by RA No. 9337 to pertain to Section 106(A)(2)(b). Accordingly, Section 112(A), as amended by RA No. 9337, reads as follows: "SEC. 112. Refunds or Tax Credits o.flnput 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 Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue currency exchange proceeds have been duly accounted for in accordance with the Bangko Sentral ng Pilipinas (BSP) rules and regulations;36 As regards the taxpayer's input VAT being refunded:

6. the input taxes are not transitional input taxes;37

7. the input taxes are due or paid;38

8. the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume· 39 and ' '

9. the input taxes have not been applied against output taxes during and in the succeeding quarters.40 In addition, in claims for VAT refund/credit, applicants must satisfy the substantiation and invoicing requirements under the NIRC of 1997, as amended, and other implementing rules and regulations. 41

Petitioner's

compliance with all the VAT invoicing requirements is, thus, required to be able to file a claim for input taxes attributable to zero-rated sales.42 The \t\ --------------------------------------------------------------------- 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 ofzero-rated sales under Section I06(A)(2)(a)(I), (2) and (b) and Section 108(B)(l) 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 1 08(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." (Emphasis added) However, in view of the amendments introduced by RA No. I 0963, Section I 06(A)(2)(b) is now deleted.

36 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc. vs. Commissioner of Internal Revenue, supra. 37 !d.

38 !d.

39 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; and San Roque Power Corporation vs. Commissioner of Internal Revenue, supra. 40 Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue, supra; San Roque Power Corporation vs. Commissioner of Internal Revenue, supra; and AT&T Communications Services Philippines, Inc., supra.

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue invoicing and substantiation requirements should be followed because it is the only way to determine the veracity of the taxpayer's claims.43 Moreover, it must be pointed out that compliance with all the VAT mvmcmg requirements provided by tax laws and regulations is mandatory.44 Strict compliance with substantiation and invoicing requirements is necessary considering the VAT's nature and the VAT system's tax credit method, where tax payments are based on output and input taxes and where the seller's output tax becomes the buyer's input tax that is available as tax credit or refund in the same transaction. It ensures the proper collection of taxes at all stages of distribution, facilitates computation of tax credits, and provides accurate audit trail or evidence for BIR monitoring purposes. 45 Furthermore, it must be emphasized that in cases filed before this Court, which are litigated de novo, party-litigants must prove every minute aspect of their case.46 Thus, it behooves petitioner to show compliance with each of the foregoing requisites and invoicing requirements. As a corollary, the absence of any of the said requisites is already a valid ground to deny the refund claim.

Petitioner's

administrative and judicial claims were timely filed.

To reiterate, the first requisite pertains to the filing of the claim for tax credit or refund of input VAT before the BIR, within two years from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made.

The. present claim covers the taxable period from January 1, 2019 to March 31, 2019. Counting two years from the close of the said quarter, petitioner had until March 31, 2021, within which to file its administrative claim for refund.\ 43 Nippon Express (Philippines) Corporation vs. Commissioner of Internal Revenue, G.R. No. 191495, July 23,2018.

44 Eastern Telecommunications Philippines, Inc. vs. Commissioner of Internal Revenue, G.R. No. 183531, March 25,2015.

45 Team Energy Corporation vs. Commissioner of Internal Revenue, et seq., supra. 46 Edison (Bataan) Cogeneration Corporation vs. Commissioner of Internal Revenue, et seq., G.R. Nos. 201665 and 201668, August 30, 20 17; Commissioner of Internal Revenue vs. Philippine National Bank, G.R. No. 180290, September 29, 2014; Commissioner of Internal Revenue vs. United Salvage and Towage (Phils.), Inc., G.R. No. 197515, July 2, 2014; Dizon vs. Court of Tax Appeals, et al., G.R. No. 140944, April 30, 2008; Atlas Consolidated Mining and Development Corporation vs. Commissioner of Internal Revenue, G.R. No. 145526, March 16, 2007; and Commissioner of Internal Revenue vs. Manila Mining Corporation, G .R. No. 153204, August 31, 2005.

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

However, pursuant to Section 4(tt) ofRA No. 1149447 signed into law on September 11, 2020, the statutory deadlines and timelines for the filling and submission of any document were extended, to wit: (tt) Moving of statutory deadlines and timelines for the filing and submission of any document, the payment of taxes, fees, and other charges required by law, and the grant of any benefit, in order to ease the burden on individuals under CQ48 ;

To implement the same, Revenue Regulations (RR) No. 27-202049 dated October 6, 2020 was issued, where Section 5 thereof provides, in part, that [i]f the deadline for the filing of the VAT refund claim falls within the Enhanced Community Quarantine (ECQ) or Modified Enhanced Community Quarantine (MECQ) period, filing of the claim shall be extended for 3 0 days after the lifting of the ECQ or MECQ. This applies to the affected areas of the processing offices or to the registered business address of the taxpayer- claimant where the restrictions are strictly enforced. Relative thereto, Revenue Memorandum Circular (RMC) No. 39- 202150 dated March 18, 2021 provides that the filing of VAT Refund, where the two-year period within which to file the claim falls on March 31, 2021, shall be extended until April 12, 2021.

Thereafter, RMC No. 45-2021 51 was issued on April 5, 2021, which provides that the extended deadline for filing of VAT refund applications with the VAT Credit Audit Division (VCAD) which falls due on April 12, 2021 per RMC No. 39-2021 is 30 days from the lifting ofthe ECQ. The National Capital Region (NCR), among others, was then placed under MECQ from April 12, 2021 to April 30, 2021, and from May 1, 2021 to May 14, 2021, pursuant to the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) Resolution Nos. 109- A dated April 10, 2021 and 113-A dated April29, 2021. \ 47 AN ACT PROVIDING FOR COVID-19 RESPONSE AND RECOVERY INTERVENTIONS AND PROVIDING MECHANISMS TO ACCELERATE THE RECOVERY AND BOLSTER THE RESILIENCY OF THE PHILIPPINE ECONOMY, PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES, otherwise known as "Bayanihan to Recover as One Act". 48 Community Quarantine.

49 SUBJECT:

Regulations Suspending the Filing and Ninety (90)-Day Processing of Value-Added Tax (VAT) Refund Claims Anchored Under Section 112 of the Tax Code of 1997, as Amended, in Relation to Section 4 (tt) of Republic Act (R.A.) No. 11494, Otherwise Known as the "Bayanihan to Recover as One Act".

50 SUBJECT:

Extension of the Deadline for the Filing of Applications and Suspension of the Ninety (90)-Day Processing of Value-Added Tax (VAT) Refund Claims Pursuant to Section 112 of the Tax Code of 1997, as Amended by the R.A. No. 10963 (TRAIN Law) with the VAT Credit Audit Division (VCAD).

51

SUBJECT:

Extension of the Deadline for the Filing of Position Papers, Replies, Protests, Documents and Other Similar Letters and Correspondences in Relation to Ongoing BIR Audit Investigations, and Filing of VAT Refund with VAT Credit Audit Division (VCAD).

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Subsequently, the NCR, among others, was placed under General Community Quarantine (GCQ), starting May 15, 2021 until May 31, 2021, pursuant to IATF Resolution No. 115-A dated May 13,2021. Hence, petitioner's administrative claim for refund was timely filed within the extended deadline on May 6, 2021.52 As for the second requisite, the same necessitates that the judicial claim must have been filed within 30 days from receipt of respondent's decision or after the expiration of the 90-day period from the date of submission of the ORs or invoices and other documents in support of the application for refund under Section 112(C) of the NIRC of 1997, as amended by RA No. 10963.

Thus, from the filing of petitioner's administrative claim on May 6, 2021, respondent had 90 days therefrom, or until August 4, 2021, to decide on petitioner's claim for refund.

In the present case, the denial letter was issued on July 8, 2021,53 which was within the 90-day period to decide, and was received by petitioner on August 2, 2021. 54 As such, petitioner had 30 days from such receipt, or until September 1, 2021, to file an appeal before this Court. However, due to the physical closure of the Courts brought about by the COVID-19 pandemic, the following Office of the Court Administrator (OCA) Circulars and Supreme Court Administrative Circulars (ACs) were issued suspending the filing periods for pleadings and motions for courts in the NCR, among others, until the physical reopening of the relevant court, to wit:

Issuance

Date Issued

Subject

OCA

Circular

August 20, 2021

RE:

Court

No. 114-2021

Operations

Starting

23 August 2021

52 Exhibits "P-12" and "R-1", BIR Records, pp. 440 to 448. 53 Exhibit "P-13 ", Docket, 4 79 to 481.

54 !d.

Content

Considering that the

NCR

has been placed under MECQ beginning

August

21, 2021, all courts in the NCR, except the Supreme Court, shall be

PHYSICALLY

CLOSED to court users for the duration of the MECQ. xxx

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Issuance

Date Issued

Sub.iect

OCA

Circular

August 28, 2021

RE: Reiteration of

No. 117-2021 OCA Circular No.

114-2021, Dated 20

August 2021

OCA

Circular

September 7, 2021

RE:

Court

No. 119-2021

Operations

Beginning

8

September 2021

Content

The time for filing and service of pleadings and motions during this period is

SUSPENDED

and shall resume after seven calendar days counted from the first day of the physical reopening of the relevant court.

Considering that the

NCR

and other identified areas shall remain under MECQ until September 7, 2021, OCA Circular No. 114-2021, dated 20 August 2021, IS hereby reiterated.

All

courts m the NCR and identified areas under MECQ, except the Supreme Court, shall be

PHYSICALLY

CLOSED to court users for the duration ofthe MECQ. xxx The time for filing and service of pleadings and motions during this period lS

SUSPENDED

and shall resume after seven calendar days counted from the first day of the physical reopemng of the relevant court.

In v1ew of the continued surge of confirmed COVID- 19 cases in different variants, and considering that the proposed granular or localized lockdown will be pilot-tested in the NCR which is on "\ Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Issuance

Date Issued

Subject

Content

Alert Level 4 (except the City of Manila), ALL COURTS m the NCR, except the Supreme Court, shall rem am

PHYSICALLY

CLOSED to court users until September 30, 2021, notwithstanding the NCR will be under

GCQ

beginning September 8, 2021.

XXX

The time for filing and service of pleadings and motions during this period is

SUSPENDED

and shall resume after seven calendar days counted from the first day of the physical reopemng of the relevant court,

XXX

AC No. 72-2021 September 15, 2021

RE:

Court Notwithstanding that

Operations

the NCR will be

Beginning

16 under

GCQ

with

September 2021

Alert

Level

4 beginning

September

2021,

COURTS

NCR will 16,

ALL

m the continue to remain

PHYSICALLY

CLOSED to court users until further notice.

XXX

XXX

XXX

The time for filing and service of pleadings and motions during this period

REMAINS

SUSPENDED

and shall resume after seven calendar days \

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Issuance

Date Issued

AC No. 75-2021 October 1, 2021 AC No. 83-2021 October 18, 2021

Subject

Content

counted from the first day of the physical reopening of the relevant court, unless otherwise expressly ordered by the relevant court which shall consider the physical closure of the courts and the granular lockdowns in the different areas.

RE:

Court

Notwithstanding any

Operations

modification of the Beginning 4 October alert level guidelines 2021 m the NCR, all

RE:

Court

Operations

Beginning

October

20, 2021 until October 29, 2021 appellate collegiate courts within the NCR, except the

Supreme

Court, shall, beginning

October

4, 2021 until further notice, remain

PHYSICALLY

CLOSED to court users EXCEPT for urgent matters where in-court hearings may be deemed necessary, at the sound discretion of

the Presiding Justice or the Chairpersons

of the different divisions.

XXX

XXX

XXX

The time for filing and service of pleadings and motions during this period shall

REMAIN

SUSPENDED until further notice.

Considering that the

NCR

has been placed under Alert

Level

3 of the

IATF's

COVID-19

Alert Levels System, all appellate

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Issuance

Date Issued

Sub.iect

Content

collegiate courts within the NCR, beginning

October

20, 2021 until October 29, 2021, may conduct m- court proceedings on urgent matters and on other matters as may be determined by the presiding justice or the chairpersons of the different divisions, but in-court attendance shall be limited to lawyers, parties, and witnesses required to participate in-court.

All others who are not required to be in- court but wish to observe the proceedings may do so through videoconferencing, subject to existing guidelines.

The suspension of the time for filing and service of pleadings and motions, regardless of the alert level or community quarantine, is LIFTED.

Pursuant

to

Administrative

Circular

No.

72- 2021, the period for filing and service shall resume seven calendar days from October 20, 2021.

XXX

Based on the foregoing issuances, all appellate collegiate courts within the NCR reopened on October 20, 2021, and the filing of pleadings and motions resumed on October 27, 2021. Considering that petitioner timely filed its judicial claim for refund through the present Petition for Review on ,

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

October 8, 2021,55 this Court has jurisdiction to take cogmzance of the present case.

Such being the case, the Court finds that petitioner complied with the above-stated first and second requisites.

Petitioner is a VAT-registered entity.

Anent the third requisite, it is undisputed that petitioner is a VAT- registered taxpayer, having been issued a Certificate of Registration No. OCN 9RC0000652585E with TIN 251-156-024-00000 by the BIR Revenue Region No. 8, RDO No. 47.56 Petitioner, thus, complied with the said requisite.

Petitioner was able to establish that it was engaged in zero-rated sales during the first quarter ofTY 2019.

The fourth requisite requires that the taxpayer is engaged in zero-rated or effectively zero-rated sales.

In its letter application for VAT refund, 57 petitioner claims that, during the period from January 1, 2029 to March 31, 2019, it had accumulated excess or unutilized input VAT in the amount of P718,630.38 arising from its local purchases of goods and services, purchases of services rendered by non-residents and importation of non-capital goods directly attributable to its sale of services to EDC, a Renewable Energy (RE) Developer; and thus, its sale of services to EDC is considered VAT zero- rated.

As such, petitioner invokes Section 108(B)(3) ofthe NIRC of 1997, as amended and Section 15(g) ofRA No. 9513 or the Renewable Energy Act of 2008, which grants certain tax incentives to RE developers, such as EDC. Said provisions read, in part, as follows:

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

XXX

XXX

r

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT -registered persons shall be subject to zero percent (0%) rate:

XXX

XXX

XXX

(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; (Emphases added.)

CHAPTER VII

GENERAL INCENTIVES

Section 15. Incentives for Renewable Energy Projects and Activities. - RE developers of renewable energy facilities, including hybrid systems, in proportion to and to the extent of the RE component, for both power and non-power applications, as duly certified by the DOE, in consultation with the BOI, shall be entitled to the following incentives:

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XXX

XXX

(g) Zero Percent Value-Added Tax Rate. -The sale of fuel or power generated from renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging energy sources using technologies such as fuel cells and hydrogen fuels, shall be subject to zero percent (0%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337.

All RE Developers shall be entitled to zero-rated value added tax on its purchases of local supply of goods, properties and services needed for the development, construction and installation of its plant facilities.

This provision shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors. (Emphases and underscoring added.) Relative to the foregoing provisions, Part III, Rule 5, Section 13.G of the Department Circular (DC) No. DC2009-05-0008 dated May 25, 2009 issued by the Department of Energy (DOE), or the Implementing Rules and Regulations (IRR) ofRA No. 9513, provides:

SEC. 13.

Fiscal Incentives for Renewable Energy Projects and

Activities

DOE-certified existing and new RE Developers of RE facilities, including Hybrid Systems, in proportion to and to the extent of the RE component, for both Power and Non-Power Applications, shall be entitled to the following incentives: '

Air Drilling Associates Pte Ltd vs. Commissioner of Internal Revenue

XXX

XXX

G. Zero Percent Value-Added Tax Rate

XXX

The following transactions/activities shall be subject to zero percent (0%) value-added tax (VAT), pursuant to the National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337:

XXX

XXX

XXX

(b) Purchase of local goods, properties and services needed for the development, construction, and installation of the plant facilities of RE Developers; and

(c) Whole process of exploration and development of RE sources up to its conversion into power, including, but not limited to, the services performed by subcontractors and/or contractors. (Emphases added.)

Based on the foregoing provisions, all RE Developers are entitled to zero-rated VAT on their purchases of local supply of goods, properties and services needed for the development, construction and installation of plant facilities. Furthermore, the law declares that the VAT zero-rating applies to the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors. However, the same Part III, Rule 5 ofthe IRR ofRA No. 9513 further states the conditions for the availment of incentives and other privileges under the said law. Section 18(A), (B), and (C) thereof reads: SEC. 18. Conditions for A vailment of Incentives and Other

Privileges

A.

Registration/ Accreditation with the DOE

For ourooses of entitlement to the incentives and privileges under the Act, existing and new RE Developers, and manufacturers, fabricators, and suppliers of locally-produced RE equipment shall register with the DOE, through the

Renewable

Energy

Management Bureau (REMB). The following certifications shall be issued:

B.

DOE Certificate of Registration- issued to an RE Developer holding a valid RE Service/Operating Contract. For existing RE projects, the new RE Service/Operating Contract shall pre-terminate and replace the existing Service Contract that the RE Developer has executed with the DOE subject to the Transitory Provision in Rule 13, Section 39. \

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

The

DOE

Certificate of Registration

shall be issued immediately upon award of an RE Service/Operating Contract covering an existing or new RE project or upon approval of additional investment.

Any investment added to existing RE projects shall be subject to prior approval by the DOE.

XXX

XXX

XXX

C.

Registration with the Board of Investments (BOI)

The RE sector is hereby declared a priority investment sector that will regularly form part of the country's Investment Priority Plan (IPP), unless declared otherwise by law.

To qualify for the availment of the incentives under Sections 13 and 15 of this IRR, RE Developers and manufacturers, fabricators, and suppliers of locally-produced RE equipment, shall register with the BOI.

The registration with the BOI shall be carried out through an agreement and an administrative arrangement between the BOI and the DOE, with the end-view of facilitating the registration of qualified RE facilities. The applications for registration shall be favorably acted upon immediately by the BOI, on the basis of the certification issued by the DOE.

D.

Certificate of Endorsement by the DOE

RE Developers, and manufacturers, fabricators, and suppliers of locally- produced RE equipment shall be qualified to avail of the incentives provided for in the Act only after securing a Certificate of Endorsement from the DOE, through the REMB, on a per transaction basis.

The DOE, through the REMB, shall issue said certification within fifteen (15) days upon request of the RE Developer or manufacturer, fabricator, and supplier; Provided, That the certification issued by the DOE shall be without prejudice to any further requirements that may be imposed by the government agencies tasked with the administration of the fiscal incentives mentioned under Rule 5 of this IRR.

XXX

XXX

xxx (Emphases and underscoring added) However, the DOE, expressing its contemporaneous interpretation on the conditions for the availment of incentives and other privileges of RE Developers under RA No. 9513, issued DC No. DC2021-12-0042, amending Section 18(c) of the IRR of RA No. 9513, to state that, as a rule, RE Developers are automatically qualified to avail of the incentives provided for in RA No. 9513 after securing a DOE Certificate of Registration and that \

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue a Certificate of Endorsement is necessary only on importations by an RE developer, viz.:

SEC. 18. Conditions for A vailment of Incentives and Other Privileges-

XXX

XXX

XXX

C.

DOE ENDORSEMENT FOR A V AILMENT OF INCENTIVES

AND DUTY-FREE IMPORTATIONS OF MACHINERY, . EQUIPMENT, AND MATERIALS RE Developers and manufacturers, fabricators, and suppliers of locally-produced RE equipment shall be AUTOMATICALLY qualified to avail of the incentives provided for in the Act,

OTHER

THAN

THE

INCENTIVE

OF

DUTY-FREE

IMPORTATION

OF

QUALIFIED

MACHINERY, EQUIPMENT, MATERIALS, PARTS AND COMPONENTS, after securing a Certificate of Registration from the DOE.

RE

DEVELOPERS

THAT

IMPORT

RE

EQUIPMENT, EQUIPMENT, MATERIALS, PARTS AND COMPONENTS

SHALL SECURE A CERTIFICATE OF ENDORSEMENT

FROM THE DOE, THROUGH THE REMB, ON A PER IMPORTATION BASIS. (Underscoring added.)

XXX

XXX

XXX

Thus, in order to qualify for and be entitled to VAT zero-rating on an REDeveloper's purchases as contemplated under RA No. 9513 and its IRR, theRE developer must present the following documents: 1.

Registration with the DOE; and, 2.

Registration with the Board of Investments (BOI). Records reveal, however, that only EDC's projects in Tongonan, Leyte, and Palinpinon, N egros Oriental, were duly supported with the aforementioned documents, viz.:

Location of

DOE Certificate

EDC's Projects of Registration

T ongonan, Leyte

GRESC-2009-1 0-

001 dated October 23 200958 ' Palinpinon,

GRESC-2009-1 0-

N egros Oriental 002 dated October 23 200960 ' 58 Exhibit "P-6", Docket, p. 314.

59 Exhibit "P-7", Docket, pp. 319 to 325.

60 Exhibit "P-6-A", Docket, p. 315.

Registration with the BOI

Certificate

of

Registration

No.

2012-024 dated February 6, 201259

Certificate

of

Registration

No.

2014-027 dated

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

February

201461

Bacon-Manito

GRESC-2009-1 0-

None

Sorsogon/ Albay

003 dated October 23 200962 ' Kidapawan City, GRESC-2009-1 0-

None

North Cotabato

004 dated October 23 200963 ' Northern Negros, GRESC-2009-1 0-

None

Negros Occidental 005 dated October 23 200964 ' 12, Hence, petitioner failed to establish that EDC's projects in (1) Bacon- Manito Sorsogon/Albay; (2) Kidapawan City, North Cotabato; and, (3) Northern Negros, Negros Occidental, have been registered with the BOI. Correspondingly, only the sale of services made to EDC's projects in Tongonan, Leyte, and Palinpinon, Negros Oriental, shall be subject to VAT zero-rating under the law.

Nonetheless, petitioner must still show compliance with the pertinent invoicing requirements under Section 113 (A) and (B) of the NIRC of 1997, as amended, which provides that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties, and for every sale, barter or exchange of services, issue a VAT official receipt (OR) which must contain the information stated in the said provisions, to wit: SEC. 113. Invoicing and Accounting Requirements for VAT- registered Persons.- (A) Invoicing Requirements. - A VAT -registered person shall

ISSue:

(1) A VAT invoice for every sale, barter or exchange of goods or properties; and

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. (B) Information Contained in the VAT Invoice or VAT Official Receipt. - The following information shall be indicated in the VAT invoice or VAT official receipt:

( 1) A statement that the seller is a VAT -registered person, followed by his Taxpayer's Identification Number (TIN); \

CTA Case No.l0609 Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value- added tax: Provided, That:

(a) The amount of the tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from value-added tax, the term 'VAT- exempt sale' shall be written or printed prominently on the invoice or receipt;

(c) If the sale is subject to zero percent (0%) value-added tax, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the value-added tax on each portion of the sale shall be shown on the invoice or receipt: Provided, That the seller may issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and ( 4) In the case of sales in the amount of One thousand pesos (P1,000) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and Taxpayer Identification Number (TIN) of the purchaser, customer or client. The foregoing provisions are further implemented by Section 4.113- 1(A) and (B) ofRR No. 16-2005, as amended, to wit: SEC. 4.113-1. Invoicing Requirements. - (A) A VAT-registered person shall issue: - ( 1) A VAT invoice for every sale, barter or exchange of goods or properties; and

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT -registered persons are required to print their TIN followed by the word 'VAT' in their invoice or official receipts. Said documents shall be considered as a 'VAT Invoice' or 'VAT official receipt'. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. \

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

(B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt:

(1) A statement that the seller IS a VAT -registered person, followed by his TIN;

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That:

(a) The amount of tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from VAT, the term 'VAT-exempt sale' shall be written or printed prominently on the invoice or receipt;

(c) Ifthe sale is subject to zero percent (0%) VAT, the term 'zero- rated sale' shall be written or printed prominently on the invoice or receipt;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of the VAT on each portion of the sale shall be shown on the invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

(3) In the case of sales in the amount of one thousand peso (Pl,OOO.OO) or more where the sale or transfer is made to a VAT- registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) ofthis Section. In addition to the above requirements, the pertinent sales invoices and ORs must be duly registered with the BIR as prescribed under Section 23 7 in relation to Section 23 8 of the NIRC of 1997, as amended, to wit: SEC. 237.

Issuance of Receipts or Sales or Commercial

Invoices.-

(A)

Issuance. -All persons subject to an internal revenue tax shall, at the point of each sale and transfer of merchandise or for services rendered valued at One hundred pesos (P 1 00) or more, issue duly registered receipts or sale or commercial invoices, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: Provided, however, That where the receipt is issued to cover payment made as rentals, commissions, compensation or fees, receipts or invoices shall be issued which shall show the name, business style, if any, and address of the purchaser, customer or client: Provided, further, That 1 where the purchaser is a VAT -registered person, in addition to the

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue information herein required, the invoice or receipt shall further show the Taxpayer Identification Number (TIN) of the purchaser.

XXX

XXX

XXX

SEC. 238. Printing of Receipts or Sales or Commercial Invoices. -All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

Simply put, petitioner is required to issue BIR-registered VAT ORs for the gross receipts derived from its sale of services, containing the above- stated information.

In its Amended Quarterly VAT Return for the first quarter of TY 2019, petitioner declared zero-rated sales/receipts in the total amount of P26,967,278.67.65 In support thereof, petitioner presented the ORs and the related billing invoices, summarized as follows:

Exhibit

OR

Exhibit

Billing

Amount in

Amount in

No.

No.

No.

Invoice

US Dollar ($)

Philippine

No.

Peso(P)

"P-20"

1007

"P-21"

517 235,537.44 p 13,358,385.45

"P-22"

518 19,867.60

"P-23"

1008

"P-24"

519 258,115.72 13,608,893.22

TOTAL

513,520.76 p 26,967,278.67 A scrutiny of the aforesaid supporting documents reveals that the reported zero-rated sales of P26,967,278.67 were duly supported by zero- rated ORs compliant with the invoicing requirements under the VAT law and regulations.

Considering the foregoing, petitioner has sufficiently proven that its sales of services to EDC during the first quarter of TY 2019 in the amount of P26,967,278.67 is entirely subject to VAT zero-rating, thereby satisfying the fourth requisite. \

CT A Case No. I 0609 Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

There is no need to comply with the fifth requisite.

The fifth requisite is to the effect that the refund claimant must prove that the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations, but only for zero-rated sales under Section 1 06(A)(2)(a)(l ), (2) and (b), and 1 08(B)(l) and (2), all of the NIRC of 1997, as amended. Since the legal basis for petitioner's zero-rated sales is Section 1 08(B)(3) of the NIRC of 1997, as amended, in relation to Section 15(g) ofRA No. 9513, the present case need not comply with the saidfzfth requisite.

To be sure, Section 108(B)(3) ofthe NIRC of 1997, as amended, only requires that the services be rendered to persons or entities enjoying tax exemption under special laws or international agreements to which the Philippines is signatory. Petitioner is, thus, not required to present proof that the transaction was paid in acceptable foreign currency. The input taxes being claimed are not transitional input taxes.

In its Amended Quarterly VAT Return for the first quarter of TY 2019,66 petitioner declared a total input VAT of P718,630.38 from its domestic purchases of goods and services and purchases of services rendered by non-residents, as shown below:

Current

Input VAT

Purchases

Domestic purchases of goods other than capital goods p 406,934.02 p 48,832.08 Domestic purchases of services 1,349,912.33 161,989.48 Services rendered by non-residents 4,231,740.15 507,808.82

Purchases Not Qualified for Input Tax

142,171.85

Total

p 718,630.38 The said claimed input taxes do not appear to be transitional input taxes, as understood under Section 111 (A) of the NIRC of 1997, as amended, to wit:

SEC. 111. Transitional/Presumptive Input Tax Credits. - (A) Transitional Input Tax Credits. -A person who becomes liable to value-added tax or any person who elects to be a VAT -registered person shall, subject to the filing of an inventory according to the rules and , 66 Exhibit "P-3-B", Docket, pp. 282 to 283.

\

CTA Case No .. 10609 Air Drilling Associates Pte Ltd vs. Commissioner of Internal Revenue regulations prescribed by the Secretary of Finance, upon recommendation of the Commissioner, be allowed input tax on his beginning inventory of goods, materials and supplies equivalent to two percent (2%) of the value of such inventory or the actual value-added tax paid on such goods, materials and supplies, whichever is higher, which shall be creditable against the output tax.

Transitional input tax credit operates to benefit newly VAT -registered persons, whether or not they previously paid taxes in the acquisitions of their beginning inventory of goods, materials and supplies. During the period of transition from non-VAT to VAT status, the transitional input tax credit serves to alleviate the impact ofthe VAT on the taxpayer.67 Since there is no showing that the claimed input VAT are transitional input VAT, petitioner has complied with the sixth requisite for the grant of an input VAT refund.

Not all input taxes due or paid by petitioner during the first quarter of

TY 2019

are valid and duly substantiated.

Anent the seventh reqms1te in claiming VAT refund, it is of fatal importance for petitioner to provide supporting documents to prove that the input taxes claimed during the first quarter of TY 2019 were actually due or paid in accordance with Section llO(A) of the NIRC of 1997, as amended, and as implemented by Sections 4.110-1,⁴.110-2 and 4.110-8 ofRR No. 16- 2005, as amended.

Thus, in order to prove entitlement to credits for input taxes due or paid, the same must be evidenced by VAT invoices (for domestic purchases of goods) or ORs (for domestic purchases of services) issued in accordance with Section 113 of the NIRC of 1997, as amended, as the case may be, as well as, the import entry or other equivalent documents showing actual payment of VAT (for importation of goods) and BIR Form 1600 with corresponding payment confirmation (for services rendered by non- residents).

As mentioned earlier, petitioner reported total current input VAT of P718,630.38 from its domestic purchases of goods and services, and services rendered by non-residents, which is the subject of petitioner's claim for refund.~ 67 Fort Bonifacio Development Corporation vs. Commissioner of Internal Revenue, et al., et seq., G.R. Nos. 158885 and 170680, April2, 2009.

Air Drilling Associates Pte Ltd vs. Commissioner of Internal Revenue

In support of its input VAT, petitioner presented, among others, the suppliers' ORs and invoices,68 and Monthly Remittance Return of Value- Added Tax and Other Percentage Taxes Withheld Return (BIR Form No. 1600),69 which were all examined by the Court-commissioned ICPA. Based on the findings ofthe ICPA, the total input VAT of'P26,436.51 shall be disallowed for petitioner's failure to meet the substantiation and invoicing requirements prescribed under the VAT law and regulations, as follows: 70 With invalid supporting documents p 7,751.53 Without supportin_g_ documents 18,586.16 Over-claimed input VAT 98.82

Total

p 26,436.51 Upon further verification, the Court finds that the additional input VAT on domestic purchases of goods and services in the total amount of P9,935.70 shall likewise be disallowed for reasons stated herein, viz.:

Exhibit

Supplier

Input Tax

Reason for the

No.

Disallowance

·Business Process

Not found in the records

"P-27"

Outsourcing

p 7,200.00 of the case/USB International, Inc.

"P-29"

Globe Telecom, Inc.

1,351.14 Nature of service cannot be ascertained

"P-60"

Globe Telecom, Inc.

1,349.53 Nature of service cannot be ascertained "P-1 00" LBC Express, Inc.

17.14 TIN of petitioner not indicated "P-101" LBC Express, Inc.

17.89 TIN of petitioner not indicated

Total

p 9,935.70 Hence, for purposes of compliance with the seventh requisite, out of the total reported input VAT of P718,630.38, only the amount of P682,258.17 represents petitioner's valid input VAT due or paid for the first quarter ofTY 2019, as computed below: \

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

Input VAT per VAT Return

Less: Disallowances

Per ICPA findings Per Court's further verification Substantiated valid input VAT Petitioner's input taxes claimed are attributable to zero-rated sales.

p 26,436.51 9,935.70 p 718,630.38 36,372.21 p 682,258.17 The eighth requisite is to the effect that the input taxes claimed are attributable to zero-rated or effectively zero-rated sales. However, where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume.

Here, considering that petitioner had no other type of sales except zero-rated sales, the entire substantiated input VAT of P682,258.17 is attributable thereto. To be sure, the input taxes of taxpayers engaged purely in either zero-rated or effectively zero-rated transactions are presumably attributable to the zero-rated or effectively zero-rated activity as they are not engaged in any other category for VAT purposes. 71 Thus, petitioner has complied with the said eighth requisite. The subject input taxes have not been applied against output taxes during imd m the succeeding quarters.

Having determined that petitioner had valid input VAT attributable to its zero-rated sales, the Court will now determine whether the same was not applied against its output VAT liability during and in the succeeding quarters, relative to the ninth requisite for the successful prosecution of an input VAT refund claim.

Since petitioner had no VATable sales subject to 12% for the first quarter of TY 2019, it had no output VAT against which the claimed input VAT ofP718,630.38 may be applied or credited.'\ 71 Commissioner of Internal Revenue vs. Toledo Power Company, G.R. Nos. 255324 & 255353, April 12, 2023.

DECISION

CT A Case No. I 0609 Air Drilling Associates Pte Ltd vs. Commissioner of Internal Revenue

Page 28 of 29 ·

Further, although the claimed input VAT amount of P718,630.38, which necessarily includes the substantiated input VAT of P682,258.17, was carried over by petitioner in the succeeding quarters, 72 the same remained unutilized until it was deducted as "VAT Refund/TCC claimed"73 in its Amended Quarterly VAT Return for the fourth quarter of TY 2020, filed on March 29, 2021. Accordingly, the subject claim no longer formed part of the excess input VAT of P91 ,929,977 .4 774 as of the end of the fourth quarter of TY 2020. Such being the case, the claimed input VAT could not have been carried over or utilized in the succeeding quarters ofTY 2020. Verily, petitioner complied with the ninth requisite for the grant of the input VAT claimed for refund or issuance of tax credit certificate. In sum, petitioner has sufficiently proven its entitlement to the refund in the amount of P682,258.17, representing unutilized input VAT attributable to its zero-rated sales for the first quarter ofTY 2019.

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED.

Accordingly, respondent is ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner, amounting to P682,258.17, representing petitioner's unutilized input VAT attributable to its zero-rated sales for the first quarter of taxable year 2019 or for the period covering January 1, 20 19 to March 31, 20 19.

-FLO ES

~ t.B. cfo...-.·~

Associate Justice

WE CONCUR:

~.~ ../S>"~ MA. BELEN M. RINGPIS-LIBAN

Associate Justice

72 Exhibits "P-4-A", "P-4-C", "P-4-E", "P-5-A", "P-5-C", "P-5-D" and "P-5-F", Docket, pp. 286 to 287, 290 to 291,294 to 295,298 to 299,302 to 303,304 to 305, and 308 to 309, respectively.

Air Drilling Associates Pte Ltd. vs. Commissioner of Internal Revenue

ESTO-SAN PEDRO

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

~.~ h-'~ MA. BELEN M. RINGPIS-LIBAN

Associate Justice

Chairperson

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

Presiding Justice