U-Dev Corporation vs. Commissioner of Internal Revenue

DECISION

CUI-DAVID, J.:

Before this Court is a Petition for Review seeking a judgment ordering respondent to grant petitioner a cash refund of P26, 155,535.43, representing the balance of its administrative claim for refund of unutilized input value-added ta)C (VAT) for ta)Cable years (TY) 2020 and 2021, attributable to its VAT zero-rated sales. 1

THE PARTIES

Petitioner U-DEV Corporation is a corporation organized under the laws of the Republic of the Philippines. 2 It is registered with the Bureau of Internal Revenue (BIR) as a VAT ta)Cpayer under Ta)Cpayer Identification Number (TIN) 755-974- 906-000, with registered address at Km. 15, Daang Maharlika, Brgy. Pandacan Bunawan District, Davao City 8000.3 Docket- Vol. I, p. 18, Petition for Review, Prayer. /d. at 156--159, Exhibits "P-1 " and "P-2". tf( /d. at 429, Exhibit "P-3". Although Exhibit "P-3" was denied admission for failure of the exhibit formally offered to correspond with the document actually identified in the Resolutions dated August 6, 2024, November 15, 2024 and March 31, 2025, Docket- Vol. I, at pp. 455 and 480, and Docket- Vol. II, pp. 507-5 10, respectively, the duly marked document is actually a certified true copy issued by Abolhasan S. Balindong, Asst. Revenue District Officer, hence, a public document which is self-authenticating. Refer to Asian Terminals, Inc. v. Phi/am Insurance Co., Inc. (now Chartis Philippines Insurance, Inc.), et seq., G.R. Nos. 181163, 181262 & 181319, July 24, 2013. Also, respondent found that petitioner is a VAT-registered entity, Refer to Exhibit "R-3", BIR Records (Exhibit "R-5"), at p. 385.

U-DEV Corporation v. Commissioner of Internal Revenue

Respondent is the duly appointed Commissioner of Internal Revenue (CIR) who is tasked to assess and collect all national internal revenue taxes, fees, and charges, and enforce all forfeitures, penalties, and fines connected therewith, and holds office at the BIR National Office Building, Senator Miriam P. Defensor-Santiago Avenue, Diliman, Quezon City.4

THE FACTS AND PROCEEDINGS

On August 25, 2022, petitioner filed with the BIR two Applications for Tax Credits/ Refunds (BIR Form No. 1914) covering input tax for the periods January 1, 2020 to December 31, 2020,s and January 1, 2021 to December 31, 2021 ,6 in the amounts of P16,716,772.14 and P20,804,237.59, respectively. On December 7, 2022, petitioner received a VAT Refund Notice dated November 4, 2022,7 which denied in full its claim for refund of input VAT for the 1st to 4th quarters of 2020, and partially granted its claim for the 1st to 4th quarters of 2021 in the amount ofP11 ,365,474.30, while disallowing the remainder of the claim.s On January 4, 2023, petitioner filed the present Petition for Review (With Motion for Commissioning of Independent Certified Public Accountant). 9 On March 14, 2023, respondent filed his Answer (Re: petition for Review dated 28 December 2022), 10 interposing the following special and affirmative defenses: ( 1) the instant claim should be denied for petitioner's failure to substantiate its claim for refund at the administrative level; (2) it is incumbent upon petitioner to prove that it is entitled to the refund sought because a claim for refund is not ipso facto granted upon filing of the claim; and (3) petitioner is not entitled to tax refunds for TYs 2020 and 2021.

Docket - Vol. I, p. 233, Joint Stipulation of Facts and Issues (JSFI), Stipulation of Facts, par. l.b. /d. at 177, Exhibit "P-12".

6 !d. at 178, Exhibit "P-13".

/d. at 181- 184, Exhibit "P-1 5''.

!d. at 232-233, JSFI, Stipulation of Facts, par. I.a. /d. at 6-2 1, and 28- 33 (for the Secretary 's Certificate and Special Power of Attorney). 10 /d. at 122- 137.

U-DEV Corporation v. Commissioner of Internal Revenue

Thereafter, on March 27, 2023, respondent transmitted the BIR Records consisting of one folder with pages consecutively numbered from 1 to 406. 11 The Pre-Trial Conference was held on September 28, 2023.12 Prior thereto, the Petitioner's Pre-Trial Briefwas filed on September 21, 2023, 13 while the Respondent's Pre-Trial Brief was submitted on September 22, 2023.14 On December 11, 2023, the parties submitted their Joint Stipulation of Facts and Issues, 15 which was approved by the Court in a Resolution dated December 21 , 2023.16 Accordingly, the Court declared the pre-trial terminated and thereafter issued the Pre-Trial Order dated January 15, 2024. 17 During trial, the parties presented their respective testimonial and documentary evidence. Petitioner presented the testimonies of: (1) Ms. Riza D. Hernandez,18 its Tax Manager; and (2) Ms. Krista V. Bambao,19 the

Court-commissioned

Independent

Certified

Public

Accountant (ICPA).2o The ICPA submitted the Report on April 1, 2024.21 On April 30, 2024, petitioner filed its Formal Offer of Evidence,22 to which respondent filed a Comment (on Petitioner's Formal Offer of Evidence) on May 14, 2024.23 In a Resolution dated August 6 , 2024, 24 the Court admitted petitioner's offered exhibits, except Exhibits "P-1", "P- 14" "P-14-1" "P-36" "P-37" "P-38" "P-39" "P-40" "P-41" "P- ' ' ' ' ' ' ' ' 42, "P-43" "P-44" "P-45" "P-46" "P-4 7" "P-48" "P-49" "P- ' ' ' ' ' ' ' '

50" "P-51" "P-52" "P-53" "P-1617" "P-1618" "P-1619" "P-

' ' ' ' ' ' ' 11 !d. at 139- 141, Compliance dated March 24, 2023. 12 /d. at 144-145, Notice of Pre-Trial Conference dated May 26, 2023; 214-219, Minutes of the hearing held on, and Order dated, September 28, 2023.

13 !d. at 149- 155.

14 !d. at 185- 189.

15 !d. at 232- 237.

16 !d. at 240.

17 !d. at 243- 254.

18 !d. at 71-83, Exhibit "P-1 7''; 255- 257, and 260-262, Minutes of the hearing held on, and Order dated, February 15, 2024, respectively.

19 !d. at 336--345, Exhibits "P-2913"; 347- 348, Order dated April 16, 2024. 20 !d. at 259, Oath of Commission dated February 15, 2024; 255-257, and 260-262, Minutes of the hearing held on, and Order dated, February 15, 2024, respectively. 21 /d. at 271- 335, Exhibit "P-1 8".

22 /d. at 354-428.

23 /d. at 432-434.

24 !d. at 443-456.

U-DEV Corporation v. Commissioner of Internal Revenue

1620", and "P-2908", due to conspicuous discrepancies between the exhibit formally offered and the document actually marked. Exhibit "P-3" was likewise denied admission because the document formally offered as "BIR Certificate of Registration No. 2RCOOO 1699217" was identified by petitioner's witness, Riza D. Hernandez, as "BIR Certificate of Registration No. 2RCOOO 1838411 ".

On August 27, 2024, petitioner filed a Motion for Reconsideration, 25 to which respondent filed a Comment (on Petitioner's Motion for Reconsideration) on September 24, 2024.26 In a Resolution dated November 15, 2024,27 the Court partially granted petitioner's Motion for Reconsideration and admitted petitioner's exhibits, except Exhibit "P-3", for failure of the exhibit formally offered to correspond with the document actually identified.

Petitioner then filed another Motion for Reconsideration on December 2, 2024, 28 to which respondent filed his

Comment/ Opposition

(Re:

Petitioner's

Motion

for Reconsideration) on January 22, 2025. 29 In a Resolution dated March 31, 2025, 30 the Court denied petitioner's Motion for Reconsideration for lack of merit. However, the Court noted petitioner's Tender of Excluded Evidence embodied in petitioner's Motion for Reconsideration with respect to Exhibit "P-3".

For his part, respondent presented the testimonies of Revenue Officers Charlene Mae A. Grageda31 and Daniel Carlo Perez.32 During the hearing on June 24, 2025, respondent's counsel orally offered respondent's exhibits, all of which were admitted by the Court. 33 25 /d. at 457-461.

26 /d. at 467-469.

27 /d. at 4 78-481.

28 /d. at 482-486.

29 !d. at 492-496.

30 Docket - Vol. II, pp. 507- 510.

31 Docket- Vol. I, pp. 206--210, Exhibit "R-6'"; Docket- Vol. II, pp. 595-596, Order dated May 28, 2025. 32 Docket - Vol. II. pp. 604--609, Exhibit "R-7": 61 ~20. Order dated June 24, 2025. 33 /d. at 619-620, Order dated June 24, 2025.

U-DEV Corporation v. Commissioner of Internal Revenue

Thereafter, petitioner's Memorandum34 and respondent's Memorandum3s were both personally filed on July 28, 2025. The case was submitted for decision on August 14, 2025.36

THE ISSUE

The parties submitted the following issue for the Court's resolution:

Whether Petitioner is entitled to its claim for refund in the total amount of P26, 155,535.43 representing alleged unutilized input taxes for periods of 01 January to 31 December 2020 (Taxable Year 2020) and 01 January to 31 December 2021 (Taxable Year 2021).37

Petitioner's Arguments:

Petitioner argues that: it is a VAT-registered entity as required under Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended; it is engaged in zero-rated transactions as required under the NIRC and its pertinent regulations; the input taxes arising from purchases of goods and services directly attributable to its zero-rated sales were duly supported by VAT invoices and official receipts; the claimed input taxes are not transitional input taxes; the claimed input VAT payments were not applied against any output tax in the succeeding periods; the input taxes claimed are attributable to zero-rated or effectively zero-rated sales; with respect to zero- rated sales under Sections 1 06(A)(2)( 1) and (2), 1 06(B), and 1 08(B)( 1) and (2), the corresponding foreign currency proceeds were duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP); where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and the administrative and judicial claims for refund were filed within the prescriptive period provided under the NIRC and its pertinent regulations.

34 !d. at 624--649.

35 !d. at 653-670.

36 !d. at 673, Notice of Resolution dated August 14, 2025.

U-DEV Corporation v. Commissioner of Internal Revenue

Respondent's Arguments:

Respondent contends that the instant claim should be denied for petitioner's failure to substantiate its claim for refund at the administrative level; it is incumbent upon petitioner to prove that it is entitled to the refund sought because a claim for refund is not ipso facto granted upon filing of the claim; and petitioner is not entitled to tax refunds for TYs 2020 and 2021.

THE COURT'S RULING

The present Petition for Review is partly meritorious. Requisites for the grant of a refund or issuance of a tax credit certificate under the law.

Section 112 of the NIRC of 1997, as amended by Republic Act (RA) No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Law,38 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)(1), (2) and (b) and Section 108(8)(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 38 AN ACT AMENDrNG SECTIONS 5, 6, 24, 25, 27, 3 1, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99, 100, 10 1. 106, 107, 108, 109, 110, 112, 11 4, 11 6. 127, 128, 129, 145, 148, 149, 151, 155, 17 1, 174, 175, 177, 178, 179. 180, 18 1' 182, 183. 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, AND 288; CREATrNG NEW SECTIONS 5 1-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, AND 265-A; AND REPEALrNG SECTIONS 35, 62, AND 89; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL rNTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES. Section 112(A) was last amended by RA No. 12066, otherwise known as the CREATE MORE Act (Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy). However, the facts of this case transpired prior to the effectivity of the said law.

U-DEV Corporation v. Commissioner of Internal Revenue 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(8)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales. (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 of the 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 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. (Emphasis supplied) 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: 39 As to the timeliness of the filing of the administrative and judicial claims:

1. The refund claim is filed with the BIR within two (2) years after the close of the taxable quarter when the sales were made;39 ·

2. In case of full or partial denial of the refund claim rendered within a period of ninety (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 AT & T Communications Services Philippines. Inc. v. Commissioner of Internal Revenue, G.R. No. 182364, August 3, 20 I 0 [Per J. Carpio-Morales, Third Division]; San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009 [Per J. Chico-Nazario, Third Division]; Intel Technology Philippines. Inc. v. Commissioner of Internal Revenue. G.R. No. 166732, April 27, 2007 [Per J. Callejo, Sr., Third Division].

U-DEV Corporation v. Commissioner of Internal Revenue

40 41 42 43 44 45 46 47 Court within thirty (30) days from receipt of the decision;40 With reference to the taxpayer's registration with the BIR:

3. The taxpayer is a VAT-registered person.41 Relative thereto, it must be emphasized that registration is an indispensable requirement under our VAT law.42 In relation to the taxpayer's output VAT:

4. The taxpayer is engaged in zero-rated or effectively zero-rated sales;43

5. For zero-rated sales under Section 106(A)(2)(a)(l), (2) and (b) and Section 108(B)(l) and (2), 44 the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with the Bangko Sentral ng Pilipinas (BSP) rules and regulations;45 As regards the taxpayer's input VAT being refunded:

6. The input taxes are not transitional input taxes;46

7. The input taxes are due or paid;47

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 Refer to Commissioner of Internal Revenue v. Vest as Services Philippines, Inc., G.R. No. 255085, March 29, 2023; Commissioner of Internal Revenue v. CE Casecnan Water and Energy Company, Inc., G.R. No. 2 I 2727, February I, 2023 [Per J. Hernando, First Division]; Energy Development Corporation v. Commissioner of Internal Revenue, G.R. No. 203367, March I 7, 202 I [Per J. Hernando, Third Division]. AT&T Communications Services Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. I 82364, August 3, 20 I 0 [Per J. Carpio-Morales, Third Division]; San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009 [Per J. Chico-Nazario, Third Division]; Intel Technology Philippines. Inc. v. Commissioner of Internal Revenue, G.R. No. 166732, April 27, 2007 [Per J. Calleja, Sr., Third Division].

Commissioner of Internal Revenue v. Seagate Technology (Philippines), G.R. No. I 53866, February I I, 2005 [Per J. Panganiban, Third Division].

/d.

Under Republic Act (RA) No. I 0963, Section I 06(A)(2)(a)(2) was renumbered to Section I 06(A)(2)(a)(3) while Section 106(A)(2)(b) was deleted. However, there was no corresponding amendment to the subsections cited in Section I I 2(A) of the National Internal Revenue Code (NIRC} of I 997, as amended. AT & T Communications Services Philippines. Inc. v. Commissioner of Internal Revenue, G.R. No. I 82364, August 3, 2010 [Per J. Carpio-Morales, Third Division]; San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009 [Per J. Chico-Nazario, Third Division] ; Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 166732, April 27,2007 [Per J. Callejo, Sr., Third Division].

/d.

!d.

U-DEV Corporation v. Commissioner of Internal Revenue proportionately allocated on the basis of sales volume;48 and

9. The input taxes have not been applied against output taxes during and in the succeeding quarters. 49 In addition, in claims for VAT refund/ credit, applicants must satisfy the substantiation and invoicing requirements under the

NIRC

and other implementing rules and regulations. 50 Thus, petitioner's compliance with all the VAT invoicing requirements is required to be able to file a claim for input taxes attributable to zero-rated sales. 51 The invoicing and substantiation requirements should be followed because they are the only way to determine the veracity of the taxpayer's claims.s2 Moreover, it must be pointed out that compliance with all VAT invoicing requirements provided by tax laws and regulations is mandatory. 53 Strict compliance with substantiation and invo1c1ng requirements is necessary, given 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 available as a 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 an accurate audit trail or evidence for BIR monitoring purposes. 54 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. 55 Thus, it { 48 San Roque Power Corporation v. Commissioner of Internal Revenue, G.R. No. 180345, November 25, 2009 [Per J. Chico-Nazario, Third Division]; Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 166732, April27, 2007 [Per J. Callejo, Sr., Third Division). 49 Supra note 39.

50 Team Energy Corporation (Formerly: Mirant Pagbilao Corporation and Southern Energy Quezon, Inc.) v. Commissioner of Internal Revenue. G.R. Nos. 197663 & 197770, March 14, 2018 [Per J. Leon en, Third Division]. 51 JR. A. Philippines, Inc. v. Commissioner of Internal Revenue, G.R. No. 171307, August 28, 2013 [Per J. Perlas- Bemabe, Second Division].

52 Nippon Express (Philippines) Corporation v. Commissioner of Internal Revenue, G.R. No. 191495, July 23, 2018 [Per 1. Martires, Third Division].

53 Eastern Telecommunications Philippines. Inc. v. Commissioner of Internal Revenue, G.R. No. 183531, March 25, 2015 [Per 1. Reyes, Third Division].

54 Supra note 50.

55 Commissioner of Internal Revenue v. Vestas Services Philippines, Inc., G.R. No. 255085, March 29, 2023 [Per 1. Hernando, First Division]; Commission of Internal Revenue v. Deutsche Knowledge Services, Pte. Ltd. , G.R. Nos. 226548 & 227691, 226682- 83, February 15, 2023 [Per J. M.V. Lopez, Second Division) citing Atlas Consolidated Mining and Development Corporation v. Commissioner of Internal Revenue, G.R. No. 145526, March 16, 2007 [Per 1. Corona, First Division]; See also Edison (Bataan) Cogeneration Corporation v. Commissioner of Internal Revenue, G.R. Nos. 201665 & 201668, August 30, 2017 [Per J. Del Castillo, First Division]; Commissioner of Internal Revenue v. Philippine National Bank, G.R. No. 180290, September 29, 2014 [Per J. Leonen, Second Division]; Commissioner of Internal Revenue v. United Salvage and Towage (Phils.), Inc., G.R. No. 197515, July

U-DEV Corporation v. Commissioner of Internal Revenue behooves petitioner to show compliance with each of the foregoing requisites and invoicing requirements. Accordingly, the absence of any of these requisites is a valid ground to deny the refund claim.

First and second requisites:

Petitioner's

administrative and judicial claims for refund/credit were timely filed.

The first requisite provided in Section 112(A) of the NIRC of 1997, as amended, commands the taxpayer to file an administrative claim for input VAT refund within two years from the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The table below shows a summary of the relevant dates pertaining to petitioner's filing of the administrative claim for refund, viz.:

Close orthe

End or the Two-

Date or Filing or

Taxable Quarter

Year Period

Jl~inistrative

Claim

Mar. 31, 2020 Mar. 3 1, 2022 June 30, 2020 June 30, 2022 Aug. 25, 202256 Sept. 30, 2020 Sept. 30 , 2022 Dec. 3 1, 2020 Dec. 31 , 2022 Mar. 3 1, 2021 Mar. 31 , 2023 June 30, 2021 June 30, 2023 Aug. 25, 202257 Sept. 30, 202 1 Sept. 30, 2023 Dec. 3 1, 202 1 Dec. 3 1, 2023 Records show that petitioner did not generate any sales, let alone zero-rated sales, for any of the four quarters of TY 2020. 58 Consequently, the input taxes petitioner incurred during TY 2020 could not be directly and entirely attributed to any sale made within that year. Applying Section 112(A) of the NIRC of 1997, as amended, the two-year prescriptive period for filing the administrative claim is reckoned from the close of the taxable quarter when the sales were made- here, the 2nd, 3rct, 2, 2014 [Per J. Peralta, Third Division]; Dizon v. Court of Tax Appeals. eta/. , G.R. No. 140944, April 30, 2008 [Per J. Nachura, Third Division]; Commissioner of Internal Revenue v. Manila Mining Corporation, G.R. No. 153204, August 3 1, 2005 [Per J. Carpio-Morales, Third Division].

U-DEV Corporation v. Commissioner of Internal Revenue and 4th quarters of TY 2021, 59 closing on June 30, 2021 , September 30, 2021 , and December 31, 2021, respectively. Having filed its administrative claim for refund on August 25, 2022, petitioner's claim, in its entirety, was filed within the two- year period prescribed by law. From the date of the filing of the administrative claim, respondent or the BIR had a ninety (90)- day period, or until November 23, 2022, within which to decide the said claim.

As regards the second requisite, the same necessitates that the judicial claim must have been filed within thirty (30) days from receipt of respondent's decision or after the expiration of the 90-day period under Section 112(C) of the NIRC of 1997, as amended.

In this case, respondent was able to decide on petitioner's administrative claim within the 90-day period when the BIR, through Assistant Commissioner, Assessment Service, Maria Luisa I. Belen, issued the VAT Refund Notice dated November 4, 2022, which petitioner received on December 7, 2022. 60 Counting 30 days from petitioner's receipt of such VAT Refund Notice, it had until January 6 , 2023, to appeal its denied claim for refund before this Court. Thus, petitioner timely instituted the present Petition for Review on January 4, 2023.61 Given the foregoing, petitioner complied with the above- stated first and second requisites to successfully obtain a credit or refund of input VAT.

Third requisite: Petitioner is a VAT-registered entity.

Anent the third requisite, petitioner is a VAT-registered taxpayer with TIN 755-974-906-000 as indicated in its BIR Certificate of Registration No. OCN 2RCOOO 1699217.62 59 !d. at 171- 176, Exhibits "P-9" to "P-11". 60 !d. at 181- 184, Exhibit "P-1 5".

61 !d. at 6-21 , and 28- 33 (for the Secretary's Certificate and Special Power of Attorney).

U-DEV Corporation v. Commissioner of Internal Revenue

Fourth and Rfth requisites:

Petitioner

had zero-rated sales in the amount of p 122,374,252.31.

The fourth and fifth requisites require that the taxpayer be engaged in zero-rated or effectively zero-rated sales and for zero- rated sales under Sections 106(A)(2)(a)(1), (2), and (b),63 and 1 08(B)( 1) and (2), of the NIRC of 1997, as amended, the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations. In its amended Quarterly VAT Returns (BIR Form No. 2550- Q) for the four quarters of TY 2021 ,64 petitioner declared total sales amounting to P157,922,596.06, consisting of sales subject to 12°/o VAT (vatable sales) of P35,548,343.75 and zero-rated sales ofP122,374,252.31, summarized as follows:

TY 2021

Exhibit

Vatable Sales

Zero-rated Sales

Total Sales

1st Quarter

"P-8"

, 21,814,560.33 , - , 21,814,560.33 2nd Quarter

"P-9"

13,733,783.42 16,232,007.56 29,965,790 .98 3rd Quarter

"P-10"

- 61,366,016.66 61,366,016.66 4 th Quarter

"P -11"

- 44,776,228 .09 44,776,228.09

Total

P35,548,343. 75 P122,374,252.31 P157,922,596.06 As earlier stated, petitioner did not generate any sales for the four quarters of TY 2020, as evidenced by the submitted amended Quarterly VAT Returns. 65 In its Petition for Review, petitioner anchored its claim for zero-rated sales on Section 106 (A)(2) of the NIRC of 1997, as amended. This pertains to the sale of goods to Laysun (Far East) Limited, petitioner's customer abroad, shipped outside of the Philippines. 66 Section 1 06(A)(2)(a)( 1) of the NIRC of 1997, as amended, governs the determination of whether petitioner's sales qualify for zero percent (0°/o) VAT rate, which is quoted below for easy reference:

SEC. 106. Value-Added Tax on Sale of Goods or Properties. - 63 Under RA No. I 0963, or the "Tax Refonn for Acceleration and Inclusion (TRAIN)", Section I 06(A)(2)(a)(2) was renumbered to Section I 06(A)(2)(a)(3), while Section I 06(A)(2)(b) was deleted. However, there was no corresponding amendment to the subsections cited in Section 112(A) of the NIRC of 1997, as amended. 64 Docket - Vol. I, pp. 169-176, Exhibits "P-8" to "P-1 1 ". 65 !d. at 161- 168, Exhibits "P-4" to "P-7". 66 !d. at 12, Petition for Review, par. 22.

U-DEV Corporation v. Commissioner of Internal Revenue

(A)

Rate and Base of Tax. - xxx (1)

XXX

(2) The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a) Export Sales. - The term 'export sales' means:

(1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of the Sangko Sentral ng Pilipinas (SSP); Relative thereto, Section 4.106-5 of Revenue Regulations (RR) No. 16-2005,67 as further amended by RR No. 13-2018,68 provides:

SEC.

4.106-5. Zero-Rated Sales of Goods or Properties. - ...

The following sales by VAT-registered persons shall be subject to zero percent (0%) rate:

(a) Export Sales. - 'Export Sales' shall mean:

(1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported, paid for in acceptable foreign currency or its equivalent in goods and services, and accounted for in accordance with the rules and regulation of the Sangko Sentral ng Pilipinas (SSP); Based on the above-cited provisions, for petitioner's export sales of goods to qualify as zero-rated pursuant to Section 1 06(A)(2)(a)( 1) of the NIRC of 1997, as amended, the following essential elements must be present:

1. The sale was made by a VAT-registered person;

2. There was a sale and actual shipment of goods from the Philippines to a foreign country; and 67 SUBJECT: Consolidated Value-Added Tax Regulations of 2005. 68 SUBJECT: Regulations Implementing the Value-Added Tax Provisions under the Republic Act (RA) No. 10963, or the "Tax Reform for Acceleration and Inclusion (TRAIN)," Further Amending Revenue Regulations (RR) No. 16-2005 (Consolidated Value-Added Tax Regulations of 2005}, as Amended.

U-DEV Corporation v. Commissioner of Internal Revenue

3. The sale was paid for in acceptable foreign currency, and accounted for in accordance with the rules and regulations of the BSP.

As a corollary thereto, pursuant to the prov1s1ons of Section 106(A)(2)(a)(1) of the NIRC of 1997, as amended, in relation to Sections 113(A)(1), (B)(1), (2)(c) and (3), 237 and 238 of the same Code, and Section 4.113-1(A)(1), (B)(1) and (2)(c) of RR No. 16-2005, as amended, any VAT-registered person claiming zero-rated sales on its export sale of goods must present at least three types of documents, as follows:

1. Sales invoice as proof of sale of goods;

2. Bill of lading or air waybills as proof of actual shipment of goods from the Philippines to a foreign country; and

3. Bank credit advice, certificate of bank remittance, or any other document proving payment for the goods in acceptable foreign currency or its equivalent in goods and services.

Consequently, only the export sales supported by the said documents shall qualify for VAT zero-rating under Section 1 06(A)(2)(a)( 1) of the NIRC of 1997, as amended. With respect to the first essential element, petitioner sufficiently proved that it is a VAT-registered entity under TIN 755-974-906-000, as evidenced by its BIR Certificate of Registration. 69 Regarding the second essential element, petitioner presented various Commercial Invoices, 70 Credit Memos, 71 Export Declaration Documents, 72 Bills of Lading or Waybills, 73 and after-loading reports, 74 to prove the actual shipment of goods from the Philippines to a foreign destination. Records show that petitioner's zero-rated sales are direct exports of goods to Laysun (Far East) Limited amounting to US$2,447,166.13, with a peso equivalent of P122,374,252.31. The !CPA's findings on the mentioned documents supporting petitioner's zero-rated sales for TY 2021 are summarized as follows:75 v

U-DEV Corporation v. Commissioner of Internal Revenue

In United

In Philippine

Particulars

States Dollars

(US$)76

Peso (PhP)

1. Zero-rated sales properly supported by $1,959,544.33 p 97,946,344.66 commercial invoice, export declaration, air waybill, & bank certification 2 . Zero-rated sales properly supported by 489,034.60 24,498,677.77 commercial invoice, bank certification, export declaration, air waybill, notarized attestation, & after-loading reports

3. Zero-rated sales properly supported by 384.20 19,190.08 commercial invoice, bank certification, & export declaration but with undated airway bill

4. Adjustments to zero-rated sales (48.60) (2,453.96) supported by credit memo

5. Adjustments to zero-rated sales (1,748.40) (87 ,506.24) supported by credit memo and bank certification

Total

$2,447,166.13 P122,374,252.31 As to the third essential element, petitioner submitted Bank Certifications77 issued by the Development Bank of the Philippines (DBP) for the remittances of fees paid by Laysun (Far East) Limited to establish that the sales were paid in acceptable foreign currency and duly accounted for in accordance with the BSP's rules and regulations. The I CPA's summary of the amount remitted as against the amount due from Laysun (Far East) Limited is presented as follows:78

Bank Certification

issued by DBP

DBP Bank Certification for SA 01-5-57311-915-7

dated 18 January 202280

DBP Bank Certification for SA 0 1-5-59380-915-7

dated 18 January 202281

DBP Bank Certification for SA 01-5-59380-9 15-7

dated 13 June 202282 Credit Memo Nos. 008 & 009 issued by U-DEV83

Zero-rated

Sales per Invoice in US$

(Annex 2)79

109,863.25 1,842,998.22 494,353.26 (48.60) 76 !d. at 287- 295, Exhibit "P-18", Summation per Annex 2. 77 Exhibits "P-1 147" to "P-1149", USB (Exhibit "P-18-3").

Amount

remitted per

Certification

issued by

DBP in US$

Difference

109,863.25 1,842,996.22 2.00 494,3 12.86 40.40 (48.60)

U-DEV Corporation v. Commissioner of Internal Revenue

Bank Certification

issued by DBP

Zero-rated

Sales per Invoice in US$

(Annex 2)19

Amount

remitted per

Certification

issued by

DBP in US$

Difference

Total

2,447,166.13 2,447,172.33 (6.20) Based on the foregoing submissions, export sales to

Laysun

(Far

East)

Limited in the entire amount of P122,374,252.31, equivalent to $2,447,166.13, satisfied the essential elements required to qualify for VAT zero rating under Section 1 06(A)(2)(a)( 1) of the NIRC of 1997, as amended. Sixth requisite: The input VAT being claimed does not appear to be transitional input taxes.

The sixth requisite provides that the claimed input taxes do not appear to be transitional input taxes, pursuant to 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 regulations prescribed by t h e 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.

The transitional input tax credit benefits newly VAT- registered persons, whether or not they previously paid taxes on the acquisition of their beginning inventory of goods, materials, and supplies. During the transition from non-VAT to VAT status, the transitional input tax credit alleviates the impact of VAT on the taxpayer. 84 Since there is no showing that the subject input VAT is transitional, petitioner has complied with the sixth requisite for the grant of an input VAT refund.

U-DEV Corporation v. Commissioner of Internal Revenue

Seventh requisite: Not all of petitioner's input VAT being claimed for refund were duly substantiated.

Anent the seventh requisite in claiming VAT refund, it is of fatal importance for petitioner to provide supporting documents to prove that the input taxes claimed were actually due or paid in accordance with Section 11 O(A) of the NIRC of 1997, as amended, as implemented by Sections 4.110-1 to 4.110-3 and 4.110-8 of RR No. 16-2005, as amended. Furthermore, said documents must likewise comply with the invoicing requirements under Sections 113(A) and (B), 237 and 238 of the NIRC of 1997, as amended, and as implemented by Section 4.113-1(A) and (B) ofRR No. 16-2005, as amended. Based on petitioner's amended Quarterly VAT Returns for TYs 2020 and 2021 , petitioner reported total current input VAT of P16,716,772.14 and P25,070,038.84, respectively, or in the aggregate amount of P41 ,786,810.98, from its domestic purchases of goods other than capital goods, purchases of capital goods not exceeding PlMillion, purchases of capital goods exceeding P1Million, domestic purchases of services, and importation of goods other than capital goods.ss Out of this total input VAT, P37,521,009.73 86 was the subject of the administrative claim, detailed as follows: Current input VAT forTY 2020:

Year 2020

l •t Quarter 2nd Quarter 3rc1 Quarter 4th Quarter

Total

Exhibit

"P-4"

"P-5"

"P-6"

"P-7"

Purchase of

Capital Goods

p 39,225.00 p - p 61,836.23 p 325,278.92 p 426,340.15 not exceeding

P1Million

Purchase of

Capital Goods

- - - 186,535.71 186,535.71 exceeding

P1Million

Domestic

Purchases of

Goods Other

149,740.39 875,528.63 1 '727 ,068.69 1,921,974.40 4,674,312.11 than Capital

Goods

Importation of

Goods Other

- - - - - than Capital

Goods

ss Docket - Vol. I, pp. 161- 176, Exhibits "P-4" to "P- 11 •·.

U-DEV Corporation v. Commissioner of Internal Revenue

Konno naan nnn ence n enema nana nana nnn senna nen cn nnn nnn naan cnn ennn nnn sce= x

Capital Goods

Claim for

tae "p P821,418.67 | P1,673,269.95 | P7,774,351.67 | P6,447,731.85 | P16,716,772.14 12" exceeding

P1Million

Current input VAT for TY 2021:

Year 2021 2nd Quarter 4th Quarter deferred for a 2: 2

Purchase of

Capital

Goods not P 22,864.61] P 73,131.64 P 22,488.21] P 135,394.92 | P 253,879.38 exceeding

P1 Million

Domestic

alsa oF 607,945.62} 773,233.67 | 5 969,939.10 4,172,861.94| 11,514,980.33 ervices

Input Tax

Deferred on

Capital Goods

Exceeding 481,983.85 457,476.19 432,968.54 408,460.89 481,983.85

P1Million

from Previous

Quarter

Less: Input

(457,476.19) (432,968.54) (408,460.89) (567,380.01) (567,380.01) the succeeding

Purchase of

Capital

Goods 942,535.72 942,535.72 2,093,418.20 2,124,602.61 3,120,149.75 2,978,938.36 10,317,108.92 67,629.62 67,629.62

Capital

Goods

Tax on

Total

Conrent P821,418.67 | P1,673,269.95 | P7,774,351.67 | P6,447,731.85 | P16,716,772.14 Input VAT eal TT il = ae

for TY 2020

exceeding

Domestic

eee oe 3,649,819.05 | 3,684,591.69 | 3,033,915.97| 3,860,670.74 | 14,228,997.45

3" Quarter

Purchases of

Less: Output 7

Tax

P1Million

Domestic

Purchases of

Goods Other

than Capital

Goods

Importation of Goods

Other than

U-DEV Corporation v. Commissioner of Internal Revenue

Input Tax

Deferred on

Capital

Goods

Exceeding

567,380.01 533,545.66 499,711.22 1,388,453.49 567,380.01

P1Million

from

Previous

Quarter

Less: Input

Tax on

Purchases of

Capital

Goods

exceeding (533,545.66) (499,711.22) (1,388,453.49) (1 ,307,492.26) (1 ,307,492.26)

P1Million

deferred for the succeeding period

Total

Current

P5 ,799,936.21 PS, 983,790.00 P6 ,230,347 .38 P7 ,055,965.25 P25,070,038.84

Input VAT for TY 2021

Less: Output

- -

Tax

2,617,747.24 1,648 054.01 4 265,801.25

Claim for

Refund

P3,182,188.97 P4 ,335,735.99 P6 ,230,347 .38 P7 ,055,965.25 P20,804,237 .59

(Exhibit "P-

13") Summary oftotal current input VAT for TYs 2020 and 2021:

TY

2020 2021

Total

Purchase of Capital

Goods not exceeding

P1Million

p 426,340.15 p 253,879.38 p 680,219.53

Purchase of Capital

Goods

exceeding

P1Million

186,535.71 942,535.72 1,129,071.43

Domestic

Purchases

of Goods Other than

Capital Goods

4,674,312.11 10,317,108.92 14,991,421.03

Importation of Goods

Other than Capital

Goods

- 67,629.62 67,629.62

Domestic Purchase of

Services

11,514,980.33 14,228,997.45 25,743,977.78

Input Tax Deferred on

Capital

Goods

Exceeding

P1Million

from Previous Quarter 481,983.85 567,380.01 1,049,363.86

Less: Input Tax on

Purchases of Capital

Goods

exceeding P 1 Million deferred for the succeeding period (567 ,380.0 1) (1 ,307 ,492.26) (1,874,872.27)

U-DEV Corporation v. Commissioner of Internal Revenue

Total Current Input

VAT

P16,716,772.14 P25,070,038.84

Less: Output Tax

- 4,265,801 .25

Claim for Refund

P16, 716,772.14 P20,804,237.59 P41, 786,810.98 4,265,801 .25 P37,521,009. 73 To substantiate the reported input VATof'P41,786,810.98, petitioner submitted its suppliers' sales invoices and receipts87 which were all examined and verified by the ICPA. The ICPA summarized its findings by checking the compliance of the purchase documents provided with the invoicing requirements, as follows:ss

Particulars

Exhibit

Input VAT

Reference89

Amount

I. CY 202090 A. Compliant purchase documents (Annex 4)

1. Purchase of goods supported by "P-1178" to p 494,602.34 mvmce

"P-1269"

2. Purchase of goods supported by

"P-1270" to

373,759.17

InVOICe

with countersigned

"P-1288"

corrections

3. Purchase of services supported by "P-1289" to 177,970.36 official receipt

"P-1302"

4. Purchase of services supported by

"P-1303" to

1,395,711.75 official receipt with countersigned

"P-1306"

corrections 5 . Purchase of services supported by "P-1307" to 8,885,195.41 official receipt with countersigned

"P- 1390"

corrections & notarized vendor certification

6. Purchase of services supported by

"P-1391"

75,822.37 certified true copy of official receipt with countersigned corrections & notarized vendor certification

7. Purchase of goods supported by

"P-1392" to

2,247,214.54

InVOICe

with countersigned

"P-1566"

corrections & notarized vendor certification

Subtotal (A)

Pl3,650,275.94 B. Non-compliant purchase documents (Annex 4)

1. Address of Petitioner not indicated

"P-1567"

p 562.50

2. Document dated outside the

"P-1568" to

34,629.50 covered year when the input VAT

"P-1575"

was claimed

U-DEV Corporation v. Commissioner of Internal Revenue

Particulars

Exhibit

Reference89

3. Document dated outside the

"P-1576"

covered year when the inpu t VAT was claimed; Difference in VAT amount per document and SLP

4. Document not valid for claiming "P-1577" to input tax

"P- 1596"

5. Illegible document

"P- 1597"

6. Incomplete address of Petitioner

"P-1598" to

"P-1600"

7. Incomplete TIN of Petitioner

"P-160 1"

8. Incorrect name and

TIN

of

"P-1602"

Petitioner

9. Nature of service not indicated

"P- 1603" to

"P-1609"

10.

Purchase

of goods not "P- 1610" to su pported by invoice

"P-1613"

11.

Purchase of goods supported

"P-1614"

by u ndated invoice

12. Purchase of services not "P-16 15" to supported by official receipt

"P-1620"

13.

TIN of Petitioner & natu re of "P-1621" to service not indicated

"P- 1623"

14.

TIN of Petitioner not indicated

"P-1624" to

"P-1627"

15.

TIN of Petitioner not indicated; "P-1628" to Incomplete address

"P- 1630"

16.

VAT and/or VATable amounts

"P-163 1" to

not indicated

"P-1635"

17.

Purchase of goods supported "P-1636" to by invoice with corrections not

"P-1637"

countersigned 18.

Difference in VA Table and j or "P- 1638" to VAT amount/s per docu ment vs

"P-1649"

SLP

19 .

Incorrect address of Petitioner;

"P-1650"

Nature of service not indicated 20.

Docu ment dated ou tside

"P- 1651"

covered year when the input VAT was claimed; Nature of service indicated 21.

Unit, cost & quantity not

"P-1652"

indicated 22.

Unsu pported input VAT from local purchases

Subtotal (B)

Total for CY 2020 (A + B)_ [Cl

II. CY 2021 A. Compliant purchase documents (Annex 5)

Input VAT

Amount

11,256.00 522,345.06 9,377.68 4 1,475.98 190.59 53.74 74,940.62 116,322.30 9,642.86 37,340.84 54,966.96 78,519.68 1,329.88 21,682.49 109,180.87 1,579,468.30 9,240.00 1,320.00 396.43 251, 114.37 ?2,965,356.65 P16,615,632.59

U-DEV Corporation v. Commissioner of Internal Revenue

Particulars

Exhibit

Reference89

1. Purchase of goods supported by

"P-1653" to

lnVOlCe

"P-2 110"

2. Purchase of goods supported by

"P-2 111" to

lnVOlCe with countersigned

"P-2 156" &

correction s

"P-28 11"

3. Purchase of services supported by "P-2 157'' to official receipt

"P-2286"

4. Purchase of services supported by

"P-2287" to

official receipt with countersigned

"P-229 1"

corrections

5. Purchase of services supported by

"P-2292" to

official receipt with countersigned

"P-25 12"

corrections and notarized vendor certification

6. Purcha se of goods supported by

"P-2513" to

lnVOlCe with cou ntersigned "P-254 7";

corrections and notarized vendor "P-2549" to certification

"P-2697" &

"P-2812"

Subtotal (A)

Input VAT

Amount

p 6, 120,034 .08 365,818 .74 2,797,347.36 225,992.95 10,120,312.63 2,894,120.64 P22, 523,626.40 B. Non-compliant purchase documents (Annex 5)

1. Difference in VAT and/ or VAT

"P-2698" to

p 169,349.27 amountjs per document vs SLP

"P-27 11" &

"P-2813"

2. Document dated outside the

"P-27 12" to

622,638.70 covered year when th e input VAT

"P-2755"

was claimed

3. Document dated outside the

"P-2756"

24,107. 14 covered year when the input VAT was claimed; Nature of service not indicated

4. Document not valid for claiming

"P-2757" to

332,998.48 input tax

"P-277 1"

5 . Document not valid for claiming

"P-2772"

5,978 .57 inpu t tax;

Document

dated ou tside the covered year when the input VAT was claimed

6. Illegible document

"P-2773" to

5,2 18.35

"P-2779"

7 . Incomplete address of Petitioner

"P-2780" to

18,332.14

"P-2782"

8. Incorrect name of Petitioner

"P-2783" to

3,546.42

"P-2784"

9. Incorrect name, TIN & address of

"P-2785"

474.11 Petitioner; Nature of service not indicated ; VAT and/or VATable amount/ s not indicated

10. Incorrect TIN of Petitioner

"P-2786"

3,075.00

11. Natu re of service not indicated

"P-2787" to

229,780.10

"P-2805"

U-DEV Corporation v. Commissioner of Internal Revenue

Particulars

Exhibit

Reference89

12. No

VA Table

and/ or

VAT

"P-2806"

amount/ s indicated

13. Purchase of goods not "P-2807" to supported by invoice

"P-2810"

14. Purchase of services not

"P-2814"

supported by official receipt

15. Purchase of services supported

"P-2815"

by official receipt with corrections not countersigned

16. TIN & address of Petitioner not "P-2816" to indicated

"P-2818"

17. TIN of Petitioner not indicated

"P-2819" to

"P-2821"

18. TIN of Petitioner not indicated;

"P-2822"

Difference m VA Table and/or VAT amount/s per document vs

SLP

19. Not reported in SLP

"P-2823"

20. Unit, cost & quantity not

"P-2824"

indicated

21. Difference in VAT amount per

"P-2825"

document vs SLP

22. Document not dated

"P-2826" &

"P-2548"

23. Unsupported input VAT from local purchases

24. Unsupported input VAT from importation

Subtotal (B)

Total for CY 2021 (A + B) [D]

GRAND TOTAL (C +D)

Input VAT

Amount

4,060.71 49,492.80 38,577.50 3,221.99 1,688.26 37,996.63 9,320.89 23,063.89 8,029.29 9,402.24 18,874.36 724,761.10 67,629.62 P2,411,617.56 P24, 935,243.96 P41,550,876.5491 Notably, the ICPA accounted only for the amount of P41 ,550,876.55 in input VAT for TYs 2020 and 2021, as indicated above. Thus, the discrepancy of P235,934.43 in the amount of input VAT reported per petitioner's amended Quarterly VAT Returns of P41,786,810.98 for TYs 2020 and 2021 vis-a-vis I CPA's findings of P41 ,550,876.55, which are unsubstantiated, shall be disallowed, computed as follows: 91 With PO.O I difference; Actual footing is P41 ,550,876.55.

U-DEV Corporation v. Commissioner of Internal Revenue

Input VAT

Year 2020

Year 2021

Per Quarterly VAT Returns

P16,716,772.14 P25,070,038.84 Per !CPA's findings 16,615,632.59 24,935,243.96

Difference /Unsupported

p 101,139.55 p 134,794.88

Total

P41,786,810.98 41,550,876.55 p 235,934.43 Moreover, based on the ICPA table summary, as presented earlier, the input VAT amounting to P5,376,974.21, classified under "B. Non-compliant purchase documents" in the amounts of P2,965,356.65 and P2,411,617.56 for TYs 2020 and 2021, respectively, shall be disallowed for failure to comply with the invoicing requirements under Section 113 of the NIRC of 1997, as amended, and Section 4.113-1 of RR No. 16-2005, as amended.

Furthermore, the purchase of goods from supplier Mt.

Kalatungan Agri-Ventures

Inc.

on November

1, 2021, amounting to P297,808.58, with corresponding input VAT of P35,737.03, shall also be disallowed since the CAS Permit indicated in the lower right of the invoice is dated March 20, 2022, issued after the date of that invoice.92 In fine, for purposes of compliance with the seventh requisite, of the total reported input VAT amounting to P41,786,810.98, only the total amount of P36,138,165.31 represents petitioner's valid and substantiated input VAT for TY s 2020 and 2021, computed as follows:

Particulars

2020

Per Quarterly VAT Returns

p 16,716,772.14 Deductions from claim:

Disallowances by ICPA

2,965,356.65

Disallowances by the Court

Unsupported input VAT 101 ,139.55

Disallowance per Court

-

Valid Input VAT

P13,650,275.94 Eighth requisite: A portion of petitioner's valid input VAT of P36,138,165.31 is attributable to its zero-rated sales.

2021

Total

p 25,070,038.84 p 41,786,810.98 2 ,411 ,617.56 5,376,974.21 134,794.88 235,934.43 35,737.03 35,737.03 P22,487,889.37 P36,138,165.31

U-DEV Corporation v. Commissioner of Internal Revenue

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.

To reiterate, in its amended Quarterly VAT Returns for the TY 2021, petitioner declared total sales amounting to P157 ,922,596.06, consisting of the following:93

Particulars

Total

Vatable Sales

p 35,548,343.75

Zero-Rated Sales

122,374,252.31

Total Sales

P157,922,596.06 However, since petitioner's valid input VAT for the TY s 2020 and 2021 amounting to P36,138,165.31 cannot be directly or entirely attributed to any of the sales transactions, the said valid input VAT shall be allocated based on the volume of its total sales, as follows:

Amount

Allocation

Allocated Valid

Nature

Factor

Input VAT of Sales

[a} [c =a+ b] [e = c x d)

Vatable Sales

p 35,548,343.75 22.5099793423% p 8,134,693.55

Zero-Rated Sales

122,374,252.31 77.4900206577% 28 ,003,471.76

Total Sales

P157,922,596.06 fbi 100% P36,138,165.31 Thus, for purposes of, and with regard to p etitioner's compliance with the eighth requisite, only the amount of P28,003,471. 76 represents valid input VAT attributable to its total zero-rated sales for the TY 2021. Ninth requisite: The input VAT has not been applied against output VAT during and in the succeeding quarters.

Having determined that petitioner had valid input VAT attributable to its zero-rated sales, the Court shall now 93 Docket- Vol. l, pp. 169-176, Exhibits "P-8" to "P-11 ". [dj

U-DEV Corporation v. Commissioner of Internal Revenue 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.

For TY 2021, petitioner reported output VAT from its taxable sales in the aggregate amount of P4,265,80 1.25, to wit:94

TY 2021

Exhibit

VATable Sales

Output VAT

1st Quarter

"P-8"

p 21 ,814,560.33 p 2,617,747.24 2nd Quarter

"P-9"

13,733,783.42 1,648,054.01 3rct Quarter

"P-10"

- - 4th Quarter

"P-11"

- -

Total

p 35,548,343.75 P4,265,801.25 In Chevron Holdings, Inc. (Formerly Caltex Asia Limited) us. Commissioner of Internal Revenue, 95 the Supreme Court held that the input tax attributable to zero-rated sales may, at the option of the VAT-registered taxpayer, be: (1) charged against output tax from regular 12°/o VAT-able sales, and any unutilized or "excess" input tax may be claimed for refund or the issuance of tax credit certificate; or (2) claimed for refund or tax credit in its entirety, and such option is vested with the taxpayer- claimant, to wit:

Thus, the input tax attributable to zero-rated sales m ay, at the option of the VAT-registered taxpayer, be: (1) charged against output tax from regular 12% VAT-able sales, and any unutilized or 'excess' input tax may be claimed for refund or the issuance of tax credit certificate; or (2) claimed for refund or tax credit in its entirety. It must be stressed that the remedies of charging the input tax against the output tax and applying for a refund or tax credit are alternative and cumulative. Furthermore, the option is vested with the taxpayer-claimant . ... (Emphasis and underscoring supplied) Applying the foregoing, records show that petitioner chose the first option, i.e., it computed its claim for refund in the aggregate amount of P37,521,009.73 by offsetting its output VAT from taxable sales for the TY 2021 against its available input VAT for the TY 2021, as shown hereafter: 94 !d.

U-DEV Corporation v. Commissioner of Internal Revenue

Particulars

TY 2020

TY 2021

Total current input VAT P16,716,772.14 P25,070,038.84

Less: Output Tax

- 4,265,801 .25

Applied for Tax Refund

P16, 716,772.14 P20,804,237. 59

Total

P41,786,810.98 4,265,801.25 P37,521,009. 73 Following the same computation, the refundable input VAT shall be computed net of output tax liability. Since petitioner's valid input VAT allocated to vatable sales in the amount of P8, 134,693.55, as earlier determined, is enough to cover its output VAT liability amounting to P4,265,80 1.25, the valid input VAT allocated to total zero-rated sales in the amount of P28,003,4 71.76 shall all be attributed to petitioner's total zero-rated sales amounting to P122,374,252.31. Considering that the entire zero-rated sales amounting to P122,374,252.31 are valid, the valid input VAT allocated to total zero-rated sales in the amount of P28,003,4 71 .76 shall be refunded in favor of petitioner.

Finally, to ensure that the present input VAT claim for refund will no longer be available for application to future output VAT liabilities, it was ascertained that:

a. the amount of P16,716,772.14 or the amount of excess input tax attributable to petitioner's zero-rated sales for TY 2020 was deducted as "VAT Refund/TCC claimed" in its amended Quarterly VAT Return for the 1st quarter

of TY 2021 ·96 and

'

b. the amount ofP20,804,237.59, or the amount of excess input tax attributable to petitioner's zero-rated sales for TY 2021, was deducted as "VAT Refund/TCC claimed" in its amended Quarterly VAT Return for the 1st quarter ofTY 2022.97 Accordingly, the subject claim no longer formed part of the excess input VAT of P5,455,728.7298 as of the end of the 1st quarter ofTY 2022, which was carried over to the 2nd quarter of TY 2022.99 Hence, petitioner is deemed to have fulfilled the ninth requisite for the refund of input VAT under Section 112(A) of the NIRC of 1997, as amended. y'

U-DEV Corporation v. Commissioner of Internal Revenue

In fine, petitioner has sufficiently proven its entitlement to a total input VAT refund amounting to P28,003,471.76. However, since respondent has already granted the amount of P11,365,474.30, then, petitioner is entitled to the refund in the amount of Pl6,637,997.46, representing the remaining balance of its excess and unutilized input VAT for TYs 2020 and 2021 attributable to its valid zero-rated sales forTY 2021 , that was disallowed by respondent, computed as follows: Valid Input VAT attributable to Zero-rated Sales p 28,003,471.76

Less: Final Amount Recommended for VAT Refund by the BIR100

11,365,474.30 Valid Input VAT available for Refund P16,637,997.46

WHEREFORE, in light of the foregoing considerations, the present Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is ORDERED TO REFUND to petitioner the additional amount of Pl6,637,997.46, representing the latter's excess and unutilized input VAT for taxable years 2020 and 2021 attributable to its zero-rated sales for taxable year 2021 .

LAN~~~AVID

Associate Justice

!CONCUR:

~'

JEAN MARl~ BACORRO-VILLENA

~iate Justice

U-DEV Corporation v. Commissioner oflntemal Revenue

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CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, 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's Division. ' ~ JEAN ..... .&.&OL&_,..,. A. BACORRO-VILLENA esiding Justice