CTA Case No. 4888

DECISION

Contested in this petition for review is the of petitioner for the refund or ta:t~ credit of its excess input value-added taMes <VAT> paid for the period April 1991 to March 1992 in the of P740,730.82.

The facts are as follows. Petit i onet~ is a non-resident foreign corporation organized and e:t~isting under the laws of Switzerland with ~ain office address at CH-5401 8aden 7 Switzerland. 1t is a duly registered VAT entity with an approved application fot~ zeTo-t~ating effective l'lay 3 7 1991. <E.tthibit "C"> Sometime in 1989, the National Power Corporation <NPC cont ,~act Pd petit i onet~ for the engineering, supply, installation, construction, testing 223 ' • •,.

··' DEC l !:1 ION -

.-.

c.

and commissioning on a turn key basis of a t""o <2> l.tnit gas turbine power plant within the Naga Ther•al Powet~ Naga, Cebu Island, Philippines under NPC Contract No. KWGV-8400126 <Exhibit "A">. The contt~act is f1.mded undet~ a 1 oan agreement between NPC and Swiss Banks dated April 30, 1990. <Exhibits "FF", "GG" and "GG-1"> Attendant to the i•ple•entation of the contract, dm~ing the 1991 to March 1992, petit i onet~ purchased supplies ft~om 1 ocal suppliers and engaged the of local subcontractors, the pay•ent of which included thE' 10~ input VAT, which is now thE' subject of oJ~ tax <MP•oranda of PPtitionl"r Rl"spondent, pars. 4.1 and 4.3, and p. 3, rl"spectivl"ly>. is the 1.mdi sputPd brpakdown petitionl"r's input VAT in the a•ount of P740,730.82, wit:

Pl"t~i od Coverl"d Excess VAT Credits Apr· i 1 1991 Sept.

1991 Dec.

1991 Mar-ch 1991 August 1991 Nov.

1991 Feb.

1992 May 1992 TOTAL p 242,23.3.00 482, 762. ()(I 5~ 301. C>O 10., 134.82 p 740,730.82 and of to On nugust 5, L'J':J~::. petitioner· filed its a.ppl.ication for taM credit and/or refund of the input VAT paid with respondent's Bureau. <Exhibits "H" and ·• I") Respondent, 224 • • I - 3 - however~ disputes this fact and alleges t.hat petitioner· did not file a written claim for refund or tax cr·edi t..

<Memorandum for the Respondent, p. 3-4) to alleged inaction petit i one•-· filed the instant petition few 1 c::, 1932.

The issues brought up by the pa•~t i es and confr·ont i ng this court can be summed up in this wise : not this jurisdiction to take cognizance of this case; the .-, c..

Whethet~ ot~ not Sect.wi ties and petitioner needs a license in able to sue before the Philippine courts; and, 3.

petit i onet~ is entitled to refund or ta» credit. Anent the issue, t~FspondFnt contends petitioner did not file has from be wn that for ct~edit pt.wsuant to Sections 230 and 2•)4 of the Ta~l Code.

1934 tesf.i~~tony of Atty. Sergio Buaya, Assistant Revenue District Officer of Revenue District Office No.

83 of Talisay, CFbu to provE' her point.

We qt.tot F:

)4)()( 0.

Correct me if I am wrong, Mr.

l-Jitnpss, you at~P here in 225

DECISION -

C.T.A. CASE NO. 4BBB Jn A.

a.

A.

a.

Yes.

Now Thet~e - 4 - compliance with the that corr·ect?

subpoena~ is in co•pliance with the said !:·•.tbpoena~ did you bring along with yo•.t pe,~t i nent recot~ds on the claim f OJ~ VAT refund of the pet it i one•~ dm~ing the per~ i od Ap,~i 1 17 ~ 19'91 to lt1at~ch 1'992" was no available ,~eco•··d, Yo1.w Honot~s.

Do you know the reason why there was Mt~.

this no available records, Witness, could you infor• Honorable Court?

A.

Except for the paper that I brought, D.

ln this is the only paper available in om~ di st•~ict.

We tt~i ed fo•~ two days to look for the available records, but the ,~ecot~ds I bt~o ... ght c:n~e the on 1 y available records.

other words 9 Mr.

Witness~ these records were not available with yo1.w office? My q ... estion is 9 did you try to locate this record in other districts within the .~egi on?

A.

Except that I can recall that I addition, to inq ... ire fro• ad~~tinistrative office regional office in Cebu the answer is negative. XXX 0 f 01.1)~ City and she avet~s that petitionPr's been cancelled "on for non-compliance (i.e. failure to f i 1 e VAT t··et. 1.wn 226 ' VAT 19'93 for .

'· ..

·'•

DECISION -

C.T.R. CASE NO. 4888 - 5 - thP. J st.~ 2nd~ 3rd and 4th quarters of the year 1991> as • •• te::.t.:ified to by Atty. Sergio Buaya" in the hearing of Decembe..-. 13, 1994.

<Memorandum for Respondent, p.

9).

She thus submits that the herein clai• for refund cJ~ed it be denied in view of the failure of pe-titioneJ~ to file its VAT returns covering the quarters ended August • 1991~ November 1991, February 1992 and May 1992. She further asserts that it was was no clai• filed with her Bureau, as the alleged claim or tax credit dated August 5., 1992 was discovered to be non-existent and (ibid.' p.

9) Respondent's arguments must necessarily fail.

is much misunderstanding and a•bivalence in respondent's posturing in the case at bar. Firstly, respondent in her .:~ns"IP.t~ the- fact of petit i onet~' s filing of its application fpr • tax credit and/or refund of VAT on August 5, 1992. It is to be noted therein that she only specifically denied the rest of the allegations to said application, more particularly on the reasons advanced by petitioner in support of its clai•.

E•, p.

CHI reccwds.l.

Such act of t~e spondPnt constitutE's j•.1d1cial admission and c:.hl?

may not thus rontr~dict it' unlr:ss it i '!:· 5hown that.

made 227 '·" - Eo - tht-ough pal pabl P mistakE.> or that no ~·-•ch adll'li ssi on was made.

(5Pction Matt Pt~ of fact 1 y, writtPn -: .· ..

application P~ists.

t~P 1 i ancp on thP abovp-quoted to Pstablish thP fact that no claim for refund was filPd by pPtitionpJ~ i!'- mi~placed.

A rpading of his tPsti•ony shows that the VAT of petit i onPt~ WE're dPPmPd to be unavailablE>~ after two days of seat··ch fot~ s•.•ch futile.

for the respondpnt to concludE.> somewhat that the t~PCOJ~ds unavai 1 abl P, ipso r acto~ pPtitionPr failed to fill!?

thP rPquisitP application.

lhP unavailability of thP rPcords could have bPI!?n duP to thP lack of a vi qot~ous and diligPnt sparch or pffort, or that it •ay have lost by thp w]llful to causE.> injury on thiE' and so on.

1n fin£>, thP tPstimony of Atty.

Buaye~ littlE> or no probativE.> valuE> in Pstablishing the dPfinitP I!?Xistl!?ncp or absence of thP writtpn claim for refund. La:=.t.l y,.

···pspondent' s advent tu~o us Jnf!?rrncer, Hh:ich l.ihe >.IS to be]ii!?VP, that ca•.I!-P uf '· ce~ncp]le~tion of petit. :i onpt··' s non- was due t (I i t 5 f i:l l ) I,.W £' Awe

DECISION —

C.T.A. CASE NO. 4894 to file VAT ‘returns for the year 1991, as quoted, supra, bespeahs of a mycpic appreciation of the evidence oan record.

Respondent herself presented in evidence the wD omg OP ‘Taxspayer’s Master Card of the petitioner ¢ Exbibit -",

p. 3250, CTA records? which clearly reveals that at filed on December 13, 1991, December ca, 1991, March 19, i979 and June eZee, 1992 its secand, third, and Fourth quarterly VOT returns for 1991 and first quarterly VAT return for 1992 respectively. These apparent different dates of filing of the VAT returns , except fer the fourth guarter, as coapared with the dates indicated in the VAT returns offered in evidence by petitioner {Exhibits "Dp", "Er sand "E"), after a painstaking scrutiny, could be fully explained by the fact that petitioner’s exhibits are amended returns.

The Fact that petitioner’s VAT registration was cancelled on March of 1993 for non-campliance daes wot necesgariLly signify that during priae years, i.e. i?2t and 1998, petitioner did not File its VAT returas. Theat is a convaluted digestion of logic and actual fact. The March il, 1993 Memorandum = af. Cathrina 0. Laurente, Revenue Of Ficer [ af Revenue District No. 60-A, Talisay, Cebu, whict dealt on the various reasons an why VAT registered establishments were not camplying with the 223 a »° 2 “” -.. ...

-

B -

requirements embodied under Revenue Regulations No.

5-87~ readily states that the cancellation of registration was due to the completion of its pr··oject with the NPC and that it has been called back to its office in Switzerland.

( Exhibit .. 1 "' p.

348., CTA Respondent must have forgotten its own records. Moreover, respondent existence of.petitioner's VAT returns ( Answer, par. 5; p. 33, CTA Likewise, she interposed no objection to the existence of the VAT when they fon11al 1 y in evidence.

<CoiiJIIJent to Petitioner's Offer of Evidence, p. 329, CTA records) On the second issue~ events show that petitioner was only engagP.d in an isolated not sec•.lt~e to do in Philippines.

Section 123 of the Code 1 i mit ed .~ights.

of a suet• petitioner·, to wit:

"SEC.

123.

Definitions and ,~iyhts of fo1·eiyn co1·po1·ations.- For~ the P'-wposes of this Code, a for~ei gn corpor~at ion is one for~•ed, organized or existing under any laws other than those of the Philippines and whose laws allow Filipino citizens and corporations to do business in its own country or state. It shall tl_av~ the right to transact business in the Philippines after it shall have obtained a Jirense to transact business in this country in accordance with this Code and a certificate of 230 the as • • • \ ..

OECISlON -

9 - authority fro• the appropriate agency." <Under·scor·ing supplied) And pertinent to the issue on maintaining a suit Co1..wt, Section 133 of the Corporation Code states, thusly:

"SEC.

133.

Doing businl!ss without a license.

No foreign corporation transacting business in the Philippines without a license, or its successot~s ot~ assigns., shall bP per•itted to maintain or intervene in any action, suit or proceeding in any court or administ.~ative agPncy of the PhilippinE'<:·;

but such corporation may be sued or proceedPd against before Philippine courts or ad•inistrative tribunals on any valid cause of action t~ecogn i zed o..mder Phi 1 i ppi ne 1 aws. " Insofar as petitioner is concerned~ it has onlv to contend with "1hat by the phrase business" in the above-quoted provision of 1 aw in order to right to institute thE' pt~E'SPnt SHit ot~ procePdings with or without license. Respondent, on the othet~ hand., that petitioner failed to prove or even show proof that it is a duly registered cm .. porat ion with the 5Pcm .. i ties and E:Hchange Commission, and as a consequence, re!:.pondent that petitioner has no legal, and juridical e~istence.

into the met~ it of the • .. espPct i ve ;:wopo<:.it.ion of WE' believe that the hey lies in what is meant by the bu!'.'-ine<:.s''.

231 t

- 10 - case of The Mentholau• Co • ., lnc. vs.

Mangali•an., 72 Phil. 528, true ~eaning of transacting business, thusly: "No genet~al t~ule ot~ governing principle can be laid down as to what constitutes "doing' or "engaging in' o•~ 'tt~ansacting' business.

Indeed, each case ~ust be judged in the light of its peculiar environ~ental circumstances. The true test, however, see•s to be whether the foreign corporation is continuing the body or substance of the business or enterprise for which it was organized or whether it has substantially retired fro• it and turned it ovet~ to another.

<Traction Cos. vs. Collectors of Internal Revenue lC.C.A • ., OhioJ., 223 F. 984, 987).

The ter• i•plies a continuity of commercial dealings and arrangements, and contemplates, to that eHtent, the perfor•ance of acts or works or the eHercise of some of the functions normally incident to, and in progressive prosecution of, the purpose and object of its organization. HHH" that petitioner the lone contract with the NPC for, among others, the construction of the gas turbine project within the Naga Thermal Power plant in Naga, Cebu Island <EHhibit "A", supral, and after the completion of which, it was recalled back to <TSN of Atty.

Sergio Ell.tanga, DecE>mber 12, 1394., p. 348, CTA t~ecot~ds > VE>rily, petitioner did not intend to prosE>cute its in the Philippines on a t~egul at~ basis, as it ,-et. •.wnfO·d back to Switzerland after the completion of its It only entered into an isolated business o•- transaction foundE>d on a single agreement with thE> NPC. 232 • .

' ..

OEClS[ON -

- 11 - "lt is a rule generally accepted that one single o•~ isolated business transaction does not constitute 'doing b~l!· i ness' within the meaning of the 1 aw, and that transactions which are occasional, incidental and casual, that of a character to indicate a purpose to engage in business do not constitute the doing or engaging in business contemplated by law.

corporation may be regarded as doing business in a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character.

xxx" <Pacific Micronesian Line, Inc. vs. Del Rosario and Pelingon, 9& Phil 30> Considering, therefore, that petitioner is not doing • or transacting business in the Philippines, it is • ' axiomatic to conclude, a fcwtiori, that it need not obtain license before it may sue. With regard to the last issue, we find the i n~.tant claim for refund or tax credit to be amply suppot~tpd by Both par~t i es the legal authority for~ herein claim springs from Section 8(bJ of RFpublic Act No.

E>'J35, the enabling statute of thp NPC, which states, to quote:

233

- 12 "(b) Foreign loans- The corpm~ation <NPC> is hereby authorized to contract loans, credit, in any convertible foreign currency, or capital goods, ~nd indebtedness from time to time from foreign government or fund source. MMN The loans credits and indebtedness contracted under this subsection and the payment ·of the pt~incipal, interest and other charges thereon, as well as the importation of the machinet~y, equipment, matet~ials, supplies and services, by the corporation, paid from the proceeds of any loan, credit or indebtedness incurred under the Act, shall also be exempt froM all direct and indirect taxes, fees, imposts, other charges and t~estt~ictions. "<Petition fat~ Review and Answet~,.

pat~s.

4 and 3 t~espectively, t,mderscoring St,1pplied> On the basis of the above provision of law, and VAT

Ruling

No. 097-90 dated May 2, 1990, whet~e in the BIR ruled that the canst .~ .. ,ct ion services rendered by a foreign corporation to NPC, if funded by loans incurred und et~ R. A.

No.

E.935 shall not be subjected tP VAT beca1..1se NPC' s exemption include "indit~ect taxes" on the purchases of services funded by foreign loans, petitioner· applied fat~ VAT zero-rating pursuant to Section 102 <a) <3> of the Ta.>< Code, inasmuch as the services renderFd by it to NPC are under similar circumstances with said BJR ruling.

Consequently, respondent approved petit i onet~' s application for zero-rating on May 3, 1991. <Petition for Review, 2> In het~ answer, she, however~, deemed the·applicability of said t~uling to the 234 • ..

- 13 - instant case as mere conclusion bereft of basis in fact and in 1 aw.

Respondent singular objection in this issue.

She asset~ts that petit i onet~ failed to substantiate or show proof that the fund used in the construction of the gas turbine power plant proceeds of foreign loans obtained by NPC, and therefore, fatal to petitioner's case. A cursory reading of the evidences formally by the petitionet~, unobjected to by respondent as to their existence, would show that NPC contracted a foreign loan agreement with Swiss Banks for the financing of the gas turbine power plant within the Naga Thermal PowPr Comple)( in Naga, Cebu Island. This was furth~r certified to by the President of NPC, Ernesto Aboitiz on February 25, 1991.

<E>(hibits "FF", "GG", and "GG-1", pp. 312-314, CTA t~ecords) The meandering opposition of respondent is thus not its salt.

·rhe above evidencE's speak f ot~ themselves.

Rt!s ipsa JoquitoJ>~. Mot~ eo vet~, find the objection of t~espondent entirely opposite het~ prior approval of petit i onPt~' s application f Ol~ VAT z ero-t~at i ng.

The ·-' application glaringly shows on its face the typpwritten desct~i pt ion of the of services rendpred by 235

- 14 - petit i onet~, and the NPC's enabling law, R.

A. No.

5375, as amended.

There is no other conceivable rationale for the appt~oval, except that petitioner has fully complied with the requirements of R.A. No. 6375, one of which is the u~e of foreign funds. Respondent is, for all intents and put" p o s e s , estopped questiCJning petit i onet~' s alleged nCJn-compliance with said law. With the disposition of all the legal and f act•.1a 1 obstacles thrown by the respondent, there is no 1 onget~ any justification to prolong the agony of the petit i onet~ in its quest for the refund or tax credit of its excess input VAT taxes.

We note however that petitioner presented claims for items which were not proven to be d i t~ect 1 y and at t t" i but a b 1 e t o the ptw s uant- to Section 1 OG < b > of the Tax Code and BIR Reventte Regulations No. 3-88.

Correspondingly, such it ems at"e a.

i11voices c 1 a i • ot" bearing dates beyond the after March 1992 <Exhibits "AA", "BO" to "BS" and "EF" to "EI">; b.

gasoline receipts which according to Section 103(d) are exempt from payment.

Hence, there is no input tax that can be shifted to petitionet" <Exhibits "AL" to "AZ", "BA" to "BD", "BT" to "BZ", "CA" to "CE", "DT", "EA", "EB", "EE"> c.

(EHhibits cot~respondence "CF" to "CZ", 236 to various "DA" to "DF">;

..

I .· . _. . ··~· . ;

.

- 15 - d.

offic~ supplies attributed to the power which plant cannot be const ,-uct ion <Exhibits "DG", to "DK", "DN" and "DO"l; e.

coffee, mineral miscellaneous expenses such as coffee filter, toilet paper, a1cohol, watet-, etc. <Exhibits "DL", "DM". "DU", "DV", "DW", "DX", "DY", ''ED">; repairs of automobile <E:~hi bits "DP".

"DQ", "DR" and "DS">;

g.

invoice referring to OR <Exhibit "AK">; and h.

not a VAT invoice <Exhibit "EC">. What can thus be granted to petitioner are the following, to wit:

Supplirr "indanao Oriental Builders, Inc. "indanao Oriental Builders, Inc. "indanao Oriental Builders, Inc. "indanao Oriental Builders, Inc. "indanao Oriental Builders, Inc. Mindanao Oriental Builder~, Inc. O.nit!Ch Builders l Allied Contractors, Inc.

Olnitrr:h BuiJdrrs I Allird Contractors, Inc.

Ownitrr:h BuiJdrrs I Allird Contractors, Inc.

Olnitrr:h BuiJdrrs I Allird Contractors, Jnc.

Olnitrr:h Buildrrs I Allird Contractors, Inc.

Olnitrr:h BuiJdrrs I Allird Contractors, Inc.

Ornitrrh BuiJdrrs I Allird Contractors, Inc.

011Jihrh lhtildrrs I Allird [tmtracton, Inc.

lmlitrrh lhtildrrs I Allird Contractors, Inc.

Vwnitrr:h Buildrrs I Allird Contractors, Inc.

VAT Rrg. No.

Exh.

lnv/OR I Datr 7S-S-ooo260 7S-S-4)()1R60 7S-S-4)()1R60 7S-S-Q()CR60 7S-S-oooai0 1S-S-4)()1R60 K L " N 0 p 28-5-001988 g 28-5-001988 A ZB-5-001988 S 28-5-001988 T 28-5-001988 u 28-5-001988 \1 Z&-5-001988 " 28-5-001988 l f'&-5-001 988 y 28-5-001988 l 237 ~ uo ~ S08 JSl Sl6 ll--o'i-91 ll~-91 l2-o5-'31 12-IS-'31 12-17-'31 006 04-23--91 015 0&-28-91 012 0&-25-91

OJ J

0&-05-91 016 06-25-91 017 0&-25-91 018 07-09-91 013 0&-25-91 014 0&-28-91 007 0&-1()-91 Jnv.

A1ount Pl,SOO,OOO.OO l\5,200.00 l,l77,J~O.OO J,J(lilj,lSJ.OO 810,000.00 50,~70.00 %,400.00 94,472.00 31,680.00 2£,, 730.00 60,687.00 4,100.00 41,514.25 25,000.00 44,251.47 26,942.00 Input lilJI P136,J6.1.6\ lJ,2QO.OO llli, 121.82 JOO, SS'J. 36 73,636.36 ~. 588.18 8, 7Ea£4 8,~&36 2,800.00 2,430.00 5,517.00 372.73 3,774.<te 2,272.73 4, OC.'i.'.86 2,443.27 • I ,, •..

- 16 - • SuppJirr WJI Rrg. No. hh. Jnv/OR I Dah Jnv. Alount input la• Philips Electrical La1ps, Inc. J~-7-t00011 AB 101091 07-QC-91 ts,:m.,o 1,1tl7.oW Lily,s G@neral M@rchandise 600-S-ooo 1 ft6 oc 106J0S ~-26-91 138,000.00 12,5'5.'5· Lily's G@neral Merchandise 600-S-004>l ft6 AO 10103, 05-09-91 7,800.00 709.09 Asian High Technology Corp. Jl7-0Ql80J 1¥::

ZS79 06-tl-91 325,~.35 ~,589.12 Teleco••unications & Co1puter Trcb., Jnc.

lZA-7-000J 10 ~ 941 <6-09-91 Z9,500.00 2,&81.8Z Tropical Markrting (.()-4-000£,42 A6 ~942 07-if...-91 l7,~80.00 2,498.18 Philippinr Packings & Srals Corporation 32A-3-000601 ru 35029 03-<6-92 10,780.00 980.00 Liprrcon Srrvicrs, Inc. lZA-10009& BE 9138 11-0b-91 10,079.73 91&.34 Liprrcon Srrvicrs, Joc. JZA-10009& Bf 9077 JJ-14-'91 2, 108.~1 1'91.67 Liprn:on Srrvicrs, Inc. lZA-100096 fiG 9085 JJ-Z9-91 2,63'5.50 239.59 Liprn:on Srnit'Ps, ]JJC'. ~·10009L Jill 9151 ll-13-91 2,63'5.50 2~.59 Liprrcon SrrYicrs, ]JJC'. D-JOOO!.IL JJ 9164 01-03-92 1,845.00 167.73 Liprrcon SrrYicrs, Inc. ~·IO[I(t96 aJ ~ OH!"r-9Z 2,371.9& (15.£3 Liprrcon Srrvicrs, Jnc. lZA-100096 BK 9ZI4 01-30-92 3, 162. &1 287.51 Liprrcon Srrvicrs, Inc. &-.10009& 9l 9Z2Z OZ-19-92 3,947.99 JC"A91 Liprrcon Srrvicrs, ]nc. D-100096 Itt 9ZS6 03-JJ-92 3,072.6& 273.33 Liprrcon Srrvicrs, Inc. D-100096 BN 9259 03-21-92 3,4&4.13 314.92 Yah Hardwarr 23-7-0017&1 Dl 93912 02-24-92 570.00 51.82 Total P8, 1Jll ft6,, 96 P7J91 22~.07 ' ' It must be stressed at this point that a refund [or tax credit] of taxes partakes the nature of a tax exemption and are construed in strictiss1mi JUris against the taxpayer and in favor of the taxing authority.

<Associated Sugar, Inc. vs.

CIR~ CTA

Case No. 2944, May G, 1994, p. 4 citing Insular Lu•ber Co. vs. CTR, 104 SCHA 721, and CIR vs. Rio Tuba Nickel Mining Corp., 207 SCRA 549)

WHEREFORE, in view of the foregoing, this Coo..wt here by t~ e s o 1 v e s t o GRRNT t he PET 1 T 1 ON. In consideration, of the fact that petitioner is a non-resident foreign corporation not engaged in business in the Philippines, whereby the issuance of a tax credit 238

- 17 - certificate would be of no use to it, this Court hereby ORDERS the t~espondent to REFUND the amo\.mt of P739, 224.07 in favor of the petitioner.

WE CONCUR:

i' t~:L R ~0. DE VE~A~ Associate Ju~;v No costs.

~~Q_,Q~ ERNESTO D. ACOSTA Pt~es i ding Judge CERTIFICRTION I hereby cer·t i fy that this decision \-las rP.,:~ched after' due consultation among the member's of the Coc.wt of Tal( Appea 1 s in accordance with Section 13, Ar·ticle VIII of the Constitution.

239 <J. .. ~tQ'- Q~ ERNESTO U. HCOSTA Pt~es i ding Judge Court of TaM Appeals