Mirant Sual Corporation vs. Commissioner of Internal Revenue

DECISION

REVENUE, BAUTISTA, J.:

The Petition for Review seeks the refund or issuance of tax credit certificate in the amount of P179,314,926:56, representing unutilized input value-added tax (VAT) on petitioner's domestic purchases and importation of goods and services attributable to its zero-rated sales to National Power Corporation (NPC) for taxable year 2000. Petitioner Mirant Sual Corporation, formerly called Southern Energy Pangasinan, Inc.,

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is a corporation duly organized and existing by virtue of Philippine laws. Its principal office is located at Barangay Pangascasan, Sual, Pangasinan.1 Petitioner is principally engaged in the business of power generation and the subsequent sale thereof solely to National Power Corporation under a Build, Operate, Transfer (BOT) Scheme.2

Pursuant to Section 107 of

: .

1 Par. 1, Joint Stipulation of Facts and Issues (JSFI), Docket, p. 147 2 Par. 3, JSFI, Docket, p. 147 66 I j ~

) ) the former Tax Code [now Section 236 :of the National Internal Revenue Code (NIRC) of !

1997, as amended], petitioner is registerbd with the Bureau of Internal Revenue (BIR) as a ' VAT taxpayer with Tax Identification Number (TIN) OOJ-841-103. 3

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Respondent, on the other hand,' is the duly appointed Commissioner of Internal

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Revenue (CIR) vested with authority to a'ct as such, including the power to decide, approve

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and grant claims for refunds or tax credits of overpaid internal revenue taxes as provided by law.

He holds office at the BIR Nation'al Office Building, Agham Road, Diliman, Quezon '

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Petitioner was originally registered with the Securities and Exchange Commission i (SEC) under the name Pangasinan Electric Corporation. On August 17, 1999, petitioner's name was officially changed to Southern 1 Energy Pangasinan, Incorporated. Then, on June 28, 2001, the SEC approved petitioner's application to further change its corporate name to Mirant Sual Corporation.5

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In connection with petitioner's 1 sales of power generation services to NPC, respondent approved on November 26, 1999 the Application for Zero-Rate of petitioner for its sale of power generation services to NPC under the BOT scheme for the year 2000.6 Petitioner filed its Quarterly VAT: Returns for taxable year 2000 on the following

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dates: 7

VAT Returns (2000) ·

1st Quarter 2nd Quarter (Original) 3 rct Quarter 4th Quarter 3 Par. 4, JSFI, Docket, pp. 147-148 1 Par. 2, JSFI, Docket, p. 147 5 Par. 5, JSFI, Docket, p. 148 6 Par. 8, JSFI, Docket, p. 148; Exhibit "J" 7 Par. 6, JSFI, Docket, p. 148 (Amended) i

Date Filed

Exhibit

April 24, 2000

"A"

July 25, 2000

"B-8"

August 23, 2000

"B"

October 25, 2000

"C"

January 25, 2001

"D"

67

On March 11, 2002, pursuant to the procedure prescribed in Revenue Regulations

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No. 7-95, as amended, petitioner filed a'n administrative claim for refund of unutilized input

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VAT with the BIR.8 ' In order to toll the running of the two-year prescriptive period under the NIRC of

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1997, as amended and Revenue Regula:tions No. 7-95, petitioner filed the present Petition for Review on April 1, 2002. On May 2, 2002, respondent filed his Answer9 and averred the following Special and

Affirmative Defenses:

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"4.

Petitioner-'s alleged claim fori refund is subject to administrative routine investigation/examination bt .respondent's Bureau. ) ' . .

i 5.

The petition was filed ~ithout compliance with the conditions precedent for claiming inpu:t tax refund because there is no showing that petitioner has submitted complete documents in support of its claim, in contravention with ithe requirements of Section 112 (D) of the Tax Code. Said provision rea9s: 'In proper cases, the Commissioner shall grant a refund or isstJe • the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsecti6ns (A) and (B) hereof'. 6.

Taxes paid and collected by the Bureau of Internal Revenue are presumed to have been macle in accordance with law, and the burden of proof to prove otherwise is upon the petitioner. .

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7.

Assuming but without admitting the fact that petitioner is entitled to tax refund, it is incumbent upon the latter to show that it has complied with the provisions under S~ctions 204 (C) and ,230 of the Tax Code. Otherwise, its failure to prov'e the same is fatal to the claim for refund. !

8.

Claims for refund are construed strictly against the claimant for the same partakes the nature qf exemption· from taxation (Commissioner of Internal Revenue vs. Lec/.esma/ 31 SCRA 95) and as such, they are looked upon with disfavor (Western Mino/co Corp. vs. Commissioner of Inteinal Revenue/ 124 SCRA: 1211)." Petitioner filed its Pre-Trial Brief10 on June 14, 2002, while respondent filed its Respondent's Pre-Trial Brief11 on June u3, 2002. On June 21, 2002, the parties stipulated 8 Par. 7, JSFI, Docket, p. 148 9 Docket, pp. 123-125 ' 68

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/ ( on the facts and issues/2 then filed their Joint Stipulation of Facts and Issues on July 1,

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2002, 13 which was approved in a R.esolubon14 dated July 9, 2002. .

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On July 29, 2002, Mr. Ruben I R. Rubio was commissioned as the Independent Certified Public Accountant (CPA) who will examine· the voluminous documents of petitioner. 15 The Court-commissioned Indep~ (1de nt CPA submitted his Initial Report16 on March

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. 24, 2003, the Final Report17 on May 9, ~ 2003, and the Supplementary Report18 on May 16, 2003.

Petitioner's Formal Offer of Evidence 19 filed on April 10, 2007, with .respondent's

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Comment (Re: Petitioner's Formal Offer ,of Evidencef0 filed on April 18, 2007, was resolved !

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in Resolutions dated May 23, 200721 and 1 November 20, 200722 • On July 31, 2007, respondent's counsel manifested that no report was submitted by

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' the Revenue Examiners; thus, she is su~mitting the case for decision. 23 Consequently, in a Resolution24 dated August 10, 2007, the Court ordered the parties to file their respective Memorandum.

In a Resolution25 dated February 5, 2008, the case was submitted for decision, taking

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into consideration the Memorandum26 filed by petitioner on January 25, 2008 and the

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Memorandum27 filed by respondent on Jdnuary 28, 2008. t Hence, this decision.

1 ~ Docket, pp. 129-133 11 Docket, pp. 134-137 11 Docket, p. 143 13 Docket, pp. 14 7-149 " Docket, p. 150 15 Docket, p. 156 16 Docket, pp. 173-174; Exhibit "L" 17 Docket, pp. 176-222; Exhibits "0-1" to "0-47" 18 Docket, p. 227 19 Docket, pp. 466-543 10 Docket, pp. 544-545 11 Docket, pp. 548-550 11 Docket, pp. 581-582 13 Docket, p. 567 11 Docket, p. 569 15 Docket, p. 624 16 Docket, pp. 593-615 17 Docket, pp. 616-621

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The following are the stipulated issues28 for this Court's resolution:

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"1.

Whether Petitioner has un 1utilized VAT input taxes for CY 2000 arising from its domestic' purchases of goods and services which are attributable to its zero-rateo sales of power generation services to NPC during CY 2000.

i 1 2.

Whether Petitioner's unu~ilized VAT input taxes for CY 2000 are substantiated by d<;>cumentary evidence in the form of invoices and official receipts.

;' i 3.

Whether or not the said Clnutilized creditable input VAT for the four

(4) quarters of 2000 were carried over to the succeeding taxable quarter(s) and applied ag~inst any of the output VAT liability of the Petitioner for the said period. i .

4.

Whether or not Petitioner has complied with the provisions of Section 204 (C) and 230 of theTa~ Code ('RA 8424')." !

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' The issues raised can be reduced :to one basic issue: i

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"Whether or not petitioner is entitled to a refund or issuance of tax credit certificate !

in the amount of P179,314,926.56, r~presentin g unutilized input VAT on its domestic

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i purchases and importation of goods and services attributed to zero-rated sales to NPC for taxable year 2000."

Relevant to the resolution of th ~ above-mentioned issue is Section 112(A) of the i NIRC of 1997, as amended, which providbs: !

"SEC. 112. Refunds or 1Tax Credits of Input Tax. - i

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(A) Zero-rated or Effectively Zero-rated Sales. -Any VAT- registered person, whose sa le ~ 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 on paid attributable to such sales, except transitional input tax, to the dxtent that such input tax has not been applied against output tax: xxx" ! i i Based on the foregoing, in order for· petitioner to be entitled to a refund or tax creoit certificate, the following requisites must doncur: i 21 JSA, Doc~et, p. 148

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1. there must be zero-rated ior effectively zero-rated sales;

2. the input taxes were incutred or paid;

3. the input VAT payments ~ re directly attributable to such zero-rated · or effectively-zero-rated sbles;

4. the input VAT payments lwere not applied against any output VAT liability; and i

5. the claim for refund was filed within the two-year prescriptive period.

Regarding the first requisite, thi ~ Court has consistently held that NPC is an entity

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with a special charter29, which categorically makes it exempt from payment of all taxes, i whether direct or indirect, including V!f.T. Thus, services rendered by a VAT-registered ' I entity, like ·. herein petitioner, to NPC are effectively subject to zero percent (0%) VAT, in !

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accordance with Section 108(8)(3) of the NIRC of 1997, as amended, which states that: j .

"SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - t i (A) Rate and Base of Tax. - xxx

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

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XXX

XXX

XXX

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

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· Respondent even recognized this :when he approved petitioner's Application for Zero- Rate.30 Moreover, the various VAT invoices and official receipts issued by petitioner to NPC ' for the year 200031, as listed in its Summ 1ary of Zero-Rated Sales32, confirmed that it actually

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generated gross receipts from sales of electricity to NPC amounting to P10,909,934,960.40; i which was reflected in its Quarterly VAT Returns as follows: ' ' 29 Section 13, Republic Act No. 6395, otherwise 'known as the NPC Revisep Charter, as amended by Presidential Decree Nos. 380 and 938 " · 30 Par. 8, JSFI, Docket, p. 148; Exhibit ''J"

31 Exhibits "N-1" to "N-200"

32 Exhibits "M-1" to "M-4"

7 1'

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Exhibit

''A" "B/1

"C"

"D"

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Zero-Rated

Year 2000

Sales/Receipts

1st Quarter p 1,826,467 019.26 2nd Quarter 2 671 934 264.06 3rd Quart~r 2 970 223 075.04 4th Quart~r 3 441 310 602.04

TQtal

E.l.Q.900 0-:t...t 0110.40

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As regards the second requisite) petitioner presented as evidence the invoices and official receipts issued by its suppliers as well as the Bureau of Customs (BOC) import entry declarations and official receipts/ 3 to sJpport its rep~rted input taxes for the four quarters !

' of 2000 in the amount of P179,314,926.S6, broken down as follows:

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Exhibit

Y~ar20do

INPUT VAT

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"A"

1st Quarter p 18 919 590.47

"B"

2nd Quarter 31,537 162.40

"C"

3rd Quarter 104 746 044.31

"D"

4th Quarter 24 112 129.38 i

Tot~ I:

p 179.314 _Q'Jf;.56

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Upon examination of the aforesaid documents, the Independent CPA presented the following findings: 34 Input taxes on Purchases of Service~

1. Supported by Non-VAT ORs

2. Supported by ORs with pre- print~d "TIN" but stamped "VAT"; printed afte ~ July 31, 1991

3. Supported by a VAT OR without biR Permit Number

4. Erroneously computed

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5. Supported by VAT ORs issued ndt in the name of the company

6. Supported by a check voucher only

7. Input taxes on purchases of serv:ices claimed twice I i Input taxes on Purchases of Goods ! !

1. Supported by Non-VAT Invoices ! ,

2. Supported by Invoices with pre-~ririted "TAN" only

3. Supported by photocopy of VAT invoices

4. Supp; rted by invoices with pre-phnted "TIN" but stamped "VAT"; printed afte ~ July 31, 1991

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33 Exhibits "R-1" to "R-1,617", "5-1" to "S-1,867", "T-1" tb "T-1,928", "U-1" to "U-1,983"

31 Exhibits "0-3" to "0-5"

72 p 92,576.43 8,015.58 86,480.73 17,277.92 27,310.96 545.00 10,452.00 6,410.43 25,246.03 13,180.65 78,039.69

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5. Claimed Twice

6. Erroneously computed

7. Supported by VAT ORs only ' i !

Input Taxes claimed on Importatio~s and purchases of goods and services without suppbrtinq documents

Total

i 3,072.73 -· 193.80 15,675.91 6 041 889.36 p f\.471\ .. ~f\7 '2 The Independent CPA disallowed P6,041,889.36 of input taxes for lack of supporting i

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documents.

Petitioner subsequently slilbmitted pertinent documents to prove the same. - .

l However, only the amount of P5,389,S64.9s of the disallowance were properly documented, i which are summarized as follows: '

Supporting

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Documents

Schedule

Amount

Exhibit

Input Taxes on Importations and Purch'ases of Goods &

Services

' p 719,519.45

"X-1" to "PPP"

(Exhibits "W" to "W-2")

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Input Taxes on Importations and Purchases of Goods &

Services

i 1,358,898.43 "EBn to "8 !On

(Exhibits "08" to "08-2")

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Input Taxes on Importations and Purch~ses of Goods &

Services

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593,706.00 "Q30n to "W30n

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(Exhibits "V33" to "V33-2")

Input Taxes on Importations and Purchases of Goods &

Services

j 1,605,721.10 u A 34u to "G3Sn

(Exhibits "Z33 " to "Z33-2")

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Input Taxes on Importations and Purch~ses of Goods &

Services

1,111,720.00 ny37n to "C38n

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(Exhibits "X37" to "X37-2")

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TOTAL

i e.s_ ":IRQ 1;,;4 QR With the submission of these ddcuments, the input taxes claimed on importations

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i and purchases of goods and service orlginally fo'und by the Independent CPA as without

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supporting documents is only P652,324. ~ 8 (P6,041,889.36 less P5,389,564.98). In effect,

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the total exceptions per Report of th~ Independent CPA is reduced to Pl,036,802.24. i

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However, from the claimed P5,389,564.~8, only the amount of P2,899,074.32 qualifies as a !

valid input taxes on importatio~ and burchases of· goods and services. The remaining !

amount of P2,490,490.66 will still be disallowed for the following reasons:

Input VAT

Exl1ibit Reason for the disallowance

Payee

Bureau of

"EE·il" to EE-

Customs

p 584,887.00 2" i Amoun~ reflected did not tally per bank statement ' Out of period Claim (OR/Invoice dated S.K. Hardware 34.10 "KK',' 8/ 14/1999)

"LL":

OR/Invoice with pre-printed "TIN-V" instead of S.K. Hardware 90.91 "TIN-VAT'' liNN II OR/Invoice with pre-printed "TIN-V" instead of ' S.K. Hardware 136.37

"TIN-VAT"

' OR/Invoice with pre-printed "TIN-V" instead of ' S.K. Hardware 837.28 "XX':

'TIN-VAT"

Bureau of

' IEIRD wj out Machine Validation nor Bank

Customs

193,169.00 ns9"i

Certification

Bureau of

' IEIRD wj out Machine Validation nor Bank

Customs

6 513.00 nT9n

Certification

Bureau of

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IEIRD w/out Machine Validation nor Bank

Customs

80 839.00 "Q3o'·

Certification

Bureau of

IEIRD w/ out Machine Validation nor Bank

Customs

43,614.00 "RJoj

Certification

Bureau of

"53 0'~ IEIRD w/out Machine Validation nor Bank

Customs

603.00

Certification

Bureau of

''T30'!

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IEIRD w/out Machine Validation nor Bank

Customs

9,497.00

Certification

Bureau of

, IEIRD w/out Machine Validation nor Bank

Customs

6 513.00 "U3oj

Certification

Bureau of

"V3o'~ 'IEIRD w/out Machine Validation nor Bank

Customs

57,376.00

Certification

Bureau of

IEIRD wjout Machine Validation nor Bank

Customs

395,264.00 "W30."

Certification

Bureau of

' IEIRD w/ out Machine Validation nor Bank

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Customs

584,887.00 .

"y37"i

Certification

Bureau of

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IEIRD w/out Machine Validation nor Bank

Customs

80,839.00 "z3r;

Certification

Bureau of

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IEIRD w/out Machine Validation nor Bank

Customs

43 614.00 "A3B'j

Certification

Bureau of

"C3s·i IEIRD wj out Machine Validation nor Bank

Customs

6,513.00

Certification

Bureau of

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Customs

395,264.00 ' No IEIRD attached

Total

e.24QO 4Q0.66 In addition, the amount of P917)785.79, supported by invoices/official receipts with .

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• pre-printed "TIN·-v'' or "TIN-NV" instead 9f "TIN-VAT", as required under Section 4.108-1 of i Revenue Regulations No. 7-95, shall be disallowed:

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Payee

Angelcon Properties

Angelcon Properties

Angelcon Properties

Five Star Bus Co. Inc.

R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort St. Marie Club Resort Ernalyn Engineering & Canst. Arnzen Industries, Inc.

Arnzen Industries Inc.

Dagupan Tony's Lumber, Inc. Dagupan Tony's Lumber , Inc. Ernalyn Engineering & Canst. R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction R.LL. Arcinue Construction Rotrade Phils. Inc.

Rotrade Phils. Inc.

Angelcon Properties

Angelcon Properties

Angelcon Properties

Angelcon Properties

Angelcon Properties

Ernalyn Engineering & Canst. Ernalyn Engineering & Canst. Ernalyn Engineering & Canst. Ernalyn Engineering & Canst. R.LL. Arcinue Construction R.LL. Arcinue Construction Ang_elcon Properties DCN International Trading, Inc. DCN International Trading, Inc. DCN International Trading, Inc. DCN International Trading, Inc. Transrnan Brokerage & Transport Corp. Transrnan Brokerage & Transport Corp. Transrnan Brokerage & Transport Corp. p

Indut VAT

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13,809.55 i 154.55 14,842.05 28 363.64 12,136.36 14,079.55 1) 454.55 14,410.00 :1,727.28 604.55 I 518.19 12,590.90 807.91 i 645.91 I 786.91 276.82 563.00 i . 236.37 1,288.28 i 335.73 1P,OOO.OO 32 386.19 E3 751.28 ~,211.81 i 860.36 1S,498.55 40,909.09 7,840.91 8,471.13 .

19,468.19 f 342.64 4!3,345.91 5V 661.36 7,840.91 fl,942.91 61,862.27 ~,363.63 ~,945.45 7,565.91 i 176.82 19,608.41 2~ 605.00 ; 423.28 17 272.73 L909.09 i 979.72 ~,500.00 14,359.10 85~8.18 20,1j34.10 11.,435.13 69,829.20 $,919.90 65,721.00 i 767.91 I 172.40 : 738.00 75 '

Reason for the

Exhibit

disallowance

"R-8"

Pre-printed "TIN-V"

"R-9"

Pre-printed "TIN-v"

"R-10"

Pre-printed "TIN-V"

"R-113"

Pre-printed "TIN-NV"

"R-247" to "251"

Pre-printed "TIN-V"

"R-247" to " 251"

Pre-printed "TIN-v''

"R-247" to "251"

Pre-printed "TIN-v"

"R-247" to "251"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-v''

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to " 394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

''R-382" to "394" Pre-printed "TI,N-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-382" to "394"

Pre-printed "TIN-V"

"R-S76"

Pre-pririted "TIN-V"

"R-991" to "994"

Pre-printed "TIN-V"

"R-991" to "994"

Pre-printed "TIN-V"

"R-1166" to "1169"

Pre-printed "TIN-V"

"R-1166" to "1169"

Pre-printed "TIN-V"

"R-11895"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1013" to " 1028"

Pre-printed "TIN-V"

"S-1013" to " 1028"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1013" to " 1028"

Pre-printed "TIN-V"

"S-1013" to "1028"

Pre-printed "TIN-V"

"S-1032" to "1034"

Pre-printed "TIN-V"

"S-1032" to " 1034"

Pre-printed "TIN-V"

"S-1223" to "1225"

Pre-printed "TIN-V"

"S-1223" to "1225"

Pre-printed "TIN-V"

"S-1223" to "1225"

Pre-printed "TIN-V"

"S-1223" to "1225"

Pre-printed "TIN-V"

"S-1223" to "1225"

Pre-printed "TIN-V"

"S-1405" to "1410"

Pre-printed "TIN-V"

"S-1405" to "1410"

Pre-printed "TIN-V"

"S-1405" to "1410"

Pre-printed "TIN-V"

"S-14'05" to " 1410"

Pre-printed "TIN-V"

"S-1671"

Pre-printed "TIN-V"

"S-1672"

Pre-printed "TIN-V"

"T-12"

Pre-printed "TIN-V"

"T-143" to "T-146"

Pre-printed "TIN-V"

·'T-143" to "T-146"

Pre-printed "TIN-V"

"T-143" to "T-146"

Pre-printed "TIN-V"

''T-143" to "T-146"

Pre-printed "TIN-V"

"T-398" to "T-403"

Pre-printed "TIN-NV"

"T-398" to "T-403"

Pre-printed "TIN-NV"

"T-398" to "T-403"

Pre-printed "TIN-NV"

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' Transman Brokerage & Transport Corp.

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287.90 ''T-398" to "T-403"

Pre-printed "TIN-NV"

Transman Brokerage & Transport Corp. ! 122.27

"T-398" to "T-403"

Pre-printed "TIN-NV"

Dagupan Tony's Lumber Inc.

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776.37 "T"711"

Pre-printed "TIN-V"

R.LL. Arcinue Construction 30568.19

"T-1017"

Pre-printed "TIN-V"

R.LL. Arcinue Construction i4,659.10

"R-1662"

Pre-printed "TIN-V"

R.LL. Arcinue Construction ,5,414.64

"R-1666"

Pre-printed "TIN-v"

R.LL. Arcinue Construction 18,477.28

"Rc 1668"

Pre-printed "TIN-V"

Valley Technologies , Inc. 16,561.42

"T-1905"

Pre-printed "TIN-V"

R.LL. Arcinue Construction IS 930.32

"U-471"

Pre-printed "TIN-V"

R.LL. Arcinue Construction 81,835.91

"U-471 "

Pre-printed "TIN-v"

Republic Commodities Corporation

j3,181.82

"U-478"

Pre-printed "TIN-V"

TO T A L

P91J.785.79 Further, the Court notes the follot.ving items35 in the Independent CPA Report:

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1.

Input taxes amounting to ~949,316.00 were claimed on importations supported by photocopied! IEDs and certified true copies of bank statements.

The lED sho\fved . the computation of the 10% VAT on each importation. The bank statement evidenced the actual payment of the VAT (See Annex 1). ! 2.

Input taxes amounting 1 to P23,712,158.00 were claimed on importations supported by photocopied IEDs with original bank statements and bank ORs 6r with original bank statement only. The

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lED showed t~e computati<Pn of the 10% on each importation. The bank statement or the bank OR evidenced the actual payment of the VAT. The duty, VAT and 9ther charges are presented separately in the bank ORs. (See Annex 2) 3.

Input taxes amounting to P90,695.00 were claimed on importations supported by photocopied IEDs and Original Bureau of Customs (BOC) ORs.

The lED showed th~ computation of the 10% VAT on each importation. The BOC OR ~videnced the actual payment of the VAT. The duty, VAT and other chlarges are presented separately in the BOC Ors. (See Annex 3)

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4.

Input taxes amounting to P528,306.00 were claimed on importations supported by original BOCj ORs only. The BOC OR evidenced the actual payment of the VAlL The duty, VAT and other charges are presented in the BOC ORs. (!See Annex 5.

Input taxes amounting to P1,603,547.02 were claimed on purchases of goods for which the date df the related VAT invoices fall within the calendar quarters of 1999 (Outside the period of claim) (See Annex 5)

JS Exhibit "Q-6"

We were able to ascertain, ~hat there were no double claiming relative to these input taxes. These input taxes were claimed only in the 1 5 \ 2nd, and 3rd quarters of 2000, and were not claimed in any quarters of

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1999.

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7S

• i 6.

Input taxes amounting to Pl1,351.00 were claimed on importations supported by original bank ORs only. ·The bank OR evidenced the actual payment of the VAl The duty, VAT and other charges are presented separately in the ,bank ORs. (See Annex 6)

I

!

7. The OR No. for input iaxes amounting to P18,684,818.22 on purchases of services fro~ Sual Construction Corporation for the month of September 2000 I WE:re presented in the "Schedule of VAT Input Tax" as 272 instead of 0051. With respect to the input taxes ' in the amounts of P949,316.00, P23,712,158.00, !

P90,695.00, P528,306.00, and P11,351.bo under Nos. 1, 2, 3, 4, and 6, respectively, the Court finds these input taxes valid sihce the supporting original BOC or bank official

I

receipts/bank statements clearly indicatJd the VAT paid by petitioner. Likewise, petitioner i

I

was able to present certified true copies iof the Import Entry Declarations (IEDs) supporting i i the input taxes of P949,316.00 and P23,712,158.00. i As to the input taxes under No. !7 in the amount of P18,684,818.22, pertaining to i petitioner's purchases of services from i S~al Construction Corporation for the month of i September 2000, the Court finds the same valid since it is properly supported by a VAT official receipt. 36 As regards the input taxes of P1!,603,547.02 (under No. 5) referring to petitioner's !

i purchases of goods for which the date of the related VAT invoices fall within the calendar !

I

quarters of 1999 (outside the period of <±laim), the same shall be denied because petitioner

I

.

!

should have declared these input taxes in the corresponding taxable quarters when the !

purchases of goods were consummated ~ s evidenced by VAT invoices, in keeping with this

I

I

Court's decision in th~ case of lepanto :consolidated Mining Co. vs. Commissioner of .

I

Internal Revenue37/ thus: !

"We agree with the resp~ndent. '

I

36 Exhibit "T-1832"

37 ITA Case Nos. 6368 and 6480, December l S, 2004 11

•

The alleged unutilized 1 input VAT of P5,820,863.87 should be denied since the supporting i ~voices and official receipts thereof bore dates which were earlier than! the period of · petitioner's claim. Section

110(A)(2) of the 1997 Tax Code

1 provides:

'SECTION 110. Tax Credits. - A. Creditable Input Tax. -

I

2.

The input tax on domestic purchases of goods or properties shall be creditable!

I

(a) To the purchaser ~ p o n consummation of sale and on importation of goods or prop~rties; and However, in the case of purchases of services, lease or use of properties, the input tax: shall be creditable to the purchaser; lessee or licensee upon payment of the compensation, rental, royalty or fee. ' ' •

I

It IS clear from the above-quoted prov1s1ons of law that for purchases of goods, the corresponding input value added taxes of which is creditable to the purchaser upoh consummation of sale, that is, upon the issuance of the corresponding invoice. On the other hand, for purchases of services, the corresponding inpljt value added taxes of which is creditable to the purchaser upon payment of compensation, rental, royalty, or fee, that is, upon the date of officiai Jreceipt. Section 110(A) is explicit. It states 'upon consummation', in the case of domestic purchases of goods, and 'upon payment', in the case of purchases of services. It does not provide any qualification, such as 'upon 1delivery of invoice or official receipt' which is the main thesis of petitioner's !contention. i In a resolution of the case entitled Telecommunications Technologies Philippines, Jnc. vs. Commissioner of Internal Revenue, CTA Case No. 6168, promulgated on July 28, 2004, this Court elucidated that 'the input VAT on domestic purchases of goods or properties shall be allowed !as tax credit tci the purchaser upon consummation of sale, which means upon issuance by the seller of the VAT sales invoices evidencing the sale of goods/properties. On the other hand, the input VAT on purchillses of services shall be available as tax credit to the purchaser only upon payment of the compensation or fee, i.e., upon issuance by the sellier of the VAT official receipt evidencing receipt of the payment for servides performed or yet to be performed.' Thus, it is indubitable o~ the part of the petitioner to declare the

I

input value added taxes on domestic purchases of goods and services at the end of the corresponding taxable quarter where purchases of goods were consummated, as evidenFed by VAT invoice and for payment of services, as evidenced by VAT official receipt. 18

• c.T.A. c;ASE NO. 6421

Therefore, the amount : of input VAT of P5,820,863.87 which is supported by VAT invoices arid official receipts dated earlier than the period of petitioner's claims can no longer be Claimed for refund pursuant to Section 110(A) in relation ·yvith Section 112(A) of the 1997 National Internal Revenue Code."

r.

From the total claimed input taxes of P179,314,926.56, petitioner was able to ' substantiate only the amount of P173,266,300.85, computed as follows:

Input VAT Claim

p 179,314,926.56

Less:

Disallowances

a.

Per independent CPA P 6,426,367.22 Less: input taxes for which documents were subsequently submitted by petitioner 1 5,389,564.98 1,036,802.24 b.

Invalid documents supporting part· of the claimed input tax ofP5,389,564.98 c.

Input taxes supported 'by invoices or official receipts with pre-printed "TIN- V" or "TIN-NV" instead of "TIN-VAT" d.

Input taxes on purchases of goods for which the related VAT invoices fall outside the period of claim

Total Disallowances

Substantiated Input VAT

2,490,490.66 917J85.79 1,603,547.02 p 6,048,625. 71 P173,266,300.85 The Court now proceeds to the issue of whether or not the claimed input taxes are i attributable to zero-rated sales and not applied against any output VAT liability.

I

Petitioner's VAT Return for the third quarter of'200038 reflected an output tax due of

I

P1,039.55 which should be deducted fro'm the substantiated input tax of P173,266,300.85. ' .

Thus, only the resulting excess input t~x of P173,265,261.30 is entirely attributable to petitioner's zero-rated sales:

Substantiated Input VAT

Less: Output VAT

i Substantiated Excess Input lrAT !

p 173,266,300.85 1 039.55 Pl73.265.261.30 Although the claimed input tax was carried-over to the succeeding quarters until the first quarter of 2002, the same was dedJcted as "Any VAT Refund/TCC Claimed"39 from the ! .

"Total Available Input Tax" of P382,414)953.99 as of the first quarter of 2002. Thus, the

38 Exhibit "C"

.

39 Exhibit "I-S"

79 subject claim no longer formed part of the excess input VAT of P200,018,925.75 as of the first quarter of 2002 which was to be ca'rried over/applied to the succeeding second quarter

I

of 2002.

Anent the last requisite, it had been declared by the High Tribunal in the case of ' I

I

• Atlas Consolidated Mining and Development Corporation vs. Commissioner of

I

.

Internal Revenue40 that the reckoning of the two-year prescriptive period given to taxpayers to file a claim for VAT refur:\d shall commence from the date of filing of the corresponding Quarterly VAT Returns. Here, the earliest quarter covered by the present Claim is the first quarter of 2000, for which petitioner filed its Quarterly VAT Return on April 24, 200041 • Counting from said date, boih the administrative claim filed on March 11, 200242

I

and the Petition for Review filed on April i1, 2002 fell within the two-year prescriptive period. In sum, petitioner is entitled to a refund .or issuance of tax credit certificate for its unutilized input VAT on domestic purchases and importation of goods and services !

attributable to its zero-rated sales to NP'C for taxable year 2000, in the reduced amount of P173,265,261.30.

WHEREFORE, the instant Petitibn for Review is hereby GRANTED. Accordingly, i respondent is hereby ORDERED to REFUND or to I SSUE TAX CREDIT CERTIFICATE in i favor of petitioner in the amoun~ of P173!265,261.30. '

11 Exhibit "A"

12 Par. 7, JSFI, Docket, p. 148 eo ~b- . BAUTISTA

/ Associate Justice

OECISION

WE CONCUR:

G-~- c~ (Wifh C.Onc.urril'l':} and Vis.seYI-!1~ Of'il'liol'l) ERNESTO D. ACOSTA

Presiding Justice

CAESAR A. CASANOVA

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the ' I 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. 81

L~-~

ERNESTO D. ACOSTA

Presiding Justice

Chairperson, First Division