Manulife Data Services, Inc. vs. Commissioner of Internal Revenue

DECISION

CASTANEDA, JR., J_.:

This case is a consolidation of three (3) separate Petitions for Review filed by Manulife Data Services, Inc. to seek the issuance of a fJ-

CTA CASE Nos. 8054, 8117 and 8139 tax credit certificate in the aggregate amount of P15,908,004.93, allegedly representing unutilized input value-added tax (VAT) paid for the four quarters of taxable year 2008, broken down as follows:

CTA Case

Year2008

Amount

No.

8054 1st Quarter p 4,355,695.62 8117 2nd Quarter 3,047,596.00 8139 3rd Quarter 8,504,713.31 4th Quarter

TOTAL

11!15,908,004.93 Manulife Data Services, Inc. (petitioner) is a foreign corporation duly registered with and authorized by the Securities and Exchange Commission (SEC) to operate as a Regional Operating Headquarter (ROHQ) under SEC Certificate of Registration and License No. FS200603505. 1 Petitioner is a VAT-registered taxpayer as evidenced by Certificate of Registration No. OCN3RC0000330824. 2 It was established for the purpose of engaging in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development;

technical support and maintenance; data processing and communication and business development. 3 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue (BIR), with authority, among others, to decide, approve and grant claims for refund or tax credit of internal revenue taxes. She holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner duly filed its original and amended Quarterly VAT Returns for taxable year 2008.4 Alleging that it has unapplied/excess input VAT from its zero- rated sales, petitioner filed administrative claims for refund or issuance of tax credit certificate5 before the BIR Revenue Districtjc--

erA CASE Nos. 8054, 8117 and 8139

Office (RDO) No. 38 on the following dates and for the following amounts:

PERIOD COVERED

DATE FILED

AMOUNT CLAIMED

First Quarter of 2008

December 4, 2009 p 4,356,925.62

Second to Fourth

February 26, 2010 p 11,552,309.31

Quarters of 2008

Due to inaction on the part of respondent, petitioner elevated its refund claims before this Court on the following dates:

PERIOD COVERED

DATE FILED

CASE DESIGNATION

First Quarter of 2008

March 30, 2010

Second Quarter of 2008

June 29, 2010

Third and Fourth

July 26, 2010

Quarters of 2008

In her Answer6 in CTA Case No. 8054, respondent alleged the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSES 4.

He reiterates and re-pleads the preceding paragraphs of this Answer as part of his Special and Affirmative Defenses.

5. Petitioner's claim for the issuance of tax credit certificate is subject to administrative investigation/examination by respondent's Bureau.

6. Taxes paid and collected are presumed to have been paid in accordance with law and regulations, hence, not refundable.

7. Moreover, in order to validly claim for tax credit/refund, it is imperative for petitioner to prove its compliance with the following, viz: p

CTA CASE Nos. 8054, 8117 and 8139 a. The registration requirements of a value- added taxpayer under the pertinent provision of the 1997 NIRC, as amended, and its implementing revenue regulations.

b. The invoicing and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT pursuant to the provisions of Sections 113 and 114 of the 1997 NIRC, as amended. Failure to comply with the invoicing requirements on the documents supporting the sale of goods and services will result in the disallowance of the claim for input tax of the taxpayer claimant (Revenue Memorandum Circular No. 42-2003).

c. The submission of complete documents in support of the administrative claim for tax refund pursuant to Section 112 (C) of the 1997 NIRC, as amended, otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for tax credit/refund which is a condition sine qua non prior to the filing of such claim.

d. That the input taxes of P4,355,695.62 allegedly representing unutilized input VAT from its purchases of goods and services were:

i. paid by petitioner; ii. attributable to its zero-rated or effectively zero-rated sales; and, iii. such input taxes paid should not have been applied against any output tax.

e. That petitioner's claim for tax credit/refund allegedly representing unutilized input VAT in the amount of P4,355,695.62 was filed within two (2) years after the close of the r

CTA CASE Nos. 8054, 8117 and 8139 taxable quarter when the sales were made in accordance with Section 112 (A) of the 1997 NIRC, as amended.

8. In an action for tax credit/refund, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for tax credit/refund.

9. Finally, basic is the rule that tax refunds are in the nature of tax exemptions and are to be construed strictissimi juris against the entity claiming the same (Philippine Geothermal, Inc. vs. Commissioner of Internal Revenue, G.R. No. 154028, July 27, 2005). Moreover, statutes in derogation of sovereignty such as those containing exemption from taxation should be strictly construed in favor of the State. In this regard, taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and that he who would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted (Sea-Land Service, Inc. vs. Court of Appeals, 357 SCRA 444)."

Respondent employed the same arguments in her Answer in CTA Case No. 8117.

In her Answer7 in CTA Case No. 8139, respondent interposed the following Special and Affirmative Defenses: "SPECIAL AND AFFIRMATIVE DEFENSES

4. Claims for refund are strictly construed against the taxpayer as the same partakes the nature of a tax exemption;

5. The taxpayer has the burden to show that the taxes were erroneously or illegally paid. Failure on the part of the Petitioner to prove the same is fatal to its cause of action. In the instant case, the Petitioner failed r

CTA CASE Nos. 8054, 8117 and 8139 to present proof that the input VAT it is claiming as refund remained unutilized.

6. In addition, Petitioner must prove that the compensation or consideration which it received for the services rendered were actually paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas;

7. The Petitioner should prove its legal basis for claiming the amount being refunded." On September 9, 2010, petitioner filed

a Motion for

Consolidation of erA Case No. 8117 with erA Case No. 8054.8 Likewise, on October 18, 2010, petitioner filed a Motion for Consolidation of erA Case No. 8139 with erA Case No. 8054. Both Motions were granted on November 4, 20109 and November 11, 201010, respectively.

During

trial, petitioner presented its documentary and testimonial evidence. On the other hand, respondent, through counsel, manifested that she has no witness to present. The case was submitted for decision on August 29, 2012, considering petitioner's Memorandum11 filed on August 23, 2012 and respondent's Memorandum12 filed on August 17, 2012. The parties submitted the following issue13 for this Court's disposition:

"Whether or not petitioner is entitled to its claim for refund or issuance of a tax credit certificate for its unutilizedjexcess input VAT payments for the 1st to 4th Quarters of 2008 amounting to Php15,908,004.93."/z--

CTA CASE Nos. 8054, 8117 and 8139

Section 112(A) of the National Internal Revenue Code (NIRC) of 1997 provides the basis for refunds or tax credits of input tax attributable to zero-rated or effectively zero-rated sales, to wit: "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 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, final/~ 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." Based on the afore-quoted provision, the refund/tax credit of unutilized input VAT attributable to zero-rated or effectively zero- rated sales is allowed subject to the taxpayer's compliance with the following requisites:

1. that there must be zero-rated or effectively zero-rated sales;

2. that input taxes were incurred or paid;

3. that such input taxes are attributable to zero-rated or effectively zero-rated sales;

4. that the input taxes were not applied against any output VAT liability; and ~

CfA CASE Nos. 8054, 8117 and 8139

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

The Court reckons it appropriate to discuss first the fifth requisite pertaining to the two-year prescriptive period for filing of refund claim.

As explicitly stated under Section 112(A) of the NIRC of 1997, the application for tax credit certificate/refund of unutilized input VAT must be filed within two years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the four taxable quarters of 2008 which closed on March 31, 2008; June 30, 2008; September 30, 2008 and December 31, 2008. Counting two years from the said dates, petitioner had until March 31, 2010; June 30, 2010; September 30, 2010 and December 31, 2010, respectively, within which to file its administrative claim for tax credit certificate/refund.

Thus, petitioner's administrative claims for refund were seasonably filed on December 4, 2009 and February 26, 2010, as shown below:

DATE OF FILING

CLOSE OF THE

LAST DAY TO FILE

OF

CTA

TAXABLE

ADMINISTRATIVE

ADMINISTRATIVE

CASE NO.

YEAR 2008

QUARTER

CLAIM

CLAIM

EXHIBIT

8054 1st Quarter Mar. 31, 2008 Mar. 31, 2010 Dec. 4 2009

"C-1"

8117 2nd Quarter Jun. 30 2008 Jun. 30 2010 3rd Quarter Sep. 30 2008 Sep. 30 2010 Feb. 26, 2010

"C-4"

8139 4th Quarter Dec. 31 2008 Dec. 31 2010 As to the timeliness of petitioner's judicial appeal, Section 112(C) of the NIRC of 1997, as amended, provides that the Commissioner of Internal Revenue (CIR) has 120 days from the date of the submission of the complete documents in support of the application for tax refund/credit within which to grant or deny the claim. In case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before this Court within 30 days from receipt of the decision of the CIR. However, if after the 120-day period the CIR fails to act on the application for tax refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to this Court within 30 days. ~

CTA CASE Nos. 8054, 8117 and 8139

Applying Section 112(C) of the NIRC of 1997, as amended, the following are the pertinent dates to petitioner's claim for refund:

END OF 120 DAYS

FOR BIR

END OF 30

DATE OF

DATE OF FI LING OF

COMMISSIONER

DAYS FROM

FILING OF

CTACASE

ADMI NISTRATIVE

TO DECIDE ON

EXPIRATION

JUDICIAL

NO.

YEAR 2008

CLAIM

THE CLAIM

OF 120 DAYS

CLAIM

8054 1st Quarter

December 4 2009

April 3 2010

May 3 2010

March 30 2010

8117 2nd Quarter

June 29 2010

8139 3rd Quarter February 26, 2010 June 26, 2010 July 26, 2010 July 26, 2010 4th Quarter Clearly from the foregoing table, petitioner's judicial claims for the second, third and fourth quarters of 2008 (CTA Case Nos. 8117 and 8139) were timely filed within the "120-30-day" period required under Section 112(C) of the NIRC of 1997, as amended. On the other hand, petitioner's judicial claim for the first quarter of 2008 (CTA Case No. 8054) was prematurely filed on March 30, 2010 or 4 days short of the lapse of the 120-day period. However, in the consolidated case of Commissioner of Internal Revenue vs.

San Roque Power Corporation

Taganito Mining

Corporation vs. Commissioner of Internal Revenue/ and Phi/ex Mining Corporation vs. Commissioner of Internal Revenue4, promulgated on February 12, 2013, the Supreme Court En Bane ruled that the mandatory and jurisdictional nature of the 120-30-day period does not apply on claims for refund that were filed during the period of December 10, 2003 to October 6, 2010.

The Supreme Court En

Bane held that BIR Ruling No. DA-489-03, expressly stating that the "taxpayer-claimant need not wait for the lapse of the 120-day period before it could seek judicial relief with the CTA by way of Petition for Review", is a general interpretative rule which can be relied upon by all taxpayers from the time of its issuance on December 10, 2003 up to its reversal by the Supreme Court in the case of Commissioner of Internal Revenue vs. Aiehi Forging Company of Asia/ Inc.15 on October 6, 2010. Accordingly, petitioner's judicial claim for the first quarter of 2008 shall also be considered as timely filed. The Court will now proceed to discuss the remaining requisites.1--

CTA CASE Nos. 8054, 8117 and 8139

Anent the first requisite, petitioner alleges that its sales of services to its foreign affiliates which are all engaged in business conducted outside the Philippines, and which services were paid for in United States Dollars inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP) qualify for VAT zero-rating under Section 108(8)(2) of the NIRC of 1997, as amended, which states that:

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

XXX

XXX

XXX

(B) Transactions Subject to Zero Percent (0%)

Rate.

- The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0°/o) rate:

(1) Processing, manufacturing or repacking goods for other persons doing business outside the Philippines which goods are subsequently exported, where the services are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);

(2) Services other than those mentioned in the preceding paragraph rendered to a person engaged in business conducted outside the Philippines or to a nonresident person not engaged in business who is outside the Philippines when the services are performed, the consideration for which is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);"

In the case of Commissioner of Internal Revenue vs.

Burmeister and Wain Scandinavian Contractor Mindanao, Inc.16, the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108(8)(2) of the NIRC of 1997, as amended, the following conditions must be satisfied: r

CTA CASE Nos. 8054, 8117 and 8139

1. the services must be other than processing, manufacturing or repacking of goods;

2. the payment for such services must be in acceptable foreign currency accounted for in accordance with the BSP rules and regulations; and

3. the recipient of such services is doing business outside the Philippines.

Corollary to the second requisite, Sections 113(A)(2), (B)(1), (2)(c) and (3) of the NIRC of 1997, as amended, as implemented by Sections 4.113-1(A)(2), B(1) and (2)(c) of Revenue Regulations (RR) No. 16-05, provide that a VAT taxpayer, like herein petitioner, shall for every lease of goods or properties, and for every sale, barter or exchange of services, issue a VAT official receipt which must contain the following information:

"SEC. 113. Invoicing and Accounting Requirements for VAT-registered Persons. -

(A)

Invoicing Requirements. - A VAT-registered person shall issue:

XXX

XXX

XXX

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.

(B)

Information Contained in the VAT Invoice or

VAT Official Receipt- The following information shall be indicated in the VAT invoice or VAT official receipt:

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

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

CTA CASE Nos. 8054, 8117 and 8139

XXX

XXX

XXX

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

XXX

XXX

XXX

(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature of the service; and xxx" (Emphasis supplied) "SEC. 4.113-1. Invoicing Requirements. - (A) A VAT-registered person shall issue:-

XXX

XXX

XXX

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.

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

(B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; Jv

CTA CASE Nos. 8054, 8117 and 8139

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

XXX

XXX

XXX

(c) If the sale is subject to zero percent (0°/o) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt;" (Emphasis supplied) Pursuant to the foregoing prov1s1ons, the foreign currency remittances referred to under Section 108(8)(2) of the NIRC of 1997, as amended, must likewise be supported by VAT zero-rated official receipts.

It is undisputed that petitioner is duly registered with the BIR as a VAT taxpayer. 17 As Regional Operating Headquarters (ROHQ), petitioner is authorized to engage in general administration and planning; business planning and coordination; sourcing/procurement of raw materials and components; corporate finance advisory services; marketing control and sales promotion; training and personnel management; logistic services; research and development services and product development;

technical support and maintenance; data processing and communication and business development. 18 Such services are not in the same category as "processing, manufacturing or repacking of goods". For the four taxable quarters of 2008, petitioner rendered services to its affiliates, namely: Manulife (International) Limited,

John

Hancock

Life

Insurance

Company

(U.S.A.), and The Manufacturers Life Insurance Company. 19 It was established that Manulife (International) Ltd. and John Hancock Life Insurance Company (U.S.A.) are non-resident foreign entities doing business outside the Philippines as shown by the SEC tz.- 17 Par. 3, Stipulation of Facts, Consolidated Joint Stipulation of Facts and Issue, CTA Case No. 8054, docket, p. 658

CTA CASE Nos. 8054, 8117 and 8139

Certifications of Non-Registration of Company20, by Manulife Financial Corporation Annual Report for 200821 as certified by the Philippine Stock Exchange, by the authenticated and certified copy of Certified Documents of Manulife (International) Limited22, by the authenticated and certified copy of Certificate of Registration of Change of Name of Oversea Company of Manulife (International) Limited23, and by the authenticated and certified copy of

Amended

Articles

of Redomestication of John Hancock Life Insurance Company (U.S.A.). 24 However, as regards petitioner's client-affiliate, The Manufacturers Life Insurance Company, records show that it is a corporation organized under the laws of the Dominion of Canada but duly licensed and registered with the SEC to do business in the Philippines though its branch, The Manufacturers Life Insurance Co. (Phils.), Inc., as evidenced by the Certificate of Filing of Amended General By-Laws of a Foreign Corporation25 issued by the SEC and by the 2008 General Information Sheet of The Manufacturers Life Insurance Co. (Phils.), Inc.26 • Evidently, it did not satisfy the second requisite; thus, petitioner's reported sales of services to The

Manufacturers

Life

Insurance

Company

in the amount of P176,070,408.09, detailed below, cannot qualify for VAT zero-rating.

Summary

Exhibit

Exhibit

Reference

(Invoice)

(OR)

Client

First Quarter 2008

January

MM-1

MM-4a

MM-4

The Manufacturers Life Insurance Company

MM-1

MM-6a

MM-6

The Manufacturers Life Insurance Company

MM-1

MM-7a

MM-7

The Manufacturers Life Insurance Company

MM-1

MM-10a

MM-10

The Manufacturers Life Insurance Company

MM-1

MM-11a

MM-11

The Manufacturers Life Insurance Company

MM-1

MM-12a

MM-12

The Manufacturers Life Insurance Company

MM-1

MM-13a

MM-13

The Manufacturers Life Insurance Company

MM-1

MM-15a

MM-15

The Manufacturers Life Insurance Company

MM-1

MM-16a

MM-16

The Manufacturers Life Insurance Company

MM-1

MM-17a

MM-17

The Manufacturers Life Insurance Company

MM-1

MM-18a

MM-18

The Manufacturers Life Insurance Company

MM-1

MM-19a

MM-19

The Manufacturers Life Insurance Company

February

MM-2

MM-26a

MM-26

The Manufacturers Life Insurance Company

MM-2

MM-27a

MM-27

The Manufacturers Life Insurance Company

MM-2

MM-28a

MM-28

The Manufacturers Life Insurance Company

MM-2

MM-29a

MM-29

The Manufacturers Life Insurance Company

20 Exhibits "CC" and "DD"

21 Exhibit "EE", page 115, Principal Subsidiaries (Exhibit "EE-l")

22 Exhibit "HH"

23 Exhibit "HH-1"

24 Exhibit "II"

25 Attached to Exhibit "GG"

26 Exhibit "FF"

Amount of Sales

p!

931 626.11 416 308.81 472 806.84 900 100.97 548 137.45 374 752.15 273 887.37 509 430.46 821 334.66 136 943.69 1 989 092.73 792 504.33 929 443.51 1 226 215.42 398 938.74 500 197.59

CTA CASE Nos. 8054, 8117 and 8139

MM-2

MM-32a

MM-32

MM-2

MM-33a

MM-33

MM-2

MM-34a

MM-34

MM-2

MM-35a

MM-35

MM-2

MM-38a

MM-38

MM-2

MM-39a

MM-39

MM-2

MM-40a

MM-40

MM-2

MM-41a

MM-41

MM-2

MM-42a

MM-42

March

MM-3

MM-48a

MM-48

MM-3

MM-49a

MM-49

MM-3

MM-50a

MM-50

MM-3

MM-51a

MM-51

MM-3

MM-54a

MM-54

MM-3

MM-55a

MM-55

MM-3

MM-56a

MM-56

MM-3

MM-57a

MM-57

MM-3

MM-60a

MM-60

MM-3

MM-61a

MM-61

MM-3

MM-62a

MM-62

MM-3

MM-63a

MM-63

MM-3

MM-64a

MM-64

Subtotal

Second Quarter 2008

April

MM-4

MM-72a

MM-72

MM-4

MM-75a

MM-75

MM-4

MM-76a

MM-76

MM-4

MM-79a

MM-79

MM-4

MM-80a

MM-80

MM-4

MM-81a

MM-81

MM-4

MM-82a

MM-82

MM-4

MM-85a

MM-85

MM-4

MM-86a

MM-86

MM-4

MM-87a

MM-87

MM-4

MM-88a

MM-88

MM-4

MM-89a

MM-89

May

MM-4

MM-95a

MM-95

MM-4

MM-98a

MM-98

MM-4

MM-99a

MM-99

MM-4

MM-102a

MM-102

MM-4

MM-103a

MM-103

MM-4

MM-104a

MM-104

MM-5

MM-105a

MM-105

MM-5

MM-108a

MM-108

MM-5

MM-109a

MM-109

MM-5

MM-110a

MM-110

MM-5

MM-111a

MM-111

MM-5

MM-112a

MM-112

The Manufacturers Life Insurance Company

859 150.02

The Manufacturers Life Insurance Company

490 777.55

The Manufacturers Life Insurance ComQany

534 090.96

The Manufacturers Life Insurance Company

289 640.45

The Manufacturers Life Insurance Company

511 513.83

The Manufacturers Life Insurance Company

747 886.33

The Manufacturers Life Insurance Company

110 664.51

The Manufacturers Life Insurance Company

2 205 629.15

The Manufacturers Life Insurance Company

844 184.60

The Manufacturers Life Insurance Company

859 763.65

The Manufacturers Life Insurance Company

1135 892.44

The Manufacturers Life Insurance Company

444 244.64

The Manufacturers Life Insurance Company

540 402.17

The Manufacturers Life Insurance Company

948 239.22

The Manufacturers Life Insurance Company

531 598.48

The Manufacturers Life Insurance Company

544 896.59

The Manufacturers Life Insurance Company

282 144.52

The Manufacturers Life Insurance Company

497 883.18

The Manufacturers Life Insurance Company

812 698.95

The Manufacturers Life Insurance Company

84 618.03

The Manufacturers Life Insurance Company

863 709.57

The Manufacturers Life Insurance Company

668 385.92 P26,029,735.59

The Manufacturers Life Insurance Company

p 923 963.86

The Manufacturers Life Insurance Company

433 915.95

The Manufacturers Life Insurance Company

539 532.99

The Manufacturers Life Insurance Company

903 542.45

The Manufacturers Life Insurance Company

538 712.95

The Manufacturers Life Insurance Company

555 194.31

The Manufacturers Life Insurance Company

372 669.44

The Manufacturers Life Insurance Company

608 361.14

The Manufacturers Life Insurance Company

710 808.31

The Manufacturers Life Insurance Company

85 641.31

The Manufacturers Life Insurance Company

2 339 934.42

The Manufacturers Life Insurance Company

1 328 202.56

The Manufacturers Life Insurance Company

865 102.16

The Manufacturers Life Insurance Company

449 161.78

The Manufacturers Life Insurance Company

566 130.98

The Manufacturers Life Insurance Company

940,125.09

The Manufacturers Life Insurance Company

530 843.17

The Manufacturers Life Insurance Company

444 888.06

The Manufacturers Life Insurance Company

455 909.82

The Manufacturers Life Insurance Company

537 826.19

The Manufacturers Life Insurance Company

743 943.75

The Manufacturers Life Insurance Company

71 764.57

The Manufacturers Life Insurance Company

1 898 555.60

The Manufacturers Life Insurance Company

1 301 768.13

CTA CASE Nos. 8054, 8117 and 8139

MM-5

MM-115a

MM-115

June

MM-5

MM-124a

MM-124

MM-5

MM-127a

MM-127

MM-5

MM-128a

MM-128

MM-5

MM-131a

MM-131

MM-5

MM-132a

MM-132

MM-5

MM-133a

MM-133

MM-5

MM-134a

MM-134

MM-5

MM-137a

MM-137

MM-5

MM-138a

MM-138

MM-5

MM-139a

MM-139

MM-5

MM-140a

MM-140

MM-5

MM-142a

MM-142

MM-5

MM-144a

MM-144

Subtotal

Third Quarter 2008

July

MM-6

MM-152a

MM-152

MM-6

MM-153a

MM-153

MM-6

MM-156a

MM-156

MM-6

MM-158a

MM-158

MM-6

MM-159a

MM-159

MM-6

MM-160a

MM-160

MM-6

MM-161a

MM-161

MM-6

MM-162a

MM-162

MM-6

MM-165a

MM-165

MM-6

MM-166a

MM-166

MM-6

MM-167a

MM-167

MM-6

MM-168a

MM-168

MM-6

MM-170a

MM-170

MM-6

MM-172a

MM-172

MM-6

MM-174a

MM-174

August

MM-6

MM-179a

MM-179

MM-6

MM-180a

MM-180

MM-6

MM-181a

MM-181

MM-6

MM-182a

MM-182

MM-6

MM-183a

MM-183

MM-6

MM-184a

MM-184

MM-7

MM-185a

MM-185

MM-7

MM-186a

MM-186

MM-7

MM-187a

MM-187

MM-7

MM-188a

MM-188

MM-7

MM-189a

MM-189

MM-7

MM-191a

MM-191

MM-7

MM-192a

MM-192

The Manufacturers Life Insurance Company

245 157.21

The Manufacturers Life Insurance Company_

1 052 011.49

The Manufacturers Life Insurance Company

413 311.68

The Manufacturers Life Insurance Company

663 158.18

The Manufacturers Life Insurance Company

967 388.91

The Manufacturers Life Insurance Company

544 539.57

The Manufacturers Life Insurance Company

365 727.11

The Manufacturers Life Insurance Company

653,904.74

The Manufacturers Life Insurance Company

555 137.76

The Manufacturers Life Insurance Company

1193,360.73

The Manufacturers Life Insurance Company

1186 120.61

The Manufacturers Life Insurance Company

3 373 259.32

The Manufacturers Life Insurance Company

287,544.54

The Manufacturers Life Insurance Company

1 678 245.71 P31,325 366.55

The Manufacturers Life Insurance Company

p 920 221.10

The Manufacturers Life Insurance Company

1 921 222.13

The Manufacturers Life Insurance Company

857 798.30

The Manufacturers Life Insurance Company

453 400.19

The Manufacturers Life Insurance Company

910 298.83

The Manufacturers Life Insurance Company

539 762.89

The Manufacturers Life Insurance Company_

425 537.13

The Manufacturers Life Insurance Company

623 688.95

The Manufacturers Life Insurance Company

621468.65

The Manufacturers Life Insurance Company

1 089 736.35

The Manufacturers Life Insurance Company

1 190 404.97

The Manufacturers Life Insurance Company

2 068 460.17

The Manufacturers Life Insurance Company

337 527.63

The Manufacturers Life Insurance Company

1 647 176.46

The Manufacturers Life Insurance Company

665 084.87

The Manufacturers Life Insurance Company

944 824.67

The Manufacturers Life Insurance Company

1 088 354.99

The Manufacturers Life Insurance Company

447 697.11

The Manufacturers Life Insurance Company

691149.21

The Manufacturers Life Insurance Company

875 574.36

The Manufacturers Life Insurance Company

3 260/333.32

The Manufacturers Life Insurance Company

1111 274.32

The Manufacturers Life Insurance Company

500 971.94

The Manufacturers Life Insurance Company

858 660.18

The Manufacturers Life Insurance Company

661 744.35

The Manufacturers Life Insurance Company

1 476 576.47

The Manufacturers Life Insurance Company

220 740.81

The Manufacturers Life Insurance Company

566 823.34

CTA CASE Nos. 8054, 8117 and 8139

MM-7

MM-193a

MM-193

MM-7

MM-204a

MM-204

September

MM-7

MM-209a

MM-209

MM-7

MM-210a

MM-210

MM-7

MM-211a

MM-211

MM-7

MM-212a

MM-212

MM-7

MM-213a

MM-213

MM-7

MM-214a

MM-214

MM-7

MM-215a

MM-215

MM-7

MM-216a

MM-216

MM-7

MM-217a

MM-217

MM-7

MM-218a

MM-218

MM-7

MM-219a

MM-219

MM-7

MM-220a

MM-220

MM-7

MM-222a

MM-222

MM-7

MM-223a

MM-223

MM-7

MM-224a

MM-224

MM-8

MM-235a

MM-235

Subtotal

Fourth Quarter 2008

October

MM-9

MM-240a

MM-240

MM-9

MM-241a

MM-241

MM-9

MM-242a

MM-242

MM-9

MM-243a

MM-243

MM-9

MM-244a

MM-244

MM-9

MM-245a

MM-245

MM-9

MM-246a

MM-246

MM-9

MM-247a

MM-247

MM-9

MM-248a

MM-248

MM-9

MM-249a

MM-249

MM-9

MM-250a

MM-250

MM-9

MM-251a

MM-251

MM-9

MM-253a

MM-253

MM-9

MM-254a

MM-254

MM-9

MM-255a

MM-255

MM-9

MM-267a

MM-267

November

MM-9

MM-272a

MM-272

MM-9

MM-273a

MM-273

MM-9

MM-274a

MM-274

MM-10

MM-275a

MM-275

MM-10

MM-276a

MM-276

MM-10

MM-277a

MM-277

MM-10

MM-278a

MM-278

MM-10

MM-279a

MM-279

The Manufacturers Life Insurance Company

589 239.79

The Manufacturers Life Insurance Company

1 913 106.91

The Manufacturers Life Insurance Company

967 969.53

The Manufacturers Life Insurance Company

1121 667.77

The Manufacturers Life Insurance Company

514 820.63

The Manufacturers Life Insurance Company

702 218.90

The Manufacturers Life Insurance Company

3 741 382.59

The Manufacturers Life Insurance Company

808 166.09

The Manufacturers Life Insurance Company

739 968.99

The Manufacturers Life Insurance Company

3 443 008.43

The Manufacturers Life Insurance Company

1154 137.44

The Manufacturers Life Insurance Company

1 000 480.14

The Manufacturers Life Insurance Company

677 954.74

The Manufacturers Life Insurance Company

1 553 003.35

The Manufacturers Life Insurance Company

1 008 991.48

The Manufacturers Life Insurance Company

580 736.27

The Manufacturers Life Insurance Company

536 821.21

The Manufacturers Life Insurance Company

2 220 859.75 5150,251,047.70

The Manufacturers Life Insurance Company

p 1 020 458.75

The Manufacturers Life Insurance Company

1 064 558.89

The Manufacturers Life Insurance Company

532 820.20

The Manufacturers Life Insurance Company

33 462.23

The Manufacturers Life Insurance Company

2 082 897.95

The Manufacturers Life Insurance Company

923 544.99

The Manufacturers Life Insurance Company

829 832.92

The Manufacturers Life Insurance Company

5 160 212.56

The Manufacturers Life Insurance Company

1 169 429.90

The Manufacturers Life Insurance Company

620 186.34

The Manufacturers Life Insurance Company

1 052 486.91

The Manufacturers Life Insurance Company

1 594 876.17

The Manufacturers Life Insurance Company

1 022 224.43

The Manufacturers Life Insurance Company

590 564.68

The Manufacturers Life Insurance Company

544 946.23

The Manufacturers Life Insurance Company

2 526 933.04

The Manufacturers Life Insurance Company

1 007 264.36

The Manufacturers Life Insurance Company

1 066 054.06

The Manufacturers Life Insurance Company

519 185.09

The Manufacturers Life Insurance Company

734 871.24

The Manufacturers Life Insurance Company

2 037 442.12

The Manufacturers Life Insurance Company

907 747.18

The Manufacturers Life Insurance Company

879 203.12

The Manufacturers Life Insurance Company

5 360 024.31

CTA CASE Nos. 8054, 8117 and 8139

MM-10

MM-280a

MM-280

MM-10

MM-281a

MM-281

MM-10

MM-282a

MM-282

MM-10

MM-283a

MM-283

MM-10

MM-285a

MM-285

MM-10

MM-286a

MM-286

MM-10

MM-287a

MM-287

MM-10

MM-300a

MM-300

MM-10

MM-301a

MM-301

December

MM-10

MM-306a

MM-306

MM-10

MM-307a

MM-307

MM-10

MM-308a

MM-308

MM-10

MM-309a

MM-309

MM-10

MM-310a

MM-310

MM-10

MM-311a

MM-311

MM-10

MM-312a

MM-312

MM-10

MM-313a

MM-313

MM-10

MM-314a

MM-314

MM-10

MM-315a

MM-315

MM-10

MM-316a

MM-316

MM-10

MM-317a

MM-317

MM-11

MM-319a

MM-319

MM-11

MM-320a

MM-320

MM-11

MM-321a

MM-321

MM-11

MM-334a

MM-334

MM-11

MM-335a

MM-335

Subtotal

TOTAL

The Manufacturers Life Insurance Company

1 183 650.94

The Manufacturers Life Insurance Company

828 427.80

The Manufacturers Life Insurance Company

999 424.89

The Manufacturers Life Insurance Company

1 639 123.59

The Manufacturers Life Insurance Company

1 005 971.82

The Manufacturers Life Insurance Company

593 778.56

The Manufacturers Life Insurance Company

825 414.19

The Manufacturers Life Insurance Company

907 414.75

The Manufacturers Life Insurance Company

3 148 043.45

The Manufacturers Life Insurance Company

977 638.94

The Manufacturers Life Insurance Company

1 036 957.83

The Manufacturers Life Insurance Company

487 866.69

The Manufacturers Life Insurance Company

693 547.19

The Manufacturers Life Insurance Company

2 601 238.79

The Manufacturers Life Insurance Company

867 888.35

The Manufacturers Life Insurance Company

1 029 724.66

The Manufacturers Life Insurance Company

6 472 093.32

The Manufacturers Life Insurance Company

1111 526.51

The Manufacturers Life Insurance Company

1 071 966.50

The Manufacturers Life Insurance Company

971430.90

The Manufacturers Life Insurance Company

1 581 374.55

The Manufacturers Life Insurance Company

973 833.06

The Manufacturers Life Insurance Company

576 314.48

The Manufacturers Life Insurance Company

497 729.23

The Manufacturers Life Insurance Company

627 604.93

The Manufacturers Life Insurance Company

2 473 044.66 p 68,464,258.25 P176,070,408.09 For services rendered for the four taxable quarters of 2008, petitioner received foreign currency payments, which were accounted for in accordance with the BSP rules and regulations, as evidenced by the Summary of Service Invoices and Official Receipts Issued27, VAT zero-rated sales invoices and official receipts28, Schedule of Sales29 Summary of Bank Remittances30, Customer Advices -

Bank Credit

Memos31 issued by Citibank and report32 of the Court-commissioned Independent Certified Public Accountant (CPA), Nila N. Mendiola.r-

CTA CASE Nos. 8054, 8117 and 8139

However, petitioner failed to substantiate with VAT zero-rated official receipts its sales of services in the amount of P756,087.59, detailed as follows:

YEAR

AMOUNT OF

2008

EXHIBIT

CLIENT

SALES

May

MM-91

Manulife (International) Ltd. p 486,514.72

June

MM-141

John Hancock Life Insurance Co. 269,572.87

TOTAL

P756,087 .59 In sum, out of the P462,946,245.39 zero-rated sales declared by petitioner for the four taxable quarters of 2008, only the amount of P286,119,749.71 qualifies for VAT zero-rating, computed as follows:

1STQTR

2NDQTR

3RD QTR

4TH QTR

TOTAL

Zero-Rated Sales Per

Returns

80 203 327.92 97 528 227.59 126 062 828.90 159 151 860.98 462 946 245.39

Less: Disallowances

Sales to the

Manufacturer's

Life Insurance Company

26 029 735.59 31,325 366.55 50 251 047.70 68 464,258.25 176 070 408.09

No Supporting Official

Receipts

- 756 087.59 - - 756 087.59

Total Disallowances

26 029 735.59 32 081 454.14 50,251 047.70 68 464 258.25 176 826 495.68

Valid Zero Rated

Sales

54 173,592.33 65,446,773.45 75,811,781.20 90 687 602.73 286 119 749.71 After finding that petitioner had VAT zero-rated sales of services for the four taxable quarters of 2008 in the amount of P286,119,749.71, the Court shall determine the amount of input VAT incurred by petitioner in connection thereto. In support of its claimed input VAT for the first, second, third and fourth quarters of 2008, petitioner submitted various suppliers' invoices and official receipts which were examined by the Independent CPA. In her report dated May 9, 2011, the Independent CPA recommended a downward adjustment to petitioner's claim in the amount of P1,827,838.5233 for being unsupported by VAT invoices or official receipts, broken down as follows:

YEAR 2008

INPUT VAT

1st Quarter p 93,284.19 2nd Quarter 236,378.27 3rd Quarter 652,061.85

CTA CASE Nos. 8054, 8117 and 8139

4th Quarter

TOTAL

846,114.21 ll1,827 ,838.52 The Court finds that aside from the disallowance recommended by the Independent CPA in the amount of P1,827,838.52, petitioner's claim should be further reduced by P5,219.22, representing the discrepancy between the claimed input VAT vis-a-vis the input VAT per summary, as shown below:

3RDAND4TH

1STQTR

2ND QTR

QUARTERS

TOTAL

Per Claim

~ 355,695.62 P3 047 596.00 p 8,504 713.31 p 15,908,004.93

Per Summary

4 355,695.62 3 042 376.78 9,650 407.38 17,048,479.78

Difference

- ~ 5,219.22 ~ (1,145,694.07) ~ (1,140,474.85) Thus, out of the total claimed input VAT of P15,908,004.93, only the input VAT of P14,074,947.19 was properly substantiated in accordance with Sections 110(A) and 113(A) of the NIRC of 1997, as amended, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations No. 16-2005. Below is the computation of the amount of P14,074,947.19:

3RD AND 4TH

lSTQTR

2ND QTR

QTRS

TOTAL

Input VAT Claim

p 4 355,695.62 p 3 047 596.00 p 8 504 713.31 p 15 908 004.93

Less: Disallowances

Per !CPA's Findings 93 284.19 236 378.27 1 498 176.06 1 827 838.52 Discrepancy between input VAT per claim and input VAT per Summary - 5 219.22 - 5 219.22

Valid Input VAT

~,262,411.43 ll2,805!998.51 ll7!006 537.25 ll14,074,947 .19 A portion, however, of the afore-mentioned substantiated input VAT shall be applied against petitioner's reported output VAT liabilities for the third and fourth quarters of 2008 in the respective amounts of P947,032.73 and P8,691.58 totalling P955,724.31. Hence, for the four taxable quarters of 2008, only the remaining input VAT of P13,119,222.88 can be attributed to the entire zero- rated sales declared by petitioner in the amount of P462,946,245.39 and only the input VAT of P8,294,312.44 is attributable to the valid zero-rated sales of P286,119,749.71, as computed below: JY

CTA CASE Nos. 8054, 8117 and 8139

1ST QUARTER

2ND

3RDAND 4TH

QUARTER

QUARTERS

TOTAL

Valid Input VAT

p 4 262,411.43 p 2 805,998.51 p 7 006 537.25 p 14 074 947.19

Less: Output VAT

- - 955 724.31 955 724.31

Excess Input VAT

p 4 262 411.43 p 2 805 998.51 p 6 050 812.94 p 13 119 222.88

Valid Zero-Rated Sales

p 54 173 592.33 p 65 446 773.45 p 66 499 383.93 P286 119 749.71

Divide by Total Declared Zero-Rated

Sales

80 203 327.92 97 528 227.59 285 214 689.88 462/946 245.39

Multiplied by Excess Input VAT

4 262 411.43 2 805 998.51 6 050 812.94 13,119 222.88

Excess Input VAT Attributable to

Valid Zero-Rated Sales

li2,879,059.33 li1,882,978.43 li 3,532,274.68 li 8 294 312.44 Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns34, the same remained unutilized until it was deducted as "VAT Refund/TCC claimed"35 in its Quarterly VAT Return for the first quarter of 2010. Therefore, the excess input VAT of P34,307,534.3636 as of the end of the first quarter of 2010, which was to be carried over to the succeeding second quarter of 2010, no longer included the subject claim.

WHEREFORE, premises considered, petitioner's claim for issuance of tax credit certificate is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in the amount of P8,294,312.44 in favor of petitioner, representing unutilized input VAT attributable to its zero- rated sales for the four quarters of 2008.

WE CONCUR:

~~·~c. ~--o.! . 'l JtJANITO C. CASTANEiiA,'JR.

Associate Justice

~ ~A/.4-~- c AESAR A. CASANOVA AMELIA R. COTANGCO-MANALASTAS

Associate Justice

34 Exhibits "J-2" "K-2" " L-2" " N-2" and " DDD-2"

I

I

I

I

35 Exhibit " DDD-5"

36 Exhibit " DDD-6"

Associate Justice

CTA CASE Nos. 8054, 8117 and 8139

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~Vo c.QY-~~ /h_.

fUANITO C. CASTANEDA, JR.

Associate Justice

Chairperson

CERTIFICATION

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

./J R~ki{IO

Presiding Justice