Procter & Gamble Asia, et al. vs. Commissioner of Internal Revenue

DECISION

MINDARO-GRULLA, !._.:

This is a Petition for Review filed on November 19, 2010 by Procter & Gamble Asia, Pte. Ltd. as petitioner, against the Commissioner of Internal Revenue as respondent for the Court in Division, pursuant to Rule 4, Section 3(a)(2), in relation to Rule 8, Section 4(a) 1 of the( Rule 4, Sec. 3. Cases within the jurisdiction of the Court in Division. - The Court in Division shall exercise :

(a) Exclusive original over or appellate jurisdiction to review by appeal the following:

XXX XXX

(2) Inaction by the Commissioner of Internal Revenue in cases involving disputed assessments, refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other matters arising under the National Internal Revenue Code or other laws administered by the Bureau of Internal Revenue, where the National Internal Revenue Code or other applicable law provides a specific period for action: Provided, that in case of disputed assessments, the inaction of the Commissioner of Internal Revenue within the one hundred Procter and Gamble Asia, Pte. Ltd. vs. CIR

Revised Rules of the Court of Tax Appeals, as amended, (RRCTA).

Petitioner seeks the refund or issuance of tax credit certificate (TCC) in the aggregate amount of P57,759,533.68, representing its alleged unutilized input value-added tax (VAT) attributable to zero-rated sales covering the taxable period January 1, 2009 to June 30, 2009.

Petitioner is a foreign corporation duly organized and existing under the laws of Singapore and is maintaining Regional Operating Headquarters in the Philippines at the 18th Floor, Petron Megaplaza, 358 Sen. Gil Puyat Avenue, Makati City, in accordance with the Certificate of Registration and License S.E.C. Reg. No. A199913443 issued by the Securities and Exchange Commission (SEC) on January 23, 2001.

It is authorized by the SEC to provide management, marketing, technical and financial advisory, and other qualified services to its related companies or affiliates. 2 It is registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer, with Taxpayer's ~ eighty day-period under Section 228 of the National Internal Revenue Code shall be deemed a denial for purposes of allowing the taxpayer to appeal his case to the Court and does not necessarily constitute a formal decision of the Commissioner of Internal Revenue on the tax case; Provided, further, that should the taxpayer opt to await the final decision of the Commissioner of Internal Revenue on the disputed assessments beyond the one hundred eighty day-period abovementioned, the taxpayer may appeal such final decision to the Court under Section 3(a), Rule 8 of these Rules; XXX XXX Rule 8. Sec. 4 . Where to appeal; mode of appeal.- (a) An appeal from a decision or ruling or the inaction of the Commissioner of Internal Revenue on disputed assessments or claim for refund of internal revenue taxes erroneously or illegally collected, the decision or ruling of the Commissioner of Customs, the Secretary of Finance, the Secretary of Trade & Industry, the Secretary of Agriculture, and the Regional Trial Court in the exercise of their original jurisdiction, shall be taken to the Court by filing before it a petition for review as provided in Rule 42 of the Rules of Court. The Court in Division shall act on the appeal. XXX XXX 2 Par. 1, Admitted Facts by Petitioner and Respondent, Joint Stipulation of Facts and Issues (JSFI), docket, pp. 185- 186; Exhibit "A"; Exhibit "W".

Procter and Gamble Asia, Pte. Ltd. vs. CIR

Identification Number (TIN) 203-684-973-000 as evidenced by its Certificate of Registration OCN 9RC0000071787. 3 Respondent is the duly appointed Commissioner of the Bureau of Internal Revenue, with the authority to act as such, including the power to decide, approve and grant claims for issuance of a tax credit certificate or refund of overpaid internal revenue taxes as provided by law. She holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City.

Petitioner renders services to its affiliates in the Philippines and abroad pursuant to Service Agreements4 with said affiliates.

Under these Service Agreements, petitioner provides the Service Recipients (petitioner's affiliates) accounting and financial reporting services, employee services, purchases, business intelligence services, information technology business solution, workplace services, and other services. The affiliates to whom petitioner rendered services for the period January 1, 2009 to June 30, 2009 are engaged in business conducted outside the Philippines and are not engaged in any trade or business within the Philippines; 5 and remitted the corresponding foreign currency payment for all services rendered as stipulated in the Service Agreements. 6 Petitioner filed its original and amended Monthly and Quarterly VAT Returns for the taxable period January 2009 to June 2009 on the following dates: 7 Exhibit Period Covered Date of Filing "C" January 2009 February 19, 2009 "D" February 2009 March 20, 2009 3 Exhibit "B"; Par. 3, Admitted Facts by Petitioner and Respondent, JSFI, docket, p. 186.

4 Exhibits " X- 1" to "X- 28" and "X-31 " ; Exhibit " PPP". 5 Exhibit " PPP"; Exhibits "Y" to "NN " and " PP" to "000"; "JJJJ", and "JJJJ 1- 1" to " JJJJ 1-34" .

6 Exhibit " PPP" ; Exhibit "QQQ"; and Exhibits "V" to " V- 5". 7 Pars. 4 to 12, Admitted Facts by Petitioner and Respondent, JSFI, docket, pp. 186- 187.

Procter and Gamble Asia, Pte . Ltd. vs. CIR

"E" January to March 2009 "F" April 2009 "G" May 2009 "H" April to June 2009 April to June 2009 (1 st Amended "I" Return) April to June 2009 (2nd Amended "J II Return) "K" July 2009 "L" August 2009 "M" July to September 2009 July to September 2009 (Amended "N" Return) Page 4 of 34 April 21, 2009 May 20, 2009 June 17, 2009 July 23, 2009 August 20, 2009 AQ_ril 26, 2010 Au_gust 20, 2009 September 19, 2009 October 22, 2009 April 26, 2010 On June 24, 2010, petitioner filed an administrative claim dated June 21, 2010 with the BIR Revenue District Office No. 49-North Makati for the refund or issuance of a tax credit certificate in the aggregate amount of P57,759,533.68, representing unutilized input VAT attributable to its zero-rated sales covering the period of January to June 2009. 8 Due to respondent's inaction, petitioner filed with this Court a Petition for Review on November 19, 2010, praying for the refund or issuance of a tax credit certificate in the aggregate amount of P57, 759,533.68 representing its alleged unutilized input VAT for the period of January to June 2009.

Respondent interposed the following Special and Affirmative Defenses in her Answer9 to the Petition for Review:

"3.

She reiterates and repleads the preceding paragraphs of this answer as part of her Special and Affirmative Defenses; l 8 Par. 13, Admitted Facts by Petitioner and Respondent, JSFI, docket, p. 137; Exh ibit " U"; Exhibit " W".

9 Docket, pp. 152- 153.

Procter and Gamble Asia, Pte. Ltd. vs. CIR

4.

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

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

Petitioner's claim for refund or issuance of tax credit certificate in the amount of P57, 759,533.68, as alleged unutilized input VAT attributable to its zero-rated sales of goods and services for the period covering January 1, 2009 to June 30, 2009 were not fully substantiated by proper documents, such sales invoices, official receipts and others;

7.

In an action for refund/credit, the burden of proof is upon petitioner to establish its right to the claimed refund and failure to adduce sufficient proof is fatal to its claim;

8.

Petitioner's sa les of goods and services to various alleged clients/affiliates do not qualify as zero-rated VAT;

9.

The amount subject of the claim for refund of petitioner does not pertain in full to its input VAT attributable to its zero-rated sales of goods and services for the period covering January 1, 2009 to June 30, 2009; 10.

Petitioner failed to comply with the substantiation requirements under Revenue Regulations No. 7-95 in relation to Section 113 and 237 of the 1997 Tax Code; 11.

Petitioner failed to comply with the conditions/requirements under Section 112(A)(B )(C) of the 1997 Tax Code;

12.

It is incumbent upon petitioner to show that it has complied with the provisions under Section 204 (c) in relation to Section 229 of the Tax Code. Otherwise, its failure to prove the same is fatal to its claim for refund; and 13.

Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs.~ Procter and Gamble Asia, Pte. Ltd. vs. CIR

Commissioner of Internal Revenue, 124 SCRA 1211)."

On August 31, 2011, this Court, upon petitioner's Motion for Commissioning of Independent Certified Public Accountant (CPA) 10 , appointed Czarina R.

Miranda, Tax Partner in the Tax Services Group of SGV and Co., as the duly commissioned Independent CPA. 11 During trial, petitioner presented the following witnesses: Maria Nora Manalo, Tax Manager in one of petitioner's affiliate companies and one of the persons authorized by petitioner to review tax returns/ 2 Jonathan Ng, its Associate Director, Financial Services and Solutions, Manila Service Center; 13 Teresita 0.

Sugay, Director, CitiService and Client Delivery Head, Global Transaction Services Group, Citibank, N.A., Philippine Branch/4 and Czarina R.

Miranda, the Independent CPA duly commissioned by this Court15 . Thereafter, petitioner filed its Formal Offer of Evidence (For the Petitioner) 16 on December 14, 2011, submitting Exhibits "A" to "NN" and "PP" to "0000" inclusive of sub- ' markings; which this Court admitted in the Resolution 17 dated February 2, 2012. The documentary evidence formally offered and admitted are as follows: Exhibits Description A Certificate of Registration and Licensed issued to petitioner by the Securities and Exchange Commission (SEC) on January 23, 2001.t 10 Docket, pp. 355-356. 11 Minutes, Docket, p. 364. 12 Minutes, Docket, p. 266. 13 Minutes, Docket, p. 334. 14 Minutes, Docket, p. 349. 15 Minutes, Docket, pp. 364 and 388. 16 Docket, pp. 394-429. 17 Docket, pp. 433-434.

Procter and Gamble Asia, Pte. Ltd. vs. CIR

8 c D E F G H I J K L M N 0 p Q R Certificate of Registration issued by the Bureau of Internal Revenue to petitioner on October 8, 1999.

Monthly VAT Declaration (BIR Form 2550-M) for the month of January 2009 Monthly VAT Declaration (BIR Form 2550-M) for the month of February 2009. Quarterly VAT Return (BIR Form 2550Q) for the quarter ending March 31, 2009 Monthly VAT Declaration (BIR Form 2550-M) for the month of April 2009. Monthly VAT Declaration (BIR Form 2550-M) for the month of May 2009. Quarterly VAT Return (BIR Form 2550Q) for the quarter ending June 30, 2009 First Amended Quarterly VAT Return (BIR Form 2550Q) for the quarter ending June 30, 2009 Second Amended Quarterly VAT Return (BIR Form 2550Q) for the quarter ending June 30, 2009 Monthly VAT Declaration (SIR Form 2550-M) for the month of July 2009. Monthly VAT Declaration (SIR Form 2550-M) for the month of August 2009. Quarterly VAT Return (SIR Form 2550Q) for the quarter ending September 30, 2009 Amended Quarterly VAT Return (BIR Form 2550Q) for the quarter ending September 30, 2009 Monthly VAT Declaration (BIR Form 2550 - M) for the month of October 2009. Monthly VAT Declaration (BIR Form 2550-M) for the month of November 2009. Quarterly VAT Return (BIR Form 2550Q) for the quarter ending December 31, 2009 Amended Quarterly VAT Return (BIR Form 2550Q) for the quarter ending December 31, 20094 Procter and Gamble Asia, Pte. Ltd. vs. CIR s T u V to V- 5 w Application for Tax Credits/Refunds (BIR Form 1914) for the period January 1 to March 31, 2009 Application for Tax Credits/Refunds (BIR Form 1914) for the period April 1 to June 30, 2009 Letter dated June 21, 2010 addressed to the BIR in support of petitioner's claim for refund or issuance of TCC Citibank Certification of inward remittances dated September 29, 2009 for the period January 1 to June 30, 2009 Judicial Affidavit of Maria Nora Manalo with documentary stamp tax affixed

W- 1

Signature of Maria Nora Manalo

X- 1

Service agreement with Detergent Products AG

X- 2

X-3 X-4

X- 5

X-6 X-7 X-8 X-9

X- 10

X- 11

X-12 Service agreement with Gillette Diversified Operations Private Limited Service agreement with Gillette India Ltd Service agreement with Procter & Gamble Hygiene and Health Care Limited Service agreement with Procter & Gamble Indochina Service agreement with P&G K. K. Service agreement with Max Factor Kabushiki Kaisha Service agreement with Procter & Gamble Vietnam Ltd Service agreement with Procter & Gamble Korea Inc.

Service agreement with Procter & Gamble Malaysia SON BHD Service agreement with Procter & Gamble Singapore Pte Ltd .

Service agreement with Procter & Gamble Australia Pty Ltd ( Procter and Gamble Asia, Pte . Ltd. vs. CIR

X- 13

Service agreement with Procter & Gamble Japan K.K X-14 Service agreement with Procter & Gamble Gulf FZE

X- 15

Service agreement with Procter & Gamble Home Products Limited

X- 16

Service agreement with Procter & Gamble Hong Kong Ltd

X- 17

Service agreement with Procter & Gamble International Operations SA

X- 18

Service agreement with Procter & Gamble International Operations Pte Ltd

X- 19

Service agreement with Procter & Gamble Korea IE. Co

X- 20

Service agreement with Procter & Gamble Korea S&D Co.

X-21 Service agreement with Procter & Gamble Manufacturing (Thailand) Limited

X- 22

Service agreement with Procter & Gamble Pakistan (Private) Limited X-23 Service agreement with Procter & Gamble South Africa Pty Ltd X-24 Service agreement with Procter & Gamble Taiwan Ltd X-25 Service agreement with Procter & Gamble Trading (Thailand) Limited

X- 26

Service agreement with Procter & Gamble Distributing New Zealand X-27 Service agreement with Procter & Gamble Home Products Indonesia X-28 Service agreement with The Procter & Gamble Company X-29 Service agreement with Procter & Gamble Distributing (Philippines), Inc.

X- 30

Service agreement with Procter & Gamble Philippines, Inc.' Procter and Gamble Asia, Pte. Ltd. vs. CIR

X- 31

Service agreement with Procter & Gamble Technical Centres Limited Y and Z AA BB cc DD EE Joint Affidavit of Laurent Philippe and Thomas Gorham, legal representatives of Detergent Products AG with Certificate of Authentication issued by Margarita S. Ibayan, First Secretary and Consul of the Republic of the Philippines in Switzerland Certified with copy of the License of Detergent Products AG with Certificate of Authentication issued by Margarita S. Ibayan, First Secretary and Consul of the Republic of the Philippines in Switzerland. Memorandum and Articles of Association of Gillette Diversified Operations Private Limited with Certificate of Authentication issued by Rajashree Birla, Consul General of the Republic of the Philippines in India and the affidavit of Prashant Bhatnagar, Director of Gillette Diversified Operations Private Limited Memorandum and Articles of Association of with Certificate of Authentication issued by Rajashree Birla, Consul General of the Republic of the Philippines in India and the affidavit of Deepak Acharya, Company Secretary of Gillette India Limited Certificates of Tax Withheld at source issued to Petitioner by Gillette India Limited and Gillette Diversified Operations Private Limited and affidavit of Prshant Bhatnagar, Country Tax Manager of Gillette India Limited with authentication issued by Rajashree Birla, Consul General of the Republic of the Philippines in India Memorandum and Articles of Association of Procter & Gamble Hygiene and Health Care Limited with Certificate of Authentication issued by Rajashree Birla, Consul General of the Republic of the Philippines in India and the affidavit of Amit Vyas, Company Secretary of Procter & Gamble Hygiene and Health Care Limited Affidavit of Ori BenShai Associate Marketing Director of Procter & Gamble Israel M.D.O. Ltd with Authentication issued by Thaddeus T.

Hamoy, Vice Consul of the Republic of the Philippines in Tel Aviv, Israel ~ Procter and Gamble Asia, Pte. Ltd. vs. CIR

FF GG HH II JJ KK LL MM NN Certification of Translation (Form No.

7650) bearing the signature and seal of Michal Orphir, Advocate and Notary at 67 A'Bialik St. Ramat Gan Israel and attached Company details data Authentication issued by Ana Marie L. Hernando, Vice Consul of the Republic of the Philippines in Japan, and affidavit of Hatsunori Kiriyama, Representative Director of P&G K.K. Company Register of P&G K.K.

with Authentication issued by Ana Marie L. Hernando, Vice Consul of the Republic of the Philippines in Japan Affidavit of Mari Nogami, Officer for Representative Member of P&G Max Factor Godo Kaisha with Authentication issued by Ana Marie L. Hernando, Vice Consul of the Republic of the Philippines in and for Osaka, Japan Certificate of All Current Registered Matters for Max Factor Godo Kaisha with authentication likewise issued by Vice Consul Ana Marie L. Hernando Affidavit of Andrew Charles MacCarthy, Director of Procter & Gamble Technical Centres Limited, with annexed Certificate of Good Standing for the Company, sworn at Weybridge before Solicitor Gwyne M P Jarvis Affidavit of LE THI THANH! HA, Country Finance Manager of Procter & Gamble Vietnam Ltd, with Authentication issued y Gerry T. Paglinawan, Consul General, a.h. of the Consulate General of the Republic of the Philippines Ho Chi Minh City, Vietnam.

Certificate of Incorporation with Certificate of Authentication issued by Abraham R. Estavillo, Consul General in Seoul, Korea with attached Affidavit of Okuyama Shinji, Director of Procter & Gamble Korea Incorporation and annexes thereto Certificate of Incorporation with Authentication issued by Shirlene C. Mananquil, Vice Consul of the Republic of the Philippines in Kuala Lumpur, Ma laysia and affidavit of Zulhaimi bin Abdul Hamid, External Relations Leader of Procter & Gamble (Malaysia) Sdn.

Bhd, and annexes thereto ( Procter and Gamble Asia, Pte . Ltd . vs. CIR pp QQ RR Certified copy of its Certificate of Incorporation with Certificate of Authentication issued by Nathaniel G. Imperial, Consul of the Republic of the Philippines in Singapore and affidavit of Ashok Kumar Chhabra, Director of Procter & Gamble (Singapore) Pte. Ltd Certificate of Incorporation with Affidavit of Nimalan Rutnam, Company Secretary of Procter & Gamble Australia Pty. Ltd., bearing the Seal of Philippine Consulate General in Sydney Affidavit executed by XIONG Qing Yun, Director of Procter & Gamble Distributing (HK) Limited, attached to the certification issued by Victoria Mario Dimagiba SS Certificate of Change of Name of Procter & Gamble Distributing (HK) Limited attached to the certification issued by Victoria Mario Dimagiba TT Certificates of Tax Withheld at Source with Certificate of Authentication issued by Resurrecion M. Fernando of the Manila Economic and Cultural Office in Taiwan and affidavit of Max Rangel, Branch Manager of Procter & Gamble Export Operations SARL and annexes thereto UU Affidavit executed by AI Abdul Malek Rajwani, General Manager of Procter & Gamble Gulf FZE, with authentication of Vicente Vivencio T. Bandillo of the Consulate General of the Republic of the Philippines, Dubai - UAE VV Certified copy of the Memorandum and Articles of Association of Procter & Gamble Home Products Limited with Certificate of Authentication issued by Rajashree Birla, Consul General of the Republic of the Philippines in India and affidavit of Sachin Harlalka, Company Secretary of Procter & Gamble Home Products Limited WW Certificate of Incorporation on change of Name of Procter & Gamble Hong Kong Limited with Certification issued by Victoria Mario M.

Dimagiba, Jr., Consul of the Republic of the Philippines in and for Hong Kong SAR XX Affidavit executed by XIONG Qing Yun, Director of Procter & Gamble Hong Kong Limited, with Certification issued by Victoria Mario M.

Dimagiba, Jr~ Procter and Gamble Asia, Pte. Ltd. vs. CIR yy zz Affidavit of Klaus Lindner, member of the Board of Directors of Procter & Gamble International Operations SA, with Certificate of Authentication issued by Margarita S. Ibayan Certified extract of the Commercial Register, Geneva, of Procter & Gamble International Operations SA with Certificate of Authentication issued by Margarita S. Ibayan, First Secretary and Consul of the Republic of the Philippines in Switzerland AAA Certified Copy of its Certificate of Incorporation with Certificate of Authentication issued by Nathaniel G. Imperial, Consul of the Republic of the Philippines in Singapore, and affidavit of Ashok Kumar Chhabra, Director of Procter & Gamble International Operations Pte. Ltd. BBB Certified copy of license and affidavit of Hatsunori Kiriyama, Representative Director of Procter & Gamble Japan K.K. with Authentication issued by Ana Marie L.

Hernando Vice Consul of the Republic of the Philippines in Osaka, Japan CCC Company Register of Procter & Gamble Japan K.K with Authentication issued by Ana Marie L.

Hernando Vice Consul of the Republic of the Philippines in Osaka, Japan DDD Certificate of Incorporation with Authentication issued by Abraham R. Estavillo, Consul General in Seoul, Korea, and affidavit of Okuyama Shinji, Director of Procter & Gamble Korea IE Company and annexes thereto EEE Certificate of Incorporation with Certificate of Authentication issued by Abraham R. Estavillo, Consul General in Seoul, Korea, and affidavit of Okuyama Shinji, Director of Procter & Gamble Korea S&D Company FFF Affidavit of Mrs.

Sunee Kirdniyom, Legal Counselor of Procter & Gamble Manufacturing (Thailand) Ltd. with Authentication issued by Edgar B.

Badajos, Consul at the Philippine Embassy in Thailand GGG Certification issued by Miss Kannika Achariyasakulchai of the Bangkok Metropolis Partnership and Company Registration Office (with translations) certifying that Procter & Gamble Manufacturing (Thailand) Ltd has been{ 'I Procter and Gamble Asia, Pte. Ltd. vs. CIR

HHH III JJJ KKK LLL MMM NNN registered under the Civil and Commercial Code with Authentication issued by Consul Edgar B. Badajos Certificate of Registration on Change of Name of Procter & Gamble Pet Care (Australia) Pty. Ltd with the Seal of the Philippine Consulate General and signed by Vice Consul J. Anthony A. Reyes, and the affidavit of Nimalan Rutnam, Company Secretary of Procter & Gamble Pet Care (Australia) Pty. Ltd Certificates of Tax Withheld at Source with Certificate of Authentication issued by Resurrecion M. Fernando of the Manila Economic and Cultural Office in Taiwan and affidavit of Max Rangel, General Manager of Procter & Gamble Taiwan, Ltd, and annexes thereto Affidavit of Mrs.

Sunee Kirdniyom, Legal Counselor of Procter & Gamble Trading (Thailand) ltd. with Authentication issued by Edgar B. Badajos, Consul at the Philippine Embassy in Thailand Affidavit issued by Miss Kannikar Achariyasakulchai of the Bangkok Metropolis Partnership and Company Registration Office (with translations) certifying that Procter & Gamble Trading (Thailand) Ltd has been registered under the Civil and Commercial Code with Authentication issued by Consul Edgar B. Badajos Certificate of Incorporation and Affidavit of Nimalan Rutnam, Company Secretary of Procter & Gamble Distributing New Zealand bearing the Seal of Philippine Consulate General in Sydney Certificate of Incorporation with Authentication issued by Germinia V.

Aguilar-Usudan, First Secretary and Consul of the Republic of the Philippines in and for the Consular District of Jakarta, Indonesia and affidavit of Mohamed Ahmed Ismail, President Director of P.T. Procter & Gamble Home Products Indonesia Certificate of Authentication issued by Domingo P. Nolasco, Consul General of the Republic of the Philippines in the United States and affidavit of Susan S.

Felder, Assistant Secretary of The Procter & Gamble Company l.

Procter and Gamble Asia, Pte. Ltd . vs. CIR

000 Exhibit 21 of the Procter and Gamble Company and Subsidiaries Report to the U.S. Securities and Exchange Commission.

This report may be accessed by any interested party or the public at U.S.

SEC website address at " http :/www .sec.gov /Arch ives/- edgar/data/80424/000095015207007152/127490 aexv21.hm PPP Judicial Affidavit of Mr.

Jonathan Ng with documentary stamp affixed thereto PPP-1 QQQ QQQ-1 RRR Signature of Mr. Jonathan Ng Judicial Affidavit of Teresita 0 . Sugay with documentary stamp affixed thereto Signature of Teresita 0. Sugay Partial Independent CPA Report SSS Quarterly Summary List of Sales for the Period ended March 31, SSS 1-1 to 2009 sss 1-3 TTT TTT 1- 1 to

TTT 1-3

uuu UUU 1-1 to uuu 1-22 Quarterly Summary List of Sales for the Period ended June 30, 2009 Schedule of zero-rated sales of services VVV BIR-registered Debit/Credit Memos for Zero-rated Sales of VVV 1- 1 to Services for the period January 1 to June 30, 2009 vvv 1-313 VVV 2-314 to vvv 2-620;

VVV 3-621 to vvv 3-933 vvv 4-1 WWW VAT Official Receipts issued for Zero-rated Sales of Services for WWW 1- 1 tothe period January 1 to June 30, 2009 www 1- 172 XXX Bank Statements issued by Citibank N.A.

Philippine Branches{ o I 1 ° Procter and Gamble Asia, Pte . Ltd. vs. CIR CTA CASE NO. 819 2

XXX 1- 1 to

XXX 1-37

yyy Schedule of Local Sales of Services for the period January 1 to YYY 1- 1 to yyy 1-4 June 30, 2009 ZZZ BIR-registered Debit/Credit Memos for Local Sales of Services ZZZ 1- 1 to for the period January 1 to June 30, 2009 zzz 1- 139 AAAA VAT Official Receipts issued for Local Sales of Services for the AAAA 1- 1 to period January 1 to June 30, 2009

AAAA 1- 34

BBBB Quarterly Summary Lists of Purchases for the quarter ended BBBB 1- 1 to March 31, 2009

BBBB 1-4

CCCC Quarterly Summary Lists of Purchases for the quarter ended ecce 1- 1 to June 30, 2009 ecce 1-s DODD Schedule of Domestic Purchases of Goods for the period DODD 1- 1 toJanuary 1 to June 30, 2009

DODD 1-6

EEEE Schedule of Domestic Purchases of Services for the period EEEE 1-1 to January 1 to June 30, 2009

EEEE 1- 19

FFFF

FFFF 1- 1

FFFF 1- 3

GGGG

GGGG 1- 1

HHHH Schedule of Capital Goods Purchased for the period January 1 to June 30, 2009 Schedule of Purchases of Services Rendered by Non-residents for the period January 1 to June 30, 2009 Various VAT Invoices, VAT Official Receipts, and Other HHHH 1-1 to Documents Supporting the Company's Purchases from January' Procter and Gamble Asia, Pte. Ltd. vs. CIR

HHHH 1-2411 to June 30, 2009 (Domestic Purchases of Goods Supported HHHH 2-1 toby Original Copies of VAT Invoices)

HHHH 2-413

HHHH 3-1 to

HHHH 3-18

HHHH 4-1 to

HHHH 4-36

IIII Various VAT Invoices, VAT Official Receipts, and Other IIII 1-1 to Documents Supporting the Company's Purchases from

IIII 1-3

January 1 to June 30, 2009 (Domestic Purchases of IIII 2-1;

Goods Supported by Original Copies of VAT Invoices) IIII 3-1 to IIII 3-4;

IIII 4-1;

IIII 5-1 to IIII 5-2;

IIII 6-1 to IIII 6-311;

IIII 7-1;

IIII 8-1;

IIII 9-1 to IIII 9-7;

IIII 10-1 to IIII 10-3;

IIII 11-1 to IIII 11-7;

IIII 12-1;

IIII 13-1 to IIII 13-5;

IIII 14-1 to IIII 14-7;

IIII 15-1 to IIII 15-5;

IIII 16-1 to IIII 16-11; and IIII 17-1 to IIII 17-7 JJJJ

JJJJ 1-1

JJJJ 1-34

Certificates of Non-registration of Corporation or Partnership issued by the Securities and Exchange Commission KKKK Certificates of Inward Remittances issued by Citibank KKKK 1-1 to

KKKK 1-6 4

Procter and Gamble Asia, Pte. Ltd. vs. CIR

LLLL Quarterly VAT Return for the quarter ended December 31, LLLL 1- 1 to 2008

LLLL 1-3

MMMM BIR Authority to Print Invoices or Receipts MMMM 1-1 to

MMMM 1-3

NNNN Final Independent CPA Report NNNN 1 to

NNNN 17

NNNN- 18

Signature of Ms. Czarina R. Miranda in her Final Independent CPA Report 0000 Judicial Affidavit of Ms. Czarina R. Miranda with documentary stamp affixed thereto 0000-1 Signature of Ms. Czarina R. Miranda On the other hand, during the April 30, 2012 hearing, counsel for respondent manifested that he would not be presenting any evidence considering the lack of final report of investigation on petitioner's administrative claim for refund and that respondent will be submitting this case for decision. 18 In the Resolution 19 dated June 19, 2012, the case was submitted for decision taking into consideration the Memorandum (for the Petitioner) filed on May 30, 2012 and the Report dated June 8, 2012 of the Records Division that no memorandum has been filed for respondent. However, on July 6, 2012, respondent filed her Memorandum for the Respondent; which this Court admitted in the Resolution dated July 30, 2012.

The following are the parties' jointly stipulated issues20 submitted for this Court's resolution: { 18 Minutes, Docket, p. 439. 19 Docket, p. 456.

20 Issues to be Resolved, JSFI, Docket, pp. 187- 188.

Procter and Gamble Asia , Pte . Ltd . vs. CIR

"1.

Whether or not petitioner's sales of services to affiliates abroad which are paid for in acceptable foreign currency and accounted for in accordance with the rules of the Bangko Sentral ng Pilipinas (BSP) are zero-rated for VAT purposes under Section 108(B)(2) of the 1997 Tax Code;

2.

Whether or not the refundable input VAT in the amount of P57,759,533.68 for the period January 1 to June 30, 2009 was carried over or applied to any output tax liability for the said period or in the succeeding taxable months or quarters;

3.

Whether or not the refundable input VAT in the amount of P57,759,533.68 for the period January 1 to June 30, 2009 being claimed by the petitioner as unutilized input VAT for said period pertains in full to its zero- rated sales of services for the said period; 4.

Whether or not petitioner complied with the substantiation requirements prescribed under the 1997 Tax Code, as amended and pertinent Revenue Regulations; and 5.

Whether or not petitioner is entitled to its claim for refund or tax credit in the amount of P57,759,533.68 for the period January 1 to June 30, 2009 as alleged unutilized input VAT paid on goods and services attributable to its zero-rated sales for the said period. " The principal issue is whether petitioner is entitled to a refund or tax credit in the aggregate amount of P57,759,533.68, representing unutilized input VAT payments attributable to its zero- rated sales, for the taxable period January 2009 to June 2009 ." Petitioner anchors its claim on Sections llO(B) and 112(A) of the National Internal Revenue Code (NIRC) of 1997, as amended, which provide that: " SEC. 110. Tax Credits. - (B) Ex cess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person . If the input tax exceeds the output tax, the excess shall bet • 1 • Procter and Gamble Asia, Pte . Ltd . vs. CIR carried over to the succeeding quarter or quarters: Provided, That the input tax inclusive of input VAT carried over from the previous quarter that may be credited in every quarter shall not exceed seventy percent (70°/o) of the output VAT: Provided, however, That any input tax attributable to zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112."

"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(B)(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, finally, That for a person making sales that are zero-rated under Section 108(6)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero- rated sales."

Based on the above-quoted prov1s1on of Section 112(A), petitioner must comply with the following requisites to be entitled to a refund or tax credit of unutilized input taxes attributable to zero-rated or effectively zero-rated sales:

1.

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

2. input taxes were incurred or paid; & •· Procter and Gamble Asia, Pte. Ltd. vs. CIR

3. t hat such input taxes are attributable to zero-rated sa les or effectively zero-rated sales;

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

5. that the claim for refund was filed within the two- year prescriptive period. At the outset, we will discuss petitioner's compliance with the fifth requirement pertaining to prescription. Section 112(A) of the NIRC of 1997, as amended, requires that the taxpayer's application for a refund or issuance of a tax credit certificate for unutilized or excess creditable input VAT which are attributable to its zero-rated or effectively zero-rated sa les, must be made within two (2) years after the close of the taxable quarter when such sales were made.

In the case of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (formerly Southern Energy Quezon, Inc.) 2 \ the Supreme Court aptly stated that:

"The claim for refund or tax credit for the creditable input VAT payment made by MPC embodied in OR No. 0189 was filed beyond the period provided by law for such claim. Sec. 112(A) of the NIRC pertinently reads: (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: ... (Emphasis ours.)

The above proviso clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for( 21 G.R. No. 172129, September 12, 2008 .

• I • ' ' Procter and Gamble Asia, Pte . Ltd . vs. CIR any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied the aforequoted Sec.

112(A), '[P]rescriptive period commences from the close of the taxable quarter when the sales were made and not from the time the input VAT was paid nor from the time the official receipt was issued.' Thus, when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction, said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the quarter when the pertinent sales or transaction was made, regardless when the input VAT was paid. Be that as it may, and given that the last creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC's claim for refund or tax credit filed on December 10, 1999 had already prescribed." Based on the afore-quoted provision of law and jurisprudence, the reckoning of the two-year prescriptive period for the filing of a claim for refund/tax credit of input VAT on zero-rated sales is reckoned not from the date of filing of the corresponding Quarterly VAT Return and payment of the tax but from the close of the taxable quarter when the pertinent sale or transaction was made. The instant claim involves input VAT on zero-rated sales incurred from January 1, 2009 to June 30, 2009, which closed on March 31, 2009 and June 30, 2009. Counting from said dates, petitioner had until March 31, 2011 and June 30, 2011, respectively, to file its administrative claim for refund or tax credit. Records show that petitioner filed its administrative claim for refund or issuance of tax credit certificate on June 24, 2010.

Clearly, petitioner's administrative claim for the period covering January 1, 2009 to June 30, 2009 was filed well within the two-year prescriptive period. t Procter and Gamble Asia, Pte. Ltd . vs. CIR

The question that arises is whether petitioner's judicial claim for tax refund was filed pursuant to Section 112(C) of the NIRC of 1997, as amended, which states: "SEC. 112. Refunds or Tax Credits of Input Tax. - XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue 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 Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty {30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day-period, appeal the decision or the unacted claim with the Court of Tax Appeals." (Emphasis supplied) Based on the foregoing, the taxpayer has thirty (30) days from its receipt of the decision denying the claim for refund or issuance of tax credit certificate or after the expiration of the one-hundred twenty (120) day period from the date of submission of complete documents to appeal the decision or the inaction· of the Revenue Commissioner with this Court.

In applying the provision of Section 112(C) of the NIRC of 1997, which was formerly Section 112(0) prior to its amendment by Republic Act (R.A.) No. 9337, the Supreme Court in the more recent case of Commissioner of Internal Revenue vs. Aichi Forging Company of Asia Inc. 22 (Aichi case) held in this wise: I. 22 G.R. No. 184823, October 6, 2010 Procter and Gamble Asia, Pte. Ltd. vs. CIR

"Section 112(0) of the NIRC clearly provides that the 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 the CTA 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 CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or the lapse of the 120-day period. For this reason, we find the filing of the judicial claim with the CTA premature.

Respondent's assertion that the non-observance of the 120-day period is not fatal to the filing of a judicial claim as long as both the administrative and the judicial claims are filed within the two-year prescriptive period has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent's view. Subsection (A) of the said provision states that 'any VAT-registered person, whose sales are zero-rated or effectively zero-rated may, within two 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.' The phrase 'within two (2) years x x x apply for the issuance of a tax credit certificate or refund' refers to applications for refund/credit filed with the CIR and not to appeals made to the CTA. This is apparent in the first paragraph of subsection (D) of the same provision, which states that the CIR has '120 days from the submission of complete documents in support of the application filed in accordance with Subsections (A) and (B)' within which to decide on the claim. In fact, applying the two-year period to judicial claims would render nugatory Section 112(0) of the NIRC, which already provides for a specific period within which a taxpayer should appeal the decision or inaction of the CIR. The second paragraph of Section 112(0) of the NIRC env1s1ons two scenarios: (1) when a decision is issued by the CIR before the lapse of the 120- day4 • j Procter and Gamble Asia, Pte . Ltd. vs. CIR period; and {2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal with the CTA." (Emphasis supplied) Based on the Aichi case, the second paragraph of Section 112(C)23 envisions two scenarios: (1) when a decision is issued by t he BIR Commissioner before the lapse of the 120-day period; and (2) when no decision is made after the 120-day period. In both instances, the taxpayer has 30 days within which to file an appeal with the CTA. Moreover, Revenue Memorandum Circular No. 029-09 provides that:

"III. Period within which Refund or a Tax Credit of Input Taxes shall be Made. Section 112(C) of the Tax Code of 1997, as amended by Republic Act No. 9337, provides among others, that in proper cases, the Commissioner shall grant a refund or issue the tax credit certificate {TCC) for creditable input taxes w ithin one hundred twenty {120) days from the date of submission of complete documents. For the purpose of defining 'proper cases' in the said prov1s1on, the taxpayer/claimant must have complied with the following conditions/requirements upon audit/verification of his/its claim:

a. Submission of complete documents necessary to determine and/or ascertain the correctness of the return and the amount to be refunded;

b. That all books of accounts and accounting records pertaining to the claim are immediately available to the concerned Revenue Office (RO) for audit/verification;

c. Any discrepancies/findings upon audit/verification shall be reconciled/explained in writing by the taxpayer/claimant within five (5) days from receipt of the notification from the RO; and

d. The taxpayer/claimant has signified his concurrence to the outcome of the audit/verification, which shall be evidenced by an Agreement Form.t 23 Formerly 112(D) of the NIRC of 1997, as amended.

' I Procter and Gamble Asia, Pte . Ltd. vs. CIR In cases where taxpayer failed to comply with the above conditions/requirements, i.e., failure to present accounting books and records for audit/verification, additional documents to explain discrepancies/findings are not submitted, taxpayer refuses or incurs delay in the submission of the Agreement Form, the running of the 120-day period shall stop from the date of notification to the taxpayer. Likewise, the running of the 120-day period shall be suspended in case a question of law arises during the conduct of audit/verification and/or review of the claim for tax refund/credit, and the issue is referred to the Legal Division or the Legal Service, as the case may be, for resolution and issuance of legal opinion, which should be rendered within thirty (30) working days from receipt of the request." (Emphasis supplied) In the instant case, records reveal that upon the filing of its administrative claim on June 24, 2010, petitioner simultaneously submitted the documents in support thereof. 24 The records do not show that a written notice was sent by the BIR informing petitioner that the aforesaid documents are incomplete or requiring petitioner to submit additional documents in support of its claim. Consequently, the 120-day period started and continued to run from June 24, 2010, the date when petitioner filed its administrative claim together with its supporting documents, until October 22, 2010, the date when the 120-day period for the BIR Commissioner to decide the claim expired. Petitioner filed the judicial claim for refund or tax credit on November 19, 2010 or after the lapse of twenty-eight

(28) days from October 22, 2010, which is the last day for respondent to decide on the administrative claim. Clearly, the instant Petition for Review filed on November 19, 2010 was filed within the prescribed 30-day period from the lapse of the 120-day period to decide on the administrative claim. As to petitioner's compliance with the other requisites, for the period covering January 1, 2009 to June 30, 2009,( 24 Exhibit " U".

Procter and Gamble Asia, Pte. Ltd . vs. CI R CTA CASE NO. 8 192 petitioner duly filed with the Bureau of Internal Revenue its Quarterly VAT Returns declaring the following: January 1, 2009 to April 1, 2009 to March 31 , 2009 June 30, 2009 Total (Exhibit "E") (Exhibit "J'J Zero-Rated Sales/Receipts

p. 280,780,971.88 p.

254,023,769.83 p.

534,804,741 .71 Exempt Sales/Receipts 618,552,369.95 745,864,854.95 1,364,417,224.90 Total Sales/Receipts p 899,333,341 .83 p 999,888,624.78 p 1,899,221 ,966.61 Output Tax Due p 33,693,716.63 p 30,482,852.38 p 64,176,569.00 Less: Allowable Input Tax Input Tax Deferred on Capital Goods Exceeding P1 Million from Previous Quarter p 2, 728,815.84 p 2,321 ,430.63 p 2, 728,815.84 Current transactions:

Purchase of Capital Goods exceeding P-1 Million 269,189.98 - 269,189.98 Domestic Purchases of Goods Other than Capital Goods 904,568.81 1 ,910,984.17 2,815,552.98 Domestic Purchase of Services 58,392,337.07 56,515,943.79 114,908,280.86 Others 1 ,828,000.00 1 ,048,056.53 2,876,056.53 Total p 61 ,394,095.86 p 59,474,984.49 p 120,869,080.35 Total Available Input Tax p 64,122,911 .70 p 61 ,796,415.12 p 123,597,896.19 Less: Deductions from Input Tax Input Tax on Purchases of Capital Goods exceeding P.1 Million deferred for the succeeding period p.

2,321 ,430.63 1,661 ,793.51 p.

1,661 ,793.51 VAT Refund/TCC claimed 28,107,764.45 29,651 ,769.23 57,759,533.68 Total p 30,429,195.08 p 31 ,313,562.74 p 59,421 ,327.19 Total Allowable Input Tax p 33,693,716.62 p 30,482,852.38 p 64,176,569.00 Net VAT Payable p 0.00 p 0.00 p 0.00 As reflected the two quarters 2009 amounted follows:

in the Returns, petitioner's input VAT for that ended March 31, 2009 and June 30, to P121,936,102.68, broken down as Amount of Deferred Input Amount of VAT on Capital Deferred Input Goods VAT on Capital Exceeding Goods Exceeding Amount of Input P-1M to be P 1M from the VAT on Current Carried-over to Previous Quarter Purchases Per Succeeding Amount of Input Quarter Ended Per Return Return Period Per VAT Per Return Quarter Ended Mar. 31 , 2009 June 30, 2009 Less:

Procter and Gamble Asia, Pte. Ltd. vs. CIR

March 31 , 2009 (A) (8) June 30, 2009 P- 2,728,815.84 p.

61 ,394,095.86 2,321 ,430.63 59,474,984.49 Total p 5,050,246.47 p 120,869,080.35 Page 28 of 34 Return (C)

(A)+ (8)-(C)

p. 2,321 ,430.63 p.

61 ,801,481 .07 1,661 ,793.51 60,134,621 .61 p 3,983,224.14 p 121 ,936,102.68 Out of the reported input VAT of P121,936,102.68, petitioner is claiming the refund of P57, 759,533.68 25 allegedly attributable to its zero-rated sales for the same period, computed as follows: Percentage Amount of Input of Zero- VAT Amount of Local Amount of Zero- rated Sales Amount of Input Attributable to Sales Per rated Sales Per Total Sales Per to Total VAT Per Zero-rated Returns Returns Returns Sales Returns Sales p.

p.

P--280,780,971 .88 p.

618,552,369.95 p.

899,333,341 .83 68.7790% 61 ,801 ,481 .07 42,506,433.16 254,023,769.83 745,864,854.95 999,888,624.78 74.5948% 60,134,621 .61 44,857,296.82 p

p. 534,804,741 .71 P-1 ,364,417,224.90

p. 1,899,221,966.61 121 ,936,102.68 P- 87,363,729.98 Amount of Input VAT Attributable to Zero-rated Sales Applied Against Remaining Output VAT Liability on Local Sales p Amount of Output VAT Liability on Local Sales (P 534,804,741 .71 x 12%) 64,176,569.00 Less: Amount of Input VAT Attributable to Local Sales (P.121 ,936,102.68 1ess P 87,363, 729.98) 34,572,372.70 29,604,196.30 Difference-Amount of Unutilized and/or Unapplied Input VAT Claimed for Refund or for the issuance of TCC p 57,759,533.68 Anent the first requisite, petitioner alleges that its sale of services to its affiliates abroad is subject to zero percent (0°/o) VAT pursuant to Section 108(B)(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°/o) 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~ 25 Exhibit " NNNN-1 6", Findings and Observation, Item IV.6.

Procter and Gamble Asia, Pte. Ltd . vs. CIR 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. 26, the Supreme Court held that in order for the supply of services to be VAT zero-rated under Section 108(B)(2) of the NIRC of 1997, as amended, the following requisites must be met:

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

2. 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. This Court finds that petitioner has complied with all of the above requisites.

Petitioner is duly registered with the BIR as a VAT taxpayer27 and the services it performs in the Philippines, through its Regional Operating Headquarters, like accounting and financial reporting services, employee services, purchasing services, business intelligence services, information technology business solution, workplace services and other services/8 are not in the same category as "processing, manufacturing or repacking of goods". ( 26 G.R. No.153205, January 22, 2007. 27 Par. 3, JSFI, Admitted Facts by Petitioner and Respondent, docket, p. 186. 28 Exhibit " PPP", A10, p. 3.

Procter and Gamble Asia, Pte . Ltd. vs. CIR

For the said services, petitioner received payments in the amount of US$27 ,833,666.04 with the peso equivalent of P1,364,417,224.9029 , which was duly accounted for in accordance with the rules and regulations of the BSP as evidenced by the Certifications of Inward Remittances30 and the Bank Statements31 issued by Citibank, N.A., Philippine Branch, and duly affirmed by the testimony32 of Citibank's representative, Ms.

Teresita Sugay, the BIR-registered Debit/Credit Memos33 and the VAT zero-rated official receipts. 34 This Court also finds that petitioner has sufficiently established that it rendered services to its non-resident foreign affiliates which were not registered corporations in the Philippines and were not doing business in the country as evidenced by the SEC Certificates of Non-Registration35, Service Ag reements36, affidavits37 executed by the respective officers of petitioner's affiliates abroad with attached proof of business registrations of the affiliates duly authenticated by consuls of the Republic of the Philippines, and Exhibit (21) 38 of The Procter & Gamble Company and Subsidiaries Report, which can be accessed at the United States Securities and Exchange Commission website. Based on the foregoing, petitioner has sufficiently proven that it had VAT zero-rated sales in the amount of P1,364,417 ,224. 90 for the period covering January 1, 2009 to June 30, 2009.£ 29 Exhibits " NNNN-7" to "NNN N-8", Findings and Observation, items 11.4 and 11.5 and uuu 1-22.

30 Exhibits "V" to "V- 5" or Exhibits "KKKK 1- 1" to "KKKK 1-6". 31 Exhibits "XXX 1-1" to "XXX 1-37". 32 Exhibit "QQQ".

33 Exhibits "VVV 1-1" to "VVV 1- 313" "VVV 2-314" to "VVV 2-620" "VVV 3-621" to , , "VVV 3-933" and "VVV 4-1". 34 Exhibits "WWW 1- 1" to " WWW 1-172". 35 Exhibits "JJJJ-1" to "JJJJ 1-34". 36 Exhibits "X-1" to "X-28" and "X-31". 37 Exhibits "Y" to " NNN ". 38 Exhibit "000".

Procter and Gamble Asia, Pte. Ltd . vs. CIR

Consequently, this Court will discuss the amount of excess input VAT attributable thereto. In support of its reported input VAT of P121,936,102.68, petitioner presented various invoices, official receipts and other documents39 that were all examined by the Court-commissioned Independent CPA. In her Report dated October 28, 2011, the Independent CPA noted that the following input taxes amounting to P11,263,057.4040 may be disallowed from petitioner's claim : Exhibit

"NNNN "

Jan. 1, 2009 to Apr. 1, 2009 to Nature of Exception Annex Mar. 31, 2009 June 30, 2009 Total Domest ic Purchase of goods supported by original copies of VAT invoices not in the name of the Company 15 P- 25 136.88 - p 25 136.88 Domestic pu rchase of goods supported by Non-VAT invoices 16 7 564.29 - 7 564.29 Domestic pu rchase of goods supported by original copies of Payment Request Form 17 - p 24 176.48 24 176.48 Domestic purchase of goods supported by origina l copy of Payment Request Form not in the name of the Company 18 - 1 193.14 1 193.14 Domestic purchase of goods supported by VAT invoices without TI N 19 4 757.14 4 100.31 8 857.45 Domestic purchase of goods supported by original copies of Statement of Accounts 20 32 322.86 16 297.03 48 619.89 Domestic purchase of goods supported by oriqina l copy of Tax invoice 21 - 12 758.68 12 758.68 Domestic purchase of services supported by original copy of VAT OR with "Not Va lid for Input Tax" stamp 22 4 203.97 - 4 203 .97 Domestic purchase of services supported by origina l copies of VAT ORs with imQ_roper VAT bases 23 135 326.16 - 135 326.16 Domestic purchase of services supported by original copies of VAT ORs not in the Company's name 24 99 247.84 - 99 247 .84 Domestic pu rchase of services supported by original copies of VAT ORs not in the Company's address 25 255 359.57 109 540.49 364 900.06 Domestic purchase of services supported by Provisiona l OR in the name of the Company 26 - 14 773.72 14 773.72 39 Exhibits " HHH H 1-1" to " HHHH 1-241", "HHH H 2-1" to "2-413", " HH HH 3-1" to "H HHH 3-18", and " HHHH 4-1" to " HH HH 4-36", "Exhi bits 1111 1-1" to "1111 1-3", "1111 2-1", "1111 3- 1" to "1111 3-4", "1111 4-1", "1111 5-1" to "1111 5-2", "1111 6-1" to "1111 6-311", "1111 7- 1", "1111 8-1", "1111 9-1" to "1111 9-7", "1111 10-1" to "1111 10-3", "1111 11-1" to "1111 11-7", "1111 12-1", "1111 13-1" to "1111 13-5", "1111 14-1" to "1111 14-7", "1111 15- 1" to "1111 15-5", "1111 16-1" to "1111 16-11", and "1111 17-1" to "1111 17-7".

40 Exhi bits " NNNN - 14" to " NNNN-15" and " NN NN-18". ( Procter and Gamble Asia, Pte. Ltd. vs . CIR

Do mestic purchase of services supported by Provisional OR not in the

Company's name 27 167 545.48 - 167 545.48 Overstatement in input VAT claimed on domestic purchases of capital goods with aggregate acquisition cost of more than P1Mil lion in a calendar month 28 20 471.72 20 471.72 40 943 .43 Domestic purchase of goods supported by original copies of VAT invoices not dated within t he period of claim 29 3 828.06 3 828.06 7 656.1 2 Domestic purchase of services supported by original copies of VAT ORs dated within 7 days after the period of claim 30 - 6 066 240 .59 6 066 240.59 Domestic purchase of services supported by original copies of VAT ORs dated beyond 7 days after the period of claim 31 - 111 035.31 111 035.31 Domestic purchase of goods without supporting documents 32 1 928.63 368 803 .32 370 731.95 Domestic purchase of goods not dated within the period of claim and without supportinq documents 33 1597.11 - 1 597.11 Domestic purchase of services without VAT ORs 34 3 680 526.81 70 022.04 3 750 548.85 Total P4 439,816.52 P6 823,240.89 P11,263,057.40 This Court finds the disallowance of the P11,263,057 .40 input VAT to be in order because the corresponding invoices, receipts and other documents did not meet the substantiation requirements under Sections 110(A) and 113(A) and (B) of the NIRC of 1997, as amended, in relation to Sections 4.110- 1, 4.110-8, and 4 .113- 1 of Revenue Regulations (RR) No. 16-05 . Aside from the Independent CPA's recommended disallowance of P11,263,057 .40, the following input VAT in the amount of P98,298,633 .0641 should be denied for reasons stated below : Jan. 1, 2009 to Apr. 1, 2009 to Nature of Exception Mar. 31 , 2009 June 30, 2009 Total Domestic purchases of services supported by VAT Invoices instead of VAT ORs as required under Section 113(A)(2) of the NIRC of 1997, as amended P- 8,160.00 P- 300,779.89 P- 308,939.89 Domestic purchases of goods/services supported by Invoices/OR but VAT not separately shown in violation of Section 113(B)(2)(a) of the NIRC of 1997, as amended 51 ,605,406.27 43,508,230.35 95,113,636.62 Purchases of services supported by 1,828,000.02 1 ,048,056.53 2,876,056.55 41 See details per Annex A of this Report .

Procter and Gamble Asia, Pte. Ltd. vs. CIR printed BIR Form No.

1600 without corresponding proof of payment in violation of Section 4.114-2(b )(3) of RR No. 16-05 Total P-53,441 ,566.29 Page 33 of 34 P-44,857 ,066. 77 P-98,298,633.06 Considering all the aforesaid disallowances, out of the total reported input VAT of P121,936,102.68, only the amount of P12,374,412.22 is properly substantiated by VAT invoices or official receipts, as computed below : Jan. 1, 2009 to Apr. 1, 2009 to Mar. 31 , 2009 June 30, 2009 Total Total input VAT per return p 61 ,801 ,481 .07 p 60,134,621 .61 P121 ,936, 102.68 Less:

Disallowances Per ICPA's findings p 4,439,816.52 p 6,823,240.89 p 11 ,263,057.40 Per this Court's findings 53,441 ,566.29 44,857,066.77 98,298,633.06 Total Disallowances p 57,881 ,382.81 p 51 ,680,307.65 P1 09,561 ,690.46 Valid Input VAT p 3,920,098.26 p 8,454,313.96 p 12,374,412.22 Since petitioner's output tax liability in t he amount of P64,176,569.00 as reflected in its Quarterly VAT Returns for January 1, 2009 to June 30, 2009 is much higher t han the properly substantiated input VAT of P12,374,412.22, there is no excess input VAT that may be the subject of a claim for refund/tax credit under Section 112(A) of the NIRC of 1997, as amended .

WHEREFORE, the instant Petition for Review is hereby DENI ED for lack of merit. SO ORD ERED .

~ N. M ,.;.~. GnJL..

CIELITO N. MINDARO- GRULLA Associate Justice Procter and Gamble Asia, Pte . Ltd. vs. CIR

WE CONCUR:

~C.Gkf-~ ~­ JtJ'ANITO c. CASTANEDA, JR. Associate Justice Page 34 of 34 ~ CAESAR A. CASANOVA Associate Justice 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. ~~,<. C, ~~~, ~ ~ JtJANITO C. CASTANEtfA, 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's Division. Presiding Justice (/i.- PROCT ER AN D G AMBLE ASIA, PTE. LTD. -versus- COMMISSIONER OF INTERNAL R EVENU E

ADDITIONA L INPUT VAT DISALLOWANCES PER THIS COURT'S FINDI NGS Exhibit Supplier Domestic puchases of services supported by VAT invoices instead of VAT ORs as requi red under Section 1 13(A)(2) of the NIRC of 1997, as a mended

HHHH 1-22

Cebu Praedia Development Corp.

HHHH 1-20 1

Semantics Ace for Verbal Excellence lnt'l Languages lnp.

HHHH 1-203

Semantics Ace for Verbal Excellence lnt'l Languages Inc.

HHHH 1-205

Techserv Enterprises

HHHH 1-208

The 8th Design and Prints

HHHH 1-209

The 8th Design and Prints Subtotal Domestic purchases of goods/services supported by VAT invoices/ORs but VAT not sepa rately shown in violation of Section 1 13(B)(2)(a) of the NIRC of 1997, as a mended

HHHH 1-2 16

Walter Mart

HHHH 2- 18

Accent Micro Technologies, Inc.

HHHH 2-55

BTl Phi lippines Marsman Travel

HHHH 2- 175

Hewlett-Packard Phi ls. Corp.

HHHH 2-269

Karen International, Inc.

HHHH 2-47

Argent Business Consultants & Stores Specialist, Inc.

HHHH 2-6 1

BPO International, Inc.

HHHH 2- 168

Guilly's Flowers and Fruits

HHHH 2-207

Info! ink Placement & Computer Services Corp.

HHHH 2-280

Master Key and Lock Service

HHHH 2-26

Airfreight 2 100, Inc.

HHHH 2- 176

Hewlett-Packard Phils. Corp.

HHHH 2- 103

Computer Profesionals, Inc.

HHHH 2-1 18

Crown Worldwide Movers, Inc.

HHHH 2-1 55

Evercrest Golf Club Resort, Inc.

HHHH 2- 177

Hewlett-Packard Phils. Corp.

HHHH 2-62

BPO International, Inc.

HHHH 2-83

Carlita's Lechon Cebu

HHH H 2-397

Veterans Philippines Scout Security Agency

HHHH 2-320

Pixografx, Inc.

HHHH 2-1 59

Globe Telecom

HHHH 2-1 78

Hewlett-Packard Phils. Corp.

HHHH 2-224

Jones Lang Lasalle Philippines, Inc.

HHHH 2-225

Jones Lang Lasalle Philippines, Inc.

HHHH 2- 11

8008 Tours and Transport Services

HHHH 2-63

BPO International, Inc.

HHHH 2-27

Airfreight 2 100, Inc.

HHHH 2-1 79

Hewlett-Packard Phils. Corp.

HHHH 2-1 50

Edgework Creative and Production

HHHH 2-226

Jones Lang Lasal le Philippines, Inc.

HHHH 2-227

Jones Lang Lasalle Philippines, Inc.

HHHH 2-228

Jones Lang Lasalle Phi lippines, Inc.

HHHH 2-229

Jones Lang Lasalle Philippines, Inc.

HHHH 2-230

Jones Lang Lasalle Philippines, Inc.

HHHH 2-64

BPO International, Inc.

HHHH 2-23 1

Jones Lang Lasalle Philippines, Inc.

HHHH 2-232

Jones Lang Lasalle Philippines, Inc.

HHHH 2-282

Maxibuild, Inc.

HHHH 2-383

Telecommunications & Computer Tech, Inc.

HHHH 2-98

CN Network Specialist

ANNEX A

Da te In put VAT 5/22/2009 27 1,260.00 3/23/2009 5,760.00 6/3/2009 696.43 6/9/2009 28,823.46 4/26/2009 2,040.00 4/26/2009 360.00 308,939.89 6/29/2009 2,790.60 1/8/2009 75,974.46 1/8/2009 42,050.95 1/8/2009 28,643.24 1/8/2009 7,861.69 1/9/2009 .

3,388.34 1/9/2009 17,868.26 1/9/2009 750.00 1/9/2009 3,2 14.29 1/9/2009 I 0 1.78 1/ 14/2009 6,862. 12 1/ 14/2009 6,750,923.02 1/ 15/2009 63,432.00 1/ 15/2009 5,522.76 1/ 15/2009 13,54 1.89 1/ 15/2009 1,863. 11 1/ 16/2009 2,579.3 1 1/1 6/2009 28,266.00 111 6/2009 11 .63 1/1 9/2009 218 .05 1/22/2009 4,332.1 2 1/22/2009 2,052, 169. 10 1/22/2009 6,287.85 1/22/2009 3,249.45 1/23/2009 4,023.60 1/23/2009 40,970.8 1 1/25/2009 I ,968.96 1/25/2009 7,980.84 1/26/2009 32,076.00 1/26/2009 14,534.3 1 1/26/2009 26,992.29 1/26/2009 123 ,969.90 1/26/2009 13,532.85 1/26/2009 87, 153 .60 1/28/2009 7,200.00 1/29/2009 18,868.05 1/29/2009 10, 159.72 1/30/2009 2 11 ,739.33 2/2/2009 I 0,200.00 2/4/2009 I 0,080.00 page I of8 PROCT ER AND GAMBLE ASIA, PTE. LTD. -versus- COMMISSIONER OF INTERNAL R EVENUE

ADDIT IONA L INPUT VAT DISALLOWA NC ES PER THIS COURT'S FINDI NGS Exhibit Supplier

HHHH 2-105

Computer Profesionals, Inc.

HHHH 2-270

Karen International, Inc.

HHHH 2-65

BPO International, Inc.

HHHH 2- 104

Computer Profesionals, Inc.

HHHH 2-1 19

Crown Worldwide Movers, Inc.

HHHH 2-233

Jones Lang Lasalle Philippines, Inc.

HHHH 2-234

Jones Lang Lasalle Philippines, Inc.

HHHH 2-235

Jones Lang Lasalle Philippines, Inc.

HHHH 2-84

Carl ita's Lechon Cebu

HHHH 2-283

Maxibuild, Inc.

HHHH 2-96

Center For Leadership and Change, Inc.

HHHH 2-32 1

Pixografx, Inc.

HHHH 2- 146

DNS Shuttle Service, Inc.

HHHH 2- 160

Globe Telecom

HHHH 2-29 1

Microbase, Inc.

HHH H 2-296

Mount Sea Resort Hotel & Restaurant

HHH H 2-398

Veterans Philippines Scout Security Agency

HHHH 2-85

Carlita's Lechon Cebu

HHHH 2- 166

Goudie Assoc. Mani la Limited Company

HHHH 2-28

Airfreight 2 100, Inc.

HHHH 2-29

Airfreight 2 100, Inc.

HHHH 2-1 35

Delta Rent-a-Car Corp.

HHHH 2-180

Hewlett-Packard Phi ls. Corp.

HHHH 2-2 14

Information Professionals, Inc.

HHHH 2- 181

Hewlett-Packard Phi ls. Corp.

HHHH 2-284

Maxibuild, Inc.

HHHH 2-365

Summit Furnishings, Inc.

HHHH 2-66

BPO International, Inc.

HHHH 2-1 65

Goodream Printers Corp.

HHHH 2-30

Airfreight 2 100, Inc.

HHHH 2-3 1

Airfreight 2 100, Inc.

HHHH 2-56

BTl Philippines Marsman Travel

HHHH 2-1 82

Hewlett-Packard Phils. Corp.

HHHH 2-322

Pixografx, Inc.

HHHH 2-1 2

8008 Tours and Transport Services

HHHH 2- 133

CTV Corp. Television, Inc.

HHHH 2-183

Hewlett-Packard Phils. Corp.

HHHH 2-236

Jones Lang Lasalle Philippines, Inc.

HHHH 2-237

Jones Lang Lasalle Philippines, Inc.

HHHH 2-276

L TS Luggage Trading & Services, Inc.

HHHH 2-53

BM I Slimmers World Int'l

HHHH 2-274

Link Worth Internation, Inc.

HHHH 2-32

Airfreight 2 100, Inc.

HHHH 2-81

Caritas Health Shield, Inc.

HHHH 2- 120

Crown Worldwide Movers, Inc.

HHHH 2- 185

Hewlett-Packard Phils. Corp.

HHHH 2-33

Airfreight 2 100, Inc.

HHHH 2-86

Carlita's Lechon Cebu

HHHH 2-99

CN Network Specialist

HHHH 2-106

Computer Profesionals, Inc.

HHHH 2-184

Hewlett-Packard Phi ls. Corp.

HHHH 2-208

Infolink Placement & Computer Services Corp.

HHHH 2-2 19

Jets Trophy, Inc.

HHHH 2-23 8

Jones Lang Lasalle Philippines, Inc.

ANNEX A

Date In put VAT 2/4/2009 2,772.00 2/4/2009 2, I 00.00 2/5/2009 53,657.87 2/5/2009 98,745.25 2/5/2009 190.08 2/5/2009 2,220.00 2/5/2009 45,476.63 2/5/2009 22,659.95 2/6/2009 35, 11 2.30 2/6/2009 30,867.00 2/ 10/2009 9,000.00 2/ 10/2009 37.92 2/ 12/2009 I ,620.00 2/ 12/2009 3,577.22 2/ 12/2009 4,832.14 2112/2009 6,7 13.04 2112/2009 I ,33 1.85 2/ 13/2009 16,3 14.00 2/ 13/2009 7 1,064.00 2115/2009 13 1.57 211 8/2009 I ,569. 18 211 8/2009 2,01 4.80 2/ 18/2009 6,774,692.64 2/ 18/2009 137,797.70 2/ 19/2009 2,0 I 0,69 1.63 211 9/2009 I ,069,39 1.46 2/ 19/2009 73 ,358.27 2/20/2009 28,077.25 2/20/2009 1,205.37 2/23/2009 2,708.34 2/25/2009 9,802.33 2/25/2009 36,827.07 2/25/2009 I ,234, 165.44 2/25/2009 11 9.9 1 2/26/2009 3,829.80 2/26/2009 26,785.7 1 2/26/2009 637,05 1.06 2/26/2009 6,287.85 2/26/2009 3,249.45 2/26/2009 I ,560.00 2/27/2009 3,750.00 2/27/2009 64.29 3/2/2009 5,684.53 3/2/2009 193,946.66 3/3/2009 5,53 1.1 6 3/3/2009 I 08, 186.36 3/5/2009 4,65 1.1 6 3/5/2009 23 ,568.00 3/5/2009 I 0,080.00 3/5/2009 123,906.54 3/5/2009 1,747, 196.54 3/5/2009 7,554.63 3/5/2009 18,000.00 3/5/2009 14,109. 18 page 2 of8 PROCT ER AND GAMBLE ASIA, PTE. LTD. -versus- COMMISSION ER OF INTERNAL REV ENU E CTA CASE NO. 81 92 ADDITIONA L INPUT VAT DISALLOWANCES PER THIS CO URT'S FINDINGS Exhibit Supplier

HHHH 2-239

Jones Lang Lasalle Phi lippines, Inc.

HHHH 2-285

Maxibuild, Inc.

HHHH 2-48

Argent Business Consultants & Stores Specialist, Inc.

HHHH 2-67

BPO International, Inc.

HHHH 2-152

Ever Printing Press

HHHH 2-385

The Peninsula Manila Hotel, Inc. HHHH2-117 Cornersteel System Corporation

HHHH 2-22

Advan Integrated Services, Inc.

HHHH 2-34

Airfreight 2100, Inc.

HHHH 2-16 1

Globe Telecom

HHHH 2-186

Hewlett-Packard Phils. Corp.

HHHH 2-292

Microbase, Inc.

HHHH 2-295

Motrade, Inc.

HHHH 2-68

BPO International, Inc.

HHHH 2-69

BPO International, Inc.

HHHH 2-215

Information Professionals, Inc.

HHHH 2-386

The Peninsula Manila Hotel, Inc.

HHHH 2-389

Tyco Integrated Systems Phi ls., Inc.

HHHH 2-390

U-bix Corporation

HHHH 2-39 1

U-bix Corporation

HHHH 2-399

Veterans Philippines Scout Security Agency

HHHH 2-35

Airfreight 2100, Inc.

HHHH 2-87

Carlita's Lechon Cebu

HHHH 2- 187

Hewlett-Packard Phils. Corp.

HHHH 2- 169

Gui lty's Flowers and Fruits

HHHH 2-240

Jones Lang Lasalle Phi lippines, Inc.

HH HH 2-241

Jones Lang Lasalle Phi lippines, Inc.

HHHH 2-242

Jones Lang Lasalle Philippines, Inc.

HHHH 2-243

Jones Lang Lasalle Phili ppines, Inc.

HHHH 2-244

Jones Lang Lasalle Philippines, Inc.

HHHH 2-297

Nippon Housiung Phi lippines, Inc

HHHH 2- 121

Crown Worldwide Movers, Inc.

HHHH 2-245

Jones Lang Lasalle Philippines, Inc.

HHHH 2-406

Walter Mart Supermarket, Inc.

HHHH 2-13

8008 Tours and Transport Services

HHHH 2-45

American Bearing Marketing Corp

HHHH 2-136

Delta Rent-a-Car Corp.

HHHH 2-147

DNS Shuttle Service, Inc.

HHHH 2-4 10

Watson Wyatt Philippines, Inc.

HHHH 2- 167

Goudie Assoc. Manila Limited Company

HHHH 2-286

Maxibuild, Inc.

HHHH 2-36

Airfreight 2100, Inc.

HHHH 2-140

Destiny Cable Incorporated

HHHH 2-246

Jones Lang Lasalle Philippines, Inc.

HHHH 2-380

TechServ Enterprises

HHHH 2-122

Crown Worldwide Movers, Inc.

HHHH 2-137

Delta Rent-a-Car Corp.

HHHH 2- 188

Hewlett-Packard Phils. Corp.

HHHH 2-271

Karen International, Inc.

HHHH 2-30 1

Nobi lity Collection Agency, Inc.

HHHH 2-411

Yutivo Corporation

HHHH 2-70

BPO International, Inc.

HHHH 2-209

lnfolink Placement & Computer Services Corp.

HHHH 2-404

V J Graphic Arts, Inc.

ANNEX A

Date Inpu t VAT 3/5/2009 26,202.76 3/5/2009 547,436.98 3/6/2009 2,283.54 3/6/2009 15,781.37 3/6/2009 393.02 3/6/2009 17,238.60 3/ 11/2009 301 ,671.74 3/ 12/2009 4,306.50 3/12/2009 3,037.63 3/ 12/2009 3,329.54 3/ 12/2009 16, 138,415 .64 3/12/2009 46,017.86 3/ 12/2009 I ,242.36 3/ 13/2009 49,051.21 3/ 13/2009 48,212.15 3/ 13/2009 140,484.85 3/13/2009 I ,957.59 3/13/2009 169,579.12 3/ 13/2009 13,769.24 3/13/2009 6,745 .26 3/ 13/2009 933.58 3/ 16/2009 616.80 3/ 16/2009 2, 100.00 3/ 16/2009 40,599.96 3117/2009 621.43 3/17/2009 II ,279.45 3/17/2009 3,066.13 3/17/2009 207,312.74 3117/2009 136,093 .36 3117/2009 27,259.72 3/ 17/2009 8,883.67 3/18/2009 66.00 3/18/2009 27,578.10 3/ 18/2009 694,299.09 3/ 19/2009 3,805.80 3/ 19/2009 2,287.20 3/ 19/2009 828.00 3/ 19/2009 4,089.60 3/ 19/2009 42,000.00 3/20/2009 7,896.00 3/20/2009 82,173.78 3/23/2009 2,365.2 1 3/23/2009 2,742.32 3/23/2009 147,368.16 3/23/2009 9,500.00 3/25/2009 4,873.56 3/26/2009 360.00 3/26/2009 8,041 ,072.80 3/26/2009 1,180.80 3/26/2009 2,400.00 3/26/2009 2,587.50 3/27/2009 19,059.80 3/27/2009 3,367.69 3/27/2009 964.29

PROCTER AND GAMBLE ASIA, PTE. LTD. -versus- COMMISSIONER OF INTERNAL REVENUE

ADDITIONAL INPUT VAT DISALLOWANCES PER THIS COURT'S FINDINGS Exhibit Supplier

HHHH 2-7 1

BPO International, Inc.

HHHH 2-88

Carlita's Lechon Cebu

HHHH 2-100

CN Network Specialist

HHHH 2-1 23

Crown Worldwide Movers, Inc.

HHHH 2- 124

Crown Worldwide Movers, Inc.

HHHH 2- 189

Hewlett-Packard Phils. Corp.

HHHH 2-340

Pronto Express Distribution, Inc.

HHHH 2-37

Airfreight 2 100, Inc.

HHHH 2-90

Carlita's Lechon Cebu

HHHH 2-202

IBM Philippines, Inc.

HHHH 2-34 1

Pronto Express Distribution, Inc.

HHHH 2-362

Sogo Home & Office Center

HHHH 2-49

Argent Business Consultants & Stores Specialist, Inc.

HHHH 2-57

BTl Philippines Marsman Travel

HHHH 2-72

BPO International, Inc.

HHHH 2-35 1

Schenker Philippines, Inc.

HHHH 2-387

Tri Alpha Corporation

HHHH 2-405

V J Graphic Arts, Inc.

HHHH 2-407

Walter Mart Supermarket, Inc.

HHHH 2-409

Washington Jewelry Emporium

HHHH 2-162

Globe Telecom

HHHH 2-170

Guilly's Flowers and Fruits

HHHH 2-289

Met Holdings, Inc.

HHHH 2-293

Microbase, Inc.

HHHH 2-298

Nippon Housiung Philippines, Inc

HHHH 2-38

Airfreight 2 1 00, Inc.

HHHH 2-107

Computer Profesionals, Inc.

HHHH 2- 11 6

Conglow-Trai lads Marketing Services, Inc.

HHHH 2- 125

Crown Worldwide Movers, Inc.

HHHH 2- 126

Crown Worldwide Movers, Inc.

HHHH 2- 15 1

Electronic Security Systems Corp.

HHHH 2-203

IBM Philippines, Inc.

HHHH 2-2 16

Information Professionals, Inc.

HHHH 2-222

John Clements Consultants, Inc.

HHHH 2-247

Jones Lang Lasalle Philippines, Inc.

HHHH 2-248

Jones Lang Lasalle Philippines, Inc.

HHHH 2-249

Jones Lang Lasalle Philippines, Inc.

HHHH 2-250

Jones Lang Lasalle Philippines, Inc.

HHHH 2-378

Technicom Electronics Trading

HHHH 2-38 1

TechServ Enterprises

HHHH 2-2 1

Accurate Relocation Specialist, Inc

HHHH 2- 190

Hewlett-Packard Phils. Corp.

HHHH 2-305

Philippine Long Distance Telephone Company

HHHH 2-306

Philippine Long Distance Telephone Company

HHHH 2-307

Philippine Long Distance Telephone Company

HHI-IH 2-308

Philippine Long Distance Telephone Company

HHHH 2-309

Philippine Long Distance Telephone Company

HHHH 2-3 10

Philippine Long Distance Telephone Company

HHHH 2-3 11

Philippine Long Distance Telephone Company

HHHH 2-3 12

Philippine Long Distance Telephone Company

HHHH 2-3 13

Philippine Long Distance Telephone Company

HHHH 2-3 14

Philippine Long Distance Telephone Company

HHHH 2-3 15

Philippine Long Distance Telephone Company

HHHH 2-3 16

Philippine Long Distance Telephone Company

ANNEX A

Date Input VAT 3/3 1/2009 48,004.49 3/3 1/2009 2,213.47 4/ 1/2009 10,080.00 4/ 1/2009 673.70 4/ 1/2009 180.84 4/1 /2009 157,7 19.50 4/ 1/2009 956.16 4/2/2009 8,348 .1 2 4/2/2009 9,204.00 4/2/2009 11 2,239.96 4/2/2009 1,285.71 4/2/2009 3,739.29 4/3/2009 1,3 11.93 4/3/2009 21 ,766.38 4/3/2009 10, 181.75 4/3/2009 I 0 1.90 4/3/2009 535.71 4/3/2009 4,285.71 4/3/2009 964.29 4/5/2009 10, 140.00 4/7/2009 4,457.99 4/7/2009 396.43 4/7/2009 160,429.56 4/7/2009 2,3 16.00 4/7/2009 4,294.0 I 4/8/2009 7.26 4/8/2009 93,527.71 4/8/2009 8, 109.94 4/8/2009 498.96 4/8/2009 180.84 4/8/2009 30,857. 14 4/8/2009 26,893.48 4/8/2009 140, 132.34 4/8/2009 22,830.24 4/8/2009 2,540.40 4/8/2009 4,9 15.80 4/8/2009 28,727. 13 4/8/2009 15,468.45 4/8/2009 7,875.00 4/8/2009 4, 162.00 4/13/2009 37,409.92 4/ 13/2009 6,790,6 11 .36 4/ 13/2009 44,38 1.73 4/13/2009 59,761.45 4/ 13/2009 13,625.17 4/ 13/2009 7,843. 13 4/13/2009 I ,062.88 4/ 13/2009 12,977.64 4/ 13/2009 8,538.65 4/ 13/2009 132,989.92 4/ 13/2009 I ,800.00 4/ 13/2009 I 0, 199.48 4/13/2009 8,542.14 4/13/2009 2,640.00

PROCTER AND GAMBLE ASIA, PTE. LTD. -versus- COMMISSIONER OF INTERNAL REVENUE

ADDITIONAL INPUT VAT DISALLOWANCES PER THIS COURT'S FINDINGS Exhibit Supplier

HHHH 2-317

Philippine Long Distance Telephone Company

HHHH2-3 18

Philippine Long Distance Telephone Company

HHHH 2-3 19

Philippine Long Distance Telephone Company

HHHH 2-342

Pronto Express Distribution, Inc.

HHHH 2-347

Quartz Business Products Corp.

HHHH 2-395

Vanguard Interiors (Phils.) Inc.

HHHH 2-17 1

Guilly's Flowers and Fruits

HHHH 2-388

Tri Alpha Corporation

HHHH 2-39

Airfreight 2100, Inc.

HHHH 2-58

BTl Philippines Marsman Travel

HHHH 2-89

Carlito's Lechon Cebu

HHHH 2- 127

Crown Worldwide Movers, Inc.

HHHH 2-210

Info! ink Placement & Computer Services Corp.

HHHH 2-343

Pronto Express Distribution, Inc.

HHHH 2-352

Schenker Philippines, Inc.

HHHH 2-392

U-bix Corporation

HHHH 2-400

Veterans Philippines Scout Security Agency

HHHH2-41 2

Yutivo Corporation HHHH2-17 Abenson, Inc.

HHHH 2-73

BPO International, Inc.

HHHH 2- 108

Computer Profesionals, Inc.

HHHH 2-251

Jones Lang Lasalle Philippines, Inc.

HHHH 2-252

Jones Lang Lasalle Philippines, Inc.

HHHH 2-253

Jones Lang Lasalle Philippines, Inc.

HHHH 2-275

Link Worth lnternation, Inc.

HHHH 2-360

Sodexho Pass Inc.

HHHH 2-384

The Brain Computer Corp.

HHHH 2-19 1

Hewlett-Packard Phils. Corp.

HHHH 2- 14

8008 Tours and Transport Services

HHHH 2-40

Airfreight 2100, Inc.

HHHH 2-46

American Bearing Marketing Corp

HHHH 2- 109

Computer Profesionals, Inc.

HHHH 2-148

DNS Shuttle Service, Inc.

HHHH 2-192

Hewlett-Packard Phils. Corp.

HHHH 2-272

Karen International, Inc.

HHHH 2-40 1

Veterans Philippines Scout Security Agency

HHHH 2-23

Advan Integrated Services, Inc.

HHHH 2-74

BPO International, Inc.

HHHH 2-91

Carlito's Lechon Cebu

HHHH 2-156

Faci lities Managers, Inc.

HHHH 2- 138

Delta Rent-a-Car Corp.

HHHH 2-19

Accent Micro Technologies, Inc. HHHH2-41 Airfreight 2 100, Inc.

HHHH 2-82

Caritas Health Shield, Inc.

HHHH 2-299

Nippon Housiung Philippines, Inc

HHHH 2-42

Airfreight 2100, Inc.

HHHH 2-75

BPO International, Inc.

HHHH 2-348

Quartz Business Products Corp.

HHHH 2-10 1

CN Network Special ist

HHHH 2-110

Computer Profesionals, Inc.

HHHH 2-158

GG & A Club Shares Brokers, Inc.

HHHH 2-344

Pronto Express Distribution, Inc.

HHHH 2-54

BM I Slimmers World lnt'l

HHHH 2-92

Carlito's Lechon Cebu

ANNEX A

Date Input VAT 4/13/2009 38,532.28 4/ 13/2009 71 , 100.73 4/ 13/2009 9,229.54 4/ 14/2009 1,767.85 4/ 14/2009 3,080.36 4/ 14/2009 8,207.14 4/ 15/2009 214.29 4/ 15/2009 478.00 4/ 16/2009 452.63 4/ 16/2009 26, I 08.42 4/ 16/2009 6,2 13.43 4/ 16/2009 5,097.36 4/ 16/2009 2,142.86 4/ 16/2009 7,863.48 4/16/2009 12,240.00 4/16/2009 7, 195.49 4/ 16/2009 121.25 4/16/2009 3,510.00 4/ 17/2009 I, 167.86 4/ 17/2009 27,629.54 4/ 17/2009 40,800.00 4/20/2009 6,2 10.50 4/20/2009 61 ,143 .17 4/20/2009 91 ,058.56 4/20/2009 64.29 4/20/2009 9.60 4/21 /2009 194,313 .12 4/22/2009 I ,410,949.44 4/23/2009 3,923 .40 4/23/2009 5,843.86 4/23/2009 427.80 4/23/2009 20,958.87 4/23/2009 828.00 4/23/2009 1,002,3 87.24 4/23/2009 7,728.00 4/23/2009 351.22 4/24/2009 1,3 19.42 4/24/2009 51 ,921.45 4/24/2009 10,205 .36 4/24/2009 1,749.16 4/26/2009 888.00 4/27/2009 937.50 4/27/2009 3,041.81 4/29/2009 193,946.66 4/29/2009 27,966.87 4/30/2009 18,764.54 4/30/2009 2 1,406.36 4/30/2009 616.07 5/4/2009 10,080.00 5/4/2009 92,653 .03 5/5/2009 2, 142.86 5/5/2009 1,977 .84 5/6/2009 2,049. 15 5/6/2009 20,065.30 page 5 or 8 PROCTER AND GAMBLE ASIA, PTE. LTD. -versus- COMMISSIONER OF INTERNAL REVENUE

ADDITIONAL INPUT VAT DISALLOWANCES PER THIS COURT'S FINDINGS Exhibit Supplier

HHHH 2- 174

Headstrong Philippines, Inc.

HHHH 2-349

Quorum International, Inc.

HHHH 2-43

Airfreight 2 100, Inc.

HHHH 2- 172

Guilly's Flowers and Fruits

HHHH 2- 193

Hewlett-Packard Phils. Corp.

HHHH 2-323

Pixografx, Inc.

HHHH 2-353

Schenker Philippines, Inc.

HHHH 2-50

Argent Business Consultants & Stores Specialist, Inc.

HHHH 2-95

Cebu Praedia Decelopment Corp.

HHHH 2-254

Jones Lang Lasalle Philippines, Inc.

HHHH 2-255

Jones Lang Lasalle Philippines, Inc.

HHHH 2-2 11

Info! ink Placement & Computer Services Corp.

HHHH 2-76

BPO International, Inc.

HHHH 2-77

BPO International, Inc.

HHHH 2-1 I I

Computer Profesionals, Inc.

HHHH 2- 149

DNS Shuttle Service, Inc.

HHHH 2-2 17

Information Professionals, Inc.

HHHH 2-359

Shellsoft Technology Corporation

HHHH 2-44

Airfreight 2100, Inc.

HHHH 2-1 28

Crown Worldwide Movers, Inc.

HHHH 2-402

Veterans Philippines Scout Security Agency

HHHH 2-1 94

Hewlett-Packard Phils. Corp.

HHHH 2-273

Karen International, Inc.

HHHH 2-403

Veterans Philippines Scout Security Agency

HHHH 2- 15

8008 Tours and Transport Services

HHHH 2- 11 2

Computer Profesionals, Inc.

HHHH 2-256

Jones Lang Lasalle Philippines, Inc.

HHHH 2-257

Jones Lang Lasalle Philippines, Inc.

HHHH 2-258

Jones Lang Lasalle Philippines, Inc.

HHHH 2-259

Jones Lang Lasalle Philippines, Inc.

HHHH 2-260

Jones Lang Lasalle Philippines, Inc.

HHHH 2-1 29

Crown Worldwide Movers, Inc.

HHHH 2-287

Maxibuild, Inc.

HHHH 2-78

BPO International, Inc.

HHHH 2- 130

Crown Worldwide Movers, Inc.

HHHH 2- 141

Destiny Cable Incorporated

HHHH 2- 163

Globe Telecom

HHHH 2-294

M icrobase, Inc.

HHHH 2-52

Barrington Carpets, Inc.

HHHH 2-59

BTl Philippines Marsman Travel

HHHH 2-1 57

Files System Mfg. and Supply Corp.

HHHH 2-220

Jets Trophy, Inc.

HHHH 2-212

Info! ink Placement & Computer Services Corp.

HHHH 2-261

Jones Lang Lasalle Philippines, Inc.

HHHH 2-262

Jones Lang Lasalle Philippines, Inc.

HHHH 2-5 1

Argent Business Consultants & Stores Specialist, Inc.

HHHH 2- 102

CN Network Specialist

HHHH 2-1 34

CTV Corp. Television, Inc.

HHHH 2-93

Carlita's Lechon Cebu

HHHH 2- 11 3

Computer Profesionals, Inc.

HHHH 2- 195

Hewlett-Packard Phils. Corp.

HHHH 2-345

Pronto Express Distribution, Inc.

HHHH 2-41 3

Yutivo Corporation

HHHH 2-1 53

Ever Printing Press

ANNEX A

Date Input VAT 5/6/2009 9,855.32 5/6/2009 6,556.07 5/7/2009 19,999.78 5/7/2009 642.86 5/7/2009 7,597.32 5/7/2009 11 7.44 5/7/2009 135.22 5/8/2009 1,595.3 1 5/8/2009 290, 160.00 5/8/2009 4,662.72 5/8/2009 2,409.40 5/ 13/2009 I ,593.73 5/ 14/2009 172,793 .90 5114/2009 8, 125.3 I 5/ 14/2009 5,044.00 5/14/2009 I ,080.00 5/ 14/2009 149,282.07 5/ 14/2009 57,455.28 5/ 15/2009 17,919.17 511 5/2009 4,882.56 5/ 15/2009 466.79 5/2 1/2009 6,838,167.48 5/2 1/2009 4 1 1.60 5/2112009 3,6 10.80 5/22/2009 3,927.60 5/22/2009 26, 183.74 5/25/2009 28,020.63 5/25/2009 15,088.03 5/25/2009 79,744.74 5/25/2009 11 5,275. 13 5/25/2009 7,745.13 5/26/2009 318.12 5/27/2009 55,81 5.72 5/28/2009 51' 181.70 5/28/2009 2,343.60 5/28/2009 2,199.75 5/28/2009 7,313.39 5/28/2009 3,362.14 5/29/2009 18,736.62 5/29/2009 24,507.44 5/29/2009 3,568.32 5/29/2009 8,016.00 6/ 1/2009 3,32 1.43 611 /2009 28, 161.38 6/ 1/2009 15,163.82 6/3/2009 2,247.17 6/3/2009 I 0,080.00 6/3/2009 36,000.00 6/4/2009 15,296. 16 6/4/2009 99,39 1.50 6/4/2009 I ,489,249.48 6/4/2009 I ,399.06 6/4/2009 4,320.00 6/5/2009 I ,392.06 page 6 or 8 PROCTER AN D GAMBLE ASIA, PTE. LTD. -versus- CO M MISSIONER O F INT ERNAL R EV ENUE

ADDIT IONAL INPUT VAT DISA LLOWANCES PER THIS CO URT'S FINDI NGS Ex hi bit Supplier

HH HH 2-408

Walter Mart Supermarket, Inc.

HHHH 2-24

Advan Integrated Services, Inc.

HHHH 2-300

Nippon Housiung Philippines, Inc

HHHH 2-324

Pixografx, Inc.

HHHH 2-36 1

Sodexho Pass Inc.

HHHH 2-94

Carlita's Lechon Cebu

HHHH 2- 173

Guilly's Flowers and Fruits

HHHH 2-2 13

Info! ink Placement & Computer Services Corp.

HHHH 2-356

Semantics Ace For Verbal Excellence

HHHH 2-1 96

Hewlett-Packard Phils. Corp.

HHHH 2-288

Maxibuild, Inc.

HHHH 2-393

U-bix Corporation

HHHH 2- 164

Globe Telecom

HHHH 2-20

Accent Micro Technologies, Inc.

HHHH 2-1 32

Crown Worldwide Movers, Inc.

HHHH 2-1 39

Delta Rent-a-Car Corp.

HHHH 2- 197

Hewlett-Packard Phils. Corp.

HHHH 2-2 18

Information Professionals, Inc.

HHHH 2-263

Jones Lang Lasalle Philippines, Inc.

HHHH 2-264

Jones Lang Lasalle Philippines, Inc.

HHHH 2-265

Jones Lang Lasalle Philippines, Inc.

HHHH 2-266

Jones Lang Lasalle Philippines, Inc.

HHHH 2-267

Jones Lang Lasalle Philippines, Inc.

HHHH 2-268

Jones Lang Lasalle Philippines, Inc.

HHHH 2-382

TechServ Enterprises

HHHH 2-60

BTl Philippines Marsman Travel

HHHH 2-97

Center For Leadership and Change, Inc.

HHHH 2- 11 4

Computer Profesionals, Inc.

HHHH 2-22 1

Jets Trophy, Inc.

HHHH 2-28 1

Master Key and Lock Service

HHHH 2-396

Vanguard Interiors (Phils.) Inc.

HHHH 2-223

John Clements Consultants, Inc.

HHHH 2-357

Semantics Ace For Verbal Excellence

HHHH 2- 198

Hewlett-Packard Phi ls. Corp.

HHHH 2-304

Philamcare Health System, Inc.

HHHH 2-325

Pixografx, Inc.

HHHH 2-394

U-bix Corporation

HHHH 2-1 6

8008 Tours and Transport Services

HHHH 2-25

Advan Integrated Services, Inc.

HHHH 2- 11 5

Computer Profesionals, Inc.

HHHH 2-1 54

Ever Printing Press

HHHH 2-279

Marsman Drydale Travel, Inc.

HHHH 2-302

Nobility Co llection Agency, Inc.

HHHH 2-358

Semantics Ace For Verbal Excellence

HHHH 2-278

Mandarin Oriental Mani la

HHHH 2-346

Pure Play Sports Management, Inc.

HHHH 2- 142

Destiny Cable Incorporated

HHHH 2- 13 1

Crown Worldwide Movers, Inc.

HHHH 2-303

Ove Arup & Partners Hongkong Ltd.

HHHH 4-1 2

Accent Micro Tech Inc

HHHH 4-1 4

HP Phils Corp

HHHH 4- 19

Accent Micro Tech Inc

HHHH 4-2 1

Accent Micro Tech Inc

HHHH 4-24

Medical Gallery Trading Co

ANNEX A

Date In put VAT 6/5/2009 I ,962.59 6/8/2009 1,319.42 6/8/2009 18,795 .50 6/8/2009 504.00 6/9/2009 307.20 6/ 10/2009 14,658.00 6/ 10/2009 289.29 6/ 10/2009 11 ,357. 14 6/ 10/2009 I ,392.86 6/ 11 /2009 52,200.00 6/ 11 /2009 150,516.84 6/ 11 /2009 6, 120.09 6/ 15/2009 3,693. 12 6/ 18/2009 658.93 6/ 18/2009 4,88 1.36 6/ 18/2009 408.00 6/ 18/2009 19,499,0 19. 17 6/ 18/2009 132,532.35 6/ 18/2009 4,798.53 6/ 18/2009 270,245 .06 6/ 18/2009 13 1,990.82 6/ 18/2009 4,230.29 6/ 18/2009 2,204.78 6/ 18/2009 2 13.25 6/ 18/2009 23,8 11 .30 6/ 19/2009 29,667.56 6/ 19/2009 16,200.00 6/ 19/2009 39,602.48 6/ 19/2009 1,725.43 6/ 19/2009 32.14 6/23/2009 23 ,488.20 6/24/2009 3,392. 18 6/24/2009 40,070.40 6/25/2009 I ,335,445.08 6/25/2009 7,973 .64 6/25/2009 100.3 1 6/25/2009 8,654.65 6/26/2009 3,930.00 6/26/2009 1,3 19.42 6/26/2009 2,772.00 6/26/2009 187.50 6/26/2009 36.60 6/26/2009 2,400.00 6/26/2009 720.00 6/29/2009 19,399.22 6/29/2009 79,807.20 6/30/2009 2,199.75 6/30/2009 137.28 6/ 1/201 2 86, 148 .00 5/3/2006 41 ,520.00 5/26/2010 15,608.36 1113/2006 19,596.46 1/ 13/2006 35,369.23 12/ 15/2006 92.73

PROCTER AND GAMBLE ASIA, PTE. LTD. -versus- COMMISSIONER OF INTERNAL REVENUE

ADDITIONAL INPUT VAT DISALLOWANCES PER THIS COURT'S FINDINGS Exhibit Supplier Subtotal Purchases of services supported by printed BIR Form No. 1600 without corresponding proof of payment in violation of Section 4.114-2(b)(3) of RR No. 16-05

HHHH 1-22

Procter & Gamble Business Services Co.

HHHH 1-201

Procter & Gamble Business Service Canada

HHHH 1-203

Procter & Gamble Business Service Canada

HHHH 1-205

Procter & Gamble Business Services Co.

HHHH 1-208

Procter & Gamble Business Services Co.

HHHH 1-209

Procter & Gamble Business Services Co. Subtotal Total

ANNEX A

Date Input VAT 95,113,636.62 January 2009 408,260.83 February 2009 979,591.1 9 March 2009 440,148.00 April2009 437,591.48 May 2009 437,168.28 June 2009 173,296.77 2,876,056.55 98,298,633.06 page 8 of8