Court of Tax Appeals · Third Division

DOLE Philippines, Inc. vs. Commissioner of Internal Revenue

CTA Case No. 8665 March 18, 2016 BAUTISTA

REPUBLIC OF THE PHILIPPINES

Court ofT ax Appeals

QUEZON CITY

Third Division

DOLE PHILIPPINES, INC.,

Petitioner,

CTA CASE NO. 8665

versus -

COMMISSIONER OF

Members:

Bautista, Chairperson

Fa bon-Victorino, and

Ringpis-Liban, JJ.

Promulgated:

INTERNAL REVENVERespondent.

M~--~~J~.L'~=::: __________ x

X----------------------------------------------------------------

DECISION

BAUTISTA, J:

The Case

Before the Court is a Petition for Review1 filed by petitioner DOLE Philippines, Inc. ("DOLE") on June 28, 2013, pursuant to Section 7(a)(2)2 of Republic Act (RA") No. 11253, as amended by RA No. 92824 1 Records, CTA Case No. 8665, Vol. 1, Petition for Review, pp. 6-1911, with Annexes. 2 Sec. 7. Jurisdiction.- The Court of Tax Appeals shall exercise:

(a) Exclusive appellate jurisdiction to review by appeal, as herein provided:

(1) Decisions of 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; (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 eighty day-period under Section 228 of the National Internal revenue Code shall be deemed a denial; xxx. 3 An Act Creating the Court of Tax Appeals, as amended. 4 An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating its Rank to the Level of a Collegiate Court with Special Jurisdiction and Enlarging its Membership, Amending for the Purpose Certain Sections of Republic Act No. 1125, as amended, Otherwise Known as the Law Creating the Court of Tax Appeals, and for Other Purposes. ,-/ and RA No. 95035, in relation to Rule 46 of the Revised Rules of the Court of Tax Appeals (RRCTA")7, which seeks for the Court to render judgment ordering respondent Commissioner of Internal Revenue ("CIR") to issue a cash /tax refund in the amount of Seven Hundred Seventy Eight Million Seven Hundred Eighty Six Thousand Eight

Hundred

Thirty

One

Pesos

and

Thirty

Four

Centavos

(Php778,786,831.34) representing the unutilized input taxes for the period of January 1, 2011 to December 31, 2011, which are all attributable to the its zero-rated sales for the said period, pursuant to Sections 108(B)(1) and 112(A) of the 1997 National Internal Revenue Code ("1997 NIRC"), as amended.

The PartiesB

Petitioner is a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal office address at Polomok, South Cotabato. Respondent is the duly appointed Commissioner of Internal Revenue ("CIR") vested with authority to act as such, including inter alia, the power to decide, approve and grant refunds or tax credit of creditable input VAT due or paid that are attributable to zero-rated sales or erroneously or illegally collected internal revenue taxes as provided by law, and with office address at the BIR National Building, Diliman, Quezon City.

The Facts

Petitioner is a Value-Added Tax ("VAT") registered entity with TIN 000-428-573 and Certificate of Registration OCN 2004-111-0003909 dated May 28, 2004, issued by respondent.1° It is also registered as a large taxpayer under the Large Taxpayers Service ("LTS") and was issued Certificate of Registration OCN 8Rc0000019984, dated s An Act Enlarging the Organizational Structure of the Court of Tax Appeals, Amending for the Purpose Certain Sections of the Law Creating the Court of Tax Appeals, and for Other Purposes. 6 Rule 4. Jurisdiction of the Court, 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: (1) xxxxx; (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 applicable law provides a specific period for action: xxx. 7 A.M. No. 05-11-07-CTA, November 22,2005. s Records, Vol. 3, Joint Stipulation of Facts and Issues ("JSFI"), pp. 2139-2140. 9 Records (box), Exhibit "P-5" (also found in soft copy of FOE, Disk 1). to Records, JSFI, p. 2140.

(

November 14, 1997, issued by respondent through Large Taxpayer District Office ("LTDO") 122-Makati City.n Petitioner filed its Monthly Value-Added Tax Declaration (BIR Form No. 2550-M) and Quarterly Value-Added Tax Return (BIR Form No. 2550-Q) for taxable year 2011, as follows:

Month

Date Filed

BIRForm

Exhibit No.

January

February 18, 201112

2550-M

P-7

February

March 17, 201113

2550-M

P-8

1st Quarter April20, 201114

2550-Q

P-9

April

May 20,201115

2550-M

P-10-a

May

20,

2011 2550-M

P-10

(amended)16

May

June 17, 201117

2550-M

P-11

2nd Quarter July 25, 201118

2550-Q

P-12

July

August 19, 201119

2550-M

P-13

August

September 20, 201120 2550-M

P-14

3rd Quarter October 20, 201121

2550-Q

P-15

October

November 23, 201122 2550-M

P-16

November

December 22, 201123

2550-M

P-17

4th Quarter January)9, 201224

2550-Q

P-18

L--..- ------- - Petitioner likewise filed its Quarterly Income Tax Return (BIR Form No. 1702Q) for the 1st,25 2nd,26 and 3rd27 Quarters on May 25,2011, August 8, 2011 and November 29, 2011, respectively. Petitioner filed its Amended Annual Income Tax Return2B on May 18, 2012. 11 Records, the Court notes that JSFI provide OCN 8Rc0000017970, p. 2140; Exhibit "P-6" (also found in soft copy of FOE, Disk 1). 12 Id., JSFI, par. g, p. 2140. 13 Id.

14 Id., JSFI, par. h, p. 2141. 1s Id., JSFI, par. g, p. 2140. 16 Id.

17 Id.

1s Id., JSFI, par. h, p. 2141. 19 Id., JSFI, par. g, p. 2140. 20 Id.

21 Id, JSFI, par. h, p. 2141. 22 Id., JSFI, par. g, p. 2140. 23 Id.

24 Id., JSFI, par. h, p. 2141. 25 Records (box), Exhibit "P-19" (also found in soft copy of FOE, Disk 1). 26 Id., Exhibit "P-20" (also found in soft copy of FOE, Disk 1). 27 Id., Exhibit "P-21" (also found in soft copy of FOE, Disk 1). 28 Id., Exhibit "P-22" (also found in soft copy of FOE, Disk 1). (

On January 30, 2013, respondent received a letter29 from petitioner dated January 17, 2013, applying for a cash refund of its excess input VAT on its purchase of goods and services attributable to zero-rated sales for the period January to December 2011 in the amount of Seven Hundred Seventy Eight Million Seven Hundred Eighty Six Thousand Eight Hundred Thirty One Pesos and Thirty Four Centavos (Php778,786,831.34). Petitioner also filed its Application for Tax Credits/Refunds (BIR Form No. 1914).30 On June 28, 2013, petitioner filed the instant Petition for Review.31 On July 12, 2013, the Court issued the Summons32 addressed to respondent, ordering her to file her Answer to the Petition for Review within fifteen (15) days from receipt thereof. On July 25, 2013, respondent filed a Motion for Extension of Time to File Answer33 praying for an extension of fifteen (15) days within which to file her answer, which was granted by the Court in its Resolution34 dated July 29,2013. On August 16, 2013 and by registered mail, respondent filed her Answer3s, raising the following Special and Affirmative Defenses:36

3. She reiterates, restates, and repleads the preceding paragraphs of this Answer as part of her Special and Affirmative Defenses;

4. Petitioner's alleged claim for issuance of tax credit certificate/ refund is still subject to administrative routinary investigation/ examination by the respondent's [sic] Bureau;

5. Taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable. 29 Records (box), Exhibit "P-3" (also found in soft copy of FOE, Disk 1). 3° Id., Exhibit "P-4" (also found in soft copy of FOE, Disk 1). 31 Records, Vol. 1, Petition for Review, pp. 6-1911, with Annexes. 32 Id., Vol. 3, p. 1912.

33 Id., Vol. 3, pp. 1914-1915. 34 Id., Vol. 3, p. 1916.

35 Id., Vol. 3, Answer, pp. 1917-1918. 36 Id.

PageS of27

6. Petitioner's claim for cash refund in the amount of [Php]778,786,831.34, as alleged unutilized input VAT paid on local purchases of taxable goods and services attributable to its zero-rated sales for the period covering January to December 31, 2011 were not fully substantiated by proper documents, such [as] sales invoices, official receipts, import documents and others [sic] pertinent records.

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 sales of goods and services to various alleged clients/ affiliates do not qualify as zero-rate [sic] VAT.

9. The amount subject of the claim for cash refund of petitioner does not pertain in full to its input VAT attributable to its zero-rated sales for the period covering January to December 31,2011.

10. Petitioner failed to comply with the substantiation requirements under Section 113 and 237 of the 1997 Tax Code in relation to Revenue Regulations No. 16-2005. 11.

Petitioner

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

12. Claims for refund are construed strictly against herein petitioner for the same partakes 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. Commissioner of Internal Revenue, 124 SCRA 1211).

On August 27, 2013, petitioner filed an Urgent Motion for Extension of Time to File Reply (To: Respondent's Answer dated August 12, 2013)37, praying for an additional period of ten (10) days or until September 6, 2013 within which to file its reply, which was granted by the Court in its Order3s dated August 28, 2013. Petitioner filed its Reply (To: Respondent's Answer dated August 12, 2013)39 on September 6, 2013.

37 Records., Vol. 3, pp. 1921-1923. 38 Id., Vol. 3, p. 1924.

39 Id., pp. 1925-1929.

On January 30, 2014, the Court ordered40 the parties to submit their JSFI, and ordered petitioner to file a Motion for the Commissioning of an Independent Certified Public Accountant ("ICPA") within five (5) days from January 30, 2014 or until February 4, 2014.

On February 4, 2014, petitioner filed a Motion to Appoint Independent Certified Public Accountant.41 On February 10, 2014, the parties, through their respective counsels, filed their JSFJ.42 On February 20, 2014, a Pre-trial Order43 was issued by the Court terminating pre-trial and setting the date/ s for the presentation of evidence by the parties.

During the hearing on March 24, 2014, counsel for petitioner presented and qualified Mr. Michael L. Aguirre ("Mr. Aguirre") as an ICP A without any objection from the counsel for respondent.44 This was later confirmed in the Resolution45 dated March 27, 2014, hence, on May 9, 2014, Mr. Aguirre filed his Partial ICPA Report.46 During the hearing held on May 15, 2014, petitioner's counsel presented the following witnesses: 1) Mr. Teodoro Santos, Jr., petitioner's Finance Director47; 2) Ms. Bernadith C. Milo, petitioner's Accounting Facilitator48; and 3) Ms. Dorothy Jane D. Milo, petitioner's Tax Supervisor/ Facilita tor49. so On May 26,2014, ICPA Aguirre filed his ICPA Report.sl 40 Records, Vol. 3, Minutes of Hearing January 30, 2014, p. 2119. 41 Id., Vo. 3, p. 2123.

42 Id, Vol. 3, pp. 2139-2150. 43 Id., Vol. 3, Pre-Trial Order, pp. 2169-2175. 44 Id., Vol. 4, p. 2176.

45 Id., Vol. 4, pp. 2179-2180. 46 Id., Vol. 4, pp. 2185-2204. 47 Id., Vol. 3, Judicial Affidavit, pp. 1970-1986. 48 Id., Vol. 3, Judicial Affidavit, pp. 1987-1991. 49 Id., Vol. 3, Judicial Affidavit, pp. 2022-2024. so Id., Vol. 4, Minutes of Hearing May 15, 2014, p. 2205. s1 Id., Vol. 4, pp. 2206-2223. r

Page 7 o£27 On July 18, 2014, ICPA Aguirre transmitted four (4) original copies of his Supplemental Independent CPA Report. 52 On July 22, 2014, petitioner its Compliance with Notice of Submission53 with attached Judicial Affidavit54 of ICPA Aguirre. On July 24, 2014, petitioner presented its last witness, ICPA Aguirre, who identified his Judicial Affidavit55 dated July 21,2014, and his Supplemental Judicial Affidavit56 dated July 23, 2014 which was executed to correct the markings provided in the original Judicial Affidavit and in the ICPA Report submitted to the Court. On August 8,2014, petitioner filed its Formal Offer of Evidence57 ("FOE"). In response thereto and on September 9, 2015, respondent filed, by registered mail, her Comment (Petitioner's Formal Offer of Evidence).58 Thus, on September 16, 2014, the Court issued a Resolution59 denying petitioner's FOE for failure to submit the duly- marked exhibits.

On September 26, 2014, petitioner filed a Motion for Reconsideration with Manifestation6°, stating that it already submitted to the Court the duly marked original documents/ exhibits on August 8, 2014 when it filed its FOE; that counsel for petitioner immediately requested for examination of the records of the case on September 23, 2014; that upon checking the records, which was conducted in the presence of the Court personnel of the Judicial Records Division, all the duly-marked documents/ exhibits were located and found in the Records Division; and praying that the Court's Resolution dated September 16, 2014, be set aside and that the Exhibits submitted and offered be duly admitted as evidence for petitioner. On October 29, 2014, the Court issued a Resolution61, granting petitioner's Motion for Reconsideration, thus, the Resolution dated 52 Records, Vol. 4, pp. 2237-2366. 53 Id., Vol. 4, pp. 2367-2370. 54 Id., Vol. 4, Judicial Affidavit, pp. 2371-2544, with Annexes. 55 Id.

56 Id., Vol. 5, Supplemental Judicial Affidavit, pp. 2731-2735. 57 Id., Vol. 5, Petitioner's FOE, pp. 2743-2770. ss Id., Vol. 5, pp. 2780.

59 Id., Vol. 5, pp. 2778-2779. 6o Id., Vol. 5, pp. 2789-2792. 61 Id., Vol. 5, pp. 2820-2821.

I

Page 8 o£27 September 16, 2014 was set aside and petitioner's Exhibits were admitted.

On November 24, 2014, respondent filed her Formal Offer of Evidence,62 with petitioner's Comment (To Respondent's Formal Offer of Evidence )63 filed on December 5, 2014. On January 12, 2015, the parties filed a Manifestation with Supplemental To Joint Stipulation of Facts and Issues64 wherein they stipulated that the ultimate issue to be resolved is the amount of cash refund/ tax refund petitioner is entitled to. On January 30, 2015, the Court issued a Resolution65 admitting respondent's Evidence, noting the parties' Manifestation; and granting the parties a period of thirty (30) days from notice within which to file their respective Memoranda. On March 5, 2015, petitioner filed its Memorandum (For the Petitioner)66, while respondent filed by registered mail, her Manifestation and Motion67, which states that she is adopting all her arguments (factual and legal) found in the special and affirmative defenses of her Answer dated August 12, 2013, as well as the arguments/ purposes for which all of her documentary evidence were formally offered and admitted by the Court. On April 1, 2015, the Court resolved to submit the case for decision, at the same time noting the Memorandum filed by petitioner on March 5, 2015, and respondent's Manifestation and Motion.68 On July 22, 2015, petitioner filed a Manifestation Cum Urgent Motion for Early Resolution69 alleging that since the parties have already manifested, in their Supplemental to Joint Stipulations of Facts and Issues dated January 12, 2015, that the sole issue to be resolved by the Court is the amount of refund that it is entitled to, hence, it prayed for the early resolution of the case. 62 Records, Vol. 5, Respondent's FOE, pp. 2828-2832. 63 Id., Vol. 5, pp. 2835-2837. 64 Id., Vol. 5, pp. 2838-2841. 65 Id., Vol. 5, pp. 2843-2844. 66 Id., Vol. 5, Petitioner's Memorandum, pp. 2849-2871. 67 Id., Vol. 5, pp. 2872-2873. 68 Id., Vol. 5, pp. 2876-2877. 69 Id., Vol. 5, pp. 2878-2882.

I

On July 31, 2015, the Court issued a Resolution7o ordering respondent to file her Comment on petitioner's Manifestation Cum Urgent Motion for Early Resolution. On October 14, 2015, the Judicial Records Division issued a Records Verification Report71, stating that respondent failed to file her Comment on petitioner's Manifestation Cum Urgent Motion for Early Resolution.

On November 16,2015, the Court noted and granted petitioner's Manifestation Cum Urgent Motion for Early Resolution, hence, this decision.n

The Issue73

For resolution of the Court is the sole issue:

THE AMOUNT OF TAX REFUND/TAX CREDIT FOR THE

UNUTILIZED INPUT TAXES FOR THE PERIOD OF JANUARY 1, 2011 TO DECEMBER 31, 2011, THAT THE PETITIONER IS ENTITLED TO.

Petitioner's Arguments

Petitioner alleges that considering the joint manifestation and limitation by the parties of the ultimate issue that is left to be resolved by the Court, it has fully complied with all the requirements of the law, the implementing rules and regulations and existing jurisprudence for tax refund cases; that it timely filed its administrative and judicial claims for refund; that it complied with the requirements for cash refund under Section 112(A) of the 1997 NIRC and RR No. 16-2005; and that respondent's witness also made the admission during cross- examination that all the requirements for its VAT refund claim were complied with and submitted.

Respondent's Counter-Arguments

70 Records, Vol. 5, pp. 2884-2885. n Id., Vol. 5, p. 2886.

72 Id., Vol. 5, pp. 2889-2891. 73 Id., Vol. 5, Manifestation with Supplemental to JSFI, pp. 2838-2841. .,/

Respondent counter-argues that petitioner's alleged claim for issuance of tax credit certificate/ tax refund is still subject to her administrative routinary investigation/ examination; that taxes paid and collected are presumed to have been made in accordance with law, hence, not refundable; that petitioner failed to substantiate its claim for cash refund amounting to Php778,786,831.34; that the burden of proof is upon petitioner to establish its right to the claimed refund; and that claims for refund are construed strictly against the petitioner for the same partakes the nature of exemption from taxation.

The Ruling of the Court

The Court must first determine whether it has jurisdiction over the case at bar.

Section 112 of the 1997 NIRC, as amended, provides as follows: SEC. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-Rated or Effectively Zero-Rated Sales.- any VAT- registered person, whose sales are zero-rated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero- rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108 (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 of 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. (Underscoring ours)

I

Page 11 o£27 As to the timeliness of the judicial claim for refund, Section 112(C) of the 1997 NIRC, as amended, in relation to RR No. 16-200574 provides as follows:

(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 Subsections (A) and (B) 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. (Underscoring ours)

XXX

Corollary, RR No. 16-2005 states the following: Sec. 4.112-1. Claims for Refund/Tax Credit Certificate of Input Tax.

XXX

(d)

Period

within which refund or tax credit certificate/refund of input taxes shall be made In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate/refund 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 subparagraph (a) above. In case of full or partial denial of the claim for tax credit certificate/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirty (30) days from the receipt of said denial, otherwise the decision shall become final. However, if no action on the claim for tax credit certificate/refund has been taken by the Commissioner of Internal Revenue after the one hundred 74 Consolidated Value-Added Tax Regulations of 2005, effective November 1, 2005. / twenty (120) day period from the date of submission of the application with complete documents, the taxpayer may appeal to the CT A within 30 days from the lapse of the 120-day period. (Underscoring ours) Records disclose the following pertinent dates relative to the filing of the administrative and judicial claims:

Quarter

Return Filed

Admin Due Date

Admin

120days + 30 days

Judicial

(2 yrs from close of Qtr)

Claim Filed

1st Close of Qtr:

Apr. 20, 201F5 March 31, 2013 March 31, 2011 2nd Close of Qtr:

July 25, 201F6 June 30, 2013 June 30, 2011 Jan.30,2013 May30,2013 July 1, 2013 June 28, 2013 3rd Close of Qtr:

Oct. 20,201177 Sept. 30, 2013 Sept. 30, 2011 4th Close of Qtr.:

Jan. 19,201278 Dec. 31, 2013 Dec. 31, 2011 ---·- Based on Section 112 (A), petitioner had two (2) years from the close of the taxable quarter when the sales were made to file its administrative claim. Thus, it had until March 31, June 30, September 30, and December 31, 2013, within which to file its administrative claims for the 1st, 2nd, 3rd and 4th quarters of 2011. Petitioner filed its claim for all the taxable quarters of 2011 on January 30, 2013, thus complying with the two (2)-year prescriptive period. In accordance with Section 112(C) of the 1997 NIRC, as amended, in relation to RR No. 16-2005, respondent had one hundred twenty

(120) days from January 30, 2013 or until May 30, 2013, within which to issue its decision on the administrative claim. However, as borne by the records, no decision was taken by the respondent, hence, petitioner had thirty (30) days from May 30, 2013 or until June 29, 2013, within which to file its judicial claim for tax credit or refund before the CTA. However, since June 29,2013 falls on a Saturday, the last day for filing the judicial claim falls on July 1, 2013, a Monday. As enunciated by the Supreme Court in Commissioner of Internal Revenue v. San Roque Power Corporation, et al.,79 strict compliance with the mandatory 120 + 30-day period is necessary for a claim for tax refund or credit. In the instant case, petitioner filed its judicial claim for refund on June 28, 2013, thus complying with the mandatory 75 Records, Vol. 3, JSFI, par. h, p. 2141. 76 Id.

77 Id.

78 Id.

79 G.R. No. 187485, February 12, 2013, 690 SCRA 336. !

I

( periods. Hence, both the administrative and judicial claims for refund were filed on time.

Having settled the issue of jurisdiction, the Court now proceeds to discuss petitioner's compliance with the requirements for VAT refund.

Based on the aforecited Section 112(A) of the 1997 NIRC, a taxpayer engaged in zero-rated or effectively zero-rated sales is entitled to a refund or tax credit of unutilized input VAT attributable to such zero-rated or effectively zero-rated sales upon compliance with the following requisites:so 1.

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

that input taxes were incurred or paid; 3.

that such input taxes were attributable to zero-rated 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.

The fifth requisite was already discussed above, in relation to the Court's jurisdiction.

Anent the first and second requisites, petitioner duly filed its Quarterly VAT Return for the four quarters of CY2011 with the BIR, declaring, among others, the following: so Commissioner of Internal Revenue v. Team Sual Corporation, G.R. No. 205055, July 18, 2014. v

Vatable

Sales/Receipts-

Private

Zero-Rated

Sales/Receipts

Exempt Sales

Total SalesjR.eceipts 1st Quarterlll 2nd Quarter82 376,132,636.92 358,665,757.67 5,736,106,135.87 5,981,754,781.95 159,350,622.36 157,299,073.96 6,271,589,395.15 6,497,719,613.58 3rd Quarter83 4th Quarter84

Total

735,841,301.08 510,408,403.67 1,981,048,099.34 8,895,357,050.87 5,846,348,179.16 26,459,566,147.85 213,447,084.81 177,090,128.38 707,186,909.51 9,844,645,436. 76 6,533,846,711.21 29,147,801,156.70 Based on the ICP A Report85 total zero-rated sales per schedule is only Php25,694,237,545.9486, however, a scrutiny of the records show that the amount should be Php25,694,903,197.59, broken down as follows:

DOLE PHILIPPINES, INC.

Zero-Rated Sales

For the Year 2011

ST ANFILCO - Division of Dole Phils. Inc. Coconut Sales (Exhibit "P-25", page 1 of31) Php5,629,429. 95 DHL-Banana Sales (Exhibit "P-25", page 15 of31) 60,092,330.77 Pines Sales (Exhibit "P-25", page 29 of31) 3,453,575.92 Tropifresh Sales (Exhibit "P-25", page 1 of177) 246,541,750.66 Banana Sales (Exhibit "P-25", page 78 of177) 15,509,583,210.93 Php15,825,300,298.23 DOLEFIL - A Division of Dole Phils. Inc. Canned Pines (Exhibit "P-25", page 1 of113) Php7,606,121,598.46 Fresh Pines (Exhibit "P-25", page 74 of113) 2,263,481,300.90 9,869,602,899.36

Total Zero-Rated Sales

Ph 25,694,903,197.59 In claiming tax refunds, it is axiomatic that the applicant must prove not only entitlement to the claim but also compliance with all the documentary and evidentiary requirements therefor.s7 Petitioner claims that majority of its sales were attributed to sales of goods from the Philippines to foreign countries. Under Section 106(A)(2)(a)(1)88 of 81 Records (box), Exhibit "P-9." 82 Id., Exhibit "P-12."

83 Id., Exhibit "P-15."

84 Id., Exhibit "P-18."

85 Records (box), Exhibit "P-36." 86 Id., Exhibit "P-36," p. 9. 87 J.R.A. Philippines, Inc. v. Commissioner of Internal Revenue, GR. No. 171307, August 28, 2013, 704 SCRA94.

ss SEC. 106. Value-Added Tax on Sale of Goods or Properties.-

(A)

Rate and Base of Tax. - xxxxx

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

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

(1) The sale and actual shipment of goods from the Philippines to a foreign country, irrespective of any shipping arrangement that may be agreed upon which may influence or determine the transfer of ownership of the goods so exported and paid for in acceptable foreign currency or its equivalent in goods or services, and accounted for in accordance with the rules and regulations of ( the Bangko Sentral ng Pilipinas (BSP);

XXX

the 1997 NIRC, in order to be subjected to zero-percent (0%) rate, the following conditions89 must be complied with, to wit: 1.

there was sale and actual shipment of goods from the Philippines to a foreign country; 2.

the sale was made by a VAT registered person; 3.

the sale was paid for in acceptable foreign currency or its equivalent in goods or services; and 4.

the payment was accounted for in accordance with the rules and regulations of the BSP. In addition to the abovementioned requirements, the VAT invoices and VAT official receipts must also comply with the invoicing requirements provided in Section 11390 of the 1997 NIRC, in relation to Sections 4.113-1(A)(l), B(l) and (B)(2)(c) of RR No. 16-0591, and that such invoices and receipts must have been duly registered with the BIR as prescribed under Section 23792 in relation to Section 23893 of the 1997NIRC.

89 Philex Mining Corporation v. Commissioner of Internal Revenue, CTA Case No. 8553, March 15, 2015.

90 SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt: (1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and xxxx (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 VAT: Provided, that: xxx (c) If the sale is subject to zero percent (0%) VAT, the term 'zero-rated sale' shall be written or printed prominently on the invoice or receipt; xxx 91 Consolidated Value-Added Tax Regulations of 2005, effective November 1, 2005. 92 SEC 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale and transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sale or commercial invoices, prepared at least in duplicate, showing the date of transaction, quantity, unit cost and description of merchandise or nature of service: xxx. 93 SEC. 238. Printing of Receipts or Sales or Commercial Invoices. - All persons who are engaged in business shall secure from the BIR an authority to print receipts or sales or commercial invoices before a printer can print the same. No authority to print receipts or sales or commercial invoices shall be granted unless the receipts or invoices to be printed are serially numbered and shall show, among other things, the name, business style, Taxpayer Identification Number (TIN) and business address of the person or entity to use the same, and such other information that may be required

I

by rules and regulations to be promulgated by the Secretary of Finance, upon recommendation of the Commissioner.

Moreover, any VAT-registered person claiming VAT zero-rated on its direct export sales must present at least three (3) types of documents, to wit:

the sales invoice as proof of sale of goods; 2.

the export declaration and bill of lading or airway bill as proof of actual shipment of goods from the Philippines to a foreign country; and 3.

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

Hence, only export sales duly supported shall qualify for VAT zero-rating under Section 106(A)(2)(a)(l) of the 1997 NIRC. To support its claim, petitioner submitted Sales Invoices pre- printed/stamped with the words "Zero-rated", Airway Bills/Seaway Bills/Bills of Lading and Bank Inward Remittances and Credit Advises.94 Careful scrutiny of the documents submitted show that zero-rated sales amounting to Php259,959,852.27 should be deducted from Php25,694,903,197.59 broken down as follows:

Invoice

Amount of

Exhibit

Reason for