General Motors Automobiles Philippines, Inc. vs. Commissioner of Internal Revenue

AMENDED DECISION

CASANOVA,}.:

Before

this

Court

is respondent's

Motion

for Reconsideration filed, through registered mail, on December 16, 2016 and received by this Court on January 4, 2017, with petitioner's

Comment/Opposition

(On

Respondent's

Motion

for Reconsideration dated 16 December 2016), filed on January 30, 2016.

Respondent seeks reconsideration of the Court's Decision dated December 2, 2016, the dispositive portion of which reads: "WHEREFORE, premises considered, this instant

Petition

for

Review

is

PARTIALLY

GRANTED.

Accordingly, respondent is ORDERED TO REFUND the amount of P3,579,874.53 in favor of petitioner, representing the latter's unutilized input VAT attributable to its zero-rated sales for the CY 2012 ~

Commission

(SEC)

certificate of registration of ~ corporation/partnership and certificate/articles of foreign incorporation/association/registration to be considered as non- resident foreign corporation doing business outside the Philippines. Respondent posits that the documents presented by petitioner are not sufficient to prove that its clients are non-resident foreign corporations.

Allegedly, except for General Motors Global Service Operations, Inc.

and Onstar, LLC.

Petitioner

failed to present the certificates/articles of foreign incorporation of its clients. Respondent further states that the documents presented as to its clients Chevrolet Sales (Thailand) Ltd., General Motors (Thailand) Limited and

General

Motors

Holdings

LLC/General

Motors

North

America/Customer Care and Aftersale merely showed that they are registered in the land of incorporation, but do not prove that they are non-resident foreign corporations doing business outside the Philippines.

On the other hand, petitioner counter-argues that it submitted more than sufficient documents to prove that its clients are non- resident foreign corporations doing business outside the Philippines. Petitioner also avers that it only made and reported zero-rated sales in calendar year (CY) 2012 which all pertain to sales of consultancy and administrative services to non-resident foreign corporations doing business outside the Philippines.

Petitioner

alleges that respondent overlooked the fact that the former had no VATable and VAT exempt sales during the said period as it had no domestic sales. Considering that all of petitioner's sales are zero- rated, it is allegedly logical that all of its input VAT should be attributable to the said sales. Petitioner also insists that the Independent Certified Public Accountant (ICPA) confirmed that the input VAT amounting to P3,579,874.53 is properly attributable to petitioner's zero-rated sales for CY 2012. In addition, petitioner claims that the motion for reconsideration is merely a pro-forma motion because respondent failed to provide specific details or to illustrate why the input VAT covered by the claim for refund are not attributable to petitioner's zero-rated sales. Petitioner also alleges that respondent's reliance on the doctrine that tax refunds are in the nature of tax exemptions and must be strictly construed against the claimant is misplaced since the same would not apply in cases where the taxpayer has clearly established its entitlement to a refund based on law and evidence.~

The Court finds respondent's arguments bereft of merit. The Court has enumerated in the assailed Decision the documents presented by petitioner and has already ruled that the same proved that the latter's clients are non-resident foreign corporations doing business outside the Philippines. Contrary to respondent's allegation, petitioner has presented its clients' SEC Certificates of Non-Registration of Company and Certificates of Incorporation/ Association/Registration, as follows: Documents presented

Exhibits

Certification of Non-Registration of Company issued by the Exhibit "P-53-A"

Chevrolet Sales

Securities and Exchange Commission (SEC\ March 16, 2015 (Thailand) Ltd.

Consularized Certificate of Residence of Chevrolet Sales

Exhibit "P-52"

(Thailand) Ltd. authenticated by the Philippine Embassy on June 17, 2015 Consularized Certificate of Registration of Chevrolet Sales Exhibit "P-53" (Thailand) Ltd. authenticated by the Philippine Embassy on March 30, 2015 Certification of Non-Registration of Company issued by the Exhibit "P-55-A" SEC, March 17 2015 Consularized Certificate of Residence of General Motors Exhibit "P-54"

General Motors

(Thailand) Limited authenticated by the Philippine Embassy on

(Thailand) Limited

June 17, 2015 Consularized Certificate of Registration of General Motors Exhibit "P-55" (Thailand) Limited authenticated by the Philippine Embassy on March 30, 2015 Certification of Non-Registration of Company issued by the Exhibit "P-57-A" SEC, March 17, 2015 Original Certificate of Residence of General Motors Global

Exhibit "P-56"

General Motors

Service Operations, Inc. issued by the Department of the

Global Service

Treasury Internal Revenue Service in Philadelphia, PA, April 2, Operations, Inc.

2012 Consularized Certificate of Incorporation of General Motors Exhibit "P-57" Global Service Operations, Inc. authenticated by the Philippine

Embassy on March 13 2015

Certification of Non-Registration of Company issued by the Exhibit "P-59-A" SEC March 16, 2015 Original Certificate of Residence of Onstar, LLC issued by the Exhibit "P-58" Onstar, LLC

Department of the Treasury Internal Revenue Service in

Philadelphia PA, February 27, 2012 Consularized Certificate of Incorporation of Onstar, LLC

Exhibit "P-59"

authenticated by the Philippine Embassy on March 13 2015 Certification of Non-Registration of Company issued by the Exhibit "P-61-A"

General Motors

SEC April 14 2015

Holdings LLC/General

Certification of Non-Registration of Company issued by the Exhibit "P-61-B"

Motors North

SEC March 17, 2015

America/Customer

Certification of Non-Registration of Company issued by the Exhibit "P-61-C"

Care and Aftersales

SEC, April 15, 2015 Original Certificate of Residence of General Motors Holdings Exhibit "P-60" LLC, Inc. issued by the Department of the Treasury Internal Revenue Service in Philadelphia, PA April 9, 2012 Consularized Certificate of Formation of General Motors Exhibit "P-61"

Holdings LLC authenticated by the Philippine Embassy on May 28, 2015 Likewise, the Court has considered the testimony of Ms. Modesty N. Alcala showing that the Customer Care and Aftersales is a division of General Motors North America, which is an operating segment of General Motors Holdings LLC, to wit: "In the Judicial Affidavit of Ms. Modesty N. Alcala, petitioner's

Finance

Manager, she manifested that Customer Care and Aftersales is only a division of General Motors North America, an operating segment of General Motors Holdings LLC. All billings to General Motors North America are addressed directly to Customer Care and Aftersales. All receipts for General Motors North America are likewise in the name of Customer Care and Aftersales since it is the Customer Care and Aftersales which directly transacts with petitioner. To prove this, petitioner has submitted Exhibits "P-29" to "P-29-B". Said exhibits are comprised of internal reports such as Forecasts, Variance

Budget/Forecast

against actual, and

IAS

Monthly

Statement, of Customer Care and Aftersales to petitioner and vice versa for the months of September 2012 and October 2012.

The Court notes that even though the internal reports and billing statements pertain to Customer Care & Aftersales, the financial entity indicated in all the reports is GM LLC- GMNA."1 Without any convincing evidence to controvert the above ruling, the Court sustains its finding that petitioner complied with the second requisite that the recipient of services is a non-resident foreign corporation doing business outside the Philippines. As regards the issue on whether the input VAT is attributable to petitioner's zero-rated sales, the Court has ruled in the assailed Decision that only the input VAT of P3,579,874.53 can be attributed to petitioner's zero-rated sales, to wit: "From the declared input VAT of P4,125,644.74, petitioner is claiming the refund of the amount of41&- 1 Page 12 of the assailed Decision dated December 2, 2016

P4,125,403.72.

In support of the foregoing, petitioner has offered various official receipts and invoices issued by its supplier's (sic), which were examined by the Court- Commissioned Independent CPA (!CPA), Mr. Glenn Ian Villanueva of Reyes Tacandong & Co. In his Report. xxx.

XXX

XXX

XXX

Apparently, the foregoing findings are in order. Thus, out of the claimed input

VAT

of P4, 125,403.72, petitioner has been able to substantiate only the amount of P3,825,492.37, and only the input VAT of P3,579,874.53 can be attributed to the zero-rated sales that have been substantiated, computed as follows: Input VAT claimed for Refund p 4,125 403.72 Less: Disallowances per !CPA Report 299 911.35 Substantiated input VAT p 3,825,492.37

Divided by Reported Zero-Rated Sales

p 79,207,236.90

Multiply by Substantiated Zero-Rated Sales

p 74,121,692.81 Input VAT attributable to Substantiated Zero-Rated Sales p 3,579,874.53'12 However, as will be discussed, a re-evaluation of the evidence presented by petitioner shows that the amount of substantiated input VAT for the CY 2012 found in the assailed Decision should be reduced, which shall consequently modify the amount of input VAT attributable to the substantiated zero-rated sales. Additional input taxes should be disallowed as the nature of the services rendered were not indicated in the supporting official receipts.

Respondent avers that petitioner's claimed input taxes on domestic purchases of goods/services must be disallowed on the following grounds: that VAT was not separately indicated in the supporting VAT official receipts/sales invoices; that some of the invoices/receipts do not have the quantity, unit cost, and description of the goods or properties or nature of the service; and, that some ok 2 Pages 12 to 18 of the assailed Decision dated December 2, 2016 the sales invoices/official receipts are without TIN and address of petitioner.

Respondent also claims that failure to print/imprint the word "zero-rated" on the sales invoices is fatal to a claim for refund of input VAT.

Petitioner opposes respondent's arguments stating that the same have no basis and petitioner complied with the invoicing requirements provided in Section 113 of the Tax Code.

Petitioner

asserts that Mr. Glenn Ian D. Villanueva, the !CPA, examined all the original commercial invoices and official receipts dated January to December of CY 2012. After the said examination, the !CPA allegedly determined that only P299,911.35 out of the P4,125,403.72 claimed input VAT failed to comply with the invoicing requirements. Petitioner also claims that respondent failed to identify the specific commercial invoices and/or official receipts that do not satisfy the requirements provided in Section 113 of the Tax Code. Based on the foregoing arguments, the Court finds it proper to revisit and further scrutinize the supporting documents presented by petitioner.

A careful evaluation of the invoices and official receipts supporting petitioner's input VAT reveals that the additional input VAT of P3,552,703.74 should be disallowed as the nature of services rendered were not indicated in the supporting official receipts, in violation of Section 113(8)(3) of the NIRC of 1997, as amended, detailed as follows:

Invoice/

Disallowed

Exhibit

Supplier

Official

Input VAT

Receipt No.

P-65 p. 001 Airfrieght 2100, Inc.

1667528A

p 330.53 P-65 p. 002 Airfrieght 2100, Inc.

1686040A

323.48 P-65 p. 003 Airfrieght 2100, Inc.

1678384A

319.35 P-65 p. 004

Angara Abello Concepcion Regala & Cruz

61589 9,000.00 P-65 p. 005 John Clements Consultants, Inc.

111387 6,219.69 P-65 p. 006 John Clements Consultants, Inc.

111599 6,571.22 P-65 p. 007 Manabat Delgado Amper & Co.

14338 52,800.00 P-65 p. 008

North Point Printing Press

11837 407.14 P-65-A p. 037 Business Process Outsourcing International Inc. 51388 1,228.08 P-65-A p. 038 Business Process Outsourcing International Inc. 51773 6,940.08 P-65-A p. 039

CEO Suite Philippine Branch

2839 3,096.00 P-65-A p. 040

Commonwealth Tire Service Center

19445 2,298.21 ,....

P-65-A p. 043 | John Clements Consultants, Inc. 111959 7,158.63 John Clements Consultants, Inc. 112042 7,595.62 Lane Archive Technologies Corp 37096 5,824.20 SGV & Co. 96793 144.00 96816 26,400.00 Adventure International Tours, Inc. 200-00025295 36.00 Angara Abello Concepcion Regala & Cruz 63929 9,000.00 Angara Abello Concepcion Regala & Cruz 66050 79,086.10 BPO Outsourcing International Inc. 53143 2,070.60 BPO Outsourcing International Inc. 52503 1,642.20 BPO Outsourcing International Inc. 53521 1,642.20 BPO Outsourcing International Inc. 54292 1,642.20 Hewlett-Packard Phils. Corporation 121663 378,453.65 Hewlett-Packard Phils. Corporation 123209 378,002.97 Hewlett-Packard Phils. Corporation 123583 374,941.76 Hewlett-Packard Phils. Corporation 124400 380,812.18 P-65-B p. 164 | Hewlett-Packard Phils. Corporation 122412 379,644.53 P-65-B p. 165 | John Clements Consultants, Inc. 112548 8,341.56 P-65-B p. 166 | John Clements Consultants, Inc.

112295 7,333.85 P-65-B p. 167 | John Clements Consultants, Inc.

112741 7,854.95 258 729896 708 78060 ps8 pA 2708 578060 P-65-B p. 174 | SGV & Co. 97849 24,569.40 P-65-B p. 175 | SGV & Co.

P-65-C p. 261 Angare Abello Concepcion Regala & Cruz Law 66850 41,760.00 Angara Abello Concepcion Regala & Cruz Law 68397 23,880.00 P-65-C p. 263 | Business Process Outsourcing International Inc. 54810 1,642.20 P-65-C p. 264 | Business Process Outsourcing International Inc. 55328 1,642.20 P-65-C p. 266 | Business Process Outsourcing International Inc. 55909 1,642.20 372,651.90 7,361.89 7,099.20 5,932.25 5,790.06 803.57 31,140.00 OTA 3 552,703.74 | Thus, petitioner’s substantiated input VAT for the CY 2012 as found in the assailed Decision shall be reconsidered and adjusted,_ from P3,825,492.37 to P272,788.63.

Consequently, only the input VAT of P255,274.09 can be attributed to the zero-rated sales that have been substantiated, computed as follows: Input VAT claimed for Refund p 4 125 403.72

Less: Disallowances

Per ICPA Report

p 299,911.35 Per this Motion for Consideration 3 552,703.74 3 852 615.09 Substantiated input VAT p 2721788.63

Divided by Reported Zero-Rated Sales

p 79 207 236.90

Multiply by Substantiated Zero-Rated Sales

p 74 121 692.81 Input VAT attributable to Substantiated Zero-Rated Sales p 2551274.09

WHEREFORE, premises considered, respondent's Motion for Reconsideration is PARTIALLY GRANTED.

Accordingly, the dispositive portion of the Decision of this Court dated December 2, 2016 is hereby amended to read as follows: "WHEREFORE, premises considered, this instant

Petition

for

Review

is

PARTIALLY

GRANTED.

Accordingly, respondent is ORDERED TO REFUND the amount of P255,274.09 in favor of petitioner, representing the latter's unutilized input VAT attributable to its zero-rated sales for the CY 2012.

I CONCUR:

<;Z..,~c:.~~ ~ JtiANITO C. CASTANEDA/lR.

Associate Justice

CAESA~ANOVA

Associate Justice

CfA CASE NO. 8976

ATTESTATION

I attest that the conclusions in the above Amended Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. ~~c_.~~.Q JU'ANITO C. CASTANEoi(, JR

Associate Justice

Chairperson

CERTIFICATION

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

Presiding Justice