Accenture, Inc. vs. Commissioner of Internal Revenue

DECISION

CASANOVA, J.:

This is an appeal, by way of Petition for Review1, filed by petitioner- Accenture, Inc., with the CTA En Bane, seeking the reversal of the CTA Second Division's ( CTA Second Division) Decision dated August 07, 2008 (Assailed Decision)2 and of the Resolution dated February 27, 2009 (Assailed Resolution)3 on CTA Case Nos. 7158, 7285 and 7313 entitled "Accenture, Inc., vs.

Commissioner

of

Internal

Revenue", denying petitioner's

Motion

for Reconsideration.

The facts of the case, as culled from the records4, are as follows: c:iii- 1 En Bane Rollo, pp. 8-36 2 Division Docket, pp. 483-497 3 Division Docket, pp. 530-544 4 CT A Second Division Decision, Division Docket, pp. 483-497 87 . ' CTA EB Case No. 473 (7158, 7285 & 7313)

"Accenture, Inc. (Petitioner) is a domestic corporation duly registered with the Securities and Exchange Commission, and existing under and by virtue of the Philippine laws. Its principal office address is at MSE Building, Ayala Avenue, Makati City. 5 Petitioner is a VAT taxpayer duly registered with the Bureau of Internal Revenue (BIR), in accordance with Section 236 of the National Internal Revenue Code (NIRC) of 1997, with VAT Registration Certificate No. 000-845-543-000.6 As stated in its Articles of Incorporation, petitioner is primarily engaged in the business of providing management consulting and management information consulting services, including, but not limited to, business integration, strategic services, change management services, systems integration, systems management, development, sale and/or licensing of software, and sale of hardware and related products, either as principal or agent.7 The Commissioner of Internal Revenue (Respondent) is the duly appointed officer of the Bureau of Internal Revenue (BIR) with authority, among others, to decide, approve and grant claims for refund or tax credit of internal revenue taxes. Her office address is at the BIR National Office Building, Agham Road, Diliman, Quezon City.8 For the period of December 1, 2002 to August 31, 2003, petitioner filed the following Monthly and Quarterly VAT Returns on these dates:

B

December

January 9, 2002 2003 c

January

February

2003 19, 2003

D

2nd March 17,

Quarter

2003

E

June 17, 2004

F

March

2003

G

April 2003

5 Paragraph 1, Joint Stipulation of Facts and Issues (JSFI), Division Docket, p. 213; Exhibit "A". 6 Paragraph 3, JSFI, Division Docket, p. 214; Exhibit "A". 7 Paragraph 4, JSFI, Division Docket, p. 214. 8 Paragraph 2, JSFI, Division Docket, p. 213-214. 88 CTA EB Case No. 473 (7158, 7285 & 7313)

H

I

Q

3rd

Quarter

June

2003

R

July 2003

s 4th

Quarter

J

2003 June 17, 2003 June 17, 2004 (amended) July 10, 2003 August 13, 2003

September

24, 2003 June 17, 2004 (amended) On January 13, 2005, petitioner filed with the

BIR

an administrative claim for refund and/or issuance of tax credit certificate of its unutilized input VAT credits for the following taxable periods: 9

December

1, 2002 to February 28, 2003 March 1, 2003 to May 31, 2003 June 1, 2003 to August 31, 2003

TOTAL

23,109,346.75 30,472,949.00 73,438,995.77 Since respondent had not acted on petitioner's claim, petitioner instituted the following Petitions for Review with this Court on these dates:

December 1, 2002 to

February

Februa

28, 2003 28, 2005 7285 March 1, 2003 to May July 7, 31 2003 2005 7313 June 1, 2003 to August

August

31, 2003 24, 2005 9 Paragraph 7, JSFI, Division Docket; pp. 214-215. 89 CfA EB Case No. 473 (7158, 7285 & 7313)

On September 5, 2005, petitioner filed a Motion to Consolidate erA Case No. 7158 with erA Case No. 7285. 10 The Court granted petitioner's motion in a Resolution dated September 26, 2005. 11 On January 24, 2006, petitioner filed a Motion to Consolidate erA Case Nos. 7158 and 7285 with erA Case No. 7313 Y In the proceedings in erA Case Nos. 7158 and 7285, the Court granted petitioner's motion in open court on January 25, 2006.

On January 30, 2006, petitioner filed their consolidated Joint Stipulation of Facts and Issues. 13 During trial, petitioner presented its documentary and testimonial evidence in support of its stand. Respondent, however, manifested in open court on May 23, 2007 that she will not be presenting evidence and submitted the case for decision.14 The Court ordered both parties to submit their respective Memorandum. After petitioner and respondent submitted their memoranda on February 22 and 26, 2008, respectively, the case was submitted for decision on February 29, 2008." The issues, as jointly stipulated by the parties, are the following: '1. Whether or not Petitioner's sales of goods and services are zero-rated for VAT purposes under Section 108(8)(2)(3) of the 1997 Tax Code.

2. Whether or not petitioner's claim for refund/tax credit in the aggregate amount of P73,438,995.77 arose from Petitioner's domestic purchase of goods which are attributable to its zero-rated sales during the period covering 1 December 2002 to 31 August 2003.

3. Whether or not Petitioner has carried over to the succeeding taxable quarters the alleged unutilized input VAT paid on its domestic purchases of goods and services for the period commencing from 1 December 2002 until 31 August 2003, and applied the same fully to its output VAT liability for the said period .~ 10 Division Docket, pp. 124-126.

11 Division Docket, p. 138.

12 Division Docket (CTA Case No. 7313), pp.93-96. 13 Division Docket, pp. 213-2 16 .

• 14 Division Docket, p. 400.

90 . '.

CTA EB Case No. 473 (7158, 7285 & 7313)

4. Whether or not Petitioner is paid for in acceptable foreign currency where proceeds are inwardly remitted to the Philippines and accounted for in accordance with the rules and regulations of the SSP.

5. Whether or not Petitioner is entitled to the refund of the amount of P73,438,995.77, representing the unutilized input VAT on domestic purchases of goods and services for the period commencing from 1 December 2002 to 31 August 2003, from its sales of services to various foreign clients."

On August 07, 2008, the CTA Second Division promulgated the Assailed Decisiorr5 the dispositive portion which reads: "WHEREFORE, premises considered, the instant Petition for Review is hereby DISMISSED.

That

Petitioner's

claim in the amount of P23,109,346.75 in CTA Case No. 7285 has prescribed." On July 6, 2009, respondent19 and petitioner20 simultaneously submitted their Memoranda.

On July 9, 2009, the Court promulgated a Resolution21 submitting the case for decision.

After a careful and thorough evaluation and consideration of the records of the case, the Court En Bane finds no new matters which have not yet been considered and passed upon by the CTA Second Division in its Assailed Decision. As regards the first issue, the CTA Second Division correctly found in the Assailed Decision and We quote, to wit:

"As to whether petitioner's sales qualify for zero percent (0%) VAT pursuant to Section 108(8)(2) of the NIRC of 1997, petitioner asserts that its sales qualify for zero-rating. The bulk of its sales purportedly pertains to petitioner's services to various foreign clients in providing management consulting and management information consulting services, including but not limited to, business strategic services, change management services, systems integration, systems management, development, sale/or licensing of software, and sale of hardware and related products, either as principal or agent, and other related business activities; and the consideration for which was paid for in~ 19 Memorandum, En Bane Rollo, pp. 95-101.

20 Memorandum for the Petitioner, En Bane Rollo, pp. 103-134 21 En Bane Rollo, p. 136 92 CfA EB Case No. 473 (7158, 7285 & 7313) accordance with the rules and regulations of the Bangko Sentral ng Pilipinas.

Value-added tax at zero percent (0%) is imposed on revenues derived from sale of services aside from processing, manufacturing or repacking of goods for other persons doing business outside the Philippines which goods are subsequently exported, provided that the transaction is paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas under Section 108(8)(2) of the NIRC of 1997, which states: 'Section 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

XXX

XXX

XXX

(B) Transaction Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) rate:

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

(2) Services other than those mentioned in the preceding paragraph, 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) .' (Emphasis supplied) Thus, for services to qualify for zero-rating under Section 108 (8)(2), the taxpayer must comply with the following requirements: (1) the recipient of its business is doing business outside the Philippines, (2) the payment of its service fees was in acceptable foreign currency, and (3) accounting of such remittance was in accordance with 8SP rules.

In order to prove its alleged zero-rated or effectively zero- rated sales, petitioner presented in its formal offer of exhibits, th~

9J

CTA EB case No. 473 (7158, 7285 & 7313)

Intercompany Payment Requesf-2, Official Receiptd-3,

Billing

Statementd-4 ,

Memo

Invoices-Receivablcl-5,

Memo

Invoices-

Payablcl-6, Bank Statementd-7, and the Affidavit of its Country Controlle~ Ms. Loida S. Samsod8 • In addition, petitioner submitted the Report29 of Mr.

Emmanuel

Mendoza, the

Court-commissioned

Independent

Certified Public Accountant (ICPA) where he ascertained that petitioner's gross billing as reflected in the IPR for the 2nd to 4th quarters of 2003 (December 2002 to August 2003) pertaining to alleged zero-rated sales were all supported by zero-rated official receipts and billing statements, and/or memo invoices issued by the Company and that the foreign exchange proceeds thereof (net of petitioner's payable to Accenture Participations B.V.) were duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas. However, based on the said Report, the Court notes that the alleged zero-rated sales per IPR amounting to P2,721,540,894.68 are higher than the alleged zero- rated sales per petitioner's

Quarterly

VAT

Returns

by P343,507,014.70.

Meanwhile, petitioner did not file an Amended VAT Return to reflect the higher zero-rated sales amount of P2,721,540,894.68. Inevitably, the Court is inclined to consider only the amount of P1,612,678,624.15 reflected in its VAT Returns for the subject period of claim, broken down as follows:

ZeroRated Sales Per

Exhibit No.

Period Covered

VAT Returns

E/ AA

2na qtr 2003 Dec 1, 2002 to Feb 28, 2003 p 672,934,982.87

J/CC

41h qtr 2003 June 1, 2003 to Aug 31, 2003 939,743,641 .28

Total

p 1,612,678,624.15 Nevertheless, after a thorough review and evaluation of the documentary evidence presented, the Court notes that no evidenc~ 22 Exhibits "SS-1" to "SS-9".

23 Exhibits " TT -1" to " TT -9".

24 Exhibits "UU-1" to "UU-9".

25 Exhibits "VV-1" to "VV-74".

26 Exhibits "WW-1" to "WW-75".

27 Exhibits "XX-I " to "XX-9".

28 Exhibit "Y".

29 Exhibit "PP".

CTA EB Case No. 473 (7158, 7285 & 7313) was presented to prove the fact that the foreign clients to whom petitioner renders service are clients doing business outside the Philippines.

In the recent case of Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. 30, the

Supreme

Court

held that another essential condition for qualification to zero-rating under Section 108 (8)(2) [then Section 102(b)(2)] is that the recipient of such services is doing business outside the Philippines. We quote hereunder the pertinent portion of the said decision:

"The Tax Code not only requires that the services be other than 'processing, manufacturing or repacking of goods' and that payment for such services be in acceptable foreign currency accounted for in accordance with BSP rules. Another essential condition for qualification to zero-rating under Section 102 (b)(2) is that the recipient of such services is doing business outside the Philippines. While this requirement is not expressly stated in the second paragraph of Section 102 (b), this is clearly provided in the first paragraph of Section 102(b) where the listed services must be 'for other persons doing business outside the Philippines.' The phrase 'for other persons doing business outside the Philippines' not only refers to the services enumerated in the first paragraph of Section 102 (b), but also pertains to the general term 'services' appearing in the second paragraph of Section 102 (b). In short, services other than processing, manufacturing, or repacking of goods must likewise be performed for persons doing business outside the Philippines.

This can only be the logical interpretation of Section 102 (b )(2). If the provider and recipient of the 'other services' are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section 102 (a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the recipient of services. To interpret Section 102 (b)(2) to apply to a payer-recipient of services doing business in the Philippines is to make the payment of the regular VAT under Section 102 (a) dependent on the generosity of the taxpayer. The provider of services can choose to pay the regular VAT or avoid it by stipulating payment in foreign currency inwardly remitted by the payer-recipient. Such interpretation removes Section 102 (a) as a tax measure in the Tax Code, an interpretation th"is Cou~ 30 G.R. No. 153205, January 22, 2007, 512 SCRA 124. 9!1 CfA EB Case No. 473 (7158, 7285 & 7313) cannot sanction. A tax is a mandatory exaction, not a voluntary contribution."

In this case, the documents submitted by the petitioner merely establish the existence of sale, that the payments of its service fees were in acceptable foreign currency, that the proceeds of such sales transactions were inwardly remitted to the Philippines and accounted for in accordance with BSP rules. Even in the testimonial evidence presented by the petitioner, there is nothing that will show that the 'foreign clients' are doing business outside the Philippines and we quote hereunder the pertinent portions of the testimony given by Ms. Loida S. Samson: Q: Why do you say that your company's sales is zero- rated for VAT purposes?

A: Our company's sales pertain to its services to various clients in providing consulting and management information consulting services which are paid for in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas.

Xxx

XXX

XXX

Q: Who are the clients of Accenture?

A:

Accenture

serves foreign clients in providing consulting and management information consulting services. Likewise, in the affidavit executed by Mr. Emmanuel Mendoza, there is no testimony to the effect that petitioner's foreign clients are doing business outside the Philippines. The petitioner's allegation that its clients are 'foreign clients' is not sufficient to meet the requirement of law which mandates that the recipient of its service is doing business outside the Philippines. The phrase 'foreign clients' is couched in its generality that the Court cannot just simply assume that they are engaged in doing business outside the Philippines. A 'foreign client' may also be engaged in doing business in the Philippines and in that case, when petitioner and recipient of its services are both doing business in the Philippines, their transaction falls squarely under Section 108 (A) of NIRC of 1997 governing domestic sale or exchange of services subject to 12% VAT. Even if there is an ~ CfA EB Case No. 473 (7158, 7285 & 7313) allegation that these foreign clients are doing business outside the Philippines, still the Court cannot give weight to such allegation. Mere allegations are not sufficient but must be accompanied by supporting evidence.31 Thus, petitioner fails to prove that its sale of services to 'foreign clients' qualifies for zero percent VAT. Well settled is the rule that a claim for refund is construed strictissimi juris against the . taxpayer as it partakes the nature of exemption from taxation32 • Besides we believe that in claims for refund, the law mandates the court to observe a higher standard of caution in appreciating and evaluating evidence. If indeed a claim for refund is wanting in pertinent and supporting evidence, then the granting thereof could prove to be improper, if not difficul~ 3 • Therefore, petitioner in claiming for tax refund has the burden of proof to establish the factual basis of its claim." (Emphasis supplied) The CTA Second Division further resolved the said issue in the Assailed Resolution, and We quote with approval:

· "Petitioner underrates the force and effect of the ruling of the Supreme Court handed down in the Burmeister case, and yet it argues in its Motion, albeit erroneously, that it has presented enough evidence to prove that its clients 'are foreign corporations doing business outside the Philippines'34.

But more than this, petitioner obviously overlooks that in this jurisdiction, '(j)udicial decisions applying or interpreting the laws or the Constitution shall form a part of the legal system of the Philippines. 135

These

decisions of the Highest Tribunal are laws by their own right because they interpret what the laws say or mean, and are universal in their scope and application, and equally mandatory in character. 36 In other words, judicial decisions assume the same authority as the statute itself and, until authoritatively abandoned, necessarily become, to the extent that they are applicable, the~ 3 1 Francisco S. Tatad vs. Secretary of Department of Energy, et. a!., G.R. Nos. 124360 and 127867, November 5, 1997,281 SCRA 330.

32 Citibank N.A. vs. Court of Appeals, et. a!., G.R. No. 107434, October I 0, 1997, 280 SCRA 459. 33 ECW Joint Venture Inc. vs. Commissioner oflnternal Revenue, CTA Case No. 6398, May 26,2003. 34 Paragraph 2.2, p. 3. Rollo, p. 500.

35 Article 8, Civil Code of the Philippines (Republic Act No. 386). 36 Phil. Veterans Affairs Office vs. Segundo, G.R. No. L-51570, August 15, 1988. 97 CTA EB case No. 473 (7158, 7285 & 7313) criteria which must control the actuations not only of those called upon to abide thereby but also of those in duty bound to enforce obedience thereto.37 Accordingly, the interpretation placed by the High Court in the Burmeister case on Section 102(b)(1) and (2) of the NIRC of 1986, as amended, which was re-enacted as Section 108(8)(1),(2) of the NIRC of 1997- the law in effect in the year under consideration, viz., 2003 - formed part of said law.

And since '(t)here is only one Supreme Court from whose decision all other courts should take their bearings'38, this Court is duty bound to follow such interpretation in cases invoking the same provisions of law.

For ready reference, the pertinent portions of the Decision in the Burmeister case are hereunder quoted, to wit: 'The Tax Code not only requires that the services be other than 'processing, manufacturing or repacking of goods' and that payment for such services be in acceptable foreign currency accounted for in accordance with BSP rules. Another essential condition for qualification to zero-rating under Section 102(b)(2) is that the recipient of such services is doing business outside the Philippines. While this requirement is not expressly stated in the second paragraph of Section 102(b ), this is clearly provided in the first paragraph of Section 102(b) where the listed services must be 'for other persons doing business outside the Philippines.' The phrase 'for other persons doing business outside the Philippines' not only refers to the services enumerated in the first paragraph of Section 102(b), but also pertains to the general term 'services' appearing in the second paragraph of Section 102(b). In short, services other than processing, manufacturing, or repacking of goods must likewise be performed for persons doing business outside the Philippines.

This can only be the logical interpretation of Section 102(b)(2). If the provider and recipient of the 'other services' are both doing business in the Philippines, the payment of foreign currency is irrelevant. Otherwise, those subject to the regular VAT under Section 102(a) can avoid paying the VAT by simply stipulating payment in foreign currency inwardly remitted by the recipient of services. To interpret Section 102(b)(2) to apply to a payer-recipient of services doing business in the Philippines is to make the payment of the regular VAT under Section 102(a) dependent on the generosity of the taxpaye~ 37 Caltex (Philippines), Inc. vs. Palomar, G.R. No. L-1 9650, September 29, 1966. 38 Ysasivs. Fernandez, et al. , G.R. No. L-28593, P ecember 16, 1968. 98 CTA EB Case No. 473 (7158, 7285 & 7313)

The provider of services can choose to pay the regular VAT or avoid it by stipulating payment in foreign currency inwardly remitted by the payer-recipient.

Such interpretation removes Section 102(a) as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax is a mandatory . exaction, not a voluntary contribution.

When

Section

102(b)(2) stipulates payment in 'acceptable foreign currency' under BSP rules, the law clearly envisions the payer-recipient of services to be doing business outside the Philippines.

Only those not doing business in the Philippines can be required under BSP rules to pay in acceptable foreign currency for their purchase of goods or services from the Philippines. In a domestic transaction, where the provider and recipient of services are both doing business in the Philippines, the BSP cannot require any party to make payment in foreign currency.

Services covered by Section 102(b) (1) and (2) are in the nature of export sales since the payer-recipient of services is doing business outside the Philippines.

Under BSP rules, the proceeds of export sales must be reported to the Bangko Sentral ng Pilipinas.

Thus, there is reason to require the provider of services under Section 102(b) (1) and (2) to account for the foreign currency proceeds to the BSP. The same rationale does not apply if the provider and recipient of the services are both doing business in the Philippines since their transaction is not in the nature of an export sale even if payment is denominated in foreign currency.

Further, when the provider and recipient of services are both doing business in the Philippines, their transaction falls squarely under Section 102(a) governing domestic sale or exchange of services.

Indeed, this is a purely local sale or exchange of services subject to the regular VAT, unless of course the transaction falls under the other provisions of Section 102(b).

Thus, when Section 102(b)(2) speaks of '[s]ervices other than those mentioned in the preceding subparagraph,' the legislative intent is that only the services are different between subparagraphs 1 and 2. The requirements for zero-rating, including the essential condition that the recipient of services is doing business outside the Philippines, remain the same under both subparagraphs.p 99 CTA EB Case No. 473 (7158, 7285 & 7313)

Significantly, the amended Section 108(b )39 [previously Section 102(b)] of the present Tax Code clarifies this legislative intent. Expressly included among the transactions subject to 0% VAT are "[s]ervices other than those mentioned in the [first] paragraph [of Section 108(b)] 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 BSP .' (Emphasis supplied) A cursory reading thereof would reveal that, to qualify for zero-rating under Section 108(B)(2) of the NIRC of 1997, it must be shown, inter alia, that the persons to whom the 'services' were rendered are not only 'doing business outside the Philippines', but also such persons are not doing business within the Philippines. Apropos to the concept of 'doing business', in Commissioner of Internal Revenue vs. British Overseas Airways Corporation, et a/.40, the Supreme Court said:

'xxx. There is no specific criterion as to what constitutes 'doing' or 'engaging in' or 'transacting' business. Each case must be judged in the light of its peculiar environmental circumstances.

The term implies a continuity of commercial dealings and arrangements, and contemplates, to that extent, the performance of acts or works or the exercise of some functions normally incident to, and in progressive prosecution of commercial gain or for the purpose and object of the business organization.

In order that a foreign corporation may be regarded as doing business within a State, there must be continuity of conduct and intention to establish a continuous business, such as the appointment of a local agent, and not one of a temporary character.' (Emphasis supplied) Based on the foregoing, the question of whether petitioner's 'foreign clients' are 'doing business outside' and not within 'the Philippines' rests primarily on facts and intent of such clients. Correspondingly, petitioner could have easily determined which evidence to present and offer to establish that its 'foreig~ 39 As amended by Republic Act No. 9337.

40 G.R. Nos. L-65773-74, April30, 1987.

100 CTA EB Case No. 473 (7158, 7285 & 7313) clients' are not doing business within the Philippines, but only outside thereof.

Contrary to petitioner's gratuitous assertions, upon a second look on petitioner's Formal Offer of Evidence, its supplement, and the offered evidence themselves, especially the Intercompany Payment Request'\ Official Receipts42, Billing Statements43, Memo Invoices-Receivable44,

Memo

Invoices-Payable45,

Bank

Statements46, and Affidavit of Ms. Loida S. Samsod7, this Court still finds that not even a modicum of an intimation would establish that petitioner's 'foreign clients' are not doing business within the Philippines, but only outside thereof.

It is equally noteworthy that, in petitioner's Memorandum, nothing has been said about petitioner's 'foreign clients' as 'doing business outside the Philippines', nor is there any indication that such clients are not doing business in the Philippines.48 Petitioner only pointed out the other equally important aspects of its case insofar as the zero-rated sales of petitioner is concerned, i.e., the payments of its service fee were in acceptable foreign currency, and the proceeds of such sales were inwardly remitted to the Philippines and accounted for in accordance with the rules of the Bangko Sentral ng Pilipinas. 49 Thus, it clearly shows that petitioner was unmindful in proving such allegation. Only in the instant Motion did petitioner made the following bare assertions:

'3. The instant consolidated cases involve the rendering by petitioner of services to foreign corporations, i.e. the several Accenture companies existing in different countries, which are obviously doing business outside the Philippines, unlike i~ 41 Exhibits "SS-1'' to "SS-9".

42 Exhibits "TT-l" to "TT-9".

43 Exhibits "UU-1" to "UU-9".

44 Exhibits "VV-1" to "VV-74".

45 Exhibits "WW-1 " to "WW-75".

46 Exhibits "XX-1" to "XX-9".

47 Exhibit "Y".

48 Petitioner's Memorandum, Rollo, pp. 456 to 458. 49 Petitioner's Memorandum, paragraph 19, and the discussion found in pp. 11 to 13, Rollo, pp. 452,456 to 458.

CTA EB Case No. 473 (7158, 7285 & 7313) the Burmeister case which involved a foreign corporation found to be doing business in the Philippines. Thus: 3.1. These several Accenture companies existing in different countries are non-resident foreign clients of petitioner. They are registered entities outside the Philippines.

The records of the Philippines Securities and Exchange Commission (SEC) would reveal that that these Accenture companies have not established any branch offices to do business in the Philippines.

Further, the records of the Bureau of Internal Revenue (BIR) would reveal that these

Accenture

companies are not registered corporate taxpayers in the Philippines. 3.2. For the services rendered to these several Accenture companies existing in different countries, petitioner bills Accenture Participations B.V., which is likewise a foreign corporation which does not have any presence in the Philippines, and which is the billing agent of these several Accenture companies worldwide.'50 (Emphasis supplied) Suffice it to state that the Court does not rule on allegations which are manifestly conjectural, as these may not exist at all. The Court deals with facts, not fancies; on realities, not appearances. When the Court acts on appearances instead of realities, justice and law will be short-lived51."

As found by the CTA Second Division in the Assailed Decision, and We quote:

"The two-year prescriptive period for the filing of a VAT refund claim should not be counted from the close of the quarter but from the date of filing of the VAT Return to harmonize the provisions of Section 112(A) [then Section 106] of the NIRC of 1997 with Sections 114(C) and 229 [then Sections 110(a) and 230] of the same Code. This is because the VAT liability or refundability can only be determined upon the filing of the Quarterly VAT Return. This was affirmed by the Supreme Court in the case o.k:z._ - 50 Rollo, pp. 500 to 501 .

51 ABAKADA GURO PARTY LIST OFFICERS vs. Errnita, et al., G.R. Nos. 168056, 168207, 168461 , 168463, and 168730, September 1, 2005.

• 0 ') ~ ....

CTA

Case

No.

7158 7285 7313 CfA EB Case No. 473 (7158, 7285 & 7313)

Atlas Consolidated Mining and Development Corporation

vs.

Commissioner of Internal Revenui>2, where it ruled that: 'It is true that unlike corporate income tax, which is reported and paid on installment every quarter, but is eventually subjected to a final adjustment at the end of the taxable year, VAT is computed and paid on a purely quarterly basis without need for a final adjustment at the end of the taxable year. However, it is also equally true that until and unless the VAT- registered taxpayer prepares and submits to the BIR its quarterly VAT return, there is no way of knowing with certainty just how much input VAT the taxpayer may apply against its output VAT; how much output VAT it is due to pay for the quarter or how much excess input VAT it may carry-over to the following quarter; or how much of its input VAT it may claim as refund/credit. xxx.

xxx, it is more practical and reasonable to count the two-year prescriptive period for filing a claim for refund/credit of input VAT on zero-rated sales from the date of filing of the return and payment of the tax due which, according to the law then existing, should be made within 20 days from the end of each quarter.' In the present case, not all the periods claimed by petitioner for tax refund or issuance of tax credit certificate fall within the two-year prescriptive period for the filing of the suit in court. A perusal of the records shows the following dates pertinent to the case:

Date of Filing

Date of Filing

(Administrative

Date of Filing

Period Covered

(Original Return)

Claim)

(Judicial Claim)

2nd qtr Dec 1 , 2002 to March 17, 2003 January 13, 2005 February 28, 2005 2003 Feb 28, 2003

(Exhibit "D")

(Exhibit "A")

(Petition for Review)

3rd qtr Mar 1, 2003 to June 17, 2003 January 13, 2005 July 7, 2005 2003 May 31 , 2003

(Exhibit "H'')

(Exhibit "A'')

(Petition for Review)

4th qtr June 1, 2003 to September 24, 2003 January 13, 2005 August24, 2005 2003 Aug 31, 2003

(Exhibit "S'')

(Exhibit "A'')

(Petition for Review)

The above table clearly indicates that petitioner's administrative and judicial claims for refund of input VAT on its zero-rated sales for the 2nd and 4th quarters of 2003 were file~ 52 G.R. Nos. 141104 and 148763, June 8, 2007, 524 SCRA 73. • 0 '") .1.

..)

CTA EB Case No. 473 (7158, 7285 & 7313) within the two-year prescriptive period. However, the same cannot be said of the 3rd quarter of 2003. While the administrative claim for the 3rd quarter of 2003 was filed within the two-year prescriptive period, the corresponding Petition for Review was filed with this Court beyond the prescriptive period, or on July 7, 2005. Thus, the Court shall only resolve petitioner's claim of input VAT refund or tax credit attributable to its zero-rated sales for the 2nd and 4th quarters of 2003. The claim for the 3rd quarter of 2003 in the amount of P23,109,346.75 is denied due to prescription." Petitioner alleges that its claim for VAT refund in CTA Case 7285 has not prescribed arguing that the two-year prescriptive period under Section 112 of the NIRC applies exclusively to administrative claims filed with the Commissioner of Internal Revenue, that Section 4.106-2 of BIR Revenue Regulations No. 7-95 (the Value-Added Tax regulations) prescribing a 2:-year prescriptive period for the filing of a Petition for Review with the CTA on VAT refund claim constitutes undue delegation, and that the two-year prescriptive period on refund claims under Section 229 of the NIRC applies only to taxes that have been erroneously or illegally assessed or collected, or of any sum alleged to have been excessively or wrongfully collected.

The Court's Second Division discussed the above-mentioned arguments in the Assailed Resolution, and We quote with approval: "Petitioner advances the arguments that Section 112 of the NIRC of 1997 applies exclusively to administrative claims for refund or tax credit of creditable input VAT due or paid attributable to zero-rated or effectively zero-rated sales filed with respondent, and that Section 229 finds no application for such claims. Petitioner is certainly mistaken.

For easy reference, Sections 112(A) and (D) and 229 of the NIRC of 1997 provides as follows:

'SEC. 112. Refunds or Tax Credits of Input Tax. -~ CTA EB Case No. 473 (7158, 7285 & 7313) {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 of paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: xxx

XXX

XXX

XXX

(D) 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." (Emphasis supplied) 'SEC.

229. Recovery of Tax Erroneously or Illegally Collected. - No suit or proceeding shall be maintained in any court for the recovery of any national internal revenue tax hereafter alleged to have been erroneously or illegally assessed or collected, or of any penalty claimed to have been collected without authority, or of any sum alleged to have been excessively or in any manner wrongfully collected, until a claim for refund or credit has been duly filed with the Commissioner; but such suit or proceeding may be maintained, whether or not such tax, penalty, or sum has been paid under protest or duress.

In any case, no such suit or proceeding shall be filed after the expiration of two (2) years from the date of payment of the tax or penalty regardless of any supervening cause that may arise after payment: Provtde~ howeve~ That the Commissioner may, even without the written claim therefor, refund or credit any tax, where on the face of the return upon which payment was made, such payment appears clearly to have been erroneously paid.' (Emphasis supplied) ..t::J- lOS erA EB case No. 473 (7158, 7285 & 7313)

It is a basic principle in statutory construction that force and effect should not be narrowly given to isolated and disjoined clauses of the law but to its spirit, broadly taking all its provisions together in one rational view. 53 Since a statute is enacted as a whole and not in parts or sections, that is, one part is as important as the others, the statute should be construed and given effect as a whole.

Thus, although Section 112 of the NIRC of 1997 is specific as to the subject matter of the refund or tax credit certificate, i.e., "the creditable input tax due or paid" attributable to zero-rated or effectively zero-rated sales, such provision should still be harmonized with Section 229 of the same Code. This must be so because the latter provision covers also 'any sum alleged to have been excessively ... collected', which is exactly the nature of an input VAT attributable to zero-rated or effectively zero-rated sales. Such being the case, the mandatory statute of limitations prescribed under Section 229 in seeking judicial recourse should also be made to apply to claims for refund or tax credit certificate under Section 112. This notwithstanding the fact that second paragraph of Section 112(0) provides a period within which to file an appeal of a decision or the unacted claim with this Court, since the same provision is couched merely in a permissive sense with the employment of the word 'may'.

Correspondingly, this Court cannot subscribe to petitioner's contention that 'Section 4.106-2 of BIR Revenue Regulations No. 7- 95 (the Value-Added Tax Regulations) prescribing a 2-year prescriptive period for the filing of a Petition for Review with the CTA on VAT refund claim constitutes undue legislation.'

Said

provision states:

'SEITION 4.106-2. Procedures for claiming 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 tax credit/refund for creditable input taxes within si~ 53 Leynes vs. Commission on Audit,, et al., G.R. No. 143596, December 11 , 2003 . ·o r> 1 0 CTA EB Case No. 473 (7158, 7285 & 7313)

(60) days54 from the date of submission of complete documents in support of the application filed in accordance with subparagraphs (a) and (b) above.

In case of full or partial denial of the claim for tax credit/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from receipt of said denial, otherwise the decision will become final.

However, if no action on the claim for tax credit/refund has been taken by the Commissioner of Internal Revenue after the sixty (60) day period from the date of submission of the application but before the lapse of the two

(2) year period from the date of filing of the VAT return for the taxable quarter, the taxpayer may appeal to the Court of Tax Appeals.' (Emphasis supplied) It must also be emphasized that the above-quoted Section 112 was recently reenacted under Section 10 of Republic Act 933755.

By virtue of such reenactment, the principle of legislative approval of administrative interpretation by re-enactment clearly obtains in this case. It provides that 'the re-enactment of a statute substantially unchanged is persuasive indication of the adoption by Congress of a prior executive construction. 66 Stated differently, when a statute is susceptible of the meaning placed upon it by a ruling of the government agency charged with its enforcement and the legislature thereafter re-enacts the provisions without substantial change, such action is to some extent confirmatory that the ruling carries out the legislative purpose. 57 In the interpretation of re-enacted statutes the court will follow the construction which they received when previously in force. The legislature will be presumed to know the effect which such status originally had, and by reenactment to intend that they should again have the same effect.

It is not necessary that a~ 54 Now one hundred twenty (120) days.

55 AN ACT AMENDING SECTIONS 27, 28, 34,106, 107, 108, 109, 110, Ill, 112, 113, 114,116,117, 117, 119, 121, 148, 151 , 236, 237 AND 288 OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES.

statute should be reenacted in identical words in order that the rule may apply. It is sufficient if it is reenacted in substantially the same words. The rule has been held to apply to the reenactment of a statute which received a practical construction on the part of those who are called upon to execute it.58" In sum, the Court En Bane finds no cogerit justification to disturb the findings and conclusion spelled out in the assailed August 7, 2008 Decision and February 27, 2009 Resolution of the CTA Second Division. What the instant petition seeks is for the Court En Bane to view and appreciate the arguments/discussions raised by the petitioner in its own perspective of things, which unfortunately had already been considered and passed upon.

WHEREFORE, the instant Petition for Review is hereby DISMISSED for lack of merit. Accordingly, the August 7, 2008 Decision and February 27, 2009 Resolution of the CTA Second Division in CTA Case Nos. 7158, 7285 and 7313 entitled, ''Accenture/ Inc. vs. Commissioner of Internal Revenue" are hereby AFFIRMED in toto.

Associate Justice

WE CONCUR:

L-\a r OL-JL

(With Concurring and Dissenting Opinion)

ERNESTO D. ACOSTA ~A--t:-c.

. ar~ \2 fuANITO c. CASTANEDA, )If.'' .

Associate Justice

Presiding Justice

58 Montelibano, eta!. vs. F«rrer, eta!., G.R. No. L-7899, June 23, 1955, citing In re Dick, 38 Phil. 41, 77. 10 3 CTA EB Case No. 473 (7158, 7285 & 7313) o~~~N~

Associate Justice

~N . M~.,.·~~G~ CIELITO N. MINDARO-GRULLA

Associate Justice

Al!!:f.c~i:L~srAs

Associate Justice

CER T IFI C A TI ON

Pursuant to Article VIII, Section 13 of the Constitution, 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. ~~·~ ERNESTO D. ACOSTA

Presiding Justice

10 9