REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SECOND DIVISION

MTI ADVANCED TEST CTA Case No . 9494

DEVELOPMENT CORPORATION,
Petitioner,
Members:

-versus- CASTANEDA, JR., Chairperson

CASANOVA, and
MANAHAN, JJ.

COMMISSIONER OF INTERNAL Promulgated:

REVENUE, JIJI_ 2 6 2018
Respondent. /
){- - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - ~- - ){
DECISION f ~:nf"" ·
MANAHAN, J. :

This involves a Petition for Review 1 filed by MTI Advanced

Test Development Corporation for its claim for refund or
issuance of a ta){ credit certificate (TCC) in the total amount of
P9,732,065.36, allegedly representing its unutilized input
value-added ta){es (VAT) paid on its domestic purchases of
ta){able goods, services and capital goods , and importation of
goods and capital goods attributable to its zero-rated sales for
the period covering April 1, 2014 to March 31, 2015.

THE PARTIES

Petitioner MTI Advanced Test Development Corporation is

a corporation duly organized and e){isting under and by virtue
of the laws of the Republic of the Philippines and duly registered
with the Securities and E){change Commission (SEC), with
principal office at 3rd Floor BPI Philam Life Alabang, Alabang-

I Docket, CTA Case No. 9494, pp. 10-20. ~

DECISION
CTA Case No. 9494
Page 2 of 18

Zapote Road corner Acacia Avenue, Madrigal Business Park,

Alabang, Muntinlupa City.2

Respondent is the duly appointed Commissioner of the

BIR who has the power to decide disputed assessments, refunds
of internal revenue taxes, fees or other charges, penalties
imposed in relation thereto or other matters arising under the
1997 National Internal Revenue Code (NIRC), as amended, or
other laws or portions thereof administered by the BIR. He
holds office at the BIR National Office Building, Agham Road,
Diliman, Quezon City.

THE FACTS

Petitioner is engaged in the business of providing

engineering support services in the areas of product validation
and qualification, characterization and development of
manufacturing test procedures, and engaged in promoting
business opportunities in connection with a variety of
complementary metal oxide semiconductor (CMOS)
components to support the market for cost-effective embedded
control solutions. 3 Petitioner is also registered with the Bureau
of Internal Revenue (BIR) as a VAT taxpayer, with Taxpayer
Identification No. (TIN) 006-674-191-000. 4

Being engaged in the above-mentioned business,

petitioner was registered as a "New IT Export Service Firm in
the Field of Software Development (Test Programs for
Semiconductor Industry)" with the Board of Investments (BOI),
enjoying the privileges granted by the said agency. It was
issued a Certificate of Registration No. 2007-109. 5

For the period covering April 1, 2014 to March 31, 2015,

petitioner generated and recorded zero-rated sales in the
amount of P284,935,399.08, which was paid for in acceptable
foreign currency and inwardly remitted in accordance with the
existing regulations of the Bangko Sentral ng Pilipinas (BSP),
pursuant to Section 106(A)(2)(a)(1), (2) and (3) ofthe 1997 NIRC,
as amended. In the same period, petitioner incurred and paid
input taxes amounting to P9,732,065.36 from domestic

2 Docket, Par. 1, Stipulation of Facts, Joint Stipulation of Facts and Simplification of

Issues (JSFSI), pp. 166-167.
3 Id., Exhibit "ICPA-P9-4", CD; Par. 3, Petition for Review, p. 11.

4 Id., Exhibit "P-13", p. 319.

s Id., Exhibit "P-12", p. 318.~
DECISION
CTA Case No. 9494
Page 3 of 18

purchases of goods, services and capital goods, and importation

of goods and capital goods which were all attributable to
petitioner's zero-rated sales. 6

On June 23, 2016, petitioner filed its Applications for Tax

Credits/Refund (BIR Form No. 1914) with the BIR, requesting
the refund of its purported unutilized input VAT for the four
quarters of fiscal year (FY) 2015, summarized as follows:

PERIOD COVERED TAX CREDIT APPLIED

(FY 2015)
1st Quarter7 p 2,703,888.05
2nd Quarters 2,127,439.23
3rd Quarter9 2,291,267.68
4th Quarter 1o 2,609,4 70.40
TOTAL p 9, 732,065.36

Due to respondent's inaction on petitioner's application for

refund/tax credit within the period provided under Section 112
of the 1997 NIRC, as amended, petitioner filed the instant
Petition for Review II before this Court on November 17, 2016.

Respondent filed his Answer via registered mail on

January 13, 2017 which was received by the Court on January
19, 2017, interposing the following special and affirmative
defenses: 12

"SPECIAL AND AFFIRMATIVE DEFENSES"

5. He reiterates and repleads the preceding

paragraphs of this Answer as part of his Special and
Affirmative Defenses;

6. Taxes paid and collected are presumed to

have been made in accordance with law, hence, not
refundable;

6 Pars. 6-8, Petitioner's Memorandum, docket, p. 360.

7 Exhibit "P-5", docket, p. 296.
B Exhibit "P-6", docket, p. 297.
9 Exhibit "P-7", docket, p. 298.
1o Exhibit "P-8", docket, p. 299.
11 Docket, pp. 10-18.
12 Docket, pp. 72-75~
DECISION
CTA Case No. 9494
Page 4 of 18

7. Petitioner's claim for refund or issuance of

tax credit certificate 1n the amount of
Php9, 732,065.36, allegedly representing its
unutilized input VAT attributable to its zero-rated
export sales for the taxable period covering April 1,
2014 to March 31, 2015 evidently failed to comply
with the substantiation requirements prescribed
under Revenue Regulations No. 16-2005 in relation
to Section 113 and 237 of the 1997 Tax Code, as well
as, the conditions/requirements prescribed under
Section 112(A)(C)(D) of the 1997 Tax Code.

8. Petitioner has the burden of proof to

establish its right to the claimed refund and failure
to adduce sufficient proof is fatal to its claim. 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. (J.R.A. Philippines, Inc.,
vs. CIR, G.R. No. 171307, August 28, 2013)

9. Petitioner failed to comply with the

conditions/requirements prescribed under Sections
106(A)(2)(a)(1) and 112(A)(C)(D) ofthe 1997 Tax Code.

10. The amount subject of the claim for

refund/tax credit of petitioner do not pertain in full
to its input VAT attributable to its zero-rated export
sales for the taxable period covering April 1, 20 14 to
March 31, 2015, pursuant to Section 106 (A)(2)(a)(1)
of the 1997 Tax Code;

11. 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) Following the
latin principle, Ei incumbit probatio qui dicit, no
qui negat (He who asserts, not he who denies, must
prove), petitioner has the burden to prove with the
required quantum of evidence of its entitlement to
the claimed refund, and the court will render its
decision on the basis of the facts proven and the.ar--
DECISION
CTA Case No. 9494
Page 5 of 18

evidence presented applying the law and

jurisprudence applicable to the issue under
consideration, even if no controverting evidence was
ever presented by the respondent."

Petitioner filed its Pre-Trial Brief on January 30, 2017;

while respondent submitted his Pre-Trial Brief on January 31,
2017.13 The parties then submitted their Joint Stipulation of
Facts and Simplification of Issues1 4 on February 15, 2017.

Petitioner filed a Motion to Commission an Independent

Certified Public Accountant 15 on February 20, 2017; which the
Court granted by commissioning Ms. Ofelia C. Flores as the
Independent Certified Public Accountant (CPA) for the case.
The Court-commissioned Independent CPA submitted her
report on April 25, 2017.16

Petitioner presented Ms. Beverly M. Viray 17 , its Accounting

Supervisor and Treasurer, and Ms. Maria Eugene M. Ibaiiez 1B,
its Accountant, who testified during the hearing on March 15,
2017 19 and identified their judicial affidavits.

Subsequently, petitioner filed its Formal Offer of

Evidence2o on June 19, 20 17, consisting of Exhibits "P-1" to "P-
18-1" and "ICPA P1-1" to "ICPA P11-32" inclusive of
'
submarkings. On the other hand, respondent filed a
Manifestation and Motion manifesting his lack of objection to
the admission of petitioner's exhibits.21

In the Resolution22 dated August 11, 2017, the Court

admitted all of petitioner's formally offered documentary
evidence.

During the hearing on August 14, 2017, respondent,

through counsel, manifested that he will not be presenting any

13 Docket, pp. 140-149 and 160-162, respectively.

14 Docket, pp. 166-170.
1s Docket, pp. 171-173.
16 Exhibit "P-18", ICPA Report.
17 Exhibit "P-14, Judicial Affidavit, docket, pp. 247-260.
18 Exhibit "P-15, Judicial Affidavit, docket, pp. 150-157.

19 Minutes of the Hearing, docket, p. 196.

2o Docket, pp. 231-246.
21 Docket, p. 336.
22 Docket, pp. 340-341 ~
DECISION
CTA Case No. 9494
Page 6 of 18

evidence. 23 The Court then directed the parties to submit their

respective memoranda within thirty (30) days.2 4

On September 13, 2017, respondent manifested that he is

adopting all his factual/legal arguments and affirmative
defenses stated in his Answer to the Petition for Review as his
Memorandum.2s On the other hand, the Court received the
Memorandum26 of petitioner on September 27, 2017.

Hence, the Court declared the case submitted for decision

as of October 10, 2017.27

ISSUES

The parties submitted the following issues for the Court's

resolution:28

1. Whether or not petitioner's alleged export

sales for the period April 1, 20 14 to March 31, 20 15
are zero-rated for VAT purposes under Sections 106
(A)(2)(a)( 1) of the 1997 NIRC, as amended.

2. Whether or not petitioner has carried over to

the succeeding taxable quarters I years the alleged
unutilized input VAT paid on its domestic purchases
of goods, services and capital goods, as well as
importation of goods and capital goods allegedly
attributable to its zero-rated export sales for the
period April 1, 20 14 to March 31, 20 15 and applied
the same amount in full to its output VAT liability for
the said period, if any.

3. Whether or not the amount ofP9,732,065.36,

being claimed by petitioner as unutilized input VAT
paid on its domestic purchases of goods, services and
capital goods, as well as importation of goods and
capital goods and attributable to its zero-rated

23 Docket, Minutes of the Hearing, p. 342.

24 Jd., Order, p. 343.
2s Id., Manifestation and Motion, pp. 354-355.
26 Id. at pp. 358-382.
27 Id., Resolution, p. 385.
28 Id., Issues, JSFSI, pp. 168-169. ~
DECISION
CTA Case No. 9494
Page 7 of 18

export sales for the period April 1, 20 14 to March 31,

2015, pertains in full to its zero-rated export sales.

4. Whether or not petitioner has com plied with

the mandatory substantiation requirements under
Section 113 and 237 of the 1997 NIRC, as amended,
in relation to Revenue Regulations No. 16-2005.

5. Whether or not petitioner has complied with

the requirements under Section 112(A)(C)(D) of the
1997 NIRC, as amended.

6. Whether or not petitioner is entitled to the

claim for refund/tax credit in the amount of
P9,732,065.36, representing its unutilized input VAT
arising from its domestic purchases of goods,
services and capital goods, as well as importation of
goods and capital goods and attributable to its zero-
rated export sales for the period April 1, 20 14 to
March 31, 2015.

The foregoing issues can be summarized as follows:

Whether or not petitioner is entitled to a refund

or issuance of TCC in the amount of P9,732,065.36,
representing its alleged unutilized input VAT arising
from its domestic purchases of goods, services and
capital goods, as well as importation of goods and
capital goods and attributable to its zero-rated export
sales for the period covering April 1, 20 14 to March
31, 2015.

Petitioner's Arguments29

Petitioner argues that it is entitled to a tax credit/refund

of input VAT in the total amount of Php9,732,065.36 covering
the period from April1, 2014 to March 31, 2015 and it is a VAT
registered entity subject to VAT at zero percent on its export
sales.

Petitioner also argues that its claim for refund was timely
filed and its export sales of taxable goods and services to
persons doing business outside the Philippines are paid for in
29 Supra. Note 26.~
DECISION
CTA Case No. 9494
Page 8 of 18

acceptable foreign currency. Further, its input VAT were all

attributable to its zero-rated sales and such input taxes have
not been applied against any output tax. Also, its documentary
and testimonial evidence supports its claim for tax
credit/refund unlike that of respondent who did not present any
evidence to oppose its claim.

Respondent's Counter-Arguments3o

Respondent, on the other hand, argues that petitioner has

the burden of proof to establish its right to the claimed refund
and it failed to comply with the conditions/requirements
prescribed under Sections 106(A)(2)(a)(1) and 112(A)(C)(D) ofthe
1997 NIRC, as amended.

Respondent also argues that the amount subject of the

claim for tax refund/ credit is not attributable to its zero-rated
export sales for taxable period covering April 1, 20 14 to March
31, 2015 pursuant to Section 106(A)(2)(a)( 1) of the 1997 NIRC,
as amended.

RULING OF THE COURT

Pertinent to the resolution of the instant case is Section

112(A) and (C) of the 1997 NIRC, as amended, which provides:

"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

30 Supra. Note 25. ~

DECISION
CTA Case No. 9494
Page 9 of 18

of the volume of sales: Provided, finally, That for a person

making sales that are zero-rated under Section 108(8)(6), the
input taxes shall be allocated ratably between his zero-rated
and non-zero-rated sales.
XXX XXX XXX

(C) Period within which Refund or Tax Credit of Input

Taxes shall be Made. - In proper cases, the Commissioner
shall grant a refund or issue the tax credit certificate for
creditable input taxes within one hundred twenty ( 120) days
from the date of submission of complete documents in support
of the application filed in accordance with Subsection (A)
hereof.
In case of full or partial denial of the claim for tax refund
or tax credit, or the failure on the part of the Commissioner to
act on the application within the period prescribed above, the
taxpayer affected may, within thirty (30) days from the receipt
of the decision denying the claim or after the expiration of the
one hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals."

Based on the foregoing provision, in order to be entitled to

refund or tax credit of input tax due or paid attributable to zero-
rated or effectively zero-rated sales, the following requisites
must be satisfied:

1. that the claim for refund was filed within the two-
year prescriptive period;
2. that there must be zero-rated or effectively zero-
rated sales;
3. that input taxes were incurred or paid;
4. that such input taxes are attributable to zero-
rated or effectively zero-rated sales; and
5. that input taxes were not applied against any
output VAT liability.

Petitioner's claim for refund

was timely filed

The Court shall determine first whether petitioner

complied with the first requisite involving the timeliness of the
filing of the administrative and judicial claims.~
DECISION
CTA Case No. 9494
Page 10 of 18

Applying the above-quoted Section 112(A) of the 1997

NIRC, as amended, the administrative claim for the issuance of
tax credit certificate or the refund of input VAT must be filed
with the BIR within two (2) years after the close of the taxable
quarter when the zero-rated or effectively zero-rated sales were
made. Hence, petitioner's last day for filing of its administrative
claim for the four taxable quarters of FY ending March 31, 20 15
fell on the following dates:

END OF 2-YEAR
TAXABLE PERIOD PERIOD
April to June 20 14 (1st Quarter) June 30, 2016
July to September 2014 (2nd Quarter) September 30, 2016
October to December 2014 (3rd Quarter) December 31, 2016
January to March 2015 (4th Quarter) March 31, 2017

Clearly, petitioner timely filed its Applications for Tax

Credits/Refund with the BIRon June 23, 2016.31

As to the timeliness of petitioner's judicial claim, Section

112(C) of the 1997 NIRC, as amended, provides that the BIR
Commissioner has one hundred twenty (120) days from the date
of submission of the complete documents in support of the
application for refund or tax credit within which to grant or deny
the claim.

In case of full or partial denial by the BIR Commissioner,

the taxpayer's recourse is to file an appeal before the CTA within
30 days from receipt of the decision of the BIR Commissioner.
However, if after the 120-day period, the BIR Commissioner fails
to act on the application for refund/tax credit, the remedy of the
taxpayer is to appeal the inaction of the BIR Commissioner to
the CTA within 30 days from the expiration of the said period.

Counting from the filing of the administrative claim on

June 23, 2016, the 120-day period ended on October 21, 2016.
Frofil: the said date, petitioner had 30 days, or until November
20, 2016, to appeal with the Court of Tax Appeals. Clearly, the
Petition for Review was filed on time on November 17, 201632.
Therefore, both the administrative and the judicial claims for
refund were timely filed.

31 Docket, Exhibits "P-5" to "P-8", p. 296.

32 Jd., Petition for Review, p. 10. ~
DECISION
CTA Case No. 9494
Page 11 of 18

Petitioner's sales of service

were zero-rated or effectively
zero-rated sales

In its Quarterly VAT Returns for the FY ending March 31,

2015, petitioner reported zero-rated sales in the total amount of
P284,935,399.08, broken down as follows:

PERIOD AMOUNT OF
REFERENCE COVERED ZERO-RATED SALES
Exhibit "P-1 "33 1st Quarter p 67,333,600.27
Exhibit "P-2"34 2nd Quarter 71,850,795.47
Exhibit "P-3"35 3rd Quarter 78,186,927.35
Exhibit "P-4"36 4th Quarter 67,564,075.99
TOTAL P284,935,399.08

Petitioner submits that its sales of services to its various

non-resident affiliates, the consideration for which was paid in
acceptable foreign currency and accounted for in accordance
with the rules and regulations of the BSP, are subject to zero
percent (Oo/o) VAT pursuant to Section 108(B)(2) of the 1997
NIRC, as amended, to wit:

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

or Lease of Properties. -

XXX XXX XXX

(B) Transactions Subject to Zero Percent (0%) Rate. - The

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

( 1) Processing, manufacturing or repacking goods for

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

(2) Services other than those mentioned in the

preceding paragraph rendered to a person engaged in
business conducted outside the Philippines or to a
nonresident person not engaged in business who is outside
the Philippines when the services are performed, the
consideration for which is paid for in acceptable foreign

33 Docket, pp. 261-263.

34 Id. at pp. 270-272.
35 Id. at pp. 279-281.
36 Id. at pp. 288-290.411c../""
DECISION
CTA Case No. 9494
Page 12 of 18

currency and accounted for in accordance with the rules and

regulations of the Bangko Sentral ng Pilipinas (BSP) ;"

In the case of Commissioner of Internal Revenue vs.

Burmeister and Wain Scandinavian Contractor Mindanao, Inc. 37 ,
the Supreme Court held that in order for the supply of services
to be VAT zero-rated under Section 108(B)(2) of the 1997 NIRC,
as amended, the following requisites must be satisfied:

1. the services must be other than processing,

manufacturing or repacking of goods;
2. the payment for such services must be in
acceptable foreign currency accounted for in
accordance with the BSP rules and regulations;
and
3. the recipient of such services is doing business
outside the Philippines.

Based on the foregoing requisites, petitioner's sales of

services indeed qualify for VAT zero-rating, as discussed 1n
detail below.

First,
petitioner is primarily engaged in providing
engineering services in the areas of product validation and
qualification, characterization and the development of
manufacturing test procedures, and engaged in promoting
business opportunities in connection with a variety of CMOS
components to support the market for cost-effective embedded
control solutions; and in providing sales and technical support
services to Microchip sales channel and customers.38 Clearly,
the enumerated services are in no way the same as "processing,
manufacturing or repacking of goods".

Second, the services rendered by petitioner to its non-

resident foreign affiliates were duly supported by official
receipts and billing invoices, denominated in US Dollars, which
were inwardly remitted as evidenced by bank credit memos,
settlement advices, and Certifications issued by the Bank of the
Philippine Islands. 39

37 G.R. No. 153205, January 22, 2007.

38 Exhibit "ICPA-P9-4".
39 Exhibits "ICPA-P1-1" to "ICPA-P1-156", CD.~
 DECISION
CTA Case No. 9494
Page 13 of 18

Third,
to be considered as a non-resident foreign
corporation doing business outside the Philippines, each entity
must be supported at the very least by both SEC Certification
of Non-Registration of Company and proof of incorporation or
registration in a foreign country (e.g., Certificate of
Incorporation, Memorandum of Association, and Articles of
Association). Thus, the following clients of petitioner shall be
considered as non-resident foreign corporations doing business
outside the Philippines:

Certificate of
SEC Incorporation/
Certification of Memorandum of
Non- Association/ Articles of
Customer Registration Association
Microchip Technology "ICPA-P11-2" to
"ICPA-P11-1"
Incorporated "ICPA-P11-11"
Microchip Technology "ICPA-P11-13" to
"ICPA-P11-12"
Ireland "ICPA-P11-29"
Microchip Technology "ICPA-P11-31" to
"ICPA-P11-30"
(Thailand) Co., Ltd. "ICPA-P11-32"

Accordingly, petitioner's sales of services rendered to the

afore-mentioned entities for the four quarters of FY ending
March 31, 2015 in the total amount of USD6,415,927.07, with
peso equivalent of P284,935,399.08, 4 0 qualify for VAT zero-
rating pursuant to Section 108(B)(2) of the 1997 NIRC, as
amended.

Petitioner incurred input VAT

that were attributable to its
sales of services and the
excess were unutilized

With the finding that petitioner had valid zero-rated sales

for the period of claim, the Court shall now determine the
amount of unutilized excess input VAT attributable thereto .

. For the 1st to 4th quarters of FY ending March 31, 2015,

petitioner reported input VAT in the total amount of
P9,732,065.36, which is the subject of the present claim,
broken down as follows:

40 Exhibit "P-18", Annex E.~

 DECISION
CTA Case No. 9494
Page 14 of 18

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Apr to June July to Sept Oct to Dec Jan to Mar TOTAL
2014 2014 2014 2015
Exhibit "P-1" Exhibit "P-2" Exhibit "P-3" Exhibit "P-4"
Input tax on
capital goods
exceeding I"1M
Input Tax Deferred
on Capital Goods
Exceeding P 1M p 1,493,332.27 p 2,890,730.07 p 2,874,781.11 p 5,021,704.41 p 12,280,547.86
Purchase of Capital
Goods Exceeding
P1M 1 625 890.00 198 238.00 2 479 239.52 1 446 637.38 5 750 004.90
Total p 3 119 222.27 p 3 088 968.07 p 5 354 020.63 p 6 468,341.79 p 18 030 552.76
Less: Input Tax on
Purchases of Capital
Goods exceeding
P 1M deferred for the
succeeding period 2 890 730.07 2 874 781.11 5 021 704.41 6 046 573.51 16 833 789.10
Amortization of
Input VAT p 228 492.20 p 214 186.96 p 332 316.22 p 421 768.28 p 1,196,763.66
Domestic
purchases of goods
and services other
than capital goods
Domestic Purchases
of Goods Other than
Capital Goods p 94,662.46 p 244,823.34 p 119,962.95 p 326,866.47 p 786,315.22
Domestic Purchases
of Services 1 589 628.39 981 675.93 1 107 306.51 1 077 808.65 4 756,419.48
Sub-total I" 1,684 290.85 I" 1 226 499.27 I" 1 227 269.46 I" 1 404 675.12 I" 5 542 734.70
Importation of Goods
Other than Capital
Goods 791 105.00 686 753.00 731 682.00 783 027.00 2 992 567.00
Total Input p 2, 703,888.05 p 2,127,439.23 p 2 291,267.68 p 2,609,470.40 p 9 732,065.36

To substantiate the foregoing, petitioner submitted in

evidence various official receipts and invoices issued by its local
suppliers, 41 importation and declaration documents, invoices,
certificate of inward remittances, bank credit memos, and
official receipts 4 2; which were duly examined by the Court-
commissioned Independent CPA. The Independent CPA Report
noted the following exceptions: 4 3

Disallowed
Finding Reference 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Input VAT
Purchases of local
goods not supported p p
AnnexA.1 38,107.65 p 55,362.91 93,470.56
by suppliers' sales
invoices
Purchase of local
goods: suppliers'
sales invoices with Annex A.2 1,869.64
1,869.64
incomplete
breakdown of VAT
Purchases of local
goods not within the p
Annex A.3 35,111.52 480.00
1st to 4th quarters of 35,591.52
2015
Purchases of
services not
supported by Annex A.4 p 2,040.74
2,040.74
suppliers' official
receipts

41 Exhibits "ICPA-P2-1" to "ICPA-P2-550", "ICPA-P4-1" to "ICPA-P4-2", and "ICPA-PS-1"

to "ICPA-P4-20".
42 Exhibits "ICPA-P3-1" to "ICPA-P3-968".
43 Exhibit "P-18", Annex G.~
 DECISION
CTA Case No. 9494
Page 15 of 18

Purchases of
services not within
Annex A.5 108.56 26,838.70
the 1st to 4th quarters 26,947.26
of 2015
Purchases of
imported goods not
Annex A.6 14,244.00
within the 1st to 4th 14,244.00
quarters of 2015
Purchase of
imported goods not
supported by AnnexA.7 919.00
919.00
suppliers'
commercial invoice
Purchases of
imported goods not
supported by
Statement of Annex A.8 6,135.00 27,804.00 33,939.00
Settlement of Duties
and Taxes from
Bureau of Customs
Purchase of capital
goods not supported
AnnexA.9 29,560.30
by suppliers' sales 29,560.30
invoices
Reclassification of
input VAT
incorrectly classified
as deferred input
Annex A.lO 10,295.75 52,836.45
VAT from CIP- 63,132.20
Capital Goods
instead of purchase
of services
Disallowed deferred
input VAT from CIP-
Services treated as Annex A.ll 18,545.51 18,545.51 18,545.51 18,545.51
74,182.04
capital goods from
previous year
Reclassification of
input VAT
incorrectly classified
as deferred input Annex A.12 6,035.71 11,801.19
17,836.90
VAT from aggregate
capital goods below
Pl 000 000
Grand Total p 68,009.59 p 56,653.16 p 43,052.71 p 226,017.70 p 393,733.16

Upon further scrutiny of the supporting documents, the

Court finds that in addition to the exceptions noted by the
Independent CPA, the following input taxes amounting to
P65,0 18.65 should be disallowed for the reasons stated below:

Annex D.l Disallowed Input

Date Supplier Exhibit VAT
1. Input tax on purchases of services not separately indicated in the official
receipts
23-May-14 Golden Reef Food Services, Inc. "ICPA-P2-42" p 161.57
13-Aug-14 Federal Express Pacific, Inc. "ICPA-P2-171" 107.57
13-Jan-15 Teradyne Philippines, Ltd. "ICPA-P2-526" 50,065.05
2. Input tax on purchases of services supported by official receipt dated outside
the period of claim
Center for Training & Development,
10-Aug-15 Inc. "ICPA-P2-157" 10,140.00
3. Input tax on purchase of services supported by official receipt but no year
indicated therein
27-0ct Cavallino Inc. "ICPA-P2-300" 296.25
4. Input tax on purchase of goods supported by invoice not duly registered with
theBIR
 DECISION
CTA Case No. 9494
Page 16 of 18

9-Mar-15 Abenson Ventures, Inc. "ICPA-P2-409" 4,248.21

Total p 65,018.65

Also, the amortizations of the input VAT on purchases of

capital goods totaling P4 76,926.60, as presented below, should
be disallowed from petitioner's claim for failure to present the
supporting documents:

Amortization (Annex D.4) Total

Disallowed
Particulars l•t Quarter 2nd Quarter 3rd Quarter 4th Quarter Input VAT
Temperature
Forcing System p 8,964.60 p 5 976.40 p - p - p 14,941.00
Semiconductor
System 31,534.95 31,534.95 31,534.95 31 534.95 126,139.80
Thermoiet 8,908.71 8,908. 71 8,908.71 8,908.71 35,634.84
IQxel Test System
and Rack Mount
Kit 8,420.52 8,420.52 8,420.52 8,420.52 33,682.08
Base Channel BD
I SW Enabled to
4M 41,719.20 - - - 41,719.20
Thermojet ES-
Precision 9,833.70 9,833.70 9 833.70 9 833.70 39,334.80
Diamond 10
System 32,152.77 32,152.77 32,152.77 32,152.77 128,611.08
PABX Network
System 14 215.95 14,215.95 14,215.95 14 215.95 56,863.80
Total P155, 750.40 P111,043.00 P105,066.60 Pl05,066.60 P476,926.60

In sum, only the amount of P8,796,386.95 represents

petitioner's valid input VAT attributable to its zero-rated sales
for the four quarters ofFY ending March 31, 2015, as computed
below:

Input VAT Claim p 9,732,065.36

Less: Disallowances
Per ICPA Findings 393,733.16
Per this Court's Findings
Input VAT on purchases of goods and services p 65,018.65
Amortizations of input VAT on purchases of
capital goods exceeding P 1Million 476,926.60 541,945.25
Substantiated Input VAT p 8,796,386.95

As to whether or not the said input VAT was applied

against any output VAT and/or carried over to the succeeding
taxable quarters, petitioner's Quarterly VAT Returns for the
subject period of claim showed that petitioner had no output
tax liability against which the claimed input VAT may be applied
or credited. 44 Moreover, as evidenced by its Quarterly VAT
44 Docket, Line 198, Exhibits "P-1" to "P-4", pp. 261, 270, 279, and 288.~
DECISION
CTA Case No. 9494
Page 17 of 18

Returns 4 s, the input VAT claim was deducted from petitioner's

total available input tax in the second to fourth quarters of FY
ending March 31, 20 15 and first quarter of the following taxable
year. Consequently, the subject claim no longer formed part of
the excess input VAT of P3,344,544.96 as of the first quarter of
FY ending March 31, 2016.

WHEREFORE, premises considered, the instant Petition

for Review is PARTIALLY GRANTED. Accordingly, respondent
is ORDERED TO REFUND OR TO ISSUE A TAX CREDIT
CERTIFICATE in favor of petitioner in the amount of
P8,796,386.95, representing the latter's unutilized input VAT
attributable to its zero-rated sales for the four quarters of FY
ending March 31, 2015.

SO ORDERED.

t1~~7.
CATHERINE T. MANAHAN
Associate Justice

WE CONCUR:

~~~c.~~~~ o~
Jlf'ANITO C. CASTANED.N(JR. CAESAR A. CASANOVA
Associate Justice Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were

reached in consultation before the case was assigned to the
writer of the opinion of the Court's Division.

~~c~~"Q
JuANITO C. CASTANE:6A, JR.
Associate Justice
Chairperson

45 Id., Exhibits "P-2" to "P-4" and "P-9", pp. 270, 279, 288, and 300.
DECISION
CTA Case No. 9494
Page 18 of 18

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution and

the Division Chairperson's Attestation, it is hereby certified that
the conclusions in the above decision were reached in
consultation before the case was assigned to the writer of the
opinion of the Court.

Presiding Justice