COMMISSIONER OF INTERNAL REVENUE v.

MANILA MINING CORPORATION 468 For a judicial claim for refund to prosper, however, MMC must not only prove that
SCRA 571 (2005) it is a VAT registered entity and that it filed its claims within the prescriptive period.
It must substantiate the input VAT paid by purchase invoices or official receipts. It is
For a judicial claim for refund to prosper, the party must not only prove that it is a required that a photocopy of the purchase invoice or receipt evidencing the value
VAT registered entity, it must substantiate the input VAT paid by added tax paid shall be submitted together with the application. This MMC failed to
purchase invoices or official receipts. do.

Respondent Manila Mining Corporation (MMC), a VAT-registered enterprise, filed

its VAT Returns for the year of 1991 with the BIR. MMC, relying on Sec. 2 of
Executive Order (E.O.) 581 as amended which provides that gold sold to the Central
Bank is considered an export sale which under Section 100(a)(1) of the NIRC, as
amended by E.O. 273, is subject to zero-rated if such sale is made by a VAT-
registered person, filed an application for tax refund/credit of the input VAT it paid
from such year. The Commissioner of Internal Revenue (CIR) failed to act upon
MMC’s application within sixty (60) days from the dates of filing. MMC was then
filed a Petition for Review against the CIR before the Court of Tax Appeals (CTA)
seeking the issuance of tax credit certificate or refund. The CIR specifically denied
the veracity of the amounts stated in MMC’s VAT returns and application for
credit/refund as the same continued to be under investigation. However, such was
not verified prompting MMC to file a “SUPPLEMENT (To Annotation of Admission)”
alleging that as the reply was not under oath, “an implied admission of its requests
arose” as a consequence thereof. The CTA granted MMC’s Request for Admissions
and denied the CIR’s Motion to Admit Reply. The CTA denied MMC’s claim for
refund of input VAT for failure to prove that it paid the amounts claimed as such for
the year 1991, no sales invoices, receipts or other documents as required having
been presented. Upon appeal of MMC to the Court of Appeals (CA), it reversed the
decision of the CTA and granted MMC’s claim for refund or issuance of tax credit
certificates on the ground that there was no need for MMC to present the
photocopies of the purchase invoices or receipts evidencing the VAT paid and the
best evidence rule is misplaced since this rule does not apply to matters which have
been judicially admitted.

ISSUE: Whether or not MMC adduced sufficient evidence to prove its claim for
refund of its input VAT for taxable year 1991.

HELD: As export sales, the sale of gold to the Central Bank is zero-rated, hence,
no tax is chargeable to it as purchaser. Zero rating is primarily intended to be
enjoyed by the seller – MMC, which charges no output VAT but can claim a refund
of or a tax credit certificate for the input VAT previously charged to it by suppliers.
NORTHERN MINDANAO POWER CORPORATION, Petitioner VS. COMMISSIONER OF
INTERNAL REVENUE, Respondent (G.R. No. 185115, February 18, 2015)
FACTS:
 Petitioner is engaged in the production sale of electricity as an independent
power producer and sells electricity to National Power Corporation (NPC). It
allegedly incurred input value-added tax (VAT) on its domestic purchases of goods
and services that were used in its production and sale of electricity to NPC. For the
3rd and the 4th quarters of taxable year 1999, petitioner’s input VAT totaled to
P2,490,960.29, while that incurred for all the quarters of taxable year 2000
amounted to P3,920,932.55.
 Petitioner filed an administrative claim for a refund on 20 June 2000 for the 3rd
and the 4th quarters of taxable year 1999, and on 25 July 2001 for taxable year
2000 in the sum of P6,411,892.84.
 Alleging inaction of respondent on these administrative claims, petitioner filed a
Petition with the CTA on 28 September 2001. The CTA First Division denied the
Petition and the subsequent Motion for Reconsideration for lack of merit. The Court
in Division found that the term "zero-rated" was not imprinted on the receipts or
invoices presented by petitioner in violation of Section 4.108-1 of Revenue
Regulations No. 7-95. Petitioner failed to substantiate its claim for a refund and to
strictly comply with the invoicing requirements of the law and tax regulations.
 On appeal to the CTA En Banc, the Petition was likewise denied. The court ruled
that for every sale of services, VAT shall be computed on the basis of gross receipts
indicated on the official receipt. Official receipts are proofs of sale of services and
cannot be interchanged with sales invoices as the latter are used for the sale of
goods.
ISSUE:
1.) Whether or not the CTA acquired jurisdiction over the claim for a refund of input
VAT covering the 3rd and the 4th quarters of taxable year 1999 and on 25 July 2001
covering all the quarters of taxable year 2000?
2.) Whether or not Section 4.108-1 of Revenue Regulations (RR) No. 7- 95 which
expanded the statutory requirements for the issuance of official receipts and
invoices found in Section 113 of the 1997 Tax Code by providing for the additional
requirement of the imprinting of the terms “zero-rated” is constitutional?
RULING:
The CTA did not acquire jurisdiction over the claim for a refund of input VAT
covering the 3rd and the 4th quarters of taxable year 1999 and taxable year 2000.
Pursuant to Section 112(D) of the NIRC of 1997, CIR had 120 days from the date of
submission of complete documents in support of the application within which to
decide on the administrative claim. The burden of proving entitlement to a tax
refund is on the taxpayer. Absent any evidence to the contrary, it is presumed that
in order to discharge its burden, petitioner attached to its applications complete
supporting documents necessary to prove its entitlement to a refund. Thus, the
120-day period for the CIR to act on the administrative claim commenced on 20
June 2000 and 25 July 2001.
Both judicial claims must be disallowed.
* Claim for a refund of input VAT covering the 3rd and the 4th quarters of taxable
year 1999: Counting 120 days from 20 June 2000, the CIR had until 18 October 2000
within which to decide on the claim of petitioner for the period covering the 3rd
and the 4th quarters of taxable year 1999. If after the expiration of that period
respondent still failed to act on the administrative claim, petitioner could elevate
the matter to the court within 30 days or until 17 November 2000.
Petitioner belatedly filed its judicial claim with the CTA on 28 September 2001.
Petitioner’s claim for the 3rd and the 4th quarters of taxable year 1999 was filed
319 days after the expiration of the 30-day period. It already lost its right to claim a
refund or credit of its alleged excess input VAT attributable to zero-rated or
effectively zero-rated sales for the 3rd and the 4th quarters of taxable year 1999 by
virtue of its own failure to observe the prescriptive periods.
* Claim for the refund of input VAT covering all quarters of taxable year 2000:
For the year 2000, records show that petitioner filed its Petition with the CTA on 28
September 2001 without waiting for the expiration of the 120-day period. Barely 64
days had lapsed when the judicial claim was filed with the CTA. On 28 September
2001
– the date on which petitioner filed its judicial claim for the period covering taxable
year 2000 - the 120+30 day mandatory period was already in the law and BIR Ruling
No. DA-489-03 had not yet been issued. Considering this fact, petitioner did not
have an excuse for not observing the 120+30 day period. The judicial claim was thus
prematurely filed for failure of petitioner to observe the 120- day waiting period.

Revenue Regulations (RR) No. 7-95 is constitutional. In fact, this Court has
consistently held as fatal the failure to print the word "zero-rated" on the VAT
invoices or official receipts in claims for a refund or credit of input VAT on zero-
rated sales, even if the claims were made prior to the effectivity of R.A. 9337.
Clearly then, the present Petition must be denied.

A VAT invoice is the seller's best proof of the sale of goods or services to the buyer,
while a VAT receipt is the buyer's best evidence of the payment of goods or services
received from the seller. A VAT invoice and a VAT receipt should not be confused
and made to refer to one and the same thing. Certainly, neither does the law intend
the two to be used alternatively.

QUESTIONS:

a.) What are the information(s) contained in the VAT invoice or VAT official receipt?
Cite your legal basis.

b.) If in case, the taxpayer claiming refund failed to print the needed information in
the VAT invoice or VAT official receipt, will it cause dismissal of the claim? Explain
your answer.
Contex Corporation vs Commissioner of Internal Revenue favor of the government. Otherwise stated, any exemption from the payment of a
tax must be clearly stated in the language of the Law, it cannot be merely implied
(G.R. No.151135, July 2, 2004) therefrom. In the case of the VAT, Section 109, RA 8424, clearly enumerates the
transactions exempted from VAT. The services rendered by COMASERCO do not fall
FACTS: Petitioner Contex Corporation (CONTEX) is a domestic corporation engaged
within the exemptions.
in the business manufacturing hospital textiles and garments and other hospital
supplies for export. Petitioner’s place of business is at the Subic Bay Freeport Zone
(SBFZ). It is duly registered with the Subic Bay Metropolitan Authority (SBMA) as a
Subic Freeport Enterprise, pursuant to the provisions of RA 7227. As an SBMA-
registered firm, petitioner is except from all local and national international
revenue taxes except for the 5% preferential tax provided in RA 7227. Petitioner
also registered with the BIR as a The Court of Appeals reversed the CTA’s ruling,
hence, this petition.

Issues: Was COMASERCO engaged in the sale of services, and thus, liable to pay
VAT?

HELD: Yes. Section 99 of the National Internal Revenue Code of 1986 provides
that: “any person who, in the course of trade or business sells, barters or
exchanges goods, renders services, or engages in similar transactions and any
person, who, imports goods shall be subject to VAT imposed in Sections 100 to 102
of this Code. The Higher Court clarified the meaning of the term “in the course of
trade or business” by citing Section 105 of RA 8424 which took effect on January 1,
1998.

The phrase “in the course of trade or business” means the regular conduct or
pursuit of a commercial or an economic activity, including transactions incidental
thereto, by any person regardless of whether or not the person engaged therein is
a non-stock non-profit organization (irrespective of the disposition of its net income
and whether or not it sells exclusively to members or their guests) or government
entity.

It is immaterial whether the primary purpose of a corporation indicates that

it receives payments for services rendered to its affiliates on a reimbursement-of-
cost basis only, without realizing profit, for purposes of determining liability for VAT
on services rendered. As long as the entity provides services for a fee, remuneration
or consideration, then the service rendered is subject to VAT.

Secondly, it is a rule that business taxes are the lifeblood of the nation, statutes
that allow exemptions are construed strictly against the grantee and liberally in

GR No. 153866 CIR
vs. Seagate
FACTS: Respondent is a resident foreign
corporation duly registered with the Securities
and Exchange Commission to do business in the
Philippines and is registered with the
Philippine Export Zone Authority (PEZA). The
respondent is Value Added Tax-registered entity
and filed for the VAT returns. An
administrative claim for refund of VAT input
taxes in the amount of P28,369,226.38 with
supporting documents (inclusive of the
P12,267,981.04 VAT input taxes subject of this
Petition for Review), was filed on 4 October
1999, but no final action has been received by
the respondent from the petitioner on the claim
for VAT refund. CIR asserts that by virtue of
the PEZA registration alone of respondent, the
latter is not subject to the VAT. Consequently,
the capital goods and services respondent has
purchased are not considered used in the VAT
business, and no VAT refund or credit is due.
ISSUE: Whether or not Seagate, a VAT-Registered
PEZA Enterprise is entitled to tax refund or
credit.
HELD: Yes, Seagate is entitled to refund or
credit. As a PEZA-registered enterprise within
a special economic zone, respondent is entitled
to the fiscal incentives and benefit provided
for in either PD 66 or EO 226. It shall,
moreover, enjoy all privileges, benefits,
advantages or exemptions under both Republic
Act Nos. (RA) 7227 and 7844.
Respondent, which as an entity is exempt, is
different from its transactions which are not
exempt. The end result, however, is that it is
not subject to the VAT. The non-taxability of
transactions that are otherwise taxable is
merely a necessary incident to the tax
exemption conferred by law upon it as an
entity, not upon the transactions themselves.
The petitioner’s assertion that the capital
goods and services respondent has purchased are
not considered used in the VAT business, and
thus no VAT refund or credit is due is non
sequitur. On this matter, the SC held that by
the VAT’s very nature as a tax on consumption,
the capital goods and services respondent has
purchased are subject to the VAT, although at
zero rate.
Seagate has complied with all the requisites
for VAT refund or credit. First, respondent is
a VAT-registered entity. Second, the input
taxes paid on the capital goods of respondent
are duly supported by VAT invoices and have not
been offset against any output taxes.
To summarize, special laws expressly grant
preferential tax treatment to business
establishments registered and operating within
an ecozone, which by law is considered as a
separate customs territory. As such, respondent
is exempt from all internal revenue taxes,
including the VAT, and regulations pertaining
thereto. Its sales transactions intended for
export may not be exempt, but like its purchase
transactions, they are zero-rated. No prior
application for the effective zero rating of
its transactions is necessary. Being VAT-
registered and having satisfactorily complied
with all the requisites for claiming a tax
refund of or credit for the input VAT paid on
capital goods purchased, respondent is entitled
to such VAT refund or credit.
Having determined that respondent’s purchase
transactions are subject to a zero VAT rate,
the SC has determined that tax refund or credit
is in order.
Commissioner of Internal Revenue v. Seagate
Technology
G.R. No. 153866. February 11, 2005
FACTS:
Respondent is a resident foreign corporation duly registered with the
Securities and Exchange Commission to do business in the Philippines and
is registered with the Philippine Export Zone Authority (PEZA). The
respondent is Value Added Tax-registered entity and filed for the VAT
returns. An administrative claim for refund of VAT input taxes in the amount
of P28,369,226.38 with supporting documents (inclusive of
the P12,267,981.04 VAT input taxes subject of this Petition for Review), was
filed on 4 October 1999 and no final action has been received by the
respondent from the petitioner on the claim for VAT refund. Hence, petitioner
is sued in his official capacity. The Tax Court rendered a decision granting
the claim for refund and CTA affirmed the decision. Hence, the present
petition for certiorari.
ISSUE:
Whether or not respondent is entitled to the refund or issuance of Tax Credit
Certificate in the amount of P12,122,922.66 representing alleged unutilized
input VAT paid on capital goods purchased for the period April 1, 1998 to
June 30, 1999
HELD:
The Petition is unmeritorious. As a PEZA-registered enterprise within a
special economic zone, respondent is entitled to the fiscal incentives and
benefit provided for in either PD 66 or EO 226. It shall, moreover, enjoy all
privileges, benefits, advantages or exemptions under both Republic Act Nos.
(RA) 7227 and 7844. Respondent as an entity is exempt from internal
revenue laws and regulations. This exemption covers both direct and indirect
taxes, stemming from the very nature of the VAT as a tax on consumption,
for which the direct liability is imposed on one person but the
indirect burden is passed on to another. Respondent, as an exempt entity,
can neither be directly charged for the VAT on its sales nor indirectly made to
bear, as added cost to such sales, the equivalent VAT on its purchases. The
exemption is both express and pervasive, among other reasons, since RA
7916 states that “no taxes, local and national, shall be imposed on business
establishments operating within the ecozone”. Even though the VAT is not
 CIR vs Seagate Technology
imposed on the entity but on the transaction, it may still be passed on and,
therefore, indirectly imposed on the same entity -- a patent circumvention of

(Philippines) G.R. No. 153866,

the law. That no VAT shall be imposed directly upon business
establishments operating within the ecozone under RA 7916 also means that
no VAT may be passed on and imposed indirectly. Quando aliquid prohibetur
ex directo prohibetur et per obliquum. When anything is prohibited directly, it
is also prohibited indirectly. Special laws expressly grant preferential tax
11 February 2005
treatment to business establishments registered and operating within an Facts:
ecozone, which by law is considered as a separate customs territory. As
such, respondent is exempt from all internal revenue taxes, including the
VAT, and regulations pertaining thereto. Thus, the petition is denied and the Seagate Technology was claiming a refund for the input tax it pa
decision of lower courts affirmed. id on the unutilized capital goods purchased. It asserted that it is
exempt from all internal revenue taxes including VAT since it is
registered in and operating from the Special Economic Zone in
Naga, Cebu.

Issue:

Whether or not an entity registered and operating within an eco

zone is exempt from all revenue taxes including VAT.

Ruling:

Yes. Ecozone is considered by law as a separate customs authorit

y. It means that in such zone is created the legal fiction of foreig
n authority although it is a geographical territory of the Philippi
nes.

Under the cross-

border principle of the VAT system, no VAT shall be imposed to
form part of the cost of the goods destined for consumption outs
ide of the territorial border of the taxing authority. If exports of
goods and services from the Philippines to a foreign authority ar
e free of VAT, then the same rule holds for such exports from the
national territory to an ecozone.

This is to encourage foreign investments in order to win internat

ional markets and to promote sustainable economic growth.
Advertisements
THE COMMISIONER OF INTERNAL REVENUE, Petitioner, 
vs.
 CA Decision: PAGCOR was not only exempt from direct taxes but
ACESITE (PHILIPPINES) HOTEL CORPORATION, Respondent.
FACTS:
1. Acesite is the owner and operator of the Holiday Inn Manila Pavilion
Hotel. It leases 6,768.53 square meters of the hotel’s premises to the
Philippine Amusement and Gaming Corporation for casino operations
and caters food and beverages to PAGCOR’s casino patrons through
the hotel’s restaurant outlets.
2.For the period January 96 to April 1997, Acesite incurred VAT
amounting to P30,152,892.02 from its rental income and sale of food
and beverages to PAGCOR during said period. Acesite tried to shift
the said taxes to PAGCOR by incorporating it in the amount assessed
to PAGCOR but the latter refused to pay the taxes on account of its
tax exempt status.1awphi1.net
3. PAGCOR paid the amount due to Acesite minus the
P30,152,892.02 VAT while the latter paid the VAT to the
Commissioner of Internal Revenue.
4.However, Acesite belatedly arrived at the conclusion that its
transaction with PAGCOR was subject to zero rate as it was rendered
to a tax-exempt entity.
5. Acesite filed an administrative claim for refund with the CIR but the
latter failed to resolve the same. Acesite filed a petition with the Court
of Tax Appeals
CTA Decision: Petitioner is subject to zero percent tax insofar as
its gross income from rentals and sales to PAGCOR, a tax
exempt entity by virtue of a special law. Accordingly, the amounts
of P21,413,026.78 and P8,739,865.24, representing the 10% EVAT
on its sales of food and services and gross rentals, respectively from
PAGCOR shall be refunded to the petitioner..
was also exempt from indirect taxes like the VAT and
consequently, the transactions between respondent Acesite and
PAGCOR were "effectively zero-rated" because they involved the
rendition of services to an entity exempt from indirect taxes.
ISSUE/S: (1) whether PAGCOR’s tax exemption privilege includes the
indirect tax of VAT to entitle Acesite to zero percent (0%) VAT rate;
and (2) whether the zero percent (0%) VAT rate under then Section
102 (b)(3) of the Tax Code (now Section 108 (B)(3) of the Tax Code
of 1997) legally applies to Acesite.
HELD:
1. Yes. PAGCOR is exempt from payment of indirect taxes
It is undisputed that P.D. 1869, the charter creating PAGCOR, grants
the latter an exemption from the payment of taxes. Section 13 of P.D.
1869 pertinently provides exemption.
Under the above provision [Section 13 (2) (b) of P.D. 1869], the term
"Corporation" or operator refers to PAGCOR. Although the law does
not specifically mention PAGCOR’s exemption from indirect taxes,
PAGCOR is undoubtedly exempt from such taxes because the
law exempts from taxes persons or entities contracting with
PAGCOR in casino operations. Although, differently worded, the
provision clearly exempts PAGCOR from indirect taxes. In fact, it
goes one step further by granting tax exempt status to persons
dealing with PAGCOR in casino operations. The unmistakable
conclusion is that PAGCOR is not liable for the P30,152,892.02 VAT
and neither is Acesite as the latter is effectively subject to zero
percent rate under Sec. 108 B (3). R.A. 8424. (Emphasis supplied.)
2. The manner of charging VAT does not make PAGCOR liable to
said tax
It is true that VAT can either be incorporated in the value of the goods,
properties, or services sold or leased, in which case it is computed as
1/11 of such value, or charged as an additional 10% to the value.
Verily, the seller or lessor has the option to follow either way in
charging its clients and customer. In the instant case, Acesite followed
the latter method, that is, charging an additional 10% of the gross
sales and rentals. Be that as it may, the use of either method, and in
particular, the first method, does not denigrate the fact that PAGCOR
is exempt from an indirect tax, like VAT.
3. Yes. VAT exemption extends to Acesite
Thus, while it was proper for PAGCOR not to pay the 10% VAT
charged by Acesite, the latter is not liable for the payment of it as it is
exempt in this particular transaction by operation of law to pay the
indirect tax. Such exemption falls within the former Section 102 (b) (3)
of the 1977 Tax Code, as amended (now Sec. 108 [b] [3] of R.A.
8424), which provides:
Section 102. Value-added tax on sale of services – (a) Rate and base
of tax – There shall be levied, assessed and collected, a value-added
tax equivalent to 10% of gross receipts derived by any person
engaged in the sale of services x x x; Provided, that the following
services performed in the Philippines by VAT-registered persons shall
be subject to 0%
PAGCOR were zero-rated at the time it made the payments.
Solutio indebiti applies to the Government
Tax refunds are based on the principle of quasi-contract or solutio
indebiti and the pertinent laws governing this principle are found in
Arts. 2142 and 2154 of the Civil Code. When money is paid to
another under the influence of a mistake of fact, that is to say, on the
mistaken supposition of the existence of a specific fact, where it would
not have been known that the fact was otherwise, it may be
recovered.
Action for refund strictly construed; Acesite discharged the
burden of proof
Since an action for a tax refund partakes of the nature of an
exemption, which cannot be allowed unless granted in the most
explicit and categorical language, it is strictly construed against the
claimant who must discharge such burden convincingly.11

(3) Services rendered to persons or entities whose exemption

under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such
services to zero (0%) rate (emphasis supplied).

4. Acesite paid VAT by mistake

Considering the foregoing discussion, there are undoubtedly

erroneous payments of the VAT pertaining to the effectively zero-rate
transactions between Acesite and PAGCOR. Verily, Acesite has
clearly shown that it paid the subject taxes under a mistake of fact,
that is, when it was not aware that the transactions it had with
 ISSUE:
Is Republic Act 9337 constitutional insofar as it excluded PAGCOR from
the enumeration of GOCCs exempt from the payment of corporate
income tax?

HELD:
YES. The original exemption of PAGCOR from corporate income tax was
not made pursuant to a valid classification based on substantial
distinctions so that the law may operate only on some and not on all.
Instead, the same was merely granted due to the acquiescence of the
House Committee on Ways and Means to the request of PAGCOR.

The argument that the withdrawal of the exemption also violates the non-
impairment clause will not hold since any franchise is subject to
amendment, alteration or repeal by Congress.
However, the Court made it clear that PAGCOR remains exempt from
payment of indirect taxes and as such its purchases remain not subject to
VAT, reiterating the rule laid down in the Acesite case.

PHILIPPINE
AMUSEMENT AND
GAMING
CORPORATION VS.
BUREAU OF
INTERNAL REVENUE

PHILIPPINE AMUSEMENT v. BIR, GR No. 172087, 2011-03-15
Facts:
Petitioner further seeks to prohibit the implementation of Bureau of
Internal Revenue (BIR) Revenue Regulations No. 16-2005 for
being contrary to law.
With the enactment of R.A. No. 9337[10] on May 24, 2005, certain
sections of the National Internal Revenue Code of 1997 were
amended.
Different groups came to this Court via petitions for certiorari and
prohibition[11] assailing the validity and constitutionality of R.A. No.
9337
10% Value Added Tax (VAT) on sale of goods and properties
10% VAT on importation of goods
10% VAT on sale of services and use or lease of properties... the
Court dismissed all the petitions and upheld the constitutionality of
R.A. No. 9337.
On the same date, respondent BIR issued Revenue Regulations
(RR) No. 16-2005,[13] specifically identifying PAGCOR as one of
the franchisees subject to 10% VAT imposed under Section 108 of
the National Internal Revenue Code of 1997, as amended by R.A.
No. 9337.
Furthermore, according to the OSG,... public respondent BIR
exceeded its statutory authority when it enacted RR No. 16-2005,
because the latter's provisions are contrary to the mandates of
P.D. No. 1869 in relation to R.A. No. 9337.
Issues:
whether or not PAGCOR is still exempt... hether or not PAGCOR is
still exempt... t from
VAT with the enactment of R.A. No. 9337.
Ruling:
Anent the validity of RR No. 16-2005, the Court holds that the
provision subjecting PAGCOR to 10% VAT is invalid for being
contrary to R.A. No. 9337. Nowhere in R.A. No. 9337 is it provided
that petitioner can be subjected to VAT. R.A. No. 9337 is clear
only as to... the removal of petitioner's exemption from the
payment of corporate income tax, which was already addressed
above by this Court.
As pointed out by the OSG, R.A. No. 9337 itself exempts petitioner
from VAT pursuant to Section 7 (k) thereof... the following
transactions shall be exempt from the value-added tax:
Transactions which are exempt under international agreements to
which the Philippines is a signatory or under special laws
Petitioner is exempt from the payment of VAT, because
PAGCOR's charter, P.D. No. 1869, is a special law that grants
petitioner exemption from taxes.
Moreover, the exemption of PAGCOR from VAT is supported by
Section 6 of R.A. No. 9337
The following services performed in the Philippines by VAT-
registered persons shall be subject to zero percent (0%) rate;
Services rendered to persons or entities whose exemption under
special laws... subjects the supply of such services to zero percent
(0%) rate... although R.A. No. 9337 introduced amendments to
Section 108 of R.A. No. 8424 by imposing VAT on other services
not previously covered, it did not amend the portion of Section 108
(B) (3) that subjects to zero percent rate services performed by
VAT-registered persons to persons or entities whose exemption
under special laws or international agreements to which the
Philippines is a signatory effectively subjects the supply of such
services to 0% rate.

G.R. No. 164365

June 8, 2007

COMMISSIONER OF INTERNAL REVENUE vs. PLACER

DOME TECHNICAL SERVICES (PHILS.), INC.
 the refund of its reported total input VAT payments in
relation to the project it had contracted from PDTSL,
Facts: At the San Antonio Mines in Marinduque owned by
amounting to P43,015,461.98. Respondent argued that the
Marcopper Mining Corporation (Marcopper), mine tailings
revenues it derived from services rendered to PDTSL
from the Taipan Pit started to escape through the
qualified as zero-rated sales under Section 102(b)(2) of the
Makulapnit Tunneland Boac Rivers, causing the cessation
then Tax Code, since it was paid in foreign currency
of mining and milling operations, and causing potential
inwardly remitted to the Philippines. When the CIR did not
environmental damage. To contain the damage and
act on this claim, respondent duly filed a Petition
prevent the further spread of the tailing leak, Placer Dome,
for Review with the CTA. CTA ruled in favor of respondent
Inc. (PDI), the owner of 39.9% of Marcopper, undertook to
but only the resulting input VAT of P17,178,373.12 could
perform the clean-up and rehabilitation of the Makalupnit
be refunded. The Court of Appeals affirmed such ruling.
and Boac Rivers, through a subsidiary. To accomplish this,
PDI engaged Placer Dome Technical Services Limited
(PDTSL), a non-resident foreign corporation with office in
Issue: Whether Placer is entitled to the refund as the
Canada, to carry out the project. In turn, PDTSL engaged
revenues qualified as zero-rated sales.
the services of Placer Dome Technical Services
(Philippines), Inc. (respondent), a domestic corporation and
registered Value-Added Tax (VAT) entity, to implement the
project in the Philippines. PDTSL and respondent thus Ruling: Yes.
entered into an Implementation Agreement. Due to the
urgency and potentially significant damage to the
environment, respondent had agreed to immediately Section 102(b) Transactions Subject to Zero Percent (0%)
implement the project, and that PDTSL was to pay Rate ─ The following services performed in the Philippines
respondent "an amount of money, in U.S. funds, equal to by VAT-registered persons shall be subject to zero percent
all Costs incurred for Implementation Services as well as a (0%) rate:(1) Processing, manufacturing or repacking
fee agreed to one percent (1%) of such Costs." goods for other persons doing business outside the
Respondent amended its quarterly VAT returns. In the Philippines which goods are subsequently exported, where
amended returns, respondent declared a total input VAT the services are paid for in acceptable foreign currency and
payment of P43,015,461.98 for the said quarters, and accounted for in accordance with the rules and regulations
P42,837,933.60 as its total excess input VAT for the same of the Bangko Sentral ng Pilipinas (BSP); (2) Services
period. Then respondent filed an administrative claim for other than those mentioned in the preceding subparagraph,
the consideration for which is paid for in acceptable foreign
currency and accounted for in accordance with the rules rated, while imports are taxed. Confusion in zero rating
and regulations of the [BSP]. arises because petitioner equates the performance of a
particular type of service with the consumption of its output
It is Section 102(b)(2) which finds special relevance to this
abroad. The consumption contemplated by law does not
case. The VAT is a tax on consumption "expressed as a
imply that the service be done abroad in order to be zero-
percentage of the value added to goods or services"
rated. Consumption is the use of a thing in a way that
purchased by the producer or taxpayer. As an indirect tax
thereby exhausts it. Applied to services, the term means
on services, its main object is the transaction itself or, more
the performance or successful completion of a contractual
concretely, the performance of all kinds of services
duty, usually resulting in the performer's release from any
conducted in the course of trade or business in the
past or future liability. Its services, having been performed
Philippines. These services must be regularly conducted in
in the Philippines, are therefore also consumed in the
this country; undertaken in "pursuit of a commercial or an
Philippines. Unlike goods, services cannot be physically
economic activity;" for a valuable consideration; and not
used in or bound for a specific place when their destination
exempt under the Tax Code, other special laws, or any
is determined. Instead, there can only be a predetermined
international agreement. Yet even as services may be
end of a course when determining the service location or
subject to VAT, our tax laws extend the benefit of zero-
position for legal purposes. However, the law clearly
rating the VAT due on certain services. Under the last
provides for an exception to the destination principle; that
paragraph of Section 102(b), services performed by VAT-
is, for a zero percent VAT rate for services that are
registered persons in the Philippines, when paid in
performed in the Philippines, paid for in acceptable foreign
acceptable foreign currency and accounted for in
currency and accounted for in accordance with the rules
accordance with the rules and regulations of the BSP, are
and regulations of the BSP.
zero-rated. Petitioner invokes the "destination principle,"
citing that respondent’s services, while rendered to a non-
resident foreign corporation, are not destined to be
Further, the cost of respondent's service to be zero-rated
consumed abroad. Hence, the onus of taxation of the
need not be tacked in as part of the cost of goods
revenue arising there from is also within the Philippines.
exported. The law neither imposes such requirement nor
The Court in American Express debunked this
associates services with exported goods. It simply states
argument. As a general rule, the VAT system uses the
that the services performed by VAT-registered persons in
destination principle as a basis for the jurisdictional reach
the Philippines if paid in acceptable foreign currency and
of the tax. Goods and services are taxed only in the
accounted for in accordance with the rules and regulations
country where they are consumed. Thus, exports are zero-
of the BSP, are zero-rated. The service rendered by
respondent is clearly different from the product that arises
from the rendition of such service. The activity that creates
the income must not be confused with the main business in
the course of which that income is realized. The law neither
makes a qualification nor adds a condition in determining
the tax situs of a zero-rated service. Under this criterion,
the place where the service is rendered determines
the jurisdiction to impose the VAT. Performed in the
Philippines, such service is necessarily subject to its
jurisdiction, for the State necessarily has to have "a
substantial connection" to it, in order to enforce a zero rate.
The place of payment is immaterial; much less is the place
where the output of the service will be further or ultimately
used.

CIR V AMERICAN EXPRESS
INTERNATIONAL, INC.
(Phil. Branch)
GR 152609 | June 29, 2005 | J. Panganiban
Facts:
Respondent, a VAT taxpayer, is the Philippine Branch of AMEX USA and
was tasked with servicing a unit of AMEX-Hongkong Branch and
facilitating the collections of AMEX-HK receivables from card members
situated in the Philippines and payment to service establishments in the
Philippines.
It filed with BIR a letter-request for the refund of its 1997 excess input
taxes, citing as basis Section 110B of the 1997 Tax Code, which held that
“xxx Any input tax attributable to the purchase of capital goods or to zero-
rated sales by a VAT-registered person may at his option be refunded or
credited against other internal revenue taxes, subject to the provisions of
Section 112.”
In addition, respondent relied on VAT Ruling No. 080-89, which read,
“In Reply, please be informed that, as a VAT registered entity whose
service is paid for in acceptable foreign currency which is remitted
inwardly to the Philippine and accounted for in accordance with the rules
and regulations of the Central Bank of the Philippines, your service
income is automatically zero rated xxx”
Petitioner claimed, among others, that the claim for refund should be
construed strictly against the claimant as they partake of the nature of tax
exemption.
CTA rendered a decision in favor of respondent, holding that its services
are subject to zero-rate. CA affirmed this decision and further held that
respondent’s services were “services other than the processing,
manufacturing or repackaging of goods for persons doing business
outside the Philippines” and paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of BSP.
Issue:
W/N AMEX Phils is entitled to refund
Held:
Yes. Section 102 of the Tax Code provides for the VAT on sale of services
and use or lease of properties. Section 102B particularly provides for the
services or transactions subject to 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
BSP;
(2) Services other than those mentioned in the preceding subparagraph,
e.g. those rendered by hotels and other service establishments, the
consideration for which is paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the BSP
Under subparagraph 2, services performed by VAT-registered persons in
the Philippines (other than the processing, manufacturing or repackaging
of goods for persons doing business outside the Philippines), when paid
in acceptable foreign currency and accounted for in accordance with the
R&R of BSP, are zero-rated. Respondent renders service falling under the
category of zero rating.
As a general rule, the VAT system uses the destination principle as a
basis for the jurisdictional reach of the tax. Goods and services are taxed
only in the country where they are consumed. Thus, exports are zero-
rated, while imports are taxed.
In the present case, the facilitation of the collection of receivables is
different from the utilization of consumption of the outcome of such
service. While the facilitation is done in the Philippines, the consumption
is not. The services rendered by respondent are performed upon its
sending to its foreign client the drafts and bulls it has gathered from
service establishments here, and are therefore, services also consumed in
the Philippines. Under the destination principle, such service is subject to
10% VAT.

However, the law clearly provides for an exception to the destination

principle; that is 0% VAT rate for services that are performed in the
Philippines, “paid for in acceptable foreign currency and accounted for in
accordance with the R&R of BSP.” The respondent meets the following
requirements for exemption, and thus should be zero-rated:
(1) Service be performed in the Philippines

(2) The service fall under any of the categories in Section 102B of the
Tax Code

(3) It be paid in acceptable foreign currency accounted for in

accordance with BSP R&R.

CIR vs American Express

International, Inc
(Philippine Branch)
G.R. No. 152609 June 29, 2005
COMMISSIONER OF INTERNAL REVENUE, Petitioner,
vs.
AMERICAN EXPRESS INTERNATIONAL, INC. (PHILIPPINE
BRANCH), Respondent.
FACTS: Respondent] is a Philippine branch of American Express
International, Inc., a corporation duly organized and existing under and
by virtue of the laws of the State of Delaware, U.S.A. It is a servicing unit
of American Express International, Inc. – Hongkong Branch (Amex-HK)
and is engaged primarily to facilitate the collections of Amex-HK
receivables from card members situated in the Philippines and payment
to service establishments in the Philippines.
Amex Philippines registered itself with the Bureau of Internal Revenue
(BIR), as a value-added tax (VAT) taxpayer effective March 1988.
On April 1999 respondent filed with the BIR a letter-request for the refund
of its 1997 excess input taxes citing as basis therefor, Section 110 (B) of
the 1997 Tax Code to wit:
‘Section 110. Tax Credits. –
xxxxxxxxx
‘(B) Excess Output or Input Tax. – If at the end of any taxable quarter the
output tax exceeds the input tax, the excess shall be paid by the VAT-
registered person. If the input tax exceeds the output tax, the excess
shall be carried over to the succeeding quarter or quarters. Any input tax
attributable to the purchase of capital goods or to zero-rated sales by a
VAT-registered person may at his option be refunded or credited against
other internal revenue taxes, subject to the provisions of Section 112.’
There being no immediate action on the part of the [petitioner],
[respondent’s] petition was filed on April 15, 1999.
In addition, [respondent] relied on VAT Ruling No. 080-89, dated April 3,
1989, the pertinent portion of which reads as follows:
‘In Reply, please be informed that, as a VAT registered entity whose
service is paid for in acceptable foreign currency which is remitted
inwardly to the Philippines and accounted for in accordance with the rules
and regulations of the Central [B]ank of the Philippines, your service
income is automatically zero rated effective January 1, 1998. [Section
102(a)(2) of the Tax Code as amended]
B. Input taxes on domestic purchases of taxable goods and services
related to zero-rated revenues are available as tax refund in accordance
with Section 106 (now Section 112) of the [Tax Code] and Section 8(a) of
[Revenue] Regulations [(RR)] No. 5-87, to state:
‘Section 106. Refunds or tax credits of input tax. –
(A) Zero-rated or effectively Zero-rated Sales. – Any VAT-registered
person, except those covered by paragraph (a) above, whose sales are
zero-rated or are effectively zero-rated, may, within two (2) years after the
close of the taxable quarter when such sales were made, apply for the
issuance of tax credit certificate or refund of the input taxes due or
attributable to such sales, to the extent that such input tax has not been
applied against output tax. x x x. [Section 106(a) of the Tax Code]’
ISSUE: W/N petitioner is entitled to a refund
HELD: YES. Section 102 of the Tax Code provides:
“(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 subparagraph,
the consideration for which is paid for in acceptable foreign currency and
accounted for in accordance with the rules and regulations of the [BSP];’”
xxxxxxxxx
Under the last paragraph quoted above, services performed by VAT-
registered persons in the Philippines (other than the processing,
manufacturing or repacking of goods for persons doing business outside
the Philippines), when paid in acceptable foreign currency and accounted
for in accordance with the rules and regulations of the BSP, are zero-
rated.
Respondent is a VAT-registered person that facilitates the collection and
payment of receivables belonging to its non-resident foreign client, for
which it gets paid in acceptable foreign currency inwardly remitted and
accounted for in conformity with BSP rules and regulations. Certainly, the
service it renders in the Philippines is not in the same category as
“processing, manufacturing or repacking of goods” and should, therefore,
be zero-rated. In reply to a query of respondent, the BIR opined in VAT
Ruling No. 080-89 that the income respondent earned from its parent
company’s regional operating centers (ROCs) was automatically zero-
rated effective January 1, 1988.
In sum, having resolved that transactions of respondent are zero-rated,
the Court upholds the former’s entitlement to the refund as determined by
the appellate court. Moreover, there is no conflict between the decisions
of the CTA and CA. This Court respects the findings and conclusions of a
specialized court like the CTA “which, by the nature of its functions, is
dedicated exclusively to the study and consideration of tax cases and has
necessarily developed an expertise on the subject.”93
Furthermore, under a zero-rating scheme, the sale or exchange of a
particular service is completely freed from the VAT, because the seller is
entitled to recover, by way of a refund or as an input tax credit, the tax
that is included in the cost of purchases attributable to the sale
or exchange.94“[T]he tax paid or withheld is not deducted from the tax
base.” Having been applied for within the reglementary period,96
respondent’s refund is in order.
CAGUIOA, J:
This Petition for Review on Certiorari[1] under Rule 45
of the Rules of Court filed by petitioner Sitel
Philippines Corporation (Sitel) against the
Commissioner of Internal Revenue (CIR) seeks to
reverse and set aside the Decision dated November 11,
2011[2] and Resolution dated March 28, 2012[3] of the
Court of Tax Appeals (CTA) En Banc in CTA EB No.
644, which denied Sitel's claim for refund of unutilized
input value-added tax (VAT) for the first to fourth
quarters of taxable year 2004 for being prematurely
filed.

Facts

Sitel, a corporation organized and extsting under the

laws of the Philippines, is engaged in the business of
providing call center services from the Philippines to
domestic and offshore businesses. It is registered with
the Bureau of Internal Revenue (BIR) as a VAT
taxpayer, as well as with the Board of Investments on
pioneer status as a new information technology service
firm in the field of call center.[4]
 99.74 0,030.2 ,830.03 714.21 090.4 623.8 0.4 93.41
For the period from January 1, 2004 to December 31, 9 0 1 0
2004, Sitel filed with the BIR its Quarterly VAT 142,66
142,664 3,554, 2,846, 708,6 708,69
Returns as follows: 0 4,271.0 -
,271.00 922.94 225.66 96.58 6.58
0
Period 205,53 1,938, 4,8
Date Filed 517,73205,021 9,568, 7,629, 1,933,4
Covered 9,326.8 312.8 82.
6.36 ,590.46 047.25 734.40 30.40
1st Quarter 2004 26 April 2004 2 5 45
2nd Quarter 334,38 334,38 3,313,
26 July 2004 6,137, 3,005, 3,313,4
2004 0 4,766.4 4,766.4 455.6 -
028.74 573.11 55.63
3rd Quarter 25 October 8 8 3
2004 2004 1,025 862,52 863,5 23,10 15,927,179, 8,8 7,170,
4th Quarter 25 January ,536. 0,658. 46,194 2,712. 3,623 088. 12. 276.0
2004 2005[5] 10 23 .33 44 .57 87 85 2[6]
Sitel's Amended Quarterly VAT Returns for the first to On March 28, 2006, Sitel filed separate formal claims
fourth quarters of 2004 declared as follows: for refund or issuance of tax credit with the One-Stop
Shop Inter-Agency Tax Credit and Duty Drawback
Inp Center of the Department of Finance for its unutilized
ut input VAT arising from domestic purchases of goods
Input Tax Input and services attributed to zero-rated transactions and
Tax Allo Tax purchases/importations of capital goods for the 1st, 2nd,
Input
Input from cate Allocat 3rd and 4th quarters of 2004 in the aggregate amount of
Taxab Zero- Total Tax
Tax for Regul d to ed to P23,093,899.59.[7]
le Rated Sales from
the ar Tax Zero-
Sales Sales Capita
[Quart Trans able Rated On March 30, 2006, Sitel filed a judicial claim for
l
er] action Sale Sales refund or tax credit via a petition for review before the
(C=A+ Goods
s s CTA, docketed as CTA Case No. 7423.
(A) (B) B)
(D) [H=(B
(E)
(F+D- [G= /C) x
E) (A/ (F)] Ruling of the CTA Division
C) x
(F)] On October 21, 2009, the CTA Division rendered a
509,7 180,45180,957 3,842, 2,422, 1,400,3,931,396,6 Decision[8] partially granting Sitel's claim for VAT
refund or tax credit, the dispositive portion of which The CTA Division denied Sitel's P7,170,276.02 claim
reads as follows: for unutilized input VAT attributable to its zero-rated
sales for the four quarters of 2004. Relying upon the
In view of the foregoing, the instant Petition for Review rulings of this Court in Commissioner of Internal
is hereby PARTIALLY GRANTED. Petitioner is Revenue v. Burmeister and Wain Scandinavian
entitled to the instant claim in the reduced amount of Contractor Mindanao, Inc.[10] (Burmeister), the CTA
P11,155,276.59 computed as follows: Division found that Sitel failed to prove that the
recipients of its services are doing business outside the
P Philippines, as required under Section 108(B)(2) of the
Amount of Input VAT Claim
23,093,899.59 National Internal Revenue Code of 1997 (NIRC), as
Input VAT Claim on Zero-Rated amended.[11]
Less: 7,170,276.02
Sales
Input VAT Claim on Capital Goods P The CTA Division also disallowed the amount of
Purchases 15,923,623.57 P2,668,852.55 representing input VAT paid on capital
Not Properly Substantiated Input goods purchased for taxable year 2004 for failure to
Less: VAT Claim on Capital Goods comply with the invoicing requirements under Sections
Purchases 113, 237, and 238 of the NIRC of 1997, as amended,
Per ICPA Report (P15,923,623.57 and Section 4.108-1 of Revenue Regulations No. 7-95
2,099,494.43
less P13,824,129.14) (RR 7-95).[12]
Per this Court's further
2,668,852.55
verification Aggrieved, Sitel filed a motion for partial
Refundable Input VAT on Capital P reconsideration[13] and Supplement (To Motion for
Goods Purchases 11,155,276.59 Reconsideration [of Decision dated October 21,
Accordingly, respondent is ORDERED to REFUND 2009]),[14] on November 11, 2009 and March 26,2010,
OR ISSUE A TAX CREDIT CERTIFICATE in the respectively.
reduced amount of P11,155,276.59 representing
unutilized input VAT arising from petitioner's Prior thereto, or on January 8, 2010, Sitel filed a
domestic purchases of goods and services which are Motion for Partial Execution of Judgment[15] seeking
attributable to zero-rated transactions and the execution pending appeal of the portion of the
purchases/importations of capital goods for the taxable Decision dated October 21, 2009 granting refund in the
year 2004. amount of P11,155,276.59, which portion was not made
part of its motion for partial reconsideration.
SO ORDERED.[9]
On May 31, 2010, the CTA Division denied Sitel's
Motion for Reconsideration and Supplement (To
Motion for Reconsideration [of Decision dated October
21, 2009]) for lack of merit.[16]
Undaunted, Sitel filed a Petition for Review[17] with the
CTA En Banc claiming that it is entitled to the amount
denied by the CTA Division.
Ruling of the CTA En Banc
In the assailed Decision, the CTA En Banc reversed
and set aside the ruling of the CTA Division. Citing the
case of Commissioner of Internal Revenue
v. Aichi Forging Company of Asia, Inc.[18] (Aichi), the
CTA En Banc ruled that the 120-day period for the CIR
to act on the administrative claim for refund or tax
credit, under Section 112(D) of the NIRC of 1997, as
amended, is mandatory and jurisdictional. Considering
that Sitel filed its judicial claim for VAT refund or
credit without waiting for the lapse of the 120-day
period for the CIR to act on its administrative claim,
the CTA did not acquire jurisdiction as there was no
decision or inaction to speak of.[19] Thus, the CTA En
Banc denied Sitel's entire refund claim on the ground
of prematurity. The dispositive portion of the CTA En
Banc's Decision reads as follows:
WHEREFORE, on the basis of the foregoing
considerations, the Petition for Review En
Banc is DISMISSED. Accordingly, the Decision of the
CTA First Division dated October 21, 2009 and the
Resolution issued by the Special First Division dated
May 31, 2010, are hereby reversed and set aside.
Petitioner's refund claim of P19,702,880.80
is DENIED on the ground that the judicial claim for
the first to fourth quarters of taxable year 2004 was
prematurely filed.
SO ORDERED.[20]
Aggrieved, Sitel moved for reconsideration,[21] but the
same was denied by the Court En Banc for lack of
merit.[22]
Hence, the instant petition raising the following issues:
x x x WHETHER OR NOT THE AICHI
RULING PROMULGATED ON OCTOBER 6, 2010
MAY BE APPLIED RETROACTIVELY TO THE
INSTANT CLAIM FOR REFUND OF INPUT VAT
INCURRED IN 2004.
x x x WHETHER OR NOT THE CTA EN BANC CAN
VALIDLY WITHDRAW AND REVOKE THE PORTION
OF THE REFUND CLAIM ALREADY GRANTED TO
PETITIONER IN THE AMOUNT OF P11,155,276.59
AFTER TRIAL ON THE MERITS,
NOTWITHSTANDING THAT SUCH PORTION OF
THE DECISION HAD NOT BEEN APPEALED.
x x x WHETHER OR NOT PETITIONER IS ENTITLED
TO A REFUND OR TAX CREDIT OF ITS
UNUTILIZED INPUT VAT ARISING FROM
PURCHASES OF GOODS AND SERVICES
ATTRIBUTABLE TO ZERO-RATED SALES AND
PURCHASES/IMPORTATIONS OF CAPITAL GOODS
FOR THE 1ST, 2ND, 3RD, [AND] 4TH QUARTERS OF
TAXABLE YEAR 2004 IN THE AGGREGATE
AMOUNT OF P20,994,405.16.[23]
In the Resolution[24] dated July 4, 2012, the CIR was
required to comment on the instant petition. In
compliance thereto, the CIR filed its Comment[25] on
November 14, 2012.
On January 16, 2013, the Court issued a
Resolution[26] denying Sitel's petition for failure to
sufficiently show that the CTA En Banccommitted
reversible error in denying its refund claim on the
ground of prematurity based on prevailing
jurisprudence.
Soon thereafter, however, or on February 12, 2013, the
Court En Banc decided the consolidated cases
of Commissioner of Internal Revenue v. San Roque
Power Corporation, Taganito Mining Corporation v.
Commissioner of Internal Revenue, and Philex Mining
Corporation v. Commissioner of Internal
Revenue[27] (San Roque). In that case, the Court
recognized BIR Ruling No. DA-489-03 as an exception
to the mandatory and jurisdictional nature of the 120-
day waiting period.
Invoking San Roque, Sitel filed a Motion for
Reconsideration.[28]
In the Resolution[29] dated June 17, 2013, the Court
granted Sitel's motion and reinstated the instant
petition.
In the instant petition, Sitel claims that its judicial
claim for refund was timely filed following the Court's
pronouncements in San Roque; thus, it was erroneous
for the CTA En Banc to reverse the ruling of the CTA
Division and to dismiss its petition on the ground of
prematurity. Sitel further argues that the previously
granted amount for refund of P11,155,276.59 should be
reinstated and declared final and executory, the same
not being the subject of Sitel's partial appeal before the
CTA En Banc, nor of any appeal from the CIR.
Finally, Sitel contends that insofar as the denied
portion of the claim is concerned, which the CTA En
Banc failed to pass upon with the dismissal of its
appeal, speedy justice demands that the Court resolved
the same on the merits and Sitel be declared entitled to
an additional refund in the amount of P9,839,128.57.
The Court's Ruling
The Court finds the petition partly meritorious.
Site/'s Judicial Claim for VAT Refund was
deemed timely filed pursuant to the Court's
pronouncement in San Roque.
Section 112(C) of the NIRC, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax. -
xxxx

(C) Period within which Refund or Tax Credit of Input
Taxes shall be Made. - In proper cases, the
Commissioner shall grant a refund or issue the tax
credit certificate for creditable input taxes within one
hundred twenty (120) days from the date of
submission of complete documents in support
of the application filed in accordance with
Subsection (A) hereof.
In case of full or partial denial of the claim for tax
refund or tax credit, or the failure on the part of the
Commissioner to act on the application within the
period prescribed above, the taxpayer affected may,
within thirty (30) days from the receipt of the decision
denying the claim or after the expiration of the one
hundred twenty day-period, appeal the decision or the
unacted claim with the Court of Tax Appeals.
(Emphasis supplied)
Based on the plain language of the foregoing provision,
the CIR is given 120 days within which to grant or deny
a claim for refund. Upon receipt of CIR's decision or
ruling denying the said claim, or upon the expiration of
the 120-day period without action from the CIR, the
taxpayer has thirty (30) days within which to file a
petition for review with the CTA.
In Aichi, the Court ruled that the 120-day period
granted to the CIR was mandatory and jurisdictional,
the non-observance of which was fatal to the filing of a
judicial claim with the CTA. The Court further
explained that the two (2)-year prescriptive period
under Section 112(A) of the NIRC pertained only to the
filing of the administrative claim with the BIR; while
the judicial claim may be filed with the CTA within
thirty (30) days from the receipt of the decision of the
CIR or the expiration of the 120-day period of the CIR
to act on the claim. Thus:
Section 112 (D) of the NIRC clearly provides that the
CIR has "120 days, from the date of the submission of
the complete documents in support of the application
[for tax refund/credit]," within which to grant or deny
the claim. In case of full or partial denial by the CIR,
the taxpayer's recourse is to file an appeal before the
CTA within 30 days from receipt of the decision of the
CIR. However, if after the 120-day period the CIR fails
to act on the application for tax refund/credit, the
remedy of the taxpayer is to appeal the inaction of the
CIR to CTA within 30 days.
In this case, the administrative and the judicial claims
were simultaneously filed on September 30, 2004.
Obviously, respondent did not wait for the decision of
the CIR or the lapse of the 120-day period. For this
reason, we find the filing of the judicial claim with the
CTA premature.
Respondent's assertion that the non-observance of the
120-day period is not fatal to the filing of a judicial
claim as long as both the administrative and the
judicial claims are filed within the two-year
prescriptive period has no legal basis.
There is nothing in Section 112 of the NIRC to support
respondent's view. Subsection (A) of the said provision
states that "any VAT-registered person, whose sales are
zero-rated or effectively zero-rated may, within two
years after the close of the taxable quarter when the
sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax
due or paid attributable to such sales." The phrase
"within two (2) years x x x apply for the issuance of a
tax credit certificate or refund" refers to applications
for refund/credit filed with the CIR and not to appeals
made to the CTA. This is apparent in the first
paragraph of subsection (D) of the same provision,
which states that the CIR has "120 days from the
submission of complete documents in support of
the application filed in accordance
with Subsections (A) and (B)" within which to
decide on the claim.
In fact, applying the two-year period to judicial claims
would render nugatory Section 112(D) of the NIRC,
which already provides for a specific period within
which a taxpayer should appeal the decision or
inaction of the CIR. The second paragraph of Section
112(D) of the NIRC envisions two scenarios: (1) when a
decision is issued by the CIR before the lapse of the
120-day period; and (2) when no decision is made after
the 120-day period. In both instances, the taxpayer has
30 days within which to file an appeal with the CTA. As
we see it then, the 120-day period is crucial in filing an
appeal with the CTA.
xxxx
In fine, the premature filing of respondent's claim for
refund/credit of input VAT before the CTA warrants a
dismissal inasmuch as no jurisdiction was acquired by
the CTA.[30]
However, in San Roque, the Court clarified that the
120-day period does not apply to claims for refund
that were prematurely filed during the period from the
issuance of BIR Ruling No. DA-489-03, on December
10, 2003, until October 6, 2010, when Aichi was
promulgated. The Court explained that BIR Ruling No.
DA-489-03, which expressly allowed the filing of
judicial claims with the CTA even before the lapse of
the 120-day period, provided for a valid claim of
equitable estoppel because the CIR had misled
taxpayers into prematurely filing their judicial claims
before the CTA:
There is no dispute that the 120-day period is
mandatory and jurisdictional, and that the CTA does
not acquire jurisdiction over a judicial claim that is
filed before the expiration of the 120-day period. There
are, however, two exceptions to this rule. The first
exception is if the Commissioner, through a specific
ruling, misleads a particular taxpayer to prematurely
file a judicial claim with the CTA. Such specific ruling
is applicable only to such particular taxpayer. The
second exception is where the
Commissioner, through a general
interpretative rule issued under Section 4 of
the Tax Code, misleads all taxpayers into filing
prematurely judicial claims with the CTA. In
these cases, the Commissioner cannot be
allowed to later on question the CTA's
assumption of jurisdiction over such claim
since equitable estoppel has set in as expressly in San Roque, to wit:
authorized under Section 246 of the Tax Code.
For clarity and guidance, the Court deems it proper to
xxxx outline the rules laid down in San Roque with regard to
claims for refund or tax credit ofunutilized creditable
BIR Ruling No. DA-489-03 is a general interpretative input VAT. They are as follows:
rule because it was a response to a query made, not by
a particular taxpayer, but by a government agency 1. When to file an administrative claim with the CIR:
tasked with processing tax refunds and credits, that is,
the One Stop Shop Inter-Agency Tax Credit and
Drawback Center of the Department of Finance. This a. General rule- Section 112(A) and Mirant
government agency is also the addressee, or the entity
responded to, in BIR Ruling No. DA-489-03. Thus, Within 2 years from the close of the taxable
while this government agency mentions in its query to quarter when the sales were made.
the Commissioner the administrative claim of Lazi Bay
Resources Development, Inc., the agency was in fact b. Exception - Atlas
asking the Commissioner what to do in cases like the
tax claim of Lazi Bay Resources Development, Inc., Within 2 years from the date of payment of the
where the taxpayer did not wait for the lapse of the output VAT, if the administrative claim was filed
120-day period. from June 8, 2007 (promulgation of Atlas) to
September 12, 2008 (promulgation of Mirant).
Clearly, BIR Ruling No. DA-489-03 is a general
interpretative rule. Thus, all taxpayers can rely 2. When to file a judicial claim with the CTA:
on BIR Ruling No. DA-489-03 from the time of
its issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6 October a. General rule-Section 112(D); not Section
2010, where this Court held that the 120+30 229
day periods are mandatory and
jurisdictional.[31] (Emphasis supplied).
In Visayas Geothermal Power Company v.
Commissioner of Internal Revenue,[32] the Court came
up with an outline summarizing the pronouncements i. Within 30 days from the full or
partial denial of the administrative
 claim by the CIR; or
ii. Within 30 days from the expiration
of the 120-day period provided to the
CIR to decide on the claim. This is
mandatory and jurisdictional
beginning January 1, 1998 (effectivity
of 1997 NIRC).
b. Exception - BIR Ruling No. DA-489-03
The judicial claim need not await the
expiration of the 120-day period, if such
was filed from December 10, 2003
(issuance of BIR Ruling No. DA-489-03) to
October 6, 2010 (promulgation
of Aichi).[33](Emphasis and underscoring
supplied).
In this case, records show that Sitel filed its
administrative and judicial claim for refund on March
28, 2006 and March 30, 2006, respectively, or after
the issuance of BIR Ruling No. DA-489-03, but before
the date when Aichi was promulgated. Thus, even
though Sitel filed its judicial claim prematurely, i.e.,
without waiting for the expiration of the 120-day
mandatory period, the CTA may still take cognizance of
the case because the claim was filed within the
excepted period stated in San Roque. In other words,
Sitel's judicial claim was deemed timely filed and
should have not been dismissed by the CTA En Banc.
Consequently, the October 21, 2009 Decision[34] of the
CTA Division partially granting Sitel's judicial claim for
refund in the reduced amount of P11,155,276.59, which
is not subject of the instant appeal, should be
reinstated. In this regard, since the CIR did not appeal
said decision to the CTA En Banc, the same is now
considered final and beyond this Court's review.
Sitel now questions the following portions of its refund
claim which the CTA Division denied: (1)
P7,170,276.02, representing unutilized input VAT on
purchases of goods and services attributable to zero-
rated sales, which was denied because Sitel failed to
prove that the call services it rendered for the year
2004 were made to non-resident foreign clients doing
business outside the Philippines; and (2)
P2,668,852.55 representing input VAT on purchases of
capital goods, because these are supported by invoices
and official receipts with pre-printed TIN-V instead of
TIN-VAT, as required under Section 4.108-1 of RR 7-
95.
Sitel claims that testimonial and documentary evidence
sufficiently established that its clients were non-
resident foreign corporations not doing business in
Philippines. It also asserts that the input VAT on its
purchases of capital goods were duly substantiated
because the supporting official receipts substantially
complied with the invoicing requirements provided by
the rules.
In other words, Sitel wants the Court to review factual
findings of the CTA Division, reexamine the evidence
and determine on the basis thereof whether it should
be refunded the additional amount of P9,839,128.57.
This, however, cannot be done in the instant case for
settled is the rule that this Court is not a trier of facts
and does not normally embark in the evaluation of
evidence adduced during trial.[35] It is not this Court's
function to analyze or weigh all over again the evidence
already considered in the proceedings below, the
Court's jurisdiction being limited to reviewing only
errors of law that may have been committed by the
lower court.[36]
Furthermore, the Court accords findings and
conclusions of the CTA with the highest respect.[37] As a
specialized court dedicated exclusively to the
resolution of tax problems, the CTA has accordingly
developed an expertise on the subject of
taxation.[38] Thus, its decisions are presumed valid in
every aspect and will not be overturned on appeal,
unless the Court finds that the questioned decision is
not supported by substantial evidence or there has
been an abuse or improvident exercise of authority on
the part of the tax court.[39]
Upon careful review of the instant case, and directly
addressing the issues raised by Sitel, the Court finds no
cogent reason to reverse or modify the findings of the
CTA Division.
The Court expounds.
Sitel failed to prove that the recipients of its
call services are foreign corporations doing
business outside the Philippines.
Sitel's claim for refund is anchored on Section
112(A)[40] of the NIRC, which allows the refund or
credit of input VAT attributable to zero-rated or
effectively zero-rated sales. In relation thereto, Sitel
points to Section 108(B)(2) of the NIRC [formerly
Section 102(b)(2) of the NIRC of 1977, as amended] as
legal basis for treating its sale of services as zero-rated
or effectively zero-rated. Section 108(B)(2) reads:
SEC. 108. Value-added Tax on Sale of Services and
Use or Lease of Properties. -
xxxx
(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:
xxxx
(2) Services other than those mentioned in the
preceding paragraph rendered to a person
engaged in business conducted outside the
Philippines or to a nonresident person not
engaged in business who is outside the
Philippines when the services are performed,
the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP); (Emphasis supplied)
In Burmeister, the Court clarified that an essential
condition to qualify for zero-rating under the
aforequoted provision is that the service-recipient
must be doing business outside the Philippines, 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. x x x
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 this Court cannot
sanction. A tax is a mandatory exaction, not a
voluntary contribution.
xxxx
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.
Significantly, the amended Section 108(b) [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."[41]
Foilowing Burmeister, the Court, in Accenture, Inc. v.
Commissioner of Internal Revenue,[42] (Accenture),
emphasized that a taxpayer claiming for a VAT refund
or credit under Section 108(B) has the burden to prove
not only that the recipient of the service is a foreign
corporation, but also that said corporation is doing
business outside the Philippines. For failure to
discharge this burden, the Court denied Accenture's
claim for refund.
We rule that the recipient of the service must be doing
business outside the Philippines for the transaction to
qualify for zero-rating under Section 108(B) of the Tax
Code.
xxxx
The evidence presented by Accenture may have
established that its clients are foreign. This fact does
not automatically mean, however, that these clients
were doing business outside the Philippines. After all,
the Tax Code itself has provisions for a foreign
corporation engaged in business within the Philippines
and vice versa, to wit:
SEC. 22. Definitions. - When used in this Title:
xxxx
(H) The term "resident foreign corporation" applies to
a foreign corporation engaged in trade or business
within the Philippines.
(I) The term 'nonresident foreign corporation' applies
to a foreign corporation not engaged in trade or
business within the Philippines. (Emphasis in the
original)
Consequently, to come within the purview of
Section 108(B)(2), it is not enough that the
recipient of the service be proven to be a
foreign corporation; rather, it must be
specifically proven to be a nonresident foreign
corporation.
There is no specific criterion as to what constitutes
"doing" or "engaging in" or "transacting" business. We
ruled thus in Commissioner of Internal Revenue v.
British Overseas Airways Corporation:
x x x. 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 of
the 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."
A taxpayer claiming a tax credit or refund has the
burden of proof to establish the factual basis of that
claim. Tax refunds, like tax exemptions, are construed
strictly against the taxpayer.
Accenture failed to discharge this burden. It alleged
and presented evidence to prove only that its
clients were foreign entities. However, as
found by both the CTA Division and the CTA En
Banc, no evidence was presented by Accenture
to prove the fact that the foreign clients to
whom petitioner rendered its services were
clients doing business outside the Philippines.
As ruled by the CTA En Banc, the Official Receipts,
Intercompany Payment Requests, Billing Statements,
Memo Invoices-Receivable, Memo Invoices-Payable,
and Bank Statements presented by Accenture merely
substantiated the existence of sales, receipt of foreign
currency payments, and inward remittance of the
proceeds of such sales duly accounted for in
accordance with BSP rules, all of these were devoid of
any evidence that the clients were doing business
outside of the Philippines.[43] (Emphasis supplied;
citations omitted)
In the same vein, Sitel fell short of proving that the
recipients of its call services were foreign corporations
doing business outside the Philippines. As correctly
pointed out by the CTA Division, while Sitel's
documentary evidence, which includes Certifications
issued by the Securities and Exchange Commission and
Agreements between Sitel and its foreign clients, may
have established that Sitel rendered services to foreign
corporations in 2004 and received payments therefor
through inward remittances, said documents failed to
specifically prove that such foreign clients were doing
business outside the Philippines or have a continuity of
commercial dealings outside the Philippines.
Thus, the Court finds no reason to reverse the ruling of
the CTA Division denying the refund of P7,170,276.02,
allegedly representing Sitel's input VAT attributable to
zero-rated sales.
Sitel failed to strictly comply with invoicing
requirements for VAT refund.
The CTA Division also did not err when it denied the
amount of P2,668,852.55, allegedly representing input
taxes claimed on Sitel's domestic purchases of goods
and services which are supported by invoices/receipts
with pre-printed TIN-V. In Western Mindanao Power
Corp. v. Commissioner of Internal Revenue,[44] the
Court ruled that in a claim for tax refund or tax credit,
the applicant must prove not only entitlement to the
grant of the claim under substantive law, he must also
show satisfaction of all the documentary and
evidentiary requirements for an administrative claim
for a refund or tax credit and compliance with the
invoicing and accounting requirements mandated by
the NIRC, as well as by revenue regulations
implementing them. The NIRC requires that the
creditable input VAT should be evidenced by a VAT
invoice or official receipt,[45] which may only be
considered as such when the TIN-VAT is printed
thereon, as required by Section 4.108-1 of RR 7-95.
The Court's pronouncement in Kepco Philippines
Corp. v. Commissioner of Internal Revenue[46] is
instructive:
Furthermore, Kepco insists that Section 4.108-1 of
Revenue Regulation 07-95 does not require the word
"TIN-VAT" to be imprinted on a VAT-registered
person's supporting invoices and official receipts and
so there is no reason for the denial of its P4,720,725.63
claim of input tax.
In this regard, Internal Revenue Regulation 7-95
(Consolidated Value-Added Tax Regulations) is clear.
Section 4.108-1 thereof reads:
Only VAT registered persons are required to print their
TIN followed by the word "VAT" in their invoice or
receipts and this shall be considered as a "VAT"
Invoice. All purchases covered by invoices other than
'VAT Invoice' shall not give rise to any input tax.
Contrary to Kepco's allegation, the regulation
specifically requires the VAT registered person to
imprint TIN-VAT on its invoices or receipts. Thus, the
Court agrees with the CTA when it wrote: "[T]o be
considered a 'VAT invoice,' the TIN-VAT must be
printed, and not merely stamped. Consequently,
purchases supported by invoices or official receipts,
wherein the TIN-VAT is not printed thereon, shall not
give rise to any input VAT. Likewise, input VAT on
purchases supported by invoices or official receipts
which are NON-VAT are disallowed because these
invoices or official receipts are not considered as 'VAT
Invoices."[47]
In the same vein, considering that the subject
invoice/official receipts are not imprinted with the
taxpayer's TIN followed by the word VAT, these would
not be considered as VAT invoices/official receipts and
would not give rise to any creditable input VAT in favor
of Sitel.
refunds or tax credits just like tax exemptions are
strictly construed against taxpayers, the latter having
the burden to prove strict compliance with the
conditions for the grant of the tax refund or credit."[48]
WHEREFORE, premises considered, the instant
petition for review is GRANTED IN PART. The
Decision dated November 11, 2011 and Resolution
dated March 28, 2012 of the CTA En Banc in CTA EB
No. 644 are hereby REVERSED and SET ASIDE.
Accordingly, the October 21, 2009 Decision of the CTA
First Division in CTA Case No. 7423 is
hereby REINSTATED.
Respondent is hereby ORDERED TO REFUND or,
in the alternative, TO ISSUE A TAX CREDIT
CERTIFICATE, in favor of the petitioner in the
amount of P11,155,276.59, representing unutilized
input VAT arising from purchases/importations of
capital goods for taxable year 2004.
SO ORDERED.

At this juncture, it bears to emphasize that "[t]ax

 MEDICARD PHILIPPINES, INC VS.
COMMISSIONER OF INTERNAL REVENUE (GR NO.
222743) APRIL 5, 2017

FACTS: MEDICARD is a health maintenance

organization (HMO) that provides prepaid health and
medical insurance coverage to its clients. Individuals
enrolled in its health care programs pay an annual
membership fee and are entitled to various preventive,
diagnostic and curative medical services provided by
duly licensed physicians, specialists, and other
professional technical staff participating in the group
practice health delivery system at a hospital or clinic
owned, operated or accredited by it.

MEDICARD filed it first, second, and third quarterly

VAT Returns through Electronic Filing and Payment
System (EFPS) on April 20, July 25, and October 25,
2006, respectively, and its fourth quarterly VAT
Return on January 25, 2007.

Upon finding some discrepancies between

MEDICARD’s Income Tax Returns (ITR) and VAT
Returns, the CIR issued a Letter Notice (LN) dated
September 20, 2007. Subsequently, the CIR also
issued a Preliminary Assessment Notice (PAN) against
MEDICARD for deficiency VAT. MEDICARD
received CIR’s FAN dated December 10, 2007 for
allegedly deficiency VAT for taxable year 2006
including penalties.
MEDICARD filed a protest arguing, among others,
that that the services it render is not limited merely to
arranging for the provision of medical and/or
hospitalization services but include actual and direct
rendition of medical and laboratory services. On June
19, 2009, MEDICARD received CIR’s Final Decision
denying its protest. The petitioner MEDICARD
proceeded to file a petition for review before the CTA.
The CTA Division held that the determination of
deficiency VAT is not limited to the issuance of Letter
of Authority (LOA) alone and that in lieu of an LOA,
an LN was issued to MEDICARD informing it if the
discrepancies between its ITRs and VAT Returns and
this procedure is authorized under Revenue
Memorandum Order (RMO) No. 30-2003 and 42-
2003. Also, the amounts that MEDICARD earmarked
and eventually paid to doctors, hospitals and clinics
cannot be excluded from the computation of its gross
receipts because the act of earmarking or allocation is
by itself an act of ownership and management over the
funds by MEDICARD which is beyond the
contemplation of RR No. 4-2007. Furthermore,
MEDICARD’s earnings from its clinics and laboratory
facilities cannot be excluded from its gross receipts
because the operation of these clinics and laboratory is
merely an incident to MEDICARD’s line of business
as an HMO.
MEDICARD filed a Motion for Reconsideration but it
was denied. Petitioner elevated the matter to the CTA
en banc.
CTA en banc partially granted the petition only insofar
as 10% VAT rate for January 2006 is concerned but
sustained the findings of the CTA Division.
ISSUES:
1. Is the absence of the Letter of Authority fatal?
2. Should the amounts that MEDICARD earmarked and
eventually paid to the medical service providers still
form part of its gross receipts for VAT purposes?
RULING:
1. Yes. The absence of the LOA violated MEDICARD’s
right to due process. An LOA is the authority given to
the appropriate revenue officer assigned to perform
assessment functions. Under the NLRC, unless
authorized by the CIR himself or by his duly
authorized representative, through an LOA, an
examination of the taxpayer cannot ordinarily be
undertaken. An LOA is premised on the fact that the
examination of a taxpayer who has already filed his
 tax returns is a power that statutorily belongs only to
the CIR himself or his duly authorized representatives.
In this case, there is no dispute that no LOA was
issued prior to the issuance of a PAN and FAN against
MEDICARD. Therefore, no LOA was also served on
MEDICARD.
2. No. The VAT is a tax on the value added by the
performance of the service by the taxpayer. It is, thus,
this service and the value charged thereof by the
taxpayer that is taxable under the NLRC.
CIR vs. Magsaysay Lines, Inc. , et. al G.R. 146984, 28 July 2006

Facts:

Because of a government program of privatization, National Development C

ompany(NDC) decided to sell its National Marine Corporation(NMC) shares
and five of its ships. In a VAT Ruling, it was held that the sale was subject to
VAT since NDC was a VAT
registered enterprise and the transaction is incident to its normal VAT-
registered activity of leasing out personal property.

Issue:

Whether or not the sale by NDC whose VAT

registered activity is leasing out personal property is subject to VAT consider
ing that such sale was made pursuant to a government program of privatizat
ion.

Ruling:

No, the sale of the vessels is not subject to VAT since it was not in the ordina
ry course of trade or business of NDC. “Course of business” is what is usually
done in the management of trade or business. It connotes regularity. In the
case at bar, the sale was an isolated transaction. The sale which was involun
tary and made pursuant to the declared policy of government for privatizati
on could no longer be repeated or carried on with regularity. It should be e
mphasized that the normal VAT
registered activity of NDC is leasing personal property. Any sale, barter, or e
xchange of goods or services not in the course of trade or business is not su
bject to tax.