RAFAEL ARSENIO S. DIZON, V.

CTA AND CIR

140944; APRIL 30, 2008

G.R. NO.

Facts: Jose P. Fernandez died in November 7, 1987. Thereafter,

a petition for the probate of his will was filed. The probate court
appointed Atty. Rafael Arsenio P. Dizon as administrator of the
Estate of Jose Fernandez.
An estate tax return was filed later on which showed ZERO
estate tax liability. BIR thereafter issued a deficiency estate tax
assessment, demanding payment of Php 66.97 million as
deficiency estate tax. This was subsequently reduced by CTA to
Php 37.42 million. The CA affirmed the CTAs ruling, hence, the
instant petition.
The petitioner claims that in as much as the valid claims of
creditors against the Estate are in excess of the gross estate, no
estate tax was due. On the other hand, respondents argue that
since the claims of the Estates creditors have been condoned,
such claims may no longer be deducted from the gross estate of
the decedent.
Issue: Whether the actual claims of creditors may be fully
allowed as deductions from the gross estate of Jose despite the
fact that the said claims were reduced or condoned through
compromise agreements entered into by the Estate with its
creditors
Held: YES. Following the US Supreme Courts ruling in Ithaca
Trust Co. v. United States, the Court held that post-death
developments are not material in determining the amount of
deduction. This is because estate tax is a tax imposed on the
act of transferring property by will or intestacy and, because the
act on which the tax is levied occurs at a discrete time, i.e., the
instance of death, the net value of the property transferred
should be ascertained, as nearly as possible, as of the that
time. This is the date-of-death valuation rule.
The Court, in adopting the date-of-death valuation principle,
explained that: First. There is no law, nor do we discern any
legislative intent in our tax laws, which disregards the date-ofdeath valuation principle and particularly provides that postdeath developments must be considered in determining the net
value of the estate. It bears emphasis that tax burdens are not
to be imposed, nor presumed to be imposed, beyond what the
statute expressly and clearly imports, tax statutes being
construed strictissimi juris against the government. Second.
Such construction finds relevance and consistency in our Rules

on Special Proceedings wherein the term "claims" required to be

presented against a decedent's estate is generally construed to
mean debts or demands of a pecuniary nature which could have
been enforced against the deceased in his lifetime, or liability
contracted by the deceased before his death. Therefore, the
claims existing at the time of death are significant to, and should
be made the basis of, the determination of allowable deductions.

statutory authority or basis. The transitional input tax credit

operates to benefit newly VAT-registered persons, whether or not
they previously paid taxes in the acquisition of their beginning
inventory of goods, materials and supplies.

FORT BONIFACIO DEVELOPMENT CORPORATION vs.

COMMISSIONER OF INTERNAL REVENUE- Transitional
Input Value Added Tax

FACTS:San Roque, a corporation engaged in operating powergenerating plants andunder contract with the Govt., allegedly
had unutilized input VAT credits in2007. On May 28, 2008, it filed
an administrative claim for refund of unutilized input VAT for the
1st and 2nd quarters of 2007 (first claim), andanother admin
claim for unutilized VAT credit for the 3rd and 4th quarters on
March 30, 2009 (second claim) with the CIR. In view of CIR s
inaction and to
suspend the running of 2-year prescriptive period, it filed a
judicial claim withthe CTA on March 13, 2009 for the first claim
and on June 26, 2009 for thesecond claim.
HELD
: The
30-day period within which to file an appeal with the CTA
as provided in Sec 112 of NIRC
is jurisdictional and failure to complytherewith would bar the
appeal and deprive the CTA of its jurisdiction
.Such period is not merely directory but mandatory and it is
beyond the powerof the courts to extend the same. This rule
applies to cases of tax refund orissuance of tax credit certificate
where the taxpayer may, within 30 days uponreceipt of decision
denying the claim or after expiration of 120 days, appeal
thedecision or the unacted claim with the CTA.Both
administrative claims were filed on time. However, the judicial
claim forthe first claim was filed out of time or 140 days after the
filing of admin claim

beyond the 120-day period. On the other hand, the second

judicial claim was prematurely
filed, or only after 88 days
from filing of the administrativeclaim.

FACTS:
Petitioner was a real estate developer that bought from the
national government a parcel of land that used to be the Fort
Bonifacio military reservation. At the time of the said sale there
was as yet no VAT imposed so Petitioner did not pay any VAT on
its purchase. Subsequently, Petitioner sold two parcels of land to
Metro Pacific Corp. In reporting the said sale for VAT purposes
(because the VAT had already been imposed in the interim),
Petitioner claimed transitional input VAT corresponding to its
inventory of land. The BIR disallowed the claim of presumptive
input VAT and thereby assessed Petitioner for deficiency VAT.
ISSUE:
Is Petitioner entitled to claim the transitional input VAT on its
sale of real properties given its nature as a real estate dealer
and if so (i) is the transitional input VAT applied only to the
improvements on the real property or is it applied on the value
of the entire real property and (ii) should there have been a
previous tax payment for the transitional input VAT to be
creditable?
HELD:
YES. Petitioner is entitled to claim transitional input VAT based
on the value of not only the improvements but on the value of
the entire real property and regardless of whether there was in
fact actual payment on the purchase of the real property or not.
The amendments to the VAT law do not show any intention to
make those in the real estate business subject to a different
treatment from those engaged in the sale of other goods or
properties or in any other commercial trade or business. On the
scope of the basis for determining the available transitional input
VAT, the CIR has no power to limit the meaning and coverage of
the term "goods" in Section 105 of the Tax Code without

SAN ROQUE V. CIRCTA CASES 7882 & 793716 FEBRUARY

2012

CIR V. KEPCO ILIJAN CORP.CTA EB RESOLUTION, 15

NOVEMBER 2011
FACTS:Kepco Ilijan Corporation (Petitioner) is a domestic
corporation engaged in theproduction and sale of electricity as
an Independent Power Producer (IPP), whose produced
electricity is sold solely to NPC.For the first three quarters of
taxable year 2005 and for October 2005,petitioner filed its
Quarterly and Monthly VAT Returns showing that it
ncurred expenses representing importation and domestic
purchases of goodsand services, for which petitioner also
incurred input VAT.Petitioner filed an administrative claim for
refund with the BIR representing input VAT allegedly incurred by
petitioner from importations and domesticpurchases of capital

goods/equipment and services preparatory to itsproduction and

eventual sale of electricity to NPC.Due to respondent's inaction
and in order to suspend the running of the two-year prescriptive
period
under
the
National
Internal
Revenue
Code
(NIRC),petitioner filed the present Petition for Review on April
24, 2007.
HELD
: The administrative claim for refund or issuance of tax credit cer
tificate of unutilized input VAT attributable to zero-rated sales is
governed by Section112 (A) of the 1997 NIRC. Based on Section
112 (A) the
application forrefund of unutilized input VAT attributable to zerorated sales may bemade only within two (2) years after the close
of the taxable quarter when the sales were made
.
This period, however, refers solely to applications for
refund/credit
filed with the Commissioner
of Internal Revenue (CIR) and not to appealsmade to the CTA
. The period within which to file judicial claims is foundunder
Section 112 (0)10 of the 1997 NIRC. Accordingly,
judicial claim for refund should be filed within thirty (30)days
from receipt of the decision of the CIR or upon the expiration
of the one hundred twenty (120) days in case of inaction of the
CIR
. Theobservance of these periods is mandatory and noncompliance therewith would result in the denial of the
claim. Applying the same to the present case, the administrative
claim for refund filedby respondent covering the first to third
quarters of 2005 was filed on October28. 2005 and for the
month of October 2005, the administrative claim wasfiled on
December 7, 2005.It is clear that the administrative claims were
filed within the two-yearprescriptive period. However, despite the
timely filing of the administrativeclaims, this Court is constrained
to deny respondent's refund claim on theground that its judicial
claim was filed out of time. Records show thatrespondent filed its
Petition for Review on April 24, 2007, way beyond the 30-day
period from the lapse of the 120-day period for the CIR to decide
theclaim.

MINDANAO ll GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF

INTERNAL REVENUE, G.R. No. 193301 and G.R. No. 194637,
March 11, 2013
Taxation; prescriptive periods to file VAT refund. We summarize
the rules on the determination of the prescriptive period for
filing a tax refund or credit of unutilized input VAT as
provided in Section 112 of the 1997 Tax Code, as follows:
(1) An administrative claim must be filed with the CIR within two
years after the close of the taxable quarter when the zero-rated
or effectively zero-rated sales were made.

(2) The CIR has 120 days from the date of submission of
complete documents in support of the administrative claim
within which to decide whether to grant a refund or issue a tax
credit certificate. The 120-day period may extend beyond
the two-year period from the filing of the administrative
claim if the claim is filed in the later part of the two-year period.
If the 120-day period expires without any decision from the CIR,
then the administrative claim may be considered to be denied by
inaction.
(3) A judicial claim must be filed with the CTA within 30 days
from the receipt of the CIRs decision denying the administrative
claim or from the expiration of the 120-day period without any
action from the CIR.
(4) All taxpayers, however, can rely on BIR Ruling No. DA-48903 from the time of its issuance on 10 December 2003 up to its
reversal by this Court in Aichi on 6 October 2010, as an
exception to the mandatory and jurisdictional 120+30 day
periods.
CIR VS. SONY PHILIPPINES, INC.
Facts: On Dec . 6 , 1 999 CIR is sue d a p re lim inary
assess ment fo r 19 97 deficiency taxes and penalties to Sony,
which it protested.A petition for review was filed by Sony before
the CTA, within30 days after the lapse of the 180 days from the
submission of thesupporting documents to the CIR.CTA-1
st
Division disallowed the deficiency VAT assessment thesubsidized
advertising expense paid by Sony was duly covered bya VAT
invoice resulted in an input VAT credit. However, for theEWT, the
deficiency
assessment
was upheld.CIR
soug ht
recons ide rat ion on the ground that Sony shou ld be liable
for
the
deficiency
VAT.
It contends
that
Sonys
advertisingexpense cannot be considered as an input VAT credit
because
thesame
was
eventually reimbursed
by
Sony International Singapore(SIS). As a result, Sony is not
entitled to a tax credit and that thesaid advertising expense
should
be
for the
account
of
SIS.I S S U E : W / N t h e s o u r c e o f t h e
payment
of tax is
r e l e v a n t t o determineRuling:
NO.S o n y s d e f i c i e n c y V A T a s s e s s m e n t d e r i v e d f r o
m t h e C I R s allowance of the input VAT credits that should
have been realizedfrom advertising expense of the latter.Und er
Sec . 11 0 of the 19 97 Tax Code , an ad vert is ing
e xpen seduly covered by a VAT invoice is a legitimate business
expense.It cannot be denied that Sony incurred advertising
expense.
CIRso wn witne ss Aluqu in even testified th at ad vert is in g
com pan ies is sued invoic es in the name of Sony and the

latter p aid fo r the same.Hence, Sony incurred and paid for

advertising expense services.Where the money came from
is another matter all together.Before any VAT is levied, there
must be sale, barter or exchangeof goods or property.In this
c ase, there was no sale, b arter, exchange in the
sub sid y given by SIS to Sony. It was but a dole out and not
in payment for the goods or properties sold, bartered or
exchanged by Sony.
MEDICARD vs. CIR
CTA
Case
No.
7948;
June
5,
2014 Note: an HMO is defined as an entity that provides, offers,
or arranges for coverage ofdesignated health services needed by
plan members for a fixed prepaid premium. (Sec. 4 (o) (3)of RA
7875 or Health Insurance Act of 1995).Facts: Petitioner is a
domestic corporation which is licensed to operate as a
Health MaintenanceOrganization (HMO). It aims to provide the
public a comprehensive, systematic and prevention-oriented
medical and health maintenance program thru acquiring the
services from a pool oflicensed and competent physicians,
clinics, hospitals and medical and health centers ofinstitutions.
Respondent is the CIR vested with the power to issue
tax assessments.Sometime in 2007, CIR issued a Letter Notice
(LN) to petitioner for its discrepancies inits income Tax and VAT
returns followed by a PAN and a Final Assessment Notice (FAN)
foralleged deficiency VAT for year 2006 in the amount of P196,
614, 476. 69. It cited Sec.4.108.3(k) of RR 16-2005 which
defines what is an HMO and its gross receipts shall mean
thetotal amount of money or its equivalent representing the
service fee actually or constructivelyreceived during the taxable
period for the services performed or to be performed for
another person. This means that the compensation
for their services representing their services fee, is presumed to
be the total amount received as enrollment fee from their memb
ers plus othercharges received. Moreover, citing CIR vs. Phil
Health Care Provider that since respondent (inthat case) does
not actually provide medical or hospital services, but MERELY
ARRANGESthe same, its services are not VAT-exempt.Medicare
filed a protest raising that:1. Sec. 109 (G) of the Tax Code
provides medical services, etc. except those provided
by professionals are VAT-exempt.2. That they are not merely
limited to arranging for provision of medical services but
theyactually provide medical and laboratory services to their
members themselves only when it is beyond their competence
that services of hospitals and clinics are availed by them.3. Part
of its membership fees includes fees received from clients that
are registered withPEZA (Phil Export Zone Authority) thus zerorated sale of services.
4. Assuming that it was liable to VAT, the 12% VAT was
erroneously applied to it forthe entire gross receipts of 2006 for
Jan. was still subject to 10% VAT since RA 9337 andRMC 8-2006
made effective only the 12% VAT on or after Jan. 31, 2006.5. It
sought for the abatement of Penalties and surcharges.However,

BIR issued a Final Decision on a Disputed Assessment (FDDA)

denying
petitioners protest letter. Thus, petitioner filed instant petition
for review.
In this said petition, petitioner raised said defenses:
1. That petitioners health programs include the CPP (Cost
-plus Program) and the SCP(Standard Care Program). The
former is described to be a fund held in trust and the latter is
a20% service fee and the excess of the premiums paid being
pooled as provision for medicalutilization.2. That its services
are not limited to merely arranging for health care services with
third party hospitals but includes directly providing its member w
ith said medical and laboratoryservices through its own clinic and
by that since it partake of services that are VAT-exemptunder
Sec. 109 (G) of the Tax Code thus it should not be included in
the computation of grossreceipts subject to VAT.3. That under RR
No. 4-2007 amending RR No. 16-2005, "gross receipts" does
notinclude "amounts for payment to unrelated 3rd party or
received
as
reimbursement
for
advance payment on behalf of another which do not redound to t
he benefit of the payor, thus, theamounts earmarked for medical
utilization and eventually paid to hospitals, doctors, etc. shall
not form part of petitioners taxable gross income.
4. That part of membership fees for TY 2006 were received from PEZA

registeredclients and are therefore zero-rated.5. Assuming that it

is liable for VAT, there was still erroneous application of the
12%VAT on the entire receipts for 2006 since the applicable VAT
for the month of January was still10%, and !2% thereafter.6.
That it should not be made to pay surcharge and deficiency
interests or abatementthereof.
Respondents answer summarizes the ff. contentions:
1.
That by virtue of RR no. 162005, petitioners
petitioner's compensation for servicesas an HMO is taxable for
VAT purposes based on the total amount received from
themembers' enrolment fees including other charges.2.
That an entity that does not actually provide medical and/ or
hospital services as provided under the NIRC of 1997 provisions
on VAT exempt transactions is not VATexempt on its sales
of services.3.
Enrollment fees received from clients registered with PEZA are
not subject to Zerorating because it requires an application first
and
that
the
service
fees
received
by petitioner are from Employees of PEZA-registered enterprise
not directly from saidPEZA-registered enterprises.4.
The professional fees amounting to P11,008,809.00 was treated
entirely as taxablereceipt for VAT purposes pursuant to Section 1

08(A) of the NIRC of 1997 pertainingto VAT on sale of services in

relation to Section 108.3(k) of RR No. 16-2005. Thegross
amount collected by petitioner is within the context of
compensation forservices, and petitioner's service fees are
presumed to be the total amount received asenrolment fees
from its members.On May 17, 2010, petitioner requested a
reinvestigation of the deficiency VAT assessment,which
respondent granted via Letter dated May 24, 2010. The parties
submitted their JointStipulation of Facts and Issues28 on
December 7, 2010.ISSUES:(1)
WON respondents FAN dated Dec. 10, 2007 should be cancelled
for lack of factual and
legal basis and
WON the decision of respondent CIR denying petitioners
protest sh
ould be declared null and void.a.
WON total membership fees paid to petitioner representing both
those paid
to
third party hospitals for services and those for services rendered
by Medicard itself
should be considered to form part of Medicards gross receipts for VAT
purposes;
b.
WON payments made by petitioner to third party hospitals
qualify as money
entrusted to petitioner or
amounts
earmarked
for
payment
to
unrelated
third party or received as reimbursement for advance payment o
n behalf of anotherwhich do not red
ound to the benefit of the payor under RR 4
-2007 and thereforenot part of p
etitioners gross receipts subject to VAT;
c.
WON receipts from PEZA regd enterprises are zero
-rated for VAT purposes;d.
WON petitioner is entitled to abatement
Held:
A.
Yes membership fees paid forms part of the gross receipts of the
petitioner that issubject to VAT. Petitioner is not a corporation
engaged in the establishment andoperation of clinics,
laboratories and other like facilities but an HMO. In CIR vs.PHCP
held that an entity that does not actually provide medical and/ or
hospitalservices as provided under the NIRC of 1997 provisions
on VAT exempt transactionsis not VAT exempt on its sales of
services. The operation of clinics and laboratories by petitioner
is not a line of business
that is distinct
from its operations
as an HMO, but rather a desirable incident to its core business as

a service contractor. Its membershave a choice whether to avail of

services from its own clinic or a third party whichsuggests that petitioner
itself is uncertain if what the choice of its clients would be
andtherefore uncertain also which portions of fees should be
subject or exempt of VAT.Therefore, at the time petitioner
received the premium payments, at which exact timelikewise
VAT accrued, petitioner admits it actually had no way of knowing
which ofthe amounts qualified as VAT exempt.
There is no evidence that petitioner"segregated" the
amounts it claims as VAT-exempt at the time it received
thepremiums from its clients.
B.
Petitioner is admittedly an HMO, and, on the basis of the
characteristics of an HMOenumerated above, it is immediately a
service contractor under Section 108 of the TaxCode. This
provision levies VAT on the performance of all kinds of services
in thePhilippines for others for a fee, remuneration or
consideration, performed or rendered by construction and
service contractors. As distinguished from Tours Specialists,
Inc.,the alleged amounts earmarked for payment, or actually
paid, to hospitals and doctors by petitioner HMO in this case
form part and parcel of the entire package offered to
itsmembers. The petitioner's members do not deal directly with
the doctors, hospitalsand other medical service providers on the
matter of the fees payable to the latter. Theact of "earmarking or
allocation" is by itself an act of ownership and managementover
the funds, the entire disposition of which is in truth surrendered
to it by themembers.The requirement under RR 4-2007 is that
the act of payment to a 3rd party,whether as reimbursement or
advance, is
pursuant to an obligation between such3rd partyrecipient and another person not the taxpayer.
In the case at bar, it isthe HMO or the taxpayer that is liable AND
NOT THEIR MEMBERS towards third party doctors or hospitals
for payment of latters bills. Therefore, all payments made
as professional fees form part of the gross receipts of
petitioner subject to VAT.On the issue of having a portion of said
professional fees already been subjected toVAT, the Supreme
Court ruled that
there was no evidence adduced to prove thatsuch has
already been subjected to VAT
that would be in turn be tantamount todouble taxation.C.
While sales of services by VAT

registered entities in the Customs Territory, likeherein petitioner,

to PEZA entities are effectively subject to zero percent (0%)
VATunder Section 108(B) (3) of the NIRC of 1997, as
amended. Based on the report ofthe Independent CPA, petitioner
was able to prove that its receipts from PEZA and/ orBOIregistered clients were billed as zero-rated.However,
not all PEZA and BOI clients of petitioner were able to
provideCertifications/Certificates of Registration from
PEZA or BOI

since some of petitioner's clients were allegedly already nonoperating.

D.
The Court has no authority to grant abatement rather it is the
Commissioner ofInternal Revenue (CIR) that has the SOLE
authority under Sec. 204 of the NIRC

VAT Qualification for Zero-rated sale

ACCENTURE, INC. vs. COMMISSIONER OF INTERNAL REVE
NUE G.R. No. 190102 July 11, 2012
Fac t s : P e t it i o n e r A c c e n t u r e , a V AT r e g i s t e r e d e n t i t y,
i s a c o r p o r at i o n e n g a g e d i n t h e b u s i n e s s o f p r o v i d i n g
m a n a g e m e n t c o n s u l t i n g , business strategies development,
and selling and/or licensing of software. The monthly and
quarterly VAT returns of Accenture showthat, notwithstanding its
application of the input VAT credits earned from its zero-rated
transactions against its output VAT liabilities, itstill had excess or
unutilized
input
VAT
credits
in
the
amount
of
P37,038,269.18. Thus, Accenture filed with the Department of
Finance(DoF) an administrative claim for the refund or the
issuance of a Tax Credit Certificate (TCC). When the DoF did not
act on the claim, Accenture filed a Petition for Review with CTA
praying for the issuance of a TCC in its favour.T h e C I R
answered that the sale by Accenture of goods and
s e r v i c e s t o i t s c l i e n t s a r e n o t z e r o - r a t e d t ra n s a c t i o n s
a n d t h a t Accenture has failed to prove that it is entitled to a
refund, because its claim has not been fully substantiated or
documented. Rulingthat Accentures services would qualify for
zero-rating under the 1997 National Internal Revenue Code of
the Philippines (Tax Code)only if the recipient of the services was
doing business outside of the Philippines, the Division of the CTA
ruled that since Accentureh a d f a i l e d t o p r e s e n t e v i d e n c e
to prove that the fo reign clients to which the fo rmer
r e n d e r e d s e r v ic e s d i d b u s i n e s s o u t s i d e t h e Philippines,
it was not entitled to refund.On appeal before the CTA en banc,
Accenture argued that because the case pertained to the third
and the fourth quarters of taxable year 2002, the applicable law
was the 1997 Tax Code, and not R.A. 9337 and that prior to the
amendment introduced by (R.A.)9337, there was no requirement
that the services must be rendered to a person engaged
in business conducted outside the Philippinesto qualify for zerorating. Nevertheless, the CTA en banc affirmed the decision of
the division. Hence this present petition for reviewbefore the
SC.Issues:1 . S h o u l d t h e r e c i p i e n t o f t h e s e r v i c e s b e
" d o i n g b u s in e s s o u t s i d e t h e P h i l i p p i n e s " f o r t h e
t ra n s a c t i o n t o b e z e r o - ra t e d u n d e r Section 108(B)(2) of
the 1997 Tax Code?2 . H a s A c c e n t u r e s u c c e s s f u l l y p r o v e n
t h a t it s c l i e n t s a r e e n t i t i e s d o i n g b u s i n e s s o u t s i d e
the Philippines?3 . I s A c c e n t u r e e n t i t l e d t o t a x
r e f u n d ? Held:1.Recipient
of services must
be doing
business outside the Philippines for the transactions to qualify as

zero-rated. Accenture anchors its refund claim on Section

112(A) of the 1997 Tax Code, which allows the refund of
unutilized input VAT earnedfrom zero-rated or effectively zerorated sales. The provision reads: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 notbeen applied
against output tax: Provided, however, That in the case of zerorated sales under Section 106(A)(2)(a)(1), (2) and (B)
andSection 108 (B)(1) and (2), the acceptable foreign currency
exchange proceeds thereof had been duly accounted for in
accordance withthe rules and regulations of the Bangko Sentral
ng Pilipinas (BSP): Provided, further, That where the taxpayer is
engaged in zero-ratedor effectively zero-rated sale and also in
taxable or exempt sale of goods of properties or services, and
the amount of creditable inputtax due or paid cannot be directly
and entirely attributed to any one of the transactions, it shall be
allocated proportionately on the basisof the volume of sales.
Section 108(B) referred to in the foregoing provision was first
seen when Presidential Decree No. (P.D.) 199431amended Title
IV of P.D. 1158 which is also known as the National Internal
Revenue Code of 1977. Several Decisions have referred tothis as
the 1986 Tax Code, even though it merely amended Title IV of
the 1977 Tax Code.Two years thereafter, or on 1 January 1988,
Executive Order No. (E.O.) 27333 further amended provisions of
Title IV. E.O. 273 bytransferring the old Title IV provisions to
Title VI and filling in the former title with new provisions that
imposed a VAT.The VAT system introduced in E.O. 273 was
restructured through Republic Act No. (R.A.) 7716. This law,
which was approved on 5May 1994, widened the tax base.
Section 3 thereof reads:SECTION 3. Section 102 of the National
Internal Revenue Code, as amended, is hereby further amended
to read as follows:"SEC. 102. Value-added tax on sale of services
and use or lease of properties. x x xx x x x x x x x x"(b)
Transactions subject to zero-rate. The following services
performed in the Philippines by VAT-registered persons shall
besubject to 0%:
"(1) Processing, manufacturing or repacking goods for
other persons doing business outside the Philippines which
goods aresubsequently exported, where the services are paid for
in acceptable foreign currency and accounted for in accordance
with the rulesand regulations of the Bangko Sentral ng Pilipinas
(BSP)."(2) Services other than those mentioned in the preceding
sub-paragraph, the consideration for which is paid for in
acceptable foreigncurrency and accounted for in accordance
with the rules and regulations of the Bangko Sentral ng Pilipinas
(BSP)."Essentially, Section 102(b) of the 1977 Tax Codeas
amended by P.D. 1994, E.O. 273, and R.A. 7716provides that
if theconsideration for the services provided by a VAT-registered
person is in a foreign currency, then this transaction shall be

subjected tozero percent rate.The 1997 Tax Code reproduced

Section 102(b) of the 1977 Tax Code in its Section 108(B), to
wit:(B) Transactions Subject to Zero Percent (0%) Rate. - The
following services performed in the Philippines by VAT- registered
personsshall be subject to zero percent (0%) rate.(1)
Processing, manufacturing or repacking goods for other persons
doing
business
outside
the
Philippines
which
goods
aresubsequently exported, where the services are paid for in
acceptable foreign currency and accounted for in accordance
with the rulesand regulations of the Bangko Sentral ng Pilipinas
(BSP);(2) Services other than those mentioned in the preceding
paragraph, the consideration for which is paid for in acceptable
foreigncurrency and accounted for in accordance with the rules
and regulations of the Bangko Sentral ng Pilipinas (BSP); x x
x.On 1 November 2005, Section 6 of R.A. 9337, which amended
the foregoing provision, became effective. It reads:SEC. 6.
Section 108 of the same Code, as amended, is hereby further
amended to read as follows:"SEC. 108. Value-added Tax on Sale
of Services and Use or Lease of Properties. -(B) Transactions
Subject to Zero Percent (0%) Rate. - The following services
performed in the Philippines by VAT-registered personsshall be
subject to zero percent (0%) rate:(1) Processing, manufacturing
or repacking goods for other persons doing business outside the
Philippines which goods aresubsequently exported, where the
services are paid for in acceptable foreign currency and
accounted for in accordance with the rulesand 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 thePhilippines
or to a nonresident person not engaged in business who is
outside the Philippines when the services are performed,
theconsideration for which is paid for in acceptable foreign
currency and accounted for in accordance with the rules and
regulations of theBangko Sentral ng Pilipinas (BSP); x x x."
(Emphasis supplied)We rule that the recipient of the service
must be doing business outside the Philippines for the
transaction to qualify for zero-ratingunder Section 108(B) of the
Tax Code.This Court upholds the position of the CTA en banc
that, because Section 108(B) of the 1997 Tax Code is a verbatim
copy of Section102(b) of the 1977 Tax Code, any interpretation
of the latter holds true for the former.Moreover, even though
Accentures
Petition
was
filed
before Burmeister
was
promulgated, the pronouncements made in that case maybe
applied to the present one without violating the rule against
retroactive application. When this Court decides a case, it does
not passa new law, but merely interprets a preexisting one.
When this Court interpreted Section 102(b) of the 1977 Tax
Code in Burmeister, thisinterpretation became part of the law
from the moment it became effective. It is elementary that the
interpretation of a law by this Courtconstitutes part of that law
from the date it was originally passed, since this Court's
construction merely establishes thecontemporaneous legislative
intent that the interpreted law carried into effect.That the
recipient of the service should be doing business outside the
Philippines
to
qualify
for
zero-rating
is
the
only

logicalinterpretation of Section 102(b)(2) of the 1977 Tax Code,

as we explained in Burmeister:This can only be the logical
interpretation of Section 102 (b) (2). If the provider
and recipient of the "other services" are both doingbusiness in
the Philippines, the payment of foreign currency is irrelevant.
Otherwise, those subject to the regular VAT under Section102
(a) can avoid paying the VAT by simply stipulating payment in
foreign currency inwardly remitted by the recipient of services.
Tointerpret Section 102 (b) (2) to apply to a payer-recipient of
services doing business in the Philippines is to make the
payment of theregular 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 Section102 (a) as a tax measure in
the Tax Code, an interpretation this Court cannot sanction. A tax
is
a
mandatory
exaction,
not
a
voluntarycontribution.x x x x x x x x x

Further, when the provider and recipient of services are both

doing business in the Philippines, their transaction falls squarely
under Section 102 (a) governing domestic sale or exchange of
services. Indeed, this is a purely local sale or exchange of
services subject tothe regular VAT, unless of course the
transaction falls under the other provisions of Section 102
(b).Thus, when Section 102 (b) (2) speaks of "services other
than those mentioned in the preceding subparagraph," the
legislative intent isthat only the services are different between
subparagraphs 1 and 2. The requirements for zero-rating,
including the essential conditionthat the recipient of services is
doing business outside the Philippines, remain the same
under both subparagraphs.Lastly, it is worth mentioning that
prior to the promulgation of Burmeister, Congress had already
clarified the intent behind Sections102(b)(2) of the 1977 Tax
Code and 108(B)(2) of the 1997 Tax Code amending the
earlier provision. R.A. 9337 added the followingphrase:
"rendered to a person engaged in business conducted outside
the
Philippines
or
to
a
nonresident
person
not
engaged inbusiness who is outside the Philippines when the
services are performed."2 . A c c e n t u r e
has
failed
to
e s t a b l is h t h a t t h e r e c i p i e n t s o f i t s s e r v i c e s d o
b u s i n e s s o u t s id e t h e P h i l i p p i n e s . In the CTAs opinion,

however, the documents presented by Accenture merely

substantiate
the
existence
of
the
sales,
receipt
of foreigncurrency payments, and inward remittance of the
proceeds of these sales duly accounted for in accordance with
BSP rules. Petitioner presented no evidence whatsoever that
these
clients
were doing
business
outside
the
Philippines. Accenture insists, however, that it was able to
establish
that it
had
rendered
services to
foreign
corporations doing business outside thePhilippines, unlike in
Burmeister, which allegedly involved a foreign corporation doing
business in the Philippines.513 . W e d e n y A c c e n t u r e s
P e t i t i o n f o r a t a x r e f u n d . The evidence presented by
Accenture
may
have
established
that its
clients
are
foreign.1wphi1 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
foreigncorporation engaged in business within the Philippines
and vice versa, to wit:SEC. 22. Definitions - When used in this
Title:x x x x x x x x x(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 aforeign 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:52x
x x. There is no specific criterion as to what constitutes "doing"
or "engaging in" or "transacting" business. Each case must
be judgedin
the
light
of its
peculiar
environmental
circumstances. The term implies a continuity of commercial
dealings and arrangements, andcontemplates, to that extent, the
performance of acts or works or the exercise of some of the
functions normally incident to, and inprogressive prosecution of
commercial gain or for the purpose and object of the business
organization. "In order that a foreigncorporation may be
regarded as doing business within a State, there must be
continuity of conduct and intention to establish acontinuous
business, such as the appointment of a local agent, and not one
of a temporary character."53 A taxpayer claiming a tax credit or
refund has the burden of proof to establish the factual basis of

that claim.1wphi1 Tax refunds, liketax exemptions, are

construed strictly against the taxpayer.54 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
theforeign clients to whom petitioner rendered its services were
clients doing business outside the Philippines.
Luzon Hydro Corporation v. CIRCTA EB 722, 6 January
2012
Facts:LHC is duly registered as a VAT taxpayer. A Power
Purchase Agreement(PPA) with the Napocor was entered into by
The Consortium of NorthernMini Hydro Corp.; Ever Electrical
Manufacturing
Inc.;
Aboitiz
Equity Ventures Inc; Pacific Hydro Limited. The PPP was for the
development of Bakun
hydroelectric
facilities.LHC
filed
administrative claim with BIR for refund of its unutilized VATfrom
June to September 2006 in the amount of P4,151,852.39.CTA
3rd Division: Dismissed the claim for having been filed beyond
the 30-day period for claiming refund.Issue: WON the
administrative
and
judicial
claim
were
filed
within
thereglementary period allowed by law. The administrative claim
was filed withinthe reglementary period of 2 years from the close
of the taxable quarter, thejudicial claim was filed beyond the
period mandated under Section 112 (C).Note: This case only
discussed procedural issues as regards the mandatory period for
the filing of a motion for reconsideration which is 15
days. When a judgment becomes final and executory, it becomes
immutable andunalterable and any amendment or alteration
which substantially affects a finaland executor judgment, is null
and void for lack of jurisdiction, including theentire proceedings
held for that purpose.Held: The assailed decision was received
by LHC on November 26, 2010 andpetitioner had 15 days or
until December 11, 2010 to file its Motion forReconsideration.
However, petitioner filed its motion only on December 22,2010
or nine days after the lapse of the prescribed period.Note: The
more detailed discussion is in the 2008 case of CIR v. Mirant.