COMMISSIONER OF INTERNAL REVENUE
vs. LEPANTO CONSOLIDATED MINING COMPANY
CTA EB NO. 2230, 14 June 2021
IMPORTANT RULING:
Contrary to the argument of the petitioner, there is nothing in Section 112(A) of the Tax
Code which states that the input tax needs to be directly attributable or a factor in the chain of
production to the zero-rated sale in order for it to be creditable or refundable. In fact, the
aforementioned provision allows as tax credit an allocable portion of a taxpayer's input tax
that is not directly and entirely attributable to the zero-rated sales.
Further, Section 110(A) of the Tax Code, which enumerates the transactions upon which
creditable input tax may be claimed, only requires that the transaction was incurred or paid in
connection with the taxpayer's trade or business whether directly or indirectly and that it is
evidenced by a VAT invoice or official receipt.
Clearly, based on the foregoing provisions, the Tax Code does not require the input tax to be
directly attributable to zero-rated sales to be refundable or creditable.
FACTS:
Respondent claims that for calendar year ("CY") 2015, it exported one hundred percent
(100%) of its total sales volume/value of gold and silver to Heraeus, Ltd., a corporation based
in Hong Kong. By virtue of these export transactions, respondent asserts that it incurred input
value-added tax ("VAT") in the total amount of Php 14,930,299.09.
Consequently, on 17 March 2017, respondent filed an Application for Tax Credits/Refunds
(BIR Form No. 1914) seeking a refund of its excess and/or unutilized input VAT arising
from said export transactions. Due to petitioner's inaction, respondent filed a Petition for
Review before the Court in Division on 11 August 2017.
On 23 September 2019, the Court in Division partially granted respondent's claim for input
VAT refund Petitioner filed his Motion for Partial Reconsideration (Re: Decision
promulgated 23 September 20 19) on the Court in Division's Decision, which was denied by
the Court in Division in a Resolution, dated 17 January 2020. On 12 February 2020,
petitioner filed the instant Petition.
Petitioner's main and sole contention for the allowance of his Petition is that respondent
failed to prove that the input taxes sought to be refunded are directly attributable to its
alleged zero-rated sales. Consequently, this failure on the part of respondent should result in
the denial of its claim for input VAT refund.
ISSUE:
Whether or not an input VAT subject of refund should be directly attributable to zero-rated
sales.
RULING:
As to whether an input VAT subject of refund should be directly attributable to zero-rated
sales, this issue has already long been settled. Section 112 of the NIRC does not require
absolute direct attribution of the purchases (the input VAT of which is subject of a
refund/TCC claim) to zero-rated sales. In fact, the said provision allows the allocation of
input VAT that
cannot be directly attributed to any of the taxpayer's sales (i.e., zero-rated sales, taxable sales
or exempt sales).
Moreover, in Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd.,
this Court En Banc has ruled on a similar issue, as follows:
“Contrary to the argument of the petitioner, there is nothing in Section 112(A) of the
Tax Code which states that the input tax needs to be directly attributable or a factor
in the chain of production to the zero-rated sale in order for it to be creditable or
refundable. In fact, the aforementioned provision allows as tax credit an allocable
portion of a taxpayer's input tax that is not directly and entirely attributable to the
zero-rated sales.
Further, Section 110(A) of the Tax Code, which enumerates the transactions upon
which creditable input tax may be claimed, only requires that the transaction was
incurred or paid in connection with the taxpayer's trade or business whether directly
or indirectly and that it is evidenced by a VAT invoice or official receipt.
Clearly, based on the foregoing provisions, the Tax Code does not require the input
tax to be directly attributable to zero-rated sales to be refundable or creditable.
In fact, this is not the first time the Court En Banc resolved the issue raised by the
petitioner. In Deutsche Knowledge Services Pte. Ltd. v. Commissioner of Internal
Revenue, this Court ruled, to wit:
'The CIR's insistence that 'to be creditable, the input tax must come from purchases of
goods that form part of the finished product of the taxpayer or it must be directly
used in the chain of production' is not entirely consistent with the above-quoted
Section 110. This is so because the said provision, as clearly stated, did not limit
itself to purchases or importation of goods which are to be converted into or intended
to form part of a finished product for sale, or to be used in the chain of production;
but also includes, inter alia, purchases or importation of goods for use as supplies in
the course of business, or for use in trade or business for which deduction for
depreciation or amortization is allowed; as well as purchase of services for which
VAT has been actually paid.
Accordingly, provided that the subject input tax is evidenced by a VAT invoice or
official receipt issued in accordance with Section 113 of the NIRC of 1997, as
amended, the same may be creditable against the output VAT.”
Clearly, then, on the strength of Section 112 of the NIRC and the previous ruling of the
Court, it is not necessary for input taxes to be directly attributable to zero-rated sales so that
they can be validly refunded.
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EMPRESS DENTAL LABORATORIES, INC. vs.
COMMISSIONER OF INTERNAL REVENUE
CTA CASE NO. 10186; 07 June 2021
IMPORTANT RULING:
It must be emphasized that after the claimant has successfully established a prima facie right
to the refund by complying with the requirements laid down by law, the burden is shifted to
the opposing party, i.e., the BIR, to disprove such claim. To rule otherwise would be to
unduly burden the claimant with additional requirements which has no statutory nor
jurisprudential basis.
Thus, with petitioner having complied with the requirements for tax refund and having
shown convincing proof for the grant thereof, and without the respondent showing contrary
evidence other than his bare assertions, the burden of proof of establishing the propriety of
the claim for refund has been sufficiently discharged by petitioner.
FACTS:
On October 13, 2017, petitioner filed its Monthly WTC Return via BIR Electronic Filing and
Payment System (eFPS) in the total amount of P281,003.98 for the month of September
2017. During the course of electronic payment, petitioner encountered several technical
errors or difficulties. On the same day and on its third attempt, it was able to successfully
process and pay its withholding tax on compensation for the said month in the amount of
P281,003.98.
The eFPS generated three (3) requests for confirmation of remittance for petitioner's Monthly
WTC Return for the September 2017 under Payment Transaction Nos. 179819153,
179819123, and 179819085, respectively, with an amount of P281,003.98 each.
On October 17, 2017, petitioner, through its Accounting Supervisor, approved all pending
payment instructions lodged in its BPI Express Link online banking facility. As a result, the
last two (2) of the three (3) transactions, under Transaction Nos. 179819153 and 179819085,
have been successfully processed and paid in an amount of P281,003.98 each or in the total
amount of P562,007.96.
Thereafter, on October 24, 2017, petitioner filed the letter, on even date, signed by its
General Manager, Ms. Andreas Giese, with the BIR Revenue District Office (RDO) No. 57,
Laguna, requesting for a tax credit in the amount of P562,007.98, for alleged erroneous
payment made through eFPS and BPI online banking system on its Monthly WTC Return for
the month of September 2017. Petitioner claims that since there was an error in the system,
its transaction was posted thrice in the BPI portal and was unknowingly approved on October
17, 2017.
ISSUE:
Whether or not petitioner is entitled to a refund.
RULING:
Based on the foregoing established facts, it is apparent that the said total amount of
P562,007.96 are the result of excess payments or overpayments of petitioner of income tax
withheld on compensation for the month of September 2017. In other words, the said excess
payments or overpayments fall under the definition of "erroneous or illegal tax", since it is
one levied without statutory authority.
Respondent's contention that the documents presented by petitioner do not necessarily prove
its claim, as these are susceptible to different interpretations other than a case of multiple
payment or multiple remittance and it could be that the second and third payment were for a
different transaction, is bereft of merit.
While respondent contends that petitioner fell short of proving the veracity of its claim of
alleged multiple payments of withholding tax on compensation for September 2017, he,
however, failed to present any evidence to prove such contention during trial. This is despite
his facility and/or opportunity in checking the BIR's own records to verify or determine the
veracity petitioner's claim.
It must be emphasized that after the claimant has successfully established a prima facie right
to the refund by complying with the requirements laid down by law, the burden is shifted to
the opposing party, i.e., the BIR, to disprove such claim. To rule otherwise would be to
unduly burden the claimant with additional requirements which has no statutory nor
jurisprudential basis.
Thus, with petitioner having complied with the requirements for tax refund and having
shown convincing proof for the grant thereof, and without the respondent showing contrary
evidence other than his bare assertions, the burden of proof of establishing the propriety of
the claim for refund has been sufficiently discharged by petitioner. Hence, the grant of refund
in this case is warranted.
