FIRST DIVISION

[C.T.A. CASE NO. 9382. May 9, 2018.]

VESTAS SERVICES PHILIPPINES, INC. , petitioner, vs. COMMISSIONER

OF INTERNAL REVENUE , respondent.

DECISION

DEL ROSARIO , P.J : p

This is a Petition for Review 1 filed on July 7, 2016 by Vestas Services Philippines,
Inc. seeking the refund or issuance of a tax credit certi cate (TCC) in the amount of
Fourteen Million Five Hundred Sixty-Five Thousand One Hundred Forty and 54/100
Pesos (P14,565,140.54), representing its accumulated and unutilized input Value-
Added Tax (VAT) for the first (1st) quarter of calendar year (CY) 2014.
THE PARTIES
Petitioner is a domestic corporation duly organized and existing under the laws
of the Republic of the Philippines with principal o ce at 12th oor, Five E-com, Harbor
Drive, Mall of Asia Complex, Pasay City. 2
Respondent Commissioner of Internal Revenue (CIR) is empowered by law to act
upon and approve claims for refund or tax credit. He is represented by his counsel from
the Legal Division, Bureau of Internal Revenue (BIR) Revenue Region 8 (Makati City), with
o ce address at the BIR Revenue Regional O ce Building, No. 313 Gil Puyat Ave.,
Makati City. 3
THE FACTS OF THE CASE
Petitioner was incorporated on December 14, 2009. 4 It is engaged in the
business of installation and construction services (except contracts for the
construction of locally funded public works and contracts for the construction of
defense related structures), including entering into subcontracting arrangements, and
service of wind power systems (i.e., wind turbine generators, spare parts, and activities
related thereto). It also acts as a business development and information technology
center that provides services to its a liates in the Asia Paci c Region. 5 It is registered
with the BIR for VAT purposes, with Certi cate of Registration No.
OCN9RC0000382508. 6
Petitioner led with the BIR its Amended Quarterly VAT Return for the 1st quarter
of CY 2014 on August 18, 2014. 7
On March 31, 2016, petitioner led with the Revenue District O ce (RDO) No. 50
its administrative claim for refund or issuance of TCC representing its excess and/or
unutilized input VAT for the 1st quarter of CY 2014 in the amount of P14,565,140.54. 8
On June 7, 2016, petitioner received a Letter dated June 1, 2016, signed by
Revenue District O cer Rosita U. Meniano, denying its aforesaid administrative claim
for refund or issuance of TCC. 9
In view of the denial of its administrative claim, petitioner led the present
Petition for Review before the Court on July 7, 2016. 1 0
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 On July 29, 2016, respondent posted his Answer, 1 1 interposing the following
special and a rmative defenses: (i) petitioner failed to demonstrate that the tax, which
is the subject of this case, was erroneously or illegally collected; (ii) taxes are presumed
to have been paid and collected in accordance with laws and regulations, hence, not
refundable; (iii) it is incumbent upon petitioner to show that it has complied with
Section 204 (C), in relation to Section 229, of the National Internal Revenue Code (NIRC)
of 1997, as amended; (iv) petitioner's claim for refund or issuance of TCC in the amount
of P14,565,140.54 representing alleged unutilized input VAT paid on purchases of
goods and services attributable to its zero-rated sales for the 1st quarter of CY 2014
was not fully substantiated by proper documents, such as sales invoices, o cial
receipts and others; (v) in a claim for tax refund or TCC, the taxpayer must prove not
only its entitlement to the grant of the claim under substantive law but it must also
show satisfaction of all the documentary and evidentiary requirements for an
administrative claim for refund or TCC; and, (vi) claims for refund are construed strictly
against the claimant as the same partake the nature of tax exemption which is looked
upon with disfavor.
On September 28, 2016, respondent led his Pre-Trial Brief 1 2 while petitioner
led its Pre-Trial Brief on November 21, 2016. 1 3 On November 24, 2016, the Pre-Trial
Conference was held. 1 4 On December 12, 2016, the parties led their Joint Stipulation
of Facts and Issue, 1 5 which the Court approved in the Resolution dated December 22,
2016. 1 6 The same Resolution terminated the pre-trial and directed the issuance of a
Pre-Trial Order. On January 11, 2017, the Court issued the Pre-Trial Order. 1 7
During trial, only petitioner presented testimonial and documentary evidence, 1 8
while respondent manifested that he will no longer present any evidence. 1 9 Petitioner's
documentary evidence were admitted in the Resolutions dated September 14, 2017
and January 9, 2018, save for certain exhibits which were denied admission for
petitioner's failure to present the original for comparison. 2 0
On January 23, 2018, the case was submitted for decision 2 1 after noting the
ling of the Memorandum for Respondent on October 18, 2017 2 2 and petitioner's
Memorandum on January 17, 2018. 2 3
ISSUE
The parties agreed that the sole issue to be resolved in this case is:
Whether petitioner is entitled to a refund or to the issuance of a TCC in
the amount of P14,565,140.54, representing its excess and/or unutilized input
VAT attributable to its zero-rated sales of goods or services for the 1st quarter of
CY 2014.
THE COURT'S RULING
Petitioner cites Section 112 (A), in relation to Section 112 (C), of the NIRC of
1997, as amended, in claiming a refund or issuance of a TCC of its input VAT which are
allegedly attributable to its zero-rated sales, viz.:
"SEC. 112. Refunds or Tax Credits of Input Tax — (A) Zero-rated or
Effectively Zero-rated Sales. — Any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two (2) years after the close of the
taxable quarter when the sales were made, apply for the issuance of a tax credit
certificate or refund of creditable input tax due or paid attributable to such sales,
except transitional input tax, to the extent that such input tax has not been
applied against output tax: Provided, however, That in the case of zero-rated
sales under Section 106(A)(2)(a)(1), (2) and (b) and Section 108 (B)(1) and (2),
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 the acceptable foreign currency exchange proceeds thereof had been duly
accounted for in accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged
in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of
goods of properties or services, and the amount of creditable input tax due or
paid cannot be directly and entirely attributed to any one of the transactions, it
shall be allocated proportionately on the basis of the volume of sales. Provided,
nally, That for a person making sales that are zero-rated under Section 108(B)
(6), the input taxes shall be allocated ratably between his zero-rated and non-
zero-rated sales.
xxx xxx xxx
(C) Period within which Refund or Tax Credit of Input Taxes shall be
Made. — In proper cases, the Commissioner shall grant a refund or issue the tax
credit certi cate for creditable input taxes within one hundred twenty (120) days
from the date of submission of complete documents in support of the
application filed in accordance with Subsection (A) hereof.
In case of full or partial denial of the claim for tax refund or tax credit, or
the failure on the part of the Commissioner to act on the application within the
period prescribed above, the taxpayer affected may, within thirty (30) days from
the receipt of the decision denying the claim or after the expiration of the one-
hundred-twenty-day period, appeal the decision or the unacted claim with the
Court of Tax Appeals."
Based on the aforequoted provisions of law, a claimant must satisfy the
following requisites in order to be entitled to a refund or tax credit of unutilized input
VAT attributable to zero-rated sales:
1. The administrative and judicial claims were led within the prescribed
period;
2. There must be zero-rated or effectively zero-rated sales;
3. The input VAT were incurred or paid;
4. The input VAT are attributable to zero-rated or effectively zero-rated sales;
and,
5. The input VAT were not applied against any output VAT liability.
Timeliness of the filing of the
administrative and judicial
claims
Before delving into the merits and substantiation of petitioner's claim for refund
or issuance of TCC, the Court shall make a determination on the timeliness of the ling
of petitioner's administrative and judicial claims.
Anent the petitioner's administrative claim, Section 112 (A) of the NIRC of 1997,
as amended, speci cally requires that the taxpayer's application for refund or issuance
of TCC of unutilized and/or excess input VAT arising from its domestic purchases of
services and importation of goods other than capital goods, which are attributable to
its zero-rated sales, must be made within two years after the close of the taxable
quarter when the sales were made.
Since the present claim covers the 1st quarter of CY 2014, petitioner had two (2)
years after the close of the taxable quarter on March 31, 2014 or until March 31, 2016
within which to le its claim for refund. Petitioner's administrative claim for refund or
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 issuance of TCC for the 1st quarter of CY 2014 was led on March 31, 2016, thus, the
same was timely filed.
The Court shall proceed to determine whether petitioner's judicial claim for
refund or issuance of TCC was timely filed. Section 11 of Republic Act No. (RA) 1125, 2 4
as amended by RA No. 9282, 2 5 provides the period of limitation within which to appeal
before this Court, viz.:
"SEC. 11. Who May Appeal; Mode of Appeal; Effect of Appeal. — Any
party adversely affected by a decision, ruling or inaction of the
Commissioner of Internal Revenue , the Commissioner of Customs, the
Secretary of Finance, the Secretary of Trade and Industry or the Secretary of
Agriculture or the Central Board of Assessment Appeals or the Regional Trial
Courts may le an appeal with the CTA within thirty (30) days after the
receipt of such decision or ruling or after the expiration of the period xed by
law for action as referred to in Section 7(a)(2) herein.
Appeal should be made by ling a petition for review under a procedure
analogous to that provided for under Rule 42 of the 1997 Rules of Civil
Procedure with the CTA within thirty (30) days from the receipt of the
decision or ruling or in the case of inaction as herein provided, from the
expiration of the period fixed by law to act thereon. x x x" (Boldfacing supplied)
As aforementioned, on March 31, 2016, petitioner led with RDO No. 50 its
administrative claim for refund or issuance of TCC representing its excess and/or
unutilized input VAT for the 1st quarter of CY 2014 in the amount of P14,565,140.54.
Within the 120-day period to act on petitioner's administrative claim for refund, the CIR,
through Revenue District O cer Rosita U. Meniano denied petitioner's administrative
claim in a Letter dated June 1, 2016.
The authority of Revenue District O cer Meniano to issue the denial letter nds
basis in Revenue Memorandum Circular (RMC) No. 054-14, pertinent parts of which
state:
"II. Filing and Processing of Administrative Claims —
The application for VAT refund/tax credit must be accompanied by
complete supporting documents as enumerated in Annex "A" hereof. In addition,
the taxpayer shall attach a statement under oath attesting to the completeness
of the submitted documents (Annex "B"). The a davit shall further state that
the said documents are the only documents which the taxpayer will present to
support the claim. If the taxpayer is a juridical person, there should be a sworn
statement that the o cer signing the a davit ( i.e., at the very least, the Chief
Financial O cer) has been authorized by the Board of Directors of the
company.
Upon submission of the administrative claim and its supporting
documents, the claim shall be processed and no other documents shall be
accepted/required from the taxpayer in the course of its evaluation. A decision
shall be rendered by the Commissioner based only on the documents submitted
by the taxpayer. The application for tax refund/tax credit shall be
denied where the taxpayer/claimant failed to submit the complete
supporting documents. For this purpose, the concerned
processing/investigating o ce shall prepare and issue the
corresponding Denial Letter to the taxpayer/claimant .
III. Mandatory 120+30-Day Period —

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 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 (120)-day period, appeal the decision or
the unacted claim with the CTA . Verily, a judicial claim must be led with
the CTA within 30 days from the receipt of the Commissioner's decision denying
the administrative claim or from the expiration of the 120-day period without
any action from the Commissioner, as the case may be. In this regard, the
taxpayer/claimant is required to observe the 120+30-day rule before lodging a
petition for review with the CTA.
In sum, the taxpayer can le the appeal in one of two ways: (1) le the
judicial claim within thirty days after the Commissioner denies the claim within
the 120-day period, or (2) le the judicial claim within thirty days from the
expiration of the 120-day period if the Commissioner does not act within the
120-day period." (Boldfacing supplied)
Clearly, Revenue District O cer Meniano's Letter dated June 1, 2016 denying
petitioner's administrative claim is the "Denial Letter" contemplated in RMC 054-14
which is appealable to this Court. Since petitioner received the aforesaid Letter on June
7, 2016, petitioner had thirty (30) days from said date or until July 7, 2016 within which
to appeal to the CTA. The Petition for Review which was led on July 7, 2016 was led
within the reglementary period to appeal. Thus, the Court has jurisdiction to take
cognizance of the Petition for Review.
Petitioner's zero-rated sales
Anent the second requirement , petitioner alleges that for the 1st quarter of CY
2014, it derived gross receipts from sale of services to Bayview Technologies, Inc.
(Bayview), EDC Burgos Wind Power Corporation (EDC Burgos), and Vestas Wind
System A/S (Vestas Denmark), in the amount of P1,107,422,089.20, as declared in
petitioner's Quarterly VAT Return for the same period. 2 6
Details of petitioner's gross receipts as broken down in the Schedule of Zero-
Rated, Taxable and Exempt Sales are shown hereunder: 2 7
Amo unt o f Amo unt o f Zero -
Registered Custo mer Name Gro ss Rated Sales in
Sales in Php Php
Bayview Technologies, Inc. 4,198,848.54 4,198,848.54
EDC Burgos Wind Power Corporation 343,189,262.71 343,189,262.71
EDC Burgos Wind Power Corporation 698,855,733.24 698,855,733.24
Vestas Wind System AS 61,178,244.71 61,178,244.71
TOTAL 1,107,422,089.20 1,107,422,089.20
(i) Sales to EDC Burgos
Petitioner maintains that its sales to EDC Burgos are subject to zero percent
(0%) VAT, pursuant to Section 15 (g) of Republic Act (RA) No. 9513 or the Renewable
Energy Act of 2008, in relation to Sections 106 (A) (2) (c), 110, and 112 (A), of the NIRC
of 1997, as amended.
The Court agrees with petitioner.
Section 15 (g) of RA No. 9513 pertinently provides:
"Section 15. Incentives for Renewable Energy Projects and
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 Activities . — RE developers of renewable energy facilities, including hybrid
systems, in proportion to and to the extent of the RE component, for both power
and non-power applications, as duly certi ed by the DOE, in consultation with
the BOI, shall be entitled to the following incentives:
xxx xxx xxx
(g) Zero Percent Value-Added Tax Rate. — The sale of fuel or power
generated from renewable sources of energy such as, but not limited to,
biomass, solar, wind, hydropower, geothermal, ocean energy and other emerging
energy sources using technologies such as fuel cells and hydrogen fuels, shall
be subject to zero percent (0%) value-added tax (VAT) , pursuant to the
National Internal Revenue Code (NIRC) of 1997, as amended by Republic Act
No. 9337.
All RE Developers shall be entitled to zero-rated value added tax
on its purchases of local supply of goods, properties and services
needed for the development, construction and installation of its plant
facilities.
This provision shall also apply to the whole process of
exploring and developing renewable energy sources up to its
conversion into power, including but not limited to the services
performed by subcontractors and/or contractors ." (Boldfacing supplied)
The Implementing Rules and Regulations (IRR) of RA No. 9513 further clari es
the zero-rated nature of the transaction, viz.
"G. Zero Percent Value-Added Tax Rate
The following transactions/activities shall be subject to zero
percent (0%) value-added tax (VAT) , pursuant to the National Internal
Revenue Code (NIRC) of 1997, as amended by Republic Act No. 9337:
xxx xxx xxx
(b) Purchase of local goods, properties and services needed
for the development, construction, and installation of the plant
facilities of RE Developers; and
(c) Whole process of exploration and development of
RE sources up to its conversion into power, including, but
not limited to, the services performed by subcontractors
and/or contractors ." (Emphasis supplied)
Pursuant to the aforecited law and rules, the whole process of exploration and
development of renewable energy sources up to its conversion into power, including
the services performed by contractors or subcontractors is a zero-rated transaction.
Moreover, the provision is categorical in stating that RE Developers are entitled to zero-
rated VAT on their purchases of local supply of goods, properties and services needed
for the development, construction and installation of its plant facilities.
In the case at bar, petitioner's rendition of services for the engineering,
procurement and construction of a wind power plant for EDC Burgos, a registered RE
developer of wind resources as evidenced by its Certi cate of Registration issued by
the Department of Energy on February 4, 2011 2 8 and Certi cate of Registration issued
by the BOI on June 29, 2011, 2 9 may be treated as part of the whole process of
exploration and development of renewable energy sources. As a local supplier of
services needed for the development, construction and installation of EDC Burgos'
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 facilities, the services rendered by petitioner to EDC Burgos qualify as zero-rated under
Section 15 (g) of RA No. 9513.
In the above-mentioned Schedule of Zero-Rated, Taxable and Exempt Sales, 3 0
petitioner's zero-rated sale of services to EDC Burgos amount to P343,189,262.71 and
P698,855,733.24, or a total of P1,042,044,995.95. Substantiation of VAT o cial
receipts of the foregoing zero-rated sale of services is indispensable pursuant to
Sections 113 and 237 of the NIRC of 1997, as amended, which provide:
"SEC. 113. Invoicing and Accounting Requirements for VAT-
Registered Persons. —
(A) Invoicing Requirements. — A VAT-registered person shall, for
every sale, issue an invoice or receipt. In addition to the information required
under Section 237, the following information shall be indicated in the invoice or
receipt:
(1) A statement that the seller is a VAT-registered person, followed
by his taxpayer's identification number (TIN); and
(2) The total amount which the purchaser pays or is obligated to pay
to the seller with the indication that such amount includes the value-added tax.
xxx xxx xxx."
"SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. —
All persons subject to an internal revenue tax shall, for each sale or
transfer of merchandise or for services rendered valued at Twenty- ve pesos
(P25.00) or more, issue duly registered receipts or sales or commercial invoices,
prepared at least in duplicate, showing the date of transaction, quantity, unit
cost and description of merchandise or nature of service: Provided, however,
That in the case of sales, receipts or transfers in the amount of One Hundred
Pesos (P100) or more, regardless of amount, where the sale or transfer is made
by a person liable to value-added tax to another person also liable to value-
added tax; or where the receipt is issued to cover payment made as rentals,
commissions, compensations, or fees, receipt or quantity, unit cost and
description of merchandise or nature of service: Provided, however, That in the
case of sales, receipts or transfers in the amount of One Hundred Pesos (P100)
or more, regardless of amount, where the sale or transfer is made by a person
liable to value-added tax to another person also liable to value-added tax; or
where the receipt is issued to cover payment made as rentals, commissions,
compensations, or fees, receipt or invoices shall be issued which shall show the
name, business style, if any, and address of the purchaser, customer, or client:
Provided, further, That where the purchaser is a VAT-registered person, in
addition to the information herein required, the invoice or receipt shall further
show the Taxpayer Identification Number of the purchaser. x x x."
Records show that petitioner presented the following o cial receipts and sales
invoices as proof that it rendered services to EDC Burgos, viz.:
Official Receipts

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 Exhibit Document
Client Name Document Date Amount
Reference Number
P-38 EDC Burgos Wind Power 019 March 27, 2014 P12,046,743.86
Corporation
P-39 EDC Burgos Wind Power 020 March 27, 2014 $1,175,369.43
Corporation
P-40 EDC Burgos Wind Power 022 March 27, 2014 $1,246,594.97
Corporation
Sales Invoices
Exhibit Document
Client Name Document Date Amount
Reference Number
P-41 EDC Burgos Wind Power 00003 March 20, 2014 P59,190,462.57
Corporation
P-42 EDC Burgos Wind Power 00004 March 20, 2014 $130,318.79
Corporation
P-43 EDC Burgos Wind Power 00005 March 20, 2014 P94,361,461.77
Corporation
P-44 EDC Burgos Wind Power 00006 March 20, 2014 P33,028,303.32
Corporation
P-45 EDC Burgos Wind Power 00007 March 20, 2014 $588,958.49
Corporation
P-46 EDC Burgos Wind Power 00008 No date P45,379,354.63
Corporation indicated
P-47 EDC Burgos Wind Power 00009 No date P4,460,953.34
Corporation indicated
P-48 EDC Burgos Wind Power 00010 March 20, 2014 $601,626.00
Corporation
P-49 EDC Burgos Wind Power 00011 March 20, 2014 P7,767,427.00
Corporation
P-50 EDC Burgos Wind Power 00012 March 20, 2014 $340,415.00
Corporation
An evaluation of the abovementioned evidence shows that the amounts in
Exhibits "P-39", "P-40", "P-42", "P-45", "P-47", "P-48", and "P-50" are in US Dollar currency.
There is nothing in the Court records, however, that supports petitioner's use of the
appropriate foreign exchange rate. Thus, the Court cannot reasonably determine and/or
validate the correct amount of zero-rated sales as evidenced by the said exhibits, vis-a-
vis the amount of zero-rated sales re ected in petitioner's Amended 1st Quarter VAT
Return for the CY 2014, which amount is indicated in Philippine Pesos.
Moreover, as shown below, Exhibit "P-46" bears no date when the sales invoice
was issued. For this reason, the Court cannot validate if it pertains to a sale made by
petitioner to EDC Burgos during the 1st quarter of CY 2014:
Exhibit "P-46"

From the foregoing, only the following zero-rated sales to EDC Burgos have been
properly substantiated by petitioner:
Exhibit Type Amount in Php
P-38 Official Receipt 12,046,743.86
P-41 Sales Invoice 59,190,462.57
P-43 Sales Invoice 94,361,461.77
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 P-44 Sales Invoice 33,028,303.32
P-49 Sales Invoice 7,767,427.00
TOTAL 196,394,398.52
(ii) Sales to Bayview
Petitioner posits that the rental fees it derived from subleasing an o ce space
to Bayview, a CEZA-registered enterprise, are subject to zero percent (0%) VAT
pursuant to the Cagayan Economic Zone Authority (CEZA) Certi cation issued in favor
of Bayview.
To prove that Bayview is registered with CEZA as a Cagayan Special Economic
Zone and Freeport (CSEZFP) enterprise, and that petitioner's sublease of its o ce
space to Bayview is subject to zero percent (0%) VAT, petitioner presented the
following: (i) Sublease Agreement executed by petitioner and Bayview in May 2013
(Exhibits "P-16"); (ii) Renewal Agreement executed by petitioner and Bayview in
December 2013 (Exhibit "P-17"); and, (iii) Certi cate of Registration with CSEZFP
Enterprise No. CF-006 issued by CEZA to Bayview on December 1, 2011 (Exhibit "P-
18").
The Court could not, however, consider Exhibits "P-16", "P-17" and "P-18" in
resolving whether or not petitioner's gross receipts derived from subleasing an o ce
space to Bayview qualify for VAT zero-rating as the aforesaid Exhibits were denied
admission in evidence in the Resolution dated September 14, 2017 3 1 for petitioner's
failure to present the originals for comparison. It is settled that any evidence that has
not been admitted cannot be given weight in resolving a controversy.
Considering the Court's denial of the admission of aforesaid Exhibits, and
petitioner's failure to present any other document to prove that Bayview is indeed a
CEZA-registered enterprise, petitioner's gross receipts from the rental fees it earned
from Bayview cannot be treated as subject to zero percent (0%) VAT.
(iii) Sales to Vestas Denmark
Petitioner avers that its gross receipts from Vestas Denmark, a person engaged
in business conducted outside the Philippines, are subject to zero percent (0%) VAT.
Petitioner claims that it rendered information technology (IT) services to Vestas
Denmark for which it was paid in acceptable foreign currency.
Section 108 (b) (2) of the NIRC of 1997, as amended, 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 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
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 rules and regulations of the Bangko Sentral ng Pilipinas
(BSP) ."
I n Commissioner of Internal Revenue vs. Burmeister and Wain Scandinavian
Contractor Mindanao, Inc., 3 2 the Supreme Court had the occasion to discuss that in
order for the supply of services to be VAT zero-rated under the above-mentioned
provision, the following requisites must be met:
1. the services must be other than processing, manufacturing or repacking
of goods;
2. the payment for such services must be in acceptable foreign currency
accounted for in accordance with the BSP rules and regulations; and,
3. the recipient of such services is doing business outside the Philippines.
With regard to the rst requisite, petitioner presented the Service Agreement it
executed with Vestas Denmark as Exhibit "P-12". In the Resolution dated September 14,
2017, 3 3 the Court denied admission of Exhibit "P-12" for petitioner's failure to present
the original for comparison. The Court is precluded from considering Exhibit "P-12" in
determining whether or not petitioner rendered services to Vestas Denmark and
whether said services are other than processing, manufacturing or repacking of goods.
In addition to the Service Agreement, petitioner presented VAT O cial Receipt
No. 014 (Exhibit "P-54") to substantiate its sales to Vestas Denmark but the same does
not re ect the nature of services rendered by petitioner. Thus, in the absence of any
other evidence offered by petitioner to prove that it rendered services other than
processing, manufacturing or repacking of goods to Vestas Denmark, the alleged
gross receipts from Vestas Denmark may not be considered as subject to zero percent
(0%) VAT.
Input VAT paid or incurred by
petitioner which are attributable
to its zero-rated sales
Having resolved that petitioner had VAT zero-rated receipts for the 1st quarter of
taxable year 2014 in the amount of P196,394,398.52, arising from its transaction with
EDC Burgos, the Court shall proceed to determine petitioner's compliance with the
third requirement — the amount of input VAT incurred or paid by petitioner.
For the 1st quarter of taxable year 2014, petitioner reported a total amount of
P14,565,140.54 input VAT arising from its importation of goods other than capital
goods and domestic purchases of services, 3 4 detailed as follows:
1st Quarter of 2014 Amount in
Php
Importation of Goods Other than Capital Goods 4,879,037.00
Domestic Purchase of Services 9,686,103.54
TOTAL 14,565,140.54
To substantiate its input VAT in the total amount of P14,565,140.54 as re ected
in its Amended Quarterly VAT Return for the 1st quarter of CY 2014, petitioner
submitted purchase transaction and imports transaction — reconciliation of listing for
enforcement for the 1st quarter of CY 2014, various suppliers' o cial receipts, Bureau
of Customs (BOC) Import Entries and Internal Revenue Declarations (IEIRDs), Bank of
the Philippine Islands Statements of Accounts, billing statements, collection receipts,
and statements of account. 3 5
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 Upon veri cation of the aforesaid documents, the Independent Certi ed Public
Accountant (ICPA), Ms. Krista Bambao, found that out of petitioner's reported input
VAT of P14,565,140.54, only the total amount of P6,605,380.00 is properly
substantiated, detailed as follows: 3 6
Nature E xhibit No . Amo unt in Php
1. Purchases of Services/Rent properly "P-62" to "P-84" 1,753,389.00
substantiated for VAT purposes by
VAT Reg. TIN ORs
2. Importations of Goods substantiated "P-85" to "P-93" 138,260.00
by Import Entry and Internal Revenue
Declaration with BPI system
generated proof of VAT payment
3. Importations of Goods substantiated "P-94" to "P-99" 1,083,281.00
by Import Entry and Internal Revenue
Declaration with BPI system
generated proof of VAT payment but
with unreadable IEIRD serial number
4. Importations of Goods substantiated "P-100" to "P- 3,630,450.00
by BPI system generated proof of 111"
VAT payment but photocopied Import
Entry and Internal Revenue
Declaration
TOTAL 6,605,380.00
Anent the remaining input VAT, the ICPA found the amount of P7,959,724.73 as
input VAT with exceptions, as follows:

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 Nature E xhibit No . Amo unt in Php
1. Purchases of services/rent "P-112" to "P-113" 24,413.96
substantiated by photocopied VAT
Reg. TIN ORs
2. Unsupported local purchases & 1,086,923.56
importation of non-capital goods
3. Input taxes claimed supported by "P-114" to "P-120" 5,628,192.86
VAT Registered TIN ORs dated
outside the covered period of the
claim
4. Input taxes from purchases of "P-121" to "P-137" 61,949.72
services supported by documents
other than VAT Registered TIN ORs
5. Input VAT substantiated by invalid "P-138" 3,211.20
ORs (not valid for claiming input tax)
6. Input taxes claimed supported by "P-139" to "P-141" 593,165.71
VAT Registered TIN ORs in which
VATable or VAT amount not
properly indicated
7. Input taxes from purchase of goods "P-142" to "P-143" 7,251.86
but reported under "Domestic
Purchase of Services" in the VAT
returns
8. Input taxes claimed supported by "P-144" 15,840.00
VAT Registered TIN ORs with
incomplete name of Petitioner
9. Input taxes claimed supported by "P-145" to "P-159" 438,866.18
VAT Registered TIN ORs with
no/incorrect TIN of Petitioner
10. Input taxes claimed supported by "P-160" to "P-168" 99,909.68
VAT Registered TIN ORs with
no/incorrect/incomplete address of
petitioner
TOTAL 7,959,724.73
As borne by the records, in the Resolution dated September 14, 2017, the Court
denied the admission of Exhibits "P-112", "P-113", "P-118", "P-119", "P-120", "P-137", "P-
141", "P-153", "P-154", "P-155", "P-156", "P-157", "P-158", "P-159" and "P-168" for failure
of petitioner to present the originals for comparison. As a consequence, the following
input VAT should be disallowed for not being substantiated by VAT invoices or o cial
receipts:
Input VAT Amount in
Exhibit No.
Php
P-99 24,860.00
P-112 7,285.71
P-113 17,128.25
P-118 578.57
P-119 1,897,672.75
P-120 3,720,360.00
P-137 370.08
P-141 1,326.75
P-153 642.75
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 P-154 53.57
P-155 53.57
P-156 53.57
P-157 126,794.70
P-158 101,606.36
P-159 195,646.45
P-168 14,764.06
TOTAL 6,109,197.14
In addition to the disallowed input VAT of P6,109,197.14, the Court, after
considering the exceptions noted by the ICPA, nds that the following input VAT should
likewise be disallowed for not being substantiated with valid VAT invoices or o cial
receipts in accordance with Sections 110 (A), 113, 237 and 238 of the NIRC of 1997, as
amended, in relation to Sections 4.110-1, 4.110-8 and 4.113-1 of Revenue Regulations
(RR) No. 16-2005, as amended:
Input VAT Amount in
Exhibit No.
Php
P-114 1,261.68
P-115 67,100.04
P-116 5,399.99
P-117 5,152.00
P-121 4,648.32
P-122 1,710.00
P-123 1,710.00
P-124 2,928.00
P-125 1,902.86
P-126 8,164.29
P-127 10,928.57
P-128 7,625.74
P-129 6,883.93
P-130 7,028.57
P-131 6,198.00
P-132 370.08
P-133 370.08
P-134 370.08
P-135 370.08
P-138 3,211.20
P-139 136,187.39
P-140 455,651.57
P-142 7,177.50
P-143 74.36
P-144 15,840.00
P-145 156.00
P-146 4,143.12
P-147 4,459.40
P-148 578.57
P-149 1,197.05
P-150 282.10
P-151 606.85
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 P-152 2,582.12
P-160 2,689.29
P-161 3,085.71
P-162 20,430.00
P-163 600.85
P-164 1,178.57
P-165 105.60
P-166 14,815.38
P-167 42,240.22
TOTAL 857,425.16
The Court notes that there were transactions which were considered as
unsubstantiated by the ICPA but upon further scrutiny, the Court nds the same to be
properly substantiated by VAT invoices or o cial receipts, in accordance with Sections
110 (A), 113, 237, and 238 of the NIRC of 1997, as follows:

Exhibit VATable Input VAT

Supplier Remarks
No. Amount in Php Amount in Php
P-139 SL Temps, Inc. 1,134,894.92 136,187.39 VAT amounts properly
indicated in OR
P-140 RCBC Realty Corp. 3,797,096.42 455,651.57 VAT amounts properly
indicated in OR
P-146 ISS Facility Services, 34,526.00 4,143.12 TIN of petitioner
Inc. indicated
P-147 ISS Facility Services, 37,161.67 4,459.40 TIN of petitioner
Inc. indicated
TOTAL 5,003,679.01 600,441.48

With regard to Exhibits "P-139" to "P-141", the ICPA noted that the VATable or
VAT amounts are not properly indicated in the ORs but a careful scrutiny of the ORs
reveals otherwise. Said ORs are shown below:
Exhibit P-139

Exhibit P-140

Exhibit P-141

As regards Exhibits "P-145" to "P-159", which are found by the ICPA to have been
supported by VAT Registered o cial receipts with no/incorrect Tax Identi cation
Number (TIN) of petitioner, the Court has determined that Exhibit "P-147" indicates the
correct TIN of petitioner as re ected in its Certi cate of Registration, 3 7 which is 007-
533-154-000, as shown below:
Exhibit P-147

Prescinding from the foregoing, out of petitioner's total input VAT of

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 P14,565,140.54, only the amount of P7,176,828.36 is properly substantiated by VAT
invoices or official receipts:
Exhibit No. Amount in Php
"P-62" to "P-84" 1,753,389.00
"P-85" to "P-93" 138,260.00
"P-94" to "P-98" 1,058,421.00
"P-100" to "P-111" 3,630,450.00
"P-139" to "P-140" 591,838.96
"P-147" 4,459.40
TOTAL 7,176,818.36
Petitioner's substantiated input
VAT allocated to its zero rated
sales and sales that did not
qualify as zero-rated
Relative to petitioner's compliance with the fourth requirement , the Court notes
that petitioner's Amended 1st Quarterly VAT Return for CY 2014 3 8 shows that it did
not have sales that are subject to VAT at the rate of 12%. This, notwithstanding, the
entire amount of substantiated input VAT of P7,176,818.36 is not ipso facto refundable
to petitioner.
The Court has to determine the allocation of validly substantiated input VAT
payments to petitioner's duly supported zero-rated sales, taking into consideration the
Court's nding that petitioner's sales to Bayview and Vestas Denmark could not qualify
as zero-rated and that only petitioner's sales to EDC Burgos in the amount of
P196,394,398.52 qualifies as zero-rated.
The percentage of validly supported zero-rated sales of P196,394,398.52 to total
sales of P1,107,422,089.20 as declared in petitioner's Amended 1st Quarterly VAT
Return is 17.73%. Allocating the substantiated input VAT of P7,176,818.36 to the
percentage of the zero-rated sales over total sales as declared in petitioner's Amended
1st Quarterly VAT Return for CY 2014, the amount of input VAT that is attributable to
petitioner's duly substantiated zero-rated sales is P1,272,449.90 only, computed as
follows:
Amo unt (Php)
Total valid zero-rated sales for the 1st quarter of CY 2014 divided by 196,394,398.52
total sales
for the 1st quarter of 2014 1,107,422,089.20
Percentage of valid zero-rated sales over total sales = 17.73%
Multiplied with: valid input VAT for the 1st quarter of CY 2014 = 7,176,818.36
Valid Input VAT attributable to zero-rated sales for the 1st quarter of CY = 1,272,449.90
2014
Petitioner's input VAT was not
applied against any output VAT
liability in the present and
succeeding quarters
With regard to the fifth requirement , to prove that petitioner did not carry-over
and utilize the input VAT for the present and succeeding quarters, petitioner presented
its Quarterly VAT Returns for the 1st to 4th quarters of CY 2014, 3 9 1st to 4th quarters
of CY 2015, 4 0 and 1st and 2nd quarter of CY 2016. 4 1
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 An examination of said documents reveals that, indeed, petitioner did not carry-
over the input VAT incurred during the 1st quarter of CY 2014 in the amount of
P14,565,140.54 to succeeding quarters or applied the same against any output VAT for
subsequent taxable quarters until the claim was filed on June 30, 2016. 4 2
xxx xxx xxx
In ne, petitioner has su ciently proven its entitlement to a refund or issuance of
a TCC in the amount of P1,272,449.90, representing its unutilized input VAT incurred for
the 1st quarter of taxable year 2014, attributable to its zero-rated receipts for the same
period.
WHEREFORE , premises considered, the instant Petition for Review is hereby
PARTIALLY GRANTED . Accordingly, respondent COMMISSIONER OF INTERNAL
REVENUE is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in
favor of petitioner VESTAS SERVICES PHILIPPINES, INC. in the reduced amount of
One Million Two Hundred Seventy-Two Thousand Four Hundred Forty-Nine
and 90/100 Pesos (P1,272,449.90) , representing petitioner's unutilized excess
input VAT attributable to its zero-rated sale of services for the 1st quarter of CY 2014.
SO ORDERED.

(SGD.) ROMAN G. DEL ROSARIO

Presiding Justice

Erlinda P. Uy and Cielito N. Mindaro-Grulla, JJ., concur.

Footnotes

1. Dated July 7, 2016; CTA Docket pp. 10-37.

2. Paragraph 1, Petition for Review, CTA Docket, p. 10; Exhibit "P-1", CTA Docket, p. 99; Exhibit
"P-2", CTA Docket, p. 123.

3. Par. 1.3, I. Stipulation of Facts, Joint Stipulation of Facts and Issue (JSFI), CTA Docket, p.
516.
4. Supra, note 2.

5. Par. 1.1, I. Stipulation of Facts, JSFI, CTA Docket, p. 515.

6. Par. 1.2, I. Stipulation of Facts, JSFI, CTA Docket, p. 515; Exhibit "P-3", CTA Docket, p. 134.

7. Exhibit "P-6", CTA Docket, pp. 825-826.

8. Par. 1.4, I. Stipulation of Facts, JSFI, CTA Docket, p. 516; Exhibits "P-4" and "P-5", CTA
Docket, pp. 135 and 136.

9. Paragraph 15, I. Statement of Facts, Petition for Review, CTA Docket, p. 13; Exhibit "P-26".

10. Supra, note 1.

11. CTA Docket, pp. 41-44.

12. CTA Docket, pp. 48-50.

13. CTA Docket, pp. 479-497.

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 14. CTA Docket, pp. 507-508.

15. CTA Docket, pp. 515-520.

16. CTA Docket, p. 522.

17. CTA Docket, pp. 541-548.

18. Formal Offer of Documentary Evidence, CTA Docket, pp. 762-786.

19. Order dated June 20, 2017, CTA Docket, pp. 755-756.

20. CTA Docket, pp. 1099-1101 and pp. 1192-1194.

21. Resolution dated January 23, 2018, CTA Docket, p. 1218.

22. CTA Docket, pp. 1181-1183.

23. CTA Docket, pp. 1195-1216.

24. An Act Creating the Court of Tax Appeals.

25. An Act Expanding the Jurisdiction of the Court of Tax Appeals (CTA), Elevating Its Rank to
the Level of a Collegiate Court with Special Jurisdiction and Enlarging its
Membership Amending for the Purpose Certain Sections of Republic Act No. 1125, as
amended, otherwise known as the law creating the Court of Tax Appeals, and for
Other Purposes.

26. Supra, note 7.

27. Exhibit "P-7", CTA Docket, p. 827.

28. Exhibit "P-9", CTA Docket, p. 141.

29. Exhibit "P-9", CTA Docket, p. 142.

30. Supra, note 22.

31. CTA Docket, pp. 1099-1101.

32. G.R. No. 190021, October 22, 2014.

33. Supra, note 26.

34. Supra, note 21.

35. Exhibits "P-60", "P-61", "P-62" to "P-98", "P-100" to "P-111", "P-114" to "P-117", "P-121" to "P-
136", "P-138" to "P-140", "P-142" to "P-152", "P-160" to "P-167".

36. Exhibit "P-28", ICPA Report.

37. Exhibit "P-3", CTA Docket, p. 134.

38. Supra, note 7.

39. Exhibits "P-6", "P-21-1", "P-21-2", and "P-21-3", CTA Docket, pp. 825-826, 871-876.
40. Exhibits "P-22-1", "P-22-2", "P-22-3", and "P-22-4", CTA Docket, pp. 877-887.

41. Exhibits "P-23-1", and "P-23-2", CTA Docket, pp. 889-890, 892-893.
42. Exhibits "P-21-1", "P-21-2", "P-21-3", "P-22-1", "P-22-2", "P-22-3", "P-22-4", "P-23-1", and "P-23-
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 2", CTA Docket, pp. 871-887, 889-890, 892-893.

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