[TAX CODE DOES NOT REQUIRE THE INPUT TAX TO BE DIRECTLY ATTRIBUTABLE TO ZERO-RATED SALES TO BE REFUNDABLE OR CREDITABLE] [COURTS ARE BARRED UNDER THE BUSINESS JUDGMENT RULE FROM INTERFERING WITH THE BUSINESS JUDGMENTS, POLICIES, AND DECISION-MAKING BY AN ENTITY OR ITS OFFICERS WHEN THE SAME ARE MADE IN GOOD FAITH]

Petitioner Commissioner of Internal Revenue (CIR) filed a Petition for Review seeking to reverse the partial refund or issuance of Tax Credit Certificate (TCC) in favor of Respondent S&WOO Construction Philippines, Inc. representing the latter's unutilized excess input VAT attributable to its zero-rated sales. Petitioner raised a lone assignment of error that the Court in Division erred in ruling that Respondent is entitled to refund. In ruling, the Court held that Petitioner has no standing to question the propriety of the service fees being charged by Respondent’s lone client Samsung Electro-Mechanics Philippines Corporation (SEMPHIL). Neither the Court nor Petitioner has a right to interfere with how Respondent bills its sales of services to its lone client, SEMPHIL. This is the very essence of the business judgment rule. Respondent was acting within its authority in including in the bill to SEMPHIL an amount corresponding to the input VAT it paid for its purchases of goods and services which were necessary to render services to SEMPHIL. Furthermore, on the contention that Respondent failed to prove that the input taxes sought to be refunded are directly attributable to its alleged zero-rated sale, is misplaced. The Court held that there is nothing in 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 for it to be creditable or refundable. In fact, the 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. Nonetheless, provided that the subject input tax is evidenced by a VAT invoice or official receipt issued in accordance with Section 113 of the 1997 Tax Code, the same may be creditable against the output VAT. Therefore, the Petition was DENIED. [COMMISSIONER OF INTERNAL REVENUE VS. S&WOO CONSTRUCTION PHILIPPINES, INC., CTA EN BANC CASE NO. 2340, DECEMBER 10, 2021]

DENIED INPUT VAT OF BOI-REGISTERED ENTITY DUE TO FAILURE TO PRESENT DOE ENDORSEMENT

Petitioner YH Green Energy Incorporated filed a Petition for Review seeking refund of its unutilized input VAT attributable to its zero-rated sales. Petitioner argues that it satisfied all the requisites for the VAT refund claim to prosper. Moreover, it was able to comply with the substantiation requirements of the BIR. In ruling, the Court held that Petitioner failed to establish that it is engaged in zero-rated sales. For a Renewable Energy Developer to qualify for VAT zero-rating, as contemplated under Republic Act No. 9513 otherwise known as “Renewable Energy Law of 2008” and its Implementing Rules and Regulations, DOE Certificate of Registration, Registration with the BOI, and Certificate of Endorsement from the DOE on a per transaction basis should be secured. Records showed that no DOE Certificate of Registration or a Certificate of Endorsement from the DOE, through the REMB, on a per transaction basis was submitted. The absence of these two (2) documents is fatal to Petitioner's cause. Petitioner likewise failed to establish that the unutilized input VAT is attributable to zero-rated sales. Scrutiny of documents showed that there were no zero-rated sales declared during the period of the claim against which the input VAT can be attributed. Also, it did not submit any corresponding VAT official receipts. Thus, the Petition was DENIED. [YH GREEN ENERGY INCORPORATED VS. COMMISSIONER OF INTERNAL REVENUE, CTA CASE NO. 9784, DECEMBER 7, 2021]

[RDO IS NOT ONE OF THE OFFICIALS AUTHORIZED BY LAW TO SIGN AN LOA] [ADMINISTRATIVE ISSUANCES CANNOT AMEND SUBSTANTIVE LAW] [ALL AUDITS SHOULD BE CONDUCTED UNDER AN LOA, AND REQUIRES ISSUANCE OF A NEW LOA IN CASE OF ANY REASSIGNMENT OR TRANSFER OF CASES TO ANOTHER RO]

Republic of the Philippines filed a Petition for Review, seeking to reverse and set aside the earlier Decision and Resolution of the Court in Division dismissing the tax assessment against Respondent Robiegie Corporation on the ground that the Revenue Officers (RO) were not duly authorized by a Letter of Authority (LOA) when they conducted the examination of books of accounts. Petitioner contends that a Memorandum of Assignment (MOA) is sufficient to confer authority upon the RO in question. In ruling, all audits should be conducted under an LOA, and require the issuance of a new LOA in case of any reassignment or transfer of cases to another RO. Perusal of records showed that the RO was not validly authorized by a new LOA, when she exercised assessment functions. Consequently, the subject tax assessments resulting from the investigation, audit, and recommendation is void. In any case, assuming arguendo, that the Memorandum Referral is accepted by this Court as a valid substitute for an LOA, it would still be insufficient as basis to confer authority, for the subject Memorandum showed that it was only signed by the Revenue District Officer (RDO). Under pertinent BIR issuances, RDO is not one of the officials authorized by law to sign an LOA or confer authority upon an RO to perform assessment functions. Thus, unless authorized by the CIR himself or by his duly authorized representative, through an LOA, an examination of the taxpayer cannot ordinarily be undertaken. Moreover, the Court did not accept the contention of the Petitioner that under Revenue Memorandum Orders, MOA should be recognized for the continuation of the audit. The issuances run counter to the provisions of Sections 6(A) and 13 of the 1997 Tax Code, which is the substantive law on the matter. It is well settled that a mere administrative issuance cannot amend the law. Thus, the provisions of RMO No.’s. 8-2006, 62-2010 and 69- 2010 relied upon by the Commissioner of Internal Revenue cannot prevail over the clear import of the Tax Code. With the foregoing disquisition, the Court finds no compelling reason to reverse nor modify the findings of the Court a quo in the assailed Decision and Resolution. Thus, the Petition was DENIED. [REPUBLIC OF THE PHILIPPINES VS. ROBIEGIE CORPORATION, CTA EN BANC CASE NO. 2339, DECEMBER 2, 2021]

[WITHOUT INDICTMENT AND WITHOUT BEING CHARGED IN THE INFORMATION, A PERSON CANNOT BE CONVICTED] [THERE IS NO PENAL LAW THAT DIRECTLY CHARGES CORPORATE OFFICERS FOR WILLFUL ATTEMPT TO EVADE CORPORATE INCOME TAX]

Petitioners Enviroaire, Inc., represented by Tyrone N. Ong and Arlene Chua, filed a Petition for Review praying to reverse and set aside the earlier Decision of the Court in Division finding them guilty beyond reasonable doubt of violating Section 254 in relation to Sections 253 and 256 of the Tax Code. The Court in Division rejected Petitioners' argument that Enviroaire was not required to report income in relation to its sale to the PNP in 2007 since it only received payment in 2008, hence, contrary to the accounting method employed in its financial reporting which is the Accrual Method of Accounting. Petitioners argued that that their right to be informed of the nature and cause of accusation against them was violated. They averred that based on the Amended Information, they were indicted for violation of Section 254 of the Tax Code for taxable year 2007, while the charges against them were based on official receipts that were issued in 2008. Further, they stressed that Respondent failed to prove the existence of all the elements of tax evasion under Section 254 of the Tax Code. In ruling, the Court resolved that Enviroaire was not charged as an Accused in the Amended Information, thus, the Court never obtained jurisdiction over it. Furthermore, Petitioners Ong and Chua's conviction must be set aside since Enviroaire was not charged in the Information and as such, their conviction has no leg to stand on. Likewise, the imposition of the penalty upon a corporate officer under Section 254 in relation to Section 253 of the Tax Code without first convicting the corporation is void. Henceforth, without a convicted corporation, there is no erring responsible officer. Also, to punish the officers without establishing the guilt of the juridical entity runs against the basic tenets of due process. It must be stressed that there is no penal law that directly charges the corporate officers for willful attempt to evade and defeat corporate income tax. Hence, without Enviroaire, the facts charged against Petitioners Ong and Chua do not constitute an offense. Therefore, the Petition was GRANTED, and C.T.A. Crim. Case No. 0-408 was DISMISSED on the grounds of lack of jurisdiction and the facts charged do not constitute an offense. [ENVIROAIRE, INC., REPRESENTED BY TYRONE N. ONG AND ARLENE CHUA VS. PEOPLE OF THE PHILIPPINES, CTA EN BANC CRIMINAL CASE NO. 073, NOVEMBER 25, 2021]

[VAT ZERO-RATED OR AND SI DO NOT SUFFICIENTLY ESTABLISH THAT SERVICES ARE RENDERED LOCALLY] [VAT INVOICES ARE FOR GOODS, WHILE VAT ORs ARE FOR SERVICES]

Petitioner Nokia (Philippines), Inc., filed a Petition for Review seeking to reverse the earlier Decision of the CTA Special First Division denying its claim for refund of input VAT. The Court in Division held that it was not established that the subject services were performed in the Philippines and the recipient of the service is a non-resident foreign corporation. In ruling, the Court resolved that Petitioner cannot rely upon KEPCO case to support its position that its VAT invoices and official receipts are sufficient to establish that the services rendered to Nokia Finland were performed in the Philippines. The Supreme Court simply clarified that, contrary to taxpayer’s position, the VAT invoices and official receipts should be distinguished and should not be used interchangeably. Hence, VAT zero-rated official receipts and sales invoices do not sufficiently establish that the services were rendered locally. Furthermore, a closer review of the Judicial Affidavit of Shared Accounting Services does not yield any proof that the services sold to its parent company, Nokia Finland, were actually performed in the Philippines. It likewise failed to cover any testimony to explain or describe where the services were performed. Moreover, the controlling legal rule on the probative value of said documents became final and binding to the parties. Thus, Petitioner is barred from elevating the issue anew before the Court, especially when an Entry of Judgment was issued by the Supreme Court. The Court finds nothing in the instant case that merits a reversal of the ruling of the Court a quo. Thus, the Petition was DENIED. [NOKIA (PHILIPPINES), INC. VS. COMMISSIONER OF INTERNAL REVENUE, CTA EN BANC CASE NO. 2238, OCTOBER 28, 2021]