THE COURT of Tax Appeals (CTA) denied for lack of merit the motion for partial reconsideration of the Bureau of Internal Revenue (BIR) over the P15.86 million tax refund granted to Deutsche Knowledge Services Pte. Ltd., a subsidiary of Deutsche Bank Group in Singapore.
In a six-page resolution, the CTA special second division ruled that Deutsche Knowledge established its claim for the refund of its unutilized excess input value-added tax (VAT) attributable to zero-rated sales for the second quarter of 2014, denying the appeal of the BIR.
“Clearly, there is no cogent reason to disturb the assailed Decision,” the court ruled.
The court on Feb. 12 partially granted the claim of Deutsche Knowledge, allowing only the amount of P15.86 million to be refunded out of the P27.1 million it initially claimed, saying it failed to substantiate some of its sales to foreign clients for the period.
In a motion filed on Feb. 28, the BIR claimed that the court was mistaken in ruling that the input tax refund claimed by the firms is attributable to zero-rated sales and the subject input VAT remained unutilized.
The CTA said that Section 112(A) of the Tax Code does not require the input taxes that are the subject of claims to be directly attributable to zero-rated sales. It also allows the allocation of the input taxes if they cannot be directly or entirely be attributed to the sales.
“Section 112(A) of the NIRC (National Internal Revenue Code) of 1997, as amended, only mandates that the input tax paid or incurred is attributable to a taxpayer’s zero-rated sales,” it said.
“It does not require that the input tax be directly attributable to petitioner’s zero-rated sales. Input tax that bears a direct or indirect connection with petitioner’s zero-rated sales satisfies the requirement of the law,” it added.
The CTA also said that the court previously ruled that even thought the claimed input VAT was carried over by Deutsche Knowledge in its succeeding quarterly VAT returns, “the same remained unutilized until it was deducted as ‘VAT Refund/TCC (Tax Credit Certificate’ claimed in its amended Quarterly VAT Return” for the second quarter of 2016.
It also added that the excess input VAT of P164.8 million as of the end of second quarter of 2016 is no longer included in the claim as it was carried over to the succeeding quarter.
The decision was written by Associate Justice Juanito C. Castañeda, Jr. and concurred in by Associate Justice Catherine T. Manahan. — Vann Marlo M. Villegas
