Tax court sides with Lepanto in refund case

THE Court of Tax Appeals (CTA) denied for lack of merit the appeal of the Bureau of Internal Revenue over the P12.8 million tax refund granted to a mining firm.

In a four-page resolution on Jan. 17, the court’s second division said that records showed that Lepanto Consolidated Mining Co. has valid zero-rated sales for 2015 which is the basis for its unutilized input value-added tax (VAT).

“Be that as it may, this Court has painstakingly scrutinized the evidence on record and has determined that petitioner has valid zero-rated sales for calendar year 2015 and, furthermore, determined that petitioner incurred input taxes attributable thereto. As held in the assailed Decision,” the resolution penned by Associate Justice Juanito C. Castañeda, Jr. read.

“In view of the foregoing, the Court finds no convincing reason to reverse or modify the Decision promulgated on September 23, 2019,” it added.

The court in September partially granted the P14.9 million tax refund claim of Lepanto, allowing only the amount of P12.8 million to be issued a tax credit certificate.

It said that the amount of P12.8 million can be traced to its valid zero-rated sales of P1.1 billion.

In its motion for partial reconsideration, the BIR said the court erred in finding that the company sufficiently established its claims for refund and that “direct connection between the purchases or input tax and the finished product whose sale is zero-rated as ‘concrete’ and not ‘imaginary’ or ‘remote’” cannot be found in the decision.

The court ruled that Lepanto is not required to prove which among its purchases are directly attributable to zero-rated transactions and which are taxable transactions.

The tax appellate court said that Section 112(A) of the Tax Code provided that if a taxpayer s engaged in zero-rated or effectively zero-rated sales in taxable or exempt sales and the input taxes cannot be entirely traced to the sales, “the input taxes shall be allocated proportionately on the basis of the volume of sales.” — Vann Marlo Villegas