G.R. No.

201326, February 08, 2017

SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS.,

INC.), Petitioner, v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

DECISION

CAGUIOA, J.:

This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court filed by
petitioner Sitel Philippines Corporation (Sitel) against the Commissioner of Internal
Revenue (CIR) seeks to reverse and set aside the Decision dated November 11,
20112 and Resolution dated March 28, 20123 of the Court of Tax Appeals (CTA) En
Banc in CTA EB No. 644, which denied Sitel's claim for refund of unutilized input
value-added tax (VAT) for the first to fourth quarters of taxable year 2004 for
being prematurely filed.

Facts

Sitel, a corporation organized and extsting under the laws of the Philippines, is engaged
in the business of providing call center services from the Philippines to domestic and
offshore businesses. It is registered with the Bureau of Internal Revenue (BIR) as a VAT
taxpayer, as well as with the Board of Investments on pioneer status as a new
information technology service firm in the field of call center.4

For the period from January 1, 2004 to December 31, 2004, Sitel filed with the BIR its
Quarterly VAT Returns as follows: chanRoblesvirtualLawlibrary

Period Covered Date Filed  

1st Quarter 2004 26 April 2004  
2nd Quarter 2004 26 July 2004  
3rd Quarter 2004 25 October 2004  
4th Quarter 2004 25 January 20055  
Sitel's Amended Quarterly VAT Returns for the first to fourth quarters of 2004 declared
as follows:
chanRoblesvirtualLawlibrary

Taxable Sales
(A)
Zero-Rated Sales
(B)
Total Sales
(C=A+B)
Input Tax for the [Quarter]

(D)
Input Tax from Capital Goods

(E)
 Input Tax from Regular Transactions

(F+D-E)
Input Tax Allocated to Taxable Sales

[G=(A/C) x (F)]
Input Tax Allocated to Zero-Rated Sales

[H=(B/C) x (F)]
509,799.74
180,450,030.29
180,957,830.03
3,842,714.21
2,422,090.40
1,400,623.81
3,930.40
1,396,693.41
0
142,664,271.00
142,664,271.00
3,554,922.94
2,846,225.66
708,696.58
-
708,696.58
517,736.36
205,021,590.46
205,539,326.82
9,568,047.25
7,629,734.40
1,938,312.85
4,882.45
1,933,430.40
0
334,384,766.48
334,384,766.48
6,137,028.74
3,005,573.11
3,313,455.63
-
3,313,455.63
1,025,536.10
862,520,658.23
863,546,194.33
23,102,712.44
15,923,623.57
7,179,088.87
8,812.85
7,170,276.026
 On March 28, 2006, Sitel filed separate formal claims for refund or issuance of tax
credit with the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of
the Department of Finance for its unutilized input VAT arising from domestic purchases
of goods and services attributed to zero-rated transactions and purchases/importations
of capital goods for the 1st, 2nd, 3rd and 4th quarters of 2004 in the aggregate amount of
P23,093,899.59.7

On March 30, 2006, Sitel filed a judicial claim for refund or tax credit via a petition for
review before the CTA, docketed as CTA Case No. 7423.

Ruling of the CTA Division

On October 21, 2009, the CTA Division rendered a Decision8 partially granting Sitel's
claim for VAT refund or tax credit, the dispositive portion of which reads as follows: chanRoblesvirtualLawlibrary

In view of the foregoing, the instant Petition for Review is hereby PARTIALLY

GRANTED. Petitioner is entitled to the instant claim in the reduced amount of
P11,155,276.59 computed as follows: chanRoblesvirtualLawlibrary

Amount of Input VAT Claim P 23,093,899.59

Less: Input VAT Claim on Zero-Rated Sales 7,170,276.02

Input VAT Claim on Capital
P 15,923,623.57
Goods Purchases
Not Properly Substantiated Input VAT Claim
Less:
on Capital Goods Purchases
Per ICPA Report (P15,923,623.57 less
  2,099,494.43
P13,824,129.14)
  Per this Court's further verification 2,668,852.55
Refundable Input VAT on
P 11,155,276.59
Capital Goods Purchases
Accordingly, respondent is ORDERED to REFUND OR ISSUE A TAX CREDIT
CERTIFICATE in the reduced amount of P11,155,276.59 representing unutilized
input VAT arising from petitioner's domestic purchases of goods and services which are
attributable to zero-rated transactions and purchases/importations of capital goods for
the taxable year 2004.

SO ORDERED.9
The CTA Division denied Sitel's P7,170,276.02 claim for unutilized input VAT
attributable to its zero-rated sales for the four quarters of 2004. Relying upon the
rulings of this Court in Commissioner of Internal Revenue v. Burmeister and Wain
Scandinavian Contractor Mindanao, Inc.10 (Burmeister), the CTA Division found that
Sitel failed to prove that the recipients of its services are doing business outside the
Philippines, as required under Section 108(B)(2) of the National Internal Revenue Code
of 1997 (NIRC), as amended.11

The CTA Division also disallowed the amount of P2,668,852.55 representing input VAT
paid on capital goods purchased for taxable year 2004 for failure to comply with the
invoicing requirements under Sections 113, 237, and 238 of the NIRC of 1997, as
amended, and Section 4.108-1 of Revenue Regulations No. 7-95 (RR 7-95).12

Aggrieved, Sitel filed a motion for partial reconsideration13 and Supplement (To Motion
for Reconsideration [of Decision dated October 21, 2009]),14 on November 11, 2009
and March 26,2010, respectively.

Prior thereto, or on January 8, 2010, Sitel filed a Motion for Partial Execution of
Judgment15 seeking the execution pending appeal of the portion of the Decision dated
October 21, 2009 granting refund in the amount of P11,155,276.59, which portion was
not made part of its motion for partial reconsideration.

On May 31, 2010, the CTA Division denied Sitel's Motion for Reconsideration and
Supplement (To Motion for Reconsideration [of Decision dated October 21, 2009]) for
lack of merit.16

Undaunted, Sitel filed a Petition for Review17 with the CTA En Banc claiming that it is
entitled to the amount denied by the CTA Division.

Ruling of the CTA En Banc

In the assailed Decision, the CTA En Banc reversed and set aside the ruling of the CTA
Division. Citing the case of Commissioner of Internal Revenue v. Aichi Forging
Company of Asia, Inc.18 (Aichi), the CTA En Banc ruled that the 120-day period for the
CIR to act on the administrative claim for refund or tax credit, under Section 112(D) of
the NIRC of 1997, as amended, is mandatory and jurisdictional. Considering that Sitel
filed its judicial claim for VAT refund or credit without waiting for the lapse of the 120-
day period for the CIR to act on its administrative claim, the CTA did not acquire
jurisdiction as there was no decision or inaction to speak of.19 Thus, the CTA En
Banc denied Sitel's entire refund claim on the ground of prematurity. The dispositive
portion of the CTA En Banc's Decision reads as follows: chanRoblesvirtualLawlibrary

WHEREFORE, on the basis of the foregoing considerations, the Petition for Review En
Banc is DISMISSED. Accordingly, the Decision of the CTA First Division dated October
21, 2009 and the Resolution issued by the Special First Division dated May 31, 2010,
are hereby reversed and set aside. Petitioner's refund claim of P19,702,880.80
is DENIED on the ground that the judicial claim for the first to fourth quarters of
taxable year 2004 was prematurely filed.

SO ORDERED.20
Aggrieved, Sitel moved for reconsideration,21 but the same was denied by the Court En
Banc for lack of merit.22

Hence, the instant petition raising the following issues:chanRoblesvirtualLawlibrary

x x x WHETHER OR NOT THE AICHI RULING PROMULGATED ON OCTOBER 6, 2010 MAY

BE APPLIED RETROACTIVELY TO THE INSTANT CLAIM FOR REFUND OF INPUT VAT
INCURRED IN 2004.

x x x WHETHER OR NOT THE CTA EN BANC CAN VALIDLY WITHDRAW AND REVOKE
THE PORTION OF THE REFUND CLAIM ALREADY GRANTED TO PETITIONER IN THE
AMOUNT OF P11,155,276.59 AFTER TRIAL ON THE MERITS, NOTWITHSTANDING THAT
SUCH PORTION OF THE DECISION HAD NOT BEEN APPEALED.

x x x WHETHER OR NOT PETITIONER IS ENTITLED TO A REFUND OR TAX CREDIT OF

ITS UNUTILIZED INPUT VAT ARISING FROM PURCHASES OF GOODS AND SERVICES
ATTRIBUTABLE TO ZERO-RATED SALES AND PURCHASES/IMPORTATIONS OF CAPITAL
GOODS FOR THE 1ST, 2ND, 3RD, [AND] 4TH QUARTERS OF TAXABLE YEAR 2004 IN THE
AGGREGATE AMOUNT OF P20,994,405.16.23
In the Resolution24 dated July 4, 2012, the CIR was required to comment on the instant
petition. In compliance thereto, the CIR filed its Comment25 on November 14, 2012.

On January 16, 2013, the Court issued a Resolution26 denying Sitel's petition for failure
to sufficiently show that the CTA En Banc committed reversible error in denying its
refund claim on the ground of prematurity based on prevailing jurisprudence.

Soon thereafter, however, or on February 12, 2013, the Court En Banc decided the
consolidated cases of Commissioner of Internal Revenue v. San Roque Power
Corporation, Taganito Mining Corporation v. Commissioner of Internal Revenue, and
Philex Mining Corporation v. Commissioner of Internal Revenue 27 (San Roque). In that
case, the Court recognized BIR Ruling No. DA-489-03 as an exception to the mandatory
and jurisdictional nature of the 120-day waiting period.

Invoking San Roque, Sitel filed a Motion for Reconsideration.28

In the Resolution29 dated June 17, 2013, the Court granted Sitel's motion and
reinstated the instant petition.

In the instant petition, Sitel claims that its judicial claim for refund was timely filed
following the Court's pronouncements in San Roque; thus, it was erroneous for the
CTA En Banc to reverse the ruling of the CTA Division and to dismiss its petition on the
ground of prematurity. Sitel further argues that the previously granted amount for
refund of P11,155,276.59 should be reinstated and declared final and executory, the
same not being the subject of Sitel's partial appeal before the CTA En Banc, nor of any
appeal from the CIR.

Finally, Sitel contends that insofar as the denied portion of the claim is concerned,
which the CTA En Banc failed to pass upon with the dismissal of its appeal, speedy
justice demands that the Court resolved the same on the merits and Sitel be declared
entitled to an additional refund in the amount of P9,839,128.57.

The Court's Ruling

The Court finds the petition partly meritorious.

Site/'s Judicial Claim for VAT Refund was deemed timely filed pursuant to the
Court's pronouncement in San Roque.

Section 112(C) of the NIRC, as amended, provides: chanRoblesvirtualLawlibrary

SEC. 112. Refunds or Tax Credits of Input Tax. -

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 certificate 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.
(Emphasis supplied)
Based on the plain language of the foregoing provision, the CIR is given 120 days
within which to grant or deny a claim for refund. Upon receipt of CIR's decision or ruling
denying the said claim, or upon the expiration of the 120-day period without action
from the CIR, the taxpayer has thirty (30) days within which to file a petition for review
with the CTA.

In Aichi, the Court ruled that the 120-day period granted to the CIR was mandatory and
jurisdictional, the non-observance of which was fatal to the filing of a judicial claim with
the CTA. The Court further explained that the two (2)-year prescriptive period under
Section 112(A) of the NIRC pertained only to the filing of the administrative claim with
the BIR; while the judicial claim may be filed with the CTA within thirty (30) days from
the receipt of the decision of the CIR or the expiration of the 120-day period of the CIR
to act on the claim. Thus: chanRoblesvirtualLawlibrary

Section 112 (D) of the NIRC clearly provides that the CIR has "120 days, from the date
of the submission of the complete documents in support of the application [for tax
refund/credit]," within which to grant or deny the claim. In case of full or partial denial
by the CIR, the taxpayer's recourse is to file an appeal before the CTA within 30 days
from receipt of the decision of the CIR. However, if after the 120-day period the CIR
fails to act on the application for tax refund/credit, the remedy of the taxpayer is to
appeal the inaction of the CIR to CTA within 30 days.

In this case, the administrative and the judicial claims were simultaneously filed on
September 30, 2004. Obviously, respondent did not wait for the decision of the CIR or
the lapse of the 120-day period. For this reason, we find the filing of the judicial claim
with the CTA premature.

Respondent's assertion that the non-observance of the 120-day period is not fatal to
the filing of a judicial claim as long as both the administrative and the judicial claims
are filed within the two-year prescriptive period has no legal basis.

There is nothing in Section 112 of the NIRC to support respondent's view. Subsection
(A) of the said provision states that "any VAT-registered person, whose sales are zero-
rated or effectively zero-rated may, within two 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."
The phrase "within two (2) years x x x apply for the issuance of a tax credit certificate
or refund" refers to applications for refund/credit filed with the CIR and not to appeals
made to the CTA. This is apparent in the first paragraph of subsection (D) of the same
provision, which states that the CIR has "120 days from the submission of complete
documents in support of the application filed in accordance with Subsections (A) and
(B)" within which to decide on the claim.

In fact, applying the two-year period to judicial claims would render nugatory Section
112(D) of the NIRC, which already provides for a specific period within which a
taxpayer should appeal the decision or inaction of the CIR. The second paragraph of
Section 112(D) of the NIRC envisions two scenarios: (1) when a decision is issued by
the CIR before the lapse of the 120-day period; and (2) when no decision is made after
the 120-day period. In both instances, the taxpayer has 30 days within which to file an
appeal with the CTA. As we see it then, the 120-day period is crucial in filing an appeal
with the CTA.

xxx

In fine, the premature filing of respondent's claim for refund/credit of input VAT before
the CTA warrants a dismissal inasmuch as no jurisdiction was acquired by the CTA.30
However, in San Roque, the Court clarified that the 120-day period does not apply to
claims for refund that were prematurely filed during the period from the issuance of BIR
Ruling No. DA-489-03, on December 10, 2003, until October 6, 2010, when Aichi was
promulgated. The Court explained that BIR Ruling No. DA-489-03, which expressly
allowed the filing of judicial claims with the CTA even before the lapse of the 120-day
period, provided for a valid claim of equitable estoppel because the CIR had misled
taxpayers into prematurely filing their judicial claims before the CTA:
chanRoblesvirtualLawlibrary

There is no dispute that the 120-day period is mandatory and jurisdictional, and that
the CTA does not acquire jurisdiction over a judicial claim that is filed before the
expiration of the 120-day period. There are, however, two exceptions to this rule. The
first exception is if the Commissioner, through a specific ruling, misleads a particular
taxpayer to prematurely file a judicial claim with the CTA. Such specific ruling is
applicable only to such particular taxpayer. The second exception is where the
Commissioner, through a general interpretative rule issued under Section 4 of
the Tax Code, misleads all taxpayers into filing prematurely judicial claims
with the CTA. In these cases, the Commissioner cannot be allowed to later on
question the CTA's assumption of jurisdiction over such claim since equitable
estoppel has set in as expressly authorized under Section 246 of the Tax Code.

xxx

BIR Ruling No. DA-489-03 is a general interpretative rule because it was a response to
a query made, not by a particular taxpayer, but by a government agency tasked with
processing tax refunds and credits, that is, the One Stop Shop Inter-Agency Tax Credit
and Drawback Center of the Department of Finance. This government agency is also the
addressee, or the entity responded to, in BIR Ruling No. DA-489-03. Thus, while this
government agency mentions in its query to the Commissioner the administrative claim
of Lazi Bay Resources Development, Inc., the agency was in fact asking the
Commissioner what to do in cases like the tax claim of Lazi Bay Resources
Development, Inc., where the taxpayer did not wait for the lapse of the 120-day period.

Clearly, BIR Ruling No. DA-489-03 is a general interpretative rule. Thus, all
taxpayers can rely on BIR Ruling No. DA-489-03 from the time of its issuance
on 10 December 2003 up to its reversal by this Court in Aichi on 6 October
2010, where this Court held that the 120+30 day periods are mandatory and
jurisdictional.31 (Emphasis supplied).
In Visayas Geothermal Power Company v. Commissioner of Internal Revenue,32 the
Court came up with an outline summarizing the pronouncements in San Roque, to
wit:chanRoblesvirtualLawlibrary

For clarity and guidance, the Court deems it proper to outline the rules laid down in San
Roque with regard to claims for refund or tax credit ofunutilized creditable input VAT.
They are as follows: chanRoblesvirtualLawlibrary

1. When to file an administrative claim with the CIR:

a. General rule- Section 112(A) and Mirant

Within 2 years from the close of the taxable quarter when the sales were made.

b. Exception - Atlas

Within 2 years from the date of payment of the output VAT, if the administrative
claim was filed from June 8, 2007 (promulgation of Atlas) to September 12,
2008 (promulgation of Mirant).

2. When to file a judicial claim with the CTA:

a. General rule-Section 112(D); not Section 229

i. Within 30 days from the full or partial denial of the administrative
claim by the CIR; or

ii. Within 30 days from the expiration of the 120-day period provided
to the CIR to decide on the claim. This is mandatory and
jurisdictional beginning January 1, 1998 (effectivity of 1997
NIRC).

b. Exception - BIR Ruling No. DA-489-03

The judicial claim need not await the expiration of the 120-day period, if
such was filed from December 10, 2003 (issuance of BIR Ruling No. DA-
489-03) to October 6, 2010 (promulgation of Aichi).33 (Emphasis and
underscoring supplied).

In this case, records show that Sitel filed its administrative and judicial claim for refund
on March 28, 2006 and March 30, 2006, respectively, or after the issuance of BIR
Ruling No. DA-489-03, but before the date when Aichi was promulgated. Thus, even
though Sitel filed its judicial claim prematurely, i.e., without waiting for the expiration
of the 120-day mandatory period, the CTA may still take cognizance of the case
because the claim was filed within the excepted period stated in San Roque. In other
words, Sitel's judicial claim was deemed timely filed and should have not been
dismissed by the CTA En Banc. Consequently, the October 21, 2009 Decision34 of the
CTA Division partially granting Sitel's judicial claim for refund in the reduced amount of
P11,155,276.59, which is not subject of the instant appeal, should be reinstated. In this
regard, since the CIR did not appeal said decision to the CTA En Banc, the same is now
considered final and beyond this Court's review.

Sitel now questions the following portions of its refund claim which the CTA Division
denied: (1) P7,170,276.02, representing unutilized input VAT on purchases of goods
and services attributable to zero-rated sales, which was denied because Sitel failed to
prove that the call services it rendered for the year 2004 were made to non-resident
foreign clients doing business outside the Philippines; and (2) P2,668,852.55
representing input VAT on purchases of capital goods, because these are supported by
invoices and official receipts with pre-printed TIN-V instead of TIN-VAT, as required
under Section 4.108-1 of RR 7-95.

Sitel claims that testimonial and documentary evidence sufficiently established that its
clients were non-resident foreign corporations not doing business in Philippines. It also
asserts that the input VAT on its purchases of capital goods were duly substantiated
because the supporting official receipts substantially complied with the invoicing
requirements provided by the rules.

In other words, Sitel wants the Court to review factual findings of the CTA Division,
reexamine the evidence and determine on the basis thereof whether it should be
refunded the additional amount of P9,839,128.57. This, however, cannot be done in the
instant case for settled is the rule that this Court is not a trier of facts and does not
normally embark in the evaluation of evidence adduced during trial.35 It is not this
Court's function to analyze or weigh all over again the evidence already considered in
the proceedings below, the Court's jurisdiction being limited to reviewing only errors of
law that may have been committed by the lower court.36

Furthermore, the Court accords findings and conclusions of the CTA with the highest
respect.37 As a specialized court dedicated exclusively to the resolution of tax problems,
the CTA has accordingly developed an expertise on the subject of taxation.38 Thus, its
decisions are presumed valid in every aspect and will not be overturned on appeal,
unless the Court finds that the questioned decision is not supported by substantial
evidence or there has been an abuse or improvident exercise of authority on the part of
the tax court.39

Upon careful review of the instant case, and directly addressing the issues raised by
Sitel, the Court finds no cogent reason to reverse or modify the findings of the CTA
Division.

The Court expounds.

Sitel failed to prove that the recipients of its call services are foreign
corporations doing business outside the Philippines.

Sitel's claim for refund is anchored on Section 112(A)40 of the NIRC, which allows the
refund or credit of input VAT attributable to zero-rated or effectively zero-rated sales.
In relation thereto, Sitel points to Section 108(B)(2) of the NIRC [formerly Section
102(b)(2) of the NIRC of 1977, as amended] as legal basis for treating its sale of
services as zero-rated or effectively zero-rated. Section 108(B)(2) reads: chanRoblesvirtualLawlibrary

SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. -

xxx

(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:

xxx

(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 rules and
regulations of the Bangko Sentral ng Pilipinas (BSP); (Emphasis supplied)
In Burmeister, the Court clarified that an essential condition to qualify for zero-
rating under the aforequoted provision is that the service-recipient must be
doing business outside the Philippines, to wit: chanRoblesvirtualLawlibrary

The Tax Code not only requires that the services be other than "processing,
manufacturing or repacking of goods" and that payment for such services be in
acceptable foreign currency accounted for in accordance with BSP rules. Another
essential condition for qualification to zero-rating under Section 102(b)(2) is that
the recipient of such services is doing business outside the Philippines. x x x

This can only be the logical interpretation of Section 102(b)(2). If the provider and
recipient of the "other services" are both doing business in the Philippines, the payment
of foreign currency is irrelevant. Otherwise, those subject to the regular VAT
under Section 102(a) can avoid paying the VAT by simply stipulating payment
in foreign currency inwardly remitted by the recipient of services. To interpret
Section 102(b)(2) to apply to a payer-recipient of services doing business in
the Philippines is to make the payment of the regular VAT under Section
102(a) dependent on the generosity of the taxpayer. The provider of services can
choose to pay the regular VAT or avoid it by stipulating payment in foreign currency
inwardly remitted by the payer-recipient. Such interpretation removes Section 102(a)
as a tax measure in the Tax Code, an interpretation this Court cannot sanction. A tax
is a mandatory exaction, not a voluntary contribution.

xxx

Thus, when Section 102(b)(2) speaks of "[s]ervices other than those mentioned in
the preceding subparagraph," the legislative intent is that only the services are
different between subparagraphs 1 and 2.
The requirements for zero-rating, including the essential condition that the recipient of
services is doing business outside the Philippines, remain the same under both
subparagraphs.
Significantly, the amended Section 108(b) [previously Section 102 (b)] of the present
Tax Code clarifies this legislative intent.

Expressly included among the transactions subject to 0% VAT are "[s]ervices other
than those mentioned in the [first] paragraph [of Section 108(b)] 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 rules and regulations of the BSP."41

Foilowing Burmeister, the Court, in Accenture, Inc. v. Commissioner of Internal

Revenue,42 (Accenture), emphasized that a taxpayer claiming for a VAT refund or credit
under Section 108(B) has the burden to prove not only that the recipient of the service
is a foreign corporation, but also that said corporation is doing business outside the
Philippines. For failure to discharge this burden, the Court denied Accenture's claim for
refund.

We rule that the recipient of the service must be doing business outside the
Philippines for the transaction to qualify for zero-rating under Section 108(B)
of the Tax Code.

xxx

The evidence presented by Accenture may have established that its clients are foreign.
This fact does not automatically mean, however, that these clients were doing business
outside the Philippines. After all, the Tax Code itself has provisions for a foreign
corporation engaged in business within the Philippines and vice versa, to wit:chanRoblesvirtualLawlibrary

SEC. 22. Definitions. - When used in this Title:

xxx

(H) The term "resident foreign corporation" applies to a foreign corporation engaged in
trade or business within the Philippines.

(I) The term 'nonresident foreign corporation' applies to a foreign corporation not
engaged in trade or business within the Philippines. (Emphasis in the original)
Consequently, to come within the purview of Section 108(B)(2), it is not
enough that the recipient of the service be proven to be a foreign corporation;
rather, it must be specifically proven to be a nonresident foreign corporation.

There is no specific criterion as to what constitutes "doing" or "engaging in" or

"transacting" business. We ruled thus in Commissioner of Internal Revenue v. British
Overseas Airways Corporation: chanRoblesvirtualLawlibrary

x x x. There is no specific criterion as to what constitutes "doing" or "engaging in" or

"transacting" business. Each case must be judged in the light of its peculiar
environmental circumstances.
The term implies a continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the exercise of some
of the functions normally incident to, and in progressive prosecution of commercial gain
or for the purpose and object of the business organization. "In order that a foreign
corporation may be regarded as doing business within a State, there must be
continuity of conduct and intention to establish a continuous business, such as
the appointment of a local agent, and not one of a temporary character."
A taxpayer claiming a tax credit or refund has the burden of proof to establish the
factual basis of that claim. Tax refunds, like tax exemptions, are construed strictly
against the taxpayer.

Accenture failed to discharge this burden. It alleged and presented evidence to

prove only that its clients were foreign entities. However, as found by both the
CTA Division and the CTA En Banc, no evidence was presented by Accenture to
prove the fact that the foreign clients to whom petitioner rendered its services
were clients doing business outside the Philippines.

As ruled by the CTA En Banc, the Official Receipts, Intercompany Payment Requests,
Billing Statements, Memo Invoices-Receivable, Memo Invoices-Payable, and Bank
Statements presented by Accenture merely substantiated the existence of sales, receipt
of foreign currency payments, and inward remittance of the proceeds of such sales duly
accounted for in accordance with BSP rules, all of these were devoid of any evidence
that the clients were doing business outside of the Philippines.43 (Emphasis supplied;
citations omitted)

In the same vein, Sitel fell short of proving that the recipients of its call services were
foreign corporations doing business outside the Philippines. As correctly pointed out by
the CTA Division, while Sitel's documentary evidence, which includes Certifications
issued by the Securities and Exchange Commission and Agreements between Sitel and
its foreign clients, may have established that Sitel rendered services to foreign
corporations in 2004 and received payments therefor through inward remittances, said
documents failed to specifically prove that such foreign clients were doing business
outside the Philippines or have a continuity of commercial dealings outside the
Philippines.

Thus, the Court finds no reason to reverse the ruling of the CTA Division denying the
refund of P7,170,276.02, allegedly representing Sitel's input VAT attributable to zero-
rated sales.

Sitel failed to strictly comply with invoicing requirements for VAT refund.

The CTA Division also did not err when it denied the amount of P2,668,852.55,
allegedly representing input taxes claimed on Sitel's domestic purchases of goods and
services which are supported by invoices/receipts with pre-printed TIN-V. In Western
Mindanao Power Corp. v. Commissioner of Internal Revenue,44 the Court ruled that in a
claim for tax refund or tax credit, the applicant must prove not only entitlement to
the grant of the claim under substantive law, he must also show satisfaction of
all the documentary and evidentiary requirements for an administrative claim
for a refund or tax credit and compliance with the invoicing and accounting
requirements mandated by the NIRC, as well as by revenue regulations
implementing them. The NIRC requires that the creditable input VAT should be
evidenced by a VAT invoice or official receipt,45 which may only be considered as such
when the TIN-VAT is printed thereon, as required by Section 4.108-1 of RR 7-95.
The Court's pronouncement in Kepco Philippines Corp. v. Commissioner of Internal
Revenue46 is instructive:chanRoblesvirtualLawlibrary

Furthermore, Kepco insists that Section 4.108-1 of Revenue Regulation 07-95 does not
require the word "TIN-VAT" to be imprinted on a VAT-registered person's supporting
invoices and official receipts and so there is no reason for the denial of its
P4,720,725.63 claim of input tax.

In this regard, Internal Revenue Regulation 7-95 (Consolidated Value-Added Tax

Regulations) is clear. Section 4.108-1 thereof reads: chanRoblesvirtualLawlibrary

Only VAT registered persons are required to print their TIN followed by the word "VAT"
in their invoice or receipts and this shall be considered as a "VAT" Invoice. All purchases
covered by invoices other than 'VAT Invoice' shall not give rise to any input tax.

Contrary to Kepco's allegation, the regulation specifically requires the VAT

registered person to imprint TIN-VAT on its invoices or receipts. Thus, the Court
agrees with the

CTA when it wrote: "[T]o be considered a 'VAT invoice,' the TIN-VAT must be printed,
and not merely stamped. Consequently, purchases supported by invoices or official
receipts, wherein the TIN-VAT is not printed thereon, shall not give rise to any input
VAT. Likewise, input VAT on purchases supported by invoices or official receipts which
are NON-VAT are disallowed because these invoices or official receipts are not
considered as 'VAT Invoices."47
In the same vein, considering that the subject invoice/official receipts are not imprinted
with the taxpayer's TIN followed by the word VAT, these would not be considered as
VAT invoices/official receipts and would not give rise to any creditable input VAT in
favor of Sitel.

At this juncture, it bears to emphasize that "[t]ax refunds or tax credits just
like tax exemptions are strictly construed against taxpayers, the latter having
the burden to prove strict compliance with the conditions for the grant of the
tax refund or credit."48

WHEREFORE, premises considered, the instant petition for review is GRANTED IN

PART. The Decision dated November 11, 2011 and Resolution dated March 28, 2012 of
the CTA En Banc in CTA EB No. 644 are hereby REVERSED and SET ASIDE.
Accordingly, the October 21, 2009 Decision of the CTA First Division in CTA Case No.
7423 is hereby REINSTATED.

Respondent is hereby ORDERED TO REFUND or, in the alternative, TO ISSUE A TAX

CREDIT CERTIFICATE, in favor of the petitioner in the amount of P11,155,276.59,
representing unutilized input VAT arising from purchases/importations of capital goods
for taxable year 2004.

SO ORDERED.