SITEL PHILIPPINES CORPORATION (FORMERLY CLIENTLOGIC PHILS.,
INC.), PETITIONER, VS. COMMISSIONER OF INTERNAL REVENUE, RESPONDENTG.R. No. 201326. February 08, 2017
FACTS:
Sitel, a corporation organized and existing 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 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.
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.
On March 30, 2006, Sitel filed a judicial claim for refund
or tax credit via a petition for review before the CTA.
The CTA Division partially granted Sitel’s claim for VAT
refund or tax credit. The Court ordered the issuance of tax credit certificate
or refund to respondent in the amount of P11,155,278.59 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.
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.,
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, as amended.
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 RR 7-95.
Sitel filed a Petition for Review with the CTA En Banc
claiming that it is entitled to the amount denied by the CTA Division.
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., 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. Thus, the CTA En Banc denied Sitel's entire refund
claim on the ground of prematurity.
ISSUE:
Whether or not Sitel’s judicial claim for VAT Refund was
timely filed
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
RULING:
Section 112(C) of the NIRC, as amended, provides:
SEC. 112. Refunds or Tax Credits of Input Tax. -
x x x x
(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.
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, the filing of the judicial claim with the CTA was found premature.
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.
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.
Records show that Sitel filed its administrative and
judicial claim for refund 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, 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 Decision 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.
The Court clarified that an essential condition to qualify
for zero-rating under Sec. 108(B)(2) of the NIRC is that the service-recipient
must be doing business outside the Philippines. 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.
The Court, in Accenture v. CIR, 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.
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. 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.
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.
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