FIRST DIVISION

[C.T.A. CASE NO. 8341. July 2, 2014.]

PROCTER & GAMBLE ASIA, PTE. LTD., petitioner, vs.

COMMISSIONER OF INTERNAL REVENUE, respondent.

RESOLUTION

MINDARO-GRULLA, J : p

For resolution is petitioner's "Motion for Reconsideration" filed on March

14, 2014, with respondent's "Comment (Re: Petitioner's Motion for
Reconsideration)" filed on April 22, 2014.

Petitioner assails the Decision dated February 24, 2014 on the following
grounds, to quote:

1. Petitioner complied with the requirements of Section 113 (B) (2)

(a) of the NIRC of 1997 as amended since the official receipts of
the principal provider, Hewlett-Packard Phils. Corporation, have
reference on the face of said official receipts to the corresponding
invoices paid that show VAT separately;

2. Petitioner should not be faulted for the acts of its service provider
in indicating the VAT separately in the corresponding sales
invoices but not in the official receipts issued by the latter;
acEHCD

3. There is no provision in the Tax Code which states that if the VAT
was not indicated separately in the official receipt, though
indicated separately in the corresponding invoices, the input tax
cannot be credited against output tax or cannot be refunded in case
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 of zero-rated sales; and

4. The provision of the Tax Code on the refund of input vat on zero
sales is actually an incentive to foreign capitalists to invest here in
the Philippines hence the tax benefit should be liberally construed
in favor of the petitioner.

Petitioner contends that its principal service provider issued VAT registered
invoices and VAT registered official receipts. The issued VAT registered invoices
1(1) show the unit price of the service and 12% VAT separately, while the issued
VAT registered official receipts 2(2) show the amount collected net of two percent
(2%) expanded withholding tax and the invoice number or numbers paid. Petitioner
alleges that the requirement of the input VAT being separately shown in the official
receipts was already satisfied or substantially complied by the invoices issued
corresponding to the said official receipts. It likewise argues that Section 113 (B) (2)
(a) National Internal Revenue Code (NIRC) of 1997 provides for an option to the
taxpayer to show the VAT either in the invoice or receipt and the issuance of the
official receipts is the responsibility of petitioner's service provider; thus, it is unfair
for petitioner to be faulted or penalized due to the error committed by its service
provider. Petitioner insists that the disallowance of input tax solely on the ground that
the input tax was not separately shown or indicated in the VAT registered official
receipt has no legal basis by citing Section 113 (D) of the NIRC of 1997, as amended.
Also, petitioner asserts that the provision of the aforesaid law on the refund of input
VAT on zero sales is actually an incentive to foreign capitalists to invest in the
Philippines; hence, the tax benefit should be liberally construed in favor of petitioner.
cAHIST

On the other hand, respondent opposes the above-mentioned motion positing

that the law does not look upon with favor on tax exemptions and that he who would
seek to be thus privileged must justify it by words too plain to be mistaken and too
categorical to be misinterpreted. Respondent alleges that invoicing requirements under
Section 113 (A) and (B) of the NIRC of 1997, as amended, are necessary to constitute
a valid VAT invoice. Absent a valid VAT invoice, there can never be an input tax. A
claimed refund must be duly supported by adequate evidence, being a derogation of
sovereign authority. Respondent also points out that when the VAT was not indicated
separately in the official receipt, the same violated the aforesaid invoicing
requirement.

The Court finds petitioner's arguments unmeritorious.

Copyright 1994-2016 CD Technologies Asia, Inc. Taxation 2015 2
 Section 113 (A) of the National Internal Revenue Code (NIRC) of 1997, as
amended, provides:

"SEC. 113. Invoicing and Accounting Requirements for

VAT-Registered Persons. —

(A) Invoicing Requirements. — A VAT-registered person shall issue:

(1) A VAT invoice for every sale, barter or exchange of goods or

properties; and TCIEcH

(2) A VAT official receipt for every lease of goods or properties,

and for every sale, barter or exchange of services." (Emphasis supplied.)

Clearly, a VAT-registered person shall issue a VAT official receipt and not a
VAT invoice for every sale of services.

Under the law, a VAT invoice is necessary for every sale, barter or exchange of
goods or properties while a VAT official receipt properly pertains to every lease of
goods or properties or for every sale, barter or exchange of services. The Supreme
Court in the case of Commissioner of Internal Revenue v. Manila Mining Corporation
3(3) distinguished an invoice from a receipt, thus:

"A 'sales or commercial invoice' is a written account of goods sold or

services rendered indicating the prices charged therefor or a list by whatever
name it is known which is used in the ordinary course of business evidencing
sale and transfer or agreement to sell or transfer goods and services.

A 'receipt' on the other hand is a written acknowledgment of the fact of

payment in money or other settlement between seller and buyer of goods, debtor
or creditor, or person rendering services and client or customer." TcCSIa

In other words, the VAT invoice is the seller's best proof of the sale of the
goods or services to the buyer while the VAT receipt is the buyer's best evidence of
the payment of goods or services received from the seller. Even though VAT invoices
and receipts are normally issued by the supplier/seller alone, the said invoices and
receipts, taken collectively, are necessary to substantiate the actual amount or quantity
of goods sold and their selling price (proof of transaction), and the best means to
prove the input VAT payments (proof of payment). Hence, VAT invoice and VAT
receipt should not be confused as referring to one and the same thing. Certainly,
neither does the law intend the two to be used alternatively. 4(4)
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 Contrary to petitioner's position that the law provides an option to the taxpayer
to show the VAT either in the invoice or receipt, a reading of Section 113 (B) (2) (a)
of the NIRC of 1997, as amended, proves otherwise, viz.:

"(B) Information contained in the VAT invoice or VAT Official Receipt.

— The following information shall be indicated in the VAT invoice or VAT
official receipt:

(1) A statement that the seller is a VAT-registered person, followed by

his Taxpayer's Identification Number (TIN);

(2) The total amount which the purchaser pays or is obligated to

pay to the seller with the indication that such amount includes the
value-added tax: Provided, that:

(a) The amount of the tax shall be shown as a separate item in the
invoice or receipt;" AaHcIT

It is apparent from the foregoing that the law requires certain information to be
contained in the VAT invoice or VAT official receipt. Likewise, the aforesaid
provision applies in relation to paragraph (A) of Section 113 which requires the
issuance of VAT invoice in case of sale of goods/properties and VAT official receipt
in sale of services. Thus, the information required therein must be contained in the
VAT invoice in case of sale of goods or properties and in the VAT official receipt in
case of sale of services. It is clear that it does not give any option to the taxpayer to
present either VAT invoice or VAT official receipt to prove the amount of tax paid or
to be paid.

When a tax provision speaks unequivocally, it is not the province of a Court to

scan its wisdom or its policy. The more correct course of dealing with a question of
construction is to take the words to mean exactly what they say. Where a provision of
law expressly limits its application to certain transactions, it cannot be extended to
other transactions by interpretation. 5(5)

Further, Section 110 of the NIRC of 1997, as amended, states:

"SEC. 110. Tax Credits. —

(A) Creditable Input Tax. —

(1) Any input tax evidenced by a VAT invoice or official receipt

Copyright 1994-2016 CD Technologies Asia, Inc. Taxation 2015 4

 issued in accordance with Section 113 hereof on the following transactions
shall be creditable against the output tax:

xxx xxx xxx

(B) Excess Output or Input Tax. — If at the end of any taxable quarter
the output tax exceeds the input tax, the excess shall be paid by the
VAT-registered person. If the input tax exceeds the output tax, the excess shall
be carried over to the succeeding quarter or quarters: Provided, however, that
input tax attributable to zero-rated sales by a VAT-registered person may at his
option be refunded or credited against other internal revenue taxes, subject to
the provisions of Section 112." (Emphasis supplied.) DTCSHA

The phrase "creditable against output tax" under the first paragraph of Section
110 (A) means that the input taxes are available as tax credits against the taxpayer's
VATable transactions, be it VAT zero-rated or subject to the 12% VAT, in
accordance with Section 113 of the NIRC of 1997, as amended. It bears stressing that
both taxable sales and zero-rated sales are considered transactions subject to output
VAT. Thus, in order that input tax may be the subject of a claim for refund or tax
credit certificate, petitioner must comply with the substantiation of invoicing
requirements.

Although it is true that this Court is not strictly governed by technical rules of
evidence, the invoicing and substantiation requirements must nevertheless be
followed, because it is the only way to determine the veracity of taxpayer's claims.
6(6)

Furthermore, taxpayers claiming for a refund or tax credit certificate must

comply with the strict and mandatory invoicing and accounting requirements provided
under the NIRC of 1997, as amended, and its implementing rules and regulations. 7(7)

WHEREFORE, considering the foregoing, petitioner's "Motion for

Reconsideration" is DENIED for lack of merit.

SO ORDERED.

(SGD.) CIELITO N. MINDARO-GRULLA

Associate Justice
Roman G. del Rosario, P.J. and Erlinda P. Uy, J., concur.

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 Footnotes
1. Annexes "A" to "A-8", attached to the Motion for Reconsideration.
2. Annexes "B" to "B-3", attached to the Motion for Reconsideration.
3. G.R. No. 153204, August 31, 2005, 468 SCRA 571, 590 (2005).
4. Kepco Philippines Corporation v. Commissioner of Internal Revenue, G.R. No.
181858, November 24, 2010.
5. Commissioner of Internal Revenue vs. Ariete, G.R. No. 164152, January 21, 2010.
6. Kepco Philippines Corporation v. CIR, supra, note 4.
7. Bonifacio Water Corporation (formerly Bonifacio Vivendi Water Corporation) v.
Commissioner of Internal Revenue, G.R. No. 175142, July 22, 2013.

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 Endnotes

1 (Popup - Popup)
1. Annexes "A" to "A-8", attached to the Motion for Reconsideration.

2 (Popup - Popup)
2. Annexes "B" to "B-3", attached to the Motion for Reconsideration.

3 (Popup - Popup)
3. G.R. No. 153204, August 31, 2005, 468 SCRA 571, 590 (2005).

4 (Popup - Popup)
4. Kepco Philippines Corporation v. Commissioner of Internal Revenue, G.R. No.
181858, November 24, 2010.

5 (Popup - Popup)
5. Commissioner of Internal Revenue vs. Ariete, G.R. No. 164152, January 21, 2010.

6 (Popup - Popup)
6. Kepco Philippines Corporation v. CIR, supra, note 4.

7 (Popup - Popup)
7. Bonifacio Water Corporation (formerly Bonifacio Vivendi Water Corporation) v.
Commissioner of Internal Revenue, G.R. No. 175142, July 22, 2013.

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