Case Digest (G.R. No. 234445) Core Legal Reasoning Model
Core Legal Reasoning Model
Facts:
In Commissioner of Internal Revenue v. Deutsche Knowledge Services Pte. Ltd., decided on July 15, 2020 under the 1987 Philippine Constitution, the Commissioner of Internal Revenue (CIR) challenged the Court of Tax Appeals (CTA) En Banc ruling that granted refund of excess input VAT claimed by Deutsche Knowledge Services Pte. Ltd. (DKS). DKS is the Philippine branch of a Singapore‐incorporated multinational licensed as a Regional Operating Headquarters (ROHQ) in Manila, providing qualifying services to its foreign affiliates. On October 21, 2011, DKS filed an administrative claim with the Bureau of Internal Revenue (BIR) for P33,868,101.19 representing unutilized input VAT attributable to its zero‐rated services during Q1 2010. After the CIR failed to act within 120 days, DKS filed a judicial claim with the CTA on March 19, 2012. The CTA Second Division, in its July 7, 2014 Decision, partially granted the refund, validating P21,077,388.64 of input VAT but disallowing P12,790,712. Case Digest (G.R. No. 234445) Expanded Legal Reasoning Model
Expanded Legal Reasoning Model
Facts:
- Background of parties and transactions
- Deutsche Knowledge Services Pte. Ltd. (DKS)
- Philippine branch of a Singapore-based multinational, licensed as a Regional Operating Headquarters (ROHQ) under EO 226 and RA 8756
- Rendered “qualifying services” (administration, planning, procurement, training, logistics, product development, technical support, data processing, business development) to 34 foreign affiliates under Intra-Group Services Agreements
- Value-Added Tax (VAT)-registered enterprise
- Administrative and judicial refund claims
- October 21, 2011: Filed administrative claim (BIR Form 1914) for refund of ₱33,868,101.19 unutilized input VAT attributable to zero-rated service sales for Q1 2010
- March 19, 2012: Filed petition for review before the Court of Tax Appeals (CTA) after alleged inaction by the Commissioner of Internal Revenue (CIR)
- CTA proceedings and decisions
- CIR’s defenses before the CTA
- Alleged failure to submit necessary supporting documents
- Claim subject to administrative audit and examination
- Failure to prove that clients were non-resident foreign corporations (NRFCs) doing business outside the Philippines
- Judicial claim filed prematurely
- CTA Second Division Decision (July 7, 2014)
- Held both administrative and judicial claims timely filed
- Disallowed input VAT of ₱12,790,712.55 for lack of proper support; validated input VAT of ₱21,077,388.64; net excess input VAT ₱20,364,346.86
- Established zero-rated sales to 15 proven NRFCs (73.0798% of total zero-rated sales); granted refund/credit of ₱14,882,227.02
- Denied CIR’s motion for reconsideration; granted DKS’s motion to present additional evidence but denied its partial motion for reconsideration
- CTA En Banc Decision (March 30, 2017) and Resolution (September 18, 2017)
- Affirmed evidentiary rulings, but found only 11 clients qualified as NRFCs after excluding four based on self-serving AMInet printouts
- Recomputed portion at 71.3368%, granting refund/credit of ₱14,527,282.57
- Denied both parties’ motions for reconsideration; CIR elevated the case to the Supreme Court
Issues:
- Procedural issue
- Whether DKS’s judicial claim before the CTA was prematurely filed because the CIR allegedly did not act on an incomplete administrative claim
- Substantive issue
- Whether DKS sufficiently proved that its foreign affiliates-clients are non-resident foreign corporations doing business outside the Philippines, thereby qualifying its service sales as zero-rated and entitling it to a refund/credit of ₱14,527,282.57
Ruling:
- (Subscriber-Only)
Ratio:
- (Subscriber-Only)
Doctrine:
- (Subscriber-Only)