G.R. No. 185969 - AT&T Communications Services Phils., Inc. vs. Commissioner of Internal Revenue

AT&T Communications Services Philippines, Inc. (petitioner) is a domestic corporation providing information and liaison services.
The petitioner entered into a Service Agreement with AT&T Communications Services International, Inc. (AT&T-CSI), a non-resident foreign corporation, on January 1, 1999, with compensation paid in US Dollars.
The petitioner also had Assignment Agreements with AT&T Solutions, Inc. (AT&T-SI) for services to Mastercard International, Inc. and Lexmark International, Inc., with payments similarly made in US Dollars.

The petitioner filed Quarterly VAT Returns for the taxable year 2003, with the last return filed on January 26, 2004.
On February 5, 2004, the petitioner filed its first Amended Quarterly VAT Return for the Fourth Quarter of 2003, followed by Amended Returns for all quarters on April 26, 2004.
On April 13, 2005, the petitioner applied for a refund or tax credit of unutilized VAT input taxes amounting to P3,003,265.14, but no action was taken by the Bureau of Internal Revenue (BIR).
Consequently, the petitioner filed a Petition for Review with the Court of Tax Appeals (CTA) on April 20, 2005, to suspend the prescriptive period under Section 229 of the National Internal Revenue Code (NIRC).

The CTA in Division dismissed the petitioner’s claim for refund on December 12, 2007, citing failure to comply with substantiation requirements.
The CTA emphasized that valid official receipts, not mere sales invoices, were necessary to support the claim for zero-rated VAT.
The CTA denied the petitioner’s Motion for Reconsideration on March 12, 2008, for lack of merit.

The CTA En Banc affirmed the Division's decision on September 24, 2008, reiterating that official receipts cannot be substituted with sales invoices.
The court highlighted that proof of inward remittances could not replace VAT official receipts for demonstrating zero-rated transactions.
The law mandates that a VAT official receipt must cover sales of services, with no alternative documentation permitted.

The petitioner filed a Petition for Review on Certiorari, arguing that the NIRC does not limit proof of VAT to a single document and that substantial evidence was presented for zero-rated transactions.
The petitioner contended that a mere preponderance of evidence suffices in civil cases for claims of refund or tax credit.

The court emphasized the importance of jurisdiction over the subject matter, which is conferred by law and cannot be waived by parties.
The CTA is a court of special jurisdiction and can only take cognizance of matters clearly within its jurisdiction.
The court noted that the timeliness of the administrative and judicial claims is crucial for jurisdictional purposes.

Section 112 of the NIRC outlines the process for claiming refunds or tax credits for input VAT, allowing claims within two years after the close of the taxable quarter.
The court clarified that the two-year period refers to the filing of administrative claims with the BIR, not judicial claims with the CTA.
The court found that the petitioner’s administrative claim for the First Quarter of 2003 was filed beyond the two-year prescriptive period, thus the CTA lacked jurisdiction over that claim.

The court determined that the petitioner properly filed its judicial claims for the Second, Third, and Fourth Quarters of 2003, even without waiting for the 120-day period to lapse.
The court referenced BIR Ruling No. DA-489-03, which allowed taxpayers to seek judicial relief without waiting for the expiration of the 120-day period.

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