Court of Tax Appeals dismisses Smartmatic-TIM’s bid for P193-M refund
THE Court of Tax Appeals (CTA) dismissed the bid of election provider Smartmatic-TIM Corporation to collect from the Bureau of Internal Revenue (BIR) a refund or issue a tax credit certificate (TCC) worth P193,488,562.15 representing creditable input value-added tax (VAT) paid in 2010.
In a 24-page decision, the CTA First Division through Associate Justice Erlinda P. Uy said the petition filed by Smartmatic-TIM lacks merit.
Court records showed that in 2012, the election provider filed claims for tax refund for the VAT paid for fiscal year 2010.
Smartmatic-TIM said they are entitled to VAT refund because the services it rendered to the Commission on Elections were effectively zero-rated, it was a VAT-registered, the administrative claim for refund was filed within the two-year prescriptive period, among others.
The BIR required Smartmatic-TIM to submit documents to support its claim to which the latter complied.
Then, in 2013, Smartmatic-TIM filed a petition for review with the CTA for its tax refund claims.
BIR sought the dismissal of the petition telling the Tax Court that the election provider failed to substantiate its claim by submitting proper documents such as sales invoices, official receipts and other documents pursuant to the Tax Code.
“It is incumbent upon the latter (Smartmatic-TIM) to show that it has complied with the provisions under…the Tax Code. Otherwise, its failure to prove the same is fatal to its claim for refund,” the BIR said.
“Claims for refund are construed strictly against petitioner (Smartmatic-TIM) since the same partakes the nature of exemption from Taxation,” BIR further stated.
BIR further argued that there is no law which states that the election provider is exempt from the payment of tax or that it is entitled to refund.
It added that Smartmatic-TIM also failed to secure a ruling confirming that its sale of services to Comelec should be subjected to VAT at zero percent or that the input tax Smartmatic-TIM has accumulated attributable to zero-rated sale of services to the Comelec shall be available as tax credit or refund.
The Tax Court said while there is a law stating that Smartmatic-TIM’s services rendered to the Comelec were subject to zero-percent VAT, entitlement is just “one thing.”
“Case law dictates that in a claim for tax refund or tax credit, the applicant must prove not only entitlement to the claim but also compliance with all the documentary and evidentiary requirements therefor,” the Tax Court said.
The Tax Court rejected the P57.8-million refund sought by the election provider which covers the third quarter of 2010 for being filed late.
On the other hand, of the P135.7-million remainder covering the fourth quarter of 2010, only P1.4 million could be substantiated.
However, the tax court said Smartmatic-TIM cannot even get a refund for the P1.4-million because its quarterly VAT return indicated it had no output tax liability against which to apply the amount.
The court said the firm could not show if the refund amount “was not fully utilized in the succeeding periods” yet.
The court reminded Smartmatic-TIM that tax exemptions and refunds are construed strictly against the taxpayer, and that a claimant would have the burden to establish the factual basis of the refund claim.
“As cases filed before this Court are litigated de novo, party litigants should prove every minute aspect of their cases,” the decision stated.
“Furthermore, statutes that grant tax exemptions are construed…against the taxpayer and liberally in favor of the taxing authority. Tax refunds in relation to VAT are in the nature of such exemptions. 44 Petitioner has the burden of proof to establish the factual basis of its claim for tax refund. 45 In this regard, petitioner failed to convince this Court as to its right to refund or tax credit being claimed in the instant case,” the decision further stated.
The decision was concurred in by Presiding Justice Roman G. del Rosario and Associate Justice Cielito N. Mindaro-Grulla.
