G.R. No. 190102 ; July 11, 2012
ACCENTURE, INC., Petitioner, vs. COMMISSIONER OF INTERNAL REVENUE, Respondent.

FACTS

Accenture, Inc., a VAT-registered entity providing management consulting and software services, filed administrative and judicial claims for a refund or tax credit certificate amounting to ₱35,178,844.21. This sum represented unutilized input VAT from domestic purchases for the third and fourth quarters of 2002, which it allocated to its zero-rated sales of services to foreign clients. The company argued its services qualified for zero-rating under Section 108(B)(2) of the 1997 National Internal Revenue Code (NIRC), as the payments were in acceptable foreign currency and accounted for in accordance with Bangko Sentral ng Pilipinas rules.
The Court of Tax Appeals (CTA) Division denied the claim, ruling Accenture failed to prove its foreign clients were “doing business outside the Philippines,” a requisite it derived from the interpretation of Section 102(b)(2) of the 1977 NIRC in Commissioner of Internal Revenue v. Burmeister and Wain Scandinavian Contractor Mindanao, Inc. The CTA En Banc affirmed, applying the Burmeister doctrine to the 1997 NIRC’s Section 108(B)(2), stating it was a reenactment of the old provision. Accenture appealed to the Supreme Court, contending the “doing business outside the Philippines” requirement was a judicial insertion not present in the plain text of the applicable 1997 law.

ISSUE

Whether Accenture’s sale of services to foreign corporations qualifies for zero-rated VAT under Section 108(B)(2) of the 1997 NIRC without the additional requirement that the recipient of the service is “doing business outside the Philippines.”

RULING

The Supreme Court granted the petition and reversed the CTA En Banc. The legal logic centers on statutory construction. For the taxable periods in 2002, the governing law was Section 108(B)(2) of the 1997 NIRC, prior to its amendment by Republic Act No. 9337 . The provision’s plain language only required two conditions for zero-rating: (1) the service is performed in the Philippines, (2) payment is in acceptable foreign currency accounted for in accordance with BSP rules. The Court held that the CTA erroneously engrafted the “doing business outside the Philippines” requirement from the interpretation of the 1977 NIRC in Burmeister. The 1997 NIRC was not a mere reenactment of the old code; it was a comprehensive new law. The legislature, in crafting the 1997 version, deliberately omitted the phrase “for consumption outside the Philippines” found in the old law, which was the textual basis for the Burmeister requirement. Applying the Burmeister interpretation to the 1997 law would violate the principle that courts cannot add requirements not found in the statute’s clear wording. Since Accenture satisfactorily proved the two statutory conditions through substantial evidence, including official receipts and bank documents showing foreign currency inward remittances, it was entitled to the claimed refund/credit. The Court emphasized that tax refunds, like tax exemptions, are construed strictly against the claimant, but such construction must not diminish the law’s clear intent or add restrictive conditions not legislated.