REPUBLIC OF THE PHILIPPINES

COURT OF TAX APPEALS

QUEZON CITY

SECOND DIVISION

ATLASSIAN PHILIPPINES, CTA Case No. 1oon

INC.,
Petitioner,

Members:

CASTANEDA, JR., Chairperson, and

- versus - BACORRO-VILLENA, ]].

COMMISSI~~;;N~E, Promulgate~~~-~-~~L _________x

INTERNAL-----~~~~~-~~~~~~-------------------------- /~-~-,
X--------------- ) ( •·

DECISION

BACORRO-VILLENA, ].:

At bar is a Petition for Review filed by petitioner Atlassian

Philippines, Inc. (petitionerI Atlassian) pursuant to Rule 8, Section
3(aV, in relation to Rule 4 , Section 3(a)(1)3 of the Revised Rules of the
Court of Tax Appeals 4 (RRCTA)./

Filed on 18 January 20 19, Di visio n Docket, pp. 12-26.

S EC. 3. Who may appeal; period to file petition. - (a) A party adversely affected by a dec isio n,
rul ing or the inaction of the Commissio ner of Internal Revenue on disputed assessments or cla ims
for refund of internal reve nue taxes, o r by a dec isio n or ruling of the Commissioner of Customs,
the Secretary of Finance, the Secretary of T rade and Industry, the Secretary of Agriculture, o r a
Regiona l T ri al Court in the exercise o f its original j urisdiction may appeal to the Court by petition
for rev iew tiled w ith in thi rty days after rece ipt of a copy of such decision or ruling, or expiration
of the period fixed by law for the Co mmi ss io ner of Internal Revenue to act on the disputed
assessments. In case of inacti on of the Commissioner of Inte rna l Revenue on c laims fo r refu nd of
interna l revenue taxes erroneously or illegall y co llected, the taxpayer must file a petitio n for
review w ith in the two-year peri od prescribed by law fro m payment or collecti o n of the taxes.
SEC. 3. Cases within the jurisdiction of the Court in Divisions. - T he Court in Divisions shall
exerc ise:
(a) Exclusive orig ina l over or appe ll ate jurisdi ction to review by appeal the fo ll owing:
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 2 of 43
x-------------------------------------x

The instant petition is an appeal from the adverse decision of

respondent Commissioner of Internal Revenue (respondent/CIR),
partially denying petitioner's claim for refund of its alleged unutilized
input value-added tax (VAT) paid and incurred during the period 01
July 2016 to 30 June 2017 (FY ending 30 June 2017), in the amount of
P11,376,o78.36. 5

Petitioner is a domestic corporation duly organized and existing

under Philippine laws, with principal office at 2nd Floor Building 3,
Bonifacio High Street Central East, Fort Bonifacio Global City, Taguig
City, Metro Manila. 6

Respondent is sued in his official capacity, having been duly

appointed and empowered to perform the duties of his office,
including, among others, the duty to act on and approve claims for
refund of tax credit certificates as provided by law?

FACTS OF THE CASE

Petitioner is registered with the Bureau of Internal Revenue

(BIR) as a VAT taxpayer since 31 October 2013, as evidenced by its
latest Certificate of Registration issued by Revenue District Office No.
44-Taguig City (RDO 44) under registration number OCN
9RCoooo46o963. 8

For the FY ending 30 June 2017, petitioner filed with the BIR its
quarterly VAT returns as follows/

(I) Decisions of the Commissioner of Internal Revenue in cases involving disputed assessments,
refunds of internal revenue taxes, fees or other charges, penalties in relation thereto, or other
matters arising under the National Internal Revenue Code or other laws administered by the
Bureau of Internal Revenue;

A.M. No. 05-ll·O?·CTA dated 22 November 2005.

Joint Stipulation of Facts and Issues (JSFI), Division Docket, p. 284.
6
ld., p. 283.
!d.
Exhibit "P-4", BIR Records, Folder 7, pp. 1426·1428.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 3 of 43
X-------------------------------------X

Period Covered Inclusive Months Date Filed

1" quarter 9 July to September 2016 25October 2016
2"d _g_uarter'" October to December 2016 24 Janual}' 2017
3ra quarter" January to March 2017 25 April 2017
4 '" quarter., AIJril to June 2017 25 July_2017

On 2I November 2016, petitioner filed with the BIR its Amended

Quarterly VAT Return (BIR Form No. 2550-Q) for the I'' quarter of FY
ending on 30 June 20I7Y

During the said period, petitioner generated zero-rated sales

from its services rendered solely to Atlassian Pty Ltd (APL), a non-
resident foreign corporation (NRFC) established under the laws of
Australia. At the same time, petitioner paid input VAT on its purchases
of goods and services and amortized deferred input VAT on capital
goods exceeding PI Million in the aggregate amount ofPI4,2I2>395-I3-

On 28 September 2oi8, petitioner filed with the BIR RDO 44 its

administrative claim'4 for refund of input VAT amounting to
PI4,2I2,395.I3, together with its supporting documents.

A VAT Refund Notice dated I2 December 2018' 5 (VAT Refund

Notice) was issued to petitioner informing the latter that out of its
total claim for VAT refund amounting to PI4,212>395-I3, only the
amount ofP2,836,3I6.77 has been approved.'6

PROCEEDINGS BEFORE THIS COURT

On I8 January 2019, following the partial denial of its claim for

refund, petitioner filed the instant Petition for Review.y

9
Exhibit "P-16-7'", USB (Exhibit "P-22").
10
Exhibit "P-16-8". id.
II
Exhibit "P-16-9'". id.
12
13
Exhibit "P-16-Io··. id.
Supra at note 9.
14
Exhibit "P-3", BIR Records. Folder 8, p. 1455.
15
Exhibit "P-16-3", USB (Exhibit "P-22").
16
JSFI, Division Docket, p. 284.
17
Supra at note I.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 4 of 43
x-------------------------------------x

On 26 March 2019, respondent filed his Answer'8 interposing the

following special and affirmative defenses:

1. Petitioner is not entitled to refund because it failed to

strictly comply with the invoicing requirements for VAT
refund;

2. A portion of the excess input VAT should be disallowed

because it was not supported by proper sales invoices or
official receipts (ORs);

3· Petitioner failed to prove that the recipient of its

services are foreign corporations doing business outside
the Philippines; and,

4· The burden of proof to establish entitlement to refund

is on the claimant-taxpayer and being in the nature of a
claim for exemption, refund is construed strictissimi
juris against it and in favor of the taxing power.

After the parties filed their respective pre-trial briefs'9 as well as

20
their Joint Stipulation of Facts and IssueS (JSFI), the Court issued the
Pre-Trial Order 21 on 15 July 2019.

On 22 July 2019, petitioner presented two (2) of its witnesses,

namely: (1) Doris Mabini (Mabini); and, (2) Atty. Estela Joy Intig-Mari
(Atty. Mari).

On the witness stand, Mabini testified 22 that: (1) she is

petitioner's Tax Program Manager of its Tax Department; (2) petitioner
is engaged in business of providing outsourcing services and support
solutions in all aspects of the business and operations of its affiliates
and related companies; (3) majority of the process involving the
preparation and filing ofVAT returns of petitioner are handled by their
external service provider, Reyes Tacandong & Co. (RT&Co.); (4) shy

18
Received on 01 April2019; Division Docket, pp. 121-129.
19
Pre-Trial Brief for Petitioner, id., pp. 237-250; Respondent's Pre-Trial Brief, id., pp. 254-259.
20
Filed on 21 June 2019, id., pp. 283-289.
21
ld., pp. 298-302.
22
See Judicial Affidavit, Exhibit "P-13", id., pp. 163-176.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 5 of 43
X-------------------------------------X

oversees, reviews and finalizes the work of RT&Co. for both the
preparation and filing of the VAT returns as well as the preparation of
the documents for the VAT claim; (s) petitioner's administrative claim
was filed with the BIRon 28 September 2018; (6) they received on 19
December 2018, through RT&Co., the VAT Refund Notice; (7) based on
the VAT Refund Notice, the administrative claim was denied by the
BIR supposedly on the ground that the same is "unsupported, in
violation of the invoicing requirements, 'big-ticket purchases',
insufficient export proceeds, and attributable to services rendered in
the Philippines, among others"; (8) the BIR failed to provide sufficient
explanation and specific legal bases of the denial as well as the details
on which portions of the claim were covered by the disallowed input
VAT; (9) petitioner complied with the presentation of documents
required by ROO 44 where the application was filed; (10) when the BIR
elevated the refund claim to the National Office, they were surprised
about the portion that was denied since the same was allegedly due to
failure to submit document when in fact, such documents were not
required by ROO 44; (n) its BIR Certificate of Registration would show
that it is a VAT -registered taxpayer; (12) upon filing the Application for
Tax Credits/Refunds (BIR Form No. 1914) 23 on 28 September 2018, they
also submitted a Revised Checklist of Mandatory Requirements for
Claims for VAT Refund 24 which was acknowledged and received by the
revenue office to which the application was submitted; (13) the input
VAT claimed relate to services solely rendered to APL, an NRFC
established under the laws of Australia; and, (14) the foregoing is fully
substantiated by numerous ORs, billing statements, service contracts
for the four (4) quarters of FY ending 30 June 2017, a Certification of
Non-Registration of Company25 from the Securities and Exchange
Commission (SEC) stating that APL is not a registered corporation in
the Philippines and a Certificate of Registration of a Company>6 and a
Certificate of Registration on Change of Name of Atlassian Pty Ltd 27
issued by the Australian authorities.

On cross examination, Mabini further testified that: (1) the VAT

Refund Notice was provided to RT&Co. and they were informed by the
former as to the receipt of such notice 28 ; (2) the service contra/

23
Exhibit "P·3", Supra at note 14.
24
Exhibit "P-5", Division Docket, p. 1590.
25
Exhibit "P-16-2", USB (Exhibit "P-22").
26
Exhibit "P-19", Division Docket, pp. 372-374.
27
Exhibit "P-6", BIR Records, Folder 6, pp. 1347-1349.
28
TSN of22 July 2019, p. II.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 6 of 43
X-------------------------------------X

between petitioner and APL became effective in October 2014 without

any date of termination 29 ; (3) petitioner and APL are related
companies30 and that they have one ultimate holding company, which
is Atlassian Corporation PLC 3'; (4) petitioner's services were solely
rendered to APL (which means that petitioner has no other clients)
and the former was created for the purpose of rendering services to the
latter32 ; (5) petitioner has 175,ooo subscribed capital stock with 174,900
shares being subscribed by APU3 ; and, (6) petitioner is not a subsidiary
of APL. 34

On re-direct examination, Mabini merely mentioned that,

although she had a meeting on 20 December 2019, she was unsure of
the exact date of receipt of notice from RT&Co. (of the VAT Refund
Notice). 35 Respondent did not conduct any re-cross examination. 36

Later, Atty. Mari testified that: (1) she is an Associate Manager of

the Tax Advisory Group of RT&Co.; (2) petitioner is a client of RT&Co.
and they are handling the preparation and filing of VAT refund claims
of petitioner; (3) she is the person in charge of petitioner's VAT refund
claim for FY ending 30 June 2017; (4) upon a follow-up with the Tax
Audit Review Division (TARD) of the BIR National Office, she was
given a copy of the VAT Refund Notice on 19 December 2018; and,
(5) petitioner received the decision denying its administrative claim on
19 December 2018. 37

On cross examination, Atty. Mari declared that: (1) the signatory

of the VAT Refund Notice is Erlinda A. Simple, Assistant
Commissioner of the Assessment Service (ACIR Simple)38 ; and, (2) the
document does not c~ntain any marking which states the date of
receipt of petitioner. 3 11
29
Id., p. 17.
30
Id., p. 18.
31
ld., p. 19.
32
ld., p. 20.
33
Id., p. 22.
34
ld., p. 23.
35
ld., p. 25.
36
Id.
37
See Judicial Affidavit, Exhibit "P-14", Division Docket, pp. 143-148.
38
TSN of22 July 2019, p. 30.
39
ld., p. 32.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 7 of 43
X-------------------------------------X

On re-direct examination, Atty. Mari confirmed that the VAT

Refund Notice was received on 19 December 2018. 40

On re-cross examination, when asked of proof that petitioner

received the VAT Refund Notice on 19 December 2018, Atty. Mari
explained that her receipt of the VAT Refund Notice means that
petitioner had likewise received it since she represents the latter. 41

On 09 October 2019, petitioner presented its third witness in the

person of the Court-commissioned Independent Certified Public
Accountant42 (ICPA), Mae Cristina M. Galanza (Galanza). On the
witness stand, she testified that: (1) she conducted an examination,
prepared a report 4 3, including supporting annexes and schedules, and
submitted the same to the Court on o8 July 2019; (2) the documents
she reviewed showed that petitioner is entitled to an additional
amount ofP7,16o,6so.10 on top of what the BIR granted (in the amount
of P2,836,316.77); and, (3) her findings and conclusions were based on
the results of her review of the supporting documents provided to her
and taking into account the substantiation rules and regulations on
claims for tax refund. 44

On cross examination, ICPA Galanza also stated that: (1) based

on the letter issued by the BIR, it disallowed the other portions of the
refund claimed45 ; (2) a big portion thereof pertains to petitioner's input
VAT on its big ticket purchases46 ; (3) she was able to verify that
petitioner submitted supporting documents but it was still denied
because of its big ticket purchases 47 ; (4) petitioner declared in the
instant Petition for Review that all its services were rendered in favor
of only one company which is APL 48 ; (5) in her report, the sales subject
to 12% VAT pertain to finance income of petitioner from its loan to •
employees 49 ; and, (6) based on the Articles of Incorporation (AOI) oy
40
!d., pp. 32·33.
41
!d., p. 33.
42
See Order dated 06 June 20!9, Division Docket, pp. 279-280.
43
Exhibit "P-!6", !CPA Report.
44
See Judicial Affidavit, Exhibit "P-2! ", Division Docket, pp. 3!3-32!.
45
TSN of09 October 20!9, p. 8.
46
!d.
47
!d., p. 9.
48
!d.
49
!d., p. 10.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 8 of 43
x-------------------------------------x

pet1t10ner, APL subscribed for ninety-nine (99%) of the former's

capital stock. 5° Petitioner did not conduct cross examination. 51

On 14 October 2019, petitioner filed its Formal Offer of

Evidence 52 (FOE) with respondent's Comment/Objection53 filed on 22
October 2019. On 13 November 2019, the Court resolved 54 to admit all
of petitioner's documentary evidence, except Exhibits "P-2" 55 , "P-3-1"56
and "P-n" 57 for failure to have the said exhibits identified.

On 21 November 2019, respondent filed a Motion for Leave of

Court (To File Demurrer to Evidence)58 with the attached Demurrer to
Evidence. 59

On 09 December 2019, petitioner filed a Motion for Partial

Reconsideration with Manifestation 60 (MPR) seeking reconsideration
insofar as Exhibits "P-2" and "P-3-1" are concerned and manifesting
that the other document denied admission, Exhibit "P-n"6 \ is the same
as Exhibit "P-16-46" which was already admitted by the Court.

On 10 December 2019, petitioner filed its Comment/Opposition

(to the Motion for Leave of Court to File Demurrer to Evidence) 6 \ to
which respondent filed a Repll3 on 10 January 2020.

On 31 January 2020, the Court issued a Resolution 64 denying

respondent's Demurrer to Evidence and partially granting petitioner's
MPR but only with respect to Exhibit "P-n/

50
Id., p. 10.
5I
Id .• p. I I.
52
Division Docket, pp. 339-350.
53
Id., pp. 378-379. It merely states that respondent has no objection to the admission of petitioner's
exhibits without necessarily admitting its probative value, materiality and relevance for the
proposes for which said exhibits are offered.
54
See Resolution dated 13 November 2019, id., pp. 382-383.
55
Letter of Reyes Tacandong dated 25 September 2018.
56
Signature on Letter of Reyes Tacandong.
57
Amended Quarterly VAT Return for the fourth (4'h) quarter of 20 I 8.
58
Division Docket, pp. 384-387.
59
Id., pp. 388-402.
60
Id .• pp. 405-4 I I.
61
Supra at note 57.
62
Division Docket, pp. 4 I 2-4 I 6.
63
ld., pp. 429-433.
64
ld., pp. 437-442.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 9 of 43
x-------------------------------------x

On 24 February 2020, respondent presented his only witness,

Revenue Officer (RO) Jelly Anne T. Mateo (Mateo), who testified 65
that: (1) she is an RO presently assigned at TARO of the BIR's National
Office; (2) in accordance with Revenue Administrative Order (RAO)
No. 2-201466 , the main functions of TARO include, among others,
reviewing and evaluating tax audit reports on claims for tax
credit/refund and excess input tax credits, preparing reports on the
results of such review and recommending appropriate action for the
approval of the Assistance Commissioner of Internal Revenue (ACIR),
Assessment Service; (3) the said functions are further discussed in
Revenue Memorandum Circular (RMC) No. 17-201867 ; (4) petitioner's
claim was endorsed to their division for final review; (5) she reviewed
petitioner's application together with the reports submitted by ROO
44 to come up with her own findings; (6) afterwards, she prepared a
Memorandum Report 68 indicating her recommendation for the
issuance of VAT refund in favor of petitioner in the reduced amount of
P2,836,316.77; (7) she found out that there are invoices and ORs
submitted by petitioner that do not comply with the invoicing
requirements as provided in Section 11069 in relation to Sections 11270
and 1137' of the National Internal Revenue Code (NIRC) of 1997, as
amended; (8) she likewise verified that the purchases from big ticket
suppliers should be disallowed for failure to comply with the
documentary requirements as no proof of payment was submitted;
and, (9) some of the input VAT attributable to export sales have no
proof of foreign currency remittances due to insufficient documents to
warrant offsetting arrangement under Q8/A872 ofRMC 42-2003/

65
See Judicial Affidavit, Exhibit "R-2", id., pp. 445-452. Although the document does not contain an
official marking, it is noted that respondent sought the marking thereof during the hearing on 24
February 2020.
66
ORGANIZATION AND FUNCTIONS OF OFFICES UNDER THE NATIONAL OFFICE PER
EO 366.
67
Amending Revenue Memorandum Circular (RMC) No. 89-2017 and Certain Provisions of RMC
No. 54-2014 Regarding the Processing of Claims for Issuance of Tax Refund/Tax Credit
Certificate (TCC) in Relation to Amendments Made in the National Internal Revenue Code of
1997, as Amended by Republic Act No. 10963, Known as the Tax Reform for Acceleration and
Inclusion (TRAIN).
68
Exhibit "R-1", Division Docket, pp. 453-457.
69
SEC. 110. Tax Credits. - ...
70
SEC. 112. Refunds or Tax Credits of Input Tax- ...
71
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.- ...
72
Q-8: With the full liberalization of the BSP rules on foreign exchange and trade transactions (CB
Circular NO. 1389 dated April 13, 1993 enunciated in RMC No. 57-97), the BIR requirement for
full documentation of proofs of inward remittances of export proceeds should no longer be
enforced. Accordingly, what should be the acceptable documentary requirements in the processing
of claims for TCC/refund, specifically on offsetting arrangements?

A-8: In the case of offsetting arrangements, the following documents should be required:
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 10 of 43
x-------------------------------------x

On cross examination, RO Mateo further testified that: (1) VAT

OR is one of the requirements under Section 11374 of the NIRC of 1997,
as amended, to substantiate the purchase of services75 ; (2) Under RMC
No. 29-2009 76 , the OR needs further substantiations such as delivery
receipts, cancelled checks and certified bank statements77 ; (3) the BIR
disallowed input VAT on big ticket purchases as it is not compliant,
under RMC No. 17-201878, with the required documents 79 ; (4) under
Revenue Memorandum Order (RMO) No. 16-200780 , a big-ticket
purchase refers to the purchase made from suppliers whose individual
gross annual [cumulative] sales to a particular taxpayer-[purchaser]
accounts to more than s% of the said taxpayer's annual gross
purchases81 ; (5) she performed a procedure to verify whether certain
suppliers qualify for the said definition and that is by multiplying the
total purchases by s% and those suppliers who exceed such threshold
is considered as big ticket suppliers 82 ; (6) she performed the said
procedure for every supplier that she found in the application for
refund 83 ; (7) petitioner filed the administrative claim within the
reglementary period 8\ (8) in explaining why on page two (2) of her
Memorandum Report she mentioned that petitioner failed to present '
proof of remittances but in page three (3) thereof, she mentioned thay

I. Import documents which created liability accounts in favor of the foreign parent or affiliated
company;
2. Other contracts with the foreign or affiliated company that brought about the liabilities which
were offset against receivables from export sales;
3. Evidence of proceeds of loans, in case the claimant has received loans or advances ftom the
foreign company;
4. Documents or correspondence regarding offsetting arrangements;
5. Confirmation of the offsetting arrangements by the heads of the business
organizations involved;
6. Documents to prove actual export of goods;
7. Documents to prove that the sales are zero-rated sales.
73
Clarifying Certain Issues Raised Relative to the Processing of Claims for Value-Added Tax
(VAT) Credit/Refund, Including Those Filed with the Tax and Revenue Group, One-Stop Shop
Inter-Agency Tax Credit and Duty Drawback Center, Department of Finance (OSS) by Direct
Exporters.
74
Supra at note 71.
75
TSN of24 February 2020, p. 8.
76
Clarifying Certain Issues Relative to the Processing of Claims For Tax Credit/Refund.
77
TSN of24 February 2020, p. 8.
78
Supra at note 67.
79
TSN of24 February 2020, p. I 0.
80
Prescribing Additional Procedures in the Audit of Input Taxes Claimed in the VAT Returns By
Revenue Officers and Amending "Annex B" of Revenue Memorandum Order (RMO) No. 53-98
With Respect to the Checklist of Documents to be Submitted by a Taxpayer Upon Audit of His/Its
VAT Liabilities As Well As the Mandatory Reporting Requirements to be Prepared by the
Assigned Revenue Officer/s Relative Thereto, All of Which Shall Form an Integral Part of the Tax
Docket.
81
TSN of24 February 2020, p. II.
82
!d., pp. I I -12.
83
!d., p. 12.
84
!d.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 11 of 43
X-------------------------------------X

all sales complied with the documentary requirements for zero-rated

sales, she insisted that even though it is remitted in acceptable foreign
currency, the documents are insufficient to warrant the offsetting
arrangement85 ; (9) under RMC No. 42-200386, an example of lacking
document is the contract with foreign or affiliated companl7 ; (10) the
RDO and the Regional Office actually approved and recommended the
issuance of VAT refund in the amount of-Pw,884,671.22 88 ; and, (n) she
considers the Regional Office negligent or incompetent to recommend
or approve such higher amount with respect to big ticket purchases. 89
Respondent did not conduct any re-direct examination. 90

On 02 March 2020, respondent filed his FOP', without

petitioner's comment. 92 In its Resolution dated 16 June 2020 93 , the
Court resolved to admit all of respondent's documentary evidence.

On 19 August 2020, respondent filed its Memorandum94 while

petitioner filed its own Memorandum95 on 14 September 2020. On o6
October 2020, the Court submitted the case for decision. 96

ISSUES

As the parties so stipulated, the issues for this Court's

determination are the following: 97

I.
WHETHER PETITIONER ATLASSIAN PHILIPPINES, INC.
RENDERED SERVICES IN THE PHILIPPINES TO PERSON/S
ENGAGED IN BUSINESS CONDUCTED OUTSIDE OF THE
PHILIPPINES FOR THE FIRST (1ST), SECOND (2N°), THIRD (3R 0)
AND FOURTH (4TH) QUARTERS OF TAXABLE YEAR (TY)
STARTING 01 JULY 2016 AND ENDING 30 JUNE 2017;!

"
86
Id., pp. 12-13.
Supra at note 73.
87
TSN of24 February 2020, pp. 13-14.
88
Id., pp. I 5- I 6.
89
Id., p. 16.
90
Id., p. I 9.
91
Division Docket, pp. 460-462.
92
Per Records Verification dated 04 June 2020, id., p. 481.
93
Id., pp. 483-484.
94
ld., pp. 485-506.
95
Id., pp. 508-525.
96
See Resolution dated 06 October 2020, id., p. 527.
97
JSFI, id., p. 284.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 12 of 43
X-------------------------------------X

II.
WHETHER PETITIONER ATLASSIAN PHILIPPINES, INC. IS
ENTITLED TO A TAX REFUND IN THE AGGREGATE AMOUNT OF
Pu,J76,o78.36 REPRESENTING EXCESS INPUT VALUE-ADDED
TAX (VAT) INCURRED FOR THE TAXABLE YEAR (TY) 01 JULY 2016
TO 30 JUNE 2016; AND,

III.
WHETHER RESPONDENT COMMISSIONER OF INTERNAL
REVENUE, IN PARTIALLY DENYING A CLAIM FOR TAX REFUND,
IS REQUIRED BY LAW AND CONSTITUTION TO PROVIDE
SUFFICIENT EXPLANATION AND SPECIFIC LEGAL BASES OF THE
DENIAL IN COMPLIANCE WITH THE DUE PROCESS
REQUIREMENT OF THE CONSTITUTION.

RULING OF THE COURT

Petitioner anchors its claim for refund on Section no(B), in

relation to Section nz(A) and (C) of the NIRC of 1997, as amended by
Republic Act (RA) No. 1096398 , otherwise known as Tax Reform for
Acceleration and Inclusion (TRAIN). The said provisions read as
follows:

Sec. no. Tax Credits. -

(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 any input tax attributable to
zero-rated sales by a VAT-registered person may at his option be

112.}
refunded or credited against other internal revenue taxes, subject to
~~e provisions of Section

98
AN ACT AMENDING SECTIONS 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84,
86, 90, 91, 97, 99, 100, 101, 106, 107, 108, 109, I 10, 112, I 14, I 16, 127, 128, 129, 145, 148, 149,
151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193,
194, 195, 196, 197,232,236,237,249,254,264,269, AND 288; CREATING NEW SECTIONS
51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-8, AND 265-A; AND REPEALING SECTIONS
35, 62, AND 89; ALL UNDER REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR OTHER
PURPOSES.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 13 of 43
X-------------------------------------X

Sec. 112. Refunds or Tax Credits of input Tax.-

(A) Zero-Rated or Effectively Zero-Rated Sales. - Any

VAT-registered person, whose sales are zero-rated or effectively
zero-rated may, within two (2) years after the close of the taxable
quarter when the sales were made, apply for the issuance of a tax
credit certificate or refund of creditable input tax due or paid
attributable to such sales, except transitional input tax, to the extent
that such input tax has not been applied against output tax: Provided,
however, That in the case of zero-rated sales under Section
w6(A)(2)(a)(1), (2) and (b) and Section w8(B)(1) and (2), the
acceptable foreign currency exchange proceeds thereof had been
duly accounted for in accordance with the rules and regulations of
the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where
the taxpayer is engaged in zero-rated or effectively zero-rated sale
and also in taxable or exempt sale of goods of properties or services,
and the amount of creditable input tax due or paid cannot be
directly and entirely attributed to any one of the transactions, it shall
be allocated proportionately on the basis of the volume of sales:
Provided, finally, That for a person making sales that are zero-rated
under Section w8(B)(6), the input taxes shall be allocated ratably
between his zero-rated and non-zero-rated sales.

(C) Period within which Refund of Input Taxes shall be

Made.- In proper cases, the Commissioner shall grant a refund for
creditable input taxes within ninety (90) days from the date of
submission of the official receipts or invoices and other documents
in support of the application filed in accordance with Subsections
(A) and (B) hereof: Provided, That should the Commissioner find
that the grant of refund is not proper, the Commissioner must state
in writing the legal and factual basis for the denial.

In case of full or partial denial of the claim for tax refund, the
taxpayer affected may, within thirty (3o) days from the receipt of the
decision denying the claim, appeal the decision with the Court of
Tax Appeals: Provided, however, That failure on the part of any
official, agent, or employee of the BIR to act on the application
within the ninety (90)-day period shall be punishable under Section
269 of this Code.

In Luzon Hydro Corporation v. Commissioner of Internal ,

Revenue99 , the Supreme Court laid down the requisites that mus)'

99
G.R. No. 188260, 13 November 2013; Citation omitted.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 14 of 43
X-------------------------------------X

concur in order to allow a claim for refund or tax credit for unutilized
input VAT, to wit:

A claim for refund or tax credit for unutilized input VAT may
be allowed only if the following requisites concur, namely: (a) the
taxpayer is VAT-registered; (b) the taxpayer is engaged in zero-rated
or effectively zero-rated sales; (c) the input taxes are due or paid; (d)
the input taxes are not transitional input taxes; (e) the input taxes
have not been applied against output taxes during and in the
succeeding quarters; (0 the input taxes claimed are attributable to
zero-rated or effectively zero-rated sales; (g) for zero-rated sales
under Section 106(A)(2)(1) and (2); w6(B); and w8(B)(1) and (2), the
acceptable foreign currency exchange proceeds have been duly
accounted for in accordance with the rules and regulations of the
Bangko Sentral ng Pilipinas; (h) where there are both zero-rated or
effectively zero-rated sales and taxable or exempt sales, and the
input taxes cannot be directly and entirely attributable to any of
these sales, the input taxes shall be proportionately allocated on the
basis of sales volume; and (i) the claim is filed within two years after
the close of the taxable quarter when such sales were made.

We shall now proceed to the determination of petitioner's

compliance with aforementioned requisites. For an orderly discussion,
We shall start with the first (1't) and ninth (9th) requisites, followed by
the second (2nd) and seventh (7th) requisites, then third (3'd), fourth
(4th), fifth (sth) and eighth (8th) requisites.

FIRST (Isr) REQUISITE:

PETITIONER IS A VALUE-ADDED TAX
(VAT)-REGISTERED ENTITY

Petitioner complied with the first requisite considering that it is

VAT-registered entity with Tax Identification Number (TIN) oo8-614-
557-ooo as evidenced by its Certificate of Registration OCN
9RCoooo442242 with registration date of 31 October 20137

100
Exhibit "P-4", Supra at note 8.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 15 of 43
X-------------------------------------X

NINTH (9TH) REQUISITE:

PETITIONER'S ADMINISTRATIVE AND
JUDICIAL CLAIMS WERE FILED
WITHIN THE PRESCRIPTIVE PERIOD.

In accordance with the above-cited Section n2(A) and (C) 101 of

the NIRC of 1997, as amended, the administrative claim for refund of
excess input VAT must be filed with the BIR within two (2) years after
the close of the taxable quarter when the zero-rated or effectively zero-
rated sales were made.

The instant administrative claim covers the four (4) quarters of

FY ending 30 June 2017. Thus, petitioner's last day for filing of its
administrative claim and the actual filing of administrative claim for
the four (4) quarters ofFY 2017 fell on the following dates:

Last Day to File Actual Date of Filing of

Period Covered
Administrative Claim Administrative Claim
July to September 2016
September 30, 2018
(1'' Quarter)
October to December 2016
December 31, 2018
(2"d Quarter)
Septem b er 28, 2018 102
January to March 2017
March 31, 2019
(3'd Quarter)
April to June 2017
June 30, 2019
(4'h Quarter)

Clearly, petitioner's administrative claim for refund was

seasonably filed within the prescriptive period.

As to the timeliness of petitioner's judicial claim, respondent had

ninety (9o} days to decide on petitioner's claim or until 27 December
2018. Considering that respondent, through ACIR Simple, issued a
letter dated 12 December 2018103 partially denying f'n,J76,o78.36 out of
the total claim for VAT refund amounting to f'14,212,395·13 and the
same was received by petitioner on 19 December 2018104 , the latter had
thirty (30) days therefrom or until18 January 2019, within which to ' my
101
Supra at p. 13.
102
Exhibit "P-3", Supra at note 14.
103
Exhibit "P-16-3", Supra at note 15.
104
Question & Answer No. 14, Judicial Affidavit of Ms. Estela Joy lntig-Mari Dated 3 May 2019,
Division Docket, p. 146; TSN of22 July 2019, pp. 32-33.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 16 of 43
X-------------------------------------X

a judicial claim before this Court. Thus, the instant Petition for Review
was also seasonably filed on 18 January 2019.

SECOND I2N°) AND SEVENTH I7TH)

REOUISITES:
PETITIONER IS ENGAGED IN ZERO-
RATED OR EFFECTIVELY ZERO-RATED
SALES AND FOR WHICH, THE
ACCEPTABLE FOREIGN CURRENCY
EXCHANGE PROCEEDS HAVE BEEN
DULY ACCOUNTED FOR IN
ACCORDANCE WITH THE RULES AND
REGULATIONS OF THE BANGKO
SENTRAL NG PILIPINAS (BSP).

The 2nd and 7th requisites, respectively, require that the taxpayer
is engaged in zero-rated or effectively zero-rated sales and, for zero-
rated sales under Sections w6(A)(2)(a)(1), (2) 105 and (B) 106, and
w8(B)(1) and (2) 107 of the NIRC of 1997, as amended, the acceptaby

105
Sec. 106. Value-Added Tax on Sale of Goods or Properties.-
(A) Rate and Base of Tax. -There shall be levied. assessed and collected on every sale, barter or
exchange of goods or properties, a value-added tax equivalent to twelve percent (12%) of the
gross selling price or gross value in money of the goods or properties sold, bartered or
exchanged, such tax to be paid by the seller or transferor.

(2) The following sales by VAT-registered persons shall be subject to zero percent (0%)
rate:
(a) Export Sales.- The tenn 'export sales' means:
I. The sale and actual shipment of goods from the Philippines to a foreign
country, irrespective of any shipping arrangement that may be agreed
upon which may influence or detennine the transfer of ownership of
goods so exported and paid for in acceptable foreign currency or its
equivalent in goods or services, and accounted for in accordance with the
rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
2. Sale and delivery of goods to:
(i) Registered enterprises within a separate customs territory as
provided under special laws; and
(ii) Registered enterprises within tourism enterprise zones as declared
by the Tourism Infrastructure and Enterprise Zone Authority
(TIEZA) subject to the provisions under Republic Act No. 9593 or
the Tourism Act of2009.
106
Sec. 106. Value-Added Tax on Sale of Goods or Properties.-
(B) Transactions Deemed Sale.- The following transactions shall be deemed sale:
107
Sec. 108. Value-Added Tax on Sale ofServices and Use or Lease of Properties.-

(B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the
Philippines by VAT-registered persons shall be subject to zero percent (0%) rate:
(I) Processing, manufacturing or repacking goods for other persons doing business outside
the Philippines which goods are subsequently exported, where the services are paid for in
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 17 of 43
X-------------------------------------X

foreign currency exchange proceeds must have been duly accounted

for in accordance with the Bangko Sentral ng Pilipinas (BSP) rules and
regulations.

In this case, petitioner claims that its sale of outsourcing services

and support solutions to its related party, APL, an NRFC established
under the laws of Australia, is a transaction subject to o% VAT
pursuant to Section 108(B)(2) of the NIRC of 1997, as amended, which
states:

SEC. 108. Value-Added Tax on Sale of Services and Use or

Lease of Properties.-

(B) Transactions Subject to Zero Percent (o%) Rate - The

following services performed in the Philippines by VAT-registered
persons shall be subject to zero percent (o%) rate.

(1) Processing, manufacturing or repacking goods for

other persons doing business outside the Philippines which
goods are subsequently exported, where the services are paid
for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko
Sentral ng Pilipinas (BSP);

(2) Services other than those mentioned in the

preceding paragraph, rendered to a person engaged in
business conducted outside the Philippines or to a
nonresident person not engaged in business who is
outside the Philippines when the services are performed
the consideration for which is paid for in acceptable
foreign currency and accounted for in accordance with
the rules and regulations of the Bangko Sentral ng
Pilipinas (BSP)./

acceptable foreign currency and accounted for in accordance with the rules and
regulations of the Bangko Sentral ng Pilipinas (BSP);

(2) Services other than those mentioned in the preceding paragraph, rendered to a person
engaged in business conducted outside the Philippines or to a non-resident person not
engaged in business who is outside the Philippines when the services are performed, the
consideration for which is paid for in acceptable foreign currency and accounted for in
accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP);
108
Emphasis supplied.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 18 of 43
x-------------------------------------x

In Accenture, Inc. v. Commissioner of Internal Revenue109

(Accenture), citing Commissioner of Internal Revenue v. Burmeister
110
and Wain Scandinavian Contractor Mindanao, Inc. the Supreme ,

Court held that in order for the supply of services to be considered

VAT zero-rated under the above-mentioned provision, the taxpayer-
claimant must prove the following:

1. services other than processing, manufacturing or

repacking of goods rendered by VAT registered persons
in the Philippines;

2. the transaction paid for in acceptable foreign currency

duly accounted for in accordance with BSP rules and
regulations; and,

3· the recipient of such services must be performing

business outside the Philippines.

As to the 1'' requirement, it is evident from its Amended AOI 111

that petitioner is primarily engaged in the "business of providing
outsourcing services and support solutions, including but not limited
to back office technology support, call or contact center activities, data
entry and encoding, data management, general human resource
functions (without engaging in the business of recruitment and
placement), business planning, accounts receivable management,
general legal support services, customer support services and customer
relationship management, sale support and other industry specific
purposes and other similar services, and to provide support to all
aspects of the business of affiliates and related companies and
operations, without engaging as an internet service provider".

Clearly, the nature of services being rendered by petitioner falls

within the scope of services other than "processing, manufacturing or
repacking of goods" contemplated under Section w8(B)(2) of the NIRC
of 1997, as amended./

109
G.R. No. 190102, II July2012.
110
G.R. No. 153205, 22 January 2007.
Ill
Exhibit "P-1", B1R Records, Folder 7, pp. 1416-1425.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 19 of 43
X-------------------------------------X

Before proceeding with the discussion of the 2nd requirement,

the Court deems it more appropriate to first discuss petitioner's
compliance with the 3rd requirement (as laid down in Accenture) which
requires that the recipient of such services must be performing
business outside the Philippines.

In Commissioner of Internal Revenue v. Deutsche Knowledge

Services, Pte. Ltd."\ the Supreme Court discussed the two components
that the claimant must establish to prove its clients' status as an NRFC,
to wit:

For purposes ofzero-rating under Section w8(B)(2) of the Tax

Code, the claimant must establish the two components of a client's
NRFC status, viz: (1) that their client was established under the laws
of a country not the Philippines or, simply, is not a domestic
corporation; and (2) that it is not engaged in trade or business in the
Philippines. To be sure, there must be sufficient proof of both of
these components: showing not only that the clients are
foreign corporations, but also are not doing business in the
Philippines.

To recall, the CTA found that the SEC Certification of Non-

Registration of Company and Authenticated Articles of Association
and/or Certificates of Registration/Good Standing/Incorporation
sufficiently established the NRFC status of 11 of DKS's affiliates
clients.

The Court upholds these findings.

In any case, after a judicious review of the records, the Court

still do not find any reason to deviate from the court a quo's findings.
To the Court's mind, the SEC Certifications of Non-Registration
show that their affiliates are foreign corporations. On the
other hand, the articles of association/certificates of
incorporation stating that these affiliates are registered to
operate in their respective home countries, outside the
Philippines are prima facie evidence that their clients are not
engaged in trade or business in the Philippine/

112
G.R. No. 234445, 15 July 2020; Citations omitted, italics in the original text and emphasis
supplied.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 20 of 43
X-------------------------------------X

Proof of the above-mentioned second component sets the

present case apart from Accenture, Inc. v. Commissioner of Internal
Revenue and Site/ Philippines Corp. v. Commissioner of Internal
Revenue. In these cases, the claimants similarly presented SEC
Certifications and client service agreements. However, the Court
consistently ruled that documents of this nature only establish
the first component (i.e., that the affiliate is foreign). The absence of
any other competent evidence (e.g., articles of association/
certificates of incorporation) proving the second component (i.e.,
that the affiliate is not doing business here in the Philippines) shall
be fatal to a claim for credit or refund of excess input VAT
attributable to zero-rated sales.

As held in the said case, there must be sufficient proof of both

components- (1) that the clients are foreign corporation (which can
be proven by the SEC Certifications of Non-Registration); and, (2) also
not doing business in the Philippines (the prima facie proof of
which is the articles of association/certificates of incorporation stating
that these affiliates are registered to operate in their respective home
countries. outside the Philippines).

In the instant case, to prove that petitioner rendered services to

an NRFC, it presented APL's SEC Certification of Non-Registration"\
Authenticated Certificate of the Registration"4 , Certificate of Residency
issued by the Australian Taxation Office"5, and the Services
Agree men t."6

Respondent, however, argues that petitioner appears to have

been established only for the purpose of rendering services to a sole
client or APL. He further claims that petitioner is an extension of APL's
personality to do business in the Philippines hence, the same cannot
be considered as not doing business in the Philippines.

We disagree/

113
Exhibit "P-16-2", Supra at note 25.
114
Exhibit "P-19", Division Docket, pp. 372-374.
115
Exhibit "P-20", id., pp. 375-376.
116
Exhibit "P-18", id., pp. 364-371.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 21 of 43
X-------------------------------------X

In Agilent Technologies Singapore (Pte) Ltd. v. Integrated Silicon

Technology Philippines Corporation, et al. 117 , the Supreme Court
reiterated the rule laid down in The Mentholatum Co., Inc., et al. v.
Anacleto Mangaliman, et al. 118 , with respect to the two general tests to
determine whether or not a foreign corporation can be considered as
"doing business" in the Philippines, viz:

The challenge to Agilent's legal capacity to file suit hinges on

whether or not it is doing business in the Philippines. However,
there is no definitive rule on what constitutes "doing", "engaging in",
or "transacting" business in the Philippines, as this Court observed in
the case of Mentholatum v. Mangaliman. The Corporation Code itself
is silent as to what acts constitute doing or transacting business in
the Philippines.

Jurisprudence has it, however, that the term "implies a

continuity of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts or works or the
exercise of some of the functions normally incident to or in
progressive prosecution of the purpose and subject of its
organization."

In Mentholatum, this Court discoursed on the two general

tests to determine whether or not a foreign corporation can be
considered as "doing business" in the Philippines. The first of these is
the substance test, thus:

The true test [for doing business], however,

seems to be whether the foreign corporation is
continuing the body of the business or enterprise for
which it was organized or whether it has substantially
retired from it and turned it over to another.

The second test is the continuity test, expressed thus:

The term [doing business] implies a continuity

of commercial dealings and arrangements, and
contemplates, to that extent, the performance of acts
or works or the exercise of some of the functions
normally incident to, and in the progressive
prosecution of, the purpose and object of its
. . '
orgamzatwn;;

117
G.R. No. 154618, 14 April 2004; Citations omitted and underscoring in the original text.
118
G.R. No. L-47701, 27 June 1941.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 22 of 43
X-------------------------------------X

The said rulings are echoed in the case of Site/ Philippines

Corporation (Formerly Clientlogic Phils., Inc.) v. Commissioner of
Internal Revenue119 , citing Commissioner of Internal Revenue v. British
Overseas Airways Corporation, et a/.' 20, to wit:

There is no specific criterion as to what constitutes "doing" or

"engaging in" or "transacting" business. We ruled thus
in Commissioner of Internal Revenue v. British Overseas Airways
Corporation:

x x x. There is no specific criterion as to what

constitutes "doing" or "engaging in" or "transacting"
business. Each case must be judged in the light of its
peculiar environmental circumstances. The term
implies a continuity of commercial dealings and
arrangements, and contemplates, to that extent, the
performance of acts or works or the exercise of some of
the functions normally incident to, and in progressive
prosecution of commercial gain or for the purpose and
object of the business organization. "In order that a
foreign corporation may be regarded as doing
business within a State, there must be continuity
of conduct and intention to establish a continuous
business, such as the appointment of a local agent,
and not one of a temporary character."

Upon perusal of the Services Agreement'2 ' entered into by

petitioner with APL, the services rendered by petitioner are limited to
the following administrative and support services:

a) accounting, treasury and related financial services, legal

services, human resources services, marketing services,
administrative services;
b) technical support to customers;
c) information technology support including office
networking;
d) research, development, product strategy and
engineering services;/

119
G.R. No. 201326,08 February 2017; Emphasis in the original text.
120
G.R. Nos. L-65773-74, 30 April 1987.
121
Supra at note 116.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 23 of 43
x-------------------------------------x

e) professional and consultancy services, e.g. the

implementation/installation of software, related
professional consulting services and training;
f) management services; and
g) such other functions as may be agreed between the
Parties from time to time.

Applying the two general tests above, the Services Agreement

shows no indication that petitioner is continuing the body or
substance of APL's software development activities and that the latter
performs acts or exercises of some of the functions normally incident
to, and in the progressive prosecution of, the purpose and object of its
organization.

In insisting that APL is doing business in the Philippines through

petitioner, respondent also cited Institutional Shareholder Services,
Inc.-Philippine ROHQ v. Commissioner of Internal Revenue, (ISSI-
ROHQr22, where this Court ruled that an ROHQ's sale of services in
favor of its mother company is not subject to VAT zero-rating
considering that the mother company and the ROHQ are one and the
same person. Unfortunately, a review on the said case could only
reveal that it is clearly not on all fours with the instant case.

In ISSI-ROHQ, the taxpayer-applicant is a regional operating

headquarter (ROHQ) by virtue of RA 8756. 123 Owing to its nature as an
ROHQ as defined in the law, for purposes of determining compliance
with Section w8(B)(z) of the NIRC of 1997, as amended, the mother
foreign company of the ROHQ cannot be treated as a separate entity.
However, petitioner in the instant case is not an ROHQ but a duly
registered domestic corporation as evinced by its Amended AOr24 that
is authorized to provide outsourcing services and support
solutions to all aspects of the business of affiliates and related
companies. Furthermore, the foreign company in the instant case is
not the parent company of petitioner but just a related party under •
common control as disclosed in petitioner's Audited Financi'1
122
CTA Case No. 7662,03 June 2010.
123
AN ACT PROVIDING FOR THE TERMS, CONDITIONS AND LICENSING
REQUIREMENTS OF REGIONAL OR AREA HEADQUARTERS, REGIONAL OPERATING
HEADQUARTERS, AND REGIONAL WAREHOUSES OF MULTINATIONAL COMPANIES,
AMENDING FOR THE PURPOSE CERTAIN PROVISIONS OF EXECUTIVE ORDER NO.
226, OTHER WISE KNOWN AS THE OMNIBUS INVESTMENTS CODE OF 1987.
124
Supra at note Ill.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 24 of 43
X-------------------------------------X

Statements.'25 Thus, petitioner's client, APL, cannot be considered as

doing business in the Philippines.

With respect to the 3'd requirement that payment for such

services must be in acceptable foreign currency duly accounted for in
accordance with the rules and regulations of the BSP, petitioner
presented documents such as: (1) Certificate of Inward Remittance126
issued by Bank of America Merrill Lynch (BA); (2) 0Rs'27 ; (3) Schedule
of Offsetting'28 ; (4) Debit and Credit Memos'29 ; and, (s) Intercompany
Journal Entries for Offsetting.'30

As noted by the ICPA, only PI52,6m,s62.11 out of

P1s6,s8s,229-48('3' 1 was traced to the Certificate of Inward Remittance,
broken down as follows:

Certificate oflnward Remittance

Date
Amount in USD Amount in PHP
11 August 2016 313,88o.so 14,651,94!.74
19 September 2016 253.862.9'; 12,132,110.38
19 October 2016 213,220-49 10,260,!69·98
17 November 2016 249,368.04 12,273.894-93
15 December 2016 251,661.79 12,'i44,18I.6!
n January 2017 107,471.25 15,235,200-44
13 February 2017 2Q'i, 721.22 14,743,181.42
n March 2017 128,<;68.39 16, o;1o, 561.60
12 April 2017 25'i. iQ7-17 I2,67o,2'i3.6o
11 Mav 2017 298,o61.o7 14,871,757.09
15 June 2017 338,01q.61 I6,7o8,io9.32
Total 3,105,234-48 152,601,562.1l

It was found out that the amounts reflected in the Certificate of

Inward Remittance were net of certain expenses of petitioner that were
paid using a corporate credit card registered under the name of APL
and were recorded in petitioner's books as payables to the said foreign
•
company~

125
Exhibit "P-16-30", Note I0- Related Party Transactions, p. 18.
126
Exhibit "P-16-27", USB (Exhibit "P-22").
127
Exhibit "P-16-19", id.
128
Exhibit "P-16-28", id.
129
Exhibits "P-16-25" and "P-16-26", id.
130
Exhibit "P-16-29", id.
131
Computed by deducting the 1'23,898,731.57 (out-of-period OR No. I 023, as would be discussed
below) from 1'180,483,961.05.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 25 of 43
X-------------------------------------X

Q-8 & A-8 of RMC No. 42-2003'32 enumerates the documents

required in an offsetting arrangement, as follows:

Q-8: With the full liberalization of the BSP rules on foreign

exchange and trade transactions (CB Circular No. 1389 dated April13,
1993 enunciated in RMC No. 57-97), the BIR requirement for full
documentation of proofs of inward remittances of export proceeds
should no longer be enforced. Accordingly, what should be the
acceptable documentary requirements in the processing of claims
for TCC/refund, specifically on offsetting arrangements?

A-8: In the case of offsetting arrangements, the following

documents should be required:

a. Import documents which created liability accounts

in favor of the foreign parent or affiliated company;
b. Other contracts with the foreign or affiliated
company that brought about the liabilities
which were offset against receivables from
export sales;
c. Evidence of proceeds of loans, in case the
claimant has received loans or advances from
the foreign company;
d. Documents or correspondence regarding offsetting
arrangements;
e. Confirmation of the offsetting arrangements by the
heads of the business organizations involved;
f. Documents to prove actual export of goods; [and,]
g. Documents to prove that the sales are zero-rated
sales. '33

To support its claim, petitioner presented its Schedule of

Offsetting'34 and Intercompany Journal Entries for Offsetting.'35
However, We find these two pieces of evidence to be self-serving>
Aside from the fact that it was petitioner itself that prepared and
recorded them, there were also no not accompanied by any other
supporting documents. We also take note that source documents such
as credit card slips with third-party invoices or ORs bearing the details
of APL, among others, were not adduced as evidenc~~

132
Supra at note 73.
133
Emphasis supplied.
134
Exhibit "P-16-28", USB (Exhibit "P-22").
135
Exhibit "P-16-29", id.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 26 of 43
x-------------------------------------x

It bears stressing that these advances were not provided nor

mentioned in the Services Agreement between petitioner and APL.
The Services Agreement only provides for the calculation of
petitioner's service fee wherein the latter would bill APL of the cost
incurred in rendering services plus margin. Corollary, there was no
disclosure on the movement in related party trade payable in
petitioner's Audited Financial Statements.

Given the foregoing disquisition, petitioner did not sufficiently

establish its offsetting arrangement with APLin accordance with RMC
No. 42-2003.'3 6 Hence, the zero-rated sales that were not traced to the
Certificate of Inward Remittance totalling 1'3,983,667.37 shall be
disallowed and deducted from the amount of valid and substantiated
zero-rated sales, as determined below.

As indicated in petitioner's quarterly VAT returns for the FY

ending 30 June 2017, petitioner declared zero-rated sales to APL in the
total amount ofP18o,483,96Lo5, detailed as follows:

Period Zero-Rated Sales BIRRecords

Page No.
July to September 2016 (1" Quarter) 1'38,404,320.22 1464-146~
October to December 2016 (2"ct Quarter) 40,745,087.12 147';-1477
January to March 2017 (3'd Quarter) 44.969,839·83 1484-1486
Aoril to June 2017 (4'" Quarter) 56,364,713.88 1493-1494
Total P18o,481,961.05

In examining the above, the ICPA determined that OR No.

137
1023 , which supports the zero-rated sale reported for the month of
June 2017 amounting to $480,164.18 (equivalent to 1'23,898,731.57) shall
be disallowed since it is dated 13 July 2017 or outside the period of
claim (01 July 2016 to 30 June 2017).

Moreover, the ICPA also found that there is an unreported zero-

rated gross receipt from APL amounting to P27,525,053·8i38 as ,
evidenced by OR No. 1011139 dated 21 July 2016. However, the ICP/

136
Supra at note 73.
137
Exhibit "P-16-19", USB (Exhibit "P-22"), p. 12.
138
Exhibit "P-16", Supra at note 43, p. 12.
139
Exhibit "P-16-21 ", USB (Exhibit "P-22"), p. I.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 27 of 43
X-------------------------------------X

nevertheless included the same in the total zero-rated sales supported

by VAT zero-rated sale ORs dated within FY ending June 2017. 140

We do not agree.

As held by this Court in Commissioner of Internal Revenue v.

Northwind Power Dev't. Corporation 14', unreported zero-rated sales
must be disallowed pursuant to Section 114(A)'42 in relation to Section
108'43 of the NIRC of 1997, as amended, to wit:

In the similarly assailed Resolution of June 26, 2013, which

effectively affirmed the Decision of March 12, 2013, the Court in
Division further explained, thus:

"As regards the first ground, We reiterate our

findings/ruling in the Assailed Decision that only the
amount of P34.352,340.07 was reflected as zero-rated
receipts in petitioner's Quarterly VAT Return for the
2nd quarter of 2oo8.

The difference of P22.456,725.94 was allegedly

recognized in the 3rd and 4th quarters of 2008.
Petitioner, however, failed to substantiate the said
allegations even if the difference of P22.456, 725.94 was
indeed reported in the said quarters.

Pursuant to Section 114(A) in relation to Section

108 of the NIRC of 1997, as amended, petitioner should
have reported the zero-rated sales of P22,456,725.94 in
its Quarterly VAT Returns for the period the payments
were received, i.e., on June 2008 which is covered by
the 2nd quarter of 2oo8/

140
Exhibit "P-16", Supra at note 43, p. 12.
141
CTA EB Case Nos. 1037 & 1042, 16 December 2014; Emphasis supplied.
142
SEC. 114. Return and Payment of Value-added Tax.-
(A) In General. - Every person liable to pay the value-added tax imposed under this Title shall
file a quarterly return of the amount of his gross sales or receipts within twenty-five (25) days
following the close of each taxable quarter prescribed for each taxpayer: Provided, however, That
VAT -registered persons shall pay the value-added tax on a monthly basis.
143
SEC. 108. Value-Added Tax on Sale a/Services and Use or Lease of Properties.-
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 28 of 43
X-------------------------------------X

Since the input VAT sought to be refunded in

the amount of P51,936,g56.o5 is attributable to
petitioner's gross receipts from sale of electricity to
Ilocos Norte Electric Cooperative (INEC), in the
amount of P56,8og,o66.o1, and, inasmuch as only
the amount of P34,352,340.07 was declared in its
2nd Quarterly VAT Return, it is but proper to
apportion the substantiated input VAT over the
volume of zero-rated sales per official receipts and
only the amount attributable to the zero-rated
sales of P34,352,340.07 may be claimed for refund.

Thus, there is no plausible reason why

petitioner should be entitled to a refund of the
substantiated input VAT without allocating its
reported zero-rated sales to sales per official
receipts because the substantiated input VAT
covers the entire zero-rated sales, both reported
and unreported sales for the quarter. In disallowing
a portion of petitioner's zero-rated sales, it essentially
follows that a portion of the claim for refund of input
VAT attributable to such zero-rated sales should also
be disallowed by the Court. Otherwise, We will be
disregarding the substantiation of petitioner's zero-
rated sales thereby negating its effect on the amount of
unutilized input VAT claimed for refund.

In the instant case, since some of the zero-rated

sales were not reported in the appropriate period when
such sales were made, it is apt for the Court to
apportion the input VAT because it is impossible to
specifically pinpoint what input VAT is directly
attributable to such reported zero-rated sales."

Clearly,
the unreported gross receipt amounting to
P27,525,053·87 must likewise be disallowed for purposes of
determining the amount of substantiated input VAT to be refunded to
petitioner.

To summarize, petitioner's duly substantiated zero-rated sales

for the FY ending 30 June 2017 amounted to P152,60I,562.n, computed
as follows:/ ,
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 29 of 43
X-------------------------------------X

Particulars FY2017
Zero-Rated Sales !"!80,483,961.05
Add: Unreported zero-rated sales 27,525,053·87
Total zero-rated sales 208,009,014·92
Less: Disallowance by the !CPA
!) Zero-rated sale supported by VAT 23,898,73!.57
Zero-Rated OR dated outside FY
ending 30 June 2017
Disallowances by the Court
!) Zero-rated sales that were not traced 3.983,667·37
to the Certificate of Inward Remittance
2) Unreported zero-rated sales 27,525,053·87
Total valid and substantiated zero-rated sales Pt52,6m,562.n

THIRD (JR 0 ), FOURTH (4TH), FIFTH

(5TH), and EIGHTH (8TH) REQUISITES:
PETITIONER INCURRED UNUTILIZED
INPUT VALUE-ADDED TAX (VAT)
ATTRIBUTABLE TO ITS ZERO-RATED
SALES.

The Court shall jointly determine whether petitioner complied

with the following remaining requisites:

a. 3'd requisite: the input taxes are due or paid;

b. 4'h requisite: the input taxes are not transitional input

taxes;

c. s'h requisite: the input taxes have not been applied

against output taxes during and in the succeeding
quarters; and,

d. gth requisite: where there are both zero-rated or

effectively zero-rated sales and taxable or exempt sales,
and the input taxes cannot be directly and entirely
attributable to any of these sales, the input taxes shall
be proportionately allocated on the basis of sales
volume.f
 CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 30 of 43
X-------------------------------------X

In its quarterly VAT returns for FY ending 30 June 2017' 4 \

petitioner declared excess and unutilized input VAT of P14,212.395·13
on its domestic purchases of capital goods exceeding and not
exceeding P1 Million, purchases of goods other than capital goods and
services as well as the amortization of capital goods, as shown below:

1st Quarter 2"d Quarter 3'd Quarter 4 1h Quarter Total

Input Tax Deferred
on Capital Goods
Exceeding •Million 1'1,836·745·35 1'1,854.817.05 1'1-419,983·95 1'985,150.85 1'6,o96,697·2o
from Previous
Quarter
Input tax on purchase
of Capital Goods not 107,142.86 107,142.86
exceeding P1Million

Input tax on purchase

of Capital Goods 418,o65.96 418,o65.96
exceeding P1Million
Input tax on domestic
purchase of goods
264.980.65 319,140·98 442,601.73 434.692.64 1,461,416.oo
other than capital
"oods
Input tax on domestic
2,456,866.23 567.981.45 2,055,666.45 5,168,327-98 10,248,842.11
purchase of services
Input tax on services
rendered by non· 132,400.59 106,305.45 119,555-41 332,239·•5 69o,5oo.6o
residents
Totallnout Tax o;,109,0'i8. 78 2,848,244-0~ 4.0~7.807.';4 7,027,'i'i~-48 10,022,664-7~
Less: Input tax on
purchases of capital
goods exceeding 1'1 1,854.817.05 1-419,983·95 985,150.85 550,317·75 550.317·75
million deferred for
succeedin~r oeriod
Total Allowable
Inout VAT Refund f'1,2'i4,241·'7l P•,428,26o.98 1'~,0<;2,6<;6.69 P6,477,21S·'?l P14,212,19S·I3

As regards the 4'h requisite, in one case it has been stated that
"transitional input tax credit operates to benefit newly VAT -registered
persons, whether or not they previously paid taxes in the acquisition of
their beginning inventory of goods, materials and supplies."'45
Additionally, during that period of transition from non-VAT to VAT
status, the transitional input tax credit serves to alleviate the impact of
the VAT on the taxpayer~

144
Exhibits "P-16· 7", "P-16-8", "P-16-9" and "P-16-1 0", USB (Exhibit "P-22").
145
Fort Bonifacio Development Corporation v. Commissioner of Internal Revenue, et a/., G.R. No.
158885, 02 April 2009.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 31 of 43
X-------------------------------------X

In herein case, since there is no showing that the claimed input

VAT is transitional input tax, petitioner is deemed to have complied
with the 4th requisite.

With respect to the 3rd requisite, petitioner provided supporting

documents to prove that the input VAT claimed during the subject
periods are actually due or paid, such as invoices or ORs from its
suppliers. However, as stated in the ICPA Report, petitioner's input
VAT claim in the amount of 1'2,892, 764.23 must be disallowed for not
being properly substantiated by VAT zero-rated ORs as prescribed '
under Sections no(A)'46 and 113(A) and (B), 147 of the NIRC of 1997, 7
146
SEC. 110. Tax Credits.-
(A) Creditable input Tax. -
(I) Any input tax evidenced by a VAT invoice or official receipt issued in accordance
with Section 113 hereof on the following transactions shall be creditable against the
output tax:
(a) Purchase or importation of goods:
(i) For sale; or
(ii) For conversion into or intended to form part of a finished product
for sale including packaging materials; or
(iii) For use as supplies in the course of business; or
(iv) For use as materials supplied in the sale of service; or
(v) For use in trade or business for which deduction for depreciation or
amortization is allowed under this Code.
(b) Purchase of services on which a value-added tax has actually been paid.
(2) The input tax on domestic purchase or importation of goods or properties by a VAT-
registered person shall be creditable:
(a) To the purchaser upon consummation of sale and on importation of goods or
properties; and
(b) To the importer upon payment of the value-added tax prior to the release of
the goods from the custody of the Bureau of Customs.
Provided, That the input tax on goods purchased or imported in a calendar month for use in trade
or business for which deduction for depreciation is allowed under this Code, shall be spread
evenly over the month of acquisition and the fifty-nine (59) succeeding months if the aggregate
acquisition cost for such goods, excluding the VAT component thereof, exceeds One million pesos
(PI,OOO,OOO): Provided, however, That if the estimated useful life of the capital good is less than
five (5) years, as used for depreciation purposes, then the input VAT shall be spread over such a
shorter period: Provided, finally, That in the case of purchase of services, lease or use of
properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the
compensation, rental, royalty or fee.
(3) A VAT-registered person who is also engaged in transactions not subject to the value-
added tax shall be allowed tax credit as follows:
(a) Total input tax which can be directly attributed to transactions subject to
value-added tax; and
(b) A ratable portion of any input tax which cannot be directly attributed to
either activity.
The term 'input tax' means the value-added tax due from or paid by a VAT-registered person in
the course of his trade or business on importation of goods or local purchase of goods or services,
including lease or use of property, from a VAT-registered person. It shall also include the
transitional input tax determined in accordance with Section I I I of this Code.
The term 'output tax' means the value-added tax due on the sale or lease of taxable goods or
properties or services by any person registered or required to register under Section 236 of this
Code.
147
SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons. -
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 32 of 43
x-------------------------------------x

amended, in relation to Sections 4.110-2'48, 4.110-3'49 , 4.11o-8' 5a and 4-113-

1'5' of Revenue Regulations (RR) No. 16-2oos'5', as amended. The
!CPA's findings' 53 are as follows:
I_
(A) Invoicing Requirements. -A VAT-registered person shall issue:
(I) A VAT invoice for every sale, barter or exchange of goods or properties; and
(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or
exchange of services.

(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:
(I) 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 known as a separate item in the invoice or receipt;
(b) If the sale is exempt from value-added tax, the term "VAT-exempt sale" shall be
written or printed prominently on the invoice or receipt;
(c) If the sale is subject to zero percent (0%) value-added tax, the term "zero-rated sale"
shall be written or printed prominently on the invoice or receipt.
(d) If the sale involved goods, properties or services some of which are subject to and
some of which are VAT zero-rated or Vat exempt, the invoice or receipt shall clearly
indicate the break-down of the sale price between its taxable, exempt and zero-rated
components, and the calculation of the value-added tax on each portion of the sale shall
be known on the invoice or receipt: Provided, That the seller may issue separate invoices
or receipts for the taxable, exempt, and zero-rated components of the sale.
(3) The date of transaction, quantity, unit cost and description of the goods or properties or nature
of the service; and
(4) In the case of sales in the amount of One thousand pesos (PI ,000) or more where the sale or
transfer is made to a VAT-registered person, the name, business style, if any, address and
Taxpayer Identification Number (TIN) of the purchaser, customer or client.
148
SEC. 4.110-2. Persons Who Can Avail of the Input Tax Credit. - The input tax credit on
importation of goods or local purchases of goods, properties or services by a VAT-registered
person shall be creditable:
(a) To the importer upon payment of VAT prior to the release of goods from customs custody;
(b) To the purchaser of the domestic goods or properties upon consummation of the sale; or
(c) To the purchaser of services or the lessee or licensee upon payment of the compensation,
rental, royalty or fee.
149
SEC. 4.110-3. Claim for Input Tax on Depreciable Goods. -Where a VAT-registered person
purchases or imports capital goods, which are depreciable assets for income tax purposes, the
aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million
pesos (PI ,000,000.00), regardless of the acquisition cost of each capital good, shall be claimed as
credit against output tax in the following manner:

(a) If the estimated useful life of a capital good is five (5) years or more -The input tax shall be
spread evenly over a period of sixty (60) months and the claim for input tax credit will commence
in the calendar month when the capital good is acquired. The total input taxes on purchases or
importations of this type of capital goods shall be divided by 60 and the quotient will be the
amount to be claimed monthly.

(b) If the estimated useful life of a capital good is less than five (5) years- The input tax shall be
spread evenly on a monthly basis by dividing the input tax by the actual number of months
comprising the estimated useful life of the capital good. The claim for input tax credit shall
commence in the calendar month that the capital goods were acquired.

Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable
capital goods purchased or imported during any calendar month does not exceed One million
pesos (PI ,000,000.00), the total input taxes will be allowable as credit against output tax in the
month of acquisition; Provided, however, that the total amount of input taxes (input tax on
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 33 of 43
X-------------------------------------X

depreciable capital goods plus other allowable input taxes) allowed to be claimed against the
output tax in the quarterly VAT Returns shall be subject to the limitation prescribed under Sec.
4.110-7 ofthese Regulations.

The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price
agreed upon for one or more assets acquired and not on the payments actually made during the
calendar month. Thus, an asset acquired in instalment for an acquisition cost of more than
PI,OOO,OOO.OO will be subject to the amortization of input tax despite the fact that the monthly
payments/installments may not exceed PI,OOO,OOO.OO.
150
SEC. 4.110-8. Substantiation of Input Tax Credits.-
(a) Input taxes for the importation of goods or the domestic purchase of goods, properties or
services is made in the course of trade or business, whether such input taxes shall be credited
against zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT, must
be substantiated and supported by the following documents, and must be reported in the
information returns required to be submitted to the Bureau:
(I) For the importation of goods - import entry or other equivalent document showing actual
payment of VAT on the imported goods.
(2) For the domestic purchase of goods and properties- invoice showing the information required
under Sees. 113 and 237 of the Tax Code.
(3) For the purchase of real property - public instrument i.e., deed of absolute sale, deed of
conditional sale, contract/agreement to sell, etc., together with VAT invoice issued by the seller.
(4) For the purchase of services- official receipt showing the information required under Sees.
I 13 and 23 7 of the Tax Code.

A cash register machine tape issued to a registered buyer shall constitute valid proof of
substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of
the Tax Code.
151
SEC. 4.113-1. Invoicing Requirements. -
(A) AVA T-registered person shall issue: -
(I) A VAT invoice for every sale, barter or exchange of goods or properties; and
(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or
exchange of services.

Only VAT-registered persons are required to print their TIN followed by the word '"VAT" in their
invoice or official receipts. Said documents shall be considered as a "VAT Invoice" or VAT
official receipt. All purchases covered by invoices/receipts other than VAT Invoice/VAT Official
Receipt shall not give rise to any input tax.

VAT invoice /official receipt shall be prepared at least in duplicate, the original to be given to the
buyer and the duplicate to be retained by the seller as part of his accounting records.

(B) Information contained in VAT invoice or VAT official receipt. -The following information
shall be indicated in VAT invoice or VAT official receipt:
(I) A statement that the seller is a VAT-registered person, followed by his 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 VAT; Provided, That:
(a) The amount of tax shall be shown as a separate item in the invoice or receipt;
(b) If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or
printed prominently on the invoice or receipt;
(c) If the sale is subject to zero percent (0%) VAT, the term "zero-rated sale" shall be
written or printed prominently on the invoice or receipt;
(d) If the sale involves goods, properties or services some of which are subject to and
some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly
indicate the break-down of the sale price between its taxable, exempt and zero-rated
components, and the calculation of the VAT on each portion of the sale shall be shown
on the invoice or receipt. The seller has the option to issue separate invoices or receipts
for the taxable, exempt, and zero-rated components of the sale.
(3) In the case of sales in the amount of one thousand pesos (PI ,000.00) or more where the sale or ~
transfer is made to a VAT-registered person, the name, business style, if any, address and T I N /
 CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 34 of 43
X-------------------------------------X

Nature Reference Amount

1. Input VAT on domestic purchases of goods and services AnnexQ of I'I6, 586.48
supported by VAT invoices and ORs, respectively, dated the !CPA
within the period July I, 2016 to June 30, 2017, but with Report
incorrect petitioner's registered name
2. Input VAT on domestic purchases of goods and services Annex Rof u,8I5.44
supported by VAT invoices and ORs, respectively, dated the !CPA
within the period July I, 2016 to June 30, 2017, but with Report
incomplete petitioner's address (i.e., without floor and
building number)
3· Input VAT on domestic purchases of goods supported Annex S of I4,450-56
by VAT invoices dated within the period July I, 20I6 to the !CPA
June 30, 2017, but with incorrect petitioner's TIN Report
4· Input VAT on domestic purchases of goods supported AnnexTof I,783.I3
by VAT invoices dated within the period July I, 2016 to the !CPA
June 30, 2017, but petitioner's TIN and/or address not Report
indicated
5· Input VAT on domestic purchases of goods and services Annex U of 3·048·75
supported by VAT invoices and ORs dated within the the !CPA
period July I, 2016 to June 30, 20I7, with countersigned Report
alterations but the countersignature is not the same
with that of the signatory appearing on the invoice/OR
6. Input VAT on domestic purchase of goods supported by AnnexVof 6,I92.60
VAT invoice, but with no date indicated the !CPA
Report
7· Input VAT on domestic purchases of goods and services AnnexW 97.991.78
supported by VAT invoices and ORs, respectively, dated of the !CPA
within the period July I, 2016 to June 30, 2017, but the Report
amount of VAT is not separately indicated
8. Input VAT on domestic purchases of services supported Annex X of 79.776·39
by VAT ORs dated within the period July I, 2016 to June the !CPA
30, 2017, with countersigned insertions/alterations Report
supported by certification authorizing representative of
supplier to make adjustments on the invoices/ORs and
photocopies of the company/government IDs of the
approving officer and the authorized representative,
but the certification is not signed by the authorized
representative and/or the approving officer
9· Input VATon domestic purchases of goods and services AnnexYof 113,I69·79
supported by VAT invoices and ORs, respectively, dated the !CPA
within the period July I, 2016 to June 30, 2017,with Report
countersigned insertions/alterations supported by
certification authorizing representative of supplier to
make adjustments on the invoices/ORs and
photocopies of the IDs of the approving officer and the
authorized representative, but the IDs indicate a
different company
10. Input VAT on domestic purchases of goods and services AnnexZ of 33,204.2~ I

the purchaser, customer or client, shall be indicated in addition to the information required in (I)
and (2) of this Section.
152
Consolidated Value-Added Tax Regulations of2005.
153
Exhibit "P-16", Supra at note 43, pp. 17-20.
 CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 35 of 43
X-------------------------------------X

Nature Reference Amount

supported by VAT invoices and ORs, respectively, dated the !CPA
within the period July I, 2016 to June 30, 20I7, issued in Report
the shortened name petitioner (i.e., Atlassian Phils.
Inc./ Atlassian Phil. Inc), but with issues on the other
required information (e.g., TIN not indicated,
incomplete address, incorrect TIN, VAT not separately
indicated, incorrect VAT amount)
II. Input VAT on domestic purchases of goods and services AnnexAA 22,864·36
supported by VAT invoices and ORs, respectively, dated of the !CPA
within the period July I, 2016 to June 30, 20I7, issued in Report
the shortened name of petitioner (i.e., Atlassian Phils.
Inc./ Atlassian Phil. Inc), but with alterations not
countersigned or the countersignature is not the same
with that of the signatory appearing on the invoice/OR
I2. Input VAT on domestic purchases of goods supported AnnexAB 335·27
by VAT invoices with no BIR accreditation/permit of the !CPA
number Report
I3. Input VAT on domestic purchases of goods and services AnnexAC 174.341.45
supported by ONLY by certified true copy VAT invoices of the !CPA
and VAT ORs, respectively, dated within the period July Report
I, 2016 to June 30, 20I7, without proof that the certifier
named is the actual and authorized custodian of the
said documents
I4. Input VAT on domestic purchase of service supported Annex AD 698-40
by VAT OR dated within the period July I, 20I6 to June of the !CPA
30, 2017, but not in petitioner's name Report
I5. Amortization of input VAT on purchase of services AnnexAE I74.I94-20
from nonresident which should have been claimed at of the !CPA
the time the VAT was remitted to the BIR as supported Report
by the filed Monthly Remittance Return of Value-
Added Tax and Other Percentage Taxes Withheld (BIR
Form No. I6oo) and related proof of remittance to the
BIR
I6. Amortization of input VAT on prior FYs' domestic AnnexAF 1,422,150.80
purchases of services related to construction-in- of the !CPA
progress (CIP) which should have been claimed in the Report
periods when the payments were made, as supported by
the related VAT ORs
17· Input VAT on domestic purchases of goods and services AnnexAG I4,I33·59
supported by VAT invoices and ORs, respectively, but of the !CPA
dated outside FY 2017 Report
I8. Input VAT on domestic purchases of goods and services AnnexAH 438.171.40
not supported by VAT invoices and ORs, respectively of the !CPA
Report
I9. Input VAT on duplicate domestic purchase of goods AnnexA! 271.28
supported by VAT invoice dated within the period July of the !CPA
I, 2oi6 to June 30, 20I7 effectively claimed twice (the Report
duplicate is disallowed)
20. Input VAT on domestic purchases of goods and services AnnexA} 259.747·54
where supporting documents were not available for of the !CPA
verification Report
21. Input VAT on domestic purchases of goods and services Annexes G, -jl
3,8II. 79
 CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 36 of 43
X-------------------------------------X

Nature Reference Amount

supported by VAT invoices or VAT ORs, respectively, J, K, M, and
dated within the period July 1, 2016 to June 30, 2017, but N of the
the input VAT claimed is higher than the VAT per !CPA
supporting document (overclaimed input VAT is Report
disallowed)
22. Disallowed portions of the input VAT on domestic Annex P of 4,024-94
purchases of goods supported by VAT invoices dated the !CPA
within the period July 1, 2016 to June 30, 2017, issued in Report
the shortened name of the Company (i.e., Atlassian
Phils. Inc./ Atlassian Phil. Inc.) where the input VAT
claimed is higher than the recomputed VAT on the
VATable sale per invoice (overclaimed input VAT is
disallowed)
Total Pz,89z,764.23

Upon further examination of the ICPA Report and the other

submitted documentary evidence, the Court finds that an additional
amount of P326,o81.03 shall likewise be disallowed for failure to meet
the substantiation requirements, as listed below:

Exhibit Supplier Amount Reason

a. Input Taxes on Services rendered by Nonresidents
NORTHLAND CONTROL WVAT Return was
''P-16-42" ~'55, 725.33
SYSTEMS INC filed and remitted
page nos.
outside the period of
34-36 NTT AUSTRALIA PTY LTD 173,927.18
claim
Subtotal 1"229,652-51
b. Amortization of deferred input VAT on purchases of capital goods exceeding P1 Million
"P-16-40" VAT invoices do not
page nos. RAINNOVATE SOLUTIONS, INC. ~'96,428.52 contain petitioner's
583-584 TIN
Total P3z6,o81.03

Anent the input taxes on services rendered by non-residents, it

must be noted that Sections 4.no-8(a) and (c) and 4·114-2(b) of RR No.
16-2005154 , as amended, provide:

SEC. 4.uo-8. Substantiation of Input Tax Credits. -

(a) Input taxes for the importation of goods or the domestic

purchase of goods, properties or services is made in the course of '
trade or business, whether such input taxes shall be credited agains~

'" Supra at note !52.

CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 37 of 43
x-------------------------------------x

zero-rated sale, non-zero-rated sales, or subjected to the 5% Final

Withholding VAT, must be substantiated and supported by the
following documents, and must be reported in the information
returns required to be submitted to the Bureau:

(d) Input tax from payments made to non-residents (such as

for services, rentals and royalties) shall be supported by a copy of
the Monthly Remittance Return of Value Added Tax Withheld
(BIR Form t6oo) filed by the resident payor in behalf of the
non-resident evidencing remittance of VAT due which was
withheld by the payor.

SEC. 4·n4-2. Withholding of VAT on Government Money

Payments and Payments to Non-Residents. -

(b) The government or any of its political subdivisions,

instrumentalities or agencies, including GOCCs, as well as private
corporations, individuals, estates and trusts, whether large or non-
large taxpayers, shall withhold twelve percent (12%) VAT, starting
February 1, 2oo6, with respect to the following payments:

(1) Lease or use of properties or property rights owned

by non-residents;

(2) Other services rendered in the Philippines by

non-residents.

In remitting VAT withheld, the withholding agent shall use

BIR Form No. t6oo - Remittance Return of VAT and Other
Percentage Taxes Withheld.

VAT withheld and paid for the non-resident recipient

(remitted using BIR Form No. t6oo), which VAT is passed on to
the resident withholding agent by the non-resident recipient of the
income, may be claimed as input tax by said VAT-registered
withholding agent upon filing his own VAT Return, subject to
the rule on allocation of input tax among taxable sales, zero-rated
sales and exempt sales. The duly filed BIR Form No. t6oo is the
proof or docum.entary substantiation for the claimed input tax
~~input VAT.'/

'" Emphasis and underscoring supplied.

CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 38 of 43
X-------------------------------------X

As can be gleaned from the afore-quoted provisions, the

withholding VAT (WVAT) may be claimed as input tax credit in the
month such WVAT is withheld and remitted to the BIR supported
by BIR Form No. 16oo. However, in the instant case, the June 2017
WVAT Return• 56 was remitted to the BIRon n July 2017157, which is
outside the period of claim of 01 July 2016 to 30 June 2017.

Thus, out of petitioner's claimed input VAT of P14,212,395·13 for

FY ending 30 June 2017, only the amount of P10,993.549·87 represents
the substantiated input VAT, computed as follows:

Claimed Input VAT 1"14,212.395·13

Less: Disallowances
Per !CPA 1"2,892, 764.23
Per Court's Verification 326,o81.o3 3,218,845-26
Substantiated/Valid In out VAT P10,993o549·87

Consequently, only the substantiated unutilized input VAT of

Pw,993·549-87 can be attributed to the total zero-rated sales in the
amount ofP2o8,oo9,014.92, and only the input VAT ofP8,o64,868.19 is
attributable to the valid zero-rated sales of PIS2,601,562.11, as
determined below:

FYending
30 June2017
Total Zero-Rated Sales (A] 1"2o8,oo9,014-92
Valid Zero-Rated Sales [B] 152,601,562.11
Percentage of Valid Zero-Rated Sales [C=BIA] 73·36%
Substantiated/Valid Input VAT [D] 10,993.549·87
Excess Input VAT attributable to
PS,o64,868.18
Valid Zero-Rated Sales [D x C]

Due to the BIR's previous partial approval of petitioner's claim

up to the amount ofP2,836,316.77: 58 the excess input VAT attributable
to valid zero-rated sales of P8,o64,868.18 should be further reduced by
the said amount. Hence, petitioner is entitled to a lesser input VAT
claim of Ps,228,s51.41 after taking into consideration the BIR's partial
grant of its claim, as shown below; '

156
Exhibit "P-16-42", USB (Exhibit "P-22"), pp. 34-36.
157
!d., p. 36.
158
Exhibit "P-16-2", USB (Exhibit "P-22).
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 39 of 43
x-------------------------------------x

Excess Input VAT attributable to Valid Zero-Rated Sales P8,o64,868.18

Less: Input VAT partially granted by BIR 2,8j6,j16.77
Input VAT for Refund P5,228>551.41

Furthermore, the claimed input VAT of 1"14,212.395·13 was

carried-over by petitioner up to its original 4th quarter VAT return for
FY ending 30 June 2018.'59 Nevertheless, the same remained unutilized
and was eventually deducted as "VAT Refund/TCC Claimed" in its
amended 4th quarter VAT return for FY ending 30 June 2018'60 ; thus,
preventing the carry-over or application of the claimed input VAT in
the next taxable periods.

Verily, petitioner likewise complied with the 5th requisite stating

that the input VAT have not been applied against output VAT during
and in the succeeding quarters.

Lastly, considering that petitioner is only engaged in zero-rated

sales and it has no taxable or exempt sales, petitioner is likewise
deemed to have complied with the 8th requisite.

In sum, petitioner has sufficiently proven its entitlement to the

refund in the additional amount of Ps,228,sS1.41, representing the
unutilized input VAT attributable to its zero-rated sales for the four (4)
quarters ofFY ending 30 June 2017.

Having disposed of the first two (2) issues, the Court shall now
proceed to tackle the third issue raised by the parties: whether or not
respondent, in partially denying a claim for refund, is required by law
and the Constitution to provide sufficient explanation and specific
legal bases of the denial, in compliance with the due process
requirement of the Constitution.

Pertinent to the resolution of the said issue is Section n2(C) of

the NIRC of 1997, as amended by TRAIN, which reads as follows/

159
Exhibit "P-16-46", id., pp. 7-12.
160
ld., pp. 1-6.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 40 of 43
X-------------------------------------X

Sec. 112. Refunds or Tax Credits of Input Tax.-

(C) Period within which Refund of Input Taxes shall be

Made. - In proper cases, the Commissioner shall grant a refund for
creditable input taxes within ninety (9o) days from the date of
submission of the official receipts or invoices and other documents
in support of the application filed in accordance with Subsections
(A) and (B) hereof: Provided, That should the Commissioner find
that the grant of refund is not proper, the Commissioner must
6
state in writing the legal and factual basis for the denial! '

As introduced by TRAIN, respondent is now statutorily required

to state in writing the legal and factual basis of the denial of the claim
for refund. However, while We agree with petitioner that respondent is
required by law to state in writing the legal and factual basis of the
denial, We herein find that respondent substantially complied
therewith and did not violate petitioner's right to due process.

In Commissioner of Internal Revenue v. Fitness by Design, Inc. 162 ,

the Supreme Court citing Samar-! Electric Cooperative v. Commissioner
of Internal Revenue'63 , ruled that the mandate of giving the taxpayer a
notice of the facts and laws on which the assessments are based should
not be mechanically applied, to wit:

However, the mandate of giving the taxpayer a notice of the

facts and laws on which the assessments are based should not be
mechanically applied. To emphasize, the purpose of this requirement
is to sufficiently inform the taxpayer of the bases for the assessment
to enable him or her to make an intelligent protest.

In Samar-/ Electric Cooperative v. Commissioner of Internal

Revenue, substantial compliance with Section 228 of the National
Internal Revenue Code is allowed, provided that the taxpayer would
be later apprised in writing of the factual and legal bases of the

I
assessment to enable him or her to prepare for an effective
protest. Thus:

161
Emphasis supplied.
162
G.R. No. 215957, 09 November 20 16; Citations omitted, italics in the original text and emphasis
supplied.
163
G.R. No. 193100,10 December2014.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 41 of 43
X-------------------------------------X

Although the [Final Assessment Notice] and

demand letter issued to petitioner were not
accompanied by a written explanation of the legal and
factual bases of the deficiency taxes assessed against
the petitioner, the records showed that respondent in
its letter dated April 10, 2003 responded to petitioner's
October 14, 2002 letter-protest, explaining at length
the factual and legal bases of the deficiency tax
assessments and denying the protest.

Considering the foregoing exchange of

correspondence and documents between the parties,
we find that the requirement of Section 228 was
substantially complied with. Respondent had fully
informed petitioner in writing of the factual and legal
bases of the deficiency taxes assessment, which
enabled the latter to file an "effective" protest,
much unlike the taxpayer's situation in Enron.
Petitioner's right to due process was thus not
violated.

While the aforementioned cases involve assessment and not a

claim for refund, the Court rules that the same are equally applicable
herein considering that the provisions of Section 228 of the NIRC of
1997, as amended, is similarly worded as the present Section n2(C) of
the same law in that both provisions require respondent to state in
writing the legal and factual basis of his action.

Applying above jurisprudence in herein case, the Court holds

that since petitioner was able to intelligently file this instant Petition
for Review and this Court was even convinced to partially grant the
same, respondent is deemed to have substantially complied with the
aforementioned requirement.

On the other hand, anent the supposed violation of the

Constitution, We find the same unmeritorious.

Section 14, Article Vlll of the 1987 Constitution provides/

CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 42 of 43
X-------------------------------------X

SECTION 14. No decision shall be rendered by any court

without expressing therein clearly and distinctly the facts and the
law on which it is based.

No petition for review or motion for reconsideration of a

decision of the court shall be refused due course or denied without
stating the legal basis therefor.

However, in Mangacop Mangca v. The Commission on Elections,

et a/.'64 , the Supreme Court held that the said constitutional
requirement (then Section 9, Article X of the then 1973 Constitution)
only applies to courts of justice, to wit:

Petitioner's contention that the March 31, 1981, resolution is

null and void for being violative of Sec. 9, Art. X of the Constitution
and Sec 26, Rule XV of COMELEC Resolution No. 1450 is untenable.
Firstly, both cited provisions are inapplicable to the case at bar since
the constitutional requirement applies only to courts of justice which
the COMELEC is not (Lucman vs. Dimaporo, L-31558, May 29, 1970,
33 SCRA 387} ...

Neither respondent nor the BIR is a court of justice hence,

petitioner was not denied due process.

WHEREFORE, premises considered, the present Petition for

Review filed by petitioner Atlassian Philippines, Inc. on 18 January 2019
is hereby PARTIALLY GRANTED. Accordingly, respondent
Commissioner of Internal Revenue, is hereby ORDERED TO REFUND
in favor of petitioner the reduced amount of Ps,228,551.41, representing
unutilized input VAT attributable to its zero-rated sales for the first,
second, third and fourth quarters of fiscal year ending 30 June 2017/

164
G.R. No. L-58309-1 0, 25 February 1982.
CTA Case No. 10011
Atlassian Philippines, Inc. v. CIR
DECISION
Page 43 of 43
X-------------------------------------X

SO ORDERED.

---
JEAN MARIE J:J". Dl;.\.\...V LLENA

I CONCUR:

~~C.~..t,?Q_
}tJANITO C. CASTANEDAfJR.
Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached

m consultation before the case was assigned to the writer of the
opinion of the Court's Division.

~ d(..u.c-~ c. ~a6., 9.-.

f(JANITO C. CASTANEDA, ~R.
Associate Justice
2nd Division Chairperson

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, and the

Division Chairperson's Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation before
the case was assigned to the writer of the opinion of the Court's
Division.

Presiding Justice