FACTS:

Accenture, Inc. is a VAT-registered corporation engaged in providing management consulting, business strategies development, and selling and/or licensing of software. It filed its VAT returns showing excess or unutilized input VAT credits. Accenture then filed a claim for refund or issuance of a Tax Credit Certificate (TCC) with the Department of Finance (DoF), which was not acted upon. Accenture filed a Petition for Review with the Court of Tax Appeals (CTA), seeking the issuance of a TCC. The Commissioner of Internal Revenue (CIR) argued that Accenture's services were not zero-rated transactions and that it failed to fully substantiate its claim. The CTA denied Accenture's petition, relying on a previous case. Accenture appealed through a Motion for Reconsideration (MR), which was denied. It then appealed to the CTA En Banc, arguing that there was no requirement that the services must be rendered to foreign clients doing business outside the Philippines before R.A. No. 9337 was amended. The CTA En Banc affirmed the denial of Accenture's claim. Accenture filed a Petition for Review with the Supreme Court, raising several issues including the requirement that the recipients of its services must be "doing business outside the Philippines" for the transactions to be zero-rated and whether it is entitled to a refund of the claimed input VAT. Accenture also argued that the amendment introduced by R.A. No. 9337 is unconstitutional and should not be applied to its transactions.

ISSUES:

1. Whether services, to be zero-rated for value-added tax purposes, should be rendered to clients doing business outside the Philippines.

2. Whether the ruling in the case of Burmeister can be applied retroactively to the petitioner's case.

3. Whether the interpretation in Burmeister that the recipient of the service must be doing business outside the Philippines to qualify for zero-rating under Section 108 of the 1997 Tax Code applies to Section 102(b) of the 1977 Tax Code.

4. Whether the ruling in Amex conflicts with the interpretation in Burmeister.

5. Whether the payment of foreign currency is relevant in determining the tax liability under Section 102(a) of the Tax Code.

6. Whether the services rendered by Accenture fall under Section 102(b)(2) of the Tax Code, entitling them to zero-rating.

7. Whether Accenture has established that the recipients of its services are engaged in business outside the Philippines.

8. Whether Accenture, Inc. is entitled to a refund of excess or unutilized input VAT credits.

9. Whether Accenture, Inc. has established that its clients were doing business outside the Philippines.

RULING:

1. Yes, the recipient of the service must be doing business outside the Philippines for the transaction to qualify for zero-rating under Section 108(B) of the Tax Code. The Court ruled that Section 108(B) of the 1997 Tax Code, which requires that the recipient of services must be doing business outside the Philippines, must be read in conjunction with Section 108(B)(1). The Court upheld the position of the CTA en banc that the interpretation of Section 102(b) of the 1977 Tax Code, which stated the same requirement, holds true for Section 108(B).

2. Yes, the pronouncements made in the case of Burmeister can be applied to the petitioner's case without violating the rule against retroactive application. Even though the petitioner's petition was filed before Burmeister was promulgated, the Court's interpretation of the law is part of that law as of the date of its enactment.

3. Yes, the interpretation in Burmeister that the recipient of the service must be doing business outside the Philippines to qualify for zero-rating under Section 108 of the 1997 Tax Code applies to Section 102(b) of the 1977 Tax Code. The interpretation of a law by the Court constitutes part of that law from the date it was originally passed. Furthermore, Section 108 of the 1997 Tax Code is a mere reproduction of Section 102(b) of the 1977 Tax Code.

4. No, the ruling in Amex does not conflict with the interpretation in Burmeister. The place of performance and consumption of the service is immaterial for zero-rating, but the place where the recipient conducts its business is a relevant factor. The logical interpretation of Section 102(b)(2) of the 1977 Tax Code is that the recipient of the service should be doing business outside the Philippines to qualify for zero-rating.

5. The payment of foreign currency is irrelevant in determining the tax liability under Section 102(a) of the Tax Code. The regular VAT under Section 102(a) applies regardless of the currency used for payment. It cannot be avoided by stipulating payment in foreign currency inwardly remitted by the recipient of services. A tax is a mandatory exaction, not a voluntary contribution.

6. The services rendered by Accenture do not fall under Section 102(b)(2) of the Tax Code. When both the provider and recipient of services are doing business in the Philippines, the transaction is subject to the regular VAT under Section 102(a), unless it falls under other provisions of Section 102(b).

7. Accenture has failed to establish that the recipients of its services are engaged in business outside the Philippines. The mere fact that the clients are foreign does not automatically mean that they are doing business outside the Philippines. To be entitled to zero-rating under Section 108(B)(2) of the Tax Code, it must be specifically proven that the recipient is a nonresident foreign corporation.

8. The Court denied Accenture, Inc.'s petition for refund of excess or unutilized input VAT credits. The Court affirmed the decision of the Court of Tax Appeals (CTA) en banc dismissing the petition. Accenture, Inc. failed to discharge its burden of proof to establish that its clients were doing business outside the Philippines. The evidence presented by Accenture, Inc., such as official receipts, billing statements, and bank statements, only substantiated sales and payment receipts, but did not prove that the clients were engaged in business outside the Philippines.

PRINCIPLES:

• The recipient of the service must be doing business outside the Philippines for the transaction to qualify for zero-rating under Section 108(B) of the Tax Code.

• The interpretation of Section 102(b) of the 1977 Tax Code, which states the same requirement, holds true for Section 108(B) of the 1997 Tax Code.

• The Court's interpretation of the law is part of that law as of the date of its enactment.

• The interpretation of a law by the Court constitutes part of that law from the date it was originally passed.

• The place of performance and consumption of a service is immaterial for zero-rating, but the place where the recipient conducts its business is a relevant factor.

• The logical interpretation of Section 102(b)(2) of the 1977 Tax Code is that the recipient of the service should be doing business outside the Philippines to qualify for zero-rating.

• The payment of foreign currency is irrelevant in determining the tax liability under Section 102(a) of the Tax Code.

• When both the provider and recipient of services are doing business in the Philippines, the transaction is subject to the regular VAT under Section 102(a).

• To be entitled to zero-rating under Section 108(B)(2) of the Tax Code, the recipient must be specifically proven to be a nonresident foreign corporation.

• The term "doing business" or "engaging in business" has no specific criterion and must be judged based on the peculiar circumstances of each case. It implies a continuity of commercial dealings and arrangements, and the performance of acts or works for the purpose and object of the business organization.

• The burden of proof is on the taxpayer claiming a tax credit or refund to establish the factual basis of the claim.

• Tax refunds, like tax exemptions, are construed strictly against the taxpayer.

• To be considered 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.