The Court of Tax Appeals (CTA) has denied the petition of Air Drilling Associates Pte. Ltd. which sought a tax refund of P1.8 million from the Bureau of Internal Revenue (BIR).

Air Drilling sought a tax refund or tax credit for P1,805,946.91 for its zero-rated sales covering the period July 1 to Dec. 31, 2019.

The BIR denied the refund claim for lack of legal and factual basis in a letter dated Dec. 14, 2021. Air Drilling filed a petition for review before the CTA on Feb. 3, 2022.

Despite its arguments that it rendered services subject to zero-rated value-added tax (VAT) and substantiated the claim with relevant supporting documents, the CTA said the firm failed to prove that it was engaged in zero-rated sales during the 3rd and 4th quarter of 2019.

The firm said it rendered aerated drilling services to Renewable Energy (RE) developers, namely Energy Development Corporation (EDC) and Philippine Geothermal Production Company (PGPC), where it accumulated unutilized input VAT attributable to its zero-rated sales amounting to P1,805,946.91.

But the CTA said that Air Drilling’s failure to establish PGPC's Board of Investments (BOI) registration as an RE developer makes it unable to validly claim entitlement for VAT zero-rating. The same goes for EDC projects, it also said.

The CTA said: "A scrutiny of EDC projects shows that not all of the petitioner's service transactions with EDC qualify for VAT zero-rating. Specifically, petitioner failed to prove that all projects were duly registered with the BOI."

It pointed out that the pieces of evidence presented by a taxpayer for exemption "must be duly proven." "An applicant for a claim for refund or tax credit must not only prove entitlement to the claim but also compliance with all the documentary and evidentiary requirements," it said.

Failing to do so, Air Drilling’s petition must be denied.

The 26-page decision was written by Associate Justice Lanee S. Cui-David with the concurrence of Associate Justices Roman G. Del Rosario and Jean Marie A. Bacorro-Villena.