COMMISSIONER OF INTERNAL REVENUE v. SAN ROQUE POWER CORPORATION

Re public of the Philippines COURT OF TAX APPEALS Quezon City ENBANC COMMISSIONER OF INTERNAL REVENUE, Petition er, CTA EB CASE NO. 523 (CTA CASE NO. 7173) -versus- Present: ACOSTA, P.J., CASTANEDA, JR . BAUTISTA UY CASANOVA PALANCA-ENRIQUEZ FASON-VICTORINO MINDARO-GRULLA SAN ROQUE POWER COTANGCO-MANALASTAS , JJ. CORPORATION, Respondent. Promulgated : ~ APR 1 5 2010~ 6 x------------------------------------------------------------------------------Jf-~~~~-----x DECISION MINDARO -GRULLA, J.: Submitted for decision is a Petition For Review 1 for the Court en bane under Rule 8 of the 2005 Revise d Rul es o f th e Court o f Tax Appe al s, as amended , of the Decision 2 dated April 23, 2009 , rendered by the former Second Division of this Court in C.T.A Case No . 7173, and its Reso lution 3 da ted August 6, 2009. 1 Rol lo, pp. 7-58 2 Ibid. pp .2 1-52, Penne d by Assoc iat e Jus ti ce .J uanito C. Cas tane d a ,Jr. , co nc urred in b y Ass o cciate .Justi ce Erlinda P. Uy and Assoc ia te Justice Olga f> al o nca-E nriquez 3 Rollo , pp . 53-58 (

Commissioner of Internal Revenue vs. Son Roque Power Corporation Page 2 of 15 CT A EB Case No. 523 DECISION The petitioner Commissioner of Internal Revenue (CIR) seeks reversal of both the aforesaid Decision and Resolution , the dispositive portions of which, respectively read as follows: Decision dated April 23, 2009: "WHEREFORE, premises considered, the instant PETITION FOR REVIEW is hereby PARTIALLY GRANTED . Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND or TO ISSUE TAX CREDIT CERTIFICATE in the amount of ONE HUNDRED FOURTEEN MILLION ONE HUNDRED NINETY ONE THOUSAND ONE HUNDRED SIXTEEN PESOS AND 15/100 (P114, 191 , 116. 15) in favor of petitioner, representing unutilized excess input taxes attributable to capital goods purchases and effectively zero-rated sales to NPC for the period covering January 1, 2003 to December 31, 2003. SO ORDERED." (Italics Supplied) Resolution dated August 6, 2009: "WHEREFORE, premises considered, respondent's Motion for Partial Reconsideration is hereby DENIED for lack of merit. SO ORDERED." (Italics Supplied) The facts culled from the Decision of thi s Court's former Second Division, are as follows: San Roque Power Corporation 4 is a domestic corporation duly organized and existing under and by virtue of the laws of the Philippines, with principal office at Barangay San Roque, San Manuel, Pangasinan. It was incorporated on October 14, 1997, whose primary purpose is "to design, construct, erect, assemble, own, commission, and operate power-generating plants and related facilities pursuant to and under contract with the Government of the Republic of the Philippines, or any subdivision, instrumentality or agency thereof, or any government-owned or controlled corporation, or other entity engaged in the development, supply, or distribution of energy." 4 Son Roque Power Corporation and Commissioner of Internal Revenue (CIR) were the petitioner and respondent, respec tively, in the Petition for Review before the former Second Division of this Court. In this Petition for Review before this Court En bone, CIR is the petitioner while Son Roque Corporation is the respondent. Thus, we edited and refer to the Commissioner of Internal Revenue os the CIR and Son Roque Power Corporation for Son Roque Power Corporation in the quoted portions of the Decision of this Court's former Second Division.{.

Commissioner of Internal Revenue vs. San Roque Power Corporation Page 3 of 15 CT A EB Case No. 523 DECISION On the other hand, Commissioner of Internal Revenue (CIR 5)wos duly appointed and empowered to perform the duties of his office, including, among others, the duty to act upon and approve claims for refund or tax credit as provided by low. He holds office at the BIR Notional Office Building, Dilimon, Quezon City. Son Roque Power Corporation is duly registered as a VAT taxpayer with the BIR and was issued Certificate of Registration No. OCN 98-006-007394 and TIN No. 005-017-50 I. It is likewise registered with the Boord of Investments (BOI) on a preferred pioneer status, to engage in the design, construction, erection, assembly, as well as to own, commission, and operate electric power-generating plants and related activities; for which it was issued Certificate of Registration No. 97-356 on February II, 1998. On October II, 1997, Son Roque Power Corporation entered into a Power Purchase Agreement (PPA) with the Notional Power Corporation (NPC) to develop the hydropotentiol of the Lower Agno River and generate additional power and energy for the Luzon Power Grid, by building the Son Roque Multi-Purpose Project; on indivisible project consisting of the power station, the dam and spillway, and other related facilities, located in Son Manuel, Pongosinon. The PPA provides, among others, that Son Roque Power Corporation shall be responsible for the design, construction, installation, completion, testing and commissioning of the Power Station and shall operate and maintain the some, subject to NPC instructions. During the co-operation of twenty-five (25) years commencing from the completion dote of the Power Station, NPC will toke and pay for all electricity available from the Power Station. In other words, the electricity to be generated by the Power Station will be sold to and purchased by NPC in its entirety. Relative to the construction and development of the Son Roque Multi-purpose Project, petitioner allegedly incurred excess input VAT in the amount of Pl42,256,438.22, covering the period from January I, 2003 to December 31, 2003. During the some period, Son Roque Power Corporation purportedly commenced commercial operations and generated soles of electricity to NPC in the amount of P4,870,723,38l.OO. Son Roque Power Corporation believes that its soles of electricity to NPC qualify for VAT zero-rating under Section I 08 (B) (3) of the Notional Internal Revenue Code (NIRC) of 1997 in relation to Section 13 of Republic Act {RAJ No. 6395, otherwise known as the NPC Charter. For the four quarters of 2003, Son Roque Power Corporation filed with the BIR its Quarterly VAT Returns, including amendments thereto, reflecting the alleged excess input VAT in the amount of P 142,256.438.22 and zero-rated soles of electricity in the amount of P4,870, 723,381.02 as follows: 5 1bid. (

Commissioner of Internal Revenue vs. Son Roque Power Corporation Page 4 of 15 CT A EB Case No. 523 DECISION Exh 2003 Zero-rated Output Input VAT Sales/Receipts VAT Domestic Importation Excess Purchases of Goods F 1st Qtr P83,676.97 p 18,856, 186.54 P365,795.00 p 19, 138,304.57 L 2nd Qtr p 1,081 ,634,328.00 0.00 27, 126,8 14.46 208,366.00 27,335, 180.46 0 3rd Qtr 1,951 ,602,941 .92 0.00 9, 925,652.31 3,352, 178.50 13,277,830.81 s 4 1h Otr 1,837,486, 111 . 10 0.00 82,281,037.38 224,085.00 82,505, 122.38 P4,870, 723,381 .02 P83, 676. 97 P138, 189,690.69 P4, 150,424.00 p 142,256,438.22 On November 5, 2004, San Roque Power Corporation filed with the BIR four (4) letters claiming refund of the total amount of P 142,256,438.22, representing unutilized excess input VAT, as declared in its VAT Returns for the four quarters of 2003 in the sum of p 142,256,438.22. On February 24, 2005, San Roque Power Corporation filed with the BIR an additional claim in the amount of P5,723, 120.48, allegedly representing unutilized input VAT for the first quarter of 2003 which was erroneously included in its previous claim for refund covering the period October 1, 2002 to December 31 , 2002. However, upon verification that such error was already corrected in its records and that there was no basis for the said additional claim, respondent filed a letter with the BIR on March 22, 2005 to withdraw the refund claim of P5,753, 120.48. As the two-year prescriptive period within which to file a judicial claim for refund was about to lapse without action on the part of C/R, San Roque Power Corporation elevated its claims before this Court via a Petition for Review filed on March 21 , 2005, praying for the refund or issuance of tax credit certificate in the amount of P 142,256,438.22, representing unutilized input VAT on purchases of capital goods and other taxable goods and services for the period covering January 1, 2003 to December 31, 2003. In his Answer filed on May 19,2005, CIR, raised the following Special and Affirmative Defenses: '4. San Roque Power Corporation's alleged claim for refund/ tax credit IS subject to administrative routinary examination/in ves tigation by the Bureau 's Revenue District No. 8 in Urdaneta City Pangasinan. 5. San Roque Power Corporation failed miserably to show that the total amount of Php 142,256,438 .22 represent[ing) excess input VAT on purchases of c apital goods and services for the period January I to December 31, 2003. 6. Taxes paid and collected are presumed to have been paid in accordance with law; hence, not refundable.[.

Commissioner of Internal Revenue vs . San Roque Power Corporation Page 5 of 15 CT A EB Case No. 523 DECISION 7. In on action for refund/credit, the taxpayer has the burden to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund. 8. It is incumbent upon Son Roque Power Corporation to show that it has complied with the provisions of Section 204 (c) in relation to section 229 of the Tax Code. 9. Well-established is the rule that refund/tax credits ore construed strictly against the taxpayer as they partake the nature of exemption from tax.' During the trial on the merits, Son Roque Power Corporation presented documentary and testimonial evidence. CIR, on the other hand, submitted this case for decision without presenting any witness." Thus, this Court's former Second Division rendered the assailed Decision 6 . Not satisfied, the CIR moved for a partial reconsideration of the same, which was denied in a Resolution 7 dated August 06, 2009. Hence, the CIR filed this petition . In assailing the Decision and Resolution of the Court's former Second Division, promulgated on April 30, 2009 and August 6, 2009, respectively, the Commissioner of Internal Revenue (CIR) raised the sole issue: "WHETHER OR NOT THE (FORMER) SECOND DIVISION OF THE HONORABLE COURT ERRED IN PARTIALLY GRANTING RESPONDENT'S CLAIM FOR REFUND IN THE AMOUNT OF P 114, 191 , 116.15 ALLEGEDLY REPRESENTING UNUTILIZED EXCESS INPUT TAXES ATTRIBUTABLE TO CAPITAL GOODS PURCHASES AND EFFECTIVELY ZERO -RATED SALES TO NPC FOR THE PERIOD COVERING 1 JANUARY 2003 TO 31 DECEMBER 2003 BECAUSE THE CLAIM WAS NOT FILED IN ACCORDANCE WITH THE PROC EDURE PRESCRIBED BY LAW." 6 Supra , Note 2 7 Supra, Note 3 (

Commissioner o f Interna l Revenue vs. San Roque Power Corporation Page 6 of 15 CT A EB Case No. 523 DECISION In support thereof, the CIR contends that San Roque Power Corporation's claim for refund was not properly documented in the administrative proceedings and thus , San Roque Power Corporation is not entitled to the relief sought. The CIR's argument that the denial by inaction of San Roque Power Corporation's claim for refund should be sustained for non-compliance with the legal procedure - submission of complete documents, is totally without merit. Suffice it to say that San Roque Powe r Corporation did not elevate to this Court's former Second Division its claim for refund on the ground of denial for insufficiency of evidence due to non-submission of complete documents but rather from the CIR's inaction or failure to act on it. Admittedly, the submission of rel evant and complete supporting documents is necessary for the granting of refund or tax credit certificate, in both administrative and judicial leve l. However, submission of the complete supporting documents in the administrative level is not a condition precedent before a taxpayer can eleva te its cla im before this Court. A perusal of the records would reveal that on November 5, 2004, San Roque Power Corporation filed a claim for refunds with the Bureau of Internal Revenue , Revenue Distric t Office No. 6, Urdaneta , Pangasinan . 8 Exhibits "U", "V", " W" & "X", admitted in Resolution dated Jul 14 , 2006, Second Division Docket pp .140-141 C. ~/

Commissioner of Internal Revenue vs. So n Roque f. )ower Corporatio n Pag e 7 o f 15 CT A EB Ca se No. 523 DEC I SION Pursuant to section 112 (C) of the NIRC as amended , San Roque Power Corporation has thirty (30) days from the d ecision of the CIR denying its claim or after the expiration of one hundred twenty ( 120) days from the filing of refund , to appeal the decision or the unacted claim to this Court . We quote : SEC. 112. Refunds or Tax credits of Input Tax.- XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be made.- In prop er c a ses, the C ommission er shall grant a refund or issue the tax credit certific ate for creditable input taxes within one hundred twenty ( 120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A} hereof. In case of full or partial d e nial o f the claim for tax refund or credit, or th e failure on th e part o f th e C ommissioner to act on the application within period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or the unacted claim with the Court of Tax Appeals. (Italics supplied) The above provision clearly provid es that the taxpayer must elevate its claim before this Court within 30 days from receipt of the denial of its claim for refund/tax credit or after th e expiration o f the 120-day period granted to the CIR to decide o n th e ta xpayer's c laim. Having filed the claim for refund on November 5, 2004, San Roque Power Corporation has 30 days from the expiration of th e 120-day peri o d , specifically until April 5, 2005 to petition to this Court. Th e p e titi o n ha ving b ee n fil e d o n Marc h 21 , 2005 and raffled to the Second Divisio n o f this C o urt, was w e ll within the period prescribed by law. C

Commissioner of Internal Revenue vs. Son Ro qu e Pow er Corporati o n Page 8 o f 15 CT A EB Case No. 523 DECISION The alleged non-submission of c omplete documents at the administrative level wi ll not bar this Court from receiving evidence, evaluating and appreciating its materiality, relevancy, probative value and sufficiency concerning the San Roqu e Power Corporation's claim for refund considering that the CIR fail e d to state and identify what documents did San Roque Power Corporation fail to submit in order to warrant their denial. The CIR ought to know that mere allegation is not evidence .9 Thus, mere al legation in th e to tal abse nce of evidence is just that- an allegation- undeserving of credence. Records reveal that the CIR failed to controvert the documentary and testimonial evidence prese nte d b y San Ro que Power Corporation . Likewise, neither a speck of evidence was presented nor to say the least any action/opposition from the CIR wa s made before submitting the c a se for resolution . After a thorough examination of the documentary and testimonial evidence presented before this Court's former Second Division , we find them sufficient for adjudic ation on San Roque Power Corporation 's claim. Respondent anchored its claim for refund of Php 142,256,438 .22 10 under Section ll2(A) and (B) 11 of the NIRC , as amended by RA 9224 broken down as follows. 9 1ndustriol Textil e Manufacturing Co . o f th e Phil s. Inc vs. LPJ Ent . In c. , G .R. No. 66 140; January 3 1, 1993, 2 17 SC RA 322 1o Rollo . p . 27 11 SEC. 112. Refunds or Tax Credits of Input Tax. - (A) Zero-rated or Effe ctively Zero-ra ted Sales-A ny VAT-registe re d p e rson, wh ose sol es ore zero-ra ted or e ffec tively zero-ra te d m ay, wi thin two (2) years a fte r th e c lose of th e taxabl e quart e r w he n the sol es w e re mod e, C..

Commissioner of Internal Revenue vs. Son Roque Power Corpora tion Page 9 o f 15 CTA EB Case No. 523 DECISION 2003 Per Return Capital Goods Non-Cap ital Goods/ Se rv ices January Php 8,376 ,552.05 Php 7,107,311 .52 Php 1,269 ,240 .53 February 5' 941 '941 .02 5,389 ,717 .61 552 ,223.41 March 4,819,81 1.50 3,514 ,692 .90 1,305 ,118.60 Subtotal Php 19,138,304.57 Php 16,011,722.03 Php 3,126,582.54 April 10,771 ,389 .83 9,693 ,940 .97 1,077,448 .86 May 11 ,521,557.23 1,432 ,711 .11 10,088,846 .12 June 5,042,233.40 2,969 ,322 .23 2,072 ,911 .17 Subtotal Php 27 ,335 ,180.46 Php 14,095 ,974 .31 Php 13,239,206.15 July Php 4,409,756.66 Php 3,749 ,735 .35 Php 660 ,021 .31 August 5,255,289.60 2,898,474 .21 2,356 ,824 .39 September 3,612,775.55 2,591 ,365.69 1,021,409 .86 Subtotal Php 13,277 ,830.81 Php 9,239 ,575 .25 Php 4,038 ,255 .56 October Php 2,440 ,219 .14 Php 1,205 ,337 .58 Php 1,234 ,881 .56 November 78,160,805 .76 76 ,922 ,800.49 1,238 ,005 .27 December 1,904 ,097.48 1,315 ,615 .27 588,482 .21 Subtotal 82 ,505,122.38 79,443 ,753.34 3,061 ,369 .04 Total Php 142,256,438 .22 Php 118,791,024.93 Php 23,465,413 .29 Of the ~ 118,791 ,024.93, representing alleged input tax on capital goods, the amount of ~700 , 133.45 and ~4,584,028.12 or a total of ~5,284, 161 .57 shall be disallowed. Thus, the valid input VAT attributable to capital goods amounts to~ 113,506 ,863.36 . We agree with the findings of this Court's former Second Division, the pertinent portion of which reads: apply for the issua nce of a tax c redi t ce rtifi cate or re fund o f cred itable input tax due or paid attributable to such so les, excep t tran sitional input tax, to the extent that such input tax has not been applied against ou tput tax: Provided, however, That in the case of zero-rated so les under Sec tion l06(A)(2)(o)(1) , (2) and (B) and Sec tion 108 (B)(1) and (2) , th e acceptable foreign currency exchange proceeds thereof hod been duly accounted for in accordance with the rul es and regula ti ons of the Bongko Sentrof ng Pilipinos (BSP) : Provided, furth er, That where the taxpayer is e ngaged in zero-rated or e ffectively zero-rated sole and also in taxable o r exempt sole o f goods o r properties or services. and the amount of c reditable input tax due o r paid cannot be direc tl y and en tire ly attributed to any one of the transa c tions, it shall be a llocated propor ti onately on the basis of the volume of so les. (B) Capitol Goods-A VAT-registered person may apply for th e issua nce of a tax c redit certificate or refund of in put taxes paid on capi tol goods imported or loca lly purchased, to th e ex tent the such input taxes hove not been applied against ou tput taxes. The applica ti on may be mode only within two (2) years after th e close o f the taxable quarter when the importatio n or purchase was mode. (

Commissioner of Internal Revenue vs. San Roque Power Corporation Page 10 of 15 CT A EB Case No. 523 DECISION "xxx, records disclose that out of the total input tax claim of ~ 118,791,024.93, only ~ 114,206, 996.82 is properly attributable to petitioner's purchases of capital goods and formed part of the Property plant and equipment account shown in its 2003 audited Financial statements. The purchases related to the remaining balance of ~,584,028.12, although recorded under property, plant and equipment account, are not in the nature of capital goods as these pertain to non-capitalizable transactions such as payments for curtain rods, security guards services, advertising expenses, lease and service of portalets, safety shoes, etc. Nonetheless, out of the remaining balance of ~,584,028.12, petitioner may claim the amount of ~,579,228.12 which was incurred during its commercial operations that started May 1, 2003. Thus, petitioner's entitlement to the input tax of ~,579,228. 12 shall be evaluated together with petitioner's claimed amount of ~23,465,4 13.29, allegedly representing input tax on non capital goods/services attributable to effectively zero rated sales to NPC. " As aptly found by this Court's former Second Division, the amount of ,j27QO, 133.45 is disallowed for the following reasons: Name of Supplier lnv. No. Exhibit I OR No. Exhibit Input Vat 1. Purchases of services supported by official receipts not in the name of petitioner in violation of Sections 113 and 23 7 of the NIRC of 1997 & Section 4.108.1 of Rev. Reg. 7-95 F. Gutierrez Corporation 239 PP-4-E112 300 PP-4-E111 P35,243.57 F. Gutierrez Corporation 270 PP-4G 175·-- -417 --· PP-4G 174 14,440.91 F. Gutierrez Cor[_2oration 269 PP -4G 177 417 PP-4G 174 20,023.47 F. Gutierrez Corporation 337 PP-4K 155 450 PP-4K 154 2,052.55 F. Gutierrez Corporation 331 PP-4K 156 450 PP-4K 154 3,662.01 F. Gutierrez Corporation 335 PP-4K 157 450 PP-4K 154 3,528.83 F. Gutierrez Corporation 336 PP-4K 158 450___ PP-4K 154 5,533.52 F. Gutierrez Corporation 343 PP-4K 160 451 PP-4K 159 10,633.2 F. Gutierrez Corporation 348 PP-4K161 451 PP-4K 159 9,449.09 F. Gutierrez Corporation 333 PP-4K162 451 -- ~-4K 159 7,086.02 F. Gutierrez Corporation 349 - PP-4K 163 1-451 PP-4K 159 1,866.25 F. Gutierrez Cor[_2oration 338 PP -4K 165 451 PP-4K 159 1,6301.72 F. Gutierrez Corporation 365 PP-4L 171 458 PP-4L 170 4,730.71 F. Gutierrez Corporation 223 PP-40 15 1 292 PP-40149 12, 171.00 subtotal P146 ,722.85 2. Purchases of services without supporting official receipts in violation of Section 11 O(A)(1 )(b) in relation to Sections 113 and 237 of the NIRC of 1997 and Section 4.108 of RR 7- 95 Harza Enqineerinq Harza Engineering ·-=r= Subtotal P176 ,332.78 178,567.37 P354, 900. 13 3. Not included per "Schedule of Input VAT Paid on Local Purchases with original and appropriate supporting documents" (Exhibit PP - ~ F. Gutierrez Construction 267 PP-4 -G 175 417 PP-4-G 174 P5,562 .07 Raytheon Ebasco 233 PP-4-8208 460 PP-4-8207 8,533.34 Overseas Ltd. F. Gutierrez Construction 121 3,596.55 -PP-4-C138 - - - - - - 291 PP-4-C 137 F. Gutierrez Construction 220 PP-4-C 140 288 PP-4-C 139 ' - - · · · - - · ·-·--- - - - - · - · - - - - - - - 180,818.51 - - - - · · - - - - - -subtotal ---- P198,51 0.47·· - Total P700, 133.45

Commissioner of Internal Revenue vs . Son Roqu e Power Corporation Page 11 of 15 CT A EB Case No. 523 DECISION Regarding the refund of ~23,465,413.29 1 2 input tax for non-capital goods/services, ~684,252.79 13 of it were proven to be attributable to substantiated zero-rated sales. In the recent case of San Roque Power Corporation vs. Commissioner of Internal Revenue G.R. No. 180345, November 25, 2009, on claim for refund or tax credit under Section 112(A) 14 , the Supreme Court set the following criteria: ( 1) The taxpayer is VAT registered; (2) The taxpayer is engaged in zero-rated or effectively zero-rated sales; (3) The input taxes are due or paid; (4) The input taxes are not transitional input taxes; (5) The input taxes have not been applied against output taxes during and in the succeeding quarters; (6) The input taxes claimed are attributable to zero-rated or effectively zero-rated sales; (7) For zero-rated sales under Section 106(A)(2) ( 1) and (2); 106(8); and 108(8)(1) and (2), the acceptable foreign currency exchange proceeds have been duly accounted for in accordance with 8SP rules and regulations; 12 Total claimed input tax p 142,256 ,438 .22 Less : Input Tax Claim on Capitol Goo d s Purc hases 118,791 ,024 .93 Input Tax Claim on Non-Capitol Goods/ Servic e s p 23,465,413 .29 ------------- 13 See Note 18 14 Supra , Note 12 C.

Commissioner of Interna l Revenue vs. Son Roque Power Corpora ti on Page 12 of 15 CT A EB Case No. 523 DECISION (8) Where there a re both zero-rated or effectively zero- rated sales and taxabl e or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, th e input ta xes shall be proportiona tely allocated on the basis of sales volume; and (9) The claim is filed with in two years after the close of the taxable quarter when such sa les were made. Records reveal that San Roque Power Corporation comp lied with the criteria set by the Supreme Court, as follows: First and Second criteria . - Based on the joint stipulation of facts of the parties, San Roque Power Corporatio n is a VAT registered taxpayer with Certificate of Registration No . OCN 98-006-007394 and TIN No. 005- 017-501 15 ; and it was granted a Certificate for Zero Rate by the CIR through the Chief of Regulatory Operations Monitoring Divisio n (now the Audit Information , Tax Exemption & Incentive Division) and thus, is engaged in zero-rated sales. Third criterion . - Various suppliers' VAT invoices, official receipts , confirmation letters and bank 's official receipt, Bureau of Customs (BOC) Import Entries and Internal Revenue Declara tions were presented to prove the input taxes claimed. 15 First Division Docket . P.7 5 (

Commissioner of Internal Revenue vs. Sa n Roqu e Power Corporation Page 13 of 15 CT A EB Case No. 523 DECISION Fourth and Fifth criteria . - There is no transitiona l input tax on the c la imed input tax and th a t th e same was a lready net o f the o utp ut tax for th e 1 st quarter of 2003 16. Sixth criterion. - As co rrectly found by this Court's former Second Division, San Roque Po w er Corporation was able to prove that the amount of ~ 6 8 4 ,252. 79 1 7 o f claimed input tax taxes were a ttribu tab le to subs tantiated zero-rated or effec tiv e ly zero-rated sales of~ 170,000,000.00. Seventh criterion. - Foreign currency exchange proceeds are ina p p licable considering that San Roque Power Corporation's subs tan ti ated zero-ra ted sa le of ~ 170,000 ,000.00 as operating fee did not involve foreign exchange . Eighth criterion. - Similarly, the eighth criterion is inapplicable to this case, w here the on ly sa le transaction consisted of an effectively zero- ra ted sale . 16 Findings of the Court a quo, Rollo , p . 28 ci tin g Exhibit " F" 11 Rollo , pp . 40-41 Capitol Goods Non-Capi tol Total Goods/Services Amount of c laim p l 18,791,024.93 P23,465,413.29 p 142,256,438.22 Add/(Less) a. Input val claim on capito l goods purchases which (700, 133.45) (700, 133.45) ore not duly supported by vAT o ffic ial receipls b. Input Vat, the related purchases o f which ore nol (0811,02812) (4,584,028.12) in th e nature of capitol Qoods c . Input Vat, the reloled purchases of which ore nol 11 ,579,228. 12 4,579,228.12 in the nature of capi to l goods but ore a ttributable lo e ffec tively zero-soles 1-- d.lnput VAT claim on non-capitol goods/services ( 4,204,031. 40) (4,204,031.40) which could no l be otlribuloble to effeclively Lero- soles e. lnput VAT claim on non-capitol goods/services (4,235,868.33) (4,235,868.33) which ore not du ly subston lio ted by VAT invoices, of ficial receipls, BOC imporl decloro lions/ e lc. Valid Input VAT PI 13,506,863.36 p 19,604,7 41.68 P 133, I II ,605.04 Less: Inpu t VAT attribu table lo unsubs lonlioled Lero- ( 18,920,1188.89) ( 18,920, 488.89) rated soles (Pl9,604,7 4l.68-P684 ,252.79*l p l 13,506,863.36 P P684 ,252.79 p 114,19 1,116.15 Substantiated Zero Rated Sales P170,000,000.00 divided by Total reported Zero - Rated Sales 4,870,723,381 .02 Multiplied by the Substantiated Excess Input VA T 19 604 741.68 Input VAT attributable to substantiated Zero -Rate d SaJes P p 684,252.79

Commissioner of Internal Revenue vs. San Roque Power Corporation Page 14 of 15 CT A EB Case No . 523 DECISION Ninth criterion . - Lastly, the claim was filed within two years after the close of the taxable quarter when such sales were made. The claim for refund, for the four quarters of 2003 having been filed with the BIR on November 5, 2004, is within the two year period to file a claim for refund . 2003 Close of taxable Last day within quarter which to file a claim for refund 1st Qtr March 3 1,2003 March 3 I ,2005 2nd Qtr June 30,2003 June 30,2005 Jrd Qtr September 30,2003 September 30,2005 4 th Qtr December 3 I ,2003 December 3 I ,2005 In fine , the Court En Bane finds no cogent justification to disturb the findings and conclusion in the assailed Decision and Resolution of the Court's former Second Division , promulgated on April 30, 2009 and August 6, 2009 , respectively . WHEREFORE , the instant Petition for Review is hereby DISMISSED for LACK OF MERIT. Accordingly, the April 30, 2009 Decision and August 6, 2009 Resolution of this Court's former Second Division are AFFIRMED . SO ORDERED. ~N . Mh-~~,6~ CIELITO N. MINDARO-GRULLA Associate Justice WE CONCUR: L.;;i:: ca o~ ERNESTO D. ACOSTA Presiding Justice

Commissioner of Internal Revenue vs. Son Roqu e Power Corporation Page 15 of 15 CT A EB Case No. 523 DECISION ~~(2. G.;t-- ~10,. Jt'iANITO C. CASTANEDA, JR. Associate Justice .. _a_ CAESAR A. CASANOVA Associate Justice ~tt~ OLGA PALANCA -ENRIQUEZ ESPERAN Associate Justice ~~-- r: ~~?-- AMELIA R. COT ANGCO -MANALASTAS Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation among the members of the Court En Bane before the case was assigned to the writer of the opinion of the Court En Bane. o ~ L"'. AC<5SJA ERNESTO D. Presiding Justice