KEPCO ILIJAN CORPORATION v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY THIRD DIVISION KEPCO lUJAN CORPORATION, C .T.A. CASE NO. 7627 Petitioner, Members: -versus- BAUTISTA, Chairperson PALANCA-ENRIQUEZ, and COTANGCO -MANALASTAS, JJ. THE COMMISSIONER OF Promulgated: INTERNAL REVENUE, Respondent. FEB 2 2010 il.:,r' r·,..,.- ----------~~?~~ X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -X DECISION BAUTISTA, J..: This case involves a claim for refund of the amount of P73,711 ,581.30, allegedly representing input va lue-added tax (VAT) incurred on importations and domestic purchases of goods and services attributable to the sale of electricity to the National Power Corporation (NPC) for the period covering January 1, 2005 to October 31, 2005. Kepco llijan Corporation (Petitioner) is a domestic corporation duly registered with the Securities and Exchange Commission (SEC), with principal office at 181h Floor Citibank Tower, 87 41 Paseo de Roxas, Salcedo Village, Makoti City. Petitioner is likewise registered as a VAT taxpayer with the Bureau of Internal 37 I

DECISION C.T.A. CASE NO. 7627 Revenue (BIR), as evidenced by its Certificate of Registration OCN No. 9RC0000163675. 1 It is engaged in the production and sale of electricity as an Independent Power Producer (IPP), whose produced electricity is sold solely to NPC. 2 It has a duly approved Application for VAT Zero-Rate, covering sales of electricity from January 1, 2005 to December 31, 2005.3 Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue, with authority, among others, to decide, approve and grant claims for refund or tax credit of internal revenue ta xes. He holds office at the BIR National Office Building, Agham Road, Diliman, Quezon City. For the first three quarters of ta xable year 2005 and for October 2005, petitioner filed its Quarterly and Monthly VAT R~turns showing that it incurred expenses representing importation and domestic purchases of goods and services, for which petitioner also incurred input VAT.4 On October 28, 2005, petitioner filed an administrative claim for refund of the amount of P63,950,558.01 with the BIR Revenue District Office No. 50, representing input VAT allegedly incurred by petitioner for the first three quarters of taxable year 2005 from importations and domestic purchases of capital goods/equipment and services preparatory to its production and eventual sale of electricity to NPc.s On Dece mber 7, 2005, petitioner likewise filed an administrative claim for refund of the amount of P9,761 ,023.29, allegedly representing input VAT it incurred for the month of October 2005 from I 1 Exhibit "A" 2 Exhibit "C" 3 Exhibit "B' 4 Exhibits ''0'', liE", 11 F11 , "G 11 , "H", ''1 11 , "J" , ''K" , Ill", and ''M'' s Exhibit "0" 38

DECISION C.T.A. CASE NO. 7627 importations and domestic purchases of capital goods and services attributable to its sale of electricity to NPC.6 Due to respondent's inaction and in order to suspend the running of the two-year prescriptive period under the National Internal Revenue Code (NIRC), petitioner filed the present Petition for Review on April 24, 2007. In his Answer filed on June 26, 2007, respondent raised the following Special and Affirmative Defenses: 7 "5. Assuming but without admitting that Petitioner filed a claim for a tax credit certificate, the same is still subject to investigation by the Bureau of Internal Revenue; 6. Petitioner failed to demonstrate that the tax, which is the subject of this case, was erroneously or illegally collected; 7. Taxes paid and collected are presumed to be made in accordance with the laws and regulations, hence, not creditable or refundable; 8. It is incumbent upon the Petitioner to show that its has complied with the provisions of Sections 112, 204(C) and 229 of the Tax Code, as amended; 9. In an action for tax credit or refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to discharge said burden is fatal to the claim (Emmanuel & Zenaida Aguilar v. Commissioner, CA-GR No. Sp. 16432, March 30, 1990 cited in Aban, Law of Basic Taxation in the Philippines, 151 Edition, p. 206); 10. Claims for refund are construed strictly against the claimant the same partake the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor. (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121) ." 6 Exhibit "P" 7 Docket, pp. 59-60 I 39

DECISION C.T.A . CASE NO. 7627 During trial, petitioner presented testimonial and documentary evidence; while counsel for respondent submitted the case for decision based on the pleadings for lack of report of investigation on petitioner's refund claim . The Court then required the parties to file their respective memorandum .8 After petitioner filed its Memorandum on January 26, 2009, and considering that respondent did not file his Memorandum, the case was deemed submitted for decision on February 5, 2009 .9 The parties submitted the following issues 10 for this Court's resolution: "1 . Whether for the period of 01 January 2005 to 31 October 2005, Petitioner incurred expenses representing domestic purchases and importation of goods and services for which it incurred an input VAT amounting to Php73,711 ,581 .30. 2. Whether the aforesaid expenses represent costs sustained by Petitioner for the production and sale of electricity to NPC from 01 January 2005 to 31 October 2005. 3. Whether Petitioner's sale of electricity to NPC for the covered period is subject to VAT at zero percent. 4. Whether Petitioner's claim for ta x credit certificate of the alleged input VAT for the covered period is duly substantiated by documentary evidence. 5. Whether Petitioner is entitled to the refund or issuance of Tax Credit Certificates in the amount of Php73,711,581.30 representing the input VAT incurred for the first three quarters of 2005 and O c tober 2005 from its sale of electricity solely to the NPC." Petitioner anchors its claim on Section i 12(A) of the NIRC of 1997, which provides as follows : s Docket, p . 237 9 Docket, p. 279 10 Doc ket, pp. 79-80 I 40

DECISION C.T.A . CASE NO. 7627 "SEC. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-rated or Effectively Zero-rated Soles. - Any VAT- registered person, whose soles ore zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the soles were mode, 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 toY., to the extent that such input tax has not been applied against output tax: Provided, however, That in the cases of zero-rated sales under Section 106(A) (2)(a)( 1), (2) and (b) and Section 108 (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 or 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 ore zero-rated under Section 108(B) (6), the input taxes shall be allocated ratable between his zero-rated and non-zero-rated sales." From the foregoing, in order to be entitled to a refund or tax credit of input tax due or paid attributable to zero-rated or effectively zero-rated sales, petitioner must comply with the following requisites: 11 1. there must be zero-rated or effectively zero-rated sa les; 2. the input ta xes were incurred or paid; 3. the input taxes ore attributable to zero-rated or effectively zero- rated sales; 4. the input taxes were not applied against any output VAT liability; and 5. the claim for refund was filed within the two-year prescriptive period. Anent the first requisite, this Court has consistently held in a long line of cases, that NPC is an entity with a special charter, 12 which categorica lly exempts 11 AT&T Commu nica tions Services Phils. Inc. vs . Commissioner of Internal Revenu e, CTA Case No. 7221, December 12, 2007 41 I

DECISION C.T. A. CASE NO. 7627 it from payment of all taxes, whether direct or indirect, including VAT.l3 Consequently, services rendered by a VAT-registered entity, like herein petitioner, to NPC are effectively subject to zero percent (0%) VAT, in accordance with Section 108(B)(3) of the NIRC of 1997, as amended. Petitioner is an Independent Power Producer engaged in the business of generating electricity for sale solely to the NPC. 14 Accordingly, the power generation services rendered by petitioner to NPC are subject to zero percent VAT. Respondent recognized this when he approved petitioner's Application for VAT Zero-Rate, covering the latter's sale of electricity to NPC from January l, 2005 to December 31, 2005.15 Petitioner also was able to establish through the official receipts 16 it issued to NPC that it actually generated gross receipts from sale of power generation services to NPC for the period covering January 1, 2005 to October 31, 2005, in the aggregate amount of P5,711 ,834.411.80; which was reflected in its Quarterly VAT Returns for the first three quarters of 2005 and in its Monthly VAT Declaration for October 2005, as follows : Exhibit Year 2005 Zero -Rated Sales/ Receipts "F" 1st Quarter p 1,689,941,795.30 "I" 2nd Quarter 1,694,729,455.08 "L" 3rd Quarter 1,752,763,067 .62 "M" Oc to ber 57 4,400,102.80 TOTAL p 5,711,834,420.80 12 Section 13, R.A. No. 6395, o th erwise known os th e NPC Revised Charter, os amended by P.O. Nos. 380 and 938 13 Ernesto M. Macedo vs. Han. Catalina Mocoroig, G .R. No. 8829 1, May 3 1, 199 1 14 Exhibits "C" and Q", page 3 I 15 Exhibit "B " 16 Exhibits "R" to "R-23" 42

DECISION C.T.A. CASE NO . 7627 Page 7 o f 19 While the total amount of zero-rated sales as reflected in the official receipts is lower by P44,848,727.00 when compared with the total amount of zero-rated sales declared in the Quarterly VAT Returns, such discrepancy pertains to the net foreign exchange loss on petitioner's dollar revenues17 and shall not affect petitioner's claim . As regards the second requisite, petitioner presented its schedules of input VAT on domestic purchases and importation, Bureau of Customs (BOC) Import Entry and Internal Revenue Declarations, and suppliers' invoices and official receipts 18 in support of the P73,711 ,581 .30 unutilized input taxes reported in its Quarterly VAT Returns for the first three quarters of 2005 and its Monthly VAT Declaration for October 2005, as follows: Exhibit Year2005 Input VAT "F" 1st Quarter p 7,368,603.12 "I" 2nd Quarter 44,303,387 .39 ''L" 3rd Quarter 12,278,567.50 .. M" October 9,761 ,023.29 TOTAL p 73,71 1,581.30 Upon examination of the aforesaid documents, the Court-commissioned Independent Certified Public Accountant (CPA) 19 , in his Report dated June 2, 2008, recommended the disallowance of petitioner's input VAT claim in the amount of P1,531 ,89 1.562o, to wit : "1. The Company provided us with the summary of its unutilized input taxes which showed the details of the import-entry declarations, official receipts and sales invoices issued by various suppliers for the period January to October 2005. We were able to account for the existence and compliance of the original copies 17 Exhibit "Z" IB Exhibits "QQ" to "JJJ," including sub-markings 19 Mr. Richard Lapres, Tax Partner o f Manabat Delgado Amper & Co 20 Exhibit "BB", pages 7 and 8 I 43

DECISIO N C.T.A. CASE NO . 7627 of the import-entry declarations, sales invoices and official receipts issued by these suppliers with existing regulations except for the items which we propose to be disallowed due to certain exceptions as detailed below: Details of the above disallowed input taxes are as follows: DescriQtion Amount Domestic Purchases (please see Annex 3) Invo ices and ORs do not bear vendors' TIN p 563,801.44 Invoices and ORs are not issued in the name of KEILCO 44 ,5 10.87 Invoices and ORs do not bear BIR authority to print 15,806.22 Invoices and ORs that do not fall within the period covered 369.411.07 Missing official receipts for services rendered or invoices for goods sold 69,831.14 Adjusting entry included in the Input VAT schedule (1.602.95) lnvoices/ORs do not contain vendor signature 352.491.65 Original Invo ices and ORs were not examined by ICPA 11 ,363.48 Penalty c harges for late deliveries whic h should be d educ ted from th e to tal Input Taxes claimed (Annex 1) 78,891.70 Discrepancy with the amounts per Original Invoice and Summar-r List [Annex 2) 1.141.87 Sub-total p 1,505 ,646.49 Importations (please see Annexes 5 and 6) Invoices and OR that do not fall within the period covered p 1,056.00 Missing official receipts for services rendered or invoices for goods sold 25,191.00 Discrepanc y b e tween amount claimed and import VAT schedule [1 .93) Sub-total p 26,245.07 Grand Total p 1.531.891.56 The above unutilized input VAT payments were disallowed for failure to comply with the substantiation requirements as provided under Sec. 113 of the NIRC and, as implemented by Sec. 4.108-1 of Revenue Regulations No . 7-95, to wit :" I 44

DECISION C .T.A. CASE NO. 7627 Petitioner, in its Memorandum, objects to the Independent CPA's proposed disallowance of the following input taxes: 21 1. Invoices and ORs do not bear vendors' TIN p 563,801.44 2. Invoic es and ORs do not bear BIR authority to print 15,806.22 3. Invoic es and OR that do not fall within the period covered 369.411.07 4. lnvoices/ORs do not contaii}_'I~Qdor signature - 352.491 .65 As to the proposed disallowance of P563,801.44, petitioner asserts that there was a vendor's TIN indicated in the supporting receipts . This Court partly finds for petitioner. Out of the P563,801.44 input VAT claim, the amount of P562,983.03 relates to petitioner's purchases o f goods; while the remaining amount of P818.41 pertains to petitioner's purchases of services. A scrutiny of the sales invoice22 supporting the amount of P562,983.03 shows that there was no seller's TIN preprinted thereon; while the official receipF 3 supporting the amount of P818.41 reflected the seller's TIN. Thus. out of the P563,801.44 input VAT claim, only the amount of P818.41 is valid; while the remaining input tax of P562.983.03 shall be disallowed With reference to the proposed disallowance of P15,806.22, for failure to indicate in the invoice and official receipt the BIR authority to print, petitioner argues that this issue had already been ruled upon by the ::>upreme Court in the case of Intel Technology Philippines, Inc. vs. Commissioner of Internal Revenue 24 {Intel case) , where the Highest Tribunal held that the BIR Authority to Print is not required to be reflected or indicated in duly registered receipts and invoices. 21 Docket, p . 266 22 Exhibit "00- 1" 23 Exhibit "00-2 " 24 G.R. No. 166732. April 27, 2007 ! 45

DEC ISION C.T.A. C ASE NO. 7627 Page 10 o f 19 This Court finds the disallowance of the input VAT claim of P15,806.22 in order. While it was held in the above-mentioned Intel case that the BIR authority to print need not be reflected or indicated in the invoices/receipts, however, the Supreme Court stressed that entities engaged in business are required to secure from the BIR an authority to print receipts or invoices and to issue duly registered receipts or invoic es, to wit: "It is clear from the foregoing that while entities engaged in business are required to sec ure from the BIR an authority to print receipts or invoic es and to issue duly registered receipts or invoices, it is not required that the BIR authority to print be reflected or indicated therein. xxx XXX XXX XXX It bears reiterating that while the pertinent provisions of the Tax Code and the rules and regulations implementing them require entities engaged in business to secure a BIR authority to print invoices or receipts and to issue duly registered invoices or receipts, it is not spec ifically required that the BIR authority to print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly registered ." (Emphasis supplied) In the present c ase, petitioner foiled to show that the BIR authority to print has been secured by petitioner 's suppliers as to the invoices and official receipts covering the input taxes of P15,806.22 or that the said invoices and official receipts were duly registered with the BIR. Thus , the input VAT claim of P15,806.22 shall be denied. Regarding the proposed disallowance of P369,411 .07 for invoices and official receipts that do not fall within the period covered by the claim , petitioner I 46

DECISION C.T.A. CASE NO. 7627 Page II of 19 alleges that except for two receipts in the aggregate amount of P11 ,477.0725, a ll the receipts are within the period of the claim covering January to October 2005 and that the Independent CPA verified and categorically stated in his Report that the unutilized input VAT payments pertinent to all of the receipts were not included in the VAT refund filed by petitioner for taxable year 2004 and in the 2006 input VAT general ledger. It is imperative that petitioner declare the input VAT in the corresp onding taxable quarters when the purchases of goods were consummated, as evidenced by VAT invoices and when the payments for services were made, as evidenced by VAT official receipts, as held by this Court in Lepanto Consolidated Mining Co. vs. Commissioner of Internal Revenue 26 . The pertinent portions of the said Decision are quoted hereunder, to wit: "We agree with the respondent. The alleged unutilized input VAT of P5,820,863.87 should be denied since the supporting invoices and official receipts thereof bore dates which were earlier than the period of petitioner's claim. Section 11 O(A) (2) of the 1997 Tax Code provides: 'Sec. 110. Tax Credits.- A. Creditable Input Tax.- 2. The input ta x on domestic purchases of goods or properties shall be creditable: (a) To the purchaser upon consummation_of sale and on importation of goods or properties; and However, in the case of purchases of services, lease or use of properties, the input tax shall be -~ CAIIIUII=:. -.. uv-v I 0 Ul IU V \.....rVs.tU 26 CTA Case Nos . 6368 and 6480, December 15, 2004 I 47

DECISION C .T.A. CASE NO. 7627 creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee.' It is clear from the above-quoted provisions of law that for purchases of goods, the corresponding input value added taxes of which is creditable to the purchaser upon consummation of sale, that is, upon the issuance of the corresponding invoice. On the other hand , for purchases of services, the corresponding input value added taxes of which is creditable to the purchaser upon payment of compensation, rental, royalty, or fee, that is, upon the date of official receipt. Section 11 O(A) is explicit. It states 'upon consummation' , in the case of domestic purchases of goods, and 'upon payment' , in the case of purchases of services. It does not provide any qualification, such as 'upon delivery of invoice or official receipt' which is the main thesis of petitioner's contention. In a resolution of the case entitled Telecommunications Technologies Philippines, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 6168, promulgated on July 28, 2004, this Court elucidated that 'the inputVAT on domestic purchases of goods or properties shall be allowed as tax credit to the purchaser upon consummation of sale, which means upon issuance by the seller of the VAT sales invoic es evidencing the sale of goods/properties. On the other hand, the input VAT on purchases of services shall be available as tax credit to the purchaser only upon payment of the compensation or fee, i.e ., upon issuance by the seller of the VAT official receipt evidencing receipt of the payment for services performed or yet to be performed.' Thus , it is indubitable on the part of the petitioner to declare the input value added ta xes on domestic purchases of goods and services at the end of the corresponding taxable quarter where purchases of goods were consummated, as evidenced by VAT invoice and for payment of services, as evidenced by VAT official receipt. Therefore, the amount of input VAT of P5,820,863.87 which is supported by VAT invoices and official receipts dated earlier than the period of petitioner's claims can no longer be claimed for refund pursuant to Section 11 O(A) in relation with Section 112(A) of the 1997 National Internal Revenue Code ." Verification showed that out of the P369,411 .07, input VAT claim, the amount of P365,395.91 must be denied because the, invoices and official I 48

DECISION C:T.A. CASE NO . 7627 receipts supporting the purchases of goods and serVices, respectively, were dated outside the period of claim; while the remaining amount of P4,015.16, broken down be low, represents petitioner's valid claim: Invoice/ OR Invoic e Input Supplier's Name Exhibit Number Date Amount VAT Onnuri International "00- Inc . 039" 7776 1/6/2005 P18,000.00 P1 ,636.36 Mia Fluid Sys "00- Components Inc . 060" 4270 1/26/2005 20,766.75 1,887.89 " 00- Caloocan Gds Corp. 063" 245491 1/4/2005 4,000.00 363.64 P.T. Cerna "00- Corporation 065" 17132/ 17830 04/05/05;04/29 /05 1,400.00 127.27 Total P4,015.16 With re ference to the proposed disallowance of P352,491 .65 for invoices/ official receipts which do not contain vendor's signature, petitioner contends that Revenue Regulations No. 7-95 and Sections 113 and 237 of the NIRC of 1997 do not require the signature of the vendor in the invoices and receipts. This Court agrees with petitioner on this point. However, out of the P352,491 .65 inpu t VAT claim, the amount of P12,394.05 pertaining to petitioner's purchases of goods shall be disallowed because the supporting invoices were dated outside the period of claim, to wit: Invoice/ OR Invoice Input Supplier's Name Exhibit Amount VAT Number Date Systems Control Instrumentation, Inc. "00-074" 0289 11 / 4/2004 44,000.00 4,000.00 Alpine Industrial Supply "00-076" 455 10/5/2004 33,500.00 3,045.45 lnfocorp Tradinq Inc. "00-077" 11285 12/22/2004 29,775.00 2,706.82 RS Components Limited "00-079" 178 19 9/23/2004 3,300.00 300.00 10/11/2004, 41322, 11/29/04, C. Suiza Enterprises "00-080" 42185,41485 10/ 18/04 12,747.50 1,158.86 RS Components Limited "00-084" 20770 9/12/2004 13,012.07 1,182.92 Total 136,334.57 12,394.05 7 49

DEC ISION C.T.A. CASE NO. 7627 Page 14 o f 19 Th e refore, the in put VAT d isa llowances recomme nded by the Ind e p e ndent CPA in the amoun t o f P1,53 1,89 1.56 shall be re duced to Pl,l 86,960.39, computed as fo ll ows: Toto /I nput VAT disallowances per /C PA report P1 ,53 1,89 1.56 Less: Valid Input VAT Input VAT suppo rt e d ~ O R with the seller's TIN preprinted thereon 818.41 Input VAT suppo rted by Invoic es dated w ithin the period of c laim 4,015.16 Input VAT supported b y lnvoic es/O Rs w hic h do no t have vendor's siqna ture 340,097.60 ' Adjusted Input VAT disallowances per ICPA Report P1 ,186,960.39 j In addition to the exceptions amou nting to P1 , 186,960.39 noted by th e Indep endent CPA, this Court finds tha t th e inpu t taxes in the a m ount of P928,856.4 1 shall be disall owed for the fo ll owi ng reasons : Supplier's Name Exhibit Input VAT 1.) Input VAT supported b y d oc uments o ther than Invoice/OR Asia Pacific Express "QQ-018" p 13,630.57 Shin Yang Brokerage "QQ-064" 13,523.56 Mitsubishi Corporati o n "VV-06 1" 58,864.58 Input VAT supported b y an in voic e whic h was not formally 2.) offered and with TIN- V instead o f TIN-VAT Jera Gen era l Co nstruc ti o n "WW-921" 103,749.12 Input VAT on purc hase o f ve hicles with engine 3.) displa c ement o f m ore than 2000 cc Wheel. Inc. "RR-058" 140,909.09 4.) Input VAT on purc hase o f servic es with o ut supportinq OR Mitsubishi C o rporati o n "SS-097" 50,523.88 Input VAT suppo rted b y ln vo ices/ORs with preprinted " TIN- 5.) V" instead o f " TIN-VAT" Joel C havez Equipm ent - - - - - - - --- -- -- --- - - - - --- "QQ-022" 65,312.95 I 50

DECISION C.T.A. CASE NO. 7 627 Typo Grafika "QQ-028" 136.36 Typo Gra fika "QQ-030" 95.45 Jacos Industria l Corporation "RR-036" 2,570.70 Jacos Industrial Corporation "RR-043" 1,3 15.24 Ditan Precission "SS-024" 15,363.64 Jacos Industrial Corporation ''TT-0 17" 1.321.92 Jacos Industrial Corporation "TT-024" 612.57 GAD Builders "TT-051" 10,039.50 GAD Builders "UU-014" 34,868.23 Society Glass and Aluminum "UU-020" 3,055.36 Jacos Industrial Corporation "UU-079" 2,641 .82 MOF Company "VV-022" 22,650.00 MOF Company "VV-027" 14,550.00 Fleet Maintenance "VV-038" 14,272.73 Remiqayle Emission "VV-052" 54.55 State Construc tion & Mill "WW-047" 2,149.09 DMB Fire & Safety "WW-053" 1,745.45 Jera General Construction "WW-055" 9,361.97 Standphi l Corporation "WW-071" 87,930.50 Joel Chavez "WW-079" 75,6 10.00 MOF Company "WW-080" 14,550.00 MOF Company "WW-081" 22,050.00 MOF Company "WW-082" 6, 150.00 MOF Company "XX-011" 198.00 MOF Company "XX-014" 6,150.00 L. Armani Trading "XX-030" 2,392.73 State Construction & Mill "XX-034" 3,2 17.27 Pumpcraft Industrial Sales "XX-038" 2, 127.27 MOF Company "XX-085" 3,000.00 ARB Commercial "YY-011" 2,672.73 MAC Tycoon Marketing "YY-041" 2,882.32 MOF Company "YY-076" 3,825.00 Jacos Industrial Corporation "YY-092" 2,827.30 Virgin of Carmel Enterprises "ZZ-008" 960.45 State Construction & Mill "ZZ-079" 586.36 State Construction & Mill "ZZ-080" 1,335.45 State Construction & Mill "ZZ-081" 435.64 Typo Grafika "ZZ-111" 50.91 Input VAT on purchase of services supported by an OR 6.) without the word "VAT" after the seller's TIN D & F Marble "QQ-032" 11.454.55 Input VAT on importations supported only by BOC IEIRDs 7.) which do not have machine validation Fuii Tradina "CCC-011" 26.00 51 I

DECISION C.T.A. CASE NO. 7627 Ametek "CCC -012" 1.422.00 Emerson Process "DDD-006" 89.00 Su llair Corporation "DDD-007" 71.00 AVM Compnay "DDD-011" 88.00 Input VAT supported by lnvoices/ORs not within the period 8.) of claim Commonwealth Insurance "QQ-026" 4,589.00 London Industrial "QQ-035" 88,846.60 Total P928,856.41 Therefore , out of the total claimed input taxes of P73,711 ,58 1.30, only the amount of P71 ,59 5,7 64.50 is duly substantiated by the required documentary evidence under Sections 11 O(A) and 113(A) of the NIRC of 1997, as implemented by Sections 4.104-1, 4.104-5, and 4.108-1 of Revenue Regulations No . 7-95, which is computed as follows: Amount of Claim P73,711,581.30 Less :Disallowances Per ICPA Report 1,186,960.39 Per this Court's verification 928,856.41 Substantiated Input VAT P71 ,595,764.50 As to the third and fourth requisites, petitioner's Quarterly VAT Returns for the first three quarters of 2005 27 and Monthly VAT Declaration for October 200528 showed that it only had zero-rated sales/receipts. This means that the substantiated input VAT of P71,595,7 64.50 was not applied against any output VAT and can be entirely attributed to the reported zero-rated sales/receipts of P5,711,834,420.80. Although the claimed input tax was carried over in petitioner's Monthly VAT Declaration for November 2005 29 , the same was 27 Exhibits "F", " 1", and " L" 28 Exhibit "M" 29 Exhibit "N" I 52

DEC ISIO N C.T.A. CASE NO . 7627 Page 17 o f 19 deducted as "VAT Refund/TCC Claimed" 30 from the Total Available Input Tax as of November 30, 2005. Hence, petitioner could not have possibly utilized the claimed input ta x in the succeeding quarters. Finally, with reference to the requisite that the claim for refund must be filed within the two-year period provided by law, this Court finds that petitioner's claim was seasonably filed . The reckoning of the two-year prescriptive period for the filing of a c laim for input VAT refund commences from the date of filing of the corresponding Quarterly VAT Return .3 1 The earliest period covered by the instant claim is the first quarter of 2005, for which petitioner filed its Quarterly VAT Return on April 25, 2005.32 Petitioner had until April 25, 2007, at the earliest, within which to file the instant claim both, in the administrative and judicial levels. Clearly, the administrative claims filed on October 28, 2005 33 and December 7, 2005 34 , as well as the Petition for Review filed on April 24, 2007, fall within the two- year prescriptive period. In sum , this Court finds petitioner to have sufficiently proven that it is entitled to a refund representing unutilized input VAT attributable to zero-rated sales for the p e riod c overing January 1, 2005 to October 31, 2005, but in the reduced amount of P71 ,595,764.50. WHEREFORE, premises c onsidered, the Petition for Review is hereby PARTIALLY GRANTED. Acc ordingly, respondent is hereby ORDERED to REFUND in 30 Exhibit " N-4" 3 l Atlas Co nsolida ted Mining a nd Developmen t Corpora tio n vs. Commissio ner o f Int ernal Revenue. G .R. Nos. 141 104 a nd 1487 63. June 8, 2007 32 Exhibit " F- 1" 33 Exhibit "0- 1" 3 4 Exhibit " P- 1" I 53

DECISION C.T.A. CASE NO. 7627 Page 18 o f 19 favor of petitioner the reduced amount of P71 ,595,764.50, representing petitioner's unutilized excess input VAT attributable to its zero-rated sales of electricity to NPC for the period covering January 1, 2005 to October 31, 2005. SO ORDERED. ;ociate Justice ~~~q/H~ AMELIA COTANGCO-MANALASTAS Associate Justice ATTESTATION I attest 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 . 54

DEc;ISION C.T.A. CASE NO. 7627 CERTIFICATION Pursuant to Article VIII, Section 13 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. L~~~~ ERNESTO D. ACOSTA Presiding Justice 55