TOLEDO POWER COMPANY v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION ************* TOLEDO POWER COMPANY, C.T.A. CASE NO. 7471 Petitioner, Members: -versus- ACOSTA, Chairperson BAUTISTA, and CASANOVA, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, OCJ ~ Respondent. x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION CASANOVA, J.: STATEMENT OF THE CASE This is a Petition for Review that seeks for the issuance of tax credit certificate or refund of unutilized excess input value-added tax for the four quarters of taxable year 2004 arising from its domestic purchases of taxable goods and services and importation of goods attributable to zero-rated sales in the total amount of P17,443,855.22 . STATEMENT OF FACTS The following are the facts of the case as culled from the records 1~ 1 Joint Stipulation of Facts and Issues, Rollo, pp. 184- 187. l i83

DECISION C.T.A. Case No. 7471 Petitioner Toledo Power Company is a general partnership duly organized and existing under Philippine laws, with principal office at Sangui, Toledo City, Cebu. Respondent is the duly appointed Commissioner of Internal Revenue empowered to perform the duties of said office including, among others the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes, with office address at SIR National Office Building, Agham Road, Diliman, Quezon City. Petitioner is principally engaged in the business of power generation . It is registered with the Bureau of Internal Revenue (SIR) as a Value-Added Tax (VAT) taxpayer in accordance with Section 236 of the National Internal Revenue Code (NIRC) of 1997 with Tax Identification No. 003-883-626 and SIR Certificate of Registration bearing RDO Control No. 94-083-000300. Effective June 26, 2001, pursuant to Republic Act (RA) No. 9136, otherwise known as the Electric Power I ndustry Reform Act of 2001 (EPIRA), sales of generated power by generation companies became Value Added Tax (VAT) zero- rated. This is bolstered in Rule 5, Section 6 of the Implementing Rules and Regulations to Implement EPIRA (IRR) by the Department of Energy. Petitioner is registered with and authorized by the Energy Regulatory Commission (ERC) to operate facilities used in the generation of electricity. 2 Pursuant to EPIRA, an ERC-registered generation company's sale of generated power became VAT zero-rated beginning on June 26, 2001.e. 2 ERC Certifi cate of Compl iance COC No. 04"06-GXT61-0066 1 (' J. ... 0 'J

DECISION C.T .A. Case No. 7471 On 26 April 2004, petitioner filed its quarterly VAT return for the first quarter of taxable year 2004 which reflected an alleged excess or unutilized input VAT credits of P1,906,965.78. On 26 July 2004, petitioner filed its quarterly VAT return for the second quarter of taxable year 2004, which reflected an alleged excess or unutilized input VAT credits of P2,602,997.00. On 25 October 2004, petitioner filed its quarterly VAT return for the third quarter of taxable year 2004, which reflected an alleged excess or unutilized input VAT credits of P4,446,652.54. On 25 January 2005, petitioner filed its quarterly VAT return for the fourth quarter of taxable year 2004, which reflected an excess or unutilized input VAT credits of P8,487,239.90. For the four quarters of 2004, petitioner's VAT returns reflect an alleged incurred and accumulated input VAT in the total amount of PhP17,443,855.22 on its domestic purchases of taxable goods and services and importation of goods, which purchases and importations are all allegedly attributed to its zero-rated sale of power generation services. Believing that its input taxes are refundable, and pursuant to the procedure prescribed in Revenue Regulations No. 7-95, as amended, petitioner filed on December 23, 2004 with the BIR RDO No. 83 its administrative claim3 for refund on unutilized input VAT for the four (4) quarters of 2004 in the total amount of P17,443,855.22-a, � 3 Petition for Review, Annex J l i 87

DECISION C.T.A. Case No. 7471 As its basis for the instant claim for refund or issuance of tax credit certificate, petitioner invoked Section 112(A) of the 1997 NIRC, as amended. To date, the application for refund by herein petitioner remains unacted by the respondent. Hence, this Petition for Review4 filed on April 24, 2006. Respondent, in his Answer5 interposed the following defenses, to wit: "5. Petitioner's alleged claim for refund is subject to administrative investigation by the Bureau; 6. Petitioner must prove that it paid the alleged VAT input taxes for the periods stated; 7. Petitioner must prove that its sales of electricity is subject to VAT at zero percent (0%) rate; 8. Petitioner must prove that the alleged input VAT is directly attributable to such zero-rated sales; 9. Petitioner must prove that its alleged unutilized input VAT has not been applied against any output tax liabilities; 10. Petitioner must prove that the alleged claim was filed within the two (2) year period prescribed in Section 112 of the NIRC of 1997; 11. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund, and failure to sustain the burden is fatal to the claim for refund; 12. Claims for refund are construed strictly against the claimant for the same partake of the nature of exemption from taxation." After trial on the merits, this case was submitted for decision on April 15, 20096 considering petitioner's Memorandum filed on April 7, 2009; without respondent's Memorandum..aa 4 Rollo, p. 1. 5 Rollo, p. 135. 6 Rollo, p. 330. 8 � , ( I .l .l.O

DECISION C.T.A. Case No. 7471 STATEMENT OF ISSUES The parties submitted the following issues7 for this Court's resolution: "1. Whether or not the power generation services rendered by petitioner are subject to zero percent (0%) VAT. 2. Whether or not petitioner has excess input VAT for the four quarters of 2004 in the amount of Php17,443,885.22 arising from its domestic purchases of taxable goods and services and importation of goods. � 3. Whether or not petitioner's alleged excess input VAT for the four quarters of 2004 are directly attributed to its alleged zero-rated sales of power generation services. 4. Whether or not Petitioner's alleged excess input VAT for the four quarters of 2004 have not been applied against any output tax liabilities or utilized/applied in the subsequent taxable year. 5. Whether or not petitioner's alleged unutilized/unapplied excess input tax are properly sustained by documentary evidence required by law. 6. Whether or not the claim for refund was filed within the two year period prescribed by law. 7. Whether or not petitioner is entitled to refund of its alleged unutilized unapplied excess input VAT for the four quarters of 2004 in the amount of Php17, 443,885.22." THE COURT'S RULING To begin with, let us first determine if petitioner's sales are zero-rated. Section 6 of R.A. 9136 provides that ''sales ofgenerated power by generation companies shall be value-added tax zero-rated. " Thus, beginning the effectivity of R.A. No. 9136 (EPIRA) on June 26, 2001, the pertinent provisions of the NIRC of 1997 were deemed amended by modifyin~ 7 Rollo, 187-188. 1i 89

DECISION C.T.A. Case No. 7471 the VAT rate applicable to sales of generation companies from ten percent (10%) to zero percent (0%). However, in order to qualify for zero-rating, petitioner must prove that: 1) it is a generation company, and 2) it derived sales from power generation. In the instant case, petitioner is principally engaged in the business of power generation and the subsequent sale thereof to the National Power Corporation (NPC), Cebu Electric Cooperative III (CEBECO), and Visayan Electric Company, Inc. (VECO). Perusal of the records reveals that petitioner's Certificate of Compliance with the Energy Regulatory Commission (ERC)8 pursuant to the Implementing Rules and Regulations of Republic Act No. 9136, proves that it qualifies under Section 4(x) of EPIRA as a generation company, in relation to Section 6 of the EPIRA, which reads: "Section 4. Definition of Terms. - (x) "Generation Company" refers to any person or entity authorized by the ERC to operate facilities used in the generation of electricity; " "Section 6. Generation Sector. - Generation of electric power, a business affected with public interest, shall be competitive and open. Upon the effectivity of this Act, any new generation company shall, before it operates, secure from the Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the standards set forth in this Act, as well as health, safety and environmental clearances from the appropriate government agencies under existing laws. XXX Pursuant to the objective of lowering electricity rates to end- users, sales of generated power by generation companies shall be value added tax zero-rated." (Emphasis supp/ied).-{9 8 Petition for Review, An nex B. l .i.JO

DECISION C.T.A. Case No. 7471 Clearly, petitioner's sales of electricity to NPC, CEBECO, and VECO for the four quarters of 2004 are subject to 0% VAT. As part of its documentary evidence, petitioner submitted to this Court its VAT invoices and official receipts9, together with its Quarterly VAT Returns for the four quarters of taxable year 2004 showing zero-rated sales amounting to P1,261,215,673.39, detailed as follows: Exhibit No. Period Covered Zero-Rated Sales 1st qtr 2004 p 312,773,223.94 c 2nd qtr 2004 274,547,070.37 J 3rd qtr 2004 362,858,153.18 4th qtr 2004 311 ,037 , 225 .90 Q p 1,261,215,673.39 z Total After careful perusal of the documents presented, this Court finds that only the zero-rated sales of P1,228,469,091.79 were duly substantiated by petitioner's VAT official receipts. The details of which are : Customer Exhibit Zero- Rated Sales Visayan Electric Company Inc. ll.-2 p 77,240,857.87 CEBECO III ll.-3 16,075,301.19 Visayan Electric Company Inc. l l . -4 75,638,894.40 CEBECO III ll.-5 17,655, 388 .95 Visayan Electric Compa ny Inc. ll.-6 79,667,051.51 NPC ll.-7 30,986, 94 1.00 Visaya n Electric Company Inc. ll.-8 72,066,013 .52 CEBECO III ll.-9 17, 346,180 .00 Visayan Electric Company Inc. l l .- 10 76,845,753.40 CEBECO III ll.-11 17,757,050.76 Visayan Electric Company Inc. ll.-12 73,555,509.43 CEBECO III ll.-1 3 18,769,776.96 Visayan Electric Company Inc. ll.-14 72,597,171.99 CEBECO III ll.-15 631, 123.42 CEBECO III ll.-16 17, 317,468 .08 Visayan Electric Company Inc. ll.-17 68,783,953.72 NTC ll.-18 40,430,916.33 NTC l l .- 19 9,985,958 .38 NTC ll.-20 27,089,231.54 ll.-21 NTC 13,79 1 ,786 . ~ 9 Exhibits ll.-1 to zz-34a. . ( o 'I 1 l. ;J i

DECISION C.T.A. Case No. 7471 CEBECO III ll.-22 17,465,215.74 Visayan Electric Company Inc. ll.-23 74,057,195.31 CEBECO III ll.-24 CEBECO III ll.-25 44,272 .00 CEBECO III ll.-26 1,095,697.42 CEBECO III ll.-27 Visayan Electric Company Inc. ll.-28 578,155 .17 CEBECO III ll.-29 17,300,639.07 Visayan Electric Company Inc. ll.-30 77,860,207.55 Visayan Electric Company Inc. ll.-3 1 21,507,150.25 CEBECO III ll.-32 92,293,280.29 CEBECO III ll.-33 Visayan Electric Company Inc. ll.-34 263,733.71 Total 410,364.03 18,562,137.14 82 798 714.93 p 1,228,469,091.79 Considering that petitioner's services for as much as P1,228,469,091.79 are subject to 0% VAT pursuant to EPIRA, it can, therefore, claim for a refund of input taxes attributable thereto in accordance with Sections 110(8) and 112(A) of the National Internal Revenue Code (NIRC) of 1997, which read: "Sec.110. Tax Credits.- XXX "(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. Any input tax attributable to the purchase of capital goods or zero-rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112." "SEC.112. Refunds or Tax Credits ofInput 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: Provide~ however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance ~ li.9 2

DECISION C.T.A. Case No. 7471 with the ru les and reg ulations of the Sangko Sentral ng Pilipinas (SSP): Providect furthe0 That where the taxpayer is engaged in zero-rated or effectively zero-rated sales and also in taxable or exempt sale of goods or properties or services, and t he 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." Let us now resolve the remaining issues which are interrelated and boils down to the issue of whether or not the claim for refund in the amount of P17,443,855.22 is properly substantiated. Petitioner submitted various suppliers' invoices, official receipts, Bureau of Customs (SOC) Import Entries and Internal Revenue Declarations (IEIRDs), SOC and bank official receipts 10 in support of its claimed unutilized input taxes reflected in its Quarterly VAT Returns for the four quarters of 2004, in the amount of P17,648,060.46, broken down as follows: Exhibit No. Per iod Covered In ~ ut Tax 1st qtr 2004 p 1,969,387.33 c 2nd qtr 2004 3rd qtr 2004 2,647,319.23 J 4th qtr 2004 4,499,167.36 8 �5 32�186 .54 Q p 17,648,060.46 z Total As per report of the Court-Commissioned !CPA, Mr. Emmanuel Mendoza of M&Q CPA, summarized his findings as follows 11 : Fin d in as Reference InoutTax Total (Exhibit "888") 1 I nput VAT on domest ic purchases of services supported by VAT ORs. 1st qtr Annex A-1 p 877 333.44 2nd qtr Annex A- 15 855 790.63 3rd qtr Annex A-29 1 810 117.86 p 3 687 403.50 4th qtr Annex A-41 144 161.57 ~ ::a- 10 Exhibits "UU-1" to "UU-345a", "W-1" to "W-448a", "WW-1" to "WW-530" and "XX-1" to "XX-173a", as summarized in Exhibit "BBB", Annexes A- 1 to A-58. 11 Excerpt from Annexes A-1 to A-58 and pages 4 to 9 of Exhibit "BBB" ; l i.S3

DECISION C.T.A. Case No. 7471 2 Input VAT on domestic purchases of goods supported by VAT invoices. 1st qtr Annex A-2 563 142.17 2nd qtr Annex A-16 838 629.08 3rd qtr Annex A-30 870 865.15 4th qtr Annex A-42 1 027 394.68 3 300,031.08 3 Input VAT on domestic purchases of services supported by documents other than ORs. 1st qtr Annex A-3 1 553.99 2nd qtr Annex A-1 7 35.75 3rd qtr Annex A-31 1 425.96 4th qtr Annex A-43 119.63 3 135.33 4 Input VAT on domestic purchases of goods supported by documents other than invoices. 1st qtr Annex A-4 1442.09 2nd qt r Annex A- 18 2 845.21 3rd qt r Annex A-32 157.88 4th qtr Annex A-44 8 745.09 13 190.27 5 Input VAT on domestic purchases of services supported by ORs with no BIR authority to print. 1st qtr Annex A-5 1 310.49 4th qtr Annex A-45 1 201.92 2 512.41 6 Input VAT on domestic purchases of goods supported by invoices with no BIR authority to print. 1st qtr Annex A-6 252 689.43 2nd qtr Annex A- 19 237 306.81 3rd qtr Annex A-33 412 192.69 4th qtr Annex A-46 1 490.90 903 679.83 7 Input VATon domestic services supported by ORs with pre-printed "TIN " and " Non VAT/ NV". 1st qtr Annex A-7 90 .00 2nd qtr Annex-20 2 780.90 2 870.90 8 Input VAT on domestic purchases of services supported by ORs dated before the taxable year of claim. 1st qtr Annex A-8 4 075.91 4 075.91 9 Input VAT on domestic purchases of goods supported by invoices dated before the taxable year of claim. 1st qt r Annex A-9 46 933.87 2nd qtr Annex A-23 2 295.45 4th qtr Annex A-48 62 .67 49,291.99 10 Input VAT on domestic purchases of services supported by ORs of which the amount does not tally with the amount indicated in the Schedule. 1st qtr Annex A-10 8 449.84 2nd qtr Annex A-24 1 759.23 3rd qtr Annex A-36 23 846.09 4th qtr Annex A-50 8 250.08 42 305.24 11 Input VAT on domestic purchases of goods supported by invoices with pre-printed "TAN ". 1st qtr Annex A-ll 681.50 681.50 12 Input VAT on importation of goods supported by ORs issued by_BOC. 1st qtr An nex A-12 242.00 242.00 13 Input VAT on importation of goods supported by BOC IEIRD and ORs issued by BOC. 1st qtr Annex A- 13 41 721.00 2nd qtr Annex A-25 156 878.00 3rd qtr Annex A-37 226 939.00 425 538.00 14 Input VAT on domestic purchases and goods with no available supporting documents presented to us. 1st qtr Annex A-14 169 721.60 2nd qtr Annex A-28 47 021.42 3rd qtr Annex A-40 20 710.24

DECISION C.T.A. Case No. 7471 4th qtr Annex A-57 4 076 797.57 4 314 250.83 15 Input VAT on domestic purchases of services supported by ORs with pre-printed "TIN " only. 2nd qtr Annex A-21 327.75 327.75 16 Input VAT on domestic purchases of goods supported by invoices with pre- printed "TIN" only. 2nd qtr Annex A-22 90.00 90.00 17 Input VATon importation of goods supported by BOC IEIRD only. 2nd qtr Annex A-26 454 902.00 454 902.00 18 Input VATon importation of goods supported by BOC IEIRD and ORs issued by Bank. 2nd qtr Annex A-27 46 657.00 3rd qtr Annex A-38 691 258.00 4th qtr Annex A-54 512 912.00 1 250 827.00 19 Input VAT on domestic purchases of services supported by photocopied ORs. 3rd qtr Annex A-34 18 183.30 4th qtr Annex A-52 16 883.62 35 066.92 20 Input VAT on domestic purchases of goods supported by photocopied invoices 1st qtr Annex - 2nd qtr Annex- 3rd qtr Annex A-35 26 299.95 4th qtr Annex A-53 44 165.97 70 465.92 21 Input VATon importation of goods supported by photocopied BOC IEIRD. 3rd qtr Annex A-39 397 173.00 397 173.00 22 Input VAT on domestic purchases of services supported by ORs dated after the taxable year of claim. 4th qtr Annex A-49 106 705.21 106 705.21 23 Input VAT on domestic purchases of goods supported by invoices of which the amount does not tally with the amount indicated in the Schedule. 4th qtr Annex A-51 45 039.09 45 039.09 24 Input VAT on importation of goods supported by photocopied IEIRD and ORs issued by BOC. 4th qtr Annex A-55 194 952.00 194 952.00 25 Input VAT on importation of goods supported by photocopied IEIRD and ORs issued by Bank. 4th qtr Annex A-56 1 387 804.00 1387 804.00 26 Input VAT on importation of goods with no available documents presented to us. 4th qtr Annex A-58 955 498.78 955 498.78 TOTAL p 17 648 060.46 This Court finds the !CPA report to be in order. Hence, the amount of P9,118,943.58 (item nos.1/ 2, 12/ 13/ 1'0 and 18) is ascertained to be properly substantiated while the amount of P8,529,116.88 should be denied for the grounds above-stated. To recapitulate, the said disallowances are as follows: Findings Disallowances Input VAT on domestic purchases of services supported by documents other than ORs. p 3 135.33 Input VAT on domestic purchases of Qoods supported by documents other than invoices. 13 190.27 Input VAT on domestic purchases of services supported by ORs with no BIR authority to print. 2 512.41 Input VAT on domestic purchases of goods supported by invoices with no BIR authority to print. 903 679.83 li.93

DECISION C.T.A. Case No. 7471 Inj)ut VAT on domestic services suj)ported by ORs with pre-printed '11N" and "Non VAT/NV". 2 870.90 4,075.91 Input VAT on domestic purchases of services supported by ORs dated before the taxable year of 49 291.99 claim . 42 305.24 Input VAT on domestic purchases of goods supported by invoices dated before the taxable year of claim. Input VAT on domestic purchases of services supported by ORs of which the amount does not tally with the amount indicated in the Schedule. Input VAT on domestic purchases of goods supported by invoices with pre-printed "TAN". 681.50 4 314 250.83 Input VAT on domestic purchases and goods with no available supporting documents presented to us. Input VAT on domestic purchases of services supported by ORs with pre-printed "TIN" only. 327.75 Input VAT on domestic purchases of goods supported by invoices with pre-printed '11N" only. 90.00 Input VAT on domestic purchases of services supported by photocopied ORs. 35 066.92 Input VAT on domestic purchases of goods supported by photocopied invoices 70 465.92 Input VAT on importation of goods supported by photocopied BOC IEIRD. 397 173.00 Input VAT on domestic purchases of services supported by ORs dated after the taxable year of claim. 106 705.21 Input VAT on domestic purchases of goods supported by invoices of which the amount does not tally 45 039.09 with the amount indicated in the Schedule. 194 952.00 Input VAT on importation of goods supported by photocopied IEIRD and ORs issued by BOC. Input VAT on importation of goods supported by photocopied IEIRD and ORs issued by Bank. 1 387 804 .00 Input VAT on importation of goods with no available documents presented to us. 955,498.78 TOTAL p 8 529,116.88 Moreover, this Court finds that the input VAT claim should be further decreased by P67,603.26 for the following reasons: FINDINGS Exhibit No. Inout VAT Total 1 Input VAT on domestic purchases of goods/services supported by "TIN V" Invoice/ORs. Alas Customs Brokerage UU-1 p 199.34 Alas Customs Brokerage UU-2 90.91 Alas Customs Brokerage UU-3 342 .20 Stitches Wear Industries UU-62 2 345 .45 Alas Customs Brokerage W-1 318 .94 Alas Customs Brokerage W-2 458.28 Alas Customs Brokerage W-3 801.76 Alas Customs Brokerage W-4 150.00 Stitches Wear Industries W-72 1 604.55 HL Tractors Parts W-287 772 .73 HL Tractors Parts W-288 1 454.55 NTPI International Inc. WW-380 6 050.00 Alas Customs Brokerage WW-2 347.68 li9 G

DECISION C.T.A. Case No. 7471 Alas Customs Brokerage WW- 3 498 .53 Alas Customs Brokeraqe WW-4 318.94 Alas Customs Brokeraqe WW-5 1 586.10 Alas Customs Brokerage WW -6 864.24 Alas Customs Brokerage WW-7 3 18 .94 HL Tractor Parts XX-77 425.25 HL Tractor Parts XX-78 116.36 Philippine Packings & Seals Corp. XX-99 842.97 Valley Technoloqies Inc. XX - 128 5 300.00 p 25 207.72 2 I nput VAT on domestic purchases of services supported by OR issued not in the name of the petit ioner. UCPB General Insurance Co. Inc. UU-78 905.47 Innove Communications W -39 4 600.00 Innove Communications W-40 4 600.00 Innove Communications W-41 4 214.20 Innove Communications W-42 4 600.00 Fortune Guarantee WW-43 3 214 .91 22134.58 3 I nput VAT on domestic purchases of goods/services supported by undated invoice/OR. Gilbros Enterprises UU-148 47.27 Yumphil Industries Inc. UU -24 1 700 .00 Ostrea Mineral Laboratories W-53 1874.55 V & U Enterprises W -392 160.73 Macro Tires Inc. WW-330 941.82 Specialized Bolt Center WW-427 254 .55 Specialized Bolt Center WW-428 1 486.36 5 465.28 4 I nput VAT on domestic purchases of goods supported by invoice dated not within the period of claim. Zenith Hardware Corp. UU-242 174.55 174.55 5 I nput VAT on domestic purchases of goods supported by invoice without BIR authority to print. Monark Equipment Corp. W-314 248.18 248.18 6 Input VATon domestic purchases of services supported by Non-Vatable OR. Birkart Globistics Philippines Inc. W-314 4 725.39 4 725.39 7 Input VAT on domestic purchases of goods supported by "TIN" invoice. Caltex WW-124 1 601.49 Caltex WW- 125 2 427.89 4029.38 8 Input VAT on domestic purchases of services supported byOR without "TIN VAr'. Druqcheck Philippines Inc. XX-6 318 . 18 318.18 9 Input VAT on domestic purchases of services supported by "TAN" OR. Cebu Legacy Enterprises XX-4 1 454.55 1454.55 10 I np ut VAT on domestic purchases of services supported by documents other than VAT OR. Pertian Industries Corp. XX-97 436.36 Pertian Industries Corp. XX-98 3 409.09 3 845.45 TOTAL p 67 603.26 Thus, petitioner was able to support by proper VAT invoices and/or official receipts input taxes in the amount of P9,051,340.32, computed as follows~ 1 ..ir~� 7

DECISION C.T.A. Case No. 7471 Reported Input VAT p 8,529,116.88 p 17,648,060.46 Less: Disallowan c:~s 67,603.26 8,596,720.14 Per CPA Findings p 9,051,340.32 Per this Court's Findings Substantiated Input VAT However, a portion of the substantiated input VAT of P9,051,340.32 shall be applied against petitioner's reported output VAT liability of P204,205.24, broken down as follows: Exhibit No. Period Covered OutgutTax 1st qtr 2004 p 62,421.55 c 2nd qtr 2004 44,322.23 3rd qtr 2004 52,514.82 J 4th qtr 2004 44,946.64 Q p 204,205.24 z Total Hence, only the remaining input VAT of P8,847,135.08 can be attributed to the entire zero-rated sales as declared by petitioner in the amount of P1,261,215,673.39 and only the input VAT of P8,617,425.41 is attributable to the substantiated zero-rated sales of P1,228,469,091.79, computed as follows: Substantiated Input VAT p 9,051,340.32 Less: Output VAT 204,205.24 Excess Input VAT p 8,847,135.08 Substantiated Zero-Rated Sales P1,228 ,46 9,091.79 Divided by Total Reported Zero-Rated Sales + 1,261 ,215,673.39 Multiplied by Substantiated Excess Input VAT X 8,847,135.08 Input VAT attributable to Substantiated Zero-rated Sales p 8,617,425.41 As to the issue of whether or not the excess input VAT for the four quarters of 2004 have not been applied or utilized against its output tax liabilities or utilized/applied in the subsequent taxable years, petitioner presented its Amend~~ l i9 8

DECISION C.T.A. Case No. 7471 Quarterly VAT Return for the 4th quarter of taxable year 200512, that was electronically filed through the Electronic Filing & Payment System or EFPS of the BIR, showing that its unutilized input VAT for the taxable year 2004 amounting to P17,443,855.22, together with the unutilized input taxes for the taxable year 2003 in the amount of P15,838,539.48 13 or in the aggregate amount of P33,282,394.69 14 , , was deducted from the Total Available Input Tax of P48,140,845.78 as of the fourth quarter of year 2005. Hence, the subject claim no longer formed part of the excess input VAT of P8,366,829.33 as of the 4th quarter of 2005 which was to be carried over/applied to the succeeding 1st quarter of 2006. Regarding the issue of whether or not the claim for refund/ tax credit certificate was filed within the two-year prescriptive period, this Court rules in the affirmative. The reckoning of the two-year prescriptive period for the filing of claim for VAT refund starts from the date of filing of the corresponding quarterly VAT return. The earliest quarter covered by the subject claim is the first quarter of 2004 for which petitioner filed its VAT return on April 26, 200415 (April 25, 2004 being on a Sunday). Counting from this date, petitioner had until April 26, 2006 within which to file its claim administratively and judicially~ 12 Exhibit "00". 13 As cited in "Exhibit "JJ". 14 Item 25A of Exhibit "00". 15 Exhibit "B-3". 1 �. r::~ ,._\.. v ...

DECISION ~. C.T.A. Case No. 7471 Hence, petitioner's administrative claim filed on December 23, 200516 and the Petition for Review filed on April 24, 2006 fall within the two-year prescriptive period. In view of the foregoing, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is ORDERED to REFUND OR ISSUE A TAX CREDIT CERTIFICATE in the amount of EIGHT MILLION SIX HUNDRED SEVENTEEN THOUSAND FOUR HUNDRED TWENTY FIVE PESOS AND 41/100 (P8,617,425.41) representing unutilized input VAT arising from petitioner's domestic purchases of goods and services and importations of goods which are attributable to zero-rated sales for the taxable year 2004. SO ORDERED. ~ CAESAR A. CASANOVA Associate Justice WE CONCUR : ~ ~1Sl- 0~ ( With Concurring and Dissenting Opinion ) ERNESTO D. ACOSTA 16 Exhibit "II". 1 ~ 00

�' DECISION ' C.T.A. Case No. 7471 n� Page 17 of 17 ' 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 before the case was assigned to the writer of the opinion of the Court's Division. 0 Q_ ~\.C. ..,_A- ERNESTO D. ACOSTA Presiding Justice Chairman, First Division 1 ~01