San Roque Power Corporation vs. Commissioner of Internal Revenue

DECISION

CASTANEDA, JR., J.:

This case involves a claim for refund or issuance of tax credit certificate in the sum of P142,256,438.22, allegedly representing unutilized input value- added tax (VAT) paid on purchases of capital goods and other taxable goods and services for the period covering January 1, 2003 to December 31 , 2003. San Roque Power Corporation (Petitioner) 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.1 It was incorporated on October 14, 1997, whose primary purpose is "to design, Jk- 1 Par. 1, Admitted Facts, Joint Stipulation of Facts and Simplification of Issues (JSFSI), Docket, p. 74. J r C.T.A. CASE NO. 71 73 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".2 Respondent, on the other hand, is the Commissioner of the Bureau of Internal Revenue (BIR) who was 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 law. He holds office at the BIR National Office Building, Diliman, Quezon City.3 Petitioner 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- 017-501 .4 It is likewise registered with the Board 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 11 , 1998.5 On October 11 , 1997, petitioner entered into a Power Purchase Agreement (PPA) with the National Power Corporation (NPC) to develop the hydropotential of the Lower Agno River and generate additional power and energy for the Luzon Power Grid, by building the San Roque Multi-purpose Jt- 2 Par. 5, Stipulated Facts, JSFSl, Docket, p. 75. 3 Par. 2, Admitted Facts, JSFSI, Docket, p. 74. 4 Par. 7, Stipulated Facts, JSFSI, Docket, p. 75. 5 Par. 8, Stipulated Facts, JSFSI, Docket, p. 76. ~ 8 5

Project; an indivisible project consisting of the power station, the dam and spillway, and other related facilities, located in San Manuel, Pangasinan.6 The PPA provides, among others, that petitioner shall be responsible for the design, construction, installation, completion, testing and commissioning of the Power Station and shall operate and maintain the same, subject to NPC instructions. During the cooperation period of twenty-five (25) years commencing from the completion date of the Power Station, NPC will take 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. 7 Relative to the construction and development of the San Roque Multi- Purpose Project, petitioner allegedly incurred excess input VAT in the amount of P142,256,438.22, covering the period from January 1, 2003 to December 31 I 2003.

During the same period, petitioner purportedly commenced commercial operations and generated sales of electricity to NPC in the amount of P4,870,723,381 .00.

Petitioner believes that its sales of electricity to NPC qualify for VAT zero-rating under Section 1 08(8)(3) of the National Internal Revenue Code (NIRC) of 1997 in relation to Section 13 of Republic Act (RA) No. 6395, otherwise known as the NPC Charter. For the four quarters of 2003, petitioner filed with the BIR its Quarterly VAT Returns, including amendments thereto, reflecting the alleged excess ?c- 6 Pars. 6 and 9, Stipulated Facts, JSFSI, Docket, pp. 75 and 76. 7 Pars. II and 12, Stipulated Facts, JSFSI, Docket, p. 76. !JBG Exh F L 0 s

C.T.A. CASE NO. 71 73 input VAT in the amount of P142,256,438.22 and zero-rated sales of electricity in the amount of P4,870,723,381 .02 as follows: Input VAT Zero-rated Output Domestic Importation 2003 Sales/Receipts VAT Purchases of Goods Excess 1st Qtr - P83,676.97 p 18,856,186.54 p 365,795.00 p 19,138,304.57 2nd Qtr P1 ,081 ,634,328.00 0.00 27,126,814.46 208,366.00 27,335,180.46 3rd Qtr 1 ,951 ,602,941 .92 0.00 9,925,652.31 3,352,178.50 13,277,830.81 4th Qtr 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, 150,424.50 P142,256,438.22 On November 5, 2004, petitioner filed with the BIR four (4) letters claiming refund of the total amount of P142,256,438.22, representing unutilized excess input VAT, as declared in its VAT Returns for the four quarters of 2003 in the sum of P142,256,438.22. 8 On February 24, 2005, petitioner filed with the BIR an additional claim in the amount of P5,753, 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 , 2002.9 However, upon verification that such error was already corrected in its records and that there was no basis for the said additional claim, petitioner filed a letter with the BIR on March 22, 2005 to withdraw the refund claim of P5,753, 120.48.10 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 respondent, petitioner 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 ~ 8 Exhibits "U', "V", "W", "X" and "Y". 9 Exhibit "Y".

10 Exhibit "Z".

587 in the amount of P142,256,438.22, 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, respondent raised the following Special and Affirmative Defenses: "4.

Petitioner's alleged claim for refund/tax credit is subject to administrative routinary examination/investigation by the Bureau's Revenue District No. 8 in Urdaneta City, Pangasinan.

5.

Petitioner failed miserably to show that the total amount of Php: 142,256,438.22 representing excess input VAT on purchases of capital goods and services for the period January 1 to December 31 , 2003. 6.

Taxes paid and collected are presumed to have been paid in accordance with law; hence, not refundable. 7.

In an action for tax 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 petitioner 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 are construed strictly against the taxpayer as they partake the nature of exemption from tax." During the trial on the merits, petitioner presented documentary and testimonial evidence. Respondent, on the other hand, submitted this case for decision without presenting any witness. Upon receipt of the parties' Memoranda, the case was deemed submitted for decision on May 7, 2008. fk-- 588 The issues 11 stipulated by the parties for this Court's resolution are as follows:

"1. Whether or not Petitioner's sales are subject to VAT at effectively zero percent (0%) rate;

2. Whether or not Petitioner incurred input taxes which are attributable to its effectively zero-rated transactions;

3. Whether or not Petitioner's importation and purchases of capital goods and related services are within the scope and meaning of 'capital goods' under Revenue Regulations No. 7-95;

4. Whether or not Petitioner's input taxes are sufficiently substantiated with VAT invoices or official receipts;

5. Whether or not Petitioner is entitled to a refund of VAT input taxes claimed. "

Petitioner anchors its claim on Sections 112(A) and (B) of the NIRC of 1997 which state as follows: "SEC. 112. Refunds or Tax Credits of Input 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: Provided, however, That in the case of zero- rated sales under Section 1 06(A)(2)(a)(1 ), (2) and (B) and Section 1 08(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 Jt- 11 Issues, JSFSI, Docket, pp. 77 and 78. 589 and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales. (B) Capital Goods.- A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes. The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made." The afore-quoted provisions allow the refund/tax credit of excess input VAT in two instances, namely: (1) when the excess input VAT is attributable to zero-rated or effectively zero-rated sales; and (2) when the excess input VAT is attributable to capital goods purchased by a VAT-registered person. As noted by the Court-commissioned auditing firm , Punongbayan and Araullo, in its Report dated December 18, 2006, the input VAT claim of P142,256,438.22 consists of (a) P118,791 ,024.93 input VAT paid on capital goods purchased; and (b) P23,465,413.29 input VAT incurred on non-capital goods/services, broken down as follows: 12 Non-capital 2003 Per Return Capital Goods aoods/services January p 8,376,552.05 p 7,107,311 .52 p 1,269,240.53 February 5,941 ,941 .02 5,389, 717.61 552,223.41 March 4,819,811 .50 3,514,692.90 1,305,118.60 Subtotal p 19,138,304.57 p 16,011 ,722.03 p 3,126,582.54 April p 10,771 ,389.83 p 9,693,940.97 p 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 p 27,335,180.46 p 14,095,97 4.31 p 13,239,206.15 July p 4,409,756.66 p 3,749,735.35 p 660,021 .31 August 5,255,298.60 2,898,474.21 2,356,824.39 September 3,612,775.55 2,591 ,365.69 1,021,409.86 Subtotal p 13,277,830.81 p 9,239,575.25 p 4,038,255.56 12 Exhibit "PP-27".

500

October November December subtotal Total p 2,440,219.14 78,160,805.76 1,904,097.48 82,505,122.38 p 142,256,438.22 p 1,205,337.58 p 1,234,881 .56 76,922,800.49 1 ,238,005.27 1,315,615.27 588,482.21 79,443,753.34 3,061 ,369.04 p 118,791 ,024.93 p 23,465,413.29 The Court shall rule first on petitioner's claim in the amount of P118,791 ,024.93, representing alleged input VAT paid on capital goods purchased.

Pursuant to the earlier quoted provisions of Section 112(8) of the NIRC of 1997, in order to be entitled to a refund/tax credit of input VAT paid on capital goods purchased, petitioner must prove the following :

1. that it is a VAT-registered entity;

2. that input taxes were paid on capital goods imported or locally purchased;

3. that such input taxes were not applied against any output VAT liability; and

4. that the claim for refund was filed within the two-year prescriptive period.

The fact that petitioner is a VAT-registered entity is admitted.13 It was also established that the instant claim of P142,256,438.22 (including the P118,791 ,024.93 input VAT claim on capital goods purchases) is already net of the P83,676.97 output tax declared by petitioner in its amended Quarterly VAT Return for the first quarter of 2003.14 Moreover, the entire amount of P142,256,438.22 was deducted by petitioner from the total available input tax reflected in its Quarterly VAT Return for the fourth quarter of 2004.15 This means that the claimed input VAT of P142,256,438.22 did not form part of the excess input VAT of P31 ,976,709.88 as of the end of the fourth quarter of 2004 that was to be carried-over to the succeeding quarters . ~ 13 Par. 7, Stipulated Facts, JSFSI, Docket, p. 75. 14 Exhibit "F".

15 Exhibit "NN".

591

Further, petitioner's claim for refund/tax credit of excess input VAT was seasonably filed both in the administrative and judicial levels. Pursuant to Section 112(8) of the Nl RC of 1997, the reckoning of the two-year prescriptive period for the filing of a claim for input VAT refund starts from the close of the taxable quarter when the importation or purchase was made. Counting from March 31 , 2003, June 30, 2003, September 30, 2003 and December 31 , 2003, the close of each of the subject taxable quarters of 2003, petitioner had until March 31 , 2005, June 30, 2005, September 30, 2005 and December 31 , 2005 within which to file its claim both in the administrative and judicial levels. Therefore, the four (4) letter claims for refund filed with the BIR on November 5, 200416 and the Petition for Review filed on March 21 , 2005, fall within the two-year prescriptive period. In order to prove that it actually incurred input taxes in the amount of P118,791 ,024.93, petitioner submitted various suppliers' VAT invoices, official receipts, Bureau of Customs (BOC) Import Entries and Internal Revenue Declarations, and BOC or banks' official receipts.17 An examination of these documents reveals that out of the total claim of P118,791 ,024.93, only the amount of P118,090,891.48 represents petitioner's valid input tax while the remaining amount of P700, 133.45 shall be disallowed for the following reasons: ~

Name of Supplier lnv. No.

Exhibit OR No.

1.) Purchases of services supported by official receipts not in the name of petitioner in violation of Sections 113 and 237 of the NIRC of 1997 & Section 4.108-1 of Rev. Reg. 7-95 F. Gutierrez Corporation 239 PP-4-E112 300 F. Gutierrez Corporation 270 PP-4-G175 417 F. Gutierrez Corporation 269 PP-4-G177 417 F. Gutierrez Corporation 337 PP-4-K155 450 F. Gutierrez Corporation 331 PP-4-K156 450 F. Gutierrez Corporation 335 PP-4-K157 450 F. Gutierrez Corporation 336 PP-4-K158 450 F. Gutierrez Corporation 343 PP-4-K160 451 F. Gutierrez Corporation 348 PP-4-K161 451 F. Gutierrez Corporation 333 PP-4-K162 451 F. Gutierrez Corporation 349 PP-4-K163 451 F. Gutierrez Corporation 338 PP-4-K165 451 F. Gutierrez Corporation 365

PP-4-L 171

458 F. Gutierrez Construction 223 PP-4-0151 292 2.) Purchases of services without supporting official receipts in violation of Section 110(A)(1)(b) in relation to Sections 113 and 237 of the NIRC of 1997 and Section 4.108-1 of RR 7-95 Harza Engineering Harza Engineering 3.) Not included per "Schedule of Input VAT Paid on Local Purchases With Original and Appropriate Supporting Documents" (Exhibit PP-4) F. Gutierrez Construction 267 PP-4-G175 417 Raytheon Ebasco Overseas Ltd.

233 PP-4-8208 460 F. Gutierrez Construction 121 PP-4-C138 291 F. Gutierrez Construction 220 PP-4-C140 288 Exhibit Input VAT PP-4-E111 p 35,243.57 PP-4-G174 14,440.91 PP-4-G174 20,023.47 PP-4-K154 2,052.55 PP-4-K154 3,662.01 PP-4-K154 3,528.83 PP-4-K154 5,533.52 PP-4-K159 10,633.20 PP-4-K159 9,449.09 PP-4-K159 7,086.02 PP-4-K159 1,866.25 PP-4-K159 16,301 .72

PP-4-L 170

4,730.71 PP-4-0149 12,171 .00 subtotal p 146,722.85 p 176,332.78 178,567.35 subtotal p 354,900.13 PP-4-G174 p 5,562.07 PP-4-8207 8,533.34 PP-4-C-137 3,596.55 PP-4-C139 180,818.51 subtotal p 198,510.47 Total p 700.133.45 Anent petitioner's averment that the substantiated input VAT claim of P118,090,891.48 pertains to capital goods purchases, petitioner maintains that since its existence and sole purpose is for the production of electricity for sale to NPC, all input VAT incurred by and passed on to petitioner to build and construct the San Roque Multi-Purpose Project, such as the engineering and procurement services, the building of the dam and spillway, and the design ~ 593 services are in the nature of input taxes paid on capital goods pursuant to Section 4.106-1 of Revenue Regulations No. 7-95, which states: "SECTION. 4.106-1. Refunds or tax credits of input tax. - xxx XXX XXX XXX

(b) Capital Goods- xxx XXX XXX XXX 'Capital goods or properties' refer to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section 29(f), used directly or indirectly in the production or sale of taxable goods or services." According to petitioner, the pertinent rules on Property, Plant and Equipment based on International Accounting Standards (lAS) 16 provides: "6. Definitions Property, plant and equipment are tangible assets that:

(a) are held by an enterprise for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and

(b) are expected to be used during more than one period. XXX XXX XXX Cost is the amount of cash or cash equivalents paid or the fair value of the other consideration given to acquire an asset at the time of its acquisition or construction. XXX XXX XXX Recognition of Property, Plant and Equipment

7. An item of property, plant and equipment should be recognized as an asset when:

(a) it is probable that future economic benefits associated with the asset will flow to the enterprise; and

(b) the cost of the asset to the enterprise can be measured reliably. 9'---

XXX XXX XXX Initial Measurement of Property, Plant and Equipment

14. An item of property, plant and equipment which qualifies for recognition as an asset should initially be measured at its cost.

Components of Cost

15. The cost of an item of property, plant and equipment comprises its purchase price, including import duties and non- refundable purchase taxes, and any directly attributable costs of bringing the asset to working condition for its intended use; any trade discounts and rebates are deducted in arriving at the purchase price. Examples of directly attributable costs are:

(a) the cost of site preparation;

(b) initial delivery and handling costs;

(c) installation costs;

(d) professional fees such as for architects and engineers; and

(e) the estimated cost of dismantling and removing the asset and restoring the site, to the extent that it is recognized as a provision under IAS37, Provisions 'Contingent Liabilities and Contingent Assets'."

Indeed, based on the foregoing International Accounting Standards (lAS) 16, petitioner's power plant and related facilities such as the dam and spillway can be classified as capital assets under Property, Plant and Equipment account. Therefore, all costs directly related to the building and construction thereof such as engineering and design services fall within the meaning and scope of capital goods under Section 4.106-1 of Revenue Regulations No. 7-95. However, records disclose that out of the total input tax claim of P118, 791 ,024.93, only P114,206,996.82 is properly attributable to petitioner's purchases of capital goods and formed part of the Property, Plant and p:t:-- 59:i

Equipment account shown in its 2003 Audited Financial Statements.18 The purchases related to the remaining balance of P4,584,028.1219, 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 this remaining balance of P4,584,028.12, petitioner may claim the amount of P4,579,228.12 which was incurred during its commercial operations that started May 1, 2003. Thus, petitioner's entitlement to the input tax of P4,579,228.12 shall be evaluated together with petitioner's claimed amount of P23,465,413.2920 , allegedly representing input tax on non- capital goods/services attributable to effectively zero-rated sales to NPC. Section 112(A) of the NIRC of 1997 allows the refund/tax credit of input tax attributable to zero-rated or effectively zero-rated sales subject to the taxpayer's compliance with the following requisites: 1) there must be zero-rated or effectively zero-rated sales; 2) that input taxes were incurred or paid; 3) that such input taxes are directly attributable to zero-rated or effectively zero-rated sales; 4) that the input taxes were not applied against any output VAT liability; and 5) that the claim for refund was filed within the two-year prescriptive period. J:t- 18 Exhibit "T", Notes to Financial Statements, pages 4, 5 and 9. 19 Exhibit "PP", page I 0, Exhibits "PP-27-1", "PP-27-8" to "PP-27-15". 20 Total Claim Per Petition for Review P142,256,438.22 Less: Input Tax Claim on Capital Goods Purchases 118,791.024.93 Input Tax Claim on Non-Capital Goods/Services P 23 465 413 29 59G

Anent the first requisite, the Court agrees with petitioner that its sale of electricity to NPC is effectively zero-rated pursuant to Section 1 08(8)(3) of the NIRC of 1997 in relation to Section 13 of Republic Act No. 6395, as amended by Presidential Decree Nos. 380 and 938, which are quoted hereunder for easy reference:

"SEC. 108. Value-Added Tax on Sale of Services and Use or Lease of Properties. XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) rate: XXX XXX XXX

(3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate; (Emphasis supplied) "SEC.

13.

Non-profit Character of the Corporation, Exemption from All Taxes, Duties, Fees, Imposts and Other Charges by the Government and Government Instrumentalities. - The Corporation shall be non-profit and shall devote all its returns from its capital investments, as well as excess revenues from its operation, for expansion. To enable the Corporation to pay its indebtedness and obligations and in furtherance of effective implementation of the policy enunciated in Section One of this Act, the Corporation, including its subsidiaries, is hereby declared exempt from the payment of all forms of taxes, duties, fees, imposts as well as costs and service fees including filing fees, appeal bonds, supersedeas bonds, in any court or administrative proceedings." (Emphasis supplied) This Court has consistently held that NPC is an entity with a special charter, which categorically makes it exempt from payment of all taxes, whether direct or indirect, including VAT. Hence, by virtue of the said charter, services rendered by a VAT registered entity like herein petitioner to SJc- !;97 NPC are effectively subject to zero percent (0%) VAT in accordance with Section 1 08(B)(3) of the N I RC of 1997. Moreover, the Supreme Court, in its Resolution dated June 8, 1993, affirmed NPC's tax exemption in the case of Maced a vs. Macaraig, Jr. 21 , in the following manner: "A chronological review of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely tax-exempt from all forms of taxes - direct or indirect.

XXX XXX XXX One common theme in all these laws is that the NPC must be enabled to pay its indebtedness which, as of P.O. No. 938 was P12 Billion in total domestic indebtedness, at any one time, and US$4 Billion in total foreign loans at any one time. The NPC must be and has to be exempt from all forms of taxes if this goal is to be achieved." Further, R.A. No. 9136, otherwise known as the Electric Power Industry Reform Act of 2001 22 , specifically Section 6 thereof, as well as its Implementing Rules and Regulations (IRR)23 confirmed the zero-rated nature of the sale of generated power by generation companies to NPC.24 Likewise, petitioner was granted a Certificate for Zero-Rate by respondent Commissioner, through the Chief of Regulatory Operations Monitoring Division, now the Audit Information, Tax Exemption and Incentive Division, covering the year 2003.25 In its 2003 Quarterly VAT Returns, petitioner's declared zero-rated sales/receipts amounted to P4,870,723,381 .02, broken down as follows :~ 21 223 SCRA 217.

22 took effect on June 26, 2001. 23 took effect on March 22, 2002. 24 Mindanao I Geothermal Partnership vs. Commissioner of Internal Revenue, CTA Case No. 6788, October 13, 2005.

25 Par. 15, Stipulated Facts, JSFSI, Docket, p. 77. 598

Exhibit F Zero-Rated 2003 Sales/Receipts 1st Quarter p - L 2nd Quarter 1,081 ,634,328.00 0 3rd Quarter 1,951 ,602,941 .92 s 4th Quarter 1,837,486,111 .1 0 p 4,870,723,381.02 On the other hand, petitioner's claimed input tax on non-capital goods/services attributable to effectively zero-rated sales amounted to P23,465,413.29, broken down as follows: Input Tax Claim on 2003 Non-capital goods/services January p 1,269,240.53 February 552,223.41 March 1 ,305,118.60 subtotal p 3,126,582.54 April p 1,077,448.86 May 10,088,846.12 June 2,072,911 .17 subtotal p 13,239,206.15 July p 660,021 .31 August 2,356,824.39 September 1,021,409.86 subtotal p 4,038,255.56 October p 1,234,881.56 November 1,238,005.27 December 588,482.21 subtotal 3,06 1,369.04 Total p 23,465,413.29 The claimed input taxes of P3, 126,582.54 and P1 ,077,448.86 for the first quarter of 2003 and for the month of April 2003, respectively, totaling P4,204,031.40 shall be denied outright inasmuch as petitioner started operations only in May 2003 and had no zero-rated sales/receipts for the first quarter of 2003 and for the month of April 2003 to which the said input taxes could be attributed. It is clear from Section 112(A) of the NIRC of 1997 that? 599 the refund/tax credit of input tax is premised on the existence of zero-rated or effectively zero-rated sales. Therefore, only the input tax incurred for the period covering May 1, 2003 to December 31 , 2003 in the amounts of P4,579,228.12 (balance of the claimed input tax on capital goods purchases) and P19,261 ,381.89 (P23,465,413.29 less P4,204,031.40) or in the sum of P23,840,61 0.01 , may be the proper subject of a claim for refund/tax credit under Section 112(A) of the NIRC of 1997.

In support of its declared zero-rated sales/receipts for the period May 2003 to December 2003, petitioner presented official receipts, invoices, confirmation letters and bank statements26, which were summarized in Exhibit "PP-24".

Upon perusal of these documents, the Court finds that out of the declared zero-rated receipts of P4,870, 723,381 .02, only the amount of P170,000,000.00 is duly supported by VAT zero-rated official receipts in accordance with Section 113(A) and Section 1 08(C) of the N I RC of 1997, in relation to Section 4.108-1 of Revenue Regulations No. 7-95. The amount of P170,000,000.00 is detailed as follows: Zero-Rated Exhibit OR No.

OR Date Receipts PP-24-7 183 06/27/03 p 17,000,000.00 PP-24-15 185 07/28/03 21 ,250,000.00 PP-24-23 186 08/27/03 21 ,250,000.00 PP-24-31 187 09/25/03 21 ,250,000.00 PP-24-39 188 10/27/03 21 ,250,000.00 PP-24-47 189 11 /28/03 21 ,250,000.00 PP-24-55 190 12/29/03 21 ,250,000.00 PP-24-63 194 01/26/04 21 ,250,000.00 PP-24-70 195 02/27/04 4,250,000.00 Total p 170,000,000.00 26 Exhibits "PP-24-1" to "PP-24-71 ". GOO

Considering that petitioner failed to substantiate all its zero-rated sales with the required documentary evidence, only the allowable input tax pertaining to the duly substantiated zero-rated sales may be refunded. Now, on the issue of whether or not petitioner's claimed input tax of P23,840,610.01 attributable to effectively zero-rated sales is duly supported by pertinent documents, an examination of the suppliers' VAT invoices, official receipts, Bureau of Customs (BOC) Import Entries and Internal Revenue Declarations, BOC or banks' official receipts27, and the Report of the Court- commissioned Independent CPA28 showed that only the amount of P19,604,741.68 represents petitioner's valid claim, pursuant to Sections 110(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. The remaining input taxes of P4,235,868.3329 shall be denied for the following reasons: Nature a.

Input VAT on importations with no original suppliers' invoices, import declarations and/or BOC or banks' official receipts on file b.

Input VAT on purchases which were claimed twice C.

Purchase of services are supported by photocopy of suppliers' VAT official receipts and/or original invoices d.

Original and/or photocopy of suppliers' VAT invoices and official receipts were not found on file e.

Purchases of goods whcih are supported by photocopy of suppliers' VAT invoices and/or original official receipts Exhibit · Amount PP-9 P1 ,522,511 .50 PP-10 638,591 .86 PP-11 607,163.58 PP-12 287,163.69 PP-13 286,677.97 ~ 27 Exhibits "PP-4-A I" to "PP-4-A417", "PP-48 I" to "PP-4830 I", "PP-4-C I" to "PP-4-C389", "PP-4- D I" to "PP-4-0389", "PP-4-E1 " to "PP-4-E306", "PP-4-F1 " to "PP-4-F396", "PP-4-G 1" to "PP-4- G466", "PP-4-H 1" to "PP-4-H279", "PP-4-II " to "PP-4-!393", "PP-4-Jl " to "PP-4-1482", "PP-4-K 1" to "PP-4-K357", and "PP-4-L I" to "PP-4-L409". 28 Exhibit "PP".

29 See Annex "A", for details. 60 1 f.

BIR permit number of the printers of the suppliers' VAT invoices and/or official receipts are not indicated in the suppliers' VAT invoices and/or official receipts g.

Dates indicated on the suppliers' VAT invoices and/or official receipts are not within the period covered by the application for tax credit certificate/refund h.

Original suppliers' invoices and/or official receipts on file are not dated i.

TIN indicated on the suppliers' VAT invoices are not the same as the TIN indicated on the corresponding official receipts j.

Purchase of goods and/or services from non- VAT entities k.

Errors in the computation of input VAT on local purchases Suppliers' VAT invoices and/or official receipts are not under the name of the Company m.

Certain information indicated in the suppliers' VAT invoices and/or official receipts were altered n.

BIR permits numbers of suppliers' VAT invoices and/or official receipt are not within the range of printed BIR permit period 0 .

Excess of claim over Amended VAT Returns p.

Input VAT on purchases of automobiles Total amount of VAT paid with incomplete documents and other exceptions PP-14 269,145.78 PP-15 9,303.74 PP-16 129,283.02 PP-17 88,636.35 PP-18 44,700.23 PP-19 18,715.73 PP-20 4,147.98 PP-21 1,554.06 PP-22 181 .81 PP-23 1,847.84 PP-26 326,243.19 p 4 235 868 33 Proceeding therefrom, out of the substantiated input taxes of P19,604,741 .68 , only the input taxes of P684,252.79 can be attributed to the zero-rated sales of P170,000,000.00 that have been duly substantiated by VAT zero-rated official receipts, computed as follows: Substantiated Zero-Rated Sales p 170,000,000.00 Divided by Total Reported Zero-Rated Sales + 4,870,723,381.02 Multiplied by Substantiated Excess Input VAT X 19, 604,741 .68 Input VAT attributable to Substantiated Zero-Rated Sales p 684,252 Z9 60 2

Lastly, it was established that the input taxes of P684,252. 79 were not applied against any output VAT liability during the period of claim and in the succeeding quarters.

Also, the said claim was filed within the two-year prescriptive period reckoned from the close of the second, third, and fourth taxable quarters of 2003. In sum, petitioner has sufficiently proven that it is entitled to a refund or issuance of tax credit certificate of its unutilized input taxes which are attributable to its capital goods purchases and effectively zero-rated sales of electricity to NPC for the period covering January 1, 2003 to December 31, 2003, but in the reduced amount of P114, 191 ,116.15, computed as follows: Non-Capital Capital Goods Goods/Services Total Amount of Claim P118,791 ,024.93 P23,465,413.29 P142,256,438.22 Add/( less):

a.

Input VAT claim on capital goods purchases which are not duly supported by VAT official receipts (700, 133.45) (700, 133.45) a.

Input VAT, the related purchases of which are not in the nature of capital goods (4,584,028.12) (4,584,028.12) b.

Input VAT claim on capital goods, the related purchases of which are not in the nature of capital goods but are attributable to effectively zero-rated sales 4,579,228.12 4,579,228.12 c.

Input VAT claim on non-capital goods/services which could not be attributed to effectively zero- rated sales (4,204,031.40) (4,204,031.40) d.

Input VAT claim on non-capital goods/services which are not duly substantiated by VAT invoices, official receipts , BOC import declarations/official receipts , etc. (4,235,868.33) (4,235,868.33) Valid Input VAT p 11 3, 506,863.36 P19,604,741.68 P133, 11 1,605.04 Less: Input VAT attributable to

C.T.A. CASE NO. 7I73 unsubstantiated zero-rated sales (P19,604,741.681ess P684,252.79) Refundable Input VAT (18,920,488.89) (18,920,488.89) P113,506,863.36 p 684,252.79 P114,191,116.15

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.

WE CONCUR:

E~UY Associate Justice Y4L·•·•-t&;-C . ~~...tr 0 Cd'UANITO C. CAST AN ED( cJR .. Associate Justice ~~N~UEZ Associate Justice

ATTESTATION 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.

C:L~- o...~~ ~ Q ~ANITO C. CASTANEDA; .fR' .. Associate Justice Chairperson 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. 6 05 ll__ ~... . (' _.-\.- ERNESTO D. ACOSTA Presiding Justice ANNEXA

SAN ROQUE POWER CORPORATION

vs. COMMISSIONER OF INTERNAL REVENUE

DISALLOWED INPUT VAT CLAIM ON

NON-CAPITAL GOODS/SERVICES

Name of Supplier Exhibits Input VAT a.

Input VAT on importations with no original suppliers' invoices, import declarations and/or BOC OR, banks' official receipts on file (Exhibit PP-9) August Bureau of Customs p 20,452.00 United Engineers lnt'l Inc. PP-4-H279 1,053,263.00 United Engineers lnt'l Inc. PP-4-H279 198,085.00 September Barcodes, Inc.

PP-4-1384 3,421 .00 OHL Worldwide Express (Phils.) Corp. 52,849.00 Exmart International PP-4-1389 22,276.00 Lubrication Engineers, Inc. PP-4-1392, PP-4-1391 4,817.50 November Bureau of Customs 49,611 .00 Bureau of Customs 58,675.00 December Bermont Express lnt'l 59,062.00 Subtotal p 1,522,511.50 b.

Input VAT on purchases which were claimed twice (Exhibit PP-10) May Basepoint Corp.

PP-4-F40, PP-4-F38 p 10,622.73 Technology Specialist Inc. PP-4-F354, PP-4F353 66,395.23 Technology Specialist Inc. PP-4-F356, PP-4-F355 66,395.23 Trends & Technologies Inc. PP-4-C329, PP-4-C328 81 ,889.41 Trends & Technologies Inc. PP-4-0313, PP-4-0312 7,667.85 Trends & Technologies Inc. PP-4-B239, PP-4-B238 28,183.61 Trends & Technologies Inc. PP-4-C331 , PP-4-C330 12,582.29 Trends & Technologies Inc. PP-4-C332, PP-4-C330 29,069.58 June Basepoint Corp.

PP-4-F40, PP-4-F39 10,622.73 July OHL Worldwide Express Corp. PP-4-F1 00, PP-4-F97 3,192.74 August Northwell Corp.

PP-4-J464, PP-4-J463 136,363.64 September lnfosoft lnt'l Solutions, Inc. PP-4-1183, PP-4-1182 38,925.00 October Ad En Wear Marketing PP-4-J148, PP-4-J147 10,318.18 Northwell Corporation PP-4-H165, PP-4-H164 136,363.64 Subtotal p 638,591.86 ~

60 G

page 1 of 9 ANNEXA Name of Supplier Exhibits Input VAT c.

Purchases of services are supported by photocopy of suppliers' VAT official receipts and/or original invoices (Exhibit PP-11) May Compass Inc.

PP-4-E35, PP-4-E34 p 400.00 lnfosoft lnt'l Solutions Inc. PP-4-E152 7,785.00 June Harza Eng'g Co. lnt'l PP-4-F183 46,457.83 lnfosoft lnt'l Solutions Inc. PP-4-F193 23,112.13 Sky Internet PP-4-F329, PP-4-F326-A 78.28 Sky Internet PP-4-F331 , PP-4-F-326-B 274.60 Sky Internet PP-4-F328, PP-4-F327 -A 317.60 Sky Internet PP-4-F330, PP-4-F327 -B 200.00 Tyco Integrated System Phils PP-4-F368, PP-4-F367 190,872.12 July CE reim-Don Henrico's PP-4-G67 46.91 Sky Internet PP-4-G265, PP-4-G268-C 221.40 Sky Internet PP-4-G266, PP-4-G268-A 81 .50 Sky Internet PP-4-G267, PP-4-G268-B 272.90 Sky Internet PP-4-G270, PP-4-G269-A 550.56 Sky Internet PP-4-G271 , PP-4-G269-B 300.10 Sky Internet PP-4-G272, PP-4-G269-C 20.00 Tam-Yap & Associates PP-4-G300 65,057.11 August AC & R Engineering PP-4-H4 890.91 CE reim-Data Core Comp Systems PP-4-H27 497.36 CE reim-Ride Generation Cars Accessories PP-4-H26 45.45 Phil Comm Satellite Corp PP-4-H168 4,665.48 Power Service Providers Inc. PP-4-H189, PP-4-H188 221 ,020.53 September Bitstop Inc.

PP-4-148 600.00 Phil Comsat Corp PP-4-1247 4,670.50 Veritas Research Dev Institute PP-4-1356 33,272.73 October CE-Toyota Pasong Tamo, Inc. PP-4-J60 48.00 Philippine Comm Satellite Corp PP-4-J427 4,671 .94 November Mongkok Express (Rhona) PP-4-K290-B 17.27 PCF-Giobal Res. Concepts PP-4-K344 604.74 PCF-WWW Express PP-4-K345 7.27 Sta. Monica, Conception (Rhona) PP-4-K318 14.91 December RA-Wenphil Corp.

PP-4-L30 1-B

88.43 Subtotal p 607,163.58 d.

Original and/or photocopy of suppliers' VAT invoices and official receipts were not found on file (Exhibit PP-12) May Compass Inc.

p 1,450.91 EE reim (Jollibee Foods) 123.64 Harza Engineering Co 169,068.02 Sky Internet 129.11 ~ 60 7 page 2 of 9 Name of Supplier Trends & Technologies Inc Venflor Enterprises Inc. June DHL Worldwide Express Corp Reinoso Amparo Sky Internet July Cytel Phil. Enterprises Cytel Phil. Enterprises John Clements Consultants, Inc. John Clements Consultants, Inc. Makati Shangrila August PCF-Makati Reinoso Amparo Samid Electronics Sky Internet Sky Internet VQM reimb September Ad En Wear Marketing Electro Masters Corp PFD Esguerra Ent J. Tancio Enterprises Inc. Julieto R. Marco Mercan Trading Reinoso Amparo Rrr Lim Enterprises Royal Star Aviation Showers of Blessings Sky Internet Sky Internet Sky Internet World Trade Institute October Amparo Reinoso JSO Phils.

Knowledge Institute Metrowatt Power Corp. Miles Pharma, Inc.

PCF-Mercan Trading Sky Internet Reena-reimb W. Blankenship November Reinoso Amparo French Baker (Rhona) Makati Parking Authority Inc. (Rhona) PCF-WWW Express December Bitstop, Inc.

DHL-Phils DHL-Phils Marsh Philippines Inc Philcomsat Reinoso Amparo Exhibits 60 8

ANNEX A

Input VAT 8,707.30 34.09 572.64 8,571.43 54.11 672.73 627.27 5,000.00 5,000.00 2,954.55 7.27 8,571.43 4,991 .27 20.00 22.70 679.30 1,090.91 1,590.91 10,800.00 233.18 4,854.55 4,472.73 8,571.43 363.64 12,366.82 1,363.64 236.20 389.50 77.30 181 .82 8,571.43 (904.60) 545.45 (15,468.64) (1 ,092.41 ) 15.00 489.02 345.45 50.45 8,571.43 46.00 2.73 7.27 318.18 275.73 226.36 4,781.20 4,697.87 8,571.43 9t-- page 3 of 9

ANNEX A

Name of Supplier Exhibits Input VAT Sky Internet 3,263.96 Subtotal p 287,163.69 e.

Purchases of goods which are supported by photocopy of suppliers' VAT invoices and/or original official receipts (Exhibit PP-13) June ER reimb(Balikbayan Handicrafts) PP-4-F152 p 4,090.91 Technology Specialist, Inc. PP-4-F354, PP-4-F353 68,253.97 Technology Specialist, Inc. PP-4-F356, PP-4-F355 68,253.97 VQM reimb(Magic Club Inc) PP-4-F474 . 221 .23 VQM reimb(Chimes Enterprise) PP-4-F378, PP-4-F377 45.45 Julv RF Trading & Distrib Corp PP-4-G360-A, PP-4-G359 56.82 RF Trading & Distrib Corp PP-4-G360-BPP-4-G359 45.45 VQM reim (Speed Computer Sales & Serv) PP-4-G427 90.91 August VQM reimb (Binalonan Alfosos Trading) PP-4-H250 4,048.09 VQM reimb (I.L. Loveranes Merch) PP-4-H249 13,772.27 VQM reimb (I.L. Loveranes Merch)

PP-4-H257 -A

5,421 .82 VQM reimb (Prime Mktg & Gen Merch) PP-4-H248 2,090.91 September Ad En Wear Marketing PP-4-111 42,181 .82 EN reimb (Ford Makati) PP-4-1143 209.09 Forsanz Enterprises PP-4-1172 874.09 PCF-Mkt-Microbase Inc. PP-4-1231 85.00 VQM reimb(I.L Loveranes Merch) PP-4-1359 2,938.82 VQM reimb(l. L Loveranes Merch) PP-4-1358 1,210.91 VQM reimb(l. L Loveranes Merch) PP-4-1360 4,635.73 VQM reimb(l. L Loveranes Merch) PP-4-1361 9,453.18 VQM reimb (Magiclub Inc) PP-4-1366 240.02 VQM reimb (Magiclub Inc) PP-4-1369 7.05 VQM reimb (Magiclub Inc) PP-4-1368 259.13 October Core Automotive Resources , Inc. PP-4-J375-B 236.36 LR Fajardo Trading PP-4-J369-A 94.55 PCF-JA-Metro Page Turner Marketing Inc. PP-4-J423 4.55 VQM-I.L Loveranes Merchandising PP-4-J318 3,621.73 VQM-Magiclub Incorporated PP-4-J316 215.67 November Han Gang Foam and Chemical Corp (VQM) PP-4-K333 422.39 I.L. Loveranes Merchandising (VQM) PP-4-K334 34,273.45 December CM reimb-Rustan Supercenter, Inc. PP-4-L50-B 26.82 CM reimb-BL Convenience Store PP-4-L44-B 33.84 PCF-Mkt(RF Trading) PP-4-L262 34.09 PCF-Mkt(RF Trading) PP-4L264-A 45.45 PCF-Mkt(RF Trading) PP-4-L263 45.45 PCF-Mkt(RF Trading) PP-4-L259 22.73 RA-Xentrex Automotive, Inc.

PP-4-L307 -8

213.18 VQM-I.L Loveranes Merchandising PP-4-L388 18,867.91 VQM-Magiclub Incorporated PP-4-L358-B 3.16 VQM-Speed Computer Sales and Services PP-4-L356 30.00 Subtotal p 286,677.97 ~ 60 9 page 4 of 9 Name of Supplier f.

BIR permit numbers of the printers of the suppliers' VAT invoices and/or official receipts are not indicated in the suppliers' invoices and/or official receipts (Exhibit PP-14) May Ford Makati MA reimb(Mail More Bus Serv Inc) Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber June AC & R Engineering Customize Kit, Inc.

En reimb(Ford Alabang) Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber July Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber August Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber September En reimb(Ford Alabang) En reimb(Ford Makati) Newton Hardware & Lumber Newton Hardware & Lumber Newton Hardware & Lumber 610 Exhibits PP-4-E129, PP-4-E128 PP-4-E185 PP-4-E216, PP-4-E215 PP-4-E217, PP-4-E215 PP-4-E213, PP-4-E212 PP-4-E214, PP-4-E212 PP-4-F8 PP-4-F82, PP-4-F81 PP-4-F151 , PP-4-F149 PP-4-F251 , PP-4-F248 PP-4-F252, PP-4-F248 PP-4-F249, PP-4-F248 PP-4-F250, PP-4-F248 PP-4-F254, PP-4-F253 PP-4-F257, PP-4-F253 PP-4-F256, PP-4-F253 PP-4-F255, PP-4-F253 PP-4-G297, PP-4-G296 PP-4-G298, PP-4-G296 PP-4-G299, PP-4-G296 PP-4-G300, PP-4-G296 PP-4-G301 , PP-4-G296 PP-4-G302, PP-4-G296 PP-4-G303, PP-4-G296 PP-4-G305, PP-4-G296 PP-4-G306, PP-4-G296 PP-4-G307, PP-4-G296 PP-4-G308, PP-4-G296 PP-4-H157, PP-4-H156 PP-4-H158, PP-4-H156 PP-4-H159, PP-4-H156 PP-4-H160, PP-4-H156 PP-4-H161 , PP-4-H156 PP-4-H162, PP-4-H156 PP-4-H163, PP-4-H156 PP-4-H152, PP-4-H151 PP-4-H153, PP-4-H151 PP-4-H154, PP-4-H151 PP-4-H155, PP-4-H151 PP-4-1145, PP-4-1144 PP-4-1171 , PP-4-1170 PP-4-1228, PP-4-1227 PP-4~1229 , PP-4-1227 PP-4-1230, PP-4-1227 p

ANNEX A

Input VAT 84,545.45 4.50 1,818.18 1,818.18 1,909.09 1,909.09 1,031 .82 17,727.27 246.68 1,909.09 1,909.00 1,909.09 2,386.36 1,909.09 1,909.09 2,386.36 2,386.36 1,909.09 1,909.09 1,909.09 2,386.36 2,386.36 2,386.36 5,536.36 2,386.36 2,386.36 1,909.09 1,909.09 2,386.36 2,386.36 2,386.36 1,909.09 1,909.09 1,909.09 5,536.36 2,386.36 2,386.36 1,909.09 1,909. 09 180.78 181 .82 5,536.36 2,386.36 2,386.36 Jt-- page 5 of9 ANNEXA Name of Supplier Exhibits Input VAT Newton Hardware & Lumber PP-4-1231 , PP-4-1227 2,386.36 Newton Hardware & Lumber PP-4-1232, PP-4-1227 1,909.09 Newton Hardware & Lumber PP-4-1233, PP-4-1227 1,909.09 Newton Hardware & Lumber PP-4-1234, PP-4-1227 1,909.09 Tribal Trading & Fabrication PP-4-1349, PP-4-1348 7,545.45 Tribal Trading & Fabrication PP-4-1350, PP-4-1348 1,727.27 Tribal Trading & Fabrication PP-4-1351 , PP-4-1348 1,000.00 October Newton Hardware & Lumber PP-4-1453, PP-4-1452 1,909.09 Newton Hardware & Lumber PP-4-1454, PP-4-1452 1,909.09 Newton Hardware & Lumber PP-4-1455, PP-4-1452 1,909.09 Newton Hardware & Lumber PP-4-1456, PP-4-1452 2,386.36 Newton Hardware & Lumber PP-4-1457, PP-4-1452 2,386.36 Newton Hardware & Lumber PP-4-1458, PP-4-1452 2,386.36 Newton Hardware & Lumber PP-4-1459, PP-4-1452 5,536.36 Newton Hardware & Lumber PP-4-1461 , PP-4-1460 2,386.36 Newton Hardware & Lumber PP-4-1462, PP-4-1460 1,909.09 November Newton Hardware & Lumber PP-4-K227, PP-4-K226 2,386.36 Newton Hardware & Lumber PP-4-K228, PP-4-K226 2,386.36 Newton Hardware & Lumber PP-4-K229, PP-4-K226 2,386.36 Newton Hardware & Lumber PP-4-K230, PP-4-K226 2,386.36 Newton Hardware & Lumber PP-4-K231, PP-4-K226 1,909.09 Newton Hardware & Lumber PP-4-K232, PP-4-K226 1,909.09 Newton Hardware & Lumber PP-4-K234, PP-4-K226 1,909.09 Newton Hardware & Lumber PP-4-K233, PP-4-K226 1,909.09 Newton Hardware & Lumber PP-4-K236, PP-4-K226 5,536.36 Kainan sa Zigzag (Rhona) PP-4-K290-C 22.91 December Newton Hardware & Lumber PP-4-L238, PP-4-L237 2,386.36 Newton Hardware & Lumber PP-4-L239, PP-4-L237 2,386.36 Newton Hardware & Lumber PP-4-L240, PP-4-L237 2,386.36 Newton Hardware & Lumber PP-4-L241 , PP-4-L237 1,909.09 Newton Hardware & Lumber PP-4-L242, PP-4-L237 1,909.09 Newton Hardware & Lumber PP-4-L243, PP-4-L237 1,909.09 Subtotal p 269,145.78 g.

Dates indicated on the suppliers' VAT invoices and/or official receipts are not within the period covered by the application for tax credit certificate/refund (Exhibit PP-15) September Dimensional Service Corp. PP-4-1133, PP-4-1132 p 227.27 First Phil Energy Corp. PP-4-1169, PP-4-1168 4,157.27 December Bitstop, Inc.

PP-4-L32, PP-4-L31 2,272.73 Metrawatt Power Corp. PP-4-L226, PP-4-L225 115.00 Phildata Bus Sys PP-4-L268, PP-4-L267 718.18 Phildata Bus Sys PP-4-L269, PP-4-L267 258.18 Phildata Bus Sys PP-4-L270, PP-4-L267 78.18 Romulo Torres PP-4-L394, PP-4-L393 640.00 Toyota Dagupan PP-4-L384, PP-4-L383 836.92 Subtotal p 9,303.74 ft- fil l page 6 of 9

ANNEX A

Name of Supplier Exhibits Input VAT h.

Original suppliers' invoices and/or official receipts on file are not dated (Exhibit PP-16) Mav Meralco Industrial Eng'g PP-4-E205, PP-4-E204 p 56,813.95 RF Trading & Distrib Corp PP-4-E256, PP-4-E255 45.45 June Virgo Services & Trading Corp PP-4-F381 , PP-4-F380 1,133.07 Windshear Inti Phils Inc. PP-4-F383, PP-4-F382 25,586.00 December Bitstop, Inc.

PP-4-L35, PP-4-L36 250.00 Skoal Advertising, Inc. PP-4-L329, PP-4-L328 45,454.55 Subtotal p 129,283.02 i.

Tax identification number (TIN) indicated on the suppliers' VAT invoices are not the same as the TIN on the corresponding official receipts (Exhibit PP-17) Jutv Galeo Equipment Corp PP-4-G201 , PP-4-G200 p 29,545.45 August Galeo Equipment Corp PP-4-H103, PP-4-H102 29,545.45 September Galeo Equipment Corp PP-4-1177, PP-4-1176 29,545.45 Subtotal p 88,636.35 j.

Purchase of goods and/or services from Non-VAT entities (Exhibit PP-18) June Arturo A.V.P. Balbastro, Jr. PP-4-F30, PP-4-F29 p 8,136.36 September CF Car Rentals, Inc.

PP-4-159, PP-4-158 28,727.27 October Camp John Hay Manor PP-4J64, PP-4-J63 6,085.68 F.D. Esguerra Enterprises PP-4-J184, PP-4-J183 1,194.55 Joman Enterprises PP-4-J228, PP-4-J227 386.36 RIJENN's Petron Servicenter PP-4J374-C 45.45 November Aguilar Jetti Station (Rhona) PP-4-K294-C 45.45 BB-Villafone Cellphones Center PP-4-K355-A 51 .82 Your's Me Eatery (Rhona) PP-4-K301-B 27.27 Subtotal p 44,700.23 k.

Errors in the computation of input VAT on local purchases (Exhibit PP-19) June Ritzgerald Frameshoppe p 909.09 July Ad En Wear Marketing 10.318.18 r August 61 2 page 7 of 9 '.

Name of Supplier Meralco Industrial Eng'g September Ciudad Fernandino lnfosoft lnt'l Solutions, Inc. October Bitstop, Inc.

Muttley Enterprises December VQM-Ciudad Fernandina Subtotal I.

Suppliers' VAT invoices and official receipts are not under the name of the company (Exhibit PP-20) July F. Gutierrez Construction November 5 Star Auto Supply (Rhona) Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandino Ciudad Fernandina Ciudad Fernandina Ciudad Fernandino Ciudad Fernandino Ciudad Fernandino Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandina Ciudad Fernandino Ciudad Fernandino Ciudad Fernandino Ciudad Fernandino Ciudad Fernandina Ciudad Fernandino Ciudad Fernandina Ciudad Fernandina Ciudad Fernandino Ciudad Fernandino Citystate Tower Hotel, Inc. (Rhona) Citystate Tower Hotel, Inc. (Rhona) DLC Food (Balagtas), Inc. (Rhona) Letram Foods, Inc. (Rhona) Letram Foods, Inc. (Rhona) Longwood Garden Drive in Hotel (Rhona) The Sulu Hotel (Rhona) The Sulu Hotel (Rhona) 61 3 Exhibits PP-4-G 180, PP-4-G 179 PP-4-K289 PP-4-K57 -A, PP-4-K56 PP-4-K57 -8, PP-4-K56 PP-4-K57 -C, PP-4-K56 PP-4-K58-A, PP-4-K56 PP-4-K58-B, PP-4-K56 PP-4-K58-C, PP-4-K56 PP-4-K59-A, PP-4-K56 PP-4-K59-B, PP-4-K56 PP-4-K59-C, PP-4-K56 PP-4-K60-A, PP-4-K56 PP-4-K60-B, PP-4-K56 PP-4-K60-C, PP-4-K56 PP-4-K61-A, PP-4-K56 PP-4-K61-B, PP-4-K56 PP-4-K61-C, PP-4-K56 PP-4-K62-A, PP-4-K56 PP-4-K62-B , PP-4-K56 PP-4-K62-C, PP-4-K56 PP-4-K63-A, PP-4-K56 PP-4-K63-B, PP-4-K56 PP-4-K63-C, PP-4-K56 PP-4-K64-A, PP-4-K56 PP-4-K64-B, PP-4-K56 PP-4-K64-C, PP-4-K56 PP-4-K65-A, PP-4-K56 PP-4-K65-B, PP-4-K56 PP-4-K65-C, PP-4-K56 PP-4-K66-A, PP-4-K56 PP-4-K66-B, PP-4-K56 PP-4-K291-A PP-4-K291-B PP-4-K295-A PP-4-K290-A PP-4-K293-A PP-4-K295-B PP-4-K298-A, PP-4-K298-B PP-4-K300-A, PP-4-K299-B p p ANNEXA Input VAT 3,755.45 545.45 1,250.00 872.73 381 .82 683.01 18,715.73 1,757.27 4.55 36.36 90.91 28.64 36.36 90.91 28.64 36.36 90.91 28.64 36.36 90.91 28.64 36.36 100.00 38.18 36.36 90.91 28.64 36.36 90.91 28.64 36.36 90.91 28.64 36.36 90.91 28.64 36.36 27.27 315.91 41 .82 16.55 17.77 17.68 91 .55 190.91 197.62 ~ page 8 of9 ANNEXA Name of Supplier Exhibits Input VAT December RA-JR Enterprises PP-4-L299-B 10.91 Subtotal p 4,147.98 m.

Certain information indicated in the suppliers' VAT invoices and/or official receipts were altered (Exhibit PP-21) August RD-reimb(Paraiso sa Barrio) PP-4-H196 p 175.70 September EN reimb(Ford Makati) PP-4-1147, PP-4-1146 136.36 October Trends & Technologies, Inc. PP-4-J289, PP-4-J288 1,242.00 Subtotal p 1,554.06 n.

BIR permit numbers of suppliers' VAT invoices and/or official receipts are not within the range of BIR permit period (Exhibit PP-22) July RF Trading & Distrib Corp PP-4-G357, PP-4-G358 p 45.45 September RF Trading & Distrib Corp PP-4-1298, PP-4-1297 45.45 RF Trading & Distrib Corp PP-4-1299, PP-4-1297 45.45 RF Trading & Distrib Corp PP-4-1300, PP-4-1297 22.73 RF Trading & Distrib Corp PP-4-1301 , PP-4-1297 22.73 Subtotal p 181.81 0.

Reconciliation of input VAT per return and input VAT per general ledger (Exhibit PP-23) August p 0.01 September 0.07 October 0.41 November 1,847.35 Subtotal p 1,847.84 p.

Input VAT on purchase of automobiles (Exhibit PP-26) May Ford Edsa, Inc.

PP-4-E 127, PP-4-E 121 p 130,363.64 August Ford Makati PP-4-H101, PP-4-H100 195,879.55 Subtotal p 326,243.19

TOTAL DISALLOWED INPUT VAT

p 4,235,868.33 ~ page 9 of 9