Kepco Philippines Corporation vs. Commissioner of Internal Revenue

DECISION

UY, -:!_.:

Before Us is a Petition for Review filed by petitioner Kepco Philippines Corporation against respondent Commissioner of Internal Revenue, seeking for the refund in the amount of P9,378,912.73 representing allegedly input \ 'AT incurred by petitioner for the taxable year 2003, from its sales of electricity to the National Power Corporation (NPC). ~

THE FACTS

As culled from the records and as stipulated by the parties in their Joint Stipulation of Facts and Issues, 1 these are the facts of the case. Petitioner, Kepco Philippines Corporation (KEPCO), is a domestic corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal place of business in Makati City.2 Likewise, it is a Value-Added Tax (VAT)-registered taxpayer engaged in the production and sale of electricity as an independent power producer (IPP), and sells electricity solely to the National Power Corporation (NPC). 3 On the other hand, respondent, Commissioner of Internal Revenue (CIR), is the head of the Bureau of Internal Revenue (BIR) and is vested by law with the power to decide, approve, and grant claims for refund or tax credit of internal revenue taxes. He holds office at the Bl R National Office Building, Agham Road, Diliman, Quezon City. On December 12, 2002, petitioner filed an application for VAT zero-rate with respondent for its sales of electricity to the National Power Corporation (NPC), which has been duly approved.4 For the four (4) quarters of taxable year 2003, petitioner incurred expenses representing domestic purchases of goods and services, for which it incurred an input VAT in the amount of P9,378,912.73. The said expenses r~ present the cost attributable to its production and sale of electricity to NPC . . 1 Docket, pp. 47-50.

2 Paragraph I, Petition for Review, Docket, p. I. 3 Paragraph 2, Joint Stipulation of Facts and Issues, Docket, p. 48. 4 Exhibit "G".

~

It filed its quarterly VAT Returns5 on April 25, 2003, July 25, 2003, October 27, 2003, and January 26, 2004, respectively. It declared zero-rated sales in the amount of P3,396,347, 163.15, domestic purchases of goods and services in the amount of P93,789,127.32, and related input VAT of P9,378,912.73, broken down as follows: Exhibit B c D F-2 Taxable Quarter 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total Zero-rated Sales p 715,057,716.54 896,096,647.33 861,278,992.89 923,913,806.39 P3.396.347.163.15 Purchases p 29,411,004.72 13,068,885.90 24,509,390.80 26,799,845.90 p 93.789.127.32 Inout VAT p 2,941,100.47 1,306,888.59 2,450,939.08 2,679,984.59 p 9.378.912.73 Petitioner then filed a claim for refund with the SIR through its Revenue District Office No. 43 on March 17, 2005.6 Due to respondent's inaction on its claim and in order to preserve its right to file a judicial claim within the two-year prescriptive period, in accordance with Section 229 and in relation to Section 204(C) of the National l:1ternal Revenue Code (NIRC) of 1997, petitioner elevated this case before this Court on April 25, 2005. On June 14, 2005, respondent filed his Answer, 7 interposing the following Special and Affirmative Defenses: "6.

The claim for refund is still under examination by the respondent's Bureau;

7.

The burden of proof is upon the petitioner to prove that it is entitled to the claim for refund; 8.

The grant of a claim for refund tantamount to an exemption from taxation which is construed strictly 'Exhibit, "B", "C:.~:~~~~~.:.~Iaimant and in favor of the taxing authority; r

9.

The taxes sought to be refunded were paid in accordance with law; the burden of proof to the contrary is upon the petitioner-claimant to show with clear and unambiguous provision of law supporting the same." The issues having been joined, pre-trial was held on September 29, 2005; and thereafter, both parties submitted their Joint Stipulation of Facts and Issues on October 14, 2005, and duly approved in the Resolution dated October 28, 2005.8 During trial, petitioner presented its documentary and testimonial evidence, while respondent's counsel submitted the case for decision without presenting any evidence because this case, allegedly, has no report of investigation. The Court directed both parties' counsel to file their respective memorandum.9 On March 21 , 2007, this case was deemed submitted for decision after petitioner filed its memorandum, while respondent failed to file his memorandum within the given period.10 Hence, this Decision.

ISSUES

In their Joint Stipulations of Facts and Issues, petitioner and respondent interposed the following issues for the consideration of this Court: "1.

Whether or not the sale of electricity by a VAT -registered entity, as the Petitioner, to the National Power Corporation (NPC), qualifies as a sale of services subject to a VAT rate of zero percent (0%) or otherwise called a zero-rated VAT transaction. 2.

Whether Petitioner, as a VAT-registered entity and during the calendar (taxable) year 2003, actually incurred expenses representing domestic purchases of goods and • Ibid., "P· 54 . services and which expenses represent costs attributable~

Page 5 of I5 to Petitioner's production and sale of electricity to the NPC.

3.

Whether or not the Petitioner is entitled to the refund of the total amount of P9,378,912.73, representing the input VAT incurred for the four(4) taxable quarters of the calendar (taxable) year 2003 from its sale of electricity to the NPC.

4.

Whether or not Petitioner's claim for refund is substantiated by documentary evidence."11

THE COURT'S RULING

Pertinent to the resolution of the issues is Section 112(A) of the Nl RC of 1997, which reads: "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(8)(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 (SSP): 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." From the foregoing, in order to be entitled to refund or tax credit of input VAT directly attributable to zero-rated or effectively zero-rated sales, the following requirements must be satisfied: 1) there must be zero-rated or effectively zero-rated sales;~ -------------------

2) input taxes were incurred or paid; 3) input taxes are directly attributable to zero-rated or effectively zero-rated sales; 4) 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 requirement, petitioner argues that its sale of electricity to NPC is effectively zero-rated pursuant to Section 108(8)(3) of the NIRC of 1997, as amended, in relation to Section 13 of Republic Act No. 6395, as amended (National Power Corporation Charter), which are quoted hereunder for ready reference, to wit: "Section 108. Value Added Tax on Sale of Services and Use or Lease of Properties. - (A) Rate and base of tax. - 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 exemptions 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." (Underscoring Ours) "Section 13. Non-profit Character of the Corporation: Exemption from All Taxes, Duties, 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 investment as well as excess revenues from its operations, 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 Ours) The Court agrees with petitioner. The NPC Charter categorically exempts it from payment of all taxes, whether direct or indirect, including VAT. Accordingly, services rendered by a VAT-registered entity, such as herein petitioner, to NPC are effectively subject to zero percent (0%) VAT. The Supreme Court made a corroborative finding in its Resolution dated June 8, 1993, in the case of Maceda vs. Macaraig, Jr. , 12 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." (Emphasis Ours) It is also worthy to mention that the BIR already approved petitioner's Application for VAT Zero-Rate; 13 further confirming its entitlement to the benefits of zero-rating on its sales to NPC. In order to prove its reported zero-rated sales of electricity to NPC for the four quarters of 2003 in the amount of P3,396,347,163.15, petitioner presented in evidence the Rehabilitation, Operation, Maintenance and Management (ROMM) Agreement for the 650 MW Malaya Thermal Plant ( 12 223 SCRA 217 (1993). 1 • Supra.

Complex, 14 the Accession Undertaking dated July 3, 1995 15 , and official receipts. 16 However, this Court notes that only sales in the amount of P1 , 112,870,425.80 were properly substantiated by VAT official receipts, detailed as follows:

Exhibit L L-1 L-2 L-3 L-4 L-5 L-6 L-7 L-8 L-9 L-10 L-11 L-12 L-13 L-14 OR Number 505 506 510 512 513 514 515 516 517 518 519 521 522 524 526 Total Date Amount 6-Mar-03 p 74,919,293.45 4-Apr-03 74,824,414.32 5-May-03 67,624,294.05 4-Jun-03 74,806,878.42 23-Jun-03 50,588,559.75 2-Jul-03 72,127,208.90 30-Jul-03 74,813,780.45 30-Jul-03 101,603,408.13 1-Sep-03 72,326,563.31 29-Sep-03 74,824,492.62 30-Sep-03 99,806,523.38 30-0ct-03 74,834,539.02 1-Dec-03 72,431,690.46 22-Dec-03 52,508,943.11 28-Dec-03 74£829£836.43 P1,112t870t425.80 From the foregoing, out of the total declared zero-rated sales to NPC of P3,396,347,163.15, only the sum of P1 ,112,870,425.80 was duly substantiated by VAT official receipts. Hence, only the input VAT claim proportionate to the substantiated zero-rated sales of P1 , 112,870,425.80 shall be available for refund. The rate to be applied is based on the volume of sales, computed as follows: Supported zero-rated sales Divided by total declared zero-rated sales Rate of supported zero-rated sales 1.1 Exhibit "1".

I : Exhibit "1-1".

16 Exhibits "L", "L-1" to "L-22". p 1,112,870,425.80 p 3£396£347£163.15 32.77%

I (

As regards the second and third requisites, We look into the report17 of the commissioned independent CPA Ms. Lilian S. Linsangan. It states that petitioner's claimed input VAT of P9,378,912.73 should be reduced by P339,975.75, which is the sum of the difference between the input VAT filed per return and input VAT per schedule in the amount of P27,783.66 and input VAT claimed with incomplete documentation and other exceptions on the supporting documents in the amount of P312, 192.09.18 Below is the summary of the exceptions of P312, 192.09: NATURE

a. Purchases of goods without original supplier's VAT invoice as supporting documents

b. Purchases of services without original supplier's VAT official receipts as supporting documents

c. Purchases of goods and/ or services are supported by photocopy of supplier's VAT official receipts and/or invoices

d. Supplier's VAT official receipts and invoices are not under the name of the Company

e. SIR permit numbers of the printers of the suppliers' VAT invoices and/ or official receipts are not indicated in the suppliers' VAT invoices and/ or official receipts

f. TIN indicated on the suppliers' VAT invoices are not the same ad the TIN indicated on the corresponding official receipts

g. OR has no serial number

h. Date of supporting documents are not within the period

i. Supporting documents are not dated or the date cannot be identified TOTAL EXHIBIT Q6 Q7 Q8 Q9 Q10 Q11 Q12 Q13 Q14 AMOUNT p 160,664.91 4,220.31 2,290.78 96.05 1,359.89 136,470.91 208.19 6,672.29 208.76 p 312,192.09 However, after scrutiny of petitioner's supporting documents, input VAT in the total amount of P196,836.55 should be further disallowed for the following reasons:

Exh.

Supplier Invoice lOR Invoice lOR Input VAT Date Amount

(a) Input VAT on purchases of goods not supported by an invoice

Q3 1-37

Belfast Power Gasoline Station 24-Jan-03 p 597.65 p 54.33

Q3 1-81

D' May Photo 13-Jan-03 135.00 12.27

Q3 1-86

C.S. Petron Gas Station 31-Jan-03 56,788.38 5,162.58

Q3 3-47

Trend West Enterprises 14-Mar-03 1,275.00 115.91

Q3 8-15

Kambal Industrial Supply 8-Aug-03 23,673.54 2,152.14

Q3 8-17

Belfast Power Gasoline Station 8-Aug-03 12,915.76 1,174.16

Q3 10-14

Power Systems, Inc.

3-0ct-03 13,700.06 1,245.46

Q3 10-34

Moen Home Living Inc. 29-Sep-03 11,100.00 1,009.09

Q3 10-126

F.A.T. Kee Computer Sys I nc. 21-0ct-03 8,260.01 750.91

Q3 10-168

Bulawan Floating Restaurant 23-0ct-03 3 838.12 348.92 TOTAL p 132,283.52 p 12,025.77

(b) Input VAT on purchases of services not supported by an OR

Q3 1-03

Globe Telecom 20-0ct-02 p 2,682.90 p 243.90 Globe Telecom 20-0ct-02 1,486.54 135.14 Globe Telecom 15-0ct-02 1,468.94 133.54 Globe Telecom 20-0ct-02 1,361.03 123.73 Globe Telecom 5-0ct-02 2,536.05 230.55 Globe Telecom 26-0ct-02 1,613.70 146.70 Globe Telecom 15-0ct-02 1,805.76 164.16 Globe Telecom 20-0ct-02 2,165.90 196.90 Globe Telecom 20-0ct-02 1,443.42 131.22 Globe Telecom 20-0ct-02 1,169.63 106.33 Globe Telecom 20-0ct-02 1,706.98 155.18 Globe Telecom 20-0ct-02 2,444.86 222.26 Globe Telecom 20-0ct-02 1,363.01 123.91 Globe Telecom 20-0ct-02 1,556.94 141.54 Globe Telecom 20-0ct-02 1,341.01 121.91 Globe Telecom 20-0ct-02 1,390.95 126.45 Globe Telecom 23-0ct-02 2,604.69 236.79

Q3 1-23

Globe Telecom 20-Nov-02 1,476.53 134.23 Globe Telecom 9-Dec-02 6,680.96 607.36 Globe Telecom 20-Nov-02 1,261.92 114.72 Globe Telecom 20-Nov-02 1,257.96 114.36 Globe Telecom 20-Nov-02 1,245.97 113.27 Globe Telecom 20-Nov-02 3,515.38 319.58 Globe Telecom 20-Nov-02 1,329.46 120.86 Globe Telecom 20-Nov-02 1,044.23 94.93 Globe Telecom 20-Nov-02 1,189.98 108.18 Globe Telecom 5-Nov-02 2,127.95 193.45 Globe Telecom 5-Nov-02 2,289.43 208.13 Globe Telecom 20-Nov-02 1,249.05 113.55 Globe Telecom 20-Nov-02 1,405.91 127.81 Globe Telecom 9-Nov-02 3,435.96 312.36 Globe Telecom 9-Dec-02 1,974.83 179.53 Globe Telecom 9-Dec-02 1,504.36 136.76 Globe Telecom 9-Dec-02 413.60 37.60

Q3 2-29

Globe Telecom 9-Jan-03 47,046.34 4,276.94

Q3 2-93

St. Francis Transport System 17-Feb-03 38,395.00 3,490.45;

Q3 3-103

Globe Telecom 23-Jan-03 36,608.88 3,328.08

Page II of 15

Q3 3-109

Globe Telecom 9-Mar-03 36,003.00

Q3 4-55

Dabbay, Guillermo P.

10-Jun-03 61,111.05

Q3 4-56

Data Hardware & Electrical Supply 10-Apr-03 1,409.98

Q3 4-78

Bank of Commerce 21-Apr-03 1,100.00

Q3 4-84

Dabbay, Guillermo P.

10-Jun-03 48,888.84

Q3 4-85

Piedad, Samuel A.

10-Jun-03 51,944.42

Q3 5-33

Pioneer I nsurance & Surety Corp. 14-May-03 70,125.00

Q3 5-34

Piedad, Samuel A.

10-Jun-03 51,944.42

Q3 5-93

Piedad, Samuel A.

10-Jun-03 51,944.42

Q3 5-94

Dabbay, Guillermo P.

10-Jun-03 48,888.84

Q3 8-53

Dabbay, Guillermo P.

10-Sep-03 24,444.42

Q3 8-54

Piedad, Samuel A.

10-Sep-03 51,944.42

Q3 8-75

Dabbay, Guillermo P.

10-Sep-03 48,888.84

Q3 8-76

Piedad, Samuel A.

10-Sep-03 51,944.42

Q3 10-01

Piedad, Samuel A.

10-Nov-03 51,944.42

Q3 10-31

Globe Telecom 7-Aug-03 41,212.60

Q3 10-82

Piedad, Samuel A.

10-Nov-03 51,944.42

Q3 10-172

Dabbay, Guillermo P.

10-Nov-03 73,333.37

Q3 10-173

Piedad, Samuel A.

10-Nov-03 51,944.42

Q3 10-174

Globe Telecom 9-Aug-03 15 602.84 TOTAL P1,072,160.15 p

(c) Input VAT on purchases of goods/services not within the period of claim

Q3 1-52

Filway Awards 30-Jan-02 P

Q3 2-76

Belfast Power Gasoline Station 8-Feb-02

Q3 4-68

Belfast Power Gasoline Station 1-Apr-04

Q3 5-74

Pumpcraft Industrial Sales 21-May-02 TOTAL P 949.96 p 1,881.48 1,588.51 4 740.00 9,159.95 p

(d) Input VAT on purchases of services supported by an invoice/ OR without/with questionable dates 3,273.00 5,555.55 128.18 100.00 4,444.44 4,722.22 6,375.00 4,722.22 4,722.22 4,444.44 2,222.22 4,722.22 4,444.44 4,722.22 4,722.22 3,746.60 4,722.22 6,666.67 4,722.22 1 418.44 97,469.10 86.36 171.04 144.41 430.91 832.72

Q3 4-38

Bentrade Asia Company P 9,844.01 P 894.91

Q3 4-39

Bentrade Asia Company 9,197.98 836.18

Q3 5-13

Belfast Power Gasoline Station 22-Apr 1,269.30 115.39

Q3 5-60

Onnuri International, Inc. 13,500.00 1,227.27

Q3 8-11

Shin Yang Brokerage Corp. July/Aug 6 138,075.08 12,552.28

Q3 8-22

Shin Yang Brokerage Corp. 03 160,459.20 14,587.20

Q3 8-35

Ebie Auto Supply 31-Jul 960.00 87.27

Q3 10-55

Emigo Trading 280,780.00 25,525.45

Q3 10-71

PNCC Skyway Corp.

14-Aug ___ ____,5~0~0.~00~---~4=-5~.4.=._5 TOTAL P 614,585.57 P 55,871.40

(e) Input VAT on purchases of goods/ services not in the name of the company

Q3 2-27

F.A.T. Kee Computer System Inc. 29-Jan-03 P

Q3 4-88

Complex Galleria Inc. 27-Apr-03

Q3 8-52

Tell Me Trans Corp.

14-Aug-03

Q3 10-07

St. Francis Transport System 3-0ct-03

Q3 10-21

Anson Emporium Corp.

3-0ct-03

Q3 10-45

The Foodnation Food Services, Inc. 23-Sep-03

Q3 10-103

Harvard Servicenter 29-Sep-03

Q3 10-137

Development Insurance 16-0ct-03

Q3 10-163

Ebie Auto Supply 15-0ct-03 6,259.99 1,480.00 393,760.84 6,345.51 100,000.00 1,025.97 26,125.00 1,176.01 289.96 TOTAL p 536,463.28 p p 569.09 134.55 35,796.44 587.55 9,090.91 93.27 2,375.00 106.91 26.36 48,780 .0~

(f) BIR permit numbers of the printers of the supplier's VAT invoices and/ or ORs are not indicated

Q3 1-36

Manila International Airport Authority 17-Jan-03 P 3,960.00 P 360.00

Q3 3-17

Manila I nternational Airport Authority 7-Mar-03 3,960.00 360.00

Q3 3-110

GSIS 31-Mar-03 443,850.00 40,350.00

Q3 3-114

Manila I nternational Airport Authority 10-Feb-03 4,356.00 396.00

Q3 4-80

Manila International Airport Authority 22-Apr-03 3,960.00 360.00

Q3 5-07

Capital Industries, Inc. 8-Apr-03 73,799.09 6,709.09

Q3 5-59

DHLjWWWExpress 25-Jun-03 80.00 7.27

Q3 10-138

Smog Chek Corp.

17-0ct-03 ------=3~0.::.:

0.~ 00~------=2:.:-.

7 :.:::.2~ 7 TOTAL P 534,265.09 P 48,569.63

(g) TIN indicated on the supplier's VAT invoice is not the same as the TIN on the corresponding OR

Q3 1-35

Q3 2-23

Q3 2-75

Q3 3-05

Q3 3-13

Q3 3-91

Q3 5-18

Trigold Security Agency Trigold Security Agency Trigold Security Agency Claret's Enterprises Trigold Security Agency Trigold Security Agency Trigold Security Agency TOTAL 22-Jan-03 7-Feb-03 21-Feb-03 14-Feb-03 21-Feb-03 21-Mar-03 9-May-03 p 306,994.60 307,585.74 307,526.45 5,400.00 306,708.27 307,031.45 306,803.53 p 1,848,050.04 p 27,908.60 27,962.34 27,956.95 490.91 27,882.57 27,911.95 27,891.23 p 168,004.55

(h) Input VAT on purchases of goods/ services supported by an invoice marked as "VAT Exempt"

Q3 2-24

Lubricare Marketing 29-Jan-03 P 25,800.00 P 2,345.45 2,345.45 p 25,800.00 p

(i) Input VAT on purchases of goods/services with invoices that are non-VAT or do not have "VAT" After the TIN

Q3 3-15

Petrotech Consultants, Inc.

Q3 3-16

Seafront Resources Corp. TOTAL

(j) Input VAT erroneously computed

Q3 1-09

Q3 1-24

Q3 3-31

Q3 3-87

Q3 5-03

Q3 5-04

Q3 5-53

Q3 10-25

. Q3 10-30

Q3 10-35

Q3 10-57

Omni Workx, Inc.

SGS Phils., Inc.

First Imperial Cargo, Inc. DHL Data Hardware & Electrical Supply Spectrum Scientific Corporation DHL CAD One International, Inc. Philippine Fuji Xerox Corp. Megamax Concepts, Inc. MOF Company (Subic) Inc. TOTAL

(k) Input VAT included with no supporting documents

Q3 10-104

Eastern Tanay Supermarket

Q3 10-105

Eastern Tanay Supermarket TOTAL TOTAL 11-Mar-03 11-Mar-03 Claimed p 23,413.22 337.00 5,274.53 2,098.72 48.73 46,979.20 616.00 84,344.50 127.20 1,296.36 11(302.27 P175,837.73 p p p 19,800.00 19,800.00 39,600.00 Should be p 23,411.41 306.36 5,160.64 377.18 16.00 45,021.89 299.27 61,461.73 123.67 1,282.73 11(191.16 148,652.04 p p 1,800.00 1,800.00 3,600.00 Difference p p p p 1.81 30.64 113.89 1,721.54 32.73 1,957.31 316.73 22,882.77 3.53 13.63 111.11 27,185.69 25.45 25.45 50.90 p 464,735.29

Therefore, petitioner's valid input VAT attributable to zero-rated sales only amounted to P2,809,765.89, computed as follows: Total Input VAT Claimed Less: Disallowances

(a) Per verification of the commissioned Independent CPA P

(b) Per Court's verification Validly supported input VAT Multiply by rate of supported zero-rated sales Valid Input VAT attributable to zero-rated sales 339,975.75 464 735.29 p 9,378,912.73 804 711.04 p 8,574,201.69 32.77% p 2,809,765.89 Petitioner's VAT returns for the four quarters of 2003 showed that it had no output tax liability against which the claimed input VAT may be credited. 19 Further, in its VAT return for the second quarter of 2005, 20 petitioner deducted the claimed amount of P9,378,912.73 of which the substantiated input VAT of P2,809,765.89 forms part of, as "Any VAT Refund/TCC Claimed" from the total available input tax of P41 ,541 ,547.30 as f the end of the second quarter of 2005. Petitioner could not have utilized the input VAT of P2,809,765.89 in the succeeding quarters; thus, complying with the fourth requirement. Lastly, regarding the fifth requisite, petitioner filed its claim for refund with the BIRon March 17, 2005 and the Petition for Review before this Court on April 25, 2005. 21 Both dates of filing are well within the two-year prescriptive period counted from the dates when petitioner originally filed its First, Second, Third, and Fourth Quarterly VAT Returns22 on April 25, 2003, July 25, 2003, October 27, 2003, and January 26, 2004, respectively.; 19 Exhibits "8 " "C" "D" and "F-2" 20 Exhibits "J" ~nd "J-1 ".' .

21 April 24, 2005 was a Sunday. 22 Supra.

Page I4 of 15 In sum, petitioner has sufficiently proven that it is entitled to a refund of its unutilized input VAT incurred in relation to its effectively zero-rated sales of electricity to NPC for taxable year 2003, but in the reduced amount of P2,809,765.89.

WHEREFORE, premises considered, the instant Petition for Review is PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED to REFUND to petitioner the reduced amount of TWO MILLION EIGHT HUNDRED NINE THOUSAND SEVEN HUNDRED SIXTY FIVE PESOS and 89/100 (P2,809,765.89), representing unutilized input VAT paid on domestic purchases of goods and services attributable to zero-rated sales for the taxable year 2003.

WE CONCUR:

<2.u..~AJ1<( Q. - ~~~/'~ .

S'tiM.Jirb"' C. CASTANEDA, JR.· Associate Justice ER~Y As~~~ce ~~~~

OLGA PALANCA-ENRIQUEZ

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.

G..a.-ur; C?. -~~ 0 .

<a'tiANITO c. CASTANEDAfJ'R. 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:?• L..A- ERNESTO D. ACOSTA Presiding Justice