CBK Power Company Limited vs. Commissioner of Internal Revenue

DECISION

BAUTISTA, [.:

The consolidated Petition for Review filed on March 30, 2011,1 and Amended Petition for Review filed on April8, 2013,2 pursuant to Section 112(A) of the 1997 National Internal Revenue Code, as amended,3 seek 1 Records, CT A Case Nos. 8246 & 8302, pp. 1-49, with Aru1exes; docketed as CTA Case No. 8246. 2 Td., at pp. 1439-1642, with Annexes; docketed as CTA Case No. 8302. 3 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 taxa ble 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 h·ansitional 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 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 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 cam1ot be directly and entirely otiTibuted to any one of tho '"~.c hon,, it>ha ll be allocated pmpmtionatoly on tho ""'" of the volume of>al"f CT A CASE NOS. 8246 and 8302 for the issuance of tax credit certificates in the respective amounts of ~17,784,968.91, for unutilized input taxes on local purchases and importations of goods other than capital goods, local purchases of services, payments for services rendered by non-residents, including unutilized amortized input taxes on capital goods, all attributable to zero-rated sales covering the period from January 1, 2009 to March 31, 2009; and ~5,781,915.24, for unutilized input taxes on importations of goods other than capital goods, attributable to zero-rated sales covering the period from April1, 2009 to June 30, 2009.

FACTS OF THE CASE

Petitioner, CBK Power Company Limited, is a partnership duly organized and existing under and by virtue of the laws of the Philippines, with principal office at the National Power Corporation Compound, Kalayaan, Laguna.

On the other hand, respondent is the duly appointed Commissioner of Internal Revenue, vested with authority to act as such, including, inter alia, the power to decide, approve and grant refunds or tax credit of erroneously or illegally collected internal revenue taxes as provided by law, with office address at the Bureau of Internal Revenue ("BIR") National Office Building, Diliman, Quezon City. On November 26, 2010, petitioner filed with the BIR Revenue District Office No. 55 of Laguna, its administrative claim in the amount of ~17,784,968.91, for unutilized input taxes on local purchases and importations of goods other than capital goods, local purchases of services, payments for services rendered by non-residents, including unutilized amortized input taxes on capital goods covering the period from January 1, 2009 to March 31, 2009.

Also, on February 24, 2011, petitioner filed with the BIR Large Taxpayers Service, Revenue District Office No. 121, BIR National Office Building, Agham Road, Diliman, Quezon City, its administrative claim in the amount of ~31,680,290.87, for unutilized input taxes on its local purchases and importations of goods other than capital goods, local purchases of services, including unutilized amortized input taxes on capital goods covering the period from Aprill, 2009 to June 30,2009. r

CT A CASE NOS. 8246 and 8302

Due to respondent's inaction, on March 30, 2011, petitioner filed a Petition for Review, docketed as CTA Case No. 8246,4 regarding its claim in the amount of ~17,784,968.91, covering the period from January 1, 2009 to March 31, 2009.

On June 27, 2011, respondent filed her Answer,s interposing the following Special and Affirmative Defenses: "4. Petitioner is not entitled to [a] refund or tax credit in the amount of ~17,784,968.91 representing alleged unutilized input tax because it failed to submit all the necessary and relevant documents pertaining to the above-mentioned amount with respondent (sic) in the administrative claim for refund or tax credit;

5. In an administrative claim for refund or tax credit of input taxes attributable to zero-rated sales, a VAT[-]registered person must submit complete documents to support its application for refund pursuant to Section 112(D) (sic) of the Tax Code of 1997. Otherwise, there will be no sufficient compliance with the filing of an administrative claim for refund, which is a condition sine qua non prior (sic) to the filing of judicial claim;

6. To support its claim, it is imperative for petitioner to prove and present the following, viz:

a. The registration requirements of a value-added taxpayer in compliance with Section 6(a) and (b) of Revenue Regulations No. 6-97 in relation to Section 4.107- a(a) of Revenue Regulations No. 7-95, and Section 236 of the National Internal Revenue Code of 1997 (NIRC of 1997);

b. The invo1cmg and accounting requirements for VAT -registered persons, as well as the filing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the NIRC of 1997;

c. Proof of compliance with the prescribed checklist : ~~~;;d;~ ~ Ca~fN~~::.~::~:: :~_:e subntitted ffivol vffig clalln for VAT r

CT A CASE NOS. 8246 and 8302 refund pursuant to Revenue Memorandum Order No. 53-

98. It is worthy of emphasis that Section 112(D) (sic) of the NIRC of 1997 requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants [the] immediate dismissal of the petition for review;

d. That the input taxes of !47,425,306.79 (sic) allegedly paid by petitioner on its domestic purchases of non- capital goods and services, services rendered by non- residents and importation of non-capital goods for the period April 1, 2008 to December 31, 2008 (sic) were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over in the succeeding taxable quarter or quarters;

e. That petitioner's administrative claim for tax credit or refund of [its] unutilized input tax (VAT) was filed within two (2) year[ s] after the close of the taxable quarter when the sales were made in accordance with Sections 112(A) and (D) (sic) of the NIRC of 1997;

f. The judicial claim was filed within the period prescribed in Section 112(D) (sic) of the NIRC of 1997;

g. That petitioner's domestic purchases of goods and services were made in the course of the trade or business, properly supported by VAT invoices and/ or official receipts and other documents, such as subsidiary purchase journal, showing that it actually paid VAT in accordance with Sections 110(A)(2) and 113 of the NIRC of 1997, and in pursuance (sic) to Section 4.104-5(a) and

(b) of Revenue Regulations No. 7-95 (RE: Substantiation of Claims for Input Tax Credit); [and]

h. The requirements as enumerated under Section 4.104-2 of Revenue Regulations [No.] 7-95 (Re: Persons who can avail of the Input Tax Credits).

CT A CASE NOS. 8246 and 8302

7. In Ang Tibay vs. Court of Industrial Relations, G.R. No. L- 46496, the Highest Court stated the primary rights which must be respected even in an administrative proceeding:

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Petitioner is mandated to present evidence to support its administrative claim and such evidence will be used as basis for the decision of the quasi-judicial body. If there is lack of evidence, then the decision will probably be contrary to petitioner.

Only the

evidence presented will be reviewed by the quasi-judicial body. An administrative claim is meant to expedite the proceedings where all the relevant evidence is presented.

Petitioner, however, instead chose not to submit any evidence to support its claim; and

8. Furthermore, in an action for refund the burden of proof is on the taxpayer to establish its right to refund (sic) and failure to sustain the burden is fatal to the claim for refund/ credit. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon value implications (Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466, cited in Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670)." 6 On the other hand, on June 28, 2011, petitioner filed another Petition for Review, docketed as CTA Case No. 8302,7 regarding its claim in the amount of ~31,680,290.87, covering the period from April 1, 2009 to June 30, 2009.

On September 2, 2011, respondent filed her Answer,s interposing the following:

"5. Petitioner's alleged claim for refund is subject to administrative routinary investigation/ examination by the Bureau of Internal Revenue (BIR);

CT A CASE NOS. 8246 and 8302

6. The amount of ~1,680,290.87 being claimed by petitioner as alleged unutilized input VAT on its alleged local purchases and importations of goods other than capital goods, alleged local purchases of services, including alleged unutilized amortized input taxes on capital goods exceeding F1 Million, for the period April 1, 2009 to June 30, 2009 allegedly attributable to zero-rated sales is not properly documented;

7. Petitioner must prove that it has complied with the provisions of Section 112(A) and 112(B) (sic) of the Tax Code of 1997, as amended;

8. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund pursuant to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of the administrative claim for refund, the administrative claim thereof being mere pro-forma, which is a condition sine qua non prior (sic) to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code of 1997. Further Section 112(C) of the Tax Code of 1997, as amended, requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period will apply, and before the taxpayer could avail of judicial remedies as provided for in law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants [the] immediate dismissal of the petition for review;

9. Petitioner must likewise prove that it has complied with the invoicing requirements mentioned in Sections 110 and 113 of the Tax Code of 1997, as amended, in relation to the provisions of Revenue Regulations [No.] 7-95;

10. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund (sic) and failure to sustain the burden is fatal to the claim for refund/ credit (Asiatic Petroleum Co., vs. Llanes, 49 Phil. 466 cited in Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670);

11. Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person claiming the exemption (Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc., et al., 209 SCRA 87 (1999) and further, claims for refund are construed strictly against the claimant for the same partake the~

I

CT A CASE NOS. 8246 and 8302 nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and, as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211);

12. Petitioner must likewise comply with the provisions of Section 112(C) of the Tax Code of 1997, as amended, which provides:

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13. The power of taxation will not be surrendered except in words too plain to be mistaken. The reason is that the State cannot strip itself of this highest attribute of sovereignty - its most essential power of taxation - by vague or ambiguous language. Since tax refunds are in the nature of tax exemptions, these are deemed to be in derogation of sovereign authority and to be considered in strictissimi juris against the person or entity claiming the exception (Commissioner of Internal Revenue vs. Solidbank Corporation, 416 SCRA 436). It must be indubitably shown to exist, for every presumption is against it (Davao Light & Power Co., Inc., vs. Commissioner of Customs, 44 SCRA 122). Ignoring the above teaching of the Supreme Court and adopting the interpretation favorable to petitioner cannot be done because it runs afoul of its ruling that those who claim to be exempt from the payment (here, claim for a refund) of a particular tax must do so under clear and unmistakable terms found on the statute. They must be able to point to some positive provision, not merely a vague implication (Asiatic Petroleum Co., Ltd. vs. Llanes, 49 Phil. 466), of the law creating that right (Espanol vs. Philippine Veterans Administration, 137 SCRA 314)."9 On October 14, 2011, the Court ordered the consolidation of CTA Case No. 8302, with CTA Case No. 8246, pursuant to Section 1 of Rule 31

of the 1997 Rules of Civil Procedure:10

On December 1, 2011, for failure of respondent to appear during Pre-Trial, and upon motion of petitioner, the Court declared the former 9 Id., at pp. 62-66.

1o Id., at pp. 81-82.

f \.

CT A CASE NOS. 8246 and 8302 as in default and allowed the latter to present its evidence ex-parte.11 The same was confirmed in a Resolution dated December 23,2011.12 On May 2, 2013, the Court granted petitioner's Motion for Leave of Court to File Attached Amended Petition for Review for CTA Case No. 8302.13 Accordingly, the Amended Petition for Review was admitted by the Court.

In the Amended Petition for Review for CTA Case No. 8302, petitioner seeks the reduced amount of ~5,781,915.24 for unutilized input taxes on its importations of goods other than capital goods for the period covering April 1, 2009 to June 30, 2009,14 taking into consideration the Letter dated February 19, 2013 issued by respondent. On June 11, 2013, the Court submitted the consolidated cases for decision.15 Hence, this Decision.

ISSUE

The sole issue for the Court's determination is that:

WHETHER OR NOT PETITIONER IS ENTITLED FOR THE

ISSUANCE OF TAX CREDIT CERTIFICATES IN THE TOTAL

AMOUNT OF ~23,566,884 . 15 FOR THE PERIODS COVERING JANUARY 1, 2009 TO MARCH 31, 2009, AND APRIL 1, 2009 TO JUNE 30, 2009.

RULING OF THE COURT

The Court finds the Petition for Review and Amended Petition for Review partly meritorious.

11 Records, CTA Case Nos. 8246 & 8302, p. 125. 12 Id., at p. 127.

13 Jd., at pp. 1653-1655.

14 ld., at pp. 1439-1642.

1s I d., at p. 1701.

CT A CASE NOS. 8246 and 8302

The subject claim in the amount of ~23,566,884 . 15, consisted of the following input taxes:

1st Quarter 2nd Quarter

Total Input VAT

-200916 -200917

Claim

Input Taxes on Importations of Goods Other

Than Capital Goods

~ 335,565.oo18 ~ 5,781,915.2419 ~ 6,117,480.24

Input Taxes on Domestic Purchases of Goods

6,024,501.8720

Other Than Capital Goods

- 6,024,501.87

Input Taxes on Domestic Purchases of Services

10,414,723.9221 - 10,414723.92

Input Taxes on Services Rendered by Non-

474,530.3022

Residents

- 474,530.30

Amortization of Input Taxes on Capital Goods

Exceeding ~1 Million:

Input Tax Deferred on

Capital Goods

Exceeding P1Million

4,626,744.0823 from Previous Quarter

Add: Input Tax on

Capital Goods

Exceeding

~!Million Purchased this

Quarter

1,469,860.7824

Total Unamortized

Input Tax on Capital

Goods Exceeding

~!Million 6,096,604.86

Less: Input Tax on

Capital Goods

Exceeding

~!M illion

Deferred for the Succeeding

5,560,957.0425

Period

Amortization of Input Taxes on Capital

Goods Exceeding ~!M illion 535,647.82 - 535,647.82

TOTAL CLAIMED UNUTILIZED INPUT TAXES

1!17,784,968.91 1!5,781,915.24 1!23,566,884.15 Accordingly, Section 112(A) of the 1997 National Internal Revenue Code ("NIRC"), as amended, allows the refund or tax credit of unutilized input taxes attributable to zero-rated or effectively zero-rated sales, to wit:

16 Exhibit "B B-1-002."

17 Supra, note 14.

1s Exhibit "BB-1-002," line 21H.

19 Exhibit "BB-2-002, " line 21H.

2o Exhibit "BB-1-002," line 21F.

21 Exhibit "BB-1-002," line 21).

22 Exhibit "BB-1-002," line 21L.

23 Exhibit "BB-1-002," line 20B.

24 Exhibit "BB-1-002," line 21D.

25 Exhibit "BB-1-002," line 23A.

(

CT A CASE NOS. 8246 and 8302

"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 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of 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." Thus, enumerated hereunder are the requisites that must be complied with:

1) the claimant must be a value-added tax ("VAT")-registered person;

2) there must be zero-rated or effectively zero-rated sales; 3) input taxes were incurred or paid;

4) input taxes are attributable to zero-rated or effectively zero- rated sales;

5) input taxes were not applied against any output VAT liability; and 6) both administrative and judicial claims for refund were seasonably filed.

At the outset, the Court finds it appropriate to first determine petitioner's compliance with the sixth requirement - that the administrative and judicial claims were timely filed.

CT A CASE NOS. 8246 and 8302

As earlier-quoted, Section 112(A) of the 1997 NIRC, as amended, provides that the application for refund or tax credit of unutilized excess input VAT must be filed within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. Based on the records, petitioner filed its administrative claim on November 26, 2011 covering the period from January 1, 2009 to March 31, 2009; while it filed on February 24, 2011, its administrative claim covering the period from April 1, 2009 to June 30, 2009.

Applying

therefore Section 112(A) of the 1997 NIRC, as amended, petitioner had until March 31, 2011 and June 30, 2011, respectively, within which to file its administrative claims for refund/ tax credit. The Court, thus, finds the administrative claims filed well within the two (2)-year period. Also, Section 112(C) of the 1997 NIRC, as amended, provides as follows:

"Sec. 112. Refunds or Tax Credits of Input Tax.-

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(C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof.

In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty- day period, appeal the decision or the unacted claim with the Court of Tax Appeals."

It has been settled that the Commissioner of Internal Revenue has one hundred twenty (120) days from the date of submission of the complete documents in support of the application for tax refund/ credit within which to grant or deny the claim; and in case of full or partial denial thereof, the taxpayer has thirty (30) days from receipt within which to elevate the same to this Court; nonetheless, if the Commissioner ;Z '

CT A CASE NOS. 8246 and 8302 of Internal Revenue fails to act thereon within the allotted one hundred twenty (120) days, the taxpayer has thirty (30) days to appeal the said inaction to this Court.

Based on the records, the following hereunder are the relevant dates:

CTA

Taxable

Close of

Date of Filing of

End of120

End of 30 days

Date of Filing of

Case No.

Quarter-

Taxable

Administrative

days from the lapse of

Judicial Claim

CY 2009

Quarter

Claim

the 120 days 8246 1st Qtr March 31, 2009 November 26, 2010 March 26, 2011 April 25, 2011 March 30, 201126 8302 2nd Qtr June 30, 2009 February 24, 2011 June 24, 2011 July 24, 2011 June 28, 201127 From the foregoing, the judicial claims filed by petitioner for the first (1st) and second (2nd) quarters of taxable year 2009 were timely filed. To continue, for the first requisite - that the claimant must be a VAT- registered person - as borne by the records, petitioner is registered as a VAT entity with TIN/VAT No. 205-760-474-000; it was issued a BIR Certificate of Registration OCN 1RC0000050243 dated April 10, 2000 by the BIR Revenue District Office No. 55 (San Pablo City, Laguna), which was updated on May 11, 2005, thus, it was issued a BIR Certificate of Registration OCN 1RC0000195405; and that on January 12, 2011, it received a letter from respondent dated December 21, 2010, informing it about its classification as a Large Taxpayer under the Large Taxpayers Service pursuant to Revenue Regulations No. 17-2010, dated November 16, 2010, and under the jurisdiction of Revenue District Office No. 121 effective January 1, 2011,28 thus, the Large Taxpayers Service issued a BIR Certificate of Registration OCN 8RC0000019901 dated April 10, 2000.29 From the foregoing, petitioner is a VAT -registered person, and has clearly complied with the first requisite. 26 Supra, note 1.

27 Supra, note 7.

2s Records, p. 2 and p. 68.

CT A CASE NOS. 8246 and 8302

Onto the second requisite- that there must be zero-rated or effectively zero-rated sales - Section 108(B)(7) of the 1997 NIRC, as amended, provides that sale of power generated through renewable sources of energy is among the transactions subject to zero percent (0%) VAT, to wit:

"(B) Transactions Subject to Zero Percent (0%) Rate.-

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(7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels." In relation thereto, Section 4.108-5(b)(7) of Revenue Regulations No. 16-2005,30 which implements the afore-quoted provision, qualifies the applicability of such zero-rating as follows: "(b) Transactions Subject to Zero Percent (0 %) VAT Rate. - The following services performed in the Philippines by a VAT- registered person shall be subject to zero percent (0%) VAT rate:

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(7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other emerging sources using technologies such as fuel cells and hydrogen fuels; Provided, however, That zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power." While Section 4.108-3(f) of the same Revenue Regulations provides: "SEC. 4.108-3. Definitions and Specific Rules on Selected Services. (l 30 Entitled "Consolidated Value-Added Tax Regulations of 2005," dated September 1, 2005.

CT A CASE NOS. 8246 and 8302

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(f) Sale of electricity by generation, transmission, and distribution companies shall be subject to 10% VAT on their gross receipts; Provided, That sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT. 'Generation companies' refers to persons or entities authorized by the Energy Regulatory Commission (ERC) to operate facilities used in the generation of electricity. For this purpose, generation of electricity refers to the production of electricity by a generation company or a co-generation facility pursuant to the provisions of RA No. 9136 (EPIRA).

They shall include all Independent Power Producers (IPPs) and NPC/Power Sector Assets and Liabilities Management Corporation (PSALM)-owned generation facilities." Therefore, to qualify for VAT zero-rating, petitioner must prove that it is engaged in the sale of power or fuel generated through renewable sources of energy.

It is undisputed that petitioner is a special purpose entity, the sole purpose of which is to engage in all aspects of (a) the design, financing, construction, testing, commissiOning, operation, maintenance, management and ownerhisp of

Kalayaan

II

pumped-storage hydroelectric power plant, the new Caliraya Spillway, and other assets located in the Province of Laguna; and (b) the rehabilitation, upgrade, expansion, testing, commissiOning, operation, maintenance and management of the Caliraya, Botocan and Kalayaan I hydroelectric power plants and their related facilities located in the Province of Laguna, as shown in its Securities and Exchange Commission Registration and Amended Articles of Parh1.ership.31 Also, petitioner has entered into a Second Accession Undertaking with the National Power Corporation ("NPC"), Industrias Metalurgicas Pescarmona, S.A. ("IMPSA"), and CBK Power Corporation on September 20, 2000,32 wherein it became a party to the Build-Rehabilitate-Operate- " &ro'd', p. 2 •nd p. 68.

;} 32 Exhibit "D."

~

CT A CASE NOS. 8246 and 8302

Transfer ("BROT") Agreement dated November 6, 1998.33

Under the

BROT Agreement and by virtue of the Second Accession Undertaking, petitioner shall cause and be responsible for the rehabilitation, construction, operation and maintenance of the Caliraya, Botocan, and Kalayaan hydroelectric power plants and other civil structures for the purpose of generating electricity for the NPC. In consideration thereof, NPC shall pay petitioner Capital Recovery Fees and Operation and Maintenance Fees and other fees in accordance with the BROT Agreement.34 In performing its obligations under the BROT Agreement and the Accession Undertaking, petitioner entered into an Agreement with IMPSA Construction Corporation designated as Turnkey Contract35 on August 18,2000, by virtue of which IMPSA, as Contractor, undertook the design, engineering, procurement, supply of all plant and materials, rehabilitation, construction, commissioning, testing, completion and handover of such power plants, together with the civil structures, access roads and other works as specified in the BROT Agreement.36 Petitioner then generates electricity through its Caliraya, Botocan and Kalayaan I hydroelectric power plants, as well as from the Kalayaan II hydroelectric power plant. The plants generate electricity by drawing water from an upstream reservoir, passing the water through a penstock and in the process utilizing the force of gravity to rotate the turbines. The turbines in turn rotate the generators, thereby generating electricity .37 Petitioner's Caliraya, Botocan, Kalayaan I and Kalayaan II power plants were likewise found by the Energy Regulatory Commission ("ERC") to be compliant with the pertinent rules and regulations as evidenced by the Certificates of Compliance ("COC")38 issued by the ERC to petitioner.

f!-

CT A CASE NOS. 8246 and 8302

And a verification of various sales invoices39 and official receipts40 issued by petitioner to NPC showed that for the first (1st) and second (2nd) quarters of 2009, it has derived revenues from sales of electricity to NPC in the amount of ~1,949,421,902.14 which was reflected in its Quarterly VAT Returns, as follows:

Exhibit

Period

Zero-rated Sales

"BB-1-002e" 1st Quarter IJ1,113,056,584.68 "BB-2-002e" 2nd Quarter 836,365,317.46

Total

P1,949,421,902.14 With the foregoing sales of electricity generated through a renewable source of energy, particularly, hydropower, the Court finds that the same qualifies for VAT zero-rating under Section 108(B)(7) of the 1997 NIRC, as amended.

Then next to the third requisite - that input taxes ·were incurred or paid - petitioner reflected in its Quarterly VAT Returns for the first (1st) and second (2nd) quarters of 2009 its claimed input taxes in the amount of ~23,566,884.15, broken down as follows:

Exhibit

Period

Input VAT

"BB-1-002n" 1st Quarter F17,784,968.91

"BB-2-002"

2nd Quarter 5,781,915.24

Total

F23 ,566,884.15 To prove that it has incurred/paid the aforesaid input VAT, petitioner submitted various suppliers' invoices, official receipts, Bureau of Customs ("BOC") Import Entries and Internal Revenue Declarations ("IEIRD"), BOC and bank official receipts,41which were examined by the Court-commissioned Independent Certified Public Accountant ("CPA"), Ms. Myra Celeste 0. Dabalos.

Upon scrutiny of the Independent CPA's Report42 and the related supporting documents, the Court finds that the input taxes in the

CT A CASE NOS. 8246 and 8302 amount of ~702,904.61 should be disallowed for non-compliance with the substantiation requirements under Sections 110(A)43 and 113(A) and (B)44 of the 1997 NIRC, as amended, in relation to Sections 4.110-2,45 4.110-3,46 4.110-8,47 and 4.113-148 of Revenue Regulations No. 16-05.49 43 SEC.110. Tax Credits. - (A) Creditable Input Tax. -

(1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance w ith Section 113 hereof on the following transactions shall be creditable against the output tax:

(a) Purchase or importation of goods:

(i) For sale; or (ii) For conversion into or intended to form part of a finished product for sale including packaging materials; or (iii) For use as supplies in the course of business; or (iv) For use as materials supplied in the sale of service; or

(v) For use in trade or business for which deduction for depreciation or amortization is allowed under this Code, except automobiles, aircraft and yachts.

(b) Purchase of services on which a value-added tax has been actually paid.

(2) The input tax on domestic purchase of goods or properties shall be creditable.

(a) To the purchaser upon consummation of sale and on importation of goods or properties; and

(b) To the importer upon payment of the value-added tax prior to the release of the goods from the custody of the Bureau of Customs.

However, in the case of purchase of services, lease or use of properties, the input tax shall be creditable to the purchaser, lessee or licensee upon payment of the compensation, rental, royalty or fee.

(3) A VAT-registered person who is also engaged in transactions not subject to the value-added tax shall be allowed tax credit as follows:

(a) Total input tax which can be directly attributed to transactions subject to value-added tax; and

(b) A ratable portion of any inpu t tax which cannot be directly attributed to either activity. The term "input tax" means the value-added tax due from or paid by a VAT-registered person in the course of his trade or business on importation of goods or local purchase of goods or services, including lease or use of property, from a VAT-registered person. It shall also include the h·ansitional input tax determined in accordance with Section 111 of this Code.

The term "output tax" means the value-added tax due on the sale or lease of taxable goods or properties or services by any person registered or required to register under Section 236 of this Code. 44 SEC. 113. invoicing and Accounting Requirements for VAT-Registered Persons. - (A) Invoicing Requirements. - A VAT-registered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following information shall be indicated in the invoice or receipt:

(1) A statement that the seller is a VAT-registered person, followed by his taxpayer's identification number (TIN); and

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indica tion that such amount includes the value-added tax. (B) Accounting Requirements. - Notwithstanding the provisions of Section 233, all persons subject to the value- added tax under Sections 106 and 108 shall, in add ition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on which the daily sales and purchases are recorded. The subsidiary journals shall contain such information as may be required by the Secretary of Finance. 45 SEC. 4.110-2. Persons Who Can Avail of the Input Tax Credit. - The input tax credit on importation of goods or local purchases of goods, properties or services by a VAT-registered person shall be creditable:

(a) To the importer upon payment of VAT prior to the release of goods from customs custody;

(b) To the purchaser of the domestic goods or properties upon consummation of the sale; or

(c) To the purchaser of services or the lessee or licensee upon payment of the compensation, rental, royalty or fee.

46 SEC. 4.110-3. Claim for Input Tax on Depreciable Goods. - Where a VAT-registered person purchases or imports capital goods, which are depreciable assets for income tax purposes, the aggregate acquisition cost of which (exclusive of VAT) in a calendar month exceeds One Million pesos (I11,000,000.00), regardless of the acquisition cost of each capital good, shall be claimed as credit against output tax in the following manner:

(a) if the estimated useful life of a capital good is five (5) years or more - The input tax sha ll be spread evenly over a period of sixty (60) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. The total input taxes on purchases or importations of this type of capital goods shall be divided by 60 and the quotient will be the amount to be claimed monthly.

(b) If the estimated useful life of a capital good is less than five (5) years - The input tax shall be spread evenly on a monthly basis by dividing the input tax by the actual number of months comprising the estimated useful life of f-

CT A CASE NOS. 8246 and 8302 the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired.

Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (F 1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition; Provided, ho·wever, that the total amount of input taxes (input tax on depreciable capital goods plus other allowable input taxes) allowed to be claimed against the output tax in the quarterly VAT Returns shall be subject to the limitation prescribed under Sec. 4.110-7 of these Regulations.

The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired in installment for an acquisition cost of more than P 1,000,000.00 will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1,000,000.00. 47 SEC. 4.110-8. Substantiation of Input Tax Credits. -

(a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau:

(1) For the importation of goods - import entry or other equivalent document showing actual payment of VAT on the imported goods.

(2) For the domestic purchase of goods and properties - invoice showing the information required under Sees. 113 and 237 of the Tax Code.

(3) For the purchase of real property - public instrument i.e., deed of absolute sale, deed of conditional sale, contract/ agreement to sell, etc., together with VAT invoice issued by the seller.

(4) For the purchase of semices - official receipt showing the information required under Sees. 113 and 237 of the Tax Code.

A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code.

(b) Transitional input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the BIR.

(c) Input tax on" deemed sale" transactions shall be substantiated with the invoice required under Sec. 4.113-2 of these Regulations.

(d) Input tax from payments made to non-residents (such as for services, rentals and royalties) shall be supported by a copy of the Monthly Remittance Return of Value Added Tax Withheld (BIR Form 1600) filed by the resident payor in behalf of the non-resident evidencing remittance of VAT due which was withheld by the payor.

(e) Advance VAT on sugar shall be supported by the Payment Order showing payment of the advance VAT. 48 SEC. 4.113-1. Invoicing Requirements. - (A) A VAT-registered person shall issue: -

(1) A VAT invoice for every sale, barter or exchange of goods or properties; and

(2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services.

Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoice or official receipts. Said documents shall be considered as a "VAT Invoice" or VAT official receipt. All purchases covered by invoices/ receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/ official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt:

(1) A statement that the seller is a VAT-registered person, followed by his TIN;

(2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That:

(a) The amount of tax shall be shown as a separate item in the invoice or receipt;

(b) If the sale is exempt from VAT, the term "VAT -exempt sale" shall be written or printed prominently on the invoice or receipt;

(c) If the sale is subject to zero percent (0%) VAT, tl1e term "zero-rated sale" shall be written or printed prominently on the invoice or receipt;

(d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of tl1e VAT on each portion of the sale shall be shown on tl1e invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

CT A CASE NOS. 8246 and 8302

Below is the detailed breakdown of the disallowed input VAT of ~702,904.61:

Exceptions

Exhibit

Input VAT

Input taxes on domestic purchase of goods supported by documents other than VAT invoice- Supported by other non-VAT document, ]st Quarter

"DD-5"

P-4,423.23 Input taxes on domestic purchase of goods supported by VAT invoice but not an original copy, ]sf Quarter

"DD-7"

61,710.78 Input taxes on domestic purchase of goods supported by VAT invoice not issued in the name of petitioner (e.g. Power Co. Ltd.) but with TIN and address of petitioner

"DD-8"

5,235.00 Input taxes on domestic purchases of goods supported by VAT invoice not issued in the name of petitioner (e.g. CBK only), ]sf Quarter

"DD-9"

58.93 Input taxes on domestic purchase of goods supported by TIN sales invoice, ]st Quarter

"DD-10"

18,344.99 Input taxes on domestic purchase of goods supported by VAT invoice but not dated within the VAT-taxable year, ]st Quarter

"DD-13"

14,119.23 Input taxes on domestic purchase of goods supported by VAT invoice that is not BIR registered, 1 sf Quarter

"DD-14"

72,450.00 Input taxes on domestic purchase of goods with correction on the year of the invoice date without counter signature, ] sf Quarter

"DD-17"

174.79 Input taxes on domestic purchase of services supported by documents other than VAT OR (i.e. VAT invoice, etc.), ]sf Quarter

"DD-23"

29,693.58 Input taxes on domestic purchase of services supported by documents other than VAT OR (i.e., statement of account, non-VAT invoice, etc.), ] sf Quarter

"DD-24"

18,301.21 Input taxes on domestic purchase of services supported by VAT OR not issued in the name of petitioner (e.g. EME Phils. Services Corp. and CBR Power Co. Ltd.) but with TIN and address of petitioner and the amount of tax was not separately shown

"DD-26"

493.75

(3) In the case of sales in the amount of one thousand pesos (~1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or client, shall be indicated in addition to the information required in (1) and (2) of this Section. ;;;?

49 Supra, note 30.

( '-

CT A CASE NOS. 8246 and 8302

Input taxes on domestic purchase of services supported by VAT OR not issued in the name of petitioner (e.g. CBK only, CBK New-Spillway, CBK Training Center) but without TIN and/ or address of petitioner, ]sf Quarter Input taxes on domestic purchase of services supported by TIN OR only, ] sf Quarter Input taxes on domestic purchase of services supported by VAT OR dated within the VAT -taxable year Input taxes on domestic purchase of services supported by VAT OR that is not BIR-registered, ]sf Quarter Input taxes on domestic purchase of services with correction in the OR date without counter signature Double claiming of input tax on domestic purchase of services Input taxes on domestic purchase of services supported by VAT OR. However, the sentence: "This is not a source of input tax" isE_rinted in the VAT OR, 1 sf Quarter Input taxes on domestic purchase of goods and services without supporting documents, ]sf Quarter Overclaimed input tax on domestic purchase of goods/ services due to erroneous computation (i.e. arithmetical error), ]sf Quarter Overclaimed portion of input tax arising from forex rate used on foreign currency denominated purchases of goods and services, ] sf Quarter Input taxes on domestic purchase of services supported by VAT OR which is not an original copy Input taxes on importation of goods supported by a document other than an original copy of the IEIRD and

BOCOR

Total

"DD-27"

4,505.03

"DD-28"

22,422.85

"DD-31"

187,801.33

"DD-32"

1,189.68

"DD-34"

39,594.02

"DD-40"

180.48 "DD-41 II 2,972.51

"DD-42"

32,698.72

"DD-44"

4,768.41

"DD-46"

25,580.99

"DD-49"

97,499.10

"DD-50"

58,686.00 F702,904.61 In addition, the claimed input VAT in the amount of ~737,559.61, as detailed below, should be disallowed for non-compliance with the substantiation requirements under the VAT law and regulations:

Vendor

O.R.j O.R.j

Exhibit "CC-"

Input VAT

Invoice No.

Invoice Date

) Input VAT without supporting documents

Multiple J Enterprises

- - - ~ 18,325.49

Rejoice Tyre Gallery & Auto Center

- - - 1,339.28

Asee Enterprises

- - - 1,917.88

Multiple J Enterprises

- - - 34,815.00 Phil. Envirom11ental & Teclmical Systems and Services, Inc. - - - 38,941.20

Hitachi Asia Limited

- - - 263,718.69

Kokusai Commerce

- - - 34,012.22

CT A CASE NOS. 8246 and 8302

Sumitomo Corporation

Tecnored Ingeniera

Viking Cars, Incorporated Airfreight 2100, Inc.

Airfreight 2100, Inc.

Airfreight 2100, Inc.

Airfreight 2100, Inc.

Airfreight 2100, Inc.

Globe Telecom

Viking Cars, Incorporated

Center Lane Car Rental Services

Subtotal

2) Input VAT on domestic purchases of services supported by VAT ORs but the amount of VAT was not separately shown Counterflow Movers, Inc.

Counterflow Movers, Inc.

PLDT

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

PLDT

Firstly & Foremost Resort Corp.

Gencars-San Pablo, Inc.

PLDT

PLDT

PLDT

Qconsult, Inc.

- - - - - - - - - - - 2425 2425 000072575 0602 0602 0601 000072576 000072572 000072573 000072574 000072577 000072578 000072579 000072580 000072581 000072582 000072583 000072584 000072585 000072586 000072587 000072588 000072589 000072590

PKPOR0002

PKPOR0002

PKPOR0002

PKPOR0002

PKPOR0002

0604 23045 000075268 000075269 000075265 0111 - - 71,243.16 - - 64,991.49 - - 9,510.01 - - 80.43 - - 80.43 - - 55.26 - - 72.52 - - 72.52 - - 151.83 - - 1,356.31 - - 780.00 ¥541,463.72 1/9/2009 010001-010002 ~24,816.37 1/9/2009 010001,010003 9,720.25 2/4/2009 010105-010106 107.14 2/10/2009 010015-010017 101.24 2/10/2009 010015-010017 2,555.42 2/10/2009 010033-010039 717.60 2/4/2009 010097-010098 910.69 2/4/2009 010099-010100 133.63 2/4/2009 010101-010102 369.78 2/4/2009 010103-010104 123.81 2/4/2009 010107-010108 121.63 2/4/2009 010109-010110 292.39 2/4/2009 01 0111-010112 121.63 2/4/2009 010113-010114 738.21 2/4/2009 010115-010116 235.77 2/4/2009 010117-010118 157.38 2/4/2009 010119-010120 1,066.20 2/4/2009 010121-010122 139.63 2/4/2009 010123-010124 927.23 2/4/2009 010125-010126 577.80 2/4/2009 010127-010128 126.13 2/4/2009 010129-010130 854.51 2/4/2009 010131-010132 151.90 2/4/2009 010133-010134 347.71 2/13/2009 010206-010207 1,910.53 2/13/2009 010206,010208 151.08 2/13/2009 010206,010209 151.08 2/13/2009 010206,010210 151.08 2/13/2009 010206,010211 156.54 2/26/2009 020012-020019 885.13 3/16/2009 020024-020025 306.11 3/10/2009 020097-020098 123.81 3/10/2009 020099-020100 122.76 3/10/2009 020101-020102 10,236.57 2/19/2009 020103-020104 4,320.00

CT A CASE NOS. 8246 and 8302

Banahaw Telephone Corp.

Banahaw Telephone Corp.

Banahaw Telephone Corp.

Toyota, Batangas, City Airfreight 2100, Inc.

Airfreight 2100, Inc.

New World International Development Phils., Inc.

PLOT

PLOT

PLOT

PLOT

PLOT

Firstly & Foremost Resort Corp.

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

Rejoice Tyre Gallery & Auto Center

World Best Logistics Phils., Inc.

World Best Logistics Phils., Inc.

New World International Development Phils. Inc. New World International Development Phils., Inc. Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

Firstly & Foremost Resort Corp.

40894 40894 40894 170866 1204459 1204484 14085

PKPOR0002

PKPOR0002

PKPOR0002

PKPOR0002

PKPOR0002

0621 000077286 000077301 000077302 000077303 000077304 000077305 000077306 000077307 000077308 000077309 000077310 000077311 000077312 000077313 000077316 000077317 000077318 000077319 000077479 0216 0448 0448 14383 14383 0588 0588 0588 0589 0589 0589 0589 0589 0589 3/3/2009 020112-020114 78.57 3/3/2009 020112-020114 78.57 3/3/2009 020112-020114 78.57 3/16/2009 020138-020140 159.00 2/16/2009 020162-020163 41.89 3/2/2009 020164-020165 89.80 3/5/2009 020240-020243 9,115.39 3/11/2009 020246-020247 2,393.77 3/11/2009 020246,020248 151.08 3/11/2009 020246,020249 151.08 3/11/2009 020246,020250 151.08 3/11/2009 020246,020251 171.28 3/27/2009 030073-03007 4 1,891.52 3/27/2009 030100-030101 910.69 3/27/2009 030102-030103 121.63 3/27/2009 030104-030105 364.69 3/27/2009 030106-030107 121.63 3/27/2009 030108-030109 121.63 3/27/2009 030110-030111 153.63 3/27/2009 030112-030113 121.63 3/27/2009 030114-030115 1,182.86 3/27/2009 030116-030117 142.36 3/27/2009 030118-030119 121.63 3/27/2009 030120-030121 524.53 3/27/2009 030122-030123 126.13 3/27/2009 030124-030125 139.63 3/27/2009 030126-030127 13,878.45 3/27/2009 030128-030129 133.63 3/27/2009 030130-030131 355.93 3/27/2009 030132-030133 79.88 3/27/2009 030134-030135 13,511.15 3/31/2009 030140-030141 107.14 3/17/2009 030146-030147 192.86 3/31/2009 030151-030152 1,139.15 3/31/2009 030151,030153 94.87 3/27/2009 030190-030191 720.00 3/27/2009 030190,030192 720.00 1/31/2009 030214-030220 5,113.36 030214,030221- 1/31/2009 030227 576.79 030214, 030228- 1/31/2009 030234 829.53 1/31/2009 030235-030245 865.74 030235,030246- 1/31/2009 030260 1,407.88 030235,030261- 1/31/2009 030267 850.53 030235,030268- 1/31/2009 030269 187.50 030235,030270- 1/31/2009 030271 187.50 030235,030272- 1/31/2009 030277 679.66

CT A CASE NOS. 8246 and 8302

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

PLOT

Tricom Dynamics, Inc.

000070622 000070623 000070624 000070625

PKPOR0002

PKPOR0002

PKPOR0002

PKPOR0002

PKPOR0002

162163 1/14/2009 030349-030350 133.63 1/14/2009 030351-030352 461.53 1/14/2009 030353-030354 123.81 1/14/2009 030355-030356 198.75 1/20/2009 030414-030415 2,139.91 1/20/2009 030414,030416 165.95 1/20/2009 030414,030417 151.08 1/20/2009 030414,030418 154.08 1/20/2009 030414,030419 169.10 1/9/2009 030439-030440 469.29

Subtotal

P128,431.69 ~) Input VAT on domestic purchase of goods supported by VAT invoice but the amount of VAT was not separately shown Jems Teclmik Corp.

0385 3/17/2009 030799-030800 ~0,193.34

Subtotal

P40,193.34 ~) Input VAT on domestic purchase of goods supported by VAT invoice with correction in the date but without counter signature

MFT International Corporation

2902 1/22/2009 010239-010240 ~ 22,071.43

Subtotal

P22,071.43 ~) Input VAT on domestic purchase of goods supported by a VAT invoices that is not BIR-registered Canon Marketing (Phils.), Inc.

500983 3/18/2009 030863-030864 ~4,285.71

Subtotal

P4,285.71

Eastern Aluminum Glass Supply

13486 11/28/2008 030212-030213 ~750.00

Subtotal

P750.00 R. Ong Shell Gasoline Station 2089 3/18/2009 031133,031153 ~120.95 R. Ong Shell Gasoline Station 2090 3/18/2009 031133, 031169 101.50 R. Ong Shell Gasoline Station 2763 3/26/2009 031133,031172 141.27

Subtotal

P363.72

Total

P737,559.61 Thus, from the total input VAT claim in the amount of ~23,566,884.15, only the amount of ~22,126,419.93, as computed below, has been duly substantiated:

Claimed Input VAT

P23,566,884.15

Less: Disallowances

Per CPA Report

P702,904.61 Per Court's further verification 737,559.61 1,440,464.22

Valid Input VAT

P22,126,419.93 And for the fourth and fifth requisites - that the input taxes are attributable to zero-rated or effectively zero-rated and the same -were not applied

CT A CASE NOS. 8246 and 8302 against any output tax- the Court finds that petitioner's reported sales for the first (1st) and second (2nd) quarters of 2009 were all zero-rated, thus, the substantiated input VAT in the amount of ~22,126,419.93 is entirely attributable thereto and was not applied against any output tax. In addition, in its reported unutilized input taxes for the first (1st) and second (2nd) quarters of 2009 in the respective amounts of ~17,784,968.91,50 and i231,680,290.87,51 the same were deducted as "VAT Refund/fCC claimed" in the said Quarterly VAT Returns for the same taxable quarters preventing the carry-over or application of such input taxes in the next taxable quarter/ s.

In sum, the Court finds that petitioner is entitled to the reduced amount of ~22,126,419.93, representing unutilized input VAT incurred in relation to its zero-rated sales of electricity to the NPC for the first (1st) and second (2nd) quarters of 2009.

WHEREFORE, the consolidated Petition for Review and Amended Petition for Review are hereby PARTLY GRANTED. Accordingly, respondent is hereby ORDERED to

ISSUE

a

TAX CREDIT

CERTIFICATE, in favor of petitioner, in the reduced amount of ~22,126,419.93, representing unutilized input VAT incurred in relation to its zero-rated sales of electricity to the NPC for the first (1st) and second (2nd) quarters of 2009.

I CONCUR:

50 Exhibit "BB-1-002a."

51 Exhibit "BB-2-002a. "

TISTA

Associa

~rvrj__ /- ~,L- AMELlA R. COTANGCO-MANALASTAS

Associate Justice

CT A CASE NOS. 8246 and 8302

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

Assoc· te Justice Cha· person C E R T IF I CAT I 0 N Pursuant to Section 13 of Article VIII 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's Division.

Presiding Justice