COMMISSIONER VS

SAN ROQUE POWER

CORPORATION G.R.
180345 NOV. 25, 2009

Parties to the case:

Petitioner: San Roque Power

Corporation
Respondent: Commissioner of Internal
Revenue

Decision to make:
To grant or not to grant San Roques claim
for refund and/or issuance of tax credit
certificate amounting to Php
249,397,620.18 allegedly representing
unutilized input VAT for January
December 2002
Reference: Section 112 Refunds or Tax
Credits of input Tax

About San Roque

Domestic corp. engaged in building and
operating the San Roque Multi-purpose
Project in San Miguel, Pangasinan
The project consists of power station, dam,
spillway and other related facilities
Oct. 11, 1997: Entered Power Purchase
Agreement (PPA) w/ NPC to develop
hydro potential of Lower Agno River and
generate additional power for Luzon Grid

Continuation
For 25 years starting project completion,
NPC is to buy all electricity generated by
power plant
Applied for and granted 5 certificates of
zero rate by BIR

Quarterly VAT returns

Overpayment
Q

Date filed
Original filing

1st

Apr 20, 2002

2nd

July 24, 2002

3rd

Oct. 25, 2002

4th

Jan. 23, 2003

Amended

237,950,763.19 238,034,696.40
83,692,257.83

83,692,257.83

229,817,923.26 114,082,153.62
50,830,066.97

49,845,959.93

Filed administrative claims

Q

Filed for
return

Filed for
claim

Claim after
amendment

1st April 20, 2002 June 19, 2002 May 30, 2003
2nd July 24, 2002

Oct. 5, 2002

3rd Oct. 25, 2002 Feb. 27, 2003 Feb. 27, 2003
4th Jan. 23, 2003 May 29, 2003 July 31, 2003

Continuation
Commissioner failed to act on the request
Apr. 5, 2004: San Roque filed w/ CTA
Division a Petition for Review (CTA Case
no. 6916) and sought for a refund
amounting Php 249,397,620.18
CTA Second Division denied claim since
per records, San Roque did not make any
zero-rated/ effectively zero-rated sales in
2002 as provided in Sec. 112A-B.

Continuation
Mar. 23, 2006: San Roque filed for a
Motion for Reconsideration but was again
denied by CTA Second Division
Filed an appeal to CTA En Banc (CTA EB
No. 248) but was denied on Oct. 22, 2007

Issues:
1. Whether or not petitioners sales are subject to
effectively zero-rated VAT
2. Whether or not petitioner incurred input taxes
which are attributable to its effectively zerorated transactions
3. Whether or not petitioners importation and
purchases of capital goods and related services
w/in the scope and meaning of capital goods
under RR 7-95

Issues:
4. Whether or not petitioners input taxes are
sufficiently substantiated with VAT invoices or
ORs
5. Whether or not VAT input taxes have been
applied to output taxes or (had) been carried
forward to the succeeding quarter/s;
6. Whether or not petitioner is entitled to a refund
of VAT input taxes it paid in Jan. 1, 2002 Dec.
31, 2002 in the amount 249,397,620.18.

Issues:
To claim refund/tax credit, San Roque must
comply w/ the following:
1.Taxpayer is VAT-registered
2.Engaged in zero-rated/effectively zero rated
3.Input taxes are due/paid
4.Input taxes are not transitional input taxes
5.Input taxes are not applied against output
taxes

6. Input taxes claimed are attributable to zerorated/ effectively-zero rated sales

7. Acceptable foreign currency exchange
proceeds have been duly accounted for in
accordance w/ BSP rules and regulations
8. Input taxes shall be proportionately
allocated on the basis of sales volume if sales
are a mix of zero-rated, taxable, and exempt
sales.
9. Claim is filed w/in two years after close of
taxable quarter when such sales were made

Continuation
San Roque complied with all requirements
(Item nos. 7-8 are not applicable) except
for Item no.6, which was the sole basis for
CTAs and CTA EBs decision of denying
petitioners claim

Continuation
However, in the affidavit of Echevarria,
San Roque produced and transferred
electricity to NPC during testing period
amounting to Php 42.5M
After careful examination, the court ruled
the transferred electricity amounting to
42.5M is deemed as a sale under the law
(zero-rated sale).

Continuation
Despite premature filing of claim for
refund on Oct. 25, 2002, instead of filing
at close of taxable year at Dec. 31, 2002
(see slide no.7 3rd Q), according to Court,
this does not make San Roque any less
entitled to its claim.

Continuation
BIR received something when there was no
right to demand it; hence, it is obliged to
return it (pertaining to input VAT)
Purpose of zero-rating/ effective zerorating: To relieve certain exempt entities
such as National Power Corp. (NPC) from
the burden of indirect tax so as to
encourage development of particular
industries

Continuation
San Roque is entitled to zero-rated VAT on
its purchases to relieve NPC (a tax-exempt
entity) of the burden of additional costs
that the former may shift to NPC by adding
to the cost of the electricity sold to the
latter.
Furthermore, NPC Charter (RA 6395)
states that NPC is completely exempt from
both direct and indirect taxes.

Continuation
EPIRA Law RA 9136 Sec. 6 supplements
claim of San Roque and states that
pursuant to the objective of lowering
electricity rates to end users, sales of
generation companies shall be VAT zerorated.

Conclusion
Commissioner is ordered to refund or issue
a tax credit certificate to San Roque Power
Corporation amounting to Php
246,131,610.40 representing unutilized
input VAT for the period January 1
December 31, 2002.