BIR Ruling [DA-140-96]

April 8, 1996 BIR RULING [DA-140-96] Banaria, Banaria and Co., CPAs 10 Scout Bayanan Street South Triangle Quezon City Attention: Mr. Pascasio S. Banaria Partner Gentlemen : This refers to your letter dated October 18, 1995 requesting for a confirmation of your opinion that the exemption of Duracom Mobile Power Corporation (DMPC) from value added tax refers to its sale of electricity to Meralco, and does not cover the contracted project between your client, F. F. Cruz & Co., Inc. and DMPC. It is represented that your client, F. F. Cruz & Co., Inc., as Contractor, entered into a contract with DMPC, an accredited Private Sector Generating Facility of the Department of Energy, for the construction of a Sea Wall and Mooring Dolphins for DMPC's Power Barge located in Malabon, Metro Manila; that DMPC is a corporation organized and existing under the laws of the Philippines for the purpose of operating a Power Barge Project and all electrical output thereof will be sold to Manila Electric Company (Meralco) under a Power Supply Agreement; that your client, Contractor F. F. Cruz & Co., Inc. billed DMPC for the cost of the project as per Contract, including a 10% value added tax; and, that DMPC, however, rejected the 10% VAT charge giving as reason that they are VAT exempt citing BIR Ruling No. UN-336-95 dated September 15, 1995 issued in their favor. cDTCIA In reply, please be informed that the dispositive portion of the aforementioned ruling which reads "Inasmuch as Private Sector Generation Facility is governed by laws applicable to electric utilities, then it is exempt from the payment of value-added tax on its sale of electricity pursuant to Section 103 (j) of the Tax Code, as amended . . ." (emphasis supplied) refers to the exemption from the payment of value-added tax on the sale of electricity. Accordingly, your opinion that the exemption of DMPC from value-added tax refers to its sale of electricity to Meralco, and does not cover the contracted project for the building of a Sea Wall and Mooring Dolphins, is hereby confirmed, (BIR Ruling No. 222-90 dated December 2, 1990). HTAIcD Very truly yours, (SGD.) ALICIA P. CLEMENO Assistant Commissioner (Legal Service)