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February 8, 2010BIR RULING [DA-(VAT-007) 025-10]DA598-07PROPMECH CorporationMarine Technology Center BuildingAduana cor. Arzobispo StreetsIntramuros, ManilaAttention: Mr. Edward G. AntonioManaging Director for Corporate AffairsGentlemen :This refers to your letter dated December 28, 2009 stating that on November 25, 2008, Propmech Corporation (Propmech) a domestic corporation and taxpayer was selected as the contractor by the Department of National Defense (DND)/Armed Forces of the Philippines (AFP), as the procuring entity, for the Patrol Killer Medium (ROK) Upgrade Project (Project Nr: AFPMP-PN-01-07-039) or the Project; that the Project is funded by the Government of the Philippines through the General Appropriations Act, particularly the AFP Modernization Act Trust Fund, which entails the importation of specialized military hardware and equipment that are not locally available as the main cost component of the upgrade; that also, it involves the overhaul, refurbishment, renovation, improvement, or alteration of the hull, machinery, equipment, outfits and components of the two Patrol Killer Medium (ROK) gunboats owned and operated by the Philippine Navy; that Clause 6.2 of the Special Conditions of Contract (SCC) provides that "(f)or purposes of...