CBK POWER COMPANY LIMITED v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Coon ol ToIPPBIIS QUEZON CITY SECOND DIVISION CBK POWER COMPANY C.T.A. CASE NO. 7460 LIMITED, Members: Petitioner, CASTANEDA, JR., Chairperson UY, and -versus- PALANCA-ENRIQUEZ, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, JUL 1 6 2009 Respondent. / ;z- !~~ _t~-�--- X-- -------------------------------------- X DECISION UY,~.: Before the Court is a Petition for Review filed by CBK Power Company Limited , praying for the issuance of tax credit certificate in the amount of 12 78,195,633.13, allegedly representing unutilized input taxes for the period covering January 1, 2004 to December 31 , 2004, pursuant to Sections 112(A) and 112(8) of the National Internal Revenue Code (NIRC) of 1997. THE FACTS 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~ 855

DECISION C.T.A. CASE NO . 7460 Page 2 of25 NPC Compound Kalayaan , Laguna.1 On the other hand , respondent is the duly appointed Commissioner of Internal Revenue vested with authority to act as such , including the power to decide, approve, and grant refunds or tax credit of erroneously or illegally collected internal revenue taxes as provided by law. He holds office at the Bureau of Internal Revenue (BIR) , National Office Building , Diliman, Quezon City.2 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 ownership 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 .3 It is registered as a valued-added tax (VAT) entity, with Tax Identification Number (TIN) 205-760-474-000, in accordance with the NIRC, as amended . It was issued a BIR Certificate of Registration OCN 1RC00000502434 dated April 10, 2000 and BIR Certificate of Registration OCN 1RC0000195405 on May 11 , 2005.5 On December 29, 2003, petitioner filed an Application for VAT zero-rate with BIR in accordance with Section 108(B)(3) of the NIRC of 1997. The said Application was duly approved by the BIR, pursuant to VAT Review Committee Ruling No. 018- 1 Par. 1, Facts Admitted, Joint Stipu lation of Facts and Issues (JSFI), Docket, p. 327 . 2 Par. 2, Facts Admitted, JSFI, Docket, pp. 327-328. 3 Annex "B", Petition for Review, Docket, p. 19; Par. 5, Facts Admitted, JSF1, Docket, pp. 328-329. 4 Annex "C", Petition for Review, Docket, p. 28. 5 Par. 3, Facts Admitted, JSFI, Docket, p. 328. 95 G

DECISION C.T.A. CASE NO. 7460 Page 3 of25 03, as indicated in the lower portion thereof which in part reads : "Valid only for sale of electricity from January 1, 2004 to December 31 , 2004, unless sooner revoked ."6 On the following dates, petitioner filed its Original and Amended Quarterly VAT Returns: 7 Taxable Date of Filing Year 2004 Original Quarterly Amended Quarterly Quarter VAT Return VAT Return April 23, 2004 1st July 1, 2004 March 23, 2005 2nd June 29, 2005 3rd October 22, 2004 June 29, 2005 4th January 25, 2005 June 29, 2005 Thereafter on June 30, 2005, petitioner, through its tax counsel , filed with the BIR Revenue District Office (ROO) No. 55 of Laguna, an administrative claim for the issuance of tax credit certificate in the amount of Iii 78,195,633.13, for its unutilized input taxes on the purchase of capital goods for calendar year 2004 in the amount of Iii 51 ,920,893.34, pursuant to then Sections 112(A) and 112(8) of the Nl RC of 19978, and its unutilized input taxes on the local purchase of goods and services, other than capital goods, for calendar year 2004 in the amount of Iii 26,274,739.79, attributable to its zero-rated sales , pursuant to Section 112(A) of the same Code .9 Due to respondent's failure to act on petitioner's request for issuance of tax credit certificate and in order to preserve its right to claim refund by judicial action , petitioner filed the instant Petition for Review on April 20, 2006. 6 Pars. I0 and 11, Facts Admitted, JSFI, Docket, pp. 330-331. Exhibit " I". 7 Par. 6, Facts Admitted, JSFI, Docket, p. 329. 8 Republic Act No. 9337, which took effect on July 1, 2005, amended Section 112 of the NIRC of 1997, by adding a certain clause to its paragraph (A), and by deleting the provisions of its paragraph (B) referring to "Capital Goods". 9 Par. 9, Facts Admitted, JSFI, Docket, p. 330. "A". 957

DECISION C.T.A. CASE NO. 7460 Page 4 of25 Respondent filed his "Answer" on June 16, 2006, interposing the following Special and Affirmative Defenses: "4. Petitioner's alleged claim for refund is subject to administrative routinary investigation/examination by respondent's Bureau ; 5. The amount of P78,195,633.13 being claimed by petitioner as alleged unutilized input taxes for the period January 1, 2004 to December 31 , 2004 was not properly documented; 6. In an action for refund/credit, the burden of proof is on the taxpayer to establish its right to refund , and failure to sustain the burden is fatal to the claim for refund/credit; 7. Petitioner must show that it has complied with the provisions of Sections 112 and 229 of the National Internal Revenue Code of 1997 on the prescriptive period for claiming tax refund/credit; 8. Claims for refund are construed strictly against the claimant for the same partake the 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 )."10 During trial , petitioner presented testimonial and voluminous documentary evidence primarily aimed at proving its supposed entitlement to the issuance of a tax credit certificate in the amount of Iii 78,195,633 .13, representing input taxes for the period covering January 1, 2004 to December 31 , 2004. When it was respondent's turn to present evidence on June 2, 2008, his counsel failed to appear and upon motion of petitioner's counsel , the former was deemed to have waived the right to present evidence for respondent, and the Court directed both parties' counsel to submit their respective Memorandum .11 After the 10 Docket, p. 264. 11 Minutes of Hearing held on June 2, 2008 stating that petitioner is given 30 days from said date to fi le memorandum while respondent's counsel is given 20 days from notice to do so and upon expiry of the period for the fi ling thereof, this case shall be deemed submitted for decision, Docket, p. 749. 85 8

DECISION C.T.A. CASE NO . 7460 Page 5 of25 submission of petitioner's Memorandum 12 within the given period , this case was submitted for decision on July 18, 2008.13. However, upon motion of respondent 14 and in the interest of justice, his belatedly filed Memorandum 15 was admitted by the Court in the Resolution dated on August 8, 2008.16 THE ISSUES The parties have jointly stipulated the following issues 17 for this Court's resolution : "1. Whether or not Petitioner is entitled to a tax credit certificate in the amount of P51 ,920,893.34 representing unutilized input taxes paid on its purchases of capital goods for the period January 1, 2004 to December 31 , 2004; 2. Whether or not the unutilized input taxes amounting to P51 ,920,893.34 paid by Petitioner for the period January 1, 2004 to December 31 , 2004 were related to payments to its contractors for the construction of the hydroelectric power plants in Laguna, as well as all related expenditures in pursuance of the rehabilitation , construction and operation of the power plant complex; 3. Whether or not Petitioner has duly substantiated its claim for the issuance of a tax credit certificate for unutilized input taxes amounting to P51 ,920,893.34 paid on its purchases of capital goods for the period January 1, 2004 to December 31 , 2004; 4. Whether or not the input taxes amounting to P51 ,920,893.34 paid by Petitioner on its purchases of capital goods for the period January 1, 2004 to December 31 , 2004 have not been carried over to the succeeding quarters and have not been utilized against any output tax; 5. Whether or not Petitioner is entitled to a tax credit certificate in the amount of P26,274,739.79 representing unutilized input taxes paid or incurred on local purchase of goods and services , other than capital goods, attributable to Petitioner's zero-rated sales to 12 Petitioner' s Memorandum filed on July 2, 2008, Docket, pp. 750-819. 13 Resolution dated July 18, 2008 , Docket., p. 821. 14 Motion to Admit Memorandum, Docket, pp. 828-830. 15 Respondent's Memorandum fi led on August 8, 2008, Docket, pp. 831 -848. 16 Docket , p. 850. 17 Issues to be Tried or Resol ved, JSFI, Docket, pp. 331-334. 959

DECISION C.T.A. CASE NO. 7460 Page 6 of25 the National Power Corporation (NPC) for the period January 1, 2004 to December 31, 2004; 6. Whether or not Petitioner's sale of services to the National Power Corporation (NPC) for the period January 1, 2004 to December 31 , 2004 qualify as zero rated sales; 7. Whether or not unutilized input taxes amounting to P26,274,739.79 representing unutilized input taxes paid or incurred on local purchase of goods and services, other than capital goods, for the period January 1, 2004 to December 31 , 2004 were attributable to Petitioner's zero rated sales for the same period; 8. Whether or not Petitioner has duly substantiated its claim for the issuance of a tax credit certificate for its unutilized input taxes amounting to P26,274,739.79 representing unutilized input taxes paid or incurred on local purchase of goods and services, other than capital goods, attributable to its zero-rated sales for the period January 1, 2004 to December 31 , 2004 ; 9. Whether or not the unutilized input taxes amounting to P26,274,739.79 representing unutilized input taxes paid or incurred on local purchase of goods and services, other than capital goods, for the period January 1, 2004 to December 31 , 2004 have not been carried over to the succeeding quarters and have not been utilized against any output tax; 10. If any portion of Petitioner's unutilized input taxes paid on its purchase of capital goods amounting to P51 ,920,893.34 for the period January 1, 2004 to December 31 , 2004, is disallowed for not falling under the category of 'capital goods' under then Section 112(8) of the Tax Code, whether or not Petitioner is entitled to claim the same as a tax credit under then Section 112(A) of the Tax Code, as unutilized/excess input taxes paid or incurred on its local purchases of goods and services for the period January 1, 2004 to December 31 , 2004 attributable to its zero-rated sales for the same period; 11 . Whether or not Petitioner had timely and duly filed its administrative claims for the refund or issuance of tax credit certificates amounting to P51 ,920,893.34 representing unutilized input taxes paid on its purchases of capital goods for the period January 1, 2004 to December 31 , 2004; and for P26,274,739.79 representing unutilized input taxes paid or incurred on local purchase of goods and services, other than capital goods, attributable to Petitioner's zero-rated sales to the National Power {IJ" Corporation (NPC) for the period January 1, 2004 to December A ..~ 31 , 2004, respectively; a.nd, 8GO

DECISION C.T.A. CASE NO. 7460 Page 7 of25 12. Whether or not Petitioner is entitled to a tax credit certificate in the total amount of Seventy-Eight Million One Hundred Ninety-Five Thousand Six Hundred Thirty-Three Pesos and 13/100 (P78, 195,633.13) representing its unutilized input taxes for the period January 1, 2004 to December 31 , 2004. " Being interrelated , We simplify the foregoing issues into a general all- encompassing issue, as follows : "Whether or not petitioner is entitled to issuance of tax credit certificate in the total amount of Seventy Eight Million One Hundred Ninety Five Thousand Six Hundred Thirty Three Pesos and Thirteen Centavos (fii 78, 195,633.13), representing alleged unutilized input taxes for the period covering January 1, 2004 to December 31, 2004, pursuant to Section 112 (A) and (B), and Section 229 of the NIRC of 1997." Petitioner's arguments Petitioner asserts that it had sufficiently proven that it has complied with all the basic requirements in order to be entitled to the issuance of a tax credit certificate. It points out that it is a VAT-registered person ; that the input taxes being claimed were paid ; that said input taxes have not been applied against its output tax liability; and that its administrative and judicial claims for refund or the issuance of a tax credit certificate were seasonably filed . Respondent's counter-argument Respondent contends that petitioner has not sufficiently proven its claim as the amount of Iii 78,195,633.15 representing unutilized VAT input taxes for the period January 1, 2004 to December 31 , 2004 was not properly documented in accordance with the requirements set forth under Section 112 (C) of the Tax Code of 1997. Thus, the instant petition should allegedly be dismissed for lack of merit. 861

DECISION C.T.A. CASE NO. 7460 Page 8 of25 THIS COURT'S RULING Petitioner anchors its claim on Sections 11 O(A) and (B) , and 112(A) and (B) of the NIRC of 1997, which are quoted hereunder for ready reference: "SEC. 110. Tax Credits.- (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or official receipt issued in accordance with 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 tf{ (b) A ratable portion of any input tax which cannot be directly .. (f ~ attributed to either activity. 962

DECISION C.T.A. CASE NO. 7460 Page 9 of25 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 transitional 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. (B) Excess Output or Input Tax. - If at the end of any taxable quarter the output tax exceeds the input tax, the excess shall be paid by the VAT-registered person. If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital goods or to zero- rated sales by a VAT-registered person may at his option be refunded or credited against other internal revenue taxes , subject to the provisions of Section 112." "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(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 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. (B) Capital Goods. -A VAT-registered person may apply for the issuance of a tax credit certificate or refund of input taxes paid on capital goods imported or locally purchased, to the extent that such input taxes have not been applied against output taxes . The application may be made only within two (2) years after the close of the taxable quarter when the importation or purchase was made. " ~ 963

DECISION C.T.A. CASE NO. 7460 Page 10 of25 The aforequoted provisions mention two (2) instances when the refund/tax credit of excess input VAT within two (2) years after the close of the taxable quarter may be allowed : (A) when the excess input VAT is attributable to zero-rated or effectively zero-rated sales;18 or (B) when the excess input VAT is attributable to capital goods, imported or locally purchased by a VAT-registered person .19 Records show that petitioner's Amended Quarterly VAT Returns for the four quarters of calendar year 2004 reflect the following details: Exhibit Taxable Date Filed Zero-Rated Sales Input Tax on Input Tax on Total Input Tax Quarter Capital Goods Other Goods z 3/23/2005 1'11 ,589,203,468.07 and Services 1st 6/29/2005 1,585 ,170,102 .07 BB 2nd 6/29/2005 1 ,597,052 ,738 .88 1'1 25,288 ,903.22 ~ 10,254,146 .56 ~ 35,543 ,049.78 DO 3rd 6/29/2005 1,600 ,605 ,038 .92 12,936 ,890 .84 3,464,870.57 16,401,761.41 4th 7,671 ,732.65 8,055,716 .95 15,727,449.60 FF Iii 6,372,031,347.94 6,105 ,854.91 4 ,526 ,1 7 0 .73 10,632 ,025.64 Total Iii 52,003,381.62 Iii 26,300,904.81 Iii 78,304,286.43 Out of the reported input VAT of li 78,304,286.43, only the amount of li 78, 195,633.13, representing input tax on capital goods purchased in the amount of li 51 ,920,893.34 and input tax on local purchases of goods and services other than capital goods in the amount of li 26,274,739.79, can be the subject of the present claim , computed as follows :20 Quarter-2 004 Capital Goods Other Goods/Services Total 1st Iii 25,288,903.22 Iii 10,254,146.56 Iii 35 ,543 ,049 .78 2nd 12,854,402.56 3,463,398.95 16,317,801 .51 3rd 7,671,732 .65 8,052 ,61 8.89 15,724,351 .54 4th Total 6,1 05,854.91 4,504,575.3 9 10,610,430.30 p 51,920,89 3.34 p 26,274,739.79 p 8,1 95,633.13 Before We look into the merits of petitioner's claimed input VAT in the total amount of Seventy Eight Million One Hundred Ninety Five Thousand Six Hundred Thirty Three Pesos and Thirteen Centavos (li 78, 195,633.13), a prior determination 18 Section 112 (A), NIRC of 1997. 19 Section 112 (B), NIRC of 1997. 20 Refer to Annex "A" of Exhibit "HHHHH" . 964

DECISION C.T.A. CASE NO. 7460 Page 11 of25 of the timeliness of the filing of the instant claim is appropriate considering that claims filed beyond the reglementary period will not prosper. In the case of Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation (Formerly Southern Energy Quezon, lnc.),21 the Supreme Court held that the period within which to file the claim for refund or tax credits of unutilized input VAT attributable to zero-rated or effectively zero-rated sales is provided under Section 112(A) of the NIRC of 1997. The pertinent portion of the High Court's Decision reads: "The claim for refund or tax credit for the creditable input VAT payment made by MPC embodied in OR No. 0189 was filed beyond the period provided by law for such claim . Sec. 112 (A) of the NIRC pertinently reads: (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 appl ied against output tax: x x x (Emphasis ours.) The above proviso clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two years reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. As the CA aptly puts it, albeit it erroneously applied the aforequoted Sec. 112 (A) , '[P]rescriptive period commences from the close of the taxable quarter when the sales were made and not from the time the input VAT was paid nor from the time the official receipt was issued .' Thus , when a zero-rated VAT taxpayer pays its input VAT a year after the pertinent transaction , said taxpayer only has a year to file a claim for refund or tax credit of the unutilized creditable input VAT . The reckoning frame would always be the end of the quarter when the pertinent sales or transaction was all'{ made, regardless when the input VAT was paid. xxx" (Emphases /'f , and underscoring supplied) 21 G.R. No. 172129, September 12; 2008. 865

DECISION C.T.A. CASE NO. 7460 Page 12 of25 Based on the aforequoted jurisprudence , the reckoning of the prescriptive period shall commence from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. The present claim involves petitioner's input VAT incurred for the four (4) quarters of 2004. Counting from the close of each of the said taxable quarters, petitioner had until the following dates within which to file its claim, both in the administrative and judicial levels: Taxa b le Close of Date of Filing Quarter Taxable (Year 2004) Quarter End of Administrative Judicial Amount of Two(2) Claim Claim Claim year period ~ 35,543,049.78 1st 3/31/2004 3/31/2006 6/30/2005 4/20/2 006 ~ 16,317,801 .51 ~ 15,724,351 .54 2nd 6/30/2004 6/30/2006 6/30/2005 4/20/2006 ~ 10,610,430.30 3rd 9/30/2004 9/30/2006 6/30/2005 4/20/2006 4th 12/31 /2 004 12/31/06 6/30/2005 4/2 0/2 006 As shown in the foregoing table , petitioner's administrative and judicial claims for refund of input VAT for the second , third , and fourth quarters of 2004 fall within the two-year prescriptive period except that of the first quarter of 2004 which closed on March 31, 2004. Although petitioner's administrative claim for the first quarter of 2004 was filed seasonably on June 30, 2005, its judicial claim thereon (which is included in the instant Petition for Review) was filed out of time , or only on April 20, 2006, or beyond the two-year prescriptive period , the last day of which was on March 31 , 2006. Consequently, petitioner's claim for refund of the input taxes for the first quarter of 2004 in the amount of li 35,543,049.78, representing the sum of the input VAT claim on capital goods purchases amounting to li 25,288,903.22 and of the input VAT claim on other goods and services amounting to li 10,254,146.56 shall be disallowed in this petition. 96C

DECISION C.T.A. CASE NO. 7460 Page 13 of25 Accordingly, We shall evaluate petitioner's refund claim of excess input VAT only those pertaining to the second , third , and fourth quarters of 2004 in the total amount of li 42,652,583.35,22 consisting of the following : input VAT claim on capital goods amounting to li 26,631 ,990.12;23 and input VAT claim on other goods and services amounting to li 16,020,593.23.24 Petitioner avers however that in the event that a portion of its tax credit claim for unutilized input taxes on the purchase of capital goods is disallowed for not falling under the category of "capital goods" under Section 112(8) of the NIRC of 1997, it is nevertheless still entitled to claim the same as a tax credit/refund under Section 112(A) of the Nl RC of 1997 because said unutilized input taxes are also attributable to its effectively zero-rated sales to the National Power Corporation (NPC) for calendar year 2004.25 Taking the foregoing into consideration , We shall first discuss petitioner's claimed input taxes on domestic purchases of capital goods in the reduced amount ofli26,631 ,990.12 as allowed under Section 112(8) of the NIRC of 1997, upon compliance with the following requ isites: 1. that claimant is a VAT-reg istered person; 2. that input taxes were paid on capital goods imported or locally purchased ; 3. that such input taxes were not applied against its output VAT liability; and 4. that the claim for refund was filed within the two-year prescriptive period . 22 P 78,195,633.13 Jess P 35,543,049.78. 23 P 51 ,920,893 .34less P 25,288,903 .22. 24 P 26,274,739.79less P 10,254,146.56. " P�c. 32, Momm�ndum fo, tho PoHHon", Dookot, p. 771. ~ 867

DECISION C.T.A. CASE NO. 7460 Page 14 of25 It is undisputed that petitioner is a VAT-registered entity. 26 To determine compliance with the second requirement, We look into the meaning of "capital goods" as defined in Section 4.106-1 of Revenue Regulations (R.R.) No. 7-9527 , implementing Section 112(8) of the NIRC of 1997, to wit: "SECTION 4.106-1. Refunds or tax credits of input tax. - XXX XXX XXX (b) Capital Goods - XXX XXX XXX 'Capital goods or properties' refer to goods or properties with estimated useful life greater than one ~ear and which are treated as depreciable assets under Section 29(f) 8, used directly or indirectly in the production or sale of taxable goods or services." Clearly, in order that the items purchased can be classified as capital goods or properties, petitioner must show compliance with the following : 1. that the goods or properties must have estimated useful life of more than one year; 2. they are treated as depreciable assets under Section 29(f)29; and 3. they are used directly or indirectly in the production or sale of taxable goods or services. Petitioner alleges that its input VAT on capital goods represents payments to its contractors and/or suppliers of goods and services, such as IMPSA Construction Corporation, among others , for the construction of the hydroelectric power plants in Laguna, as well as for the rehabilitation , construction , and start-up of the power plant complex; and these payments purportedly qualify as capital goods. To support its 26 Par. 3, Facts Admitted, JSFI, Docket, p. 328; Annex "C", Petition for Rev iew, Docket, p. 28~ 27 SUBJECT:Consolidated Value-Added Tax Regulations 28 Now, Section 34(F), NIRC of 1997. HM . 968

DECISION C.T.A. CASE NO. 7460 Page 15 of25 claim , petitioner submitted various VAT invoices/official receipts 30 , including its Summary of VAT for the months of January to December 200431 , and the Report32 of Mr. Richard Lapres of Manabat Delgado Amper & Co., the Court-commissioned Independent Certified Public Accountant (CPA) . Moreover, petitioner's Accounting Manager, Joey Polintan, testified by way of Affidavit,33 that petitioner's payments to and/or billings by its contractors and/or suppliers of capital goods are reflected under "Property, Plant and Equipment" in the Statement of Assets , Liabilities, and Partners' Capital as of December 31 , 2004 and 2003 of the Audited Financial Statements for the period ending December 31 , 2004; that the said payments to and/or progress billings by its contractors and/or suppliers of capital goods were initially recorded under the asset account "Construction Work in Progress"; that once a particular power plant is completed , the accumulated costs in the "Construction Work in Progress" accounts are then transferred to the corresponding "Property, Plant and Equipment" accounts . Therefore, according to him, a depreciation expense is recognized upon completion of each unit by recording depreciation expense and the corresponding accumulated depreciation in its General Ledgers. A perusal of the above-mentioned documents however fails to convince the Court that such payments were reported in petitioner's financial statements for the years 2003 and 2004 34 . In addition , petitioner neglected to provide a detailed 30 Exhibits "BBBB-1 " to "BBBB-1335", "BBBB-1A" to "BBBB-1335A", "CCCC-1 " to "CCCC-510", "CCCC- 1A" to "CCCC-510A", "DDDD-1 " to "DDDD-74", "DDDD-1A" to "DDDD-74A", "EEEE-1" to "EEEE-162", "EEEE-11A" to "EEEE-162A", "FFFF-1 " to "FFFF-58", "FFFF-2A to "FFFF-57A", "GGGG-1 " to "GGGG-7", "GGGG- 1A" to "GGGG-7A", "HHHH-1" to "HHHH-61 ", "HHHH-1A" to "HHHH-61A", "IIII-1 " to "IIII-11", "IIII-1 A" to "IIII-7A", "JJJJ-1 " to "JJJJ-46", and "JJJJ-1A" to "JJJJ-44A". 31 Annex "A", Exhibit "HHHHH". r" . 32 Exhibit "HHHHH". _~~ - 33 Exhibit "YYY", at pp. 13-14. Docket, pp. 424-425 . 34 Exhibit "JJJ". 969

DECI SION C.T.A. CASE NO. 7460 schedule of each of its accounts under "Property, Plant and Equipment", to enable the Court to ascertain and reconcile the corresponding payments to , and/or billings by its contractors and/or suppliers of capital goods. And as previously discussed , the input VAT arising from the purchase of capital goods pertaining to the first quarter in the amount of 12 25,288,903.22 shall be disallowed due to prescription. Furthermore, in his Report 35 dated September 24, 2007, the Court- commissioned Independent CPA presented the following findings as regards petitioner's purchases of capital goods: 1 Missing Official Receipts (Exhibits GGGG-1 and GGGG-1A) ICPA Report Input VAT 2 Supported by out of period official rece ipts . (Exhibits GGGG-2 to Annex G ~ 1,177,856 .52 Annex G GGGG-7, and GGGG-2A to GGGG-7A) 861 ,903 .37 Annex J 3 Discrepancies due to round ing off differences in fore ign cu rrency 165,445 .57 Iii 2,205,205.46 rate used by Company against per examination . (Exhibits JJJJ- 1 to JJJJ-44, JJJJ-46 and JJJJ-1A to JJJJJ-44A) Total We break down the above amount of 12 2,205,205.46 on a per quarter basis, as follows :36 Exhibit 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Annex G 1 Missing Official Receipts Annex G - ~ 306,259.49 - ~ 87 1,597.03 ~ 1,177, 856.52 2 Supported by out of Annex J - - - 861 ,903 .37 861 ,903 .37 period official receipts . 3 Discrepancies due to ~ 43,723 .7537 12,706 .9 6 ~ 51 2 .14 108,502 .72 165,445.57 Iii 318,966.45 lil512.14 rounding off differences lil 43,723.75 Iii 1,842,003.12 Iii 2,205,205.46 in foreign currency rate used by Company against per examination. Total Thus, the remaining input VAT claim on capital goods substantiated by VAT official receipts/sales invoices, considering the above find ings of the Independent CPA, specifically, that which refers to the above-stated discrepancies due to~ 35 Exhibit "HHHHH", pp . 10- 11. 36 Annexes "G" and "J", Exhibit "HHHHH". 37 Refer to Annex " 1" of this Decision. 870

DECISION C.T.A. CASE NO. 7460 Page 17 of25 rounding off in the amount of 12 43,723.75, and those that are already barred by prescription, is computed as follows : Input VAT claim on capital goods 12 51 ,920 ,893 .34 Less: Disallowances 12 25 ,288 ,903.22 -Input VAT (for the 1st Qtr.-2004) barred due to prescription -Per ICPA's Findings pertaining to 2"d, 3'd, and 4th qtrs. 2,161,481 .7 1 27,450,384 .93 (P2,205,205.461ess P43 ,723.75) p 24,470,508.41 Remaining Input VAT claim on capital goods Notably, petitioner substantiated with VAT official receipts/sales invoices its remaining claimed input VAT on capital goods of 12 24,470,508.41 , but it failed to prove that the related purchases formed part of the account under "Property, Plant and Equipment" as reflected in its audited financial statements for calendar year 2004 . Nevertheless however, as correctly pointed out by petitioner, it may still claim the substantiated input taxes on purchases of capital goods under Section 112(A) of the NIRC of 1997, because the said input taxes are also attributable to petitioner's zero-rated sales for calendar year 2004. Relative thereto, it is vital to petitioner 's claim to prove compliance with the requisites mentioned in Section 112(A) of the NIRC of 1997, to wit: 1. there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid ; 3. that such input taxes are directly attributable to zero-rated sales or effectively zero-rated sales; 4. that the input taxes were not applied against any output VAT liability during and in the succeeding quarters; and 5. that the claim for refund was filed within the two-year prescriptive period . As regards the first requisite , there is no argument that the sale of electricity by a VAT-registered taxpayer, like herein petitioner, to the NPC is effectively subject 971

DECISION C.T.A. CASE NO. 7460 Page 18 of25 to zero percent (0%) VAT, pursuant to Section 108(8)(3) of the NIRC of 1997. This issue had been settled in the landmark case of Maceda vs. Macaraig38 , where the Supreme Court held that: "The NPC is a non-profit public corporation created for the general good and welfare, wholly owned by the government of the Republic of the Philippines. From the very beginning of its corporate existence, the NPC enjoyed preferential tax treatment, to enable the Corporation to pay the indebtedness and obligation and in furtherance and effective implementation of the policy enunciated in Section one of 'Republic Act No. 6395 ' which provides: XXX XXX XXX x x x. Presidential Decree No . 938 amended the tax exemption by simplifying the same law in general terms . It succinctly exempts NPC from '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'. The use of the phrase 'all forms ' of taxes demonstrate the intention of the law to give NPC all the tax exemptions it has been enjoying before. The rationale for this exemption is that being non-profit the NPC 'shall devote all its returns from its capital investment as well as excess revenues of its operation , for expansion . xxx' XXX XXX XXX It is evident from the provisions of P.O. No. 938 that its purpose is to maintain the tax exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A. No. 6895 and P.O. No. 380 if it is to attain its goals." Moreover, in the same case , NPC's tax exemption was affirmed and further explained as follows : "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 and indirect. XXX XXX XXX One common theme in all these laws is that the NPC must be enable to pay its indebtedness which , as P.O. No. 938 was P12 Billion 38 G. R. No. 8829 1, May 31, 1991. 972

DECISION C.T.A. CASE NO . 7460 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"39 . In keeping with the foregoing jurisprudence, the Court has consistently ruled that the NPC is an entity with a special charter, which categorically makes it exempt from payment of all taxes , whether direct or indirect, including VAT. Hence, services rendered by a VAT-registered entity, like herein petitioner, to NPC are effectively subject to zero percent (0%) VAT. Moreover, the BIR itself approved petitioner's Application for VAT Zero-rating dated December 29, 2003 which is "(v)alid only for sale of electricity from January 1, 2004 to December 31 , 2004, unless sooner revoked." 40 It was also established that petitioner entered into a Second Accession Undertaking with the NPC and its affiliates, lndustrias Metalurgicas Pescarmona S.S. (IMPSA) and CBK Power Corporation (CBK Power) on September 20, 2000, wherein petitioner became a party to a Build-Rehabilitate-Operate-and-Transfer (BROT) Agreement dated November 6, 1998 to rehabilitate , construct, operate, and maintain the Caliraya, Botocan, and Kalayaan hydroelectric power plants .41 Under the BROT Agreement, petitioner shall generate and supply electricity to NPC and shall receive fees in consideration thereof. 42 In its Amended VAT Returns for the second , third , and fourth quarters of calendar year 2004, petitioner's reported effectively zero-rated sales/receipts amounted to Iii 4,782,827,879.87.43 However, out of the reported effectively zero- 39 Reso lution dated June 8, 1993 , G.R. No . 8829 1 (223 SCRA 217). 40 ~ Exhibit "I". 41 Exhibit "D" . 42 Exh ibit "C-6" 43 Exhibits "8 8 -2", "DD-4", and "FF-4". 973

DECISION C.T.A. CASE NO . 7460 Page 20 of25 rated sales/receipts of 12 4,782,827,879.87, only the amount of 12 4,539,223,259.11 44 is duly covered by official receipts . Therefore , only a portion of the input VAT claim attributable to the substantiated zero-rated receipts will be considered for refund. The rate to be applied is computed as follows : Supported zero-rated receipts Fi 4,539,223,259.11 Divided by total declared zero-rated receipts ~ P4 782,827,879.87 Rate of supported zero-rated receipts 1 94.906682262% To prove compliance with the second requisite, petitioner submitted invoices and official receipts to support its purchase of goods other than capital goods and services for calendar year 2004, which has corresponding input VAT in the aggregate amount of 12 26,274,739.79. As earlier mentioned , the input VAT arising from the purchase of goods other than capital goods and services pertaining to the first quarter in the amount of P1 0,254,146.56 shall be disallowed due to prescription. Upon verification of the submitted documents, the Independent CPA had come up with the following findings , to wit: FINDINGS Exhibit Total A. INPUT VAT ON PURCHASES OF SERVICES " HHHHH" 714 ,611.90 Missing Official Receipts Annex E 6,849.59 Annex E 2 Original ORs not available , supported only 58,972 .21 by photocopies of the original ORs. Annex E 2,054 .05 Without ORs, supported by machine Annex E 2,545.46 3 validated invoices. Invoices do not have BIR Annex E 15,881 .35 Annex E 5,066, 752 .54 authority to print. Annex E 152,758.41 Annex E Without ORs , supported only by bank Annex E 798.41 4 deposit or bank transaction record . Bank " deposit slips and bank transaction records do not comply with invoicing requirements . 5 Supported by ORs which do not bear BIR authority to print. 6 Supported by out of period Ors. 7 Supported by non-VAT ORs . 8 Supported by provisional receipts . 9 Supported by ORs not in the name of the Company . 44 See Annex "4" of this Decision. 974

DECISION C.T.A. CASE NO. 7460 Page 21 of25 Supported by OR where the Php amounts Annex H 794 ,883.30 10 are exactly the same as the invoice amount in USD - Exclusive of input VAT per audit based on Php amount. Discrepancies due to difference in foreign Annex H 12,166.69 11 currency rate used by Company against per Annex H 42 ,955 .69 examination . Iii 6,871,229.60 12 Supported by official receipts wit VAT amount incorrectly computed . B. INPUT VAT ON PURCHASES OF GOODS OTHER THAN CAPITAL GOODS Missing Sales Invoices. Annex F li 143,971 .32 Annex F 8 ,648 .21 2 Supported by Sales Invoices which do not bear SIR authority to print. Supported by statement of accounts or other 3 documents which do not comply with invoicing requirements . Annex F 104,994.69 Unsubstantiated VAT on importation of 327 ,297 .00 69,661 .54 4 goods (No import declarations or import 259.09 entry documents evidencing payment of VAT). Annex F 5 Supported by out of period sales invoices. Annex F 6 Supported by sales invoices not in the name Annex F of the Company. 7 Original sales invoice not available, supported only by photocopies of the original sales invoice. Annex F 11,492.44 Discrepancies due to rounding off Annex I 29 .81 8 differences in foreign currency rate used by Annex I 8 18 .20 Company against per examination. 667,172.30 Iii 7,538,401.90 9 Supported by sales invoices with VAT amount incorrectly computed . TOTAL Out of the above amount of IZ 7,538,401 .90, the input VAT of IZ 6,026, 719.8245, as shown below, pertains to the first quarter of 2004: FINDINGS Exhibit 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total A . EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES Annex E Jiil381 ,795 .19 jiil 4,070 .15 Jiil139,532.79 Jiil189,213.77 jiil 714,611 .90 Annex E 6 ,376.86 6 ,849 .59 1 Missing Official Receipts - - 472 .73 2 Original ORs not available, supported only by photocopies of the original ORs. 45 Refer to Annexes "2" and "3" of this Decision.

DECISION C.T.A. CASE NO. 7460 Page 22 of25 3 Without ORs, supported by machine Annex E 17, 685 .91 16,811 .68 15 ,172.98 9,301 .64 58 ,972 .21 validated invoices . Invoices do not have BIR authority to print. Without ORs, supported only by bank deposit or bank transaction record . Bank 4 deposit slips and bank transaction records do not comply with invoicing - - reQuirements. Annex E 1,917 .50 - 136.55 2,545.46 2,054.05 221 .50 15 659.85 5 Supported by ORs which do not bear Annex E - 557 .41 - 2 ,545.46 BIR authority to print. Annex E - 29,023 .77 - 6 ,790.48 15,881 .35 Annex E 5,059, 404.65 - 123 ,7 3 4 .6 4 5,066 ,752.54 6 Supported by out of period Ors. Annex E - 152 ,758.41 7 Supported by non-VAT Ors . - - - 798.41 8 Supported by provisional receipts . 688 .7 1 109.70 9 Supported by ORs not in the name of the Company. Annex E Supported by ORs where the Php Annex H 47 6 ,169.44 3 18 ,713 .86 - - 794 ,883.30 amounts are exactly the same as the 10 invoice amount in USD - Exclusive of input VAT per audit based on Php amount. 11 Discrepancies due to difference in foreign currency rate used by Company against per examination. Annex H 2 ,773 .56 2,667 .69 5,548.10 1,177.34 12 ,166.69 Annex H 12 Supported by official receipts wit VAT 18 ,83 0 .6 5 3,282 .86 19 ,024.01 1,818.17 42 ,955.69 amount incorrectly computed . Iii 5,965,642.47 Iii 6,871 ,229.60 Iii 375,348.92 lil179,524.13 lil350,714.08 B. EXCEPTIONS OF INPUT VAT ON Annex F IW 980.25 IW 1,757.46 - IW 141 ,233.61 IW 143,971 .32 PURCHASES OF GOODS OTHER THAN Annex F 8 ,648 .21 - - - 8 ,648 .21 CAPITAL GOODS Annex F 1 Missing Sales Invoices. Annex F 2 Supported by Sales Invoices which do Annex F not bear BIR authority to print. Annex F 3 Supported by statement of accounts or Annex F 14 ,123.84 18 ,335.36 37 ,039 .21 35 ,496 .28 104 ,994 .69 other documents which do not comply with invoicing reQuirements . Annex I Annex I Unsubstantiated VAT on importation of - - - 327 ,297 .00 327,297 .00 4 goods (No import declarations or import 45 ,685 .17 69,661 .54 22,330.91 1,645.46 - entry documents evidencing payment of 259 .09 - 259 .09 VAT) . - - 5 Supported by out of period sales invoices. 6 Supported by sales invoices not in the name of the Company. 7 Original sales invoice not available, - - - 11 ,492.44 11 ,492.44 supported only by photocopies of the original sales invoice. 8 Discrepancies due to rounding off differences in foreign currency rate used by Company against per examination. 29.00 - 0 .25 0.56 29.81 9 Supported by sales invoices with VAT - - - 818 .20 818 .20 amount incorrectly computed . Iii 38,684.92 Iii 524,986.30 Iii 667,172.30 " 61 ,077.35 " 42,423.73 Iii 218,209.05 Iii 75,700.38 lil7,538 ,401 .90 TOTAL lil6,026,719.82 lil417,772.65 97G

DECISION C.T.A. CASE NO. 7460 Page 23 of25 Thus, deducting the said amount of~ 6,026 ,719.89 from the amount of !i 7,538,401.90, the resulting difference in the amount of ~ 1,511,682.08 would pertain to the second , third , and fourth quarters of 2004; hence, the remaining input VAT claim on goods other than capital goods amounts to !i 14,508,911.15, computed as follows : Input VAT claim on goods other than capital goods and services Iii 26,274 ,739.79 Less: Disallowances 11 ,765 ,828.64 lit 14,508,911.15 Input VAT barred due to prescription Iii 10,254,146.56 Per ICPA's Findings pertaining to 2nd, 3rd and 4th quarters 1,511 ,682 .08 Remaining Input VAT claim on goods other than capital goods and services To recapitulate , out of the claimed input VAT of~ 78,195,633.13 for the four quarters of calendar year 2004, only the input VAT in the total amount of !i 38,979,419.56 which are attributable to its effectively zero-rated sales can be a proper subject of a claim for refund or tax credit, determined as follows : Substantiated Input VAT claim on capital goods Iii 24,470,508 .41 Substantiated Input VAT claim on other goods and services 14,508,911 .15 Total Substantiated Input VAT Iii 38,979,419.56 As regards the requirement that no input were applied against any output VAT liability during and in the succeeding quarter, considering that all of petitioner's sales were effectively zero-rated ,46 there is no output VAT to speak of. In other words, the input taxes were not applied against any output VAT liability, and the said unutilized input VAT was not carried over to the succeeding taxable quarters , as evidenced by its VAT Returns for the four quarters of calendar year 2005.47 Lastly, anent the timeliness of the administrative and judicial claim , as discussed earlier, petitioner's administrative and judicial claims for refund pertaining 46 Exhibits "Z", "BB", "DD", and "FF". 47 Exhibits "HH", "JJ", "LL", and "NN". 977

DECISION C.T.A. CASE NO. 7460 Page 24 of25 to its local purchases of goods and services attributable to its effectively zero rated sales for the second , third and fourth quarter of 2004 were filed within the two-year prescriptive period. However, as regards its claim pertaining to the first quarter of 2004, although its administrative claim thereon was filed within the two-year period , its judicial claim which is included in the instant petition for review, was filed out of time, and will therefore be denied . In sum , petitioner has sufficiently proven its entitlement to the issuance of tax credit certificate, representing unutilized excess input VAT on local purchases of goods and services attributable to effectively zero-rated sales for calendar year 2004, but only in the reduced amount of 12 36,994,073.87, computed as follows : Substantiated Input VAT li 38 ,979,419 .56 Rate of supported zero-rated sales X 94.906682262% Valid Input VAT attributable to effectively zero-rated sales p 36.994.073.87 WHEREFORE, all the foregoing considered , the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of THIRTY SIX MILLION NINE HUNDRED NINETY FOUR THOUSAND SEVENTY THREE PESOS AND 87/100 (Ji 36,994,073.87) , representing unutilized input VAT for calendar year 2004. SO ORDERED. AEsR~~~~tUicYe 978

.' ~~~c~ Associate Justice DECISION C.T.A. CASE NO . 7460 WE CONCUR: Jfa fAN~no~Ca . CA. ~ STANG EDA , ~R. Associate Justice CERTIFICATION Pursuant to Article VIII , Section 13 of the Constitution , 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. ~-~C2.Q.;r--~ \2. tjuANITO C. CASTANEDA , 'J~.v ' Acting Presidin~ Justice Chairperson , 2n Division 97 9

CBK POWER COMPANY LIMITED Annex 1 0 INPUT VAT ON PURCHASES OF CAPITAL GOODS co FOR THE YEAR 2004 Page 1 of4 C) Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Jul Aug ~ 3rdQtr AnnexG - -- - - 1 Missing Official Receipts Annex G - 306,259.49 - IMPSA Construction Corp. Annex J 306,259.49 IMPSA Construction Corp. . Trevi Foundations Phils. I Twin V Tech Systems & Services I 2 Supported by out of period official receipts. ' - - - Building Construction Maintenance Building Construction Maintenance People's Asia Pacific Construction Corp. Sta. Clara International Corp. Twin V Tech Systems and Services Twin V Tech Systems and Services 3 Discrepancies due to rounding off differences in foreign currency rate used by Company 43 ,723.75 12,706.96 512.14 I against per examination. 43,723 .75 225 .09 879 .06 ! IMPSA Construction Corp. 1,439.49 4,907.88 People's Asia Pacific Construction 1,506 .97 i People's Asia Pacific Construction ! IMPSA Construction Corp. Whessoe Phils. Construction Whessoe Phils. Construction . i BCMS International Specialty 487.05 24.24 Supreme Strategic Construction System Sta. Clara International Corp. 3,237 . 18 I Arne! Mojica Const. 122.56 77.09 Supreme Strategic Construction System 2 1.96 Supreme Strategic Construction System People's Asia Pacific Construction 2.90 0.52 People's Asia Pacific Construction 268 .25 14.47 Sta. Clara International Corp. 3.41 0.98 i Whessoe Phils. Construction i Whessoe Phils. Construction Whessoe Phils. Construction Supreme Strategic Construction System I Supreme Strategic Construction System I ; Sta. Clara International Corp. I- I I.Sta. Clara International Corp. I' t

IK POWER COMPANY LIMITED Annex 1 PUT VAT ON PURCHASES OF CAPITAL OODS Page 2 of4 ~-,.j OR THE YEAR 2004 G) Building Const. Maint. Services Supreme Strategic Construction System Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Jul Aug ~ 3rd Qtr Supreme Strategic Construction System Supreme Strategic Construction System l 512.(1 290.53 Sta. Clara International Corp. Sta. Clara International Corp. Trevi Foundations Phils., Inc. Trevi Foundations Phils., Inc. Sta. Clara International Corp. Sta. Clara International Corp. Building Const. Maint. Services People's Asia Pacific Construction People's Asia Pacific Construction People's Asia Pacific Construction People's Asia Pacific Construction Supreme Strategic Construction System Supreme Strategic Construction System Supreme Strategic Construction System Trevi Foundations Phils., Inc. Whessoe Phils. Construction Whessoe Phils. Construction Whessoe Phils. Construction 43,723.75 43,723.75 8,958.49 306,770.78 3,237.18 318,966.45 221.61

CBK POWER COMPANY LIMITED Annex 1 N INPUT VAT ON PURCHASES OF CAPITAL Page 3 of 4 00 GOODS FOR THE YEAR 2004 C> 1 Missing Official Receipts Oct Nov Dec 4th Qtr Total IMPSA Construction Corp. IMPSA Construction Corp. 154,585.17 871,597.03 I ,177,856.52 Trevi Foundations Phils. Twin V Tech Systems & Services 682 , 177.45 59,434.06 34,834.41 383,955 .14 2 Supported by out of period official receipts. Building Construction Maintenance 6,336.45 861 ,903 .37 861 ,903 .37 Building Construction Maintenance 327,403 .06 People's Asia Pacific Construction Corp. Sta. Clara International Corp. 67,598.40 Twin V Tech Systems and Services 17,176.26 Twin V Tech Systems and Services 108,502.72 165,445 .57 3 Discrepancies due to rounding off differences in foreign currency rate used by Company 8.64 t against per examination. 32 .20 IMPSA Construction Corp. 31.62 People's Asia Pacific Construction 22 .52 People's Asia Pacific Construction IMPSA Construction Corp. Whessoe Phils. Construction Whessoe Phils. Construction BCMS International Specialty Supreme Strategic Construction System Sta. Clara International Corp. Arne! Mojica Const. Supreme Strategic Construction System Supreme Strategic Construction System People's Asia Pacific Construction People's Asia Pacific Construction Sta. Clara International Corp. Whessoe Phils. Construction Whessoe Phils. Construction Whessoe Phils. Construction Supreme Strategic Construction System Supreme Strategic Construction System i Sta. Clara International Corp. I � Sta. Clara International Corp.

CBK POWER COMPANY LIMITED Annex 1 INPUT VAT ON PURCHASES OF CAPITAL Page 4 of4 GOODS FOR THE YEAR 2004 ("') Oct Nov Dec 4th Qtr Total o:> 150.94 14.47 2,205,205.461 Building Const. Maint. Services 24.40 C1 245.92 65.31 Supreme Strategic Construction System 81.45 Supreme Strategic Construction System 1,247.87 139.75 Supreme Strategic Construction System 148.50 329.52 Sta. Clara International Corp. 418.76 Sta. Clara International Corp. 719,481.89 Trevi Foundations Phils., Inc. Trevi Foundations Phils., Inc. Sta. Clara International Corp. Sta. Clara International Corp. Building Const. Maint. Services 598.42 6.50 People's Asia Pacific Construction 23.49 People's Asia Pacific Construction 91 ,681.54 12,095 .62 � People's Asia Pacific Construction II 0.55 People's Asia Pacific Construction 28.80 384 .3 2 Supreme Strategic Construction System 191.64 166.25 Supreme Strategic Construction System 89.55 410.09 Supreme Strategic Construction System 1,122,275.31 1,842,003.12 Trevi Foundations Phils., Inc. Whessoe Phils. Construction Whessoe Phils. Construction - - Wh-ess-oe- Phils. Construction -- --

Annex 2 CBK POWER COMPANY LIMITED "=:1' EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES 00 FOR THE YEAR 2004 Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Ci} 1 Missing Official Receipts Annex E Asian Insights Inc. 2,318.18 381,795 .19 4,070.15 Globe Telecom 194.65 Globe Telecom 59.25 . Globe Telecom 109.14 Angelis Mgmt & Prof. Srvcs. 662.07 Angelis Mgmt & Prof. Srvcs. 113.64 Globe Telecom Globe Telecom 193.90 Globe Telecom 188 .00 Angelis Mgmt & Prof. Srvcs. 149.82 Solutions Cons. Group 766.78 Sycip, Salazar & Gatm 2 ,234 .88 Sycip, Salazar & Gatm 18 ,623.67 Control Risk Globe Telecom 17 . 15 Globe Telecom Globe Telecom 247 ,610 .00 Globe Telecom 208.26 Jardine Lloyd Thompson 296 .76 Media General 111.87 Sycip, Salazar & Gatm 203 .00 Mondial Tours & Travel 49.00 PLDT TUV Product Service Asia 2 , 164 .71 Sycip, Salazar & Gatm 6,604 .62 Jardine Lloyd Thompson 3,235 .91 Hearty & Hastings PLDT 81.13 Jardine Lloyd Thompson 11,922 .24 PLDT 83,676.56 Elite Mach ines Metrobank Visa 320.99 Digital Telecom 272 .73 Digital Telecom 141.12 Digital Telecom Fersal Olace 3,272.45 62 .86 f\

Annex 2 CBK POWER CO MPANY LIMITED i......, EXCEPTIONS O F INP UT VAT ON PURCHASES OF SERVICES 00 FOR THE YEAR 2004 m Exhibit Jan Feb Ma r 1st Qtr Apr May Jun 2nd Qtr PLDT ' Asian Insights Inc. Marsh Philippines, Inc. PLDT PLDT PLDT PLDT PLDT Digital Telecom Digital Telecom Digital Telecom Government Performance Counterflow Movers Counterflow Movers PLDT Asian Insights Inc. The Hongkong & Shanghai Bank Mondial Tours & Travel Multi-Lift Sales Corp. Mondial Tours & Travel Royal Cargo Combined Tax Studies & Research Center City Service Corp. EM Cruz Construction La Corona de Pagsanjan City Service Corp. Explorer Freight Corp. 2 Original ORs not available, supported only by photocopies of the origin a l ORs. AnnexE 6,376.86 - 17 ,685.91 Clean City Inc. 3,188.43 16,811.68 3, 188.43 Clean City Inc. ~ F & R Trading & Construction 3 Without OR, supported by machine validated invoices. Invoices do not have BIR a uthority to print. Annex E PLDT 139 .61 PLDT 139.61

Annex 2 Page 3 of18 CBK POWER COMPANY LIMITED c.;, EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES co FOR THE YEAR 2004 m PLDT Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr PLDT PLDT 2,813.00 PLDT 139.61 PLDT PLDT 2,504.38 PLDT 171.91 PLDT PLDT 2,813 .00 PLDT 138.77 PLDT 138.77 PLDT 138.77 PLDT 217.48 PLDT PLDT 2,7 16.81 PLDT PLDT 2,813 .00 PLDT 140.61 PLDT 189.30 PLDT 140.6 1 PLDT 140.61 PLDT PLDT 2,190.06 PLDT PLDT 2,813.00 ! PLDT 230.66 PLDT 141.48 PLDT 141.48 PLDT 141.48 PLDT PLDT 2,112.60 PLDT PLDT 177.26 PLDT 140 .86 Globe Telecom 140 .86 Globe Telecom 140 .86 Globe Telecom 2,099 .97 2,813 .00 2,813.00 2,289 .44 138.69 199.66 138.69 138 .69 ~

Annex 2 Page 4 of18 CBK POWER COMPANY LIMITED r'- EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES 00 FOR THE YEAR2004 Jan Jun Cl PLOT PLOT Exhibit Feb Mar 1st Qtr Apr May 2nd Qtr PLOT PLOT i PLOT PLOT ~ Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom PLOT PLOT PLOT PLOT PLOT PLOT Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom PLOT PLOT PLOT PLOT PLOT

Annex 2 Page 5 of18 C BK POWER COMPANY LIMITED ro EXCEPTIONS OF INP UT VAT ON co PUR CHASES OF SERVICES FOR THE YEAR 2004 Ol Exhibit Jan Feb Mar 1st Qtr Apr May J un 2nd Qtr Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom PLDT PLDT PLDT PLDT PLDT Globe Telecom Globe Telecom Globe Telecom Globe Telecom 4 Without OR, supported only by bank deposit or bank transaction record. Bank deposit slips and bank transaction records do not comply with invoicing requirements. Annex E 1,917.50 - Globe Telecom Globe Telecom 75 .77 - - Globe Telecom 367.96 - 247.04 22!.50 55.49 Globe Telecom 523.76 41 .60 Globe Telecom 402.62 69. 12 Globe Telecom Globe Telecom 76.51 {tl Globe Telecom 140 .31 Skycable 83.53 5 Supported by OR which do not bear BIR authority to print. Annex E Government Perfo rmance AnnexE 6 Supported by out of period OR. Airfreight 2100, Inc. - Airfreight 2100, Inc. L__ Ajrfj-eight 21Q_Q_,_ll1C:�__ ~--- ___

Annex 2 CBK POWER COMPANY LIMITED en EXCEPTIONS OF INPUT VAT ON co PURCHASES OF SERVICES FOR THE YEAR 2004 Q') Airfreight 2100, Inc. Exhib it Jan Fe b Mar 1st Qtr A pr Ma y Jun 2nd Qtr Copy Quest Corp. Copy Quest Corp. 55.29 Copy Quest Corp. Dassad Warehousing AnnexE 272 ,763.30 5,059,404.6 5 557.41 Webpower Internet Annex E 4,363 ,250.11 Webpower Internet 49.00 557.41 SFM Sales Corp. 415,279 .61 445.46 29,023.77 Heart & Hastings Phils., Inc. 425 .18 7,044.22 Heart & Hastings Phils., Inc. 113.25 ~ High Grip Auto Center 34 .52 High Grip Auto Center High Grip Auto Center - High Grip Auto Center Jefcor Laboratories Inc. Punongbayan & Araullo Punongbayan & Araullo SFM Sales Corp. SFM Sales Corp. Twin V Tech Systems & Serv. USA& Co. USA& Co. Welltech Service Corp. 7 Supported by non-VAT ORs. Jardine Lloyd Thompson Jardine Lloyd Thompson Jardine Lloyd Thompson Sycip, Salazar & Gatm Sycip, Salazar & Gatm Sycip, Salazar & Gatm Jardine Lloyd Thompson Nu Print Phils. Sycip, Salazar & Gatm Sycip, Salazar & Gatm Glezel Catering Services Phi lam Care Health Systems 8 Supported by provisional receipts.

CBK POWER COMPANY LIMITED Annex 2 Page 7 of18 EXCEPTIONS OF INPUT VAT ON 0 PURCHASES OF SERVICES en FOR THE YEAR 2004 Gl Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr - - --- - - - Jardine Lloyd Thompson 300.00 318,713 .86 Jardine Lloyd Thompson 98.00 i Jardine Lloyd Thompson 28,625 .77 ! I Jardine Lloyd Thompson 2,667.69 9 Supported by OR not in the name of the rl\ Company. Annex E 688 .71 PLOT 112 .27 PLOT 107 .72 PLOT 468 .72 PLOT 10 Supported by OR where the Php amounts are exactly the same as the invoice amount in USD Exclusive of input VAT per audit based on Php amount. Annex H 476, 169.44 Business Profiles Inc. 70 ,396.90 Business Profiles Inc. 87 ,220.99 Business Profiles Inc. 87 ,601.41 Business Profiles Inc. 70,706.30 Business Profiles Inc. 88 ,370.74 Business Profiles Inc. 71 ,873 .10 Business Profiles Inc. 72,000.50 Business Profiles Inc. 88,527.38 Business Profiles Inc. 70 ,950 .10 Business Profiles Inc. 87,235 .88 11 Discrepancies due to difference in foreign currency rate used by Company against per examination. Annex H 2,773.56 Asian Insights Inc. 54.09 EME Philippines 1,543.75 Kalayaan Power 950.2 1 Sycip, Salazar & Gatm 2 19.38 Sycip, Salazar & Gatm 1.87 Sycip, Salazar & Gatm 4.06 Sycip, Salazar & Gatm 0.20 Kalayaan Power 2,667.69 Business Profiles Inc. Business Profiles Inc. -- - - -- - - - --- --

CBK POWER COMPANY LIMITED Annex 2 EXCEPTIONS OF INPUT VAT ON .....,j PURCHASES OF SERVICES en FOR THE YEAR 2004 0} Exhibit Jan Feb Ma r 1st Qtr Apr May Jun - - - - - -- - -- - - - - - ------ - -------- 2nd Qtr - ' Business Profiles Inc. 3,2 82.86 Kalayaan Power /JA TUV Product Service TUV Product Service TUV Product Service Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Kalayaan Power Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Kalayaan Power EME Philippines Business Profiles Inc. Business Profiles Inc. 12 Supported by official receipts wit VAT amount in correctly computed. Annex H 18,830.65 Smart Moves Consulting 1,090.9 1 Globe Telecom 16 . 12 Globe Telecom 157.77 Globe Telecom 350.11 Globe Telecom 361.91 Punongbayan & Araullo 490 . 19 Certeza Surveying & Aerophoto 14 , 181.82 1,090.9 1 Smart Moves Consulting Smart Moves Consulting 1,090 .91 Smart Moves Consulting 1,090.91 8.99 Globe Telecom Smart Moves Consulting 1,090 .91 1.14 City Service Corp. Smart Moves Consulting 1,090 .91 Smart Moves Consulting Jersse Equipt & Supplies Sales Smart Moves Consulting Solu_tion~Consulting L_

Annex 2 CBK POWER COMPANY LIMITED C'\J EXCEPTIONS OF INPUT VAT ON C") PURCHASES OF SERVICES C) FOR THE YEAR 2004 Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Smart Moves Consulting Explorer Freight Corp. 180,630.14 5,253,891.93 531,120.40 5, 965,641.47 170,611.0 I 197,149.92 7,587.99 t JNJKons Enterprise Smart Moves Consulting 3 75,348.91 Smart Moves Consulting Smart Moves Consulting Tot�"

Annex 2 C BK POWER COMPANY LIMITED ""'C1") EXCEPTIONS OF INP UT VAT ON PURCHASES OF SERVICES m FOR THE YEAR 2004 Jul Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total 1 M issing Officia l R eceipts Asian Insights Inc. 139,532.79 189,213 .77 714,611.90 Globe Telecom Globe Telecom 81.82 Globe Telecom 363.64 Angelis Mgmt & Prof. Srvcs. Angelis Mgmt & Prof. Srvcs. 57.84 I~ Globe Telecom 152.49 Globe Telecom 190.00 Globe Telecom 437 .73 Angelis Mgmt & Prof. Srvcs. Solutions Cons. Group Sycip, Salazar & Gatm Sycip, Salazar & Gatm Control Risk Globe Telecom Globe Telecom Globe Telecom Globe Telecom Jardine Lloyd Thompson Media General Sycip, Salazar & Gatm Mondial Tours & Travel PLOT TUV Product Service Asia Sycip, Salazar & Gatm Jardine Lloyd Thompson Hearty & Hastings PLOT Jardine Lloyd Thompson PLOT Elite Machines Metrobank Visa Digital Telecom D igital Telecom Digital Telecom Fersal Olace

Annex 2 Page 11 of18 CBK POWER COMPANY LIMITED 'o::::!" EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES en FOR THE YEAR 2004 Cl Jul Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total PLDT Asian Insights Inc. 112 .54 Marsh Philippines, Inc. PLDT 122 ,828 .45 PLDT 11 ,235 .80 PLDT 3,109.60 PLDT 140 . 17 PLDT 140.17 Digital Telecom Digital Telecom 166.56 Digital Telecom 140 . 17 Government Performance 57.88 Counterflow Movers 153.79 Counterflow Movers 164.14 PLDT Asian Insights Inc. 1,454.55 The Hongkong & Shanghai Bank Mondial Tours & Travel 695.46 Multi-Lift Sales Corp. 624.55 Mondial Tours & Travel 120 .80 Royal Cargo Combined Tax Studies & Research Center 110 ,800 .66 City Service Corp. EM Cruz Construction 127.96 La Corona de Pagsanjan 2,097 .55 City Service Corp. Explorer Freight Corp. 363.64 2 Original ORs not available, supported only by 69 , 196 .55 photocopies of the original ORs. Clean City Inc. 120.00 Clean City Inc. 362.73 F & R Trading & Construction 3 Without OR, supported by machine validated 733 .50 invoices. Invoices do not have BIR authority to 1,527 .27 print. PLDT 396.69 PLDT 501.86 90.00 - 472 .73 6,849 .59 472 .73 15,172.98 9,301.64 58,972.21 L__ - - - - - -- -- - L- -- �- - -- - - - - --- �- l[f\

Annex 2 CBK POWER COMPANY LIMITED l.!..., EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES Jul Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total en FOR THE YEAR 2004 C) PLOT PLOT 166 . 17 ~ PLOT 3.05 PLOT PLOT 214 .39 PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT PLOT Globe Telecom Globe Telecom Globe Telecom

C BK POWER COMPANY LIMITED Annex 2 EXCEPTIO NS OF INPUT VAT O N Page 13 of 18 PURCHASES OF SERVICES FOR THE YEAR 2004 (.0 CT) Jul Aug Se p 3rd Qtr Oct N ov Dec 4th Qtr 0} 140.20 45.46 T otal 140.20 109.09 PLDT 193.89 109.30 PLDT 140.20 126.05 PLDT 2,813.00 72.60 PLDT 3,101.71 109.09 PLDT 238 .13 PLDT 2,813 .00 Globe Telecom 2,870.96 Globe Telecom 140 . 17 Globe Telecom 140 . 17 Globe Telecom 140.17 Globe Telecom 174.29 Globe Telecom Globe Telecom 161.19 i PLDT 72.60 PLDT 166.03 72.60 PLDT 136.68 177 . 19 PLDT 45 .46 134.22 PLDT 72.60 45.45 PLDT 111.82 140.17 Globe Telecom 181.68 219.79 Globe Telecom 223.63 140.17 Globe Telecom 140 . 17 Globe Telecom - -- � - - 3,203 .75 ~ Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom Globe Telecom PLDT PLDT PLDT PLDT PLDT

CBK POWER COMPANY LIMITED Jut Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Annex 2 EXCEPTIONS OF INPUT VAT ON Page 14 of 18 PURCHASES OF SERVICES ------- 72.60 FOR THE YEAR 2004 129.07 r-- 183 .05 Globe Telecom 155.93 cn Globe Telecom 109 .77 Globe Telecom 72 .60 G) Globe Telecom 111.37 Globe Telecom 72 .60 Total Globe Telecom 2,794 .66 Globe Telecom 140.17 ! Globe Telecom 140 . 17 PLOT 140 . 17 PLOT 187 .94 PLOT PLOT 188.49 PLOT 209 . 18 Globe Telecom Globe Telecom 72.60 Globe Telecom 247 .76 Globe Telecom 4 Without OR, supported only by bank deposit 136.55 - 2,054.05 or bank transaction record. Bank deposit slips and bank transaction records do not comply 136.55 with invoicing requirements. Globe Telecom - 2,545.46 2,545.46 Globe Telecom Globe Telecom 2,545.46 Globe Telecom Globe Telecom - 15,659.85 15,881.35 Globe Telecom Globe Telecom ~ Globe Telecom Sk:ycable 5 Supported by OR which do not bear BIR authority to print. Government Performance 6 Supported by out of period OR. Airfreight 2100, Inc. Airfreight 2100, Inc. Airfreight 2100, Inc.

Annex 2 CBK POW ER COMPANY LIMITED ro EXCEPTIONS OF INPUT VAT ON en PURCHASES OF SERVICES Jul Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total FOR THE YEAR 2004 CJ) Airfreight 2100, Inc. 2,700 .00 40 .00 Copy Quest Corp. 45 .46 Copy Quest Corp. 90.91 454.55 Copy Quest Corp. 454 .55 Dassad Warehousing 964.47 Webpower Internet 357.90 7.27 Webpower Internet 260.00 22 .73 SFM Sales Corp. 45.46 Heart & Hastings Phils., Inc. - Heart & Hastings Phils. , Inc. 5.00 High Grip Auto Center 723.27 High Grip Auto Center 1,000 .00 High Grip Auto Center 510.09 High Grip Auto Center Jefcor Laboratories Inc. 56.36 Punongbayan & Araullo 185.46 Punongbayan & Araullo 4,590.91 SFM Sales Corp. 2,000.00 SFM Sales Corp. 400 .00 Twin V Tech Systems & Serv. 745.46 USA&Co. USA&Co. 6,790.48 5,066,752 .54 Welltech Service Corp. 7 Supported by non-VAT ORs. 5,886 .36 Jardine Lloyd Thompson Jardine Lloyd Thompson 904 . 12 If' 152,758.41 Jardine Lloyd Thompson Sycip, Salazar & Gatm - 123 ,734.64 Sycip, Salazar & Gatm Sycip, Salazar & Gatm Jardine Lloyd Thompson N u Print Phils. SyciQ, Salazar & Gatm Sycip, Salazar & Gatm Glezel Catering Services Philam Care Health Systems 8 Supported by provisional receipts.

Annex 2 CBK POWER COMPANY LIMITED c.n EXCEPTIONS OF INPUT VAT ON c.n PURCHASES OF SERVICES FOR THE YEAR 2004 G) Jardine Lloyd Thompson Jul Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total Jardine Lloyd Thompson Jardine Lloyd Thompson 123 ,734.64 Jardine Lloyd Thompson 9 Supported by OR not in the name of the 109 .70 - 798.41 Company. PLDT 109.70 PLDT PLDT - - 794,883.30 PLDT 10 Supported by OR where the Php a mounts are 5 ,548 . 10 1, 177.34 12,166.69 exactly the same as the invoice a mount in USD Exclusive of input VAT per audit based on 341.90 -- -- ~ Php amount. 420 .38 Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. Business Profiles Inc. 11 Discrepancies due to difference in foreign currency rate used by Company against per examination. Asian Insights Inc. EME Philippines Kalayaan Power Sycip, Salazar & Gatm Sycip, Salazar & Gatm Sycip, Salazar & Gatm Sycip, Salazar & Gatm Kalayaan Power Business Profiles Inc. Business Profiles Inc.

Annex 2 CBK POWER COMPANY LIMITED 0 EXCEPTI ONS OF INPUT VAT ON PURCHASES OF SERVICES 0 FOR T HE YEAR 2004 l .::> Jul Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total ..-4 Business Profiles Inc. 44 .71 Kalayaan Power 2,318 .26 TUV Product Service 15.44 TUV Product Service 27.02 TUV Product Service 27.02 Business Profiles Inc. 441 .15 Business Profiles Inc. 358.80 Business Profiles Inc. 23.46 Kalayaan Power 1,390.84 I Business Profiles Inc. 62.40 Business Profiles Inc. 76.72 Business Profiles Inc. Business Profiles Inc. I 01.40 Kalayaan Power 124 .67 67 .76 EME Philippines 712 .50 Business Profiles Inc. 94.31 Business Profiles Inc. 76.70 12 Supported by official receipts wit VAT a moun t 19,024.0 1 1,818.17 42,955.69 incorrect ly computed. Smart Moves Consulting Globe Telecom Globe Telecom Globe Telecom Globe Telecom Punongbayan & Araullo Certeza Surveying & Aerophoto Smart Moves Consulting Smart Moves Consulting Smart Moves Consulting Globe Telecom Smart Moves Consulting City Service Corp. Smart Moves Consulting Smart Moves Consulting 1,090 .91 Jersse Equipt & Supplies Sales 53 .14 Smart Moves Consulting 1,090.91 Solutions Consulting 39 .25 M

Annex 2 CBK POWER COMPANY LIMITED ~ EXCEPTIONS OF INPUT VAT ON PURCHASES OF SERVICES Jut Aug Sep 3rd Qtr Oct Nov Dec 4th Qtr Total _,.0.;, FOR THE YEAR 2004 11,943.30 11,383.49 454 .54 350,714.08 1,090.91 12,335.98 454.54 909.09 Smart Moves Consulting 14 ,825 .81 312,491.88 25,886.22 Explorer Freight Corp. JNJKons Enterprise 833 .08 Smart Moves Consulting Smart Moves Consulting 156,197.34 179,524.13 6,871,229.60 Smart Moves Consulting Totals ~

CBK POWER COMPANY LIMITED N INPUT VAT ON PURCHASES OF GOODS 0 Annex 3 ' :::> Page 1 of6 -4 OTHER THAN CAPITAL GOODS FOR THE YEAR 2004 Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Jut Aug - - -�� - 66 .81 -� 1 Missing Sales Invoices. Annex F 3,463 .99 980.25 1,757.46 3,814.45 Office Basics Corp. Glues Business Enterprises 327.27 520.30 Office Basics Corp. 65.87 Office Basics Corp. Roadstar Enterprises 1,145.46 612.00 NCH Philippines IMPSA Construction Corp. IMPSA Construction Corp. Office Basics Corp. Office Basics Corp. Office Basics Corp. Mindtech Equipment Office Basics Corp. Office Basics Corp. Office Basics Corp. 2 Supported by Sales Invoices which do not bear BIR authority to print. Annex F - - Pilipinas Shell Petroleum Access Frontier Tech 3 Supported by statement of accounts or other documents which do not comply with invoicing requirements. Annex F 14,123.84 18,335.36 R.O. Shell Gasoline Station R.O. Shell Gasoline Station R.O. Shell Gasoline Station 4,690.90 138.64 SFM Sales Corp. 2,015 .86 SFM Sales Corp. ! R.O. Shell Gasoline Station 7,007.80 i 139.55 SFM Sales Corp. i SFM Sales Corp. 590 .91 R.O. Shell Gasoline Station 5,286.88 4,627.40 R.O. Shell Gasoline Station 298.18 SFM Sales Corp. 384.64 I SFM Sales Corp. I I. Our Lady of Guadalupe Shell I 4,490.09 R.O . Shell Gasoline Station 5,228 .60 f-=-' ~

CBK POWER COMPANY LIMITED "0 "' INPUT VAT ON PURCHASES OF GOODS OTHER THAN CAPITAL GOODS Annex 3 ; ~) FOR THE YEAR 2004 Page 2 of6 ~ Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Jut Aug SFM Sales Corp. 6,060 .00 171.82 SFM Sales Corp. 13 ,623 .64 SFM Sales Corp. 6,055 .55 727.82 Our Lady of Guadalupe Shell 5,091.71 116.82 R.O. Shell Gasoline Station SFM Sales Corp. 3,834.55 SFM Sales Corp. High Grip Auto Center I 4,872.41 Our Lady of Guadalupe Shell R.O. Shell Gasoline Station 462.27 Our Lady of Guadalupe Shell R.O. Shell Gasoline Station 114.09 R.O. Shell Gasoline Station SFM Sales Corp. SFM Sales Corp. SFM Sales Corp. Our Lady of Guadalupe Shell R.O. Shell Gasoline Station SFM Sales Corp. Our Lady of Guadalupe Shell R.O. Shell Gasoline Station SFM Sales Corp. SFM Sales Corp. Our Lady of Guadalupe Shell R.O. Shell Gasoline Station 4 Unsubstantiated VAT on importation of goods (No import declarations or import entry Annex F - - documents evidencing payment of VAT). Bureau of Customs 45 ,685.17 22,330 .91 I Bureau of Customs Ai Bureau of Customs Bureau of Customs 5 Supported by out of period sales invoices. Annex F Ascend Industrial Supplies Inc. Gaisca Industrial Corp. L, Junna Industrial Corp. I Office Basics Corp. 1i -'=-

CBK POWER COMPANY LIMITED "<:1' INPUT VAT ON PURCHASES OF GOODS 0 OTHER THAN CAPITAL GOODS FOR THE YEAR 2004 Annex 3 ,:,.) Page 3 of6 -i Exhibit Jan Feb Mar 1st Qtr Apr May Jun 2nd Qtr Jul Aug 8,904.81 22,3 30.91 10,597.10 High Grip Auto Center 29.00 472 .73 259.09 38,205.15 22,921.82 High Grip Auto Center 469 .09 - I, 141.82 High Grip Auto Center 29.00 High Grip Auto Center 672.73 - High Grip Auto Center 454.54 61,077.35 Icon Ind. Control Systems 11 ,643.36 Gaisca Industrial Corp. Fast Track Sales 1,645.46 6 Supported by sales invoices not in the name of - the Company. Annex F ' VMA Home Appliances Co. 259.09 - 7 Original sales invoice not available, supported - only by photocopies of the original sales Annex F invoice. Annex I 0.19 Twin V Tech Systems 8 Discrepancies due to rounding off differences Annex I - in foreign currency rate used by Company against per examination. .I 42,423.73 10,735.34 1o,928.78 Integrated Computer System Siemens Inc. Anaki Systems Sales Recar Industrial Sales Anaki Systems Sales Recar Industrial Sales 9 Supported by sales invoices with VAT amount incorrectly computed. Multiple J Enterprises 16,026.80 6,845.40

CBK POWER COMPANY LIMITED Annex 3 L"":: INPUT VAT ON PURCHASES OF GOODS Page 4 of6 0 OTHER THAN CAPITAL GOODS FOR THE YEAR 2004 �~ ....c - Sep 3rd Qtr Oct Nov Dec 4th Qtr Total - -------- 7,136.38 ------- 1 Missing Sales Invoices. - 141,233.61 143,971.32 - Office Basics Corp. 37,039.21 Glues Business Enterprises Office Basics Corp. Office Basics Corp. Roadstar Enterprises NCH Philippines IMPSA Construction Corp. 128,004.55 7,680.27 IMPSA Construction Corp. 962.80 163.31 Office Basics Corp. 462.37 2,376.55 Office Basics Corp. 958.08 163.3 1 Office Basics Corp. 462.37 Mindtech Equipment 1,511.83 Office Basics Corp. Office Basics Corp. Office Basics Corp. 2 Supported by Sales Invoices which do not bear BIR authority to print. 8,648.21 8,648.21 Pilipinas Shell Petroleum Access Frontier Tech 3 Supported by statement of accounts or other documents which do not comply with invoicing requirements. 35,496.28 104,994.69 R.O. Shell Gasoline Station R.O. Shell Gasoline Station R.O. Shell Gasoline Station SFM Sales Corp. ! SFM Sales Corp. R.O. Shell Gasoline Station SFM Sales Corp. SFM Sales Corp. R.O. Shell Gasoline Station R.O. Shell Gasoline Station SFM Sales Corp. SFM Sales Corp. r Our Lady of Guadalupe Shell ( ! R.O . Shell Gasoline Station I I -- -- - I

CBK POWER COMPANY LIMITED Annex 3 c..:> INPUT VAT ON PURCHASES OF GOODS OTHER THAN CAPITAL GOODS Page 5 of6 o FOR THE YEAR 2004 ;.;;;> SFM Sales Corp. SFM Sales Corp. -4 SFM Sales Corp. Our Lady of Guadalupe Shell Sep 3rd Qtr Oct Nov Dec 4th Qtr Total R.O. Shell Gasoline Station SFM Sales Corp. ------- 2,335.49 SFM Sales Corp. 4,927.58 High Grip Auto Center 14.55 Our Lady of Guadalupe Shell 1,912.29 580.46 R.O . Shell Gasoline Station 15,093 .90 Our Lady of Guadalupe Shell 92 ,447 .00 R.O. Shell Gasoline Station 1,929.22 R.O. Shell Gasoline Station 5,325.82 SFM Sales Corp. 5,440.21 SFM Sales Corp. SFM Sales Corp. 864.73 Our Lady of Guadalupe Shell 131.36 R.O. Shell Gasoline Station 129.18 SFM Sales Corp. Our Lady of Guadalupe Shell - 1,225.82 R.O. Shell Gasoline Station 4,611.72 SFM Sales Corp. 56,923.00 SFM Sales Corp. 110,981.00 130.46 Our Lady of Guadalupe Shell 211.36 R.O. Shell Gasoline Station 1,645.46 1,523 .06 4 Unsubstantiated VAT on importation of goods 6,129.81 (No import declarations or import entry documents evidencing payment of VAT). 327,297.00 327,297.00 Bureau of Customs Bureau of Customs 66,946.00 - 69,661.54 Bureau of Customs Bureau of Customs i I 5 Supported by out of period sales invoices. Ascend Industrial Supplies Inc. I Gaisca Industrial Corp. r . Junna Industrial Corp. ! Office Basics Corp.

CBK POWER COMPANY LIMITED Sep 3rd Qtr Oct Nov Dec 4th Qtr Total Annex 3 INPUT VAT ON PURCHASES OF GOODS 101,802.36 Page 6 of6 OTHER THAN CAPITAL GOODS 0. 11 11 ,492.44 FOR THE YEAR 2004 188,861.01 t- 0.25 o High Grip Auto Center 0.20 High Grip Auto Center 818.20 .�~-1 High Grip Auto Center 234,322.93 High Grip Auto Center - - 259.09 High Grip Auto Center - Icon Ind. Control Systems 11 ,492.44 11 ,492.44 Gaisca Industrial Corp. 0.25 Fast Track Sales 0.06 0.56 29.81 6 Supported by sales invoices not in the name of the Company. - 818 .20 I818.20 VMA Home Appliances Co. 524,986.30 7 Original sales invoice not available, supported 17,020.80 38,684.92 667,172.30 only by photocopies of the original sales invoice. Twin V Tech Systems 8 Discrepancies due to rounding off differences in foreign currency rate used by Company against per examination. Integrated Computer System Siemens Inc. Anaki Systems Sales Recar Industrial Sales Anaki Systems Sales Recar Industrial Sales 9 Supported by sales invoices with VAT amount incorrectly computed. Multiple J Enterprises Totals

CBK POWER COMPANY LIMITED Annex4 SCHEDULE OF EFFECTIVELY ZERO-RATED SALES Page 1 of4 FOR THE 2nd , 3rd and 4th QUARTER OF YEAR 2004 1008 OR Date OR No Exhibit No Amount 04/26/04 193 SSSS-75 111 ,872,376 .00 04/26/04 194 SSSS-77 111,872,376.00 04/26/04 195 SSSS-79 116,067,590.10 04/26/04 196 SSSS-81 04/26/04 197 SSSS-83 7,524,749 . 10 04/26/04 198 SSSS-85/41 0 7,524,749.10 04/26/04 199 SSSS-86 5,881,956.53 04/26/04 200 SSSS-88 5,847,995.27 04/27/04 185 SSSS-59 04/27/04 186 SSSS-61 104,547.40 04/27/04 187 SSSS-63 9,619 .53 04/27/04 188 SSSS-65 04/27/04 189 SSSS-67 692,360 .75 04/27/04 190 SSSS-69 538,080 .72 04/27/04 191 SSSS-71 692,360.75 04/27/04 192 SSSS-73 541,205.53 05/27/04 203 SSSS-90 I0,293,505 .01 05/27/04 204 SSSS-92 10,679,511.45 05/27/04 205 SSSS-94 10,293,505.01 05/27/04 206 SSSS-96 702,522 .87 05/27/04 207 SSSS-98 10,448,587.79 05/27/04 208 SSSS-100 10,444,587.79 05/27/04 209 SSSS-102 10,836,259.84 05/27/04 210 SSSS-104 702,522.87 06/03/04 211 SSSS-106 549,149 .07 06/03/04 212 SSSS-108 545,978.39 06/03/04 213 SSSS-110 06/03/04 214 SSSS-112 9,760.72 06/03/04 215 SSSS-114 111,274, 128.00 06/03/04 216 SSSS-116 111,274,128.00 06/03/04 217 SSSS-118 115,446,907 .80 06/03 /04 218 SSSS-120 06/25/04 229 SSSS-139 7,484,509 .80 06/25/04 230 SSSS-141 7,484,509.80 06/25/04 231 SSSS-143 5, 850,502 .22 06/25/04 232 SSSS-145 5,816,722 .57 06/25/04 233 SSSS-147 06/25/04 234 SSSS-149 103,988 .32 06/25/04 235 SSSS-151 111,832,492.80 06/25 /04 236 SSSS-153 111,832,492.80 06/25/04 237 SSSS-412 116,026,211.28 06/28/04 219 SSSS-122 06/28/04 220 SSSS-124 7,522,066.48 06/28/04 221 SSSS-126 7, 522 ,066.48 06/28/04 222 SSSS - 128 6,656,696.00 06/28/04 223 SSSS-129 6,656,696 .00 06/28/04 224 SSSS-131 06/28/04 225 SSSS-133 99,530.78 06/28/04 226 SSSS - 135 3,165,285.87 06/28/04 227 SSSS - 137 10,783,558.17 06/28/04 228 SSSS-411 10,393,791.01 10,393,791.01 293,483.51 699,106.18 618 ,678.04 699 , 106.18 618,678 .04 9,250.47 359,224.85

CBK POWER COMPANY LIMITED Annex4 SCHEDULE OF EFFECTIVELY ZERO-RATED SALES Page 2 of4 FOR THE 2nd, 3rd and 4th QUARTER OF YEAR 2004 100 9 OR Date OR No. Exhibit No. Amount 07/29/04 246 SSSS-413 17 ,042.40 08/02/04 238 SSSS-155 671 ,412 .69 08/02/04 239 SSSS-157 671,412.69 08/02/04 240 SSSS-159 594 , 170 .52 08/02/04 241 SSSS-161 08/02/04 242 SSSS-163 8,884.04 08/02/04 243 SSSS-165 594,170 .52 08/02/04 244 SSSS-167 10,356,392.22 08/02/04 245 SSSS-169 9,982 ,064 .79 08/10/04 1267 SSSS-200 9,982,064.79 08/10/04 1268 SSSS-202 111 ,333,952.80 08/10/04 1269 SSSS-204 111 ,333,952.80 08/10/04 1270 SSSS-206 115 ,508,976.03 08110/04 1271 SSSS-208 7,488,533.73 08/10/04 1272 SSSS-210 7,488,533 .73 08/10/04 1273 SSSS-212 6,627,021 .00 08/1 0/04 1274 SSSS-214 6,627,021.00 08/27/04 1251 SSSS-414 530,161.68 08/27/04 1252 SSSS-171 327 ,081.70 08/27/04 1253 SSSS-173 9,449 ,092 .86 08/27/04 1254 SSSS-175 9,803,433 .84 08/27/04 1255 SSSS-177 9,803,433 .84 08/27/04 1256 SSSS-179 9,449,092 .86 08/27/04 1257 SSSS-181 635,563.98 08/27/04 1258 SSSS-183 635 ,563.98 08/27/04 1259 SSSS-185 403 ,476.89 08/27/04 1260 SSSS-187 08/30/04 1275 SSSS-216 6,049.93 08/30/04 1276 SSSS -218 396,693 .17 08/30/04 1277 SSSS-220 7,552,916 .61 08/30/04 1278 SSSS-222 7,552,916.61 08/30/04 1279 SSSS-224 6,683,997.00 08/30/04 1280 SSSS-226 6,683 ,997.00 08/31/04 1281 SSSS-228 534,719.76 08/31/04 1282 SSSS-230 112,291 ,149.60 08/31104 1283 SSSS-232 112,191 ,441.60 09/02/04 1261 SSSS-189 116,398,620.66 09/02/04 1262 SSSS-191 116,398,620.66 09/02/04 1263 SSSS-193 10,783,558 .17 09/02/04 1264 SSSS-195 10 ,356 ,392 .22 09/02/04 1265 SSSS-197 10,836 ,259 .84 09/02/04 1266 SSSS-199 10,673 ,511.45 09116/04 1284 SSSS-234/419 1,052 ,082.28 09/16/04 1285 SSSS-236 10,589,009.17 09/ 16/04 1286 SSSS-238 116,336,552.43 09/ 16/04 1287 SSSS-240 116,336,552.43 09/20/04 1288 SSSS-242 116,336 ,552.43 09/20/04 1289 SSSS-244 116 ,336,552.43 09/27/04 1290 SSSS-246 116,564,135 .94 09/27/04 1291 SSSS-248 116,564,135 .94 09/27/04 1292 SSSS-250 562,855.95 636,027 .22 636,027 .22

CBK POWER COMPANY LIMITED Annex4 SCHEDULE OF EFFECTIVELY ZERO-RATED SALES Page 3 of4 FOR THE 2nd, 3rd and 4th QUARTER OF YEAR 2004 101 0 OR Date OR No. Exhibit No. Amount 09/27/04 1293 SSSS-252 9,592.94 09/27/04 1294 SSSS-254 562,855.95 09/2 7/04 1295 SSSS-256 9,810,579 .19 09/27/04 1296 SSSS-258 9,455,979 .95 09/27/04 1297 SSSS-260 9,455,979.95 09/27/04 1298 SSSS-262 9,810,579.19 10/08/04 1305 SSSS-264 112 ,650 ,098.40 10/08/04 1306 SSSS-265 112,650,098.40 10/08/04 1307 SSSS-267 116,874,477.09 10/08/04 1308 SSSS-269 116,874,477.09 10/08/04 1309 SSSS-271 7,577,060 .19 10/08/04 1310 SSSS-273 7,577,060.19 10/08/04 1311 SSSS-275 6,705,363.00 10/08/04 1312 SSSS-277 6,705,363.00 10/08/04 1313 SSSS-279 536,429 .04 10/29/04 1314 SSSS-281 643,447 .74 10/29/04 1315 SSSS-283 10/29/04 13 16 SSSS-285 8,514 .01 10/29/04 1317 SSSS-287 569,422.78 10/29/04 1318 SSSS-289 569,422 .78 10/29/04 1319 SSSS-291 643 ,447.74 10/29/04 1320 SSSS-293 9,566 ,302.69 10/29/04 1321 SSSS-295 9,566,302.69 10/29/04 1322 SSSS-297 9,925 ,039.04 11/02/04 1327 SSSS-299 9,925,039.40 11102/04 1328 SSSS-301 112,331,032.80 11102/04 1329 SSSS-303 112,331 ,032 .80 11/02/04 1330 SSSS-305 116,543 ,446 .53 11102/04 1331 SSSS-307 116,543 ,446.53 11/02/04 1332 SSSS-309 7,555,599.23 11105/04 1323 SSSS-415 21 ,028,315 .71 11105/04 1324 SSSS-416 11112/04 1325 SSSS-417 68,304.50 11/25/04 1326 SSSS-418 6,967.49 11126/04 1333 SSSS-314 14,589.31 11/26/04 1334 SSSS-316 11 ,000.00 11/26/04 1335 SSSS-318 8,520 .70 11/26/04 1336 SSSS-320 11126/04 1337 SSSS-322 643 ,953 .32 11/26/04 1338 SSSS-324 569,870.19 11 /26/04 1339 SSSS-326 569,870 .19 11/26/04 1340 SSSS-328 643,953.32 11126/04 1341 SSSS-330 9,932,837.42 11130/04 1342 SSSS-332 9,932,837.42 11/30/04 1343 SSSS-334 9,573,819.20 11/30/04 1344 SSSS-336 9,573,819.20 11/30/04 1345 SSSS-338 7,538,162 .20 11/30/04 1346 SSSS-340 7,538 , 162.20 12/01/04 1347 SSSS-342 6,670,940.00 12/01 /04 1348 SSSS-344 6,670 ,940.00 12/01/04 1349 SSSS-346 99,743.76 112, 131,616.80 112 , 131,616.80 116,3 36,552.43

Annex4 CBK POWER COMPANY LIMITED SCHEDULE OF EFFECTIVELY ZERO-RATED SALES FOR THE 2nd, 3rd and 4th QUARTER OF YEAR 2004 OR Date OR No. Exhibit No Amount 12/01104 1350 SSSS-348 1 I 6 ,336 ,552.43 12/28/04 1351 SSSS-350/455 8,511.84 12/28/04 1352 SSSS-352/454 12/28/04 1353 SSSS-354/453 569,277.77 12/28/04 1354 SSSS-356/452 569,277.77 12/28/04 1355 SSSS-358/451 643,283.88 12/28/04 1356 SSSS-360/448 643,283 .88 12/28/04 1357 SSSS-362/449 9,563 ,866.46 12/28/04 1358 SSSS-364/450 9 ,922 ,511.46 12/28/04 1359 SSSS-366/447 9,922,511.46 12/29/04 1360 9,563,866.46 12/29/04 1361 SSSS-368 7,559,623.16 12/29/04 1362 SSSS-370 7,559,623.16 12/29/04 1363 SSSS-372 6,689,932.00 12/29/04 1364 SSSS-374 SSSS-376 =r' 6,689,932.00 Total 100,027.73 4,539,223,259.11 l Oll