CBK POWER COMPANY LIMITED v. COMMISSIONER OF INTERNAL REVENUE

REPUBliC OF THEPHiliPPINES Court of Tax Appeals QUEZON CITY SECOND DIVISION CBK POW ER COMPANY LI MITED, C.T.A. CASE NO. 7220 Petitioner, Members: -versus- CASTANEDA, JR., Chairperson UY, and PALAN CA-E NR IQ UEZ, JJ. ' Promulgated: COM MISSION ER OF INTERNAL FEB 0 6 2009 / REV ENUE, Respondent. 8 �. 2J .:t � rn � X -�- ------------ {"\. / X- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - D EC ISION UY,~.: I I Before Us is a Petition for Review filed on April 18, 2005 by petitioner CBK Power Company Limited , against respondent Commissioner of Internal Revenue, for the issuance of a tax credit certificate in the amount of TWO HUNDRED NINETY .FIVE MILLION NINE HUNDRED NINETY FOUR ' THOUSAND FIVE HUNDRED EIGHTEE N PESOS (P295,994,518.00) allegedly representing unutilized input ta xes on local purchases of goods and services attrib[.1table to zero-rated sales for the period covering January 1, 2003 to December 31, 2003. . tf"128

DECISION C.T.A . CASE NO. 7220 Page 2 of22 THE FACTS Culled from the parties Joint Stipulation of Facts and Issues (JSFI) submitted on August 10, 2005 ,1 these are the facts of the case. Petitioner is a partnership duly organized and existing under and by virtue of the laws of the Philippines, with principal office at the National Power Corporation (NPC) Compound, Kalayaan, Laguna. On the other hand, respondent is the duly appointed Commissioner of Internal Revenue vested with authority to act as such, including inter alia, the power to decide, approve and grant refunds or tax credit of erron eously or illegally collected internal revenue taxes as provided by law. He holds office at the Bureau of Internal Revenue (SIR) National Office Building, Diliman , Quezon City. Petitioner is a special purpose entity and was formed for the sole purpose of engaging in all aspects of (a) the design , financing, construction, testing , commissioning , operation , maintenance, management and ownership of Kalayaan II pumped-storage hydroelectri c 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. It is registered as a valued-added tax (VAT) entity since April 10, 2000, with Tax Identification Nurp ber (TIN)NAT No. 205-760-474-000 and BIR Certificate of Registration 1RC00001 95405. 12D 1Docket, pp. 303-308.

I I I D E C IS IO N C.T.A. CASE NO. 7220 Page 3 of22 On January 2, 2003, petitioner fil ed an Application for VAT zero-rate with the BIR which was duly approved on January 29, 2003 pursuant to VAT Review Committee Ruling No. 018-03. During the period from January 1, 2003 to December 31, 2003, petitioner filed with the BIR its Monthly VAT Declarations and Quarterly VAT I Returns. It filed its Original Quarterly VAT Returns for the first, second , third, and fourth quarters of calendar year 2003 on the following dates :2 Quarter Date filed First A12ril 24, 2003 July 25, 2003 Secofld October 24, 2003 Third January 26, 2004 Fourth Subsequently, petitioner amended its Monthly VAT Declarations and � Quarterly VAT Returns for calendar year 2003, wherein the Amended Quarterly VAT Returns reflected unutilized/excess input taxes amounting to P298,430,362.42. Petitioner filed its Am ended Quarterly VAT Returns on the following dates:3 Quarter Date filed First June 10, 2003 and March 23, 2005 Second Third " I March 23, 2005 Fourth March 23, _2005 March 23, 2005 On March 29, 2005, petitioner filed with the BIR Revenue District Office (ROO) No. 55 of Laguna an administrative claim for the issuance of a tax credit certificate for a total amount of P295, 994,518.00 for its unutilized input taxes on the purchase of capital goods for calendar y1~ar 2003, amounting to P278,669.281 .1 7, and on its unutilized input taxes on its local purchase of 2 Par. 6, Facts Adm itted, Joint Stipulation of Facts and Issues (JSFI); 1Jocket, pp. 304-305. I 3 Par. 7, Ibid.; Docket, p. 305 . 130

DECISION C.T.A. CASE NO . 7220 Page 4 of22 goods and � services, other than capital goods for calendar year 2003, amounting to P17,325,236.83, attributable to its zero-rated sales.4 To toll the running of the two-yea r prescriptive period to judicially claim . a tax refund/credit, petitioner filed the instant Petition for Review on April 18, 2005 pursuant to Section 229 of the National Internal Revenue Code (NIRC) of1997. Respondent, in his Answer filed on June 3, 2005, raised the following Special and Affirmative Defenses: "4. Petitipner's alleged ! claim for refund is subject to administrative routinary investigation/examination by respondent's Bureau; 5. The amount of P295, 994,518.00 being claimed by petitioner as alleged unutilized input ta xes for the period January 1, 2003 to December 31 , 2003 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 204 (C) and 229 of the 1997 Tax Code 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. Commission,er of Internal Revenue, 124 SCRA 1211)." To support its claim , petitioner pre sen ~ed testi n10nial and documentary evidence. Respondent, on the other hand, submitt ed the case for decision 1 based on the pleadings as there was no report of inv estigation in this case .5 4 Par. 8, Id.; Docket, p. 305. 5 Minutes of the hearing held on January 16, 2008; Docket, p. 94 - �< 131 .

DECISION C.T.A. CASE NO. 7220 Page 5 of22 On February 7, 2008, respondent filed his Memorandum, while petitioner filed its Memorandum on March 14, 2008. On March 26, 2008, this case was deemed submitted for decision .6 THE ISSUES As jointly stipulated by the parties ' counsel, these are the issues for this Court's resolution : "1. Whether or not Petiti'oner is entitl'ed to a tax credit certificate in the amount of P278,669,281 .17 representing unutilized input taxes paid or incurred on its purchases of capital goods for the period January 1, 2003 to December 31 , 2003; 2. Whether or not the unutilized input taxes amounting to P278,669 ,281 .17 paid or incurred by Petitioner for the period January 1, 2003 to December 31 , 2003 were related to payments to its contractors for the construction of the hydroelectric power plants in La gur:~a , as well as all related expenditures in pursuance of the rehabilitation , construction and operation of the power plant complex; 3. Whether or not Petitioner is entitled to a tax credit certificate in the amount of P17 ,325,236. 83 representing unutilized input taxes paid or incurred on its local purchase of goods and services, 'other than ca pital goods, attributable to Petitioner's zeta-rated sales to the National Power I Corporation (NPC) for the period January 1, 2003 to December 31, 2p03; 4. Whether or not Petitioher's unutilized input taxes amounting to P17,325,236.83 representing unutilized input taxes paid or incurred on its local purchases of goods and services, other than capital goods, for the period January 1, 2003 to December 31 , 2003, were attributable to Petitioner's zero- rated sales for the period January 1, 2003 to December 31 , 2003 ; 5. Whether or not Petitioner has duly substantiated its claim for the issuance of a tax credit certificate for unutilized input taxes amounting to P278,669,28 1.17 paid or incurred on its purchases of capital goods for t11e period January 1, 2003 to December 31 , 2003 and fo r its unutilized input taxes 0 �:::,:3 �R"olotion.::do~~:::,,t: :.;1~~~k:: representirig unutilized input~ 13 2

DECISION C.T.A. CASE NO. 7220 Page 6 of22 taxes paid or incurred on its local purchases of goods and services, other than capital goods, attributable to its zero- rated sales for the period January 1, 2003 to December 31, 2003 ; 6. Whether or not the unutilized input taxes amounting to P278,669,281 .17 paid: or in cu rred by Petitioner on its purchases of capital goods for .the period January 1, 2003 to December 31, 2003 and the unutilized input taxes amounting to P17,325,236.83 representing unutilized input taxes paid or incurred by Petitioner on its local purchases of goods and services, other than capital goods, for the period January 1, 2003 to December 31 , 2003 have not been carried over to the succeeding guarters and have not been utilized against any output ta�x; 7. If any portion of Petitioner's unutilized input taxes paid or incurred on its purchases of capital goods amounting to P278,669,281 .17 for the period January 1, 2003 to December 31, 2003, is disallowed for not falling under the category of 'capital goods' under Section 112(B) of the Tax Code , whether or not Petitioner is entitled to claim the same as a tax credit under 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, 2003 to December 31, 2003 attributable to its zero-rated sales for the same period ; 8. Whether or not Petitioner had timely and duly filed its administrative claims for refund or issuance of tax credit certificates amounting to P27 S,669,281 .17 representing unutilized input taxes paid or incurred on its purchases of capital goods for the period January 1, 2003 to December 31, 2003; and for P17 ,325,236. 83 representing unutilized input taxes paid or incurred on its local purchase of goods and services, other than capital goods, attributable to Petitioner's zero-rated sales to the National Power Corporation (NPC) for the period January 1, 2003 to December 31 , 2003, respectively ; and 9. Whether or not Petitioner is entitled to a tax credit certificate in the total amount of Two Hundred Ninety Five Million Nine Hundred Ninety Four Thousand Five Hundred Eighteen Pesos (P295,994,518.00) representing unutilized input taxes for the period January 1, 2003 to December 31, 2003."7 1 Issues to be Tried or Reso lved, JSFf; Docket, pp. 306-307. 133

DECISION C.T.A. CASE NO. 7220 Page 7 of22 The foregoing issues can be summarized as follows: whether or not petitioner is entitled to the issuance of a tax credit in its favor in the amount of Two Hundred Ninety Five Million Nine Hundred Ninety Four Thousand Five Hundred Eighteen Pesos (P295,994,51 8. 00), representing unutilized input taxes on its domestic purchases �of capital goods and services for the period from January 1, 2003 to December 31 , 2003 . Thus, We shall discuss all the foregoing stipulated issuesjointly. THE COURT'S RULING At the outset, it bears stressing that based on the records of this case, petitioner filed with the Bl R its Quarterly VAT Returns declaring zero-rated sales in the amount of P3,560,865,265 .70 and input VAT of P243,043,717.78 on domestic purchases of capital goods and other goods and services for the four quarters of calendar year 2003, detailed as follows : I Exhibit Taxable Date of Original Zero-rated .Sales Input VAT I Quarter Filing 89,337,364 . 16 L 1st Quarter p 846,754,206.25 p 39,124 , 833 .77 N 2nd Quarter 4/24/2003 p 3rd Quarter 7/25/2003 824 ,090,126.80 109,637, 087.89 4th Quarter 10/24/2003 49,444,319 .56 1/26/2004 874,449,852 .69 Total 287,543,605.38 1,015,571,079.96 p 3,560,865,265.70 p The VAT Return for the first quarter was aJllended on June 10, 2003,8 and was further amended on March 23, 2005 along with the remaining VAT Returns, showing the following : . �E x h i b i t Taxable Date of Filing Zero-rated Sales Input VAT K Quarter 3/23/2005 113 795,651.09 M 1st Quarter 3/23/2005 p 846,754,206.25 p 0 2nd Quarter 3/23/2005 23,823 ,726 .33 Q 3rd Quarter 3/23/2005 824 ,090,126.80 1 0 9 ,637,087 .89 4th Quarter 874,449,852 .69 49,268,644 .26 Total 296,525,109.57 1.015,571,079.96 p 3,560,865,265.70 p 8 Exhib it "J". ,,

DECISION C.T.A. CASE NO . 7220 �Page 8 of22 Out of the reported input VAT of P296,525, 109.57, only the amount of P295,994,518.00 is the subject of the present claim which allegedly consisted of the following : Domestic purchases-Capital Goods Input VAT Domestic purchases-Other Goods/Services p 278,669,281 .17 TOTAL 17,325 ,2 36 .83 p 295,994,518.00 Now proceeding with the discussion on the merits of this case, petitioner anchors its claim on Sections 11 O(B) and 112(A) and (B) of the NIRC of 1997, 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 witl1 Section 113 hereof on the following transactions shall be creditable against the output tax: XXX XXX XXX (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 I 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) yea'rs 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 b~en applied I' against output tax: Provided, however, That in the case of zero- - 13:l

DECISION C.T.A. CASE NO . 7220 Page 9 of22 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 furth er, 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 volume of sales . ~ {B) Capital Goods. - A VAT-registered person may apply for the issuante 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 ta xable quarter when the importation or purchase was made ." Petitioner avers that if ever any portion of its tax credit claim for unutilized input taxes on the purchase of capital goods for calendar year 2003 amounting to P278,669,281 .17 is disallowed for not falling under the category of "capital goods" under Section 112(8) of the NI RC of 1997, petitioner is entitled to claim the same as a tax crediUrefund undm Section 112(A) of the NIRC of 1997 because these unutilized input taxes of P278,669,281 .17 were also attributable to petitioner's effectively zero-rated sales to the NPC for calendar year 2003. 9 In this regard, the Court de ems it appropriate to first . I discuss petitioner's claimed input taxes on dom estic purchases of capital goods in the amount of P278,669,281 .17. Under Section 112(8) of the NIRC of H~97, in order to be entitled to a refund or tax credit of input tax on dom , �;'cic purchases of capital goods, petitioner must prove the following : 1. that it is a VAT-registered entity; ) 9 Par. 37, Petitioner's Memorandum ; Docket, p. 99 1. 136

DECISION C.T.A. CASE NO . 7220 Page 10 of22 2. that input taxes were paid on capital goods imported or locally purchased; 3. that such input taxes were not applied against. any output VAT liability; and 4. that the claim for refund wa s filed within the two-year prescriptive period. It is an admitted fact that petitioner is a VAT-registered entity.10 And in order to prove that it incurred input taxes in the amount of P278,669,281 .17 on capital goods purchased, petitioner submitted a schedule of capital goods11 and suppliers' official receipts ,12 which were examined by the Court-commissioned Independent CPA, Uy Singson Abella & Co, through its partner, Ms. Milagros F. Padernal. Based on the Report13 of Ms. Padernal, petitioner's claim for refund of . input taxes on purchases of capital goods in the aggregate amount of P278,669,281 .17 is broken down qS follows: I Input Tax p 109,227,373.86 Quarter I First 20 ,798 ;387 .69 104,974,132.54 Second Third 43,669,387.08 Fourth p 278,669,281.17 TOTAL The foregoing allegedly represents payments to the following local contractors for the construction of hydroelectric power plants in Laguna (Caliraya , Botocan , Kalayaan I and Kalayaa n II): 1. IMPSA Construction Corporati on - for the design, engineering , procurement, supply of all pl ants and materials, rehabilitation, commissioning , testing, compl etion and handover of the power 10 Par. 5, Facts Admitted, JSFI; Docket, p. 304. II Exhibit "JJJJJJ". 12 Exhibits "CCCCCC- 1" to "CCCCCC-58". 137 � , par, 13 Exhibit "N 6 Summary of F indin gs~ 10. ",

DECIS ION C.T.A . CASE NO . 7220 Page 11 of22 plants, together with the civil structures, access roads and other works �14 ' 2. EME Philippine Services Corporation - for the administration and oversight of the engineering , procurement, rehabilitation, construction, commissioning , testing and completion and start up of the power plants ; and 15 3. Asian Insights , Inc. - for the review of all land acquisition documents of NPC covering th e entire lots comprising the site of such power plants aad other related services.16 According to Ms. Padernal , during th e construction period, all billings received from these contractors were booked as "Construction in Progress (CIP)", consisting of the following acco unts in the general ledger: (a) Constructio'n Work in Progress, whi ch ,was used for billings from IMPSA Construction Corporation; and (b) Proj ect Cost, which was used for billings from other contractors . Cl P wa s reflected under Property, Plant and Equipment in the financial statements. Once a particular power plant unit was completed , the accumulated am ount refle cted in the related CIP was transferred to the Power Plants acco unt un der Property, Plant and Equipment and depreciated over a period of 25 years.17 I Petitioner submitted a schedule showing how the purchases of capital goods were recorded in the general ledger.18 And this was explained by Mr. I Joey L. Polintan , petitioner's Accounting Manager, in the following manner: "14. The payments to Petitioner's contractors and/or billings by its contractors and/or su ppliers of capital goods were reflected under the Property, Pl ant and Equipment (PPE) of P22,727,867 ,516 in the Statement of Assets , Liabilities and Partners' Capital as of Oe'cember 31, 2003 xxx of the Audited 14 Exhibit "E". 138 15 Exhibit "F". 16 Exhibit "G". 17 Exhibit "N6", Summary of Findings, par. 13. 18 Exhibits "JJJJJJ" to "JJJJJJ-5 1".

DECISION C.T.A. CASE NO . 7220 Page 12 of22 Financial Statements for the Peri od Ending December 31, 2003, previously marked as Exhibit 'MM', and in Note 5 to the said Audited Financial Statements under the Power Plants of P23,277,889,825 . 15. The said payments to Petitioner's contractors and/or suppliers of capital goods for the rehabilitation and construction of (Petitioner's) Power PIC~nt in Laguna, excluding VAT, are �initially recorded under the asset account Construction Work in .Progress, more sp~cifically und er CWIP-I<alayaan I Unit 1, Kalayaan I Unit 2, Kalayaan II , Kalayaan II Unit 1, Kalayaan II Unit 2, Caliraya, Caliraya Unit �1, Caliraya Unit 2, Botocan , Botocan Unit 1, Botocan Unit 2, Botocan Unit 3, and Civil Structures. xxx" 19 For easy reference, Note 5 to petitioner's audited financial statements for the period ending December 31, 200320 is shown below: Net Additions/ 2003 (Transfers_}_ 2002 p 6,080,270,841 Power plants p 23,277,889,825 p 17,197,618,984 Transportation equipment 10,006,743 Computer equipment 10,674 ,926 668,183 5,876,322 Leasehold improvements 2,656,992 Furniture & fixtures 7,660 ,87 6 1,784,554 464,314 Power plant tools & equipment 2,656,992 231,400 - Accumulated Depreciation p 6,099,506,612 657,034 192,720 191 ,647,020 Construction in progress : Kalayaan 456,383 .. 224,983 p 5,907,859,592 Botocan Civil works p 23 ,299,996,036 p 17,200,489,424 p 10,613,089,004 1,94 1,364,225 572,128,5 20 380,481,500 595,491 ,498 p 22,727,867,516 p 16,820,007,924 p 13,149,944,727 p 19,057,804,319 - p. (10,613,089,004) - (1 ,941 ,364,225) - (595,49 1,498) - p (13,149,944,727) p 22,727,867,516 p 3,670,063,197 Mr. Polintan also stated that upon completion of each unit of the power plants, the CWIP accounts were closed and subsequently transferred to petitioner's PPE accounts. Thereafter, recognition of depreciation expenses commenced. The corresponding accumulated depreciation were recorded in 19 Exhibit "UUUUUU". 139 20 Exhibi t "MM", p. 6.

DECISION C.T.A. CA SE N O. 7220 petitioner's general ledger under Accumul ated pepreciation-Kalayaan I Unit 1, Kalayaan I Unit 2, Kalayaan II , Caliraya Unit 1, Caliraya Unit 2, Botocan, and Civil Structures.21 A scrutiny of the documents presented revealed that petitioner's total payments to and/or billings by its contractors and/or suppliers of capital goods for the rehabilitation and construction of its power plants in the year 2003 amounted to P2,786 ,692,811.84. The fo regoing payments to contractors were verified to have been properly recorded as assets in petitioner's general ledger. However, the Court could not ascertain whether such payments were indeed reported in the financial statements . Petitioner failed to provide a detailed schedule of each of its acco unt under "Property, Plant and I Equipment" so that the correspbnding payments to and/or billings by its contractors and/or suppliers of capital goods could be accounted for and reconciled . The Independent CPA likewise found that the claimed input tax on purchase of capital goods in the am ou nt of P1 ,407 ,094.5622 should be disallowed for petitioner's failure to pres ent VAT official receipts as supporting documents. Hence, even if petitioner's remaining claimed input VAT on capital goods in the amount of P277,262, 186.6123 is duly substantiated with VAT official receipts , the same shall be denied because petitioner failed to prove that the related purchases form ed pa rt of the account under "Property, Plant and Equipment" as reflected in its audited financial statements for ca lendar year 2003. 2 1 Exhibits "PP PPPP" and " QQQQQQ". 22 Exh ibit "DDDDDD". 23 Exhi bit "N6", Summary o.f Findings, par. 12. : \40 .

DECISION C.T.A. CASE NO. 7220 Page 14 of22 Nevertheless, as correctly pointed out by petitioner, petitioner may still claim the substantiated input taxes on purchases of capital goods under Section 112(A) of the NIRC of 1997, since the said input taxes are also attributable to petitioner's z;ero-:~ted sales f?r calendar year 2003. The Court shall now determine whether petitioner complied with the requisites under Section 112(A) of the NIRC of 1997, in o_rder to be entitled to a refund or tax credit of input VAT payments attributable to its zero-rated sales, 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 VAT payments are directly attributable to zero-rated sales or effectively zero-rated sales; 4) that the input VAT payments were not applied against any output VAT liability; and 5) that the claim for refund was filed within the two-year prescriptive period . Anent the first requisite, there is no argument that the sale of electricity by a VAT registered taxpayer, li~e herein petitioner, to the NPC is subject to zero percent (0%) VAT pursuant to Section 108(8)(3) of the NIRC of 1997. This Issue has been well-settled in the case of Maceda vs. Macaraig, G.R. No. 88291, May 31, 1991, 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 effecti ve implementation of the policy enunciated in Section one of Republic Act No. 6395' XXX XXX XXX XXX Presidential Decree No. 938 am ended the tax exemption by simplifying the s�ame law in general terms . It ~;uccinctly exempts NPC from 'all forms of taxes, duti es, fees, imposts, as well as 14 1

D E C I S IO N C.T.A. CASE NO . 7220 costs and service fees including filing fees , appeal bonds, supersedeas bonds, in any,court or administrative proceedings'. I . 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.D. No. 938 that its purpose is to maintain the ta x exemption of NPC from all forms of taxes including indirect taxes as provided for under R.A. No. 6395 and P.O. No. 380 if it is to atta in its goals." (Underscoring supplied) Moreover, in the same case , NPC's tax exemption was affirmed and further explained as follows : "A chronological revi ew of the NPC laws will show that it has been the lawmaker's intention that the NPC was to be completely ta x-exempt from all form s of taxes - direct or indirect. XXX XXX XXX One common theme in all these laws is that the NPC must' be enabled to pay its indebtedness which, as of P.O. No. 938 was P1 2 Billion in total domes tic indebtedness, at any one time, and US$4 Billion in total forei gn 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 ." 24 As a matter of fact, the Secretary of Finance , in his Memorandum to the CIR dated January 26 , 1998, upheld NPC's exemption from both direct and indirect taxes , and said that purchases by NPC of electricity from independent power producers are subject t~ VAT at zero-rate. From the foregoing jurisprudence, the Court has consistently ruled that the NPC is an entity with a special charter, which categorically makes it I 24 Resolution dated June 8, 1993, G.R. No. 8829 1 (223 SCRA 2 !7).

DECISI ON C.T.A. CAS E NO . 7220 exempt from payment of 911 taxes, whether direct or indirect, including VAT. Hence, by virtue of the said charter, services rendered by a VAT-registered entity, like herein petitioner, to NPC are effectively subject to zero percent (0%) VAT. Moreover, the BIR itselfapproved petitioner's application for zero-rating on January 29, 2003.25 It was also established that petitioner entered into a Second Accession Undertaking with the NPC and its affiliates, lndustrias Metalurgicas � Pescarmona S.A. (IMPSA) and CBK Power Corporation (CBK Power) on September 20, 2000, 26 wherein petitioner � became a party to a Build- � I Rehabilitate-Operate-Transfer (BF~.OT) Agreement dated November 6, 1998 to rehabilitate, construct, operate, and maintain the Caliraya, Botocan, and Kalayaan hydroelectric power plants in tile Province of Laguna.27 Under the BROT Agreement, petitioner shall generate and supply electricity to NPC and shall receive fees in consideration thereof. 28 Likewise, in its Amended VAT Returns for the four quarters of calendar year 2003, petitioner's reported zero-rated sales/receipts amounted to P3,560,865,265 .70. 29 In order to support this, petitioner presented a Schedule of Zero-rated Sales and Collections for calendar year 200330 with the corresponding invoices, 31 bank credit advices, 32 and official receipts. 33 A j 25 Exhibits "JJ" and " KK"; par. 10; Facts Admitled, JSFI; Docket, p. 305. 26 Exhi bit "D". 27 Exhibit "C". 28 Exhibit "C-6". 29 Exhibits " K", "M", " 0 ", and "Q". 30 Exhibit "BBBBBB". 31 ExJ1ibits "BBBBBB-1 " to "BBBBBB-160": 32 Ex.J1ibits "BBBBBB-l a" to "BBBBBB- IOa". 142 33 Exhibits "BBBBBB-lb" to "B13BBBB-114b".

! �) y DECISION C.T.A. CASE NO . 72 20 I scrutiny of the forego ing documents shows th.at the official receipts issued by petitioner to NPC amounting to P115,561 ,550.82 do not bear the word "zero- rated" 34 in violation of the substantiation re quirements under Section 4.108-1 of Revenue Regulations No. 7-95 in relati on to Sections 113 and 237 of the " NIRC of 1997, quoted hereunder as foll ows: "SECTION 4.108-1. Invoicing Requirements- All VAT registered persons shall , for every sale or lease of goods or properties or services, issue duly reg istered receipts or sales or commercial invoices which must sh ow: 1. the name , TIN and address of seller; 2. date of transaction ; 3. quantity, unit � cost and description of merchanqise or nature of service; 4. the name, TIN , business style, if any, and address of tile VAT-registered purchaser, customer or client; 5. the word 'zero-rated ' im printed on the invoice covering zero-rated sales; and 6. the invoice value or consid eration . XXX XXX XXX Only VAT-registered persons are required to print their TIN followed by the word 'VAT' in thei r invoice or receipts and this shall be considered as a 'VAT Invoice'. All purchases covered by invoices other than 'VAT Invoice' shall not give rise to any input tax. If the taxable person is eng ag ed in exempt operations, he should issue separate invoices or receipts for the taxable and exempt operations . A 'VAT Invoice' sh all be issued only for sales of goods, properties or servi ces subject to VAT imposed in Section 100 and 102 of the Code. " "SEC. 113. Invoicing and Accounting Requirements for VAT-Registered Persons.- (A) Invoicin g Requirements. - A VAT-registered person shall , for every sal e, issue an invo ice or receipt. In addition to the information required under Section 237, the following information shall. be indicated in the invoi ce or receipt: 34 Seedetail s perAnnex"A- l " . 143 #'

DECISION C.T.A. CASE NO . 7220 Page 18 of22 (1) A statement that the seller is a VAT-registered person , followed by his taxpayer's identification number (TIN) ; and I (2) The total amoun~ which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the value-added tax." "SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - All persons subject to an internal revenue tax shall, for each sale or transfer of merchandise or for services rendered valued at Twenty-five pesos (P25.00) or more, issue duly registered receipts or sales or commercial invoices, prepared at least in du plicate, showing the date of transaction , quantity, unit cost and description of merchandise or nature of service. xxx" Hence, said amount shall be disallowed . Only the reported ze ro-rated receipts in the amount P2 ,651 ,928 ,988.85 is duly substantiated with VAT zero-rated offi ci al receipts. 35 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 comp.uted as follows : p 2,651,928 ,988 .85 + p 3 560 865 265 .70 Supported zero-rated receipts Divided by total declared zero-rated receipts 14:.41% Rate of supported zero-rated receipts Regarding the second requisite , petitioner submitted invoices and official receipts to support its purch ases of goods other than capital goods and services for calendar year 2003, with corresponding input VAT in the aggregate amount of P17,325 ,236. 83. Upon verification of the said documents, the Court-commission ed Independent CPA noted the following exceptions :36 35 See detai lsf..er Annex "A-2". 14 4 36 Exhibit "N ", Summary of Findings, par. ' 18 .

DECISION , C.T.A. CASE NO . 7220 Page 19 of22 Finqings Exhibit Amount Purchase of services EEEEE E-246 and EEEEE E-9 15 to 927 p 68,492.06 VAT ORs not dated w ithin th e peri od of claim FFFFF F 36,249.87 VAT ORs issued not in the name of Petitioner' GGGGGG 1,3 10,6 14.00 No VAT ORs were prese nted Purchase of goods IIIII I 196 083.80 No VAT invoices w ere presented p 1.611,4J.W TOTAL Further evaluation of petitioner's su ppliers ' official receipts and invoices revealed that the following aqditional input taxes in the amount of P2,928,631 ~ 58 should be disallowed for the following reasons :37 Purchase of Services P 2,0 37,868 .38 1.) Supported by ORs issued not in the name of Petitioner 183,47 1.03 2.) Supported by OR with TAN , not reg istered with the BIR or with no indicated date I 85 ,191 .30 3.) Supported by documents other than ORs 46 ,570.63 Purchase of Goods 68 ,377.49 4.) Supported by invoices issu ed not in the nam e of Petitione r 6 1,865.76 5.) Supported by invoices with TIN-V instead of TIN-VAT 385 ,558.21 6.) Supported by invoices with stamp ed VAT registration only 7.) Supported by non-VAT invoices or BIR unreg istered in voi ces 8.) Purchase of services includ ed in th e schedul e and no offi ci al 59 728.78 receipts were presented TOTAL Accordingly, petition er's claim shou ld be reduced by P5,947 ,165.87 , detailed as follows : Disallowances per CPA report p 1,407,094.56 p 3,018,534.29 Purchase of capital goods: 68 ,492 .06 36 ,249.87 No VAT ORs were presen ted Purchase of services: 1,310,614 .00 196 083.80 ORs not dated withi n the period of claim ORs iss ued not in the name of Pe titioner p 2,037,868.38 No VAT ORs were presented Purchase of goods other th an capital goods : No VAT invoice s were pr.esenteci � Add'l Disallowances per this Court's-verification Purchase of Services : Supported by ORs issued not in the name of Petiti on .er Supported by O R with TAN , not registered with 1.he 37 See details per Annex "B". 145

DECISION C.T.A. CASE NO. 7220 Page 20 of22 BIR , or with no indicated date 183,47 1 .03 85, 191.30 Supported by documents other th an ORs Purchase of Goods: 46,570.63 6 8 ,377.49 Supported by invoices issued not in the name of 61,865 .76 385,558.21 Petiti oner � 59 728.78 Supported by invoices with TIN -V instead of TIN-VAT Supported by invoices with stamped VAT reg istration on ly Supported by non-VAT invoices or .I? IR unregisterep in vo ice s 2 928 631. 58 Purchase of service s included in th e schedule and no p 5.947 165.87 official receipts were presented TOTAL As regards the third and fourth requisites, the Court finds that all of petitioner's � input ta xes are attributabl e to its zero-rated sales. All of petitioner's sales were zero-ratecj ,38 and there was no output VAT thereon; thus , the input taxes were not appli ed against any output VAT liability. The said unutilized input VAT was not carri ed over to the succeeding taxable quarters, as eviden ced by its VAT Retu rn s for the four quarters of calendar year 2004.39 Finally, with respect to the fi fth requisite , petitioner filed its 40 administrative claim for refund With the BIR on March 29, 2005 and this Petition for Review on April 18, 2005. Both dates of fi ling are within the two- . year period from the respective dates wh en petitioner filed its Original First, Second , Third , and Fourth Quarterly VAT Returns on April 24, 2003, July 25, 2003, October 24, 2003, and January 26, 2004, respectively.41 In sum , petitioner has sufficiently proven its entitlement to the issuance I of a tax credit certificate , repres enting unutili zed excess input VAT on local pLJ.rcllases of goods and services attributable to zero-rated sales for the period 38 Exh ibits "K", "M", "0", " Q", and "LL" . 39 ExJ1 ibits "CCC" "ODD" "000" "PPP" "QQQ" " IUUZ" "SSS" and "TTT" 40 Exh ibit "A". ' ' , , ' , ' . 14 G 41 Exhibi ts "I- 10", "L- 10", "N-10", and "P- Hl".

DECIS ION C.T.A. CASE NO. 7220 Page 2 1 of22 covering January 1, 2003 to December 31, 2003, but in the reduced amount of P215,998,263.13, computed as follows: Amount of Input VAT Claim p 295,994 518.00 Less: Disallowances 5 947 165.87 Validly supported Input VAT Rate of supported zero-rated sales p 290,047 ,352.13 Valid input VAT attributable to zero-rated sales 74.47% p 215 .9.98..263.13 WHEREFORE, -premises consid ered, the instant Petition for Review is PARTIALLY GRANTED . Accord ingly, r~ spondent is hereby ORDERED to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of TWO HUNDRED FIFTEEN MILLION NINE HUNDRED NINETY EIGHT THOUSAND TWO HUNDRED SIXTY THREE PESOS and 13/100 (P215,998,263.13) , representing unutili zed input value-added tax on local purchases of goods and services attributa ble to zero-rated sales for the period covering January 1, 2003 to December 31, 20 03. SO ORDERED. WE CONCUR: <Qtu~A.~NI~Io c. C~cA Cl. ~RIQUEZ JR-. - c. cAS'TANEDA, Associate Justice Associate Justice 147

I > DECISION C.T.A. CASE NO . 7220 Page 22 of22 ATTESTATION I attest that the conclusions in til e above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division . ~~C-~~Sl.. WANITO C. CASTANEDA, ffR.. Associate Justice Chairperson CERTIFICATION I Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairperson's Attestation , it is hereby ce rti~ed that the conclusions in the above Decision were reached in consultati on before the case was assigned to the writer of the opinion of the Court. ~lp_. ~ ERNESTO D. ACOSTA Presiding Justice 148

CBK Power Company Ltd. vs CIR A1mex A-1 CTA Case No. 7220 Page I of I OFFICIAL RECEIPTS THAT DO NOT BEAR THE ' VORD "ZERO-RATED" Exhibit OR Number OR Date Amount BBBBB B-54b 349 6/3/2003 p 632,676.73 BBBBBB-56b 339 6/2/2003 632,676.73 BBBBBB-57b 348 6/2/2003 BBBBBB-59b 346 6/2/2003 9,878,638.37 BBBBBB-60b 340 6/2/2003 9,864,333 .76 BBBBBB-61b 342 6/2/2003 BBBBBB-62 b 343 6/2/2003 640,346.72 BBBBBB-64b 344 6/2/2003 640,876.59 BBBBBB-65b 345 6/2/2003 640,876.59 BBBBBB-66b 336 6/2/2003 9,473,195.09 BBBBBB-67b 338 6/2/2003 9,528,076.81 BBBBBB-68b 337 6/2/2003 9,391,345.83 BBBBBB-69b 335 6/2/2003 9,391,345.83 BBBBBB-70b 353 6/25/2003 . 631,379.81 BBBBBB-71b 355 6/25/2003 631,679.81 BBBBBB-72 b 354 6/25/2003 10,069,326.10 BBBBBB-73b 359 7/25/2003 1,076,870.41 BBBBBB-74b 360 7/25/2003 1,078,089 .68 357 7/25/2003 9,635,095.77 BBB~BB-75b 358 7/25/2003 9,635,095.77 365 8/27/2003 648,074 .89 BBBBBB-76b 362 8/2 7/2003 648,074.89 I 363 ' 8/27/2003 9,741,505.13 364 8/27/2003 9,741,505.13 BBBl3BB -8 0 b 655,232.19 BBBBBB-81b TOTAL p 655 232.19 BBBBBB-82b BBBl3BB-83b t 115,561,550.82

CBK Power Company Ltd. vs CIR Annex A-2 CTA Case No. 7220 Page 1 of2 SUBSTANTIATED ZERO-RATED SALES I OR Amount Number Exhibit OR Date US Dollars Ph Peso 43 2/27/2003 116,227,931.48 BBBBBB-1b 44 2/27/2003 $ 2,160,410.63 p BBBBBB-2b 50 6/3/2003 115,870,9~9.11 BBBBBB -3 b 54 6/11/2003 2,153,775.89 BBBBBB-4b 53 6/3/2003 57,728,9Q9.36 BBBBBB-5b 107 10/16/2003 1,073,048.00 55,672,225.18 BBBBBB-6b 55 6/11/2003 657,076,208.53 BBBBBB-7b 108 10/16/2003 1,034,818.96 BBBBBB-8b 56 6/25/2003 556,511.82 . BBBBBB-9b 57 6/25/2003 12,090,830.96 43,723,725.72 BBBBBB-10b 58 6/25/2003 BBBBBB-11b 59 6/25/2003 10,240.35 669,669.26 BBBBBB-12b 60 7/25/2003 115,719,081.61 BBBBBB-13b 61 7/25/2003 : : 804,558.39 113,498,827.06 BBBBBB-14b 62 7/25/2003 12,509.70 BBBBBB-15b 63 7/25/2003 12,138,203.32 BBBBBB-16b 68 9/10/2003 2,171,823.16 12,151,946.88 BBBBBB-17b 69 9/10/2003 107,098,356.96 BBBBBB-18b 70 9/10/2003 2,130,158.28 107,098,356.96 BBBBBB-19b 74 9/22/2003 7,203,639.49 75 9/?,2/2003 227,810.58 I 76 9/22/2003 71203,639.49 84 9/25/2003 228,068 .52 938,491.94 BBBBBB-20b 85 9/25/2003 933,073.00 BBBBBB-21b 86 9/25/2003 1,994,160.00 6,672.43 . BBBBBB-22b 87 9/25/2003 BBBBBB-23b 88 9/25/2003 1,994,160.00 5,734,016.41 BBBBBB-24b 89 9/25/2003 5,700,909.33 BBBBBB-25b 90 9/25/2003 134,131.00 BBBBBB-26b 100 10/28/2003 101,917.87 BBBBB B-27b 101 10/28/2003 134,131.00 110,161,386 .72 BBBBBB-28b 102 10/28/2003 110,16 1, 386.72 BBBBBB-29b 10/28/2003 17,474.62 BBBBBB-30b l 10/28/2003 7,409,664.70 BBBBBB-31b 10/28/2003 17,373.72 BBBBBB-32b 103 10/28(2003 7,409,664.70 BBBBBB -3 3 b 104 11/28/2003 124.24 5,791,997.19 BBBBBB-34b 105 12/1/2003 5,758,555.34 BBBBBB-35b 106 11/28/2003 104,847.71 BBBBBB-36b 116 11/28/2003 102,948.43 BBBBBB-37b 122 11/28/2003 104,242.34 109,766,543.04 BBBBBB-38b 117 11/28/2003 109,766,543.04 . BBBBBB-39b 118 11/28/2003 1,863.59 BBBBBB-40b 119 12/29/2003 7,383,106.76 BBBBBB-41b 120 12/29/2003 1,994,160.00 7,383,106.76 BBBBBB-42b 121 12/29/2003 5,771,237.35 BBBBBB-43b 130 1,994,160.00 5,737,915.36 BBBBBB-44b 131 BBBBBB-45b 132 134,131.00 102,579.45 BBBBBB-46b 110,360,802.72 134,131.00 110,360,802.72 104,847.71 7,423,077.80 7,423,077.80 104,242.34 5,802,481.97 5,768,979.58 1,863.59 103,134.80 1,9()4,160.00 110,973,009.84 110,973,009.84 . 1,994,160.00 t 7,464,256.02 134,131.00 'L34, 131.QQ 104,847.71 104,242.34 1,863.59 1,994,160.00 1,994,160.00 134,131.00 134,131.00 104,847.71 104,242.34 1,863.59 1,994,160.00 1,994,160.00 134,131.00 I 1 5 0;

CBK Power Company Ltd. vs CIR Annex A-2 CTA Case No. 7220 Page 2of2 Exhibit OR Amount Number BBBBBB-47b OR Date US Dollars Ph Peso BBBBBB-48b 133 12/29/2003 134 12/29/2003 134,131.00 7,464,256.02 BBBBBB-49b 135 12/29/2003 104,847.71 5,834,670.2 1 BBBBBB-SOb BBB BBB - 5 1 b 136 12/29/2003 104,242.34 5,800,981.98 BBBBBB-52b 52 6/6/2003 BBBBBB-53 b 41 2/27/2003 1,863.59 103,7q6.92 BBBBBB -55 b 42 2/ 27/2003 BBBBBB-58b 51 6/6/2003 4,884,7q5.45 BBBBBB-63b 91 BBBBBB-77b 92 10/20/2003 10,190,347.68 BBBBBB-78b 65 10/20/2003 BBBBBB-79b 66 9/10/2003 10,155,052.58 BBBBBB-84b I 67 9/10/2003 BBBBBB-85b 71 9/10/2003 3,775,136.99 BBBBBB-86b 72 9/17/2003 BBBBBB-87b 73 9/17/2003 48,887.82 BBBBBB c88 b 83 9/17/2003 BBBBBB-89 b 77 9/25/2003 59,771.23 BBBBBB-90b 78 9/25/2003 BBBBBB- 9 1 b 79 9/25/(003 84,431.34 BBBBBB-92b 80 9/25/2003 BBBBBB-93b 82 9/25/2003 83,943.85 BBBBBB-94b 81 9/25/2003 BBBBBB-95b 98 9/25/2003 600 .28 BBBBBB-96b 99 10/27/2003 BBBBBB-97b 96 10/27/2003 512,182.83 . BBBBBB-98b 97 10/27/2003 BBBBBB-99b 93 10/27/2003 509,225.58 BBBBBB - 1 0 0 b 94 10/27/2003 BBBBBB - 1 0 1 b 95 10/27/2003 9,103.67 BBBBBB-102b 109 10/27/2003 BBBBBB-103b 110 11/17/2003 10,033,632.00 BBBBBB-104b 115 11/27/2003 BBBBBB-105b 114 11/27/2003 10,033,632.00 . BBBBBB-106b 113 11/27/2003 BBBBBB-107b 112 11/27/2003 674,881.20 BBBBBB -1 0 8 b 111 11/27/2003 BBBBBB-109b 123 11/27/2003 674,881.20 BBBBBB-110b 124 12/30/2003 BBBBBB-111b 128 12/30/2003 527,542 .09 BBBBBB-112b 129 12/30/ 2003 BBBBBB-113b 125 12/30/2003 524,496 . 17 BBBBBB-114 b 126 12/30/2.003 127 12/30/2003 9,376.67 TOTAL 12/ 30/2003 9,988,629.68 9,988,629.68 671,854 .2 6 671,854.26 525,175.99 . 522,143.73 9,334.61 10,051,795.05 10,051,795.05 676,102 .88 676,102.88 528,497.06 525,445.62 9,393.64 10,098,701.36 10,098,701.36 679,257.89 679,257.89 530,963 .27 527,897.59 15 1 9 437.48 ; p 2,651,928,988.85

CBK Power Company Ltd. vs CIR Annex B CTA Case No. 7220 Page 1 of7 DISALLOWANCES PER COURT'S VERIFICATION Ex h. OR[Invoice Supplier I nput VAT Date Purchase of Services 1.) Supported by ORs issued not in the name ofPetitioner EEEEEE-55 1/27/2003 PLDl' p 262.43 EEEEEE-69 2/10/2003 SMART Moves Consulting 25,000.00 EEEEEE- 162 3/14/2003 Mondial Tours & Travel 14,429.82 EEEEEE-179 3/21/2003 Mondial Tours & Travel 32,406.14 EEEEEE-286 4/22/2003 High Grip Auto Center 575.91 EEEEEE-307 4/30/2003 Servicio Filipino, Inc: EEEEEE-370 5/21/2003 Sycip, Salazar, Hernandez & Gatmaitan 24,395.45 EEEEEE-371 5/21/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-372 5/21/2003 Sycip, Sala zar, Hernandez & Gatmaitan 263,921.97 EEEEEE-373 5/21/2003 Sycip, Sala zar, Hernandez & Gatmaitan EEEEEE-377 5/23/2003 Makati Shangri-La, Manila 917.09 3,676.00 270.50 4 , 3 3 0 . 27 EEEEEE-379 5/23/2003 Webpower Internet Service Provider 180.00 EEEEEE-380 5/23/2003 Webpower Internet Service Provider 130.00 EEEEEE-381 5/23/2003 Webpower Internet Service Provider 180.00 EEEEEE-382 5/23/2003 Webpower Internet Service Provider EEEEEE-383 5/23/2003 Webpower Intern et Service Provider 130.00 EEEEEE-384 5/23/2003 Webpower Internet Service Provider 302.47 180.00 EEEEEE-385 5/25/2003 Banahaw Telephone Corp. 65 .4 8 EEEEEE-454 6/18/2003 Sycip, Salazar, Hernand ez & Gatmaitan EEEEEE-455 6/18/2003 Sycip, Salazar, Hernandez & Gatmaitan 596.35 EEEEEE-456 6/18/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-469 6/25/2003 Pagsanjan Rapids Hotel 95,811.12 119,409.73 2,656.23 EEEEEE-470 6/25/2003 Pagsanjan Rapids Hotel 419 .50 EEEEEE-486 7/1/2003 Pacific Internet 5,346.50 EEEEEE-488 7/2/2003 Servicio Filipino, Inc. 32,527.27 EEEEEE-490 7/3/2003 Pagsanjan Rapids Hotel 33.48 EEEEEE-491 7/3/2003 Pagsanjan Rapids Hotel 3.60 EEEEEE-540 7/16/2003 Servicio Filipino, Inc. 17,962.92 EEEEEE- 564 7/24/2003 Banahaw Telephon e Corp. EEEEEE-570 7/28/2003 Sycip, Salazar, Hernandez & Gatmaitan 65.48 EEEEEE- 571 7/28/2003 Sycip, Salazar, Hernandez & Gatmaitan 79,147.75 25,706.38 EEEEEE-584 7/30/2003 Pacific Internet 5,346.50 EEEEEE-601 8/7/2003 Reign- ~an Sales Industry 12,890.00 EEEEEE-616 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan 4,569.35 EEEEEE-617 8/18/2003 Sycip, Salazar, Hernand ez & Gatmaitan 31,035.99 EEEEEE-618 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan 326,424.17 EEEEEE-619 8/18/2003 Sycip, Salazar, Hernandez & Gatmaitan 6,762.12 EEEEEE-623 8/19/2003 Reign -Nan Sales Industry 6,561.22 EEEEEE-685 9/12/2003 Mapecon Philippines, Inc. 18,181.82 EEEEEE-686 9/12/2003 Mondial Tours & Travel 1 7 , 3 0 7 . 11 EEEEEE-741 9/30/2003. Mondial Tours & Travel 17,307.11 EEEEEE� 742 9/30/2003 Pacific Internet 5,346 .50 EEEEEE-745 9/30/2003 1Sycip, Salazar, Hern andez & Gatmaitan 24,216.54 EEEEEE-746 9/30/2003 Sycip, Salazar, Hern andez & Gatmaitan t 15,660.71 EEEEEE-747 9/30/2003 Sycip, Salazar, Hernandez & Gatmaitan 1 , 7 3 5 . 28 33,,05.4' EEEEEE-748 9/30/2003 Sycip, Salazar, He1nandez & Gatmaitan 1 52

EEEEEE-758 10/2/2003 I AnnexB EEEEEE-766 10/20/2003 EEEEEE-774 10/10/2003 Pagsanjan Rapids Hotel Page 2 of7 EEEEEE- 781 10/22/2003 Pagsanjan Rapids Hotel EEEEEE-782 10/22/2003 Manila Bulletin 163.64 EEEEEE-783 10/22/2003 Infinity Security & Investigation Services 58.68 EEEEEE-784 10/22/2003 Sycip, Salazar, Hernandez & Gatmaitan EEEEEE-811 11/6/2003. Sycip, Salazar, Hernandez & Gatmaitan 1,798.40 EEEEEE-813 11/7/2003 Sycip, Sa lazar, Hernandez & Gatmaitan 60,908.38 EEEEEE-829 11/24/2003 Infinity Security & Investigation Services 189,635.63 EEEEEE-830 11/24/2003 Explorer Freight Corporation EEEEEE-831 11/24/2003 Sycip, Sa lazar/ Hernandez & Gatmaitan 3,081.12 EEEEEE-850 11/28/2003 Sycip Salazar/ Hernanqez & Gatmaitan 10/989.75 EEEEEE-851 11/28/2003 66,568.23 EEEEEE-852 11/28/2003 1 EEEEEE-853 11/28/2003 4,873.12 EEEEEE-854 11/28/2003 Sycip Salazar/ Hernandez & Gatmaitan 9,134 . 99 EEEEEE-855 1:)./28/2003 1 39,957 .67 EEEEEE-856 11/28/2003 EEEEEE-865 12/2/2003 Webpower Internet.Service Provider 482.68 EEEEEE-886 12/15/2003 Webpower Internet Service Provider 180.00 EEEEEE-887 12/15/2003 Webpower Intern et Service Provider 180.00 EEEEEE-888 12/15/2003 Webpower Internet Service Provider 180.00 EEEEEE-889 12/15/2003 Webpower Internet Service Provider 214.10 EEEEEE-890 12/15/2003 Webpower Internet Service Provider 180.00 EEEEEE-891 12/15/2003 Mondia l Tours & Travel 180.00 EEEEEE-902 12/22/2003 Pacific Internet 5,288 .44 EEEEEE-903 12/22/2003 Sycip, Sa lazar, Hernandez & Gatmaitan 5,346.50 EEEEEE-904 12/22/2003 Sycip Salazar, Hernandez & Gatmaitan 277,035.96 EEEEEE-905 12/22/2003 964 .69 1 6,011.04 Sycip, Salazar, Hernandez & Gatmaitan 13.76 Sycir,>, Salazar, Hernardez & Gatmaitan 6,003.33 Sycip Salazar, Hernandez & Gatmaitan 6,505.06 22,784.12 1 9,812.87 21,323.40 Mondial Tours & T ravel 10 223.12 Infinity Security &'Investigation Services p 2,037,868.38 Infinity Security & Investigation Services Infinity Security & Investigation Services Infinity Security & Investigation Services TOTAL 2.) Supported by DRs with TAN unregistered OR (without BIR authority to print number) or undated OR EEEEEE-67 2/5/2003 R. Samonte Enterprises p 8,016.58 EEEEEE-137 3/4/2003 R. Samonte Enterprises 5,454.55 EEEEEE-229 3/31/2003 R. Samonte Enterprises 18,705.36 EEEEEE-301 4/28/2003 R. Samonte Enterprises 12,727.27 EEEEEE-244 4/16/2003 Rockwe ll Land Corp. 135,567.27 EEEEEE-648 Punongbayan & Araullo 3 000.00 TOTAL p 183,471.03 3.) Supported by other documents other than an OR EEEEEE-48 1/27/2003 Globe Telecom p 215.47 EEEEEE-49 1/27/2003 Globe Telecom 88.75 EEEEEE-50 1/27/2003 Globe Telecom 87.74 EEEEEE-51 1/27/2003 1 205.42 Globe Telecom EEEEEE-52 1/27/2003 Globe Telecom 395 .55 EEEEEE-53 1/27/2003 Globe Telecom 10229 ; 476.78 EEEEEE- 54 1/27/2003 Globe Telecom 262.82 EEEEEE-96 2/17/2003 Globe Telecom 15 3'

EEEEEE-97 2/17/2003 Globe Telecom 154 AnnexB EEEEEE-104 2/20/2003 Globe Telecom EEEEEE-105 2/20/2003 Globe Telecom Page 3 of7 EEEEEE-106 2/20/2003 Globe Tel ecom Globe Telecom 72.60 EEEEEE-107 2/20/2003 Globe Tel ecom 528 .36 PLDT 251.83 EEEEEE- 108 2/20/2003 PLOT EEEEEE-125 2/28/2003 PLOT 86 .15 EEEEEE-126 2/28/2003 PLOT 220.68 EEEEEE- 127 2/28/2003 PLOT 266.68 EEEEEE-128 2/28/2003 PLOT 2,813.00 EEEEEE-129 2/28/2003 Globe Telecom 2,527.29 EEEEEE-130 2/28/2003 Globe Telecom 136.52 EEEEEE-150 3/11/2003 Globe Telecom 136.52 EEEEEE-165 3/20/2003 Globe Telecom 136.52 EEEEEE-166 3/20/2003 Globe Telecom 189.69 EEE!=EE-167 3/20/2003 Globe Telecom 3/20/2003 Globe ~elecom 72.60 EEE~EE-168 3/24/2003 Globe Tel ecom 72.60 3/24/2003 Globe Telecom 342.92 EEEEEE-182 3/24/2003 Globe Tel ecom 287.94 EEEEEE-183 3/24/2003 Globe Telecom 209.36 EEEEEE-184 3/24/2003 Globe Telecom 105.65 EEEEEE-185 3/24/2003 Globe Telecom 72.60 EEEEEE-186 3/24/2003 PLOT 274.34 EEEEEE-187 3/31/2003 PLOT 186.28 EEEEEE-188 3/31/2003 PLOT 504.68 EEEEEE-223 3/31/2003. PLOT 270.79 EEEEEE-224 3/31/2003 PLOT 368.84 EEEEEE-225 3/31/2003 Globe Telecom 72.60 3/31/2003 Globe Telecom 135.27 E~EEEE- 226 4/3/2003 Globe Tel ecom 135.27 4/3/2003 Globe Telecom 135.27 EEEEEE-227 . 4/4/2003 Globe Telecom 175.35 EEEEEE-228 4/21/2003 Globe Telecom 1,899.94 EEEEEE - 233 4/21/2003 Globe Telecom 121.00 EEEEEE-234 4/21/2003 Globe Telecom 346.86 EEEEEE-247 4/24/2003 Globe Telecom 83.71 EEEEEE-281 4/24/2003 Globe Tel ecom 72.60 EEEEEE-282 4/24/2003 Globe Telecom 226.16 EEEEEE-283 4/24/2003 Globe Telecom 169.00 EEEEEE-288 4/24/2003 Glob~ Tel ecom 143.70 EEEEEE-289 4/24/2003 Globe Telecom 131.56 EEEEEE-290 4/24/2003 239 .19 EEEEEE-291 4/24/2003 1 233.09 EEEEEE-292 4/25/2003 154.00 EEEEEE-293 5/5/2003 PLOT 72.60 EEEEEE-294 5/5/2003 Globe Telecom 91.22 EEEEEE-295 5/5/2003 Globe Tel ecom 64.96 EEEEEE-296 5/5/2003 PLOT 2,813.00 EEEEEE- 308 5/5/2003 PLOT 72.60 EEEEEE-309 5/5/2003 PLOT 161.66 EEEEEE- 3 1 0 PLOT 2,386.76 EEEEEE-311 137.14 EEEEEE-312 176.61 EEEEEE-313 I137.14

\ ' EEEEEE-314 5/5/ 2003 PLOT Annex B EEEEEE-351 5/16/2003 Globe Telecom EEEEEE-352 5/16/2003 Globe Telecom Page 4 of7 EEEEEE-353 5/16/2003 Globe Telecom EEEEEE-354 5/16/2003 Globe Telecom 137.14 EEEEEE-356 5/20/2003 Globe Telecom 177.87 EEEEEE-357 5/20/ 2003 Glooe Telecom 193.06 EEEEEE-358 5/20/2003 Globe Telecom 187.96 EEEEEE-359 5/20/ 2003 Globe Telecom EEEEEE-360 5/20/ 2003 Globe Telecom 72.60 EEEEEE-:361 5/20/2003 Globe Telecom 161.20 EEEEEE-362 5/20/2003 Globe Telecom 216.35 EEEEEE-363 5/20/2003 Globe Tel ecom 230 .94 EEEEEE-364 5/20/2003 Globe Telecom 135.55 EEEEEE-390 5/26/ 2003 PLOT 199 .00 EEEEEE-407 6/3/2003 Globe Telecom EEEEEE- 4 0 8 6/3/ 2003 Globe Telecom 77 .69 EEEEEE-409 6/3/2003 PLOT 81.79 EEEEEE-410 6/3/2003 PLOT 160.29 EEEEEE-411 6/3/2003 PLOT 74.10 EEEEEE-412 6/3/2003 PLOT 2,813.00 EEEEEE-413 6/3/2003 PLOT 72.60 EEEEEE-421 6/17/2003 Globe Telecom 186.76 EEEEEE-422 6/ 17/2 003 Globe Telecom 1,973.60 EEEEEE- 423 6/17/2003 Globe Telecom 323.48 EEEEEE-459 6/ 24/2003 Globe Telecom 134.11 EEEEEE-460 6/ 24/2003 PLOT 173 . 18 EEEEEE-461 6/24/ 2003 PLOT ! 134 . 11 EEEEEE-462 6/24/2003 PLOT 362.49 6/24/2003 PLOT 72.60 EEEEEE ~ 463 6/24/2003 PLOT 239.55 6/24/ 2003 PLOT 173.95 EEEEEE-464 6/30/2003 Globe Telecom 2,813 .00 EEEEEE- 465 6/30/2003 Globe Telecom 2,522.12 EEEEEE- 476 6/30/2003 Globe Telecom 183 . 26 EEEEEE-477 6/30/2003 Globe Telecom 130 .02 EEEEEE-478 6/30/2003 Globe Telecom 130.02 EEEEEE- 479 6/30/2003 Globe Telecom 130.02 EEEEEE-480 6/30/2003 261.21 EEEEEE-481 6/30/ 2003 I 213.95 EEEEEE-482 6/30/2003 325 . 58 EEEEEE-483 7/8/ 2003 Globe 1 elecom 280.96 EEEEEE-484 7/8/2003 Globe Telecom 137.57 EEEEEE-500 7/17/2003 Globe Tel ecom 291.12 EEEEEE-501 7/17/2003 Globe Telecom 80.87 EEEEEE-541 7/17/2003 Globe Tel ecom 72.60 EEEEEE- 542 7/ 17/2003 Globe Telecom 198.90 EEEEEE-543 7/2 5/2003 Globe Tel ecom 218.37 EEEEEE-544 7/29/2003 I Globe T elecom 72.60 EEEEEE-567 7/29/2003 Globe Telecom 265 .79 EEEEEE-572 7/ 29/2003 PLOT 223.51 EEEEEE-573 Globe Telecom 123.44 EEEEEE-574 Globe Telecom 72.60 Globe Telecom 2,813.00 278 .02 15 5 243 .79 t422.98

I I EEEEEE-575 7/29/2003 Globe Telecom AnnexB EEEEEE-576 7/29/2003 Globe Telecom EEEEEE-577 7/29/2003 Globe felecom Page 5 of7 EEEEEE-578 7/29/2003 Globe Telecom EEEEEE-579 7/29/2003 Globe Telecom 365.97 EEEEEE-580 7/29/2003 Globe Telecom 322.17 EEEEEE-587 8/4/2003 PLOT 289.58 EEEEEE-588 8/4/2003 PLOT EEEEEE-589 8/4/2003 PLOT 72.60 EEEEEE-590 8/4/2003 . PLOT 72.60 EEEEEE-591 8/4/2003 PLOT 160.44 EEEEEE- 593 8/5/2003 Globe Telecom 132.73 EEEEEE-598 8/7/2003 Globe Telecom 132.73 EEEEEE-599 8/7/2003 Globe Telecom 132.73 EEEEEE-609 8/15/2003 Globe Telecom 172.31 EEEEEE-610 8/15/2003 Globe Telecom 2,394.45 EEEEEE-611 8/15/2003 Globe Telecom 90.20 EEEEEE-612 8/15/2003 Globe Telecom 72.60 EEEEEE- 624 8/20/2003 Globe Telecom 118.92 EEEEEE-625 8/20/2003 Globe Telecom 215.75 EEEEEE-626 8/20/2003 Globe Telecom 183.38 EEEEEE-627 8/20/2003 Globe Telecom 72.60 EEEEEE-628 8/20/2003 Globe Telecom 247.52 EEEEEE-629 8/20/2003 Globe Telecom 100.81 EEEEEE-630 8/20/2003 Globe Telecom 330 .88 EEEEEE-631 8/20/2003 Gloqr; Telecom 276 . 84 EEEEEE-632 8/20/2003 Globe Telecom 233.48 EEEEEE-634 8/21/2003 Globe Telecom 649.74 EEEEEE-639 8/26/2003 PLOT 277.03 EEEEEE-660 9/3/2003 Globe Tel ecom 91.84 EEEEEE-663 9/5/2003 PLOT 93.61 EEEEEE-664 9/5/2003 PLOT 154.97 EEEEEE-665 9/5/2003 PLOT 125.25 EEEEEE-666 9/5/2003 PLOT 2,813.00 EEEEEE-667 9/5/2003 PLOT 125.56 EEEEEE-669 9/9/2003 Globe Telecom 136.09 EEEEEE-694 9/17/2003 Globe Telecom 136.09 EEEEEE-718 9/18/2003 Globe Telecom 136 .09 EEEEEE-719 9/18/2003 Globe Telecom 177.04 EEEEEE-724 9/23/2003 Globe Telecom 2,161.36 EEEEEE-72 5 9/23/2003 Globe Telecom 72.60 EEEEEE-726 9/23/2003 Globe Telecom 248.38 EEEEEE-738 9/26/2003 PLOT 109.14 EEEEEE-760 10/3/2003 PLOT 152.75 EEEEEE-761 10/3/2003 PLOT 60.47 EEEEEE-762 10/3/2003 PLOT 72.60 EEEEEE-763 10/3/2003 PLOT 123.05 EEEEEE-764 10/3/2003 PLOT . 2,813.00 EEEEEE-798 11/5/2003 Globe Telecom 2,402.37 EEEEEE-799 11/5/2003 Globe Telecom 185 .8 0 EEEEEE-800 11/5/2003 Globe Telecom 137.11 EEEEEE-801 11/5/2003 PLOT 137 . 11 137.11 1 5G 223.13 183.92 109 .3 0 2,813.00 j

I .' Annex B Page 6 of7 EEEEEE-802 11/5/2003 PLDT 138.99 EEEEEE- 803 11/5/2003 PLDT EEEEEE-804 11/5/2003 PLDT 138.99 EEEEEE-805 11/5/2003 PLPT EEEEEE-806 11/5/2003 PLDT 207.24 11/25/2003 Globe Telecom EEEEEE-834 11/25/2003 PLDT 2,2(51.68 EEEEEE-835 12/2/2003 PLDT EEEEEE-862 12/2/2003 PLDT 138.99 EEEEEE-863 12/2/2003 PLDT , EEEEEE-864 12/5/2003 Globe Telecom 172.54 EEEEEE-866 12/10/2003 Globe Telec9m EEEEEE-876 12/10/2003 Globe Telecom 5,813 .00 EEEEEE-877 12/19/2003 Globe Telecom EEEEEE-897 12/19/2003 PLDT 138.79 EEEEEE- 898 12/19/2003 PLDT 12/19/2003 PLDT 207.04 EEE~EE-899 12/19/2003 PLDT TOTAL 2,384.47 EEEEEE-900 EEEEEE-901 269.46 41.83 215.07 151.70 2,600.60 2,813.00 138.07 222 .25 p 85,191.30 Purchase of Goods I 4.) Supported by invoices issued not in the name of Petitioner HH HHHH-7 1/7/2003 Earth Gold Mdse Const. Supply p 640.91 HHHHHH-141 6/9/2003 Martin's Car Accessories 1,740.00 HHHHHH-229 7/31/2003 VMA Home Applian ces Co. 4~5.45 HHHHHH-256 8/25/2003 Workstation Designers Center 17,288.64 HHHHHH - 257 8/25/2003 Workstation Designers Center 4,637.45 HH HHHH-262 8/28/2003 Gencars-San P\'lblo, Inc. 21 818.18 TOTAL p 46,570.63 5.) Supported by invoices with TIN-Vonly HHH HHH-137 6/2/2003 HMN Unlimited Company p 16,734.45 HHHHHH-171 3/26/2003 HMN Unlimited Company 670.00 HHHHHH-254 8/25/2003 HMN Unlimited Company 377.09 HHHHHH - 273 9/4/2003 HMN Unlimited Company 18,186.36 HHHHHH-276 9/8/2003 HMN Unlimited Company 337 . 82 HHHHHH-347 6/30/2003 HMN Unlimited Company 635.91 HHHHHH-421 12/5/2003 HMN Unlimited Company 785.46 HHHHHH-437 12/15/2003 HMN Unlimited Company 17,150.40 HHHHHH-461 8/15/2003 Arvir Aluminum & Glass 13 500.00 TOTA L p 6 8, 3 7 7 . 4 9 6.) Supported by invoices with stamped VAT registration only HHHHHH-64 2/12/2003 RVG Merchandising p 6,363.64 HHHHHH - 85 4/2/2003 RVG Merchandising 790.91 HHHHHH-248 8/18/2003 1 RVG Merchandising 263.64 HHHHHH-271 9/2/2003 RVGMerchandising 3,822.73 HHHHHH-272 9/2/2003 RVG Merchandising 8,150.00 HHH HHH-283 9/23/2003 RVG Merchandising 2,481.82 HHHHHH -323 6/18/2003 RVG Merchandising 2,636.36 HHHHHH-324 6/18/2003 RVG Merchandising 12,318.18 HHHHHH-339 6/23/2003 RVG Merchandising 743 .02 HHHHHH-348 6/30/2003 RVG Merchandising rJ' 527.27 HHHHHH-354 10/8/2003 RVG Merchandising 3,454.55 157

/ AnnexB Page7of7 HHHHHH - 386 10/28/2003 RVG Merchandising 1,472.73 HHHHHH - 398 11/10/2003 RVG Merchandising HHHHHH -402 11/12/2003 RVG Merchandising 2,727 .27 HHHHHH-412 11/24/2003 RVG Merchandi sing HH HHHH-418 12/1/2003 RVG Merchandising 4,909 .09 HHHHHH - 504 9/24/2003 RVG Merchandising T OTA L 2,181.82 2,545.46 6 477.27 p 611865.76 7.) Supported by non- VAT invoices or with no BIR authority to print number (not duly registered) HHHHHH-2 07 7/14/2003 FFC Equipment Parts Supply, Inc. p 10,040.45 1,554.55 HHHHHH - Z95 5/14/2003 FFC Equipment P<!rts Supply, Inc. 57,832 .73 HHHHHH -345 6/26/2003 FFC Equipment Pa1ts Supply, Inc. 66,818 .18 88,346.76 HHHHHH-2 59 8/27/2003 SFM Sales Corporation 160 965.54 3851558.21 HHHHHH- 261 8/28/2003 Business Profiles In<;. HHHHHH -414 11/27/2003 Business Profiles Inc. TOTAL p 8.) Purchase ofservices included in the schedule and no official receipts were presented HHHHHH - 33 +!23/2003 Reign -Nan Sa les Industry p 12,890.00 HHHHHH -23 0 8/ 1/2003 Rodier Engineering & Supplies 29,909.92 HHHHHH -2 77 9/9/2003 Poly-Co re Elect. Cons. Corp. 16 928.86 TOTA L p 591728.78 TOTAL DISALLOWANCE PER COURT'S VERI FICATION p 2,9281631.58 rl' 158