CE CASECNAN WATER AND ENERGY COMPANY, INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY SPECIAL THIRD DIVISION CE CASECNAN WATER AND ENERGY COMPANY, INC., Petitioner, CTA Case No. 8245 -versus- Members: Bautista, Chairperson Cotangco-Manalastas, JJ. COMMISSIONER OF Promulgated: INTERNAL REVENUE, MA~ 10 '\3 Respondent. 20 X - - - - - - - - - - - - - - - - - - - - - - - - ~~ ~ - ~ "'". Y"fr~�,._, DECISION COTANGCO-MANALASTAS,J.: STATEMENT OF THE CASE This is a Petition for Review filed by CE Casecnan Water and Energy Company, Inc. (petitioner) to appeal the inaction of the Commissioner of Internal Revenue (respondent) over petitioner's administrative claim for refund or issuance of tax credit certificate (TCC) in the aggregate amount of P16,702,501.38, representing alleged unutilized input value- added tax (VAT) attributable to its zero-rated sales of generated power to the National Irrigation Administration (NIA) for taxable year 2009. STATEMENT OF FACTS Petitioner is a domestic corporation duly organized and existing under Philippine laws, with principal office at Pantabangan, Nueva Ecija. It was incorporated on September J- 21, 1994, the primary purpose of which is "to design, develop, construct, erect, assemble, commission, finance, own and

DECISION CTA CASE NO. 8245 operate a combined irrigation and hydro-electric power project and related facilities in Central Luzon, Philippines for the conversion into electricity of water provided by and under contract with the National Irrigation Administration and for the supply of water for agricultural purposes to the National Irrigation Administration (the 'Project'); provided that, in no event shall the corporation itself engage in the general supply or distribution of electricity, in retail trade or in the business of a public utility, or furnish electricity to end-users or consumers, or provide a public service or engage in industries or activities reserved by the Constitution or by law to corporations wholly or partially owned by Filipino citizens".1 Petitioner's multi-purpose irrigation and power plant project with the power plant component, consisting of a hydro- electric powerhouse with an installed capacity of 140 MW, has been duly accredited and certified as a Private Sector Generation Facility (PSGF) by the Department of Energy (DOE) as evidenced by its DOE Certificate of Accreditation No . 95-07- 12 issued by the DOE on July 20, 1995.2 On July 27, 2005, petitioner was granted by the Energy Regulatory Commission (ERC) a Certificate of Compliance (COC) No. 05-07-GNS-10701. This COC is valid for a period of five years from the date of issuance, or until July 27, 2010.3 It is likewise registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer in accordance with Section 236 of the National Internal Revenue Code (NIRC) of 1997, with Taxpayer Identification Number 004-500-931-000.4 Respondent, on the other hand, is the duly appointed Commissioner of the Bureau of Internal Revenue, vested with authority to act as such, including, among others, the power to decide, approve and grant refunds or tax credits of erroneously or excessively paid taxes. She holds office at the BIR National Office Building, BIR Road , Diliman, Quezon City . Petitioner filed its Original Quarterly VAT Returns for taxable year 2009, as well as their amendments through the/ 1 Pars. I and 3, Admitted Facts, Joint Stipulation of Facts and Issues (JSFI), docket, pp. 138 and 139; Exhibits " B" and "B-1" . 2 Exh ibit "C". 3 Exh ibit " E". 4 Par. 4, Admitted Facts, JSFI, docket, p. 139; Exh ibit " D".

DECISION CTA CASE NO. 8245 BIR's Electronic Filing and Payment System (EFPS) on the following dates: EXHIBIT PERIOD COVERED DATE OF FILING F Original Quarterly VAT Return for January to March 2009 April 27, 2009 G July 27, 2009 H Original Quarterly VAT Return for April to June 2009 I Original Quarterly VAT Return for July to September 2009 October 26, 2009 J Original Quarterly VAT Return for October to December 2009 January 25, 2010 K Amended Quarterly VAT Return for January to March 2009 October 18, 2010 L October 18, 2010 M Amended Quarterly VAT Return for April to June 2009 October 18, 2010 Amended Quarterly VAT Return for July to September 2009 October 27, 2010 Amended Quarterly VAT Return for October to December 2009 On November 10, 2010, petitioner filed an administrative claim with the BIR Large Taxpayers Regular Audit Division I for the refund or issuance of TCC for its alleged unutilized input VAT in the amount of P16,702,501.38, attributable to its zero-rated sales of power to NIA, covering the first quarter to the fourth quarter of 2009.5 However, due to the inaction of respondent Commissioner on petitioner's administrative claim, petitioner filed the instant Petition for Review on March 30, 20 11. In her Answer6 filed on May 19, 20 11, respondent interposed the following Special and Affirmative Defenses: "4. Respondent hereby reiterates and repleads the preceding paragraphs of this answer as part of her Special and Affirmative Defenses. 5. Taxes collected are presumed to be in accordance with laws and regulations. 6. Petitioner's alleged claim for refund is subject to administrative routinary investigation/ examination by the Bureau of Internal Revenue. A claim for refund is not ipso facto granted because respondent CIR still has to investigate j and ascertain the validity of the claim. 5 Exhibit "N". 6 Docket, pp. 97 to I03.

DECISION CTA CASE NO. 8245 7. Taxes are essential to government's very existence; (CIR v. Solidbank Corporation, G.R. No. 148191, November 25, 2003) hence, the dictum that 'taxes are the lifeblood of the government.' For this reason, the right of taxation cannot easily be surrendered; statutes granting tax exemptions are considered as a derogation of the sovereign authority. (CIR v. Fortune Tobacco Corporation, G.R. Nos. 167274-75, July 21, 2008) Tax refunds are regarded as tax exemptions and these are to be construed strictissimi juris against the person or entity claiming the exemption. (Philippine Phosphate Fertilizer Corporation vs. Commissioner of Internal Revenue G.R. 141973, June 28, 2005) 8. In an action for refund, the burden of proof is on the taxpayer who claims the exemption and he must justify his claim by the clearest grant under the Constitutional or statutory law and cannot be permitted by vague implications (BPI Leasing Corporation vs. Honorable Court of Appeals, G.R. 127624, November 18, 2003). The taxpayer is charged with the heavy burden of proving that he has complied with and satisfied all the statutory and administrative requirements to be entitled to the tax refund. (Commissioner of Internal Revenue vs. Eastern Telecommunications Philippines, Inc. G.R. 163835 July 7, 2010) 9. To support its claim, it is imperative for petitioner to prove the following, viz: a. The registration requirements of a value-added taxpayer in compliance with Section 6 (a) and (b) of Revenue Regulations No. 6-97 in relation to Section 4. 107-1 (a) of Revenue Regulations No. 7-95, and Section 236 of the Tax Code, as amended; b. The invoicing and accounting requirements for VAT-registered persons, as well as the filingj

DECISION CTA CASE NO. 8245 and payment of VAT in compliance with the provisions of Section 113 and 114 of the Tax Code, as amended; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund pursuant to Revenue Memorandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of an administrative application for refund which is a condition sine qua non prior to the filing of a judicial claim in accordance with Section 112 of the Tax Code, as amended. This requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of the judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants immediate dismissal of the petition for review; d. That the input taxes of P16,702,501.38 allegedly incurred by petitioner for the first to fourth quarter of taxable year 2009 were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over to the succeeding taxable quarter or quarters; e. That petitioner's administrative and judicial claims for tax credit or refund of the unutilized input tax (VAT) was filed in accordance with Sections 112 (A) and (D) and 229 of the Tax Code, as amended; f. That petitioner's domestic purchases of goods and services were made in the course of its trade or business, properly supported by VAT invoices and/ or official receipts and other documents, such as subsidiary purchase{-

DECISION CTA CASE NO. 8245 Journal showing that it actually paid VAT in accordance with Sections 110 (A) (2) and 113 of the Tax Code, as amended, and pursuant to Section 4.104-5 (a) and (b) of Revenue Regulations No . 7-95 (Re: Substantiation of Claims for Input Tax Credits); g. The requirements as enumerated under Section 4 . 104-5 of Revenue Regulations No. 7 - 95. (Re: Substantiation of Claims for Input Tax Credits) 11. The amount of Sixteen Million Seven Hundred Two Thousand Five Hundred One and 38/100 (P16,702,501.38) being claimed by petitioner arising from alleged unutilized input value-added tax ('VAT') paid and incurred for the taxable year 2009 is not properly documented; 12. Following the premise above-mentioned, petitioner has the burden of proving that the right to such tax refund indubitably exists and well-founded doubt is fatal to the claim." On October 17, 2011 , upon Motion7 of petitioner, this Court commissioned Mr. Abbet R. Barce of Reyes Tacandong & Co. as Independent Certified Public Accountant (CPA) .B During trial, petitioner presented Leilah Yasmin E. Alpad9 , Head of the Tax Services of CalEnergy International Services, Inc.-ROHQ; and Abbet R. Barce lo, the Independent CPA duly commissioned by this Court. Thereafter, petitioner filed on March 2, 2012 its Formal J Offe hibits "B" to r"kdNian"t'geds"�P' "Mw' ha"riRcc"hh' their sub-ma "wSa"s' Reso l u t i o n 12 raanoddfmE"i tUvt e"i ddteonbc"yLe L1t1hL' iLss"u'Cbi nomcuilrtuttsi ininvgetEhoxef 23, 2012, except Exhibit "CCCC". 7 Docket, pp. 294 to 296. 8 Minutes of Hearing dated October 17,20 11 , docket, p. 303. 9 Minutes of Hearing dated August 22,20 11 and September 19, 201 1, docket, pp. 153 and 290. 10 Minutes of Hearing dated February 2, 201 2, docket, p. 342. 11 Docket, pp. 361 to 400. 12 Docket, pp. 602 to 606.

DECISION CTA CASE NO. 8245 Subsequently, on July 6, 2012, petitioner filed its Supplemental Formal Offer of Evidence13, submitting Exhibits "FF-1-1" to "FF-1-14", "FF-2-1" to "FF-2-8"' "FF-3-1" to "FF-3- "11H3-1"H"' -"2toF-6F""-N4' -N"1H-"1H-t-2o3"-,"1F""FNt-No4--"21H-21H""'-3t"o-H1H"7N"-1'N-"-1H2"-H3t-"o4, -""1HN"HNto--13"--6H1""H' t-"o4H-"1HN2-"N2'--1"3N"-3Nt"o-, "NN-4-1" to "NN-4-3", "TT-1-1" to "TT-1-39"' "TT-2-1" to "TT-2- """3251IL04,,5I''LI""0-"''L50"CG""-"-1ZCW'1G1ZC""W5G-J-"1t1-J-'"o11"J""-t"t"1ooM0tt"oo""0MZCt0""oMZCWG--C2-8G"W1""-J"G,8'J-"1J"-"'3PA-5t o1"4P3AD522PA"""D-"-'1'M'1D"""""M-XHKt1toMXHo"K-"H-Kt"13oPA"--"P11"A'"P"tDoA-"D1tt-Noo"10DX6N"-""",XN2KH' "-"-K9"HQ'1B"K""HQ'BF--Q"2FB1tY"-oF-71'Y1-""1"-"'"1"LtN"t"oLotINoILtI"o"N--"QB11F-"""Q2BYF3QBYFtt"oo----' "t"""m11oIUBG"1IaIB3UG"Irt-"oDkBUG2'iBD"-Gn""1'X-RDg-211sXaRD"";"nX'R-td2"--toVw21"o9"'"V"hK""B"Vit'KGEocB-"hKGE1YB""KEGRYBtE-wRGYo-1-1Re"--1"139r-V""e8"t3oV'"0tto'o0V"a"""HK-d""'C7YEmHK8"CEY"KHSiC'tEYSKHt"CeES--W-4d-1--122191W""""""'b'W'ttt"oyoo"Ai-Fn1A"""cF"StHCAlFhtuSCHAoiFsSsC-H-i"-11vCW7H""e1C--Wt6"t2oooo"'"Wfu''"""rtUA"-tF"h3DAIUFe"IDIAFi'iUIrnD"F-A-X1-1sD-"9X1"ut-00hXb1tt""ooe"--'' Resolutions dated August 2, 2012 14 and September 27, "2W01W21W5 '-1e"xtcoep"Wt EWxWhi-b3i"t.s "WW-834" ' "MMM-1" to "MMM-3" ' and On the other hand, during the hearing held on November 8, 2012, counsel for respondent manifested that she has no evidence to present. The Court then granted both parties thirty (30) days from said date to file their respective Memorandum.16 On December 27, 2012, this case was submitted for decision, considering petitioner's Memorandum filed on December 21, 2012 and respondent's Memorandum filed on November 22, 2012. 17 / 13 Docket, pp. 636 to 650. 14 Docket, pp. 657 to 659. 15 Docket, pp. 689 to 690. 16 Minutes of Hearing dated November 8, 201 2, docket, p. 692. 17 Docket, p. 758.

DECISION CTA CASE NO. 8245 STATEMENT OF ISSUES The following are the parties' jointly stipulated issues18 submitted for this Court's resolution: "6. Whether or not Petitioner's alleged unutilized input VAT for the 1st to the 4th quarter of calendar year (CY) 2009 amounting to P16,702,501.38 is sufficiently substantiated by documentary evidence in the form of invoices and official receipts; 7. Whether or not Petitioner's alleged unutilized input VAT for the 1st to the 4th quarter of CY 2009 was applied or credited against any output VAT of the Petitioner in the same or subsequent quarter or quarters; 8. Whether or not Petitioner's alleged unutilized input VAT of P16,702,501.38 is attributable or allocable to zero-rated sales of power to the National Irrigation Administration (NIA); 9. Whether or not Petitioner filed its administrative and judicial claims for refund or tax credit within the prescriptive periods provided by law; 10. Whether or not Petitioner has complied with Section 112(C) of the Tax Code with respect to the submission of supporting documents; and 11. Whether or not Petitioner is entitled to a refund of and/ or issuance of a tax credit certificate (TCC) in the amount of P16,702,50 1.38." The foregoing issues can be summarized as follows: "Whether or not petitioner is entitled to a refund or j issuance of tax credit certificate 1n the amount of P16, 702,501.38, representing its unutilized input VAT 18 Docket, pp. 140 to 141.

DECISION CTA CASE NO. 8245 incurred from its purchases of goods and services attributable to its zero-rated sales of power to NIA for taxable year 2009." DISCUSSION /RULING In CE Casecnan Water and Energy Company, Inc. vs. Commissioner of Internal Revenue19, which involves the same parties, type of tax and case except for the taxable period, this Court has found, and is herein given judicial notice, that petitioner has sufficiently established that it is in the business of power generation and as such sold generated power to NIA; hence, it can treat its sale of generated power to NIA as VAT zero-rated sales. The pertinent portions of the decision are quoted below: "As correctly pointed out by petitioner, the law explicitly states that sales of generated power by generation companies are VAT zero-rated beginning June 26, 2001, the date of effectivity of Republic Act (R.A.) No. 913620. The significant parts of Section 6 of R.A. No. 9136 read as follows: 'SECTION 6. Generation Sector. - Generation of electric power, a business affected with public interest, shall be competitive and open. XXX XXX XXX Pursuant to the objective of lowering electricity rates to end-users, sales of generated power by generation companies shall be value added tax zero-rated.' (Emphasis supplied) Likewise, the Rules and Regulations to Implement Republic Act No. 9136, specifically, j Section 6 of Rule 5 thereof states that: 19 CTA Case Nos. 8041 and 8111, September 11 , 2012. 20 An Act Ordaining Reforms in the Electric Power Industry, Amending for the Purpose Certain Laws and for Other Purposes otherwise known as "Electric Power Industry Reform Act of 2001 ".

DECISION CTA CASE NO. 8245 'SECTION 6. Generation Charges and VAT.- XXX XXX XXX (b) Pursuant to the policy of reducing electricity rates to End-users, sales of generated power by a Generation Company shall, from the effectivity of the Act, be zero-rated for the purpose of imposition of value- added tax. Towards this end, the imposition of zero percent (Oo/o) VAT shall apply to the sale of generated power by a Generation Company through all stages of sale until it reaches the End-user. The DOF, through the BIR, shall issue the necessary revenue regulation within sixty (60) calendar days from effectivity of these Rules.' (Emphasis supplied) In order for a power generation company to qualify for VAT zero-rating in accordance with R.A. No. 9136, two (2) requirements must concur, namely, (1) it is a generation company; and (2) it derived sales from power generation. However, the foregoing provision was expressly repealed by R.A. No. 933721. The repealing clause of R.A. No. 9337 provides: 'SECTION 24. Repealing Clause. - The following laws or provisions of laws are hereby repealed and the persons and/ or transactions affected herein are made subject to the value-added tax subject to the provisions of Title IV of the t National Internal Revenue Code of 1997, as amended: XXX XXX XXX 21 An Act Amending Sections 27, 28, 34, 106, 107, 108, 109, 110, Ill , 112, 113, 114, 116, 117, 119, 121, 148, 151 , 236,237 and 288 of the National Internal Revenue Code of 1997, as amended, and for other purposes.

DECISION CTA CASE NO. 8245 (B) Section 6, fifth paragraph of R.A. No. 9136 on the zero VAT rate imposed on the sales of generated power by generation companies; and' Notwithstanding the said repeal, the sale of power or fuel generated through renewable source of energy continued to be VAT zero-rated under Section 108(B)(7) of the National Internal Revenue Code (NIRC) of 1997, as amended by R.A. No. 9337, which states: 'SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. XXX XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0�/o) rate : XXX XXX XXX (7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels.' (Emphasis supplied) In this case, records show that petitioner's 140- megawatt hydro-electric power plant project has been accredited by the Department of Energy as a Private Sector Generation Facility under the Implementing Rules and Regulations of Executive Order No. 215 , as amended. Likewise , the Energy Regulatory Commission issued Certificate ofj

DECISION CTA CASE NO. 8245 Compliance No. 05-07GN8-10701 for its generation facility. Further, under the Amended and Restated Casecnan Project Agreement between petitioner and NIA, petitioner generates power and subsequently sells it only to NIA. Thus, petitioner has sufficiently established that it is in the business of power generation and as such sold corresponding generated power to NIA. Accordingly, it can treat its sale of generated power to NIA as VAT zero-rated s a l e s ." As in the above-cited case, petitioner presented in evidence its DOE Certificate of Accreditation No. 95-07- 12 dated July 20, 199522 , its ERC Certificate of Compliance No. 05-07-GNB-10701 dated July 27, 200523, and the Amended and Restated Casecnan Project Agreement by and between petitioner and NIA dated June 26, 199524, which all proved that: (a) petitioner's 140-megawatt hydro-electric power plant project has been accredited by the Department of Energy as a Private Sector Generation Facility under the Implementing Rules and Regulations of Executive Order No. 215, as amended; (b) the Energy Regulatory Commission issued Certificate of Compliance No. 05-07-GNB-10701 for its generation facility; and (c) petitioner generates power through its hydro-electric power plant and subsequently sells it only to NIA. As such, petitioner has sufficiently established that it is in the business of power generation and sold corresponding generated power to NIA as VAT zero-rated sales. This Court will now resolve the issue of whether petitioner's claim for a refund or issuance of tax credit certificate in the amount of P16,702,501.38, representing its unutilized input VAT incurred from purchases of goods and services attributable to its zero-rated sales to NIA for taxable year 2009, is duly substantiated. Section 112(A) of the National Internal Revenue Code of 1997 lays down the requisites for refunds or tax credit of input j.. tax due or paid attributable to zero-rated or effectively zero- rated sales, quoted hereunder for easy reference: 22 Exhibit "C". 23 Exhibit "E". 24 Exhibit "V".

DECISION CTA CASE NO. 8245 "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(B)(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: xxx" (Emphasis supplied) Thus, in order to be entitled to a refund or issuance of tax credit certificate for its unutilized input VAT attributable to zero-rated or effectively zero-rated sales, petitioner must comply with the following requisites: 1. that 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 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.{

DECISION CTA CASE NO. 8245 For the four taxable quarters of 2009, petitioner derived receipts from sales of power generation services to NIA in the total amount of P3,243,753 ,698.55 as evidenced by official receipts25 issued by petitioner to NIA and declared in petitioner's Quarterly VAT Returns for the same period, as follows: EXHIBIT YEAR 2009 ZERO-RATED J 26 jZ- 1 1st Quarter SALES/RECEIPTS K27 /Z-2 2nd Quarter p 537,904,551.13 L28jZ-3 3rd Quarter M29jZ-4 4th Quarter 664,713,902 .37 1,336,299,982.50 TOTAL 704,835,262.55 P3,243,753,698.55 This Court shall now determine the amount of input VAT attributable thereto. Petitioner reported a total amount of P34,562,585.92 input VAT for the four quarters of 2009, arising from its domestic purchases and importation of non-capital goods, domestic purchase of services, services rendered by non- residents, and amortization of input VAT on capital goods exceeding Pl million, detailed as follows: YEAR2009 1ST QUARTER 2ND QUARTER INPUT VAT 4TH QUARTER TOTAL Z-1 Z-2 3RDQUARTER Z-4 Exhibit p 3,044,832.50 Domestic purchases Z-3 p 910,173.34 608,189 .02 - Non-capital goods 204,534.42 Importation p 557,514.83 p 546,412.31 p 1,030,732.02 30,402,081.96 - Non-capital goods 5,955,283.59 267,100.42 Domestic purchase 74,220.44 220,175.97 109,258. 19 50,318.93 -Services 240 ,382.02 Services rendered 10,047,086.75 7,345,152 .97 7,054,558.65 64,735.68 P34,562,585. 92 by non-residents P7,185,045.96 Amortization of input 216,781.49 - - VAT on capital goods exceeding P1 million 46,174.98 64,735.68 64,735.68 P10,941,778.49 P8,176,476.93 P8,259,284.54 TOTAL INPUT VAT Out of the reported input VAT of P34,562,585 .92, petitioner is claiming a refund in the amount of P16 ,702,501.38, computed as follows:{- 25 Exhibits "FF-1 -1 " to "FF- 1-14", "FF-2-1 " to "FF-2-8", "FF-3-1 " to "FF-3 -13", and "FF-4-1 " to "FF-4- 12" . 26 Docket, pp. 438 to 439. 27 Docket, pp. 440 to 44 I. 28 Docket, pp. 442 to 443. 29 Docket, pp. 444 to 445.

DECISION CTA CASE NO. 8245 YEAR2009 INPUT TAX RATIO OF INPUT VAT ZERO-RATED SALES ATTRIBUTABLE OVER TOTAL SALES TO 1st Quarter p 10,941,778.49 45.37% ZERO-RATED 2nd Quarter 8,176,4 76.93 51.72% SALES p 4,964,389.39 3rd Quarter 8,259,284.54 68.22% 4,228,553.28 4th Quarter 7,185,045 .96 28 . 17% 5,634 ,863 .96 2,023 ,695 . 52 TOTAL P34,562,585.92 P16,851,502.14 Less: Input VAT applied to Miscellaneous Sales (149,000.74) Less: rounding-off difference (0 .03) TOTAL INPUT VAT CLAIMED FOR REFUND/TCC P16, 702,501.38 Petitioner submitted in evidence various suppliers' invoices, official receipts, Bureau of Customs (BOC) Import Entries and Internal Revenue Declarations (IEIRDs), BOC and bank official receipts3� in support of its P34,562,585.92 input taxes reflected in the Quarterly VAT Returns for the four quarters of 2009. The Court-commissioned Independent CPA examined and verified the aforesaid documents and summarized his findings as follows31: I ~;:~~~A!~;~;;::;;.t.;.~~;:~:.~~~~~:.;~~~~;~~i;;:~=~~::~~~~;:~:.~:=~::~:~ J :Input VATN::u::mestic ~~~~t I ~-~ ! purchases of goods and AnnexN, Page 14 ! P10,366,908.75 I I services supported by I original VAT invoices and ; ,nflru::.x N, Page 2 7 ! VAT ORs, respectively, I with BIR Registration, II dated within the quarter 1 (i.e. , January 1 to March p 32 ,648 ,468 .91 I! 1 I 31, 2009, April 1 to June ; 30, 2009, July 1 to September 30, 2009, and IS~fE?:~il. ii1 October 1 to December1 Annex N, Page 55 6,592,303. 71 i 31 , 2009) issued in the I ~ ~~p~~Y~!~~?~~~~~~i?n ��������������������������������������������������-��-���������������������������������������������������+ - - -- -------! . �~�~�!�.-~--?~ :?~ I~ Annex 0 , Page 32,942.85 j _ 30 Exhibits " WW-1 " to"A"AWAW-1-"83t3o""' " WW-835 " to"WW-15 3"2B"B' B"X-3X",-1""CCtoC"-XI "Xt-o9""'C"CYCY--81"", t"oD"DYDY-1-5"4t"o' "ZZ-1 " to "ZZ-8", AAA-16", "BBB-1 " to "DDD-2", "FFF-1 " to "FFF-2", "GGG-1 " to "GGG-342", "HHH-1 " to "HHH-17", "111-1 " to "111-5", "JJJ-1 " to "JJJ-15", "KKK-I " to "KKK-2", "LLL-1 " to "LLL-115", "NNN-1 " to "NNN-23", "000-1'' to "000-2", "PPP-1 " to "PPP-10", "QQQ-1 " to "QQQ-113", "RRR-1 " to "RRR-300", "SSS-1 " to "SSS-71 ", "UUU-1 " to "UUU-12", "VVV-1 " to "VVV-78", "XXX-1 " to "XXX-29", "YYY-1 " to "YYY-42", "AAAA-1 " to "AAAA-10", "BBBB-1 " to "BBBB-138", "CCCC-2" to "CCCC-6", "DDDD- 1" to "DDDD-2", "EEEE-1 " to "EEEE-9", "FFFF-1 " to "FFFF-90", "GGGG-1 " to "GGGG-9", "HHHH- 1" to "HHHH-2", "IIll- I" to "1111-2", and "KKKK-1 " to "KKKK- 11 ". 31 Exhibit "BB", pp. 14 to 2 1.

DECISION CTA CASE NO. 8245 on purchases of capital Annex 0 , Page 1 51,503.55 goods exceeding P 1 Annex 0, Page 2 51,503.55 million supported by original VAT invoices, with BIR Registration, issued in the name of the Annex 0, Page 3 51,503.55 ~~:::;~:~~~s;omparry's --------�-------�����-���-����--�------+'----,--,--,---,----;---------���-��--�����------------���-�������--�----1 I Input VAT on importation Annex !'.?.J!.<?:.9f!.L _j ................~�_1~~-?.::~':!:_ !.... ! of goods duly supported !i'!:'!:~~-~- !.:..a.fl.~L �- _ ?_?_!.~~?_: !~ 321,445.76 I by original IEIRDs with 1 !i!.':.'.!:.f!.~!'.,_ !'.C!:.fl.f!.! ��������������i' ... ?~,649.79 machine validation 1 and/ or original BOC ORs 1 Annex P, Page 1 I 110,091.40 ___________ _ -~-r.?:_<:.l.L~!:~!:~g_ir.?:~!?~r.?:~Q8::>. _j___ ............................... . [_ :f.!:'!:'!:~~Q'. _f9Jl.~L- j ____ -~1.�.,?.?!:~2. _J 1 Input VAT on services _!-'.i!':!':!_':!'!.:~f~!-:~.!~Q!L..f<??::9:.f_l~.~_!J 1 ~reWnId;er;e:d~b~y~n~o~n~-OreEs~id~e~ndt s ! --1 I !- _j ----- ������---_J 267,100.42 II payment confirmation Annex Q, Page 1 50,318.93 1 I �..�f�-r--o�-�-m��-����t�-h--�e����-B�����I��R���-���--�-��������������-���----�-�����-�-�� �����������������������������-��-�--�-����-��� L__------+--==-=---=1-=-=--=-=-=-==-=---' Total �������������������--�-��-�-�-����-���-�����-�������--������������������������������������������������������������������������-�---�-��-���������������-�����������������������-����������������������������������������-������������������..Ii..............:P::...:3::::..:3::.:..~,..4..:..:2::.c.4_-__,,_4_.:...6.: :...8::::....:..5.::..:9::: ...... , Input VAT which are substantiated by proper VAT documents with certain � � o~~~!.~9 -lt? ..~1:~ifei:;::~eas shown below: ....................................................................... . Nature ------~--- ~~~~!~!!_~!!!.!~'L _J -~~~~-nt -�����-� _____ To~~-~- ~~~~~~~ ~~ g~~r;;:stic f-----~~-~=~~' ~Pa~gg_e~~1 ___ _?.~-~~ 9~- -11 ~-~~~:~~~ iP supported by VAT ~'.~~?.~.?. i j _________ Annex R, Page 1 I 67.15 I ! invoices with name of the Company written or � ���-----~ p 3,149.40 I stamped with I II countersignature but without letter of Annex R, Page 1 649 .20 1 _ ;~~~~;~~:~i:.:~~:.=~-~-~- L _ ---------------r-----------;1 _ _ __ _ ��-�-�-���--- . [_ ~';ir~~~:.~ ~~g~~';I:stic ~~~'=-~~~ ~~~~J~ supported by VAT ____ 1;-----A~-~~~~==-~~~-~''....~!~'?..~:~.:!.L___ ~------- _______ , . ;~~::::gz:~;~.but 1_____ . ~ ______ TIN and/ or address, or Annex S, Page 1 1,563.55 misstatements or alterations or additions Ii (written or stamped) of the Company's TIN and/or address without I countersi nature ! 2,58o.oo - ..... ____________ _ r, Input VAT �c;�~-cio~~;-ti~ -----r----A~nex ;;~;--;1------ purchases of goods �����---��-��--------�-�- ....................... ������-���-�-����--�-��������- ............. j supported by a VAT nexT, Page 1 1 5 , 3~~ : ?.~ _ ! Invoice issued in the I name of the Company but Annex T, Page 1 with misstatements or alterations or additions I 12,723.01 I (written or stamped) of _,i' I the Company's TIN 1 and/ or address with Annex T, Page 1 4,800.00 1 countersignature but 1 : J -- !1 without letter of I lf:~!;~ti:::7~ r ~~nexu,~ ~41.6~J: ~~;~-~

DECISION CTA CASE NO. 8245 purchases of goods Annex U, Page 1 46.09 supported by VAT Annex U, Page 1 Invoices but with Annex U, Page 1 alterations in the name of the Company but without countersignature Input VAT on domestic Annex V, Page 1 424.29 purchases of goods Annex V, Page 1 424.29 supported by VAT invoices with alterations Annex V, Page 1 in the date but without l� � � � � �~�~�~.~~ ~ ~a=~- ~ . � � �+~ ---------+ 1 c.o....u........n.......t...e.....r.....s.....i..g.....n.......a......t....u.......r..e.................................................. Input VAT on domestic ............................................ .. L..... ~'.:l:~~~�.0.f.~g~}........l................................................, purchases of services :~~.�._n.- x. .� .�.�.~:.�.�.�.~-�.�.�~-�.�.�99..�.:.�.�.�.�.1 l,i ::. .�-....... ..�.e_... .�.-.�.�.. supported by VAT ORs i__�_�...-�.�.�.�.�.�.�.�.�.�.�.�.�.!,: ���������������������������������������������������������������������� I with name of the ......................................................................................... ! Company written or I I 1,714028 I, stamped with but Annex W, Page 1 1,714028 countersignature without letter of authorization from the supplier ........ J.. ~~'.:!:f!:.~?i!.f.~gf!:.~ � � � � � � +j'.-.--- - : - -:: -:-::-- - Input VAT on domestic 2 237062 purchases of services l ~~'.:!:f!:.~?i!.f.~gf!:_'!_ : 1,794081 supported by tape ~~'.:!:f!:.~?i!.f.~g~? i;RRR:7o receipts with the Company's name written 18,353036 or stamped with countersignature but Annex X, Page 11 12,432023 without letter of authorization from the su lier i Input VAT on domestic nnex Y, Page 1 r I I purchases of services . ���������������������������������������������������������������������������������������! i 1 supported by VAT ORs 1 409 74 1 6,858085 I Annex�;?~~~1 -�l I ,.......................................... , 0 I issued in the name of the I Company but without the Y, Page 1 377090 ! I Company's TIN andjor I a~dress, or ���������������������������������������������������! 1misstatements or I alterations or additions Annex Y, Page 1 5,071.21 I I (written or stamped) of I I the Company's TIN I and/or address without I ~9.:L.!:r.?:!~r:~ig!J:~!~r:~ ............. ....................................... .......+'-- - - - - - - ..................................... ....... i I Input VAT on domestic r ~~~~i!.ix Annex Z, Page 1 I I purchases of services 185.74 1 1 : supported by VAT ORs 791073 1 I issued in the name of the [ Annex Z, Page 1 I t���-� ................................................................................................... 1 Company but wio th 1 misstatements or 1,615.29 1 alterations or additions I (written or stamped) of Annex Z, Page 1 637082 I. the Company's TIN I and/ or address with i countersignature but without letter of I author~~!i?!l:9.f ~:L.!:P.P~!~T Input VAT on domestic ; - - - - - - - - - - ; .................................................................. .........! purchases of services 97051 ! supported by VAT ORs but with alterations in the

DECISION CTA CASE NO. 8245 name of the Company but ~i!h2~!. ~9.~t.::t.!~E~~gt.::t.9.:t~!:~--!�������������-��������������������������� - - - - - - - - - !����������������������������������������������������������������������������-�����---�-��-��-���- Input VAT on domestic AnnexBB, purchases of services AnnexBB, supported by VAT ORs , but with alterations in the 1,212.21 I name of the Company with countersignature but Annex BB, Page 1 1,2 12.21 1\' without letter of Ia~~uEPt.h!.oir:~i.z!:-a� � t� �i�o� � �n� � � �f�-r�o� � m the L��������������������������������������-�- ����-� ........... -- ----- -- - i - - - - - - - - - = - =- - = - =-- =-=-=--1 [1 Total --- �'! -���--������ .................... -..... - ..... . P 48, 382.78 � ��������������--���- .................... i Amoun Total p 74,388.62 11 ,262 .09 1,581.71 215.49 18,713.89 8,342 .26 25,869.28 I I I 7,503 .33 II i l I .. . .. . .. .�.�.��.�.-.�.��.-.�-.�.�.��.�.-.�-.-!��-?-�.!!9.?.:~~....-.~.!

DECISION CTA CASE NO. 8245 ---J-- !"ln.putVAT~~-d~~esti~ -----;=- A;;_;_e�:Z0Ji_(ig~] --- ~-!.9:2?.] - ------------ purchases of goods . !!.'!::'!::f!.J!:_!_.f...f..~g~] .!.......... ��-����4.1.~.~.?...:.2.?..1 I 1?..~:~9- supported by TIN # only; ____!2'!::'!::~~-!_.f... _ f..~g~~ ....;.1...... 12,106.83 I TIN-V; TAN-V; TAN-VAT; TIN-NV/NON VAT; Annex JJ, Page 4 6,893.11 stamped or handwritten I l f~~~~tYfr!~;;~~;;:~={~ts + - - - - - - - -��������������������������----- _I -- ...................................j I purchases of goods .: .:...: .:..:.::::.: .::...: ..: ::..:!.....: ....:::::.;;c:::.....:::..........;........ ___ I ! supported by VAT 278.25 ! �����������j 278.25 ! IL I invoices but without \ A KK p 1 i nnex ' age ] ..........................,_,________ I invoice date p-~p~tvi\r~-;--ct~;:;;~~ti~ --- , --- x;_;_-e~-�i~- ?ci ~j J................~.~-1-~-~-~-:.~2 . II purchases of goods , !2'!::'!::~!.-._f.f, Fag~_ !_ -+---��-- 1 supported by VAT I[__~n'}:_f!.J!:_f.f.'- .f..~ge 1 invoices but not dated �-���������������������������--���---�-��--��! 33,824.39 within the VAT taxable Annex LL, Page 1 year (e.g., 2008, 2010, -- ~!<?..:)______ ��������������-�- Annex MM, Page 1 , 47,916.99 ------------������-���I Input VAT on domestic - A_;;_;_-e~-MM,--Pa e 2 I 138,061.95 I purchases of services 60,9 . supported by documents [.~~A:n~~nie.~x:MMgM~9.Pialg.ie2.~-T)-~~~: I~ ;I[Q.~Q~ jl other than a VAT OR .... 16,966.39 ~r:~~~~~ ~~ s~~~:!ic 1--~~=~~~- ~d~:i -j }12:_~Q __ 628.16 1 supported by a VAT OR L- ~~~~!.:__NN, .e~9.~I::]: �-=~-~!.~�. :36- . �-�����! f:i~~?~lf�~~~~~~~~ii~Y.����l � �~~~:~~~~~~~i ��: [ A~~~~oo: .P~~~-1 j --- ............... 1,474.66 Ii I 307.61 purchases of services ~-----����-������-���������-�����������-��������������������������---------r----����-�-���- 1 supported by VAT ORs 1-=00,::-J- not issued in the name of 1 Annex 00, Page 1 262.97 I �.1~1o~i~~~#~~~~~ i� � � � � � � � � � � �=~ 1 �--~~!h~.~!..~?..~nt~E~~gE-9:~~!:~\--�--��-�����- 9 �����������������������������������������������������-���+' -- - - - - - - - - - i . . . . . . . . . . . . . . . . . . . . . . . . ________________ ! ~r:~~~~~ ~~s~~~:!lc �.~-~� _�:~�.:�_:~::=�:=~�-=�.�_:~::~ ~: ~::.;z~: : �. �. �.~: ~.-:.-~��=.�.:~: .�.�.�........�.�.�. .. l--.�.�.-..�.�.. .. .. 0 0 I :~:~~~:d ~Yc~1T ~~~t -----~-n._nex_Ef!L f..~gf!_"!_ }_~~: ?5 1... ...1:...... ....... ..�....:j :�.�....��..�.���������+ I.::::.�.:1..:i��=���.. ... .. ..l::��.�.�.�.�.�_� I 1 j 239,850.57 1 _Ene~gy _______ Annex PP, P--a-g--e--2---!i 108,420.78 ! _ _____ 1 _ _ _ _ .------------------! ~Jr~~~~~ ~~s~~~=!ic ~gg~~:��;f~~~: J: ::t�-~- ~ : ~~).~? ~ ~'!::'!::~!.:_ QQ1 f..~gf!.!. .J .....................:........................! i I supported by TIN- I NV/NON VAT ORs but 40.32 i I, stamped with "VAT"/"TIN Annex QQ, Page 1 VAT" or the word VAT I NONE was erased ....... ------1 I l~i~p~t VAT on domestic purchases of services \ supported by TIN# ONLY; 30,709.47 TIN-V; TAN-V; TAN-VAT; 180.53 801.43 _ ......... _!!~: ~/.~Q~Yf...!.. Q.8.s::: +���������������������������������������������������������-��-��������������� Input VAT on domestic AnnexSS, Pa ! purchases of services _ ~_T}:_I'}:f!.J!:~~ Pag~-~ ___l?.Q?.:9~ -I --- ~'!::'!::~J!:~~~ -fag__~ }._ I supported by a tape -----1�,085.5-5-�-1. receipt without the Company's name and/or 10,977.64 .1 I TIN , or the Company's Annex SS, Page 5 8,283.63 I1 name is written or ~L~~~~;feer;~~~~~~~~--c_____J_:_]_:_~~--~�--~- ft~~~~--:--:-+l--_---::-;-~~~~ _.=: ~=~49 k:

DECISION CTA CASE NO. 824S 458.35 ! I ~ftEf~f~~~1~c =~.'...::.. =: InputVATondomestic 1,097.02 ! l.! ~~...1 ]_ 1,425.63 !- 1 1 :=-.:�.:.. ::.::>.l:::..:.: : :....... ...... j................................................... 1 ����-�� I 4 �066.4 1 I 1 ~' T..nI}N..p.u.:Yt/.V.Y.A.:f...T.!o..~n�.l:P.df:.!.o.m.t.:~.~es~t!I.cts !.:'!r.!:.f!:.!.:XX! !!..~9..f!:....!.... ..;...... ........... ~ . 9.?.?.:.?.9. '�������� �� ����������������-���- ........ I A'!'!f!:.!.:XX! f.~gf!:.L .. ...... 1 i~~~';l~;~~~ I purchases of services I I ~n~ex XJ(,J'afl"L I ORs 4,761.50 Il I 1 CLAIMING INPUT VAT" (or I Annex XX, Page 1 1,704.00 similar wordin s I Input VAT on importation ......~.'!.r.!:.f!:.~...Y!j.. f~g l I of goods not supported by ...... ~.'!.r.!:..~~..Y!j...f~g~L I , original copy of the I IEIRDs with machine YY, Pa 2,102.00 I � validation or BOC ORs or Annex YY, Page 1 LBP ORs �����������������������������-���������-�-����- ��������������������������������-��������� Input VAT on importation of goods supported with original IEIRDs with machine validation or BOC ORs or Bank ORs Annex ZZ, Pagel 3,055.00 II not issued in the name of i:~~~~~~~:!::~:!t ~~~~~:~~~~ ].. . . . . . . . . . . . . . . ----------1~ the Com an ...........................................................................................! I Input VAT on importation r: ~'!r....!. :. ....f..!..:......!......:...~..!.....:..P..~...9.........f. !��:���.��L��������.� +! - j II with pertinent BOC OR, ! 91 ,388.02 [ i1 issued pursuant to the Annex AAA, Page 1 281,586.26 1 I Voluntary Disclosure I � Program of the BOC, not I dated within the period of ~ ~l�.l:i.~(~:~: >.9:�.1:!.~9:~9.}9.l ..........j................................. ����+[ ------=-=-=---=---+----------! !.......!.:.' !.r.!:.f!:.?�. .!?.!.!..!.!.!. . .!!..~9...f!:..J. 1 !.:'!::r.!:.f!:.!.:!?.!.!..!.!.!P.~gf!:.!.? . . . I~~~r~:.:~Fo':n":;~~~or ~~9~~ I ! Overclaimed portion of 7. . . .6. . . ;i ................................................... 8. . . .�. 3. . . .4. . . . . .1 3. . . .�. . . . . . . . . . ., I input VAT arising from j................................ 55.14 900.70 I goods/services (e.g., Annex BBB, Page 3 73.95 I arithmetical error, i " " " " " " " " " " " ' " " " " " " ' " " " " " " ' " " " " " "'' " "" " " " " ' " " " " ' ' " " " " " " " " " " " " ' "+ - - - - - - - - - - !' ������� " " " ' " " " " " " " " " " " " " " " " " " " " " " " " ' " " " " " " " " ' " " " " " " ' " " " " " " 1 I. I~~~4i.!:?:K9:~ff~!:~~~.�:!.~J.... 1 1;;~~��~-�~~~~} ~~�I~t~l~ r1 :A~nn=e~X~.c:c,c;?a:g9e~i - ;~; I 45.05 1 !,. I ~~:~~~~e~rfs~~~~~~ f~o:r~e;ig~nn~etx:c~h~aun~g~e;r;art:e.~; 10,562.46 1 I I 1 . . . L [.l.�.o.-.-.f.����� �s� � � � .s. . . g� � � �o�����o� �����d� � � � � a� � � �n� � � ��-d��� � �� �.-s.... .e.. . r. . v....i. .c...e. . . . . . . . . . . . . . . . t .~r.!:.r.!:.f!:.!.:P..!?..!?..~ ?.. +- ................................................................................................................ - - - - 1-0-6 .-11-+.........................................1....1.....8....,....?......... _9? : ~~ 11:/-- 8,

DECISION CfA CASE NO. 8245 l i~piitvi\T~~ct~~~~ti~ r ~n~~~ �i5i5i5,- ?d~ 2 purchases of goods and !.!:.r:!'!::~!.:.P..P.g!!_l:!fl~_ ;} +���--�������������������������:�����:���'���������:� 118,597.32 ~~r;~:=n~~~:r:~ttorting !.!:.'!::'!::f!!.:.!?P.g . f.9:9~:! j available for verification Annex DDD, Page 5 i 13,868.91 Input VAT amortization j !.!:.r:!'!::~!..�:��.��J��~�.������.���������'�-�����?����.���9����:����9���~-���1���.� ���+- - - -J~-'--~~~-:1-.~-+� ........ �������������������-������� on purchases of capital J 6..'!.'!::~!.:.���'- ?.9:9~} , . .J. ~ '- ~.~2.13 goods exceeding P1 million supported by TIN 6..7!.'!::~!.:.���'-?.9:9~ _} 13,2 #Invoice supported by notarized certification 52,928.52 from supplier that VAT Annex EEE, Page 1 13,232 . 13 paid by the Company was already remitted to the BIR (Exhibit W) I 1-������������������:���-���������������������������������������������-��-������������������������������������������������������������L.......................................................................................... � �� � � � ���~'--- - - - - - + - - - - - - - - - ! Total P 1,089,739.26 . Q~P!Qi~!............... �����������- ............. __ ::::::::::::..........::::::::::::::.:1 P34,562,590.6332 The Court finds the Independent CPA Report in order. The input taxes of P1,089,739.26 should be disallowed for failure to meet the substantiation requirements under Sections 110(A) and 113(A) of the National Internal Revenue Code of 1997, as amended by Republic Act (R.A.) No. 9337, in relation to Sections 4.110-1, 4.110-8, and 4.113-1 of Revenue Regulations (RR) No. 16-2005. Likewise, the input taxes of P48,382.78 should be denied because there were alternations or additions in the supporting invoice or official receipt without countersignature or with countersignature but it cannot be ascertained whether the person who countersigned the alterations was the authorized representative of the supplier. The Court also found that aside from the Independent CPA's recommended disallowances of P48,382. 78 and P1,089,739.26 in the total amount ofP1,138,122.04, the input taxes of P173,842.15, should also be denied, as shown below: Exhibit VENDOR NAME OR/ OR/ TOTAL Input VAT (from Annex N of Exhibit "BB") INVOICE INVOICE AMOUNT OF Allocable to ww NUMBER INPUT VAT Zero-Rated DATE Sales 1. Input VAT on purchases of goods/services wherein the VAT amount was not separately shown in the invoice/OR. 116 Freeway Motor Sales of Cabanatuan Corp. 03/23/09 27044 p 644.93 p 292 .61 122 Global Restaurant Concepts Inc. 01 / 12/09 51470 461.00 209. 16 TOTAL FOR THE 1ST QUARTER p 1,105.93 p 501.77 932 L.A. Photo Center 08/ 02/ 09 41005 p 57.21 p 39.03 08/23/09 23489 5.34 940 Ma. Theresa J . Aguinaldo 7 .82 32 This amount is over by P4.71 when compared with the reported input VAT ofP34,562,585 .92.

DECISION CTA CASE NO. 8245 941 Ma. Theresa J. Aguinaldo 08/23/09 23490 15.96 10.89 942 Magellan's Garden & Resto Bar 07/24/09 6476 82 .71 56.43 981 Noemi L. Andres 07/29/09 62887 32.14 21.93 98 1 Noemi L. Andres 08/01/09 63165 32 . 14 21.93 986 One Commerce International Corp. 09/24/09 950 46,741.07 31,888.91 990 Pancake House, Inc. 08/14/09 2319 34 .21 23.34 1035 RFD Food Services Inc. Red Food Services Inc. 08/03/09 5330 13.39 1035 RFD Food Services Inc. Red Food Services Inc. 08/03/09 5333 9 . 14 1036 RFD Food Services Inc. Red Food Services Inc. 08/13/09 5388 9 .64 6.58 1038 RFD Food Services Inc. Red Food Services Inc. 08/14/09 5387 8.14 5 .55 1040 RFD Food Services Inc. Red Food Services Inc. 08/12/09 5373 1 0 .5 0 7 . 16 1042 RFD Food Services Inc. Red Food Services Inc. 07/24/09 5246 1 3 .8 2 9.43 1044 RFD Food Services Inc. Red Food Services Inc. 07/21/09 5232 7 .82 5 .34 1045 RFD Food Services Inc. Red Food Services Inc. 07/21/09 5230 8.04 5.49 1054 Roper Hardware TIN 08/06/09 2207 15.96 10.89 1055 Roper Hardware TIN 07/20/09 1943 64 .29 43.86 1085 Teriyaki Boy 08/20/09 8489 64.29 43 .86 1107 Wholesome Foods Inc. 08/11/09 10277 28 .93 19.74 1108 Wilfredo R. Santos 07/11/09 5214 46.18 31.51 TOTAL FOR THE 3RD QUARTER 45 .75 31.21 447862 p 47,340.01 p 32,29 7.53 70121 1118 A-1 Agro Fertilizer & Chemical Supply 12/18/09 3566 p 250.71 p 70 .61 1149 Caalibangbangan Caltex Service Station 10/18/09 20425 15.09 1150 Cabanatuan Fastfood Ventures, Inc. 10/17/09 53.57 212.75 1160 Bistro Americana Corp 11/03/09 52719 140.71 California Pizza Kitchen/Global Restaurant 755.36 1161 Concepts, Inc. 11/09/09 40368 93 .35 1162 Caltex Super Station 46052 499.57 1162 Caltex Super Station 10/27/ 09 18634 15.09 1191 Diadem Court Inc. 10/19/09 36517 331.45 1.06 1194 DLC Foods (Balagtas) Inc. 11/13/09 0817 1201 Eleanor Santa Romana 12/02/09 0950 53.57 22.63 1203 Eleanor Santa Romana 12/12/ 09 0079 3 .75 4 .83 1213 Erie A. Fontanilla 12/12/09 0413 1226 Farragut's General Merchandise 11/13/09 148779 80.36 30. 18 1227 Ferdinand V. Dysico 11/25/09 73469 17.14 15.09 1276 John DG Bernardo 10/09/09 70292 107. 14 10.62 1278 John DG Bernardo 12/12/09 127488 53.57 118.29 1285 JSReyes Enterprises 10/22/09 886974 37.71 1290 Lourdes De Dios-Cruz 11/15/09 5536 420.00 9 .05 1291 Lucullus Gourmet Products, Corp. 12/13/09 2553 32.14 30.18 1315 Mark Anthony Mendoza 11/19/09 2909 107.14 15.09 1347 New Synergy Garments Inc. 11/13/09 71726 53.57 1351 Noemi L. Andres 12/ 01/09 17488 17.14 4 .83 1360 Pancake House 12/12/09 1674 53.57 15.09 1361 Pancake House 10/30/09 46817 1,177.01 331.51 1407 Remedios F. Ignacio 11/19/09 1535 43.50 12.25 1408 Remeng Food Serv 12/11/09 5629 43.93 12.37 1409 RFD Food Services Inc. 11/09/09 5588 156.30 44.02 1410 RFD Food Services Inc. 10/12/09 5592 371.71 104.69 1410 RFD Food Services Inc. 10/01/09 5842 63.43 1 7 .8 7 1411 RFD Food Services Inc. 10/02/09 5739 160.71 45.26 1412 RFD Food Services Inc. 12/10/09 5601 617.57 173.94 1416 Rijovi Foods Corporation 11/10/09 773562 2.72 1423 Royce Motor Center Inc. 11/19/09 9.64 2.57 10/31/09 9 . 11 9.21 2 .59 13.71 3 .86 8 .36 2 .35 72 .64 20.46 154.71 I 43 .57 l --

DECISION CTA CASE NO. 8245 1442 Smiley Chix Corporation 12/24/09 2324 160.71 45.26 1444 St. Cecilia's Caltex 10/22/09 08015 1495 Toby's Sports Hou se 10/18/09 67069 8.14 2.29 TOTAL FOR THE 4TH QUARTER 41 0 .89 115.73 p 6, 418.74 p 1, 807. 86 2. Purchase of goods supported by sales invoice dated outside the period of claim. 173 Lu minaire Printing & Publishing Corp 12/09/08 16 141 p 9 10 .71 p 413 .20 413.20 TOTAL FOR THE 1ST QUARTER p 910.71 p 3 . Discrepancy between input VAT per claim and input VAT per supporting documents. p 11,103.87 12,338.47 Quisumbing Torres Law Offices OR#6716 12,9 18 . 13 15,425.68 21,975 .32 56 ,904 .99 Input VAT p er claim P130,666.46 p 118,066.76 p 61 ,059.50 In p ut VAT per official receipt OR#6716 1 2 , 5 9 9 .7 0 p 118,066. 76 p 61,059.50 TOTAL FOR THE 2ND QUARTER GRAND TOTAL P173,842.15 p 96,079.86 Accordingly, out of petitioner's reported input tax of P34,562,585.92, only the amount of P33 ,250 ,621.73 , as computed below, is duly substantiated in accordance with Sections 110(A) and 113(A) of the NIRC of 1997, as amended by R.A. No. 9337, in relation to Sections 4 . 110-1,4.110-8, and 4.113- 1 of RR No. 16-2005: 1ST QTR 2NDQTR 3RDQTR 4TH_Q_TR TOTAL p 10,941,778.49 p 8 , 176,4 76.93 Inpu t VAT per Quarterly VAT p 8 ,259,284.54 p 7 ,185,045.96 p 34,562,585.92 Returns 286,887.96 321,608 .76 2,01 6 .64 118,066.76 148,792.24 380,833.08 1 138,122.04 Less: Disallowances 439,675 .52 47,340 .01 288,904.60 P7, 736 ,801.41 196,132.25 6,418.74 173,842.15 Per ICPA's report P10,652,873.89 Per this Cou rt's P8,063, 152.29 387 ,251.82 1,311 ,964.19 fmdings P6,797,794. 14 P33,250,621.73 Total Disallowances Substantiated Input VAT It is to be noted that the substantiated amount of P33 ,250,621 .73 is not entirely attributable to petitioner's zero- rated sales, since petitioner had VATable sales to government and private entities for the year 2009. Allocating the substantiated input taxes of P33,250,621.73 among petitioner's zero-rated sales , VATable sales to government and VATable sales to private entities would result in the following: (a) input VAT attributable to VATable sales to private entities in the amount of P5 ,297.67 ; (b) input VAT attributable to VATable sales to government 1n the amount of /--

DECISION CTA CASE NO. 8245 P16,995, 165.02; and (c) input VAT attributable to zero-rated sales in the amount of P16,250, 159.04, as computed below: Year 2009 Input VAT Input VAT Input VAT Total Attributable Attributable to Attributable to Zero-Rated Sales to 12% 12% VATable VATable Sales to Sales to Private Government 1st Quarter - 5 ,819,563.28 4,833,310.61 10,652 ,873 .89 2nd Quarter - 3 ,735 ,631.07 4,001 ,170.34 7 ,736,801.41 3rd Quarter 5,297.67 2 ,556 ,801.11 5,501 ,053.51 8,063,152.29 4th Quarter - 4,883,169.56 1,914,624.58 6,797,794. 14 Total 5,297.67 16,995,165.02 16,250,159.04 33,250,621.73 Allocation was based on the percentage of each type of sales to total sales as shown below: Year 2009 12% 12% VATable Zero-Rated Sales Total VATable Sales to Sales to Private Government 1st Quarter 647 ,665,715.48 537,904,551.13 1,185,570,266.61 % to Total 54.6290451 % 45.3709549% 100.00% Sales 2nd Quarter 620,599 ,898.45 664,713,902.37 1,285,313,800.82 % to Total 48.2839209% Sales 51 .7160791% 100.00% 3rd Quarter 1,286,893.89 621 ,090 ,719 .31 1,336,299,982 .50 1'958 ,677 ,595.70 % to Total 0.0657022% 31.7096964% 68.2246014% 100.00% Sales 4th Quarter 1,797 ,652,733.76 704,835,262.55 2 ,502,487,996.31 % to Total 71.8346196% 28. 1653804% 100.00% Sales After deducting the input tax of P5,297.67 attributable to VATable sales to private entities from its output VAT liability of P154,427.27, petitioner still has a net amount of output VAT payable for 2009 in the amount of P149, 129.60, computed as follows: Output VAT Due p 154,427.27 Less: Input VAT 5,297.67 Net Output VAT Payable Pl49, 129.60

DECISION CTA CASE NO. 8245 Thus, by deducting the net amount of output VAT payable of P149, 129.60 from petitioner's total input tax attributable to zero-rated sales of P16,250, 159.04, a refundable amount ofP16,101,029.44 is in order: Input VAT Attributable to Zero-Rated Sales p 16,250,159.04 Less: Net Output VAT Payable 149, 129.60 Net Amount Refundable P16,101,029.44 Even though the claimed input VAT was carried over by petitioner in its succeeding Quarterly VAT Returns for year 201033, the same remained unutilized until it was deducted as "VAT Refund/TCC claimed"34 in its Quarterly VAT Return for the fourth quarter of 2010. Thus, the excess input VAT of P16,012,494.4635 as of the end of the fourth quarter of 2010, which was to be carried over to the succeeding first quarter of 2011, no longer included the subject claim. Finally, pursuant to Section 112(A) of the NIRC of 1997, as amended, a taxpayer must file an application for refund or tax credit of unutilized or excess creditable input VAT attributable to its zero-rated sales within two (2) years after the close of the taxable quarter when the sales were made. In the instant petition, the subject of the claim for refund or issuance of tax credit certificate is petitioner's excess and unutilized creditable input VAT attributable to its zero-rated sales for the four quarters of taxable year 2009. Counting from March 31, 2009, June 30, 2009, September 30, 2009 and December 31 , 2009, the close of the first, second, third and fourth quarters of 2009, respectively, petitioner had until March 31, 2011, June 30, 2011 , September 30, 2011 and December 31, 2011, respectively, within which to file its administrative claim with respondent. Clearly, petitioner seasonably filed its administrative claim for the first to fourth quarters of 2009 on November 10, 201036. Anent petitioner's judicial claim, Section 112(C) of the NIRC of 1997, as amended, states that: /- 33 Exhibits " P", "R", "S", and " U", docket, pp. 450-457 and "AA-1 ", "AA-2", "AA-3 ", and "AA-4". 34 Exhibits "U" and "AA-4", line 23 0 . 35 Exhibits "U" and "AA-4", line 29. 36 Exhibit "N", docket, pp. 446 to 449.

DECISION erA CASE NO. 8245 "SEC. 112. Refunds or Tax Credits of Input Tax.- XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day- period, appeal the decision or the unacted claim with the Court of Tax Appeals." {Emphasis supplied) As stated above, the taxpayer may appeal to the Court of Tax Appeals within thirty (30) days from receipt of the decision or from inaction of the Commissioner of Internal Revenue after the lapse of the one hundred twenty (120)-day period via a Petition for Review. Since petitioner's administrative claim for refund was filed on November 10, 2010, the 120-day period provided under Section 112(C) ended on March 10, 2011. Counting from March 10, 2011, petitioner may file its judicial claim within 30 days or until April 11, 2011 37. Thus, the judicial claim of petitioner filed on March 30, 20 11 was filed well within the prescriptive period./ 37 April 9, 20 11 fe ll on a Saturday.

DECISION CTA CASE NO. 8245 Respondent argues that petitioner must prove that it submitted the complete documents required under RMO No. 53-98 before the 120-day audit period shall apply and before judicial remedies as provided for in the law may be availed of. Respondent also alleges that perusal of the petition for review would show that petitioner never made mention that it submitted documents in support of its claim for refund. The allegation of submission of complete documents is a material fact necessary to invoke jurisdiction and to justify relief demanded. Having failed to allege submission of complete documents, respondent claims that she was evidently deprived of her opportunity to validate petitioner's claim for refund in the administrative level. This Court disagrees. In Team Sual Corporation (formerly: Mirant Sual Corporation) us. Commissioner of Internal Revenue, and Commissioner of Internal Revenue us. Team Sual Corporation (formerly Mirant Sual Corporation) 38, the Court En Bane discussed the proper interpretation of the term "complete documents" under Section 112 (D) of the NIRC of 1997, to wit: "The contention of the Commissioner that the law requires the submission of complete documents in support of the application filed with the BIR before the 120-day period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law, deserves scant consideration. This issue boils down to the proper interpretation of the term 'complete documents' under Section 112 (D) of the NIRC of 1997. In the case of Commissioner of Internal Revenue us. First Express Pawnshop Company, Inc. , the Supreme Court ruled: 'The term 'relevant supporting documents' should be understood as those documents necessary to support the legal basis in disputing a tax assessment as determined by the taxpayer. The BIR can only inform the taxpayer to submit additional documents .{ 38 CTA EB Nos. 649 and 65 1, Resolution dated March 2 1, 20 12.

DECISION CTA CASE NO. 8245 The BIR cannot demand what type of supporting documents should be submitted. Otherwise, a taxpayer will be at the mercy of the BIR, which may require the production of documents that a taxpayer cannot submit.' Although the foregoing ruling refers to the interpretation of the term 'relevant supporting documents' under Section 228 of the NIRC of 1997 pertaining to 'Protesting of Assessment', We find no reason why the same doctrine cannot be applied in the interpretation of 'complete documents' referred to under Section 112 (D) of the same Code, for the following reasons: 1. If the determination of the completeness of the documents depends on the BIR, the concerned taxpayer will also be at the mercy thereof; and 2. It has been held that the Commissioner ought to know the tax records of all taxpayers, and thus, the Commissioner can easily decide whether or not to grant the concerned taxpayer's administrative claim for refund or tax credit certificate. In this connection, nothing in RMO No. 53-98 mandates that the list of documents therein stated, insofar as the VAT is concerned, should be submitted in connection with an application for refund or tax credit certificate under the said Section 112, upon the filing thereof. Furthermore, said RMO is explicit, in its subject and objective, that it provides a checklist of documents to be submitted 'upon Audit', and that it was issued to '(i)dentify the documents to be required from a taxpayer during audit', respectively. In this case, it was not shown that the audit was ever conducted by the BIR in connection with Team Sual's application for refund or tax credit certificate. This is manifested by the lack of BIR Records transmitted to this Court, and by the absence of any 'report of investigation' concerning Team Sual's administrative claim for refund or tax credit certificate. But even if We are to assume that anj

DECISION CTA CASE NO. 8245 audit was made, it was never established that the Commissioner ever required Team Sual to submit the documents stated in the said RMO. Accordingly, the term 'complete documents' under Section 112(D) of the NIRC of 1997 should be understood as those documents necessary to support the application for refund or tax credit certificate as determined by the taxpayer. Thus, should the taxpayer decide to submit only certain documents, or should the taxpayer fail, or opted not, to submit any document at all, in support of its application for refund or tax credit certificate under Section 112 of the NIRC of 1997, it is reasonable and logical to conclude that the reckoning date of the 120-day period thereunder, should be reckoned from the filing of the said application." (Emphasis supplied and citations omitted) In the instant case, record shows that petitioner filed its administrative claim for refund on November 10, 2010 together with several documents39 in support of its application. Notably, respondent neither sent any written notice informing petitioner that the aforesaid documents are incomplete nor required the latter to submit additional documents. Respondent cannot now belatedly argue that petitioner was not able to submit the complete documents in support of its claim for refund or tax credit certificate. In fact, perusal of the records show that there was no audit conducted on petitioner's application for refund or tax credit certificate as evidenced by lack of BIR records on petitioner's administrative claim. Since respondent failed to act on or respond to petitioner's claim within the 120-day period required by law, petitioner exercised its statutory right to appeal before this Court. As earlier emphasized, the completeness of documents to support a claim is determined by a taxpayer. Should the taxpayer decide to submit only certain documents, or should the taxpayer fail , or opted not, to submit any document at all, in support of its application for refund under Section 112, the 120-day period should be reckoned from the filing of the said/ 39 List of documents submitted was enumerated in the claim for admin istrative refund filed on November 10, 20 I0 (Exhibit "N").

DECISION CTA CASE NO. 8245 application. Moreover, the alleged non-submission of complete documents at the administrative level is not fatal to a claim for refund in the judicial level.40 The foregoing belies respondent's argument that petitioner should have alleged submission of complete documents . Nevertheless, contrary to respondent's allegation, petitioner did allege in its petition for review that "[O]n November 10, 2000, Petitioner filed with the Large Taxpayers Audit and Investigation Division I of the Bureau of Internal Revenue ('BIR LTAID I') an administrative claim for refund or tax credit of its unutilized input VAT for the period from the 1st quarter and to the 4th quarter of CY 2009, together with supporting documents."41 In recapitulation, the Court finds that petitioner has sufficiently proven its entitlement to a refund or issuance of tax credit certificate for its unutilized input VAT attributable to zero-rated sales for the year 2009, but in the reduced amount of P16, 101,029.44. WHEREFORE, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent is hereby ORDERED to REFUND or to ISSUE A TAX CREDIT CERTIFICATE in the amount of P16 ,101 ,029.44 to petitioner, representing unutilized input VAT attributable to its zero-rated sales to NIA for taxable year 2009 . SO ORDERED. 44 /. ~.--///- AMELIA R. COTANGCO-MANALASTAS Associate Justice UTISTA �4 CE Casecnan Water and Energy Company, Inc. vs. Commissioner ofInternal Revenue, CTA Case Nos. 8041 and 8111 , Resolution dated November 29, 2012 citing Commissioner ofInternal Revenue vs. Toledo Power Company (CTA EB Case No. 589, Resolution dated January 12, 2011 ). 41 Docket, pp 2-3.

DECISION CTA CASE NO. 8245 ATTESTATION I attest 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's Division. LOVE STA Assoc1p.te stice Chairperson ( CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, 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. Presiding Justice