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

REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION CE CASECNAN WATER AND CTA Case No. 8620 ENERGY COMPANY, INC., Members: Petitioner, -versus- Del Rosario, Chairperson Uy,and Mindaro-Grulla, JJ. COMMISSIONER OF Promulgated : INTERNAL REVENUE, .. Respondent. SEP ~~~~~~~tt � M. X---------------------------------------------------------- - -----------------------X DECISION DEL ROSARIO, PJ: THE CASE This is a Petition for Review1 filed by CE Casecnan Water and Energy Company, Inc. (petitioner) which assails the inaction of the Commissioner of Internal Revenue (respondent) on petitioner's administrative claim for refund or issuance of a tax credit certificate (TCC) in the amount of P17 ,807,940.34, allegedly representing petitioner's unutilized input value added tax (VAT) attributed to its zero-rated sales of generated power to the National Irrigation Administration (NIA) for the year 2011. THE PARTIES Petitioner is a domestic corporation duly organized and existing under the laws of the Republic of the Philippines with principal office at Pantabangan , Nueva Ecija.2 0'\ 1 Dated March 21 , 2013 ; CTA Docket pp. 6-70 . 2 Joint Stipulation of Facts and Issues, CTA Docket, p.434.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Respondent, on the other hand, is the duly appointed Commissioner of Internal Revenue (CIR), empowered to perform the duties of said office, including among others, the power to decide, approve, and grant refunds and/or tax credits of erroneously paid taxes, as provided by law. 3 THE FACTS OF THE CASE Petitioner was incorporated on September 21 , 1994, the primary purpose of which is "to design , develop, construct, erect, assemble, commission, finance, own and 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."4 It is registered with the Bureau of Internal Revenue (BIR) with Taxpayer Identification No. 004-500-931-000. 5 Petitioner's multipurpose irrigation and power plant project, with an installed capacity of 140-150 MW hydropower generation plant component, has been duly accredited and certified as a Private Sector Generation Facility by the Department of Energy (DOE) as evidenced by its Certificate of Accreditation No. 95-07-12 issued by the DOE on July 20, 1995.6 On June 21, 2010, petitioner was issued a Certificate of Compliance No. 10-06-GNB-10701 by the Energy Regulatory Commission (ERC) for its Hydroelectric Generation Facilities which is valid until June 20, 2015. 7 Petitioner filed with the BIR its Original and Amended Quarterly VAT Returns for the 1st to 4th quarters of the year 2011 on the following dates: Exhibit Taxable Quarter Date of Filinq of Quarterly VAT Return and Reference No. 151 "P-8" April25 , 2011/101100004709121 "P-12" 15 (Amended) November15, 2012/101200006573724 3 ld ., CTA Docket, p. 434. 4 ld ., CTA Docket, p. 435; Exhibit "P-1 ". 5 ld ., CTA Docket, p. 435; Exhibit "P-3". 6 ld ., CTA Docket, p. 435 ; Exhibit "P-2". 7 ld ., CTA Docket, p. 435 ; Exhibit "P-6".

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 "P-9" 2nu July 25, 2011/101100004968255 "P- 13" 2na (Amended ) November15, 20 12/101200006574447 "P-10" October 25, 201 1/101100005233508 "P-14" 3ra November 15, 201 2/101200006575354 "P-11 " 3ru (Amended) "P-15" Janua~25 , 2012/1 01200005545659 4m November16, 20 12/101200006577452 4m(Amended ) On November 16, 2012, petitioner filed with the Large Taxpayers Excise Audit Division I of the BIR (BIR-LTEAD I) an administrative claim for refund or tax credit of its unutilized input VAT for the period covering the 1st quarter to the 4th quarter of the year 2011.8 Claiming inaction on the part of respondent, petitioner filed on March 21 , 2013 the present Petition for Review invoking Section 112 (C) of the National Internal Revenue Code of 1997 (1997 NIRC), as amended . Petitioner prays for a refund or issuance of a TCC in the amount of P,17,807 ,940.34 allegedly representing its unutilized input VAT for the four quarters of the year 2011 . On June 10, 2013, within the extended period allowed by this Court, respondent filed her Answer9 interposing the following special and affirmative defenses: i) petitioner's claim for refund was not properly documented ; ii) petitioner failed to prove that it submitted complete documents to support its administrative claim for refund ; iii) considering that petitioner failed to comply with the duly mandated legal requirements for administrative claims for refund/TCC , the same is considered merely pro forma , thus, the 120-day period provided for by law within which the CIR has to act on petitioner's claim for refund has not yet commenced ; iv) tax refunds are regarded as tax exemption which are to be construed in strictissimi juris against the person or entity claiming the exemption ; and v) the petition for review is prematurely filed for failing to exhaust all available administrative remedies, hence, dismissible by this Court for lack of jurisdiction . Durin~ pre-trial , the parties filed their Joint Stipulation of Facts and Issues 0 on October 1, 2013 which the Court approved in the Resolution dated October 8, 2013.11 The same Resolution terminated the pre-trial and directed the parties to proceed with the trial , limiting the presentation of evidence only to relevant matters that have not been covered by their joint stipulation of facts and issues. During trial , only petitioner presented its testimonial and documentary evidence while respondent manifested that she will no (YIJ 8 ld ., CTA Docket p. 434; Exhibit "P-7". 9 CTA Docket, pp. 78-91. �1 CTA Docket, pp.434-441. 11 CTA Docket, p 444.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 longer present any evidence.12 As prayed for, both parties were given thirty (30) days from May 13, 2014 to submit their respective memoranda.13 On June 13, 2014 respondent manifested that she will adopt the arguments raised in her Answer as her Memorandum.14 Meanwhile, petitioner filed its Memorandum15 within the extended period allowed by this Court on July 2, 2014. With the filing of the parties' respective memoranda, the petition was submitted for decision on July 11 , 201416. ISSUES The parties agreed that the sole issue to be resolved in this case is: "Whether or not Petitioner is entitled to a refund of, and/or issuance of TCC for, its unutilized input VAT amounting to R17,807,940.34, which input VAT (i) arose from petitioner's domestic purchases of non-capital goods and services, services rendered by non-residents, importation of non-capital goods, and purchases of capital goods; and (ii) are all attributable to petitioner's zero-rated sales of generated power."17 THE COURTS'S RULING Section 112(A) of the 1997 NIRC, as amended , outlines the requirements for refund or tax credit of input tax due or paid which are attributable to the taxpayer's zero-rated sales. The provision reads : "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 SectioD-1 12 CTA Docket, p. 797. 13 ld . 14 CTA Docket, pp.801-803 . 15 CTA Docket, pp.810-841 . 16 CTA Docket, p.843 . 17 1d., CTA Docket, p.436 ; Pre-Trial Order, CTA Docket, p.779.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 106(A)(2)(a)(1 ), (2) and (b) and Section 108(8)(1) and (2) , the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero- rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions , it shall be allocated proportionately on the basis of the volume of sales: xxx " Thus, in order to be entitled to a refund or tax credit of unutilized input VAT attributable to zero-rated sales, the following requisites must be complied with: 1. There must be zero-rated or effectively zero-rated sales; 2. Input taxes were incurred or paid; 3. Such input taxes are attributable to zero-rated or effectively zero-rated sales; 4. Such input taxes were not applied against any output VAT liability; and , 5. The claim for refund was filed within the two-year prescriptive period. Timeliness of the filing of the administrative and judicial claims The timeliness of the filing of petitioner's administrative and judicial claims will be determined first to ascertain if it is still necessary to resolve petitioner's compliance with the other requisites for input VAT refund or issuance of TCC. As explicitly stated under Section 112(A) of the 1997 NIRC, as amended , the application for refund or TCC of unutilized excess input VAT must be filed within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. The present claim covers the four taxable quarters of the year 2011 which closed on March 31 , 2011 , June 30, 2011 , September 30, 2011 and December 31, 2011. Records show that the petitioner's administrative claim was filed timely, viz:<JI\.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Period/Quarter Close of Taxable Last Day for Filing Date of Filing of Covered Quarter Adm inistrative Claim for Administrative Claim Refund/Issuance of TCC for Refund 1s Quarter of 2011 March 31 , 2011 March 31 , 2013 2nu Quarter of 2011 June 30, 2011 June 30, 2013 >- November 16, 2012 3ra Quarter of 2011 September 30, 2011 September 30, 2013 4m Quarter of 2011 December 31, 2011 December 31 , 2013 As to the timeliness of petitioner's judicial appeal , Section 112 (C) of the 1997 NIRC, as amended, provides that the CIR has 120 days from the date of submission of the complete documents in support of the application for tax refund/credit within which to grant or deny the claim, and in case of full or partial denial by the CIR, the taxpayer's recourse is to file an appeal before this Court within 30 days from the receipt of the decision of the CIR. If after the 120-day period, the CIR fails to act on the application for refund/credit, the remedy of the taxpayer is to appeal the inaction of the CIR to this Court within 30 days after the lapse of the 120-day period. Respondent, in her Answer, which also served as her Memorandum, argues that the failure of petitioner to submit the required complete supporting documents renders the instant petition to have been prematurely filed. The "complete documents" required by law are allegedly those enumerated under Revenue Memorandum Order No. 53-98. Records show, however, that petitioner, upon filing of its administrative claim on November 16, 2012 , simultaneously submitted the documents in support of its claim. This is evident from petitioner's letter which stated: "In support of our request, we enclose the following documents for your perusal: 1. Duly accomplished Bureau of Internal Revenue (BIR) Form No. 1914- "Application for VAT Credit/Refund" 2. Schedule/Summary list of domestic purchases of goods (capital and non-capital) and services , importations of goods (capital and non-capital) and services rendered by non-residents for first to fourth quarters of 2011 - print-out/soft copies 3. Invoices and official receipts issued by domestic suppliers of goods and services 4. Single administrative documents/Import entry internal revenue declarations and/or official receipts issued by the Bureau of Customs/Statements of settlement of duties and taxes/Bank certifications 5. BIR Forms 1600 - "Withholding VAT returns" and payment acknowledgment receipts for 2011 ~

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 6. 81R Forms 25500- "Quarterly VAT Returns" for first to fourth quarters of 2011 - original and amended 7. Schedule/Summary list of zero-rated and VATable sales for first to fourth quarters - print out/soft copies 8. Zero-rated sales invoices issued to NIA 9. Zero-rated official receipts issued to NIA 10. VAT sales invoices issued to NIA 11. VAT official receipts issued to NIA 12. VAT official receipts issued for miscellaneous collections 13. Certificate of registration issued by the 801 14. Certificate of accreditation issued by the DOE 15. Certificate of compliance issued by the Energy Regulatory Commission -original and renewal 16. Project Agreement between CE Casecnan and NIA 17. Certificate of filing of amended articles of incorporation issued by the Securities and Exchange Commission (SEC) 18. General Information Sheet filed with the SEC 19. Certificate of registration issued by the 81R 20 . Form 0605- "Annual VAT registration fee" payment for the year 2011 21 . 81R Form 1702- "Annual income tax return" for taxable year ended December 31, 2011 together with the audited financial statements 22 . 81R Forms 2306- "Certificate of Final VAT" for January to December 2011 23 . Authority to print official receipts/sales invoices and use of computerized accounting system issued by the 81R 24 . Certification that CE Casecnan has not filed a similar claim for refund duly issued by the Department of Finance 25. Summary of allocation of actual input VAT attributable to energy, water delivery, and miscellaneous collections 26 . Copy of Section 6, Chapter II of RA 9136 or the EPIRA Law 27 . Copy of Section 108(8)(7) and Section 112 (A) of RA 9337 or the National Internal Revenue Code, as amended 28. Copy of Section 4.108-5 of RR 16-2005 or the Consolidated Value-Added Tax Regulations of 2005."18 The same letter informed the respondent that the books of accounts and accounting records of petitioner are already available for audit and verification of the BIR. Based on the foregoing, the 120-day period is reckoned from November 16, 2012, the date when petitioner filed its administrative claim together with the supporting documents with the BIR LTEAD l{r? 18 Exhibit P-7; CTA Docket, pp.657-658.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Thus, pursuant to Section 112(C) of the 1997 NIRC, as amended, petitioner timely filed its appeal by way of a Petition for Review on March 21, 2013, as the same was filed within the 30-day period after the 120-day period ended on March 16, 2013. Existence of zero-rated sales The issue of whether or not petitioner's sale of electricity to NIA is zero-rated for VAT purposes is not one of first impression as this Court had already ruled in the affirmative in previous cases19 involving the same parties and issues but different taxable years. As in the previous cases, the governing law is Section 108(8)(7) of the 1997 NIRC, as amended by Republic Act (R.A.) No. 9337, and implemented by Section 4.1 08(b)(7) of Revenue Regulations (RR) No. 16-2005, which are all quoted below for easy reference: "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%) 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 ." XXX XXX XXX "SEC. 4.108-5. Zero-Rated Sale of Services.- XXX XXX XXX "(b) Transaction Subject to Zero Percent (0%) VAT Rate.- The following services performed in the Philippines by VAT- registered persons shall be subject to zero percent (0%) VAT rate: XXX XXX XXX &VI 19 CE Casecnan Water and Energy Company, Inc. vs. Commissioner of Internal Revenue, CTA Case Nos. 8041 and 8111 , September 11 , 2012; CE Casecnan Water and Energy Company, Inc. vs. Commissioner of Internal Revenue, CTA Case No. 8245 , May 10, 2013; CE Casecnan Water and Energy Company, Inc. vs. Commissioner of Internal Revenue , CTA Case No. 8446, December 16, 2013 .

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 "(7) Sale of power or fuel generated through renewable sources of energy such as , but not limited to, biomass, solar, wind , hydropower, geothermal and steam , ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels . Provided, however, That zero-rating shall apply strictly to the sale of power or fuel generated through renewable sources of energy, and shall not extend to the sale of services related to the maintenance or operation of plants generating said power." Corollary to the above provisions, Section 4.1 08-3(f) of RR No. 16-2005 states: "SEC. 4.108-3. Definition and Specific Rates on Selected Services.- XXX XXX XXX "(f) Sale of electricity by generation , transmission , and distribution companies shall be subject to 10% VAT on their gross receipts: Provided, That 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 sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT. "Generation companies" refers to persons or entities authorized by the Energy Regulatory Commission (ERC) to operate facilities used in the generation of electricity. For this purpose, generation of electricity refers to the production of electricity by a generation company or a co-generation facility pursuant to the provisions of the R.A. No. 9136 (EPIRA) . They shall include all Independent Power Producers (IPPs) and NPC/Power Sector Assets and Liabilities Management Corporation (PSALM)-owned generation facilities. " Clearly, from the foregoing , the sale of power generated through renewable sources of energy is subject to zero percent (0%) VAT. As in the previous cases,20 petitioner proved that (i) its 140- megawatt hydro-electric power plant project has been accredited by the DOE as a Private Sector Generation Facility under the Implementing Rules and Regulations of Executive Order No. 215, as amended ; (ii) the ERC issued Certificate of Compliance No. 05-07- GN8-1 0701 for its generation facility ; and (i ii) it generates power through its hydro-electric power plant and subsequently sells it only to NIA by presenting in evidence its Amended and Restated Casecnan Project Agreement by and between petitioner and NIA dated June 26 , ()-// 20 ld .

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 1995.21 Clearly, 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. For the four taxable quarters of the year 2011, petitioner derived receipts from sales of power generation services to NIA in the amount of P2,731,669,945.32, 22 as declared in petitioner's Quarterly VAT Returns for the same period and evidenced by sales invoices and official receipts23 which were summarized in its Schedule of Revenues24 and Amended Summary List of Sales, 25 as follows: Exhibit Quarterly Zero-Rated Sales/Receipts P-1226 I P-24 VAT Returns p 547 ,794 ,559.42 P-1327 I P-25 392,695 ,800.00 P-1428 I P-26 Year 2011 746,782 ,658 .70 P-1529 I P-27 1st Quarter 1,044,396,927 .20 2nd Quarter p 2,731,669,945.32 Total 3rd Quarter 4th Quarter REFERENCE ZERO- ZERO- OR DATE OR SALES EXCHANGE OR SALES RATED RATED AMOUNT RATE AMOUNT INVOICE 27-Jan-11 GROSS OF GROSS OF EWT NUMBER OR 27-Jan-11 (Exhibit P- CONVERTED TO NUMBER 25-Feb-11 EWT 21 , 25-Feb-11 (USD) PESOS 0614 30-Mar-11 Annex B) 30-Mar-11 P133 ,728 ,840 .00 1ST QUARTER 0615 78 ,432 ,202 .80 Exhibit P-36, 0601 0616 $ 3,032,400.00 P44 .100 Pages 1-3 $ 1,778,508 .00 44 .100 132,061 ,020.00 0617 $ 3,032,400.00 43 .550 Exhibit P-36, 0602 $ 920,430.40 43 .550 40 ,084 ,743 .92 Pages 4-5 0618 $ 3,032,400.00 43 .200 $ 752 ,038.72 43 .200 130 ,999 ,680 .00 Exhibit P-36, 0603 0619 Pages 6-8 32,488 ,072 .70 p 547,794,559.42 Exhibit P-36, 0604 Pages 9- 10 Exhibit P-36, 0605 Pages 11- 13 Exhibit P-36, 0606 Pages 14- 15 Subtotal- 1st Quarter 2ND QUARTER 0607 0620 27-Apr-11 $ 3,032,400.00 P43 .050 P130 ,544 ,820 .00 0608 0621 26-May-11 $ 3,032,400.00 43 .300 131 ,302,920.00 Exhibit P-37, 0609 0622 27-Jun-11 $ 3,032,400.00 43 .150 130 ,848 ,060 .00 Pages 1-3 Exhibit P-37, Pages 4-6 Exhibit P-37, Pages 7 - 9 21 Exhibit "P-4"; CTA Docket pp.565-647. 22 Annex A, Exhibit P-21 . 23 Exhibits "P-36" to "P-39". 24 Exhibits "P-32" to "P-35". 25 Exhibits "P-28" to "P-31 ". 26 Line 17, CTA Docket, p. 669. 27 Line 17, CTA Docket, p. 676. 28 Line 17, CTA Docket, p. 683. 29 Line 17, CTA Docket, p. 690.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Page11of21 Subtotal - 2nd Quarter , 392,695,800.00 3RD QUARTER Exhibit P-38, 0610 0623 27-Jul-11 $ 3,032,400.00 P41 .950 P127 ,209 ,180 .00 Pages 1-3 0624 26-Aug-11 $ 3,032,400.00 42 .250 128,118,900.00 0625 26-Aug-11 $ 3,384,229.17 42 .250 142 ,983 ,682.43 Exhibit P-38, 0611 0626 26-Sep-11 $ 3,032 ,400.00 43 .350 131,454,540 .00 Pages 4-6 0627 26-Sep-11 $ 5,006,144.32 43 .350 217,016 ,356 .27 Exhibit P-38, 0612 ~ 746,782,658.70 Pages 7-8 Exhibit P-38, 0613 Pages 9- 11 Exhibit P-38, 0614 Pages 12- 13 Subtotal- 3rd Quarter 4TH QUARTER Exhibit P-39, 0615 0628 28-0ct-11 $ 3,032,400.00 P42 .600 P129, 180,240.00 Pages 1-3 Exhibit P-39, 0616 0629 28-0ct-1 1 $ 6,669,098.98 42 .600 284 ,103,616 .55 Pages 4-5 Exhibit P-39, 0617 0630 25-Nov-11 $ 3,032,400.00 43.400 131 ,606 ,1 60.00 Pages 6-8 Exhibit P-39, 0618 0631 25-Nov-11 $ 2,298 ,583.36 43.400 99 ,758,517 .82 Pages 9- 10 Exhibit P-39, 0619 0632 28-Dec-11 $ 3,032,400.00 43.600 132 ,212 ,640 .0Q_ Pages 11- 13 Exhibit P-39, 0620 0633 28-Dec-11 $6,136,1 41.12 43 .600 267 ,535 ,752 .83 Pages 14- 15 Subtotal- 4th Quarter ~ 1,044,396,927.20 Total zero-rated sales per zero-rated VAT ORs P2,731 ,669,945.32 The receipts/collections tabulated above from petitioner's sales of electricity generated through a renewable source of energy, particularly, hydropower, qualify for VAT zero-rating as discussed above. Input VAT paid or incurred which are attributable to zero-rated sales Having resolved that petitioner had VAT zero-rated receipts for the four taxable quarters of the year 2011 in the amount of P2,731 ,669,945.32, the Court shall now determine the amount of unutilized excess input VAT attributable thereto. For the four quarters of the year 2011 , petitioner reported a total amount of P33,249,414.29 input VAT arising from its amortization of input VAT on capital goods exceeding P1 million, purchase of capital goods not exceeding P1 million, domestic ()tJ

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 purchases of non-capital goods, importation of non-capital goods, domestic purchases of services, and services rendered by non- residents, detailed as follows: Year 2011 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Total P-1230 I P-24 P-1331 I P-25 P-1432 I P-26 P-1533 I P-27 Exhibit Input Tax Deferred on Capital Goods P1 ,513,220.32 p 2,036,791 .05 p 2,161 ,947.62 P2 ,118,902 .16 p 1,513,220.32 exceeding P1 Million from Previous Quarter Add : Input Tax on Capital Goods exceeding 701 ,699.97 327 ,260.36 173,282 .29 474 ,374 .92 1. ~76 , 617 . 54 P1Million Purchased this Quarter Total Unamortized Input Tax on 2,214 ,920.29 2,364 ,051.41 2,335,229 .91 2,593 ,277.08 3,189 ,837 .86 Capital Goods exceeding P1 Million Less: Input Tax on Purchases of 2,036,791 .05 2,161 ,947 .62 2 ,118 ,902 . 16 2,380,471 .52 2,380,471 .52 Capital Goods exceeding P1 Million deferred for the succeeding period Amortization of Input Tax on p 178,129.24 p 202,103.79 p 216,327.75 p 212,805.56 p 809,366.34 Capital Goods exceeding P1 Million 62 ,298.65 2 ,220 .00 34,312 .57 15 ,522 .86 114 ,354 .08 Add : Input Tax on 812 ,959.40 611 ,063.54 646 ,066 .96 1,411 ,881 .58 3/ 91 ,971.48 Purchase of Capital Goods not exceeding P1 Million 48,491.00 51 ,022 .00 356 ,969 .00 78 ,492 .00 534 ,974 .00 5,389,912 .25 6 ,046 ,002.63 28 ,167 ,985.03 Domestic Purchases of Goods 5 ,814 ,065 .34 10,918,004 .81 other than Capital Goods 72 ,965 .76 67 ,797.60 140 ,763 .36 P6,564, 756.30 - - P7,832,502.23 P33,249,414.29 Importation of Goods other than Capital Goods P6,680,474.67 P12,171,681 .09 Domestic Purchase of Services Services rendered by non-residents Total Input VAT Out of the reported input VAT of P33,249,414.29, petitioner is claiming refund in the amount of P17,807,940.34,34 computed as follows: Total Ratio of Input Vat Input Zero-rated Sales Tax over Total Sales attributable to Year 2011 zero-rated sales 1st Quarter f'> 6,564,756.30 49 .30% f'> 3,236 ,375.30 2nd Quarter 6 ,680,474 .67 41 .33% 2,760,738 .17 3rd Quarter 12,171 ,681 .09 57 .60% 7 ,010 ,910.06 4th Quarter 7,832,502 .23 62 .54% 4,898 ,379 .06 p 17,906,402.59 Total p 33,249,414.29 Less: Input VAT applied to Miscellaneous Sales (98,462 .25) Total Input VAT claimed for refund/TCC p 17,807,940.34 Petitioner submitted various suppliers' sales invoices, official receipts, Bureau of Customs (BOC) Import Entries and Internal (Y/ �3 CTA Docket, p. 669 . 31 CTA Docket, p. 676 . 32 CTA Docket, p. 683 . 33 CTA Docket, p. 690 . 34 Exhibit "P-20", A27 , CTA Docket, p. 711 .

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Revenue Declarations (IEIRDs), BOC official receipts, BIR Form No. 1600 with BIR EFPS filing acknowledgement and payment confirmation receipts, Single Administrative Documents, Statement of Settlement of Duties and Taxes, Certifications from Authorized Agent Bank, cash or collector's receipt, tape receipt and other documents35 in support of the P33,249,414.29 input taxes reflected in its Quarterly VAT Returns for the four quarters of the year 2011. Upon verification of the aforesaid documents, the Court-commissioned independent CPA (ICPA), Mr. Protacio T. Tacandong of Reyes Tacandong & Co ., found that out of petitioner's reported input VAT of P33,249,414.29, only the amount of P32 ,849,636.85 is properly substantiated, detailed as follows :36 . ~--�� �� 1 Amount i Total I + .................::::.......:���::::������ +����������������������������������������������������������� --- ........ [ l Input VAT on domestic purchases of i Q. R:R~ .dQR .37 i goods supported by original TIN VAT ... �������������������-~ ................................................................................... ~ 1. Invoices with BIR registration , dated within ,..............:.......:...>� 605����,��5���1����9�����.�6-���9������-�i������-~���-������--��----�--��-���-���� �����������-����----�---1 the period January to December 2011 , issued in the name of the Company 670,641 .33 ! II Input VAT on domesti.C purchases of I services supported by original TIN VAT II 2� 5,743 ,113 . Official Receipts (ORs) with BIR 10,781 ,393.07 I registration, dated within the period 5 ,996 ,996 .56 . , ~::_:_:f~~: ~:=~a~~ ' January to December 2011 , issued in the ~~~:.~:.~;~� 27,875,509 .01 [____ _J __ ~~p;;E?~~;~� J....... ..........189 63 .. .......�. .........+ ... .... ................................ ....... I Input VAT on domestic purchases of i.' goods amounting to less than P1 ,000 Annex G-20, j ............... 324.39 !i i: .... F'..f!9!?~~ 3 I supported by original TIN VAT Invoices 1 1 � 1 with BIR registration , dated within the Annex G-30, 9 _64 1 1 I rne;~~dnJ:~~aoit~oe~eoc~~::; 2011' issued A~~::J?4oo, f [����� � .. i Page 101 i 52.56 i ...... =~~-== ) Input VAT on domestic purchases of ~;e;f!~~?~� ~ ~~~: ~~ ~ _~ :~;~~~~~~~~~~~~~atlo~~~~~~~;~~h ~.;e;f!~~3.0'.. . . . . ......... 1............................................4...3......0.....�. .8....4........+�������������������������������������������������������������������������������������! ~!~~=~~~a6i~~~~~~rd2~~~i.ni~:~~e~~ot~e ..]... . . . . . 4. .... ~;e:~-~#1~� � � � �-~-~~:~= ~ ����-��-��..��-� . .........J ~�.:;f!~Q~~ � !�������������������+�����n� � �a�����m��������e��������o� � �f� � �t���h�����e� � � � �C������o������m� � � � �P�����a�����n�����Y� � � � � �������������� � � � ����������������������� � � � � ������������������������������+! ~ :~~~:~~ j ~p;;;l;;~ 172.63 1 ~~~:~=~:?: [................................... ; . � Input VAT on purchase of capital goods l 188 871 .61 Annex l-20� exceeding P1 million supported by original TIN VAT Invoices with BIR registration t A:;P;;a;;g:;e~; i1=:0~i8O ,.............. .....'...............'................ �������������----�-�����---������������ 5. "'' """ l-30� � 203 095 57 issued in the name of the Company duly amortized Page 110 ,. i....... � Annex l-40� 199,426.06 756, ",,,...,... ..,.., Jn~.g~e..!1J1;2?................~--~~~~~-������������������� :~ l----l�m���������������������������m�m��������������m����������������� ���m���������������m�m�������������� Input VAT on importation of goods Annex J-10, 8,033.00 6. supported by original Import Entry Internal Page 113 Revenue Declarations (IEIRDs) with 35 Exhibits "P-71 " to "P-101 " and "P-104" to "P-172". 36 Exhibit "P-21 ", pp. 10-12.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 ............................................................................................... ������������ ���� .................................................................................... ...........................................................................r ........................................................................T .... � ��������� �������������������������� ��������������������������1 il..... ,i. .... .. . . . . . . . ~.~.~~.~:. . . . . . ........... ........... ������i � � � �~�~�~�i�~.i~� �~�~�~�~� � � � ��� � � � � � ~�=�~u~�~� .......... [.......... T~~~~ ............. ..............................! machine validation and/or origina~ ~ureau 1 ! i 1 of Customs (SOC) ORs and/or ong1nal � Annex J-2Q, I 5 ,536 .00 ! Bank ORs dated within the period January i1 Page 114 I [ to December 2011 and SOC Certifications i Annex J- Q, l J f!_f!g~JJ3.? .....! 2,313.00 ! ~~:~~~:?.?. ; .. 1 ........ ........ ...................... ! Input VAT on importation of goods Annex K-1Q, ! 7,973.00 I1 Page 116 ; -������������������������������������������������������������-� -�-----l---����������������������������������������������������������������������r����� I I supported by Single Administrative L A~;~e._KJ~2~QT � . I . I Documents (SADs) , Statement of ....... ~2.9~~�?? ; .... ................... ; J ! 7 ! Settlement of Duties and Taxes (SSDTs) I I and Certifications from Authorized Agent Annex K-3Q, [ I Bank (AAB) and the SOC . Printing of 346,980.00 ! ! Page 118 i i ! SADs and SSDTs from VASP verified . i i ' Annex K AQ, i 470,?''\7 nn Page 119 72,320.00 I �!- Tni)LiTvi\Tonimportation�aigoods l r.i � � - � Annex L-1Q, Page 120 I 8� ' supported by SOC-verified Single 32,485 .00 32,485 .00 Administrative Document (SAD) and Certifications from AAB and the SOC Input VAT on importation of goods Annex M-3Q, 3,429 .00 6 ,517 .00 9. supported by SOC-verified photocopy of Page 121 3,088 .00 SOC ORs and certification from the SOC Annex M-4Q, Page 122 Input VAT on services rendered by non- -1Q, 72 ,965.76 n. 123 67 ,797.60 10. residents supported by e-filed SIR Form No. 1600 and payment confirmation from Annex N-4Q, Page 124 140,763 .36 the SIR Input VAT on domestic purchase of Annex 0-1Q, 2,560.92 6,819.40 i services supported by TIN VAT Cash or Page 125 2,404 .34 Collection Receipt with SIR registration , 1,854 .14 11. dated within the period January to Annex 0-3Q, December 2011, issued in the name of Page 126 the Company and containing all the required information Annex 0-4Q, Page 127 Total Input VAT Properly Substantiated P32,849,636.85 P32,849,636.85 As regards the rema1n1ng input VAT, the ICPA found the amount of P399,776.86 as input VAT with exceptions, as follows: 37 ...............................................................................................................................................................................................................................................T ...........................................................................T''""' i Reference Amount ......~ ...................................................................... .1.... .............................................l .............................! ;~~~!~~~: I Input VAT on purchase of capital goods supported 13 232 13 LP , . +��� ����������������������������������������������������������+ .) 1. ! ~~p~l~e~t~n~o0':Tw~~dn~~;~~e~~~~:~~t~~sfrom i A~~:!J~gQ + ...13,2~~: 1? :�������������������������������~ I already remitted to the SIR [ F'_f!g~J}q ' . L ~~:~~~: ~~ J :.: :~~~~1~� ' =~-~�=~~ �~~ ] ...................f'''.......... ................................................................................................................................ +����������A��::� ;:..... I 13 ,232 .13 ~~~~~: =: . :~:~~_j -- I l lnpul VAT on domeSI;c puccha'e of good' Ii I 2. supported by documents other than a TIN VAT I I invoice I- + . ' omo:.....; i I F'_<!9f!J3..3.. i ~� 1~~ �~~ ~' ' Annex Q-3Q, j Pa e 134 f~?g~~J}i~� � � � � � � � � �~-___::2 7~9 1............... ) �����������������������=����:�:���=��������������������������������������������������������������������������������������������������������=������������������������������������������������������������������!............. 10,400.56 i Input VAT on domestic purchase of goods �:96::__:8:. I_ 13. 1 supported only by a photocopy of the TIN VAT Annex R-3Q, 490.18 ! 490.18 ' Page 137 ..........L.J.!:!v~:>.i.~~������������������������������������������������������� ....... ' - - - - - - - - '[m ��� .!()1 37 Exhibit "P-21", pp. 12-16.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Page 15 of 21 l Nature ������..................................... ~:;:;:~:: r���� Amount � � ----~:tal -~ p.. urct1ase ,_..__............,.......,..n.....p...u.....t.....t..a......x.......0.....n.........d...,.o......m.......e......s....t...i,-c....... ot9oods 1�������� ���� - ����� ��� 1 ������������������������������������������������f f supported by a VAT invoice not issued in the Annex S-2Q, 261.40 261 Ao I Page 138 +- - - - - - - -+ : name of the Company or without the name of the i i c : ! 4� 1- ... j---Q. t:J:l_P9r:!Y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �������������������������������������������������������������������������������!������ il rnput VAT on domestic purchase of goods Annex T- .................5..2...6....48 lI I supported by a TIN VAT invoice with name of the E'..<!9 214.29 1 Company written/stamped/altered without Annex T-3Q, _ 425 79 I countersignature or with countersignature but i without letter from supplier �1: ���������������������������������������������������������������.: ! ........ ................... .................E'!!9f!J'!1 ................. Annex T-4Q, ����������-�--�+ .......................................................................................................................................................................................................................1....... Page 142 I 1,236.48 ~ �~?~ :?~ ! Annex U-1Q, Page 154 8,035 .72 Input VAT on domestic purchases of goods Annex U-2Q, ! 4 , 99~~ . 391 : supported by tape receipt with the name of the Page 162 I Company written/stamped/altered without _e;_~~t6,.,Q a. i...... .....,...P...... .�..............f.............4....�.1...2_..5...�.1...2........; ............................................ i I countersignature or with countersignature but Annex U-4Q, 8,452.37 I 25 , ~n" . ~n I without letter from supplier ! Page 174 ! t Input VAT on domestic purchase of goods Annex V-4Q, i 7. : supported by a TIN VAT invoice that is not BIR- Page 175 49 .29 49.29 j E~9i!'.!~~~g . . _ .. .......... _ ! Input VAT on domestic purchase of goods I� ii 8� supported by a TIN VAT Invoice issued in the Annex W-10, 549 .57 549 .57 name of the Company but without the Company's Page 176 ! i TIN and/or address Annex X-3Q, ...................4i ������������������������������-�--���- ����������������-���-�-���-���������� Page 177 Input VAT on domestic purchase of goods I supported by a TIN VAT Invoice issued in the Annex Y-1Q, I! 9 � Page 178 name of the Company but with the Company's 142.50 142.50 TIN and/or address stamped/added/altered I without countersignature or with countersignature . .J ~~!Y.'.'!!b9.~JI~!~~r.f~9.1!'!'.1J.PPii~r. ! Input VAT on domestic purchase of goods I 10. supported by a VAT invoice but not dated within I the VAT taxable year (i .e., 2010 or 2012) 792.36 792 .36 Input VAT on domestic purchase of goods Annex Z-2Q, i 60 .00 12 ,2 7 4 .2 9 supported by an invoice with TIN# only; TIN-V; Page 179 11 . Tan-V; Tan-VAT; TIN-NV/Non VAT; l i 10.80 stamped/handwritten TIN-VNAT; or no TIN Annex Z-4Q, invoice Page 180 12,214.29 ! ; .......................... . Input VAT on domestic purchase of goods ���������������������~ 108.68 I 12 � .......................................... j supported by a TIN VAT invoice with alteration in Annex AA-4Q, 10.80 date without countersignature or with I i i Page 181 I j countersignature but without letter from supplier "" '' ~~~ :~~omj 1.1 108.68 j l l~~~tvAr~~d~~~~ti~~~;~h~~~~i~~~d~ Annex BB-2Q, ���������������---�����-���-������ .. J I supported by a VAT invoice with alteration in Page 182 i 13. ! taxable and or gross amount without . . . ....... .. �����������������������~ countersignature or with countersignature but I I without letter from supplier ! +m ''''''''''''''''''''' . 14�I Input VAT on domestic purchase of goods supported by a TIN VAT invoice issued in the 113.74 name of the Company where VAT was not separately indicated ��������������������! ������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������������r "'"'"'""""i--_ _ _ 30_2_.9_2-4 Input VAT on domestic purchases of services . 1,031 .22 15. supported by documents other than a TIN VAT ��������!��������������������������������������- ...................!.. OR 397.44 1

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 , .......................................... ...................................................................................................................................................................................� ..............................................................................�.............................................................. ...... . Nature Reference .L.... Amount I T nameoftheCompanyorwithout name of the AnnexEE~2 Q, 157.81 :;~:: t m:ll.np/1a;g;Eet~t1~~9�33o: t�������������������������:: ~.===: t�������������������� 1 I Company Pa: 5 ,027.14 I ..........1................ ........................................ .................................................. ...,...........P......a....g,.E..e.......1.....9...5............... +- - -6_6_2_1._6_ !;. ..............5.....�..9......1...0...�.1...1....... ; i Annex FF-20, 198 �96 Page 196 I Input VAT on domestic purchase of services I supported by a TIN VAT OR with the name of the Annex FF-30, 2 5 5 .10 I 17. Company written/stamped/altered without Page 197 1 I countersignature or with countersignature but ~ ~;~~::,~:~~~~~,.-0,::., ::~;~;~;:. ~,, I I ::::: i :� I_,! :J ~~:~~1:JRbullhenameoflhe ] ::::~~! 1 .0~~~~ [_~~ 08 ~~:~~ ~ ' F'..C!9f!..?.:9. 1 L .... ...... ~~~~f~: ~~~:;:~:=- 1 . . . . . . . . . . I ................j 19.1~;~;~�~;.~;5~~~~~:~~J;~!~1~ j 1 Page 208 f---2_5_,8_3_4._2_7--+l 1~~�~-~~-63 I. nnex 11-10, 13,101 .83 p 217 2,433.61 I I~~~~~~1h~y6~~ep~~~~!p~:~:~~t ~~;;~~~:.~� J . I Input VAT on domestic purchase of services the Company's I ___f!.FJ!!.......................................,................................................................., I I 20� written/stamped/altered without countersignature 2 , 90~) . 1 01 : 3,452.49 ~ !::::::.:~:P:~~~::o::;::,~;~ J ~~~:'is1_ � J ~~nedz~~~~;:>'s~ut ~:~~~~~ +!-__ i! 21 j supported by a TIN VAT OR issued in the name of j AnnexJJ-10, I 1 ,0 6 6 .2 5 1_0,_6_6._2_5-r[ without the company's TIN [ ....... ������������; Input VAT on domestic purchase of services l i supported by a TIN VAT OR issued in the name of ' 122 the Company but with the Company's TIN and/or Annex KK-20, 857.08 ! 8 5 7 .08 address stamped/added/altered without Page 253 i -~cio!ubn9_t~e:~_tr_sli~g!n!~artfu~9re~o- ~r~wPP!itihf::c!toun....t..e....r...s...i..g.....n....a....t..u.. r..e........b.. ut � L.. _.. _ ..... - - - - -+ ...............................; ,! _ _ ~:0~~~~~~~~~~~~-/'~t;:~~::~:~~~~meof ~~:;.~~~- ~--~~ ~ 1_ j i I 23 71 1 � the Company but with misstatement in the [ .. __ _I � Annex LL-30, l i Company's TIN and/or address Page 255 460.13 j ...... 907 54 ] .... ........ . . . ~ ;~tilii~:r~~:i~r~~;i~~~~~~t" ,_A";:~:~;a.�����1i-___1_1_9.0__3-11. 119.03 i i i Input VAT on domestic purchases of services An~ex N~5~0� Ii ........ ���������i I 25. ! supported by receipts with TIN# only; TIN-V; TIN- I age 6 .268 .80 I i I 1 VAT/NV or no TIN OR 6 ,268 .80 I t .......... 1 ! Annex 00-10, ! - - - -- - _-- 4 m---- .... P.C!9..~ ?.?.EJ. 428 57 Annex 00-20, Pa e 259 + ..... ....... . ;................................., 7,328 .06 I' Input VAT on domestic purchase of services supported by a VAT OR printed with "not allowed 663.22 I for claiming Input VAT" (or similar wordings) I I! Input VAT on domestic purchase of services 2,831.87 ! 27. I supported by a VAT OR with alteration in taxable 730.40 or gross amount without countersignature or with 1 1 2 .51 I countersignature but without letter from supplier

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 ..........................................................................................................................................................................................................................................r �����������������������������������������������������������������������������r �������������������������������������������������������������r ������������������������������������������������������-���� ~- Reference Amount I fl ,nput V: :n:::,,:p~;:a=::- 1 ! supported by a TIN VAT OR issued in the name of I 128 � the Company where VAT was not separately 50,101 .12 1 1 I indicated ��������������������������������������������������������������+ 133.63 ii 50 ,9 1 I Input VAT on domestic purchase of services Annex RR-1Q, 213 .58 Page 269 I I supported by a TIN VAT OR with alteration in the I I 29. amount of VAT separately indicated without II � countersignature or with countersignature but Annex RR-2Q, 75 .54 289 .12 without letter from supplier Page 270 1.....,.................,...,...,..,...:::::.................,...................................,...................,......................,.....................................,..........,...,................... +�������;�������...................:o���:;::�����::..�::�..���������+- - - - - - +����������..................................................... i 1 3~~~~~:~~~~~~~~:~~~: 1~; ::::~:~': :~ 1 -2-_5._2:_-:--:--:i I I 31� purchase of capital goods (e.g., arithmetical error, ! ! ' .- . .- . .- . -- . .- . . .- . .- . 2. s ..�;:;:���;;�;;;:;;� :.............................................:.����:��:������:��� t: __j i rounding differences) 0 .05 0.17 I !...... ...........1!������"' . �������������~�� ' 6 .53 I Overcla imed portion of Input VAT arising from ! erroneous computation of Input VAT on domestic 132 i purchases of goods(e.g., arithmetical error, l rounding differences) I j 2.23 128.40 t...... .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .f. ���������+!- - - - - -+...................................................j ! 663 .76 .......+�����. -�......................................................;.................................................................j ! Overclaimed portion of Input VAT arising from 7,092.05 ! erroneous computation of Input VAT on domestic L ��������-~ ...... �������������������������������������������������������~ ........................................................... ! purchases of services (e.g., arithmetical error, rounding differences) f ............, .................................................................................................................................................................................................................!f .. j Overclaimed portion of Input VAT arising from ........ j 34. foreign exchange (forex) rate used in foreign currency denominated purchases of services CCI.~g~~ ............................................................................................................................................... ; .......,.... 0.44 I 55 . i ~~P.:;tlo..;~� J =~�~~~-~~ l 135 I ~~~~~~:~~r~0s~~~~~i~~r~~~~~~~r~~~~:~~t ~~p;;~~~~� :~..:~.--~:..::.:~..:.~....~,1~ m ... ... r L I � 1ava;table fo<Verificat;on AAnnnp!e::~.e.:x3:X0;t~ .- j '1 36. I �~---1' Input VAf . . . .,.....................P......~9~;1..9!. . . . . . . . . . .~-----+............................�. . . . . . . . . .�. . . . . . . . ., ondomestic purcha-se of capitai -goods- Annex YY-4Q, where supporting documents were not available Page 308 147.32 147.32 jf~t. Y~r.if.!~~!ign. _ _ _____ _ I ! Input VAT on importation of goods where 4 ,247 .00 I j 37. supporting documents were not available for ! ' verification : l 3,084.00 7,331 .00 i i ..................................................,_ �����������������������������������������'! H ! ~ 399,776.86 ~ 399,776.86 ~ Total ������������������������������������������- ...........................................................................................................................................- ���������������������������� ������������������������������������- ~

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 Upon review and scrutiny, the Court finds the above findings of the ICPA in order. The input taxes of P399, 776.86 should be disallowed because either the supporting invoices or official receipts did not meet the substantiation requirements under Sections 11 O(A), 113, 237 and 238 of the 1997 NIRC, as amended, in relation to Sections 4.110-1, 4.110-8 and 4.113-1 of RR No. 16-2005, as amended, or it cannot be ascertained whether the alteration in the supporting invoice or official receipt was made by the authorized representative of the petitioner's supplier. It is to be noted that there is a minor discrepancy of P0.58 between the P33,249,413.71 38 input VAT verified by the ICPA and the P33,249,414.29 input VAT declared by petitioner in its 2011 Quarterly VAT Returns due to rounding-off differences. 39 Therefore, out of petitioner's claimed input VAT for taxable year 2011 in the amount of P33,249,414.29, only the amount of ~32,849,636.85, as summarized by the ICPA in his report dated August 16, 2013, 40 represents petitioner's valid input VAT, broken down as follows: r������ ............................... ,. .......... .. i I 1-- ~-~-~~-~-~ V~~ -l _]_ Total Inputi 2 � � � � � � � . 1st Quarter I ~ 66:,5sa067;,716200:.43a6�-�1! t ~d�� a�~~rier t l ~if~Tp~~:m~ i Allocation of validly substantiated input VAT payments to petitioner's zero rated sales and sales subject to 12% VAT Details of petitioner's sales for the four quarters of the year 2011 with corresponding percentage are shown below. Year 2011 12% VATable 12% VATable Zero-Rated Sales Total 1st Quarter (Exh P-12 I P-24) Sales to Private Sales to 547 ,794,559.42 1'111 '162,164.59 % to Total Sales 49.2992451 % p - Government 100 .0000000% 0.0000000% 563 ,367 ,605.17 50 .7007549 % 38 ~32 , 849 , 636 . 85 plus ~399 , 776 . 86 . 39 Exhibit "P-21 ", p. 18 and Annex AAA. 40 Exhibit "P-21 ", pp. 10-12.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 2nd Quarter (Exh P-13 I P-25) p - 557,555 ,253.12 392 ,695 ,800.00 950 ,251 ,053.12 % to Total Sales 58 .6745209 % 41 .3254791 % 100 .0000000 % 0.0000000% 3rd Quarter (Exh P-14 I P-26) p 551 ,356.34 549 ,159 ,633.47 746,782 ,658 .70 1,296 ,493 ,648 .51 % to Total Sales 42 .3572945% 57 .6001787 % 100.0000000% 0.0425267% 4th Quarter (Exh P-15 IP-27) p 325 ,000 .00 625,267 ,505.69 1,044 ,396 ,927 .20 1,669,989,432 .89 % to Total Sales 37.4414049% 62 .5391339% 100.0000000% 0 .0194612 % The substantiated input VAT of ~32 , 849 , 636.85 is not entirely attributable to petitioner's zero-rated sales since petitioner had sales to government and private entities for the year 2011 which were subject to 12�/o VAT. Allocating, therefore, the substantiated input VAT of ~32 ,849,636.85 based on the percentage of each type of sales to total sales would show that only the amount of P17,691 ,831.87 is attributable to zero-rated sales while the rest of the input VAT pertains to sales subject to 12% VAT, i.e. input VAT attributable to sales to private entities in the amount of P6,615.11, and input VAT attributable to sales to government in the amount of P15, 151 ,189.87, as shown below: Year 2011 Input VAT Input VAT Input VAT Total 1st Quarter Attributable to Attributable to Attributable to 6,507 ,120.36 2nd Quarter 12% VATable 12% VATable Zero-Rated Sales 6 ,586 ,760.48 3rd Quarter Sales to Private 4th Quarter Sales to Total Government p - p 3,299 ,159.14 p 3,207,961 .22 p - 3,864 ,750.16 2,722 ,010 .32 5,107.89 5,087 ,538.65 6,918,362 .90 12,011 ,009.44 1,507 .22 2,899 ,741 .92 4,843,497.43 7 ,744 ,746 .57 p 6,615.11 p 15,151 ' 189.87 p 17,691,831.87 p 32,849,636.85 Substantiated input VAT's excess over output VAT After deducting the input tax of P6,615.11 attributable to sales to private entities from its output VAT liability of P105, 162.76,41 petitioner still has a net amount of output VAT payable for the year 2011 in the amount of P98,547.65, computed as follows: Output VAT Due p 105,162.76 6,615.11 Less: Input VAT 98 ,547 .65 Net Output VAT Payable p 41 Sum of ~66,162 . 76 (Line 158, Exhibit "P-14", Docket, p. 683 and Exhibit "P-26") and ~39 , 000.00 (Line 158, Exhibit "P-15", Docket, p. 690 and Exhibit "P-27").

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 By deducting the net amount of output VAT payable of P98 ,547.65 from petitioner's total input VAT attributable to zero-rated sales of P17,691 ,831.87, a refundable amount of P17,593,284.22 is in order: Input VAT Attributable to Zero-Rated Sales p 17,691,831 .87 Less: Net Output VAT Payable 98,547 .65 Net Amount Refundable p 17,593,284.22 Input VAT was not applied against any output VAT liability in the succeeding quarters Although the claimed input VAT was carried-over by petitioner in its succeeding Quarterly VAT Returns for the year 2012,42 the same remained unutilized until it was deducted as "Any VAT Refund/TCC Claimed"43 in its Quarterly VAT Return for the fourth quarter of 2012. Thus, the excess input VAT of P24,285,282.5044 as of the end of the fourth quarter of 2012 , which was carried-over to the succeeding first quarter of 2013,45 no longer included the subject claim . In fine, petitioner has sufficiently proven its entitlement to a refund or issuance of a TCC in the amount of P17,593,284.22 , representing its unutilized input VAT incurred for the four quarters of the year 2011 attributable to its zero-rated receipts for the same period. WHEREFORE, premises considered, the instant Petition for Review is hereby PARTIALLY GRANTED. Accordingly, respondent COMMISSIONER OF INTERNAL REVENUE is ORDERED TO REFUND or TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner CE CASECNAN WATER AND ENERGY COMPANY, INC. in the reduced amount of P17,593,284.22, representing petitioner's unutilized excess input VAT attributable to its zero-rated sales of generated power to NIA for the four quarters of the year 2011. rYI 42 Exhibits "P-1 6" to "P-19", CTA Docket, pp. 698-704; Exhibits "P-62" to "P-65". 43 Exhibit "P-19", line 23D, CTA Docket, p. 704 and Exhibit "P-65", line 23D. 44 Exhibit "P-1 9", line 29, CTA Docket, p. 705 and Exhibit "P-65", line 29. 45 Exhibit "P-70"' line 20A.

DECISION CE Casecnan Water and Energy Company, Inc. v. Commissioner of Internal Revenue CTA Case No. 8620 SO ORDERED. ROMAN G. DEL ROSARIO Presiding Justice WE CONCUR: ~ N. 1"1~. c~ ER~.� UY CIELITO N. MINDARO-GRULLA Associate Justice Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court. Presiding Justice