PNOC ENERGY DEVELOPMENT CORPORATION (`PNOC EDC`) v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY THIRD DIVISION ENERGY DEVELOPMENT C.T.A. CASE NO. 7792 Members: CORPORATION, Petitioner, -versus- BAUTISTA, Chairperson, PALANCA-ENRIQUEZ, and COMMISSIONER OF INTERNAL COTANGCO-MANALASTAS, JJ. REVENUE, Promul gated : Respondent. JUN 11 2012 c;TY3T~~ .d:fl'lf/� -- . X ---------------------------------------------------------------------------------------- X DECISION PALANCA-ENRIQUEZ, J .: THE CASE This is a Petition for Review filed by Energy Development Corporation (hereafter "petitioner EDC") praying for the issuance of a tax credit certificate (TCC) or refund of the total amount of P293,058,460.62~

C.T.A. CASE NO. 7792 2 DEC IS ION representing petitioner's excess and unutilized creditable income taxes attributable to its zero-rated sales of steam and electricity for the year 2006. THE PARTIES Petitioner EDC is a corporation duly organized and existing under the laws of the Republic of the Philippines under Securities and Exchange Commission Registration No. 66381, with principal office at Building V, Energy Center, Merritt Road, Fort Bonifacio, Taguig City. On the other hand, respondent is the duly appointed CIR who is mandated by law to enforce and implement the National Internal Revenue Code of 1997, as amended (hereafter the "NIRC of 1997, as amended"), and related statutes, including, among others and in proper cases, the issuance of a tax credit certificate, with office address at the BIR National Office Building, Diliman, Quezon City. THE FACTS The facts, as stipulated by the parties in their Joint Stipulation of Facts and Issues, are, as follows: "3 . Petitioner is a domestic corporation primarily engaged in the business of exploration, development and utilization of renewable energy resources, including selling of electricity and geothermal steam. It is duly registered with the Bureau of Internal Revenue (BIR) as a VAT taxpayer. (9�

C.T.A. CAS E NO. 7792 3 DECISION 4. On April 26, 2006, July 26, 2006, October 25, 2006 and January 29, 2007, petitioner filed its quarterly VAT returns for the 1st to 4th quarters of 2006. Subsequently, petitioner filed an amended VAT return on December 28, 2007 for the quarter ending December 31, 2006, declaring among others the amount of Php 293,058,460.62 as creditable VAT input attributable to its zero-rated electricity and steam sales. 5. On January 7, 2008, which is within the two-year period under Section 112(A) of the NIRC, PNOC-EDC duly filed with the large Taxpayer's District Office (LTDO) of Makati City a claim for tax credit/refund, with complete attachment of documentary support, of PNOC-EDC's input VAT attributable to its zero-rated sale of steam and electricity amounting to Php293 ,058,460.62 for the year 2006." Due to respondent' s failure to act on said claim, on June 5, 2008, petitioner EDC filed the present Petition for Review. In her Answer, respondent by way of special and affirmati ve defenses alleged the following: "3. Petitioner' s claim for refund/tax credit of its alleged unutilized input taxes for the 1st quarter of 2006 has already prescribed. 4. Petitioner failed to demonstrate that the tax subject of the case at bar was erroneously or illegally collected. 5. Taxes paid and collected are presumed to have been made in accordance with law and regulations, hence not refundable. 6. In an action for tax refund/credit, the burden of proof is on the taxpayer to establish its right to refund and failure to adduce sufficient proof is fatal to the action for tax refund/credit.

C.T.A. CASE NO. 7792 4 DECISION 7. It is incumbent upon the petitioner to show that it has complied with the provisions of Section 204 in relation to Section 229 of the 1997 Tax Code including Revenue Regulations No. 5-87 as amended by Revenue Regulations Nos. 3-88 and 7-95, as amended, as well as the requirements imposed under Republic Act No. 9337. 8. Claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, G.R. No. L-13509, January 30, 1970, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 121)." Petitioner EDC presented Jose C. Catequista, Felicito A. Gesite, and Romeo T. Lupac, as witnesses, and formally offered documentary evidence, marked as Exhibits "A" to "JJJJ", inclusive of their submarkings, which were admitted by the Court, except for Exhibits "A" to "J" for petitioner's failure to have the same identified, and Exhibit "W-23" for petitioner's failure to submit the duly marked document, in the Resolutions dated September 13, 2010 and December 13, 2010, after petitioner filed a "Motion for Reconsideration". On the other hand, respondent, thru counsel, manifested that she will not present any evidence and submitted the case for decision.

C.T.A . CASE NO. 7792 5 DECISION Both parties were granted thirty (30) days from March 7, 2011 to file their simultaneous memoranda afterwhich, the case shall be deemed submitted for decision. Both parties having filed their respective memorandum, the case was deemed submitted for decision. ISSUES As stipulated upon by the parties, the following are the issues for the Court's consideration: I WHETHER OR NOT PETITIONER HAS UNUTILIZED INPUT VAT IN THE AMOUNT OF P293,058,460.62 FOR THE FOUR (4) QUARTERS OF 2006 ATTRIBUTABLE TO THE PETITIONER'S ZERO-RATED SALE OF STEAM AND ELECTRICITY. II WHETHER OR NOT PETITIONER'S ALLEGED UNUTILIZED INPUT VAT FOR THE FOUR (4) QUARTERS OF 2006 HAVE BEEN APPLIED AGAINST ITS OUTPUT TAXES FOR THE SUCCEEDING TAXABLE QUARTER/YEARS. III WHETHER OR NOT PETITIONER'S SALE OF STEAM AND ELECTRICITY QUALIFIES AS ZERO-RATED SALES. IV WHETHER OR NOT PETITIONER'S CLAIM FOR REFUND/TAX CREDIT OF ALLEGED INPUT VAT (J� ALLEGEDLY ATTRIBUTABLE TO ITS ZERO-RATED SALES OF STEAM AND ELECTRICITY FOR THE

C.T.A. CASE NO. 7792 6 DEC ISION (4) QUARTERS OF 2006 IN THE TOTAL AMOUNT OF PHP293 ,058,460.62 IS SUBSTANTIATED BY DOCUMENTARY EVIDENCE. Principal Issue The foregoing issues boil down to the principal issue of whether or not petitioner is entitled to a claim for refund of its alleged unutilized input VAT for the four (4) quarters of 2006, allegedly attributable to its zero-rated sales of steam and electricity. THE COURT'S RULING The petition is partly meritorious. In its original Quarterly VAT Returns for taxable year 2006, petitioner declared, as follows: First Quarter Output Tax Second Quarter Output Tax PI ,093,645.98 Va table 0.00 Sales/Receipt P4 ,525,402 ,553.64 p 13 1,237 .52 Pl ,ll7,587.80 P134, 110.54 0.00 Sale to P4,526,496, 199.62 Government 0.00 00.00 00.00 Zero Rated Sa les/Recei p ts P5 ,328,461 ,769.38 Exempt Sa les/Receipts 00.00 00 .00 00.00 Total Sa les/Receipts and Output Tax Du e Pll4, 113 .17 P5 ,329,579,357.18 P134, 110.54 Input Tax Purchases Input Tax Purchases Input tax carried over from previous quarter P20,092,465 .36 p 19,981 ,978 .37

C.T. A. CAS E NO . 7792 7 DEC IS ION Current Transactions P urch ase of Capital Goods not exceedin g Pl M illion 00.00 00 .00 00 .00 00 .00 00 .00 00 .00 00 .00 00.00 Purchase of Capital Goods exceedin g Pl M illion Do m es tic Purchases of Goods Other than Capital Goods 00 .00 00.00 00.00 00.00 Importation of Goods oth er than Capital G o od s 00 .00 00.00 00 .00 00.00 Dom estic P urchases of Serv ices 00 .00 00 .00 00.00 00 .00 00.00 00 .00 Total Current P20,092,465 .36 P u rc ha ses 00 .00 00 .00 T ota l Availa ble Input Tax p 19,981 ,978 .3 7 (Exhibits "E" and "F") Vata ble T hird Quarter Output Tax Fourth Qua rter Output Tax P I,392,3 94. 14 p 167,087 .30 P2, 80 I,670.82 P3 36,200. 50 Sales/R eceipt 356, 142.75 42 ,73 7 . 13 356, 142.75 42,737.1 3 Sale to ?5 ,434,636,648 .88 00.00 P5 ,56 1,386,464.80 00.00 00.00 00 .00 Gove rnm e nt P5 ,436,385 , 185 .77 Zero Rated Sales/R eceipts Exempt Sales/R eceipts Tota l Sales/R eceipts a nd Output Tax Due P2 09 ,824.43 ?5 ,564,544,278 .3 7 P378 ,937.63 Input Tax Purchases Input Tax Purchases

C.T.A. CASE NO. 7792 8 DECISION Input tax carried over from previous quarter p 19,847,867 .83 p 19,664,635.40 Current Transactions Purchase of Capital Goods not exceeding PI Million 00 .00 00.00 00.00 00 .00 00.00 00 .00 00.00 00 .00 Purchase of Capital Goods exceeding PI Million Domestic Purchases of Goods Other than Capital Goods 00 .00 00.00 208 ,824,709.45 2 1,390, 163.78 Importation of Goods other than Capital Goods 00.00 00.00 00 .00 00 .00 Domestic Purchases of S e r v ices 00.00 00.00 77 1,250,483.47 80,696,423 .84 00 .00 00 .00 Total Current P20,092,465.36 00.00 80,696,423. 84 Purchases p 12 1,751 ,223.3 0 (Exhibits "G" and "H '') Total Available Input Tax While in its amended Quarterly VAT Returns for the fourth quarter of 2006, petitioner declared, as follows: Va table Sa les/Receipt Fourth Quarter Output Tax Sa le to Government P2,80 I,670.82 P336 ,2 00 .50 Zero Rated Sales/Receipts 356, 142. 75 42,737.1 3 Exemp_t Sales/Receipts Total Sales/Receipts and Output Tax Due P5,561,386,464.80 00.00 00 .00 P378,93 7.63 Input Tax P5 ,564,544,278 .3 7 Purchases

C.T.A. CASE NO. 7792 9 DECISION Input tax carried over from previous 00 .00 p 19,664,635.40 quarter Current Transactions 1,361,479,053.87 00 .00 Purchase of Capital Goods not exceeding 103 ,3 11 ,959 . 19 163,377,579.66 PI Million Purchase of Capital Goods exceeding 00 .00 10,751 , 143 . 16 PlMillion 1, I04,207,320.46 Domestic Purchases of Goods Other than ?2,568,998 ,333 .52 00 .00 Capital Goods 118,929,737 .80 Importation of Goods other than Capital P293 058_,460.62 Goods P312,723 ,096.02 Domestic Purchases of Services Total Current Purchases (Exhibit "!") Total Available Input Tax Based on the foregoing, the input VAT for the 4th quarter of taxable year 2006 in the amount of P293 ,058,460.62, the subject of the claim for refund or issuance of TCC in the instant case, is attributable to petitioner's total sales of P5,564,544,278.37 for the 4th quarter of 2006 composed of a) vatable sales in the amount ofP2,801 ,670.82; b) sale to the government in the amount of P356,142.75; and c) zero-rated sales in the amount of P5 ,561,386,464.80. Considering that petitioner is claiming for refund or issuance of TCC based on its zero-rated sales, then only the portion of the input VAT of P293 ,058,460.62 that is attributable to zero-rated sales will be considered by the Court, computed, as follows: Zero rated sale P5 ,561 ,3 86,464.80 Divided by total sales for the fourth quarter 5,564,544,278 .37 Ratio of zero-rated sale over total sales 99.94% Multiplied by total input VAT for the 4th quarter P293 ,058 ,460.62 &ffiJ

C.T.A. CASE NO. 7792 I0 DEC ISION Input VAT attributable to zero-rated sales that may be the subject of claim for refund or issuance of TCC P292,882,625.54 Having determined the input VAT attributable to zero-rated sales that may be the subject of the claim for refund or issuance of TCC, we now proceed to determine whether or not petitioner is entitled to the claim for refund in view of the requirements prescribed by law and jurisprudence. In the case of San Roque Power Corporation vs. Commissioner of Internal Revenue, 605 SCRA 55, the Supreme Court ruled that to claim for refund or tax credit under Section I 12(A), petitioner must compl y with the following requisites: 1) The taxpayer is VAT-registered; 2) The taxpayer is engaged in zero-rated or effectively zero- rated sales; 3) The input taxes are due or paid; 4) The input taxes are not transitional input taxes; 5) The input taxes have not been applied against output taxes during and in the succeeding quarters; 6) The input taxes claimed are attributable to zero-rated or effectively zero-rated sales; 7) For zero-rated sales under Section 106(A)(2)(1) and (2); 106(B); and 108(B)( 1) and (2), the acceptable foreign ~

C.T.A. CASE NO. 7792 II DECISION currency exchange proceeds have been duly accounted for in accordance with BSP rules and regulations; 8) Where there are both zero-rated or effectively zero-rated sales and taxable or exempt sales, and the input taxes cannot be directly and entirely attributable to any of these sales, the input taxes shall be proportionately allocated on the basis of sales volume; and 9) The claim is filed within two years after the close of the taxable quarter when such sales were made. First Requisite Taxpaver is VAT Registered As regards the first requisite, records show that petitioner is a VAT registered taxpayer, as shown by its BIR Certificate of Registration No. OCN8RC0000018374 (Exhibit "C '') , wherein it has been issued a Taxpayer Identification No. 000-169-125 (Exhibit "D '') . Second Requisite - Taxpaver is Engaged in Zero-Rated or E((ectivelv Zero-Rated Sales As regards the second requisite, petitioner claims that under Section 108 (7) of the NIRC of 1997, as amended by RA 933 7, the 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 is zero-rated.

C.T.A. CASE NO. 7792 12 DECISION In this regard, Section 6 ofRA 933 7 provides: "SEC. 6. Section 108 of the same Code, as amended, is hereby further amended to read, as follows: ' SEC. 108. Value-Added Tax on Sale of Service and Use or Lease of Properties. - (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 (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." Corollary thereto, Revenue Regulations No. 16-2005, implementing RA 933 7, provides: " SEC. 4.108-3. Definitions and Specific Rules on Selected Services. - 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. ~

C.T.A . CAS E NO . 7792 13 DECISION '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 RA 9136 (EPIRA). They shall include all Independent Power Producers (IPPs) and NPC/Power Sector Assets and Liabilities Management Corporation (PSALM)-owned generation facilities. 'Transmission companies ' refers to any person or entity that owns and conveys electricity through the high voltage backbone system and/or subtransmission assets, e.g. NPC or TRANSCO. ' Subtransmission assets' shall refer to the facilities related to the power delivery service below the transmission voltages and based on the functional assignment of asset including, but not limited to step-down transformers used solely by load customers, associated switchyard/substation, control and protective equipment, reactive compensation equipment to improve factor, overhead lines, and the land where such facilities/equipments are located. These include NPC assets linking the transmission system and the distribution system which are neither classified as generation or transmission. 'Distribution companies' refer to persons or entities which operate a distribution system in accordance with the provisions of the EPIRA. They shall include any distribution utility such as an electric cooperative organized pursuant to Presidential Decree No. 269, as amended, and/or under RA No. 6938, or as otherwise provided in the EPIRA, a private corporation, or a government-owned utility or existing local government unit which has an exclusive franchise to operate a distribution system in accordance with the EPIRA. For this purpose, a distribution system refers to the system of wires and associated facilities belonging to a franchised distribution utility extending between the delivery points on the transmission or subtransmission system or generator connection and the point of connection to the premises of the end-users. 0�

C.T.A. CASE NO. 7792 14 DECISION XXX xxx." "SEC. 4.108-5. Zero-Rated Sale of Services. - XXX XXX (b) Transactions Subject to Zero Percent (0%) VAT Rate. The following services performed in the Philippines by a VAT-registered person shall be subject to zero percent (0%) VAT rate: XXX XXX (7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydrogen, geothermal and steam, ocean energy, and other emerging 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." From the above provisions, it 1s clear that the 1) sale of power generated through renewable sources of energy; and the 2) sale of fuel generated through renewable sources of energy are subject to zero percent (0%) VAT rate provided that such zero-rating shall not extend to the sale of services related to the maintenance or operation of plants generating said power. The Webster New Collegiate Dictionary defines "power" as a source w or means of supplying energy, especially: ELECTRICITY (5.a., p . 902 thereof)

C.T.A. CAS E NO. 7792 15 D ECISION and the time rate at which work is done or energy is emitted or transferred (6.c., p. 902 thereof). On the other hand, "fuel" is defined as a) a material used to produce heat or power by burning, b) a nutritive material; and c) a material upon which atomic energy can be liberated especially in a reactor [Webster New Collegiate Dictionary (1 9 77}, p. 463) . The sale of "power" therefore may refer to the sale of electricity itself, while the sale of "fuel" may refer to the material used to produce such power. The fact that the sale of power or electricity and the sale of fuel are two distinct items in this provision was clarified during the deliberation as shown in Conference Committee Report on SN 1950/ HN 3555 & 3705 (Amending the NIRC for Value Added Tax) dated May 10, 2005 , pertinent portion of which reads, as follows: " Senator Osmefia. Thank you for that clarification. Now, Section 7, line 7, the provision reads: 'SALE OF POWER OR FUEL-GENERATED THROUGH RENEWABLE SOURCES OF ENERGY SUCH AS, BUT NOT LIMITED TO,... ' and we go on. What about the importation of power or fuel-generated? Senator Recto. As I understand it, it is zero-rated, Mr. President. Senator Osmefia. There may be something in the future ... In other words, everything has to originate locally - the source of energy must be domestic. I am just anticipating because the ~

C.T.A. CASE NO. 7792 16 DEC ISION word ' biomass' appears here. Baka may mag-import ng 'biomass'. Kasama po ba iyon? Senator Recto. Well, if they import it, the way I read it, they are subject to VAT. But it is zero-rated and they can get their refund. Senator Osmefia. So, it will be a VAT zero-rated? Senator Recto. That is right. xxx xxx." The criteria required in order that the sale of power or the sale of fuel will be subject to zero percent (0%) VAT is that said power or fuel is generated or produced from renewable sources of energy. Section 4 (mm) of RA 9136 defines "Renewable Energy Resources" as energy resources that do not have an upper limit on the total quantity to be used. Such resources are renewable on a regular basis and the renewable rate is rapid enough to consider availability over an indefinite time. These include, among others, biomass, solar, wind, hydro and ocean energy. In addition to the above enumeration by example, RA 9337 also mentioned geothermal and other emerging energy sources using technologies, such as fuel cells and hydrogen fuels, as renewable sources of energy. Unlike in RA 9136, which subjects to zero percent VAT the sales of generated power by generation companies, to wit:

C.T.A. CASE NO . 7792 17 DECISION "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." (Section 6, 5th paragraph thereof). RA 933 7, which repealed the above Section 6, 5th paragraph of RA 9136, subjects to zero percent (0%) VAT the sale of power or fuel generated through renewable sources of energy, without qualifying that said zero rating must pertain only to the sale of power by generation companies or to the sale of power or electricity. Instead, RA 933 7 subjects to zero percent rate (0%) all sales of power, or all sales of fuel, as long as said power/electricity and fuel are generated or produced from renewable sources of energy. Thus, in RA 933 7, the seller of power/electricity or the seller of fuel must not only be limited to generation companies, unlike in RA 913 6. In fact, RA 9513, an "Act Promoting the Development, Utilization and Commercialization of Renewable Energy Resources and for Other Purposes" provides that the provision subjecting to zero percent VAT rate the sale of fuel or power generated from renewable sources of energy pursuant to the NIRC of1997, as amended by RA 933 7, shall also apply to the whole process of exploring and developing renewable energy sources up to its conversion into power, including but not limited to the services performed by subcontractors and/or contractors (Se ction 15 (g), Chapter VII thereof) .

C.T.A. CAS E NO. 7792 18 DEC ISION A perusal of petitioner's Amended Articles of Incorporation shows that petitioner is engaged in the exploration, discovery, development, extraction, digging and drilling for, production, utilization, refinement, treating, processing, transporting, marketing, using, experimenting with, distributing, manufacturing, smelting or otherwise dealing in, any substance, mineral or otherwise, which by itself or in combination with other substance, or after processing or refining, or the application to it of technology emanates, gives off, generates or causes the emanation of generation of heat or power or energy such as, but not limited to geothermal sources of heat and power (Exhibits "FFF " to " FFF-18'). Petitioner presented the following documentary evidence: POWER PURCHASE AGREEMENTS Exhibit Name of Contract Date of Terminati Relevant Provisions of the yyy Effectivity on Date Agreement (emphasis supplied) zzz Leyte A Geothermal March 15 , July 24, " WHEREAS , PNOC-EDC wishes Power Plant Purchase 1994 (A nnex 2021 to sell electrical energy from the Agreement El, thereof) CsuQ.ra2 geothermal power plants to NPC and the latter agrees to purchase said electrical energy under the terms and conditions hereunder" (p. 1 thereof). Mindanao I May 15, February "Thi s Agreement shall refer to the Geothermal Power 1995 (Annex 15, 2022 sale of electrical energy by Plant Purchase Dl thereof) CsuQ.ra2 PNOC-EDC to NPC xxx" (Article Agreeme nt 2, p. 2 thereof) " WHEREAS , PNOC-EDC wishes to sell electrical energy from the geothermal power plants to NPC and the latter agrees to purchase

C.T.A. CASE NO. 7792 19 DEC ISION said electri cal energy under the term s and conditi ons hereunder" (p. I thereof) BBBB Mind a nao II June I, 1998 June 17, "Thi s Agreement shall refer to the sale of electrical energy by Geothermal Power (Title page 2 0 2 4 (A n nex PNOC-EDC to N PC xxx" (A rticle th ereof) DI thereof) Pl ant Power Purchase 3, p. 4) Ag ree ment " WH EREAS , PNOC-EDC wishes to sell electrical energy from the geothermal power plants to NPC and the latter agrees to purchase said electrica l energy under the terms and condition s hereunder" (p. I thereof) "Thi s Agreement shall refer to the sale by PNOC-EDC to NPC of the electricity xxx" (A rticle 2, p. 5) ecce GEOTHERMALSTEAMSALESAGREEMENTS DODD Baco n-Manito Sales November November " WHEREAS , the CONTRA CTO R Co ntrac t for 18, 1988 18, 201 3 wishes to se ll the Geothermal Geotherm al Resources (Title page (Section Resources produ ced pursuant to thereof) 3. I, p. 4 such Service Contract to NPC; and th ereof ) xxx NPC des ires to purchase such Geotherm al Reso urces produced for purposes of generatin g electrical energy" (p. I thereof) Baco n-Manito Mac h 15, March 15, " WHEREAS , the CONTRACTO R Geothermal Power I 994(Section 201 9 has deve loped Geothermal Pl ant II Geoth erm al 2. II, p . 3 (Section Resources m Commercia l Reso urces Sales thereof) 3. I, p . 6 Quantity and Quality fo rm its Co ntrac t th ereof ) Contract Area, has so ld to NPC such Geothermal Resource produced fro m sa id area and has commi tted to continue selling to N PC such Geothermal Resource; XXX WHEREAS, N PC has accepted the CONTRACTOR ' S offer, and has committed to purchase and utili ze the Geothermal Resources for the generation of electric power fo r transmi ssion and di stribution to

C.T.A. CASE NO. 7792 20 DECISION EEEE Palinpinon I Sales December December the customers" (p. 1 thereof) 25 , 1988 25 , 2008 "WHEREAS, the CONTRACTOR Contract for has developed Geothermal (Section 3.1 (s upra) Resources m Commercial Geothermal Resources thereof) Quantity and Quality from its Contract Area and has sold to NPC such Geotherma l Resources produced from said area at guaranteed steam specifications as stated An nex I and has committed to continue selling to NPC such Geothermal Resource; xxx FFFF Geothermal Resources December December WHEREAS , NPC has accepted 13, 1993 13, 2018 CONTRACTOR' S offer, and has Sales Contract committed to purchase and utilize (Section 2.11, (Section the Geothermal Resources for (Palin pinon p. 3 thereof) 3. 1, p. 5 the generation of electric power th ereof) for transmission and distribution to Geotherma l Power its customers" (p. 1 thereof) " WHEREAS , the CONTRACTOR Plant II) has developed Geothermal Resources in Commercial Quantity and Quality form its Contract Area, has sold to NPC such Geothermal Resource produced from said area and has committed to continue selling to NPC such Geothermal Resource; and XXX WHEREAS, NPC has accepted the CONTRACTOR'S offer, and has committed to purchase and utilize the Geothermal Resources for the generation of electric power for transmission and distribution to its customers" (p.l thereof) AAAA Tongonan I Sales June 29, June 29, " WHEREAS , the CONTRACTOR 1984 (p. 21 2009 Contract for wishes to sell Geothermal thereof) (Section Geothermal Resource 3.1, p. 5 Resources produced pursuant to thereof) such Service Contract to NPC xxx . WHEREAS , NPC desires to

C.T.A. CASE NO. 7792 21 DECISION purchase such Geothermal Reso urces produced for purposes of generating electrical energy (p.l thereof) On direct examination, petitioner's witness, Romeo T. Lupac, testified that by reason of said contracts, petitioner generated sales of geothermal steam and electricity (Exhibit "JJJJ" and TSN dated May 27, 2010, pp. 7-10). A perusal of said Power Purchase Agreements and Geothermal Steam Sales Agreements shows that petitioner is engaged in selling of geothermal steam and electrical energy generated through geothermal power plants. Accordingly, said sale of services falls within the ambit of Section 108 (B) (7) ofthe NIRC of1997, as amended by RA 933 7. The Court Commissioned Independent CPA, Jose C. Catequista, in his report found that for the 4th quarter of taxable year 2006 petitioner has a total zero-rated sales with VAT OR and stamped with "Zero-rated Sale" of P5 ,794,222, 162.36 and petitioner has zero-rated sales adjustments supported by journal vouchers in the amount of P284,716,252.76 (Exhibit "NNN'') . Hence, after considering the adjustments, the total zero-rated sales with valid support for the fourth quarter of 2006 as found by the Court Commissioned ICPA, amounts to P5,509,505,709.00. Also, the Court Commissioned ICPA

C.T.A. CAS E NO . 7792 22 DECISION noted certain exceptions in the total amount ofP51,880,755.20. Verification of the records, however, shows that the noted exception of P51 ,880,755.20 does not form part of the P5,509,505,709.00 validly supported zero-rated sales. After a careful examination of the supporting documents submitted by petitioner, the Court finds that out of the P5 ,509,505,709.00 allegedly validly supported zero-rated sales: 1) P3,161 ,713 ,051.01 are with Official Receipts, dated beyond 2006, the period of claim (A nnex "1 " ofthis Dedsion) ; and 2) P338,368,432 .83 are without supporting documents (A nnex "2" ofthis Decision). Accordingly, the Court hereby excludes the amount of P3 ,500,081 ,483.84 (P3 ,161,713,051.01 + P338,368,432.83) from petitioner' s validly supported zero-rated sales. Thus, the substantiated zero-rated sales of petitioner for the 4th quarter of taxable year 2006 amounts to P2,009,424,225.76, computed, as follows: Total zero-rated sales with valid support as found P5,509,505,709.60 by the Court-Commi ss ioned !CPA after considering adjustments Less: Court 's Findings I ) Zero-rated sales with OR dated outside the

C.T.A. CASE NO. 7792 23 DEC ISION peri od of claim P3, 16 1,7 13,05 1.0 1 2) Zero- rated sales without supporting d oc um e nts P33 8,368,432 .83 Total zero-rated sa les that should be exc luded P3,500,08 1,483. 84 P2,009,424,225. 76 Valid zero-rated sales fo r the 4" quarter of taxabl e year 2006 2 ,009,424,225. 76 Allocation Factor for Zero-rated Sates Valid zero-rated sales for the 4111 qua1ier of taxabl e year 2006 5,56 1,386,464.80 36.13 % Di vi ded by th e total ze ro-rated sales per VAT returns for the 4th quarte r of2006 Allocation Factor for Zero-rated Sales Third, Fourth, Fifth and Sixth Requisites As regards the requisites that input taxes, which are not transitional input taxes, must be attributable to zero-rated sales, and must not have been applied to any output tax liability during and in the succeeding quarters, petitioner's Amended Quarterly VAT Returns for the 4th quarter of 2006 (Exhibit "!'') shows that it incurred input taxes in the amount of P293 ,058,460.62, broken down, as follo ws : Purc hases of Capita l Goods exceedin g PI Milli on Purchases Input Tax Domesti c Purchases of Goods Other than Capital PI ,36 1,479,053 .87 p 163 ,377,579.66 Goods Domesti c Purchases of Services I03,3 II ,959.19 10,75 1, 143.16 Total I, I04,207,320.46 118,929,737.80 P293,058,460.62 Out of the P293,058 ,460.62 input VAT for the 4th quarter of taxable year 2006 claimed by petitioner, the Court-Commissioned ICPA found that only the amount of P271 ,553,316.29 are validly substantiated input VAT consisting of the follo wing: Particul ars Amount Annex a. Domestic purchases of goods supported by valid invoices P5,379,262. 19 "NN" to "NN-20"

C.T.A. CASE NO. 7792 24 DEC ISION b. Domestic purchases of goods supported by 13,686,394.51 "00" to "00-75" va lid VAT invo ices dated not in the quarter of 41 ,877,451.97 " PP" to " PP-11 0" claim but within the ca lendar year 2006 47 ,23 2,627 .96 "QQ" to "QQ-155 " c. Domestic purchases of services supported by 163 ,377 ,579.66 " RR" to " RR-38 " va lid VAT official receipts P271 ,553 ,316.29 d. Domestic purchases of services supported by official receipt dated not in the quarter of claim but within calendar year 2006 e. Imported capital goods supported by certified true copy IE Ds and va li d official recei pts Total va lid input taxes for th e t �t, 2"d, 3rd and 41h qu a rter of 2006 (Exhibit "NNN", pp. 6- 7) The Court-Commissioned ICPA excluded the amount of P21,505,144.33 for the fo llowing reasons, to which the Court agrees: Dom estic Purchases of Goods Amount Ann ex a. Domestic purchases of goods with invoice in the P362,483 .01 "S S" to " SS-2" name of PNOC instead of PNOC-E DC "TT" to "TT-l " b. Domestic purchases of goods supported by OR dated 468,696.97 "UU" to "UU- 1" out of the fisca l year I 08,000.00 c. Domestic purchases of goods supported by invoices P939, 179.98 not registered with the BIR PI ,423 ,008.77 " VV" to " VY-8" Sub-total Domestic Purchases of Services 9,460,579.21 " WW" to " WW-41 " a. Domestic purchases of services supported by invoices on ly 71 ,872.68 "XX" to "XX-2" b. Domestic purchase of services with official receipts(OR) named to PNOC and/or PNOC-EDC 's 106,076.26 " YY" to " YY-I " division (e.g. PNOC BGPF, PNOC LPF, etc.) instead ofPNOC-EDC 37 ,984.11 "ZZ" to "ZZ-1 " c. Domestic purchases of services with official recei pts named to PNOC/ PNOC Energy instead of PNOC- EDC 150,035 .87 " AAA" to "AAA-2" and dated out of the ca lendar year 2006 I,853,885 .99 " BBB" to " BBB-3" d. Purchase of service supported by OR stamped TIN- VAT and undated support e. Domestic purchase of service supported by OR different from invoice supporting the input VAT f. Input taxes claimed with photocopied supporting documents g. Domestic purchases with no T IN VAT in the OR h. Domestic purchases of services supported by OR

C.T.A. CA SE NO. 7792 25 DEC ISION without the Company' s TIN and dated out of the "CCC" to "CCC-4" calend ar year 2006 I,673,347.74 i. Domesti c purchases of services supported by OR dated out of the calend ar year 2006 I,471 ,329.27 "ODD" to " DDD-8" J. Domesti c purchases of services supported by Acknowledgment Receipts onl y 4, 31 7,844.45 " EEE" to "EEE-5" P20 ,56 5, 964 .35 Sub-total P21,505,144.33 Total Considering that the creditable input tax claimed by petitioner rs attributable only to its input VAT declared in the 4th quarter of 2006 (Exhibit "!'') and petitioner was able to substantiate only its zero-rated sales for the 4th quarter of 2006, the Court will consider only the input VAT for the 4th quarter of 2006. Thus, out of the P271 ,553,316.29 substantiated input VAT as found by the Court-Commissioned ICPA, the Court will consider only the following: a) Domesti c purchases of goods supported by va lid P5,379,262.1 9 "NN " to VAT invo ices "NN -20" b) Domesti c purchases of services supported by 4 1,877,45 1.97 "00" to va lid VAT official receipts " 0 0 -75 " c) Imported capital goods supported by certifi ed true 163 ,377,579.66 " RR" to copy lEOs and valid offi cial receipts P210,634,293.83 " RR -38 " Total Input VAT pertaining to 1) domestic purchases of goods supported by valid VAT invoices dated not in the quarter of claim, but within calendar year 2006 in the amount of P13 ,686,394.51 (A nnexes "00 " to "0 0 -75 '') and 2) domestic purchases of services supported by official receipts dated not in the quarter of claim but within calendar year 2006 in the amount of

C.T.A. CAS E NO. 7792 26 DEC ISION P47,232,627.96 (A nnexes "QQ " to "QQ-155 '') are hereby excluded for the above reasons. a) Domestic Purchases of Goods in the Amount of P5,379,262.19 Verification of the invoices submitted by petitioner (A nnexes "NN" to "NN-20 '') , however, shows that out of the domestic purchases of goods in the amount of P5,379,262.19, the amount of P4,354,158.21 (A nnex "3 "of this Decision) should be excluded from the foregoing substantiated input VAT by the Court-Commissioned ICPA for fai lure to comply with the provision of Section 113 (B) (2) (a) ofthe NIRC of 1997, as amended by RA 933 7, which provides that the amount of the tax shall be shown as a separate item in the invoice or receipt. However, the input VAT for Invoice No . 13183, dated November 4, 2006, should be P78,21 1.07, and not only P43 ,332.06 (Annex "NN-18 '') . Hence, the duly substantiated input VAT incurred from domestic purchases of goods amounts to P1 ,059,982.99, computed, as follows: Domesti c purchases of goods supported by valid VAT P5,379,262. 19 in vo ices as found by the Court-Commiss ioned !CPA 4,354, 158.2 1 Less: Excluded input VAT for failure to compl y with PI ,025, I03.98 Secti on 11 3 (B) (2) (a) of th e NIRC of 1997, as amended by RA 9337 P43 ,332.06 P34,879.0 1 Di ffe rence 78,2 11.07 Add : Error in the input VAT recogni zed in Invo ice No. 13183 dated November 4, 2006 P l,059,982.99 Recogni zed Input VAT Should be Total Duly Substantiated Input VAT from domestic pu rc hases of goods

C.T.A. CASE NO. 7792 27 DEC ISION b) Domestic Purchases of Services in the Amount ofP41,877,451.97 Verification of the Official Receipts submitted by petitioner (A nnexes "PP " to "PP-110 "), however, shows that out of the domestic purchases of services in the amount of P41 ,877,451.97, the amount of P24,550,810.64 (A nnex "4 "of this Decision) should be excluded from the foregoing substantiated input VAT by the Court-Commissioned ICPA for failure to comply with the provision of Section 113 (B) (2) (a) of the NIRC of 1997, as amended by RA 933 7. Thus, the duly substantiated input VAT incurred from domestic purchases of services amounts to Pl7,326,641.33 , computed, as follows: Domesti c purchases of services supported by va lid VAT in vo ices as P4 1,877,45 1.97 fo und by the Court-Commiss ioned !CPA 24,550,8 10.64 Less: Excluded input VAT for fa ilure to compl y with Secti on 11 3 (B) (2) (a) of the NIRC of 1997, as amended by RA 933 7 P17,326,641.33 Total Validly Substantiated Input VAT from domestic purchases of service c) Imported Capital Goods in the Amount of P163,377,579.66 Verification of the documentary evidence submitted by petitioner (A nnexes "RR " to "RR-38 ", "QQQ-1 " to "QQQ-11 ", "RRR-1 " to "RRR-21 ", "TTT- 1 " to "TTT-1 .3 " and "UUU-1 " to "UUU-5 '') shows that the input taxes on said importation of capital goods were not incurred during the 4th quarter of 2006. Since the creditable input taxes claimed by petitioner are attributable only to its input VAT for the 4th quarter of 2006 and petitioner was able to substantiate only its zero-rated sales for the 4th quarter of 2006, then we (])J

C.T.A. CASE NO. 7792 28 DECISION cannot consider the input VAT of P163,377,579.66 from said importation of capital goods. From the foregoing, the Court finds that the total duly substantiated input VAT amounts only to P18,386,624.32 (total du ly substantiated input VAT from domestic purchases of goods of Pl,059,982.99 and total duly substantiated input VAT from domestic purchases of services of P17,326,641 .33). Seventh and Eight Requisites Considering that petitioner's sales of steam and electricity were made within the Philippines, the seventh requisite is not applicable to the instant case. As regards the eight requisite, considering that petitioner declared in its Quarterly VAT Returns both sales subject to VAT and zero-rated sales, We hereby proportionately apportion the substantiated input VAT attributable to petitioner's zero-rated sales, as follows: Duly substantiated input VAT for the 4th quarter of2006 P l 8 ,386 ,624.32 Multiplied by the percentage of declared zero- rated sales to total sales 99.94% Substantiated input VAT attributable to declared 18,375 ,592.35 zero rated sales

C.T.A. CASE NO . 7792 29 DEC ISION Multiplied by the percentage of total 36.13% substantiated zero-rated sales to declared zero- P6 ,63 9, 101. 52 rated sales for the 4th quarter of 2006 Refund able Input VAT for the 4th quarter of 2006 attributable to substantiated zero-rated sa les Ninth Requisite Finally, the last requisite, whether petitioner's claim for refund was timely filed within the period prescribed by law, specifically, Section 11 2 (A) of the NIRC of 199 7, as amended, as regards the period to file the administrative claim for refund, which is within two (2) years after the close of the taxable quarter when the sales were made, and Section 112 (D) of the same Code, as regards the period to file the judicial claim for refund, which is within 30 days from receipt of the decision of the CIR, or from the lapse of the 120-day period when no decision is made by the CIR within the 120-day period; records show that petitioner is claiming for refund of its unutilized input VAT for the 4th quarter of 2006. Hence, petitioner had until December 31 , 2008 within which to file its administrative claim for refund. Considering that petitioner filed its administrative claim for refund on January 7, 2008, then said administrative claim for refund was filed within the two-year prescriptive period.

C.T.A. CASE NO. 7792 30 DEC ISION Considering that petitioner filed its administrative claim for refund on January 7, 2008, the CIR had 120 days from January, 8, 2008 , or until May 6, 2008, within which to grant or deny petitioner's claim. Considering that respondent CIR did not act on petitioner's administrative claim for refund, petitioner had thirty (30) days from May 7, 2008, or until June 5, 2008, within which to file its judicial claim for refund with the CTA. Since petitioner filed its Petition for Review on June 5, 2008, then, petitioner's judicial claim for refund was timely filed. Accordingly, petitioner complied with the ninth requisite. In sum, the Court finds petitioner to have sufficiently established its entitlement for refund or issuance of a TCC for the 4th quarter of 2006 in the reduced amount ofP6,639,101.52. Since the excess input VAT from the succeeding quarter plus the creditable VAT withheld for the first, second, third and fourth quarters of 2006 are sufficient to cover the output VAT for 2006, then the output VAT for 2006 will no longer be deducted from the substantiated input VAT of P6,639 , 101.52. WHEREFORE, premises considered, the present Petition for Review is hereby PARTLY GRANTED. Accordingly, respondent Commissioner of

C.T.A . CAS E NO . 7792 31 DEC ISION Internal Revenue is hereby ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner Energy Development Corporation the reduced amount of SIX MILLION SIX HUNDRED THIRTY NINE THOUSAND ONE HUNDRED ONE AND 521100 PESOS (P6,639,101.52), representing unutilized input VAT for the 4th quarter of 2006. SO ORDERED. otGA ~~I(uEZ Associate Justice ~)_ r'- 4-----'/--- AMEDA R. COTANGCO-MANALASTAS Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the write of the opinion of the Court's Division. L

C.T.A. CASE NO . 7792 32 DECISION CERTIFICATION Pursuant to Article VIII, Section 13 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. ~~;Lz, c. ~~ Q MANITO C. CASTANED<fR: Acting Presiding Justice

C.T.A . CASE N O. 77 92 33 DEC ISION A nn ex " I " ZERO-RATED SALES WITH OFFICIAL RECEIPTS DATED BEYOND TAXABLE YEAR 2006 Exhibit OR Date of OR Amount Exhibi Invoice In voice Due Date Invoice Amount 111 -3 Number OR t ..Numbe Date 111 -4 111 -5 V B- 1-03-07 p 14,6 16,373 .38 XXX- B00077 November November p 15,244,070.40 111 -6 111-1 2 000020 2 6, 2006 30, 2006 111-1 3 111 - 14 VB- 1-03-07 14,995 ,725 .09 XXX- B00086 December 4, December 15,639,7 13.28 111-1 5 111 - 16 00002 1 3 2006 3 1, 2006 111 - 17 111 -24 V B- 1-04-07 I00,024,359. 17 XXX- B00072 November November I04,3 19,88 3.80 111 -26 111 -27 000022 4 6, 2006 30, 2006 111 -28 111 -29 VB- 1-04-07 I 03 ,482,626.59 XXX- B00084 December 4, December I0 7, 92 6 ,66 3.6 8 111 -36 111 -37 0000 23 5 20 0 6 3 1, 2006 " VL- 1-02-07 I,056,3 93 ,806.92 XXX- L00078 November December 1, 119,253, 141.03 " " 00 00 50 II 27, 2006 3 1, 2006 VL - 1-02-07 I06 ,386,925 .95 XXX- T00024 November December I07 ,055,750.53 000051 12 30,2006 3 1, 2006 VL- 1-02-07 I,434, 156.55 XXX- T00022 November November I,469,269 .50 00005 2 13 7, 2006 30, 2006 VL- 1-02-07 I,0 13,366.97 XXX- T00023 November November I,055,577.74 00005 3 14 7, 2006 30 ,2 006 VL - 1-31-07 I02,696,88 1.46 XXX- T00025 January 2, Jan uary 3 1, I 0 3,60 2,339 .23 000054 15 2007 2007 VL- 1-31-07 I,049,590,342.03 XXX- L0008 1 December January 3 I, 1, 114,647, 161.02 000055 16 27, 2006 2007 VM- 1-02-07 96,086,2 10. 04 XXX- MOO 158 November December 94,889,502. 11 000075 26 27, 2006 3 1, 2006 VM- 1-31-07 95 ,629,743.48 XXX- MOO I59 December Jan uary 3 1, 97 ,58 1,370.90 000077 27 27, 2006 2007 VM- 1-31-07 92,558,442.63 XXX- MOO I60 December January 3 1, 94 ,447 ,390.44 000078 28 27, 2006 2007 VM- 1-31-07 9,916,033 .35 XXX - M00 16 1 December Jan uary 3 1, I0, I 18,40 1.38 000079 29 27, 2006 2007 VM- 1-31-07 6,685,063 .75 XXX- MOOI 62 December January 3 1, 6,82 1,493.62 000080 30 28, 2006 200 7 VS- 1-02-0 7 I05 ,856,635.04 XXX- S001 19 November December I05 ,856 ,635.04 00 0 030 51 29, 2006 3 1, 2006 VS- 1-10-07 6 1,784,687. 3 1 XXX- S00 120 November December 15,639,7 13.28 00003 1 52 29,2006 3 1, 2006 " " " XXX- SOO I2 1 Novem ber December 14,86 5, 54 7 .47 53 29,2006 3 1, 2006 " " " XXX- S00 122 November December 15,639,7 13.28 54 29, 2006 3 1, 2006 " " " XXX- S00 123 November December 15,639,7 13.28 55 29, 2006 3 1, 2006 Total P3,161 ,7 13,051.01

C.T.A. CASE NO. 7792 34 DEC ISION Annex "2" Zero Rated Sales Recognized by the ICPA Without Official Receipts Refe re nce Date All eged OR A ll eged Sa les Amou nt N um ber In vo ice N umb e r I 23 000 1 Dec - 06 VB00002 1 8 00086 P3,027,04 1.28 I 23 000 1 Dec - 06 V8 000023 8 00084 20,889,03 1.68 I 23 000 1 Dec- 06 VL000050 L00078 46,53 I,760.04 I 23 000 1 Dec - 06 VL000050 L00078 176,397,672 .16 I 23 000 1 Dec - 06 VL00005 1 T00024 20,720,467.84 I 23 000 1 Dec- 06 VM00075 M00 156 5,4 12,139.20 I 23 000 1 Dec- 06 VM00075 M00 156 14, I04, 134.98 I 23 000 1 Dec - 06 VM00076 MOO I 58 5,264,680.35 I 23 000 1 Dec- 06 VM00076 MOO I 58 13,624,797.74 I 23 000 1 Dec- 06 YS000030 SOO I 19 20,438,380.98 I 23 000 1 Dec - 06 VS00003 I SOO I20- I I,958 ,326.58 S00 123 Total Zero-Rated Sales of Services Without Official Receipts P338,368,432.83

C.T.A. CAS E NO . 7792 35 DECISION An nex "3" In voices th a t do not s how seg regation/co mputa tion of Input VAT on Sa les of Goods Exhi bit/ Invo ice Invo ice Date Name of Supplier In vo ice Input VAT in Peso A nn ex N umber Amount in P74 ,892.86 Peso 366,000 .00 4t" Avenue Industri al & Military Suppl y 292,800 .00 222,475 . 15 "NN- 1" 0 160 Oct. 3, 2006 P699 ,000.00 406,800.9 1 " NN -2" 0354 Oct. 24, 2006 Euro Products, Inc. 3,4 16,000 .0 402,020. 16 0 660,9 14.04 268 ,932.85 " NN -2.4" 0355 Oct. 30, 2006 Euro Products, Inc. 2,732,800 .0 4 3 9 ,040.12 0 98 ,989.29 " NN-3 " 2997 Oct. 3 I, 2006 BJ Service Intern ati onal Inc. 2,076,434 .7 84,857 . 14 3 1,071.43 0 51 2,400 .00 "NN-3.6" 2998 Oct. 3 I, 2006 BJ Service Internati onal Inc. 3,796,808 .4 4 1,72 1.43 19 1, 100 .00 8 160 ,500 .00 "NN -3.8" 3000 Oct. 3 I, 2006 BJ Service Internati onal Inc. 3,752, 188. 1 99,642 .86 8 P4,354,067. 24 "NN-3.10" 3010 Nov. 8, 2006 BJ Service Internati onal Inc. 6, 168,53 1.0 0 "NN -4. 1" 3014 Nov. 29, 2006 BJ Service Internati onal Inc. 2,5 10,039 .9 4 " NN -4 .6" 301 5 Nov. 29, 2006 BJ Service International Inc. 4,097,707.7 4 "NN-5 " 673 82 1 Oct. 14, 2006 Up-Town Industri al Sa les, Inc. 923 ,900 .00 "NN-6" 0660 Oct. 13, 2006 Heidelberg Motors Corporation 792,000 .00 " NN -7" 12 12 Nov. 2, 2006 FFC Equipment Parts Suppl y, In c. 290,000 .00 "NN-9" 0357 Nov. I0, 2006 Euro Prod ucts, Inc. 4,782,400 .0 0 "NN- 10" 035 8 Nov . 23 , 2006 Euro Products, In c. 3 89,40 0 .00 "NN- 1I" 0 13 1 Nov. 13, 2006 Drilling Advisory & Logisti cs Corp . I,783,600 .0 0 "NN-1 4" 75 88 Nov. 27, 2006 Hidromac-Dura As ia, In c. I,498 ,000 .0 0 "NN -1 7" 8978l l Nov . 30. 2006 Harn we ll Chemi cals Corporation 93 0,000 .00 Tota l Inpu t VAT of In vo ices th a t d o not s how segr egation/computatio n of InputVAT on Sa les of Good s 1 Invo ice No . 673 82 is non existent. T he invoice submitted is di fferent, it is invoice No . 7 1455 , wi th diffe rent date and invo ice amount. 2 Invo ice No . 8978 1 is non ex istent. T he invoice subm itted is different, it is invoice No . 895 08 , with diffe rent date and in vo ice amount.

C.T.A. CAS E NO. 7792 36 D EC IS ION Annex "4" Offici a l Receipts that do not show seg regation/co mputa tion of Input VAT on Sa les of Se rvices Ex hibit/ Offici al OR Date Name of Supp lier Invoice Amount in Peso Input VAT in Ann ex " PP- 1" Rece ipt No. Peso " PP-2" No . " PP-3" 0005 Sept. I, 2006 EPI-COSL Consortium 0030 P949 ,023.2 4 PIOI ,681.06 " PP-4" 0032 834 ,6 5 3.2 5 89,427. 13 " PP-6" 00 33 949 ,023.24 I0 I,681. 06 " PP-7" " PP-8" 00 35 399, 196 .7 1 42,77 1.08 " PP-9" " PP- 11 " 0004 Sept. I, 2006 EPI-COSL Consortium 0036 94 9, 023.24 I0 I,68 1.06 " PP- 12" 0038 399, 196.7 1 42,77 1.08 " PP-1 3" " PP- 14" 0040 292,744.5 7 3 1,365.49 " PP-1 6" " PP-18" 0003 Sept. I, 2006 EPI -COSL Consortium 005 2 I,424,975.20 152,675.9 1 " PP-1 9" 005 3 36 1,232.24 3 8,7 03.45 " PP-20" 0054 I, 155,062.37 123,756.68 " PP-2 1" " PP-2 1" 005 5 I ,2 0 7,7 84 .82 129,405.52 0057 I, 155,062.37 123,756.68 0002 Sept. I, 2006 EPI-COSL Consortium 00 63 796,326.40 85,320.69 0064 I, 189,534.95 127,450. 17 0066 1,06 1,768.83 11 3,760.95 05 14 Oct. 3, 2006 Dynamic Builders & 04 84 2,0 89,749.59 223,90 1.74 Constru cti on Co. (Phil ) Inc. 0301 Oct. 6, 2006 Fabm ik Constructi on & 0007 I,78 8, 124.69 19 1,584.79 Equipment Co., Inc. 123 6 Oct. 6, 2006 Technology Exports Services 1829 2, I09,3 06. 08 225,997.08 Corp. 1237 Oct. 13, 2006 Technology Exports Servi ces Co rp . 1826 I,639,5 85.48 175,669.87 4 143 6 Oct. 30, 2006 Lockh eed Detecti ve & Watchman Agency, Inc. 0003 6 11 ' 180.5 0 65,483.63 0004 54 1' 187.66 57,984.39 4 1435 Oct. 30, 2006 Lockheed Detecti ve & Watchman Agency, Inc. 00 10 7 18,637.50 76,996.88 0 196 Oct. 6, 2006 Mechani cs Constructi on Corp . 00 23 88 7,726.40 95, 11 3.54 1983 89 Oct. 6, 2006 EEl Corporati on 16 78 6 3,462,657. 04 370,998.97 41 2 Oct. 23, 2006 B. Vicencio Constructi on 0007 17,945,286.72 I ,922, 709.29 3850962 Oct. 16, 2006 People's Telev ision Network In c. 10069 635, 000 .00 68,035.7 1 100 70 I,000,000 .00 107, 142.86 2005 Oct. 13, 2006 BJ Service Internati onal Inc. 02965 7 10,57 1.1 5 76, 132.62 02966 508 ,096.5 8 54,438.92 2007 Oct. 20, 2006 BJ Service Intern ational Inc. 02974 33 6,690.03 36,073.93 02975 2,539, 797.6 6 272, 12 1. 18 02976 4, 146,739. 83 444,293.55 0008 Oct. 13, 2006 EPI-COSL Consortium 000 72 I, 184,590 .64 126,920.43 000 74 876,748 .98 93,937.39 0008 Oct. 13, 2006 EPI-COSL Consortium 000 75 I, 184,590.54 126,920.43

C.T.A. CASE NO. 7792 37 DEC ISION " PP-22" 0590 Sept. 3 I, 2006 Sta. Ana Manufacturing & 00076 328,5 69.2 1 35,203.84 " PP-25" 1092 Oct. 3 I, 2006 Development Inc. 00077 I, 132,467.43 12 1,33 5.80 " PP-26" 202 1043 Dec. 12, 2006 D & G Construction " PP-27'' 11 688 Oct. 27, 2006 Globe Telecom 00093 544 ,560 .00 58,345.71 " PP-28" 0483 Oct. 27, 2006 00094 544,560.00 58,345.7 1 " PP-29" 0482 Oct. 27, 2006 AC Technical Services, Inc. 00944 504,78 1.73 54,083 .76 " PP-30" 2015 Oct. 27, 2006 San Agustin Electric Co., Inc. 270,428.43 28,974.47 " PP-31 " 102248 Nov . 17, 2006 San Agustin Electri c Co., Inc. 05671 P2,382 ,367.25 P255,253.63 " PP-32" 1240 Nov. 3, 2006 AT & E Techni ca l Services, " PP-33" 1244 Nov. I0, 2006 02041 985 ,296.36 105 ,567.47 " PP-34" 125 4 Nov. 17, 2006 Inc . " PP-35" 0009 Nov. 15 , 2006 Manila Electric Company 02044 I,024,3 16.5 1 I09 ,748.20 Technology Ex ports Services " PP- 36" 00 II Dec. 4,2006 00584 I,40 I,866.78 150,200.0 1 " PP-37" 0010 Nov. 24, 2006 Corp . 136 101 " PP-38" 4 1447 Nov. 3, 2006 Technology Ex ports Services 231003 I ,626 , 777.29 174 ,2 97 .5 7 " PP-39" 4 1456 Nov. I0, 2006 Corp . 01828 I, I04,33 1.20 11 8,321.20 Technology Ex ports Serv ices " PP-40" 41468 Nov. 17, 2006 01840 I ,427,526.24 152,949.24 Corp . " PP-41" 4 1476 Nov. 24, 2006 EPI-COSL Consortium 01857 420 ,000.00 45,000 .00 00087 656 ,050.74 70,291. 15 EPI-COS L Consortium 00089 I, 168,826.3 8 125,231.40 EPI -COSL Consortium 00090 280 ,423.98 30,045.43 Lockheed Detective & 00091 540,675 .88 57,929 .56 Watchman Agency, Inc. 00092 I, 168,826. 38 125,23 1.40 00094 1,08 1,3 51.76 11 5,859.12 Lockheed Detective & 00100 I, 11 5,844.37 119,554.75 Watchm an Agency, Inc. 00102 556, 139.86 59,586.41 00097 I, 11 5,844.37 11 9,554.75 Lockheed Detective & 00909 320,023 .83 34,288 .27 Watchman Agency, Inc. 00006 280,872.4 1 30 ,093.47 Lockheed Detecti ve & 00017 7 16,275 .00 76,743.75 Watchman Agency, Inc. 00018 611 ,83 1.50 65,553 .3 8 00019 538,387.65 57,684.39 00022 7 16,275 .00 76,743 .75 000 23 6 11 ,668.75 65,535 .94 00024 538,387.65 57,684. 39 00103 628,290 .00 67,3 16.79 00104 257,760.00 27,6 17.14 00107 435,330 .00 46,642.50 00112 628 ,290.00 67,316.79 00103 262,080.00 28,080.00 4 1747 628 ,290.00 67,316 .79 4 1748 273,870 .00 29,343.2 1 00028 716,275 .00 76,743.75 00029 6 11 ,723. 00 65 ,5 41.75

C.T.A. CASE N O. 7792 38 D EC IS IO N " PP-43" 4 1477 Nov. 24, 2006 Lockheed Detecti ve & 000 30 538,3 87.65 57,684.39 " PP-45" 4 1495 Nov. 30, 2006 Watchman Agency, Inc. 41 9 17 406, 802.25 43,585 .96 " PP-50" 201 0 Nov. I0, 2006 Lockheed Detecti ve & Watchman Agency, Inc. 4 19 18 408, 155.92 43,730.99 " PP-5 1" 06 11 Nov . 16, 2006 BJ Service International Inc. " PP-53" 11 72 1 Nov. 20, 2006 02979 286,4 19.30 30 ,687 .7 8 " PP-54" 4 111 Nov . 16, 2006 As her Buil ders 02980 3,507, 838.98 375,839.89 " PP-55" 4926 Nov. 23, 2006 AC Techni cal Services, Inc. 029 81 4 ,646,977.2 8 497,890.42 " PP-57" 201 8 Nov. 17, 2006 02982 " PP-58" 20 19 Nov. 24, 2006 Yaka l Constructi on 0 2 98 3 549,975.3 1 58,925 .93 " PP-59" 1042 Nov. 24, 2006 MAC Bui lders 02985 678,3 61 .5 0 72,68 1.59 " PP-60" 0054 De c . 4 , 2 00 6 0001 3 678,36 1.50 72,68 1.59 " PP-6 1" 198538 Nov. 16, 2006 AC Techni cal Serv ices, In c. 567 1-2 573,763.22 6 1,474.63 "P P-63" 4202 Nov. 24, 2006 AT & E Techni ca l Services, 04633 57 1,6 10.97 6 1,244.03 "P P-64" 122487 Dec. 14, 2006 03780 2,429,6 18.37 260,316.25 " PP-65" I 0 93 Nov. 29, 2006 In c. 00586 I,36 1,935.06 145 ,921.6 1 "P P-66" 01 24 Dec. 5, 2006 Sil ver Hori zon Constructi on, 903,368.38 96,789.47 " PP-68 04 84 Dec. I I, 2006 00 585 " PP-69" 201 4 Dec. 5,200 6 In c. 358,266.2 1 38,385.67 AZ Communi cations 00 797 " PP-70" 20 17 Dec.22,2006 3,327,354. 10 356,502.23 Netwo rk, Inc. 036 14 " PP- 72" 126 0 Dec. 8,2006 EE l Corporati on 15476 786, 12 1.93 84,227.35 " PP-73" 1263 Dec. 29, 2006 As ian Shipping Corporation I,486,559.2 1 159,274 .2 0 " PP-74" 1264 Dec.29,2006 00542 " PP-75" 0055 Dec. I I, 2006 Manil a Electric Company 136 11 0 820,000.00 87,857.14 " PP- 78" 4 165 1 Dec. 8,2006 602797 D & G Construction 0094 1 I ,900,887.39 203,666.5 1 BM Marketing 0 1367 I,42 8,276.43 153 ,029.62 5,337,469 .68 571 ,871.75 San Agustin Electri c Co., Inc. 02045 797,24 1.43 85 ,4 18.72 BJ Service Intern ational Inc. 02859 02 863 6,7 16,649.60 719,64 1.03 BJ Service International Inc. 9,990,02 1.60 I ,070,359.46 02999 Technology Exports Services 0300 1 506,765.88 54,296.34 Corp . 03 002 694,779.75 74 ,440.69 03 003 694,779.75 74,440.69 Techn ology Exports Services 03011 653,690.63 70,038.28 Corp. 322,098.05 34,5 10.51 018 55 Technology Ex ports Services 3,222,082. 75 345,223. 15 Corp . 0 1865 I,080,928. 14 11 5,8 13.73 Ace T ubul ar Services 0 1866 Limi ted I, I00,453 .93 11 7,905.78 0026 1 Lockheed Detecti ve & 271,855. 14 29,127.34 Watchman Age ncy, Inc. 00032 000 33 7 18,637.50 76 ,996.88 00034 6 11 ,994.25 65,570.8 1 54 1, 187.66 57,984.39

C.T.A. CASE NO. 7792 39 DEClSTON " PP-80" 41677 Dec. 29, 2006 Lockheed Detective & Watchman Agency, Inc. 00035 297,994 .97 3 1,928 .03 " PP-81 " 2091 Dec. 15, 2006 AT & E Techni ca l Services, 00038 7 16,275.00 76,743.75 In c . 00039 6 11 ,0 17.75 65 ,466 . 19 " PP-82" 2092 Dec. 15, 2006 00040 538 ,387.65 57 ,684 .39 AT & E Technical Services, 00587 588,67 1.53 63 ,07 1.95 " PP-84" 2 1142 Dec . 18, 2006 In c. " PP-8 7" 045 Dec. 27,2006 00589 1,661 ,257 .00 177, 991.8 2 P.T. Cerna Corporation " PP-88" 047 Dec. 27, 2006 Joos ung Electrical 20749 599,000 .00 64, 178.57 Construction Corp. " PP-89" 048 Dec. 28, 2006 Joosung Electrical 00036 907,565 .67 97,239. 18 Construction Corp. " PP-92" 7788 Oct. 3, 2006 Joosung Electrical 00038 652,700 . 10 69,932. 15 " PP-93" 8051 Nov. 3, 2006 Construction Corp. " PP-94" 8075 Dec. 27, 2006 00037 2,4 15,299 .03 258 ,78 2.04 " PP-95" 4 1418 Oct. 6, 2006 M iescor Builders, Inc. 35042 P3,355 ,886.43 P359 ,559 .26 Miescor Builders, Inc. 35043 " PP-96" 0302 Oct. 6, 2006 Miescor Builders, lnc. 35045 3,233 ,757.21 3 46,47 3. 9 9 Lockheed Detective & I ,2 0 2 ,2 0 0 . 7 6 128 ,807.22 " PP-97" 0007 Oct. 13 , 2006 Watchman Agency, Inc. 4 19 13 " PP-99" 10661 Oct. 6, 2006 Fabmik Construction & 293 ,309.61 31,426 .03 Equ ipm ent Co., Inc. 00008 " PP-1 00" 0525 Nov . 3, 2006 EP I-COSL Consortium 00049 303 ,828 .63 32,55 3.07 AZ Communications I ,2 0 7 , 784 . 83 129,405 .52 " PP-101 " 0463 Nov. 24, 2006 03520 " PP- 102" 416 Dec. 15 , 2006 Network, In c. 785 , 141 .3 3 84, 122 .29 Dynamic Builders & 00492 Construction Co . (Phil ) Inc. 00631 2,344,033 .0 I 251 , 146.49 00009 430,000 .00 46 ,07 1.43 Kestrel IMC Corp 00010 147,889. 38 B. Vicencio Construction I,3 80,300.85 87, 6 72 .44 00803 818 ,276 .08 " PP-1 03 0806 Dec. 15, 2006 Sil ver Horizon Construction, OOOSA- 32 1,980.18 " PP- 104" 601 Oct. 6, 2006 In c . 007418 3,005 , 148.30 879853 5,223,742. 19 Kanematsu Corporation I,000,000 .00 9 585,409.65 107, 142. 86 " PP-1 06" 8798539 Dec. I I, 2006 People ' s Television Network, 00158 263 ,000 .00 62,722 .46 00004 28, 178 .57 In c. 03791 I, 172,651.18 12 5,641. 20 " PP-1 08" 0511 Nov. I0, 2006 Lichel Techno logies, Inc. P24,550,8 10.64 " PP-1 09" 4 11 Oct. 6, 2006 B. Yicenciio Construction " PP-110" 4925 Nov. 23 , 2006 MAC Bui lders Total Input VAT of Receipts that do not show segregation/computation of Input VAT on Sale of Service

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Third Division ENERGY DEVELOPMENT CTA CASE NO. 7792 CORPORATION, Members: Petitioner, BAUTISTA, Chairperson -versus- PALANCA-ENRIQUEZ, and COTANGCO-MANALASTAS, Jl. COMMISSIONER OF INTERNAL Promulgated: REVENUE, JUN 11 2012 Respondent. X-------------------------------------------------------------------------------------------------------------X CONCURRING AND DISSENTING OPINION BAUTISTA,[.: The factual circumstances present in the case at bench supports the application of the then prevailing jurisprudence at the time the claim was made. With this, I concur with the findings of the Court that petitioner filed its administrative claim for refund within the prescribed period; nonetheless, I must point out that petitioner's judicial claim covering the first quarter of the taxable year 2006 was filed beyond the two (2)-year period, and thus, must be denied accordingly. When petitioner filed its administrative claim on January 7, 2008, and its subsequent judicial claim before this Court on june 5, 2008, the then contro~

.' CONCURRING AND DISSENTING OPINION CfA CASE NO. 7792 doctrine in this forum is that of the case of Atlas Consolidated Mining and Development Corporation v . Commissioner of Internal Revenue.1 The cases of Commissioner of Internal Revenue v . Mirant Pagbilao Corporation [Formerly Southern Energy Quezon, Inc.],2 and Commissioner of Internal Revenue v. Aichi Forging Company of A sia, Inc.,3 have yet to be promulgated on September 12, 2008, and October 6, 2010, respectively. Therefore, petitioner had until two (2) years from the filing of the relevant returns, within which to file both its administrative and judicial claims. Further, the two (2)-year prescriptive period is supported in the pronouncements made in the cases of Commissioner of Internal Revenue v. Toledo Power, Inc. ,4 and Commissioner of Internal Revenue v . San Roque Power Corporation.s Thus, it must be borne in mind that no claim can be had, whether in the administrative or judicial fora, beyond the two (2)-year period provided under Section 112 of the 1997 National Internal Revenue Code, as amended. And if the two (2)-year prescriptive period is about to expire, there is no need to wait for the denial of the claim by the Commissioner of Internal Revenue or its inaction after the expiration of the one hundred twenty (120)-day period before the taxpayer can lodge its appeal with this Court.6 1 G.R. N os. 141104 & 148763, Jun e 8, 2007, 524 SCRA 73. 2 G.R. No. 172129, September 12, 2008, 565 SCRA 154. 3 G.R. No. 184823, October 6, 2010. 4 CfA EB Case No. 321 (CfA Case Nos. 6805 & 6851), May 7, 2008. s CfA EB Case No. 408 (CfA Case No. 6647), March 25, 2009. 6 Commissioner of Internal Revenue v. CE Cebu Geothermal Power Company, Inc., CfA EB Case No. 426, May 29, 2009.

.' CONCURRING AND DISSENTING OPINION CfA CASE NO. 7792 Based on the records of the case, petitioner filed its returns for the taxable year 2006 on the following dates: April 26, 2006, July 26, 2006, October 25, 2006, and January 29, 2007. Therefore, petitioner had the following dates within which to file both its administrative and judicial claims, viz: April 26, 2008, July 26, 2008, October 25, 2008, and January 29, 2009. Thus, while I find the administrative claim filed within the prescribed period, I, however, must rule that the Petition for Review, insofar as the first (151) quarter of the taxable year 2006 is concerned, was made beyond the above mentioned period. In fine, petitioner's claim insofar as the first quarter is concerned should be denied for being filed out of time. Accordingly, I vote that the Petition for Review be PARTIALLY GRANTED, insofar as the claims for refund/ credit covering the second, third and fourth quarters of the taxable years 2006 is concerned.