MINDANAO II GEOTHERMAL PARTNERSHIP v. COMMISSIONER OF INTERNAL REVENUE

.' REPUBLIC OF THE PHILIPPINES COURT OF TAX APPEALS QUEZON CITY FIRST DIVISION MINDANAO II GEOTH ERMAL C.T.A. CASE NO. 7800 PARTNERSHIP, Petiti oner, Members : ',l' ACOSTA, Chairperson - versus - UY, and FASON-VICTORINO, JJ. COMMISSIONER OF INTERNAL Promulgated: REVENUE, _______ __ -~e_s:~ ~~~ ~t: _ _''1!!~ \ ~, �1 .._g '101'f , . x x- ___ _ __ _ <J_-_2'~":- DECISION Fabon- Victorino, J.: Th e instant Petit ion fo r Re vi ew see ks for a judgment directing res po nd ent Commi ssio ner of Internal Revenue to refund or to issue a ta x credit ce rtifi cate in favor of petitioner in the amount of P7,8 42 ,6 32 .34 , all eged ly represe nting its unutilized creditable input ta xes for th e t axa bl e yea r 200 6. Petition er Min da nao II Geoth ermal Partnership states that it is a partn ership duly re gi st ered with the Securities and Exchange Commission, with prin cipal address at Barangay Ilomavis, Kidapawan City, Nort h Cotabato. It is a duly registered VATJ

DECISION CTA Case No. 7800 taxpayer, with Ta x Identification No. (TIN) 004-766-953. 1 Respondent on the other hand, is the duly appointed Commissioner of the Bureau of Interna l Reve nue (BIR) empowered to determine and approve claims for refund or tax credit. She holds office at the 4th Floor, BIR National Office Bui lding , Agham Road, Quezon City. Petition er executed a Bui ld - Operate -Transfer (BOT) contract with the Philippin e National Oil Corporation-Energy Development Corporation (PNOC -EDC) to finance, construct, design, test, operate, maintain and repair of a 48.25-megawatt geothermal power plant in Kidap aw an, North Cotabato, provided PNOC-EDC would supply and delive r steam to petitioner at no cost. Under the the BOT, petitioner sha ll co nvert the steam into electric capacity and energy and deliver them to th e National Power Corporation (NPC) for and in behalf of PNOC- EDC. Petitioner's 48.25-megawatt geothermal power plant project has been accredited by the Departm ent of Energy (DOE) as a Block Power Production Facility und er th e Impl em enting Rules and Regulations of Executive Order No. 215, as amend ed, as ev idenced by its DOE Certificate of Accre ditation No. 99 -0"8-52 , issued on August 10, 1999. 2 / 1 Pars. 1 and 2, Stipu lation of Facts, Joint Stipulatio n of Facts and I ssues (JSFI), docket, p. 63. 2 Exhibit " A".

DECI S I O N CTA Case No. 7800 Petitioner claims that as an accredited power generation company utilizing geothermal energy, its sale of generated power and delivery of electri city to the NPC for and in behalf of PNOC-EDC is VAT zero - rated und er Section 108 (B) of the 1997 Tax Code, as amended by Republi c Act No. 9337. The sale is its lone revenue generating activity. In the course of its operation, petitioner purchased domestic goods and services other than capital goods and accumulated from such purchases creditable input taxes which remained unutilized. In its origina l and am ended Quarterly VAT Returns for the four quarters of 2006, petitioner reflected its VAT zero-rated sales/receipts in th e amount of P556,163,849.79 and unutilized input VAT in th e am ount of. P7,842,632.34, the details of which are as follows: Year Zero- Rated Unutilized Ex hibit 2 006 Date filed Sa les/Receipts Input VAT Augu s t 22 , " E" 1s t Q~ _ 2006 p 147 839 344.90 p 3 161 629.67 ' " F" 2nd Qtr Jul )" 2 5, 2 006 160,169,303.42 1 775 091.70 Octo be r 25, "G " 3 rd Ql!:_ 2006 - 83,639 429.02 1,416,049. 78 Ja nu a ry 25 , "H" 4 th Qtr 200 7 . 164,515,772.45 1 489 861.19 j P556,163,849. 79 P7,842,632.34

DEC I S I O N CTA Case No. 7800 On February 8, 2008, petitioner filed with the BIR Revenue District Office No. 108- Kidapawan City an administrative claim for refund or issuance of tax credit certificate for the amount of P7,842,632.34 for the four quarters of taxable year 2006. 3 However, respondent failed to act on the said claim for refund or tax credit. Thus th e instant petition, filed on June 27, 2008, to forestall the running of the two-year prescriptive period for filing a judicial claim for refund/issuance of tax credit certificate. Respondent CIR, In her Answer 4 dated August 4, 2008, interposes the following specia l and affirmative defenses: "4. She reiterate s and re-pleads the preceding paragraphs of this Answer as part of her Special and Affirmative Defenses . 5. Petition er's all eged claim for the issuance of a tax cre dit certificate is subject to administrative investigation/exam ination by respondent's Bureau . 6. Petition er fail ed to demonstrate that the ta x subject in the case at bar was erroneously or illegally col lected. 7. Ta xes co ll ecte d are presumed to be in accordance with laws and regulations. 8. To be entitled to refu nd or issuance of a tax credit certificate, it is imperative for petitioner to prove comp lian ce with the following, viz: a. Th e reg istration requirements of a value-added ) ta xpayer under the pertinent provision of the 3 Exhibit "J", w ith sub -marking. 4 Docket, pp. 31 to 36.

DECISION CTA Case No. 7800 1997 NIRC, as amended, and its implementing revenu e regulations; b. The invoicing and accounting requirements for VAT- r eg istered persons, as well as the filing and paym ent of VAT pursuant to the provisions of Section s 113 and 114 of the 1997 NIRC, as amended. Failure to comply with the invo1c1ng requirements on the documents supporting the sale of goods and services will result in the disallowa nce of the claim for input tax of the taxpayer claimant (Revenue Memorandum Circul ar No. 42-2003); c. The sub mission of complete documents in support of the administrative claim for refund pursuant to Section 112 (C) of the 1997 NIRC, as amended, otherwise, there would be no sufficient compliance with regard to the filing of administrative claim for tax credit/refund which is a condition sine qua non prior to the filing of judicia l claim in accordance with Section 229 of the 19 97 NIRC, as amended; d. That the input taxes of P7,842,632.34 allegedly representing unutilized input VAT from its domestic purchases of goods other than capital good s and services were: i. pai d by the petitioner; ii . attributable to its ze ro-rated or effectively ze ro-rated sales; and, iii . such input taxes paid should not have been applied against any output tax; e. That petitioner's claim for tax credit or refund of the unutili ze d input ta x (VAT) in the amount of P7,842,632.34 was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Section 112 (A) of the Ta x Code of 1997, as amended; J f. That petitioner has complied with the governing rules and regulations with reference to recovery of ta x erron eo usly or illegally collected as

DECISIO N CTA Case No. 7800 ex plicitly provided in Sections 112 (A) and 229 of the 1997 NIRC, as amended. 9. Moreover, in an action for tax credit/refund, the burden of proof rests upon the taxpayer to establish by sufficient and competent evidence its entitlement to a claim for ta x credit/refund. 10. Basic is th e rule that ta x refunds are in the nature of ta x exe mptions and are to be construed strictissimi juris again st t he entity claiming the same (Philippine Geoth erm a l, In c., vs. Commissioner of Internal Revenu e, G.R. . No . 15402 8, July 27, 2005). Moreov er, sta tutes in derogation of sovereignty such as thos e co ntaining exe mption from ta x ation should be stri ctly co nstru ed in favor of the State . In this r egard, ta x ation is th e rul e and ex emption is the exception. The law does not look with favor on tax exe mption s and t hat he who would seek to be thus privil eged mu st justify it by words too plain to be mi st a ken and too categori cal to be misinterpreted (Sea- Lan d Se rvice, In c. vs. Court of Appeals, 357 SCRA 444). " Upon direc tiv e, th e parties filed their respective Pre-Trial Briefs and thereafter, th eir Joint Stipulations of Facts and Issues which the Court approved on October 7, 2008 (Docket, p. 66). During the tri a�l, petitioner presented its Accounting Manager Daisy C. Ab enes 5 and th e Court-commissioned Independent / Certified Public Accountant (ICPA) Mi chae l L. Aguirre. 6 5 Minutes of Hearing, Nove mber 11 , 2008 , docket , p . 74. 6 Minutes of Hearing, March 20, 200 9 , docket, p . 149.

DECISION CTA Case No. 7800 Witness Daisy C. Ab enes testified that she is currently the General Offi ce and Accounting Manag er of Marubeni Energy Services Corporation (MESC) , w hi ch operates and maintains the geothermal plant fa ciliti es of peti t ioner in North Co tabato under an 'Operations and Maintenance ( 0 & M) Agree m ent'. Sh e is also the Accounting Manag er of th e petit io ner and as su ch, she is in - charge of all the accounting reco rd s and fin ancial statements of petitioner including compliance with all gove rnm ent requirements such as permits and li ce nses, in com e and � oth er ta xe s, Securities and Exchange Commissi o n r eport ori al and oth er government requirements. She fu rth er t est ifi ed t hat geo th ermal energy is th e source of th e electri c ca pacity o r energy that petition er delivers to NPC for and in behalf of PNOC- EDC. Th e geoth ermal power plant of petition er has bee n accre dited by th e DOE as evidenced by the Ce rtifi ca t e of Acc r ed ita ti on iss ued in its favor. The delivery of elect r ic capacity o r en erg y to NPC for and in behalf of PNOC-EDC is subj ect t o VAT at ze ro rate und er Section 10 8 (B) of th e 1997 NIRC, as am end ed by R.A . No. 9337. Sin ce th e delivery of electric ca pacity or energy or sa le of ge nerat ed pow er to NPC for and in behalf of PNO C- EDC is t he only source of VATable revenue for petition er, th e accumu lated creditable input taxes arising from its/

DECISION CTA Case No. 7800 Pa ge 8 of 25 domestic purchases of goods and services are always unapplied as petitioner has no output VAT liability. For purposes of filing quarterly VAT return s, the sal e of generated power were reported to the Kidapawan City Office of th e BIR. 7 ICPA Micha el L. Agu irre testified that he conducted a special audit and exa mination of th e books of accounts, records, schedules, invoices, official re ce ipts and other voluminous documents submitted to him in re latio n to petitioner's claim for refund or tax credit for th e ta xable yea r 2006. After audit procedures and tests, he submitted to th e Co urt a written report dated March 31, 2009 indicating that petiti oner's claim for refund or tax credit in the amount of Php7,816 ,087 .60 is properly substantiated which is net of the exceptions noted amounting to Php26,544.74. The examination also revea led that petitioner did not offset the unutili ze d input VAT being claimed against any output tax. 8 There being no other witness to present petitioner rested its case and formally offered its docum entary evidence marked as J Exhibits "A" to "Q", in clu sive of sub-markings, which were admitted in the Resolutions dated October 28, 20099 and January 21, 2010. 7 Judi cial Affida vit of Ms. Daisy C. Abenes, docke t, pp. 86 to 95. 8 Ju dicial Affid av it of Mr . Mi cha el L. Aguirre, docket, pp . 19 1 to 198. 9 Docket, pp . 249 and 25 0. 10 Docket, pp. 301 to 30 2.

'. DECISION CTA Case No. 7800 On December 8, 2 009, respondent waived presentation of evidence and submitted the case for decision based on the pleadings filed by th e parties. 11 In a Resolution dated Feb ruary 12, 2010, the case was dee med submitted for decision after respondent and petitioner filed their respective Mem ora nda on January 5, 2010 12 and January 25, 2010, 13 res pectively . THE ISSUES Th e parties jointly submit th e following issues for the resolution of the Court : "1. Wh ether or not petitioner's administrative and jud icial claims were timely filed. 2. Whe t her or not petitioner's sale of generated power by geothermal energy qualifi es as VAT zero-rate d under Section 108 (B) of t he 1997 Ta x Code as amended by R.A. No. 9337. 3. Wheth er or not petitioner's VAT zero- rated sales are properly supported by VAT-comp li ant official receipts and invoices. 4. Wheth er or not the amount of J P7,842,632.34 represents the 11 Docket, p. 288. 12 Docket, pp . 291 to 298. 13 Docket, p. 366.

DECIS ION CTA Case No. 7800 accumulated unapplied and unutilized creditable input taxes paid by petitioner within the Year 2006 directly attributable to its primary source of revenue which is VAT-zero rated. 5. Wheth er or not petitioner's unapplied and unutili zed creditable input taxes for the year 2006 is duly supported by pertinent docum ents, such as VAT- compliant invoi ces and official receipts. 6. Wh eth er or not the accumulated unapplied creditable input taxes paid by petiti oner within the Year 2006 in the total amount of P7,842,632.34 (sic) rem ain s unutili zed. 7. And in sum, whether or not petitioner is entitled to th e claim for refund or tax credit in th e accumulated amount of P7,842 ,632.34 (sic) representing its unappli ed and unutili zed creditable input ta xes for the year 2006 directly attributable to its primary source of r evenu e whi ch is VAT- zero rated." The crux of the co ntroversy lies on whether petitioner's sales of generated power to .NPC for and in behalf of PNOC-EDC qualify as a zero-rated VAT tran saction; and if in the affirmative, whether petitioner is entitled t o a refund or issuance of tax credit certificate in the amount of P7, 842,632.34, representing its unutilized input VAT attributable to VAT zero-rated sales for the four quarters of taxable year 2006. / The petition has no leg to stand on.

DECISION CTA Case No. 7800 Pag e 11 of 25 Petitioner anch o rs its claim for refund or tax credit on Section 112(A) of the National Internal Revenue Code (NIRC) of 1997, which reads as follow s: "SEC. 112. Re funds or Tax Credits of Input Tax. - (A) Zero-rated or Effectively Zero- rated Sales. - Any VAT- registered person, whose sa les are zero- rated or effectively ze ro - rated may, within two (2) years after the close of the ta xab le quarter when the sales were made, apply for the issuance of a tax credit ce rtifi cate or refund of creditable input ta x due or paid attributable to such sales, except transitional input � tax, to the extent that such input tax has not been app li ed against output tax: Provided, however, That in the case of ze ro - rated sa les under Section 106(A)(2)(a)(1), ( 2) and (B) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accorda nce w it h the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the ta xpa yer is engaged in zero-rated or effective ly zero- rated sale and also in ta xab le or exe mpt sale of goods or properties or serv ices , and the amount of cred itabl e input tax due or- paid cannot be directly and entirely attributed to any one of the tra nsactions, it shall be allocated proportionately o n the ba sis of the volume of sa les." Thus to be entitl ed to a refund or issuance of tax credit 0) certificate of input t ax due or paid attributable to zero - rated effectively zero-ra t ed sa les, petitioner must prove the following:

DECIS ION CTA Case No. 7800 1. that the clai m for refund with respondent was filed within the two-year prescriptive period. 2. that there w ere zero-rated or effectively zero-rated sales; 3. that input ta xe s were incurred or paid; 4. that such input VAT payments are directly attributable to zero - rated sal es or effective ly zero-rated sales; and 5. that the input VAT payments were not appl ied against any output VAT liability. Under Section 112(A) of the NIRC of 1997, the two-year prescriptive period for the filing of a claim for input VAT refund or credit is reckoned from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax was paid or not. Counting from March 31, 2006, June 30, 2006, September 30, 2006 and December 31, 2006, the close of the first, second, third and � fourth quarters of 2006, respectively, petition er had until March 31, June 30, September 30, and December 31, all of 2008, within which to file its administrative claim for input VAT refund for the sa id taxable quarters. Evidently, petitioner seasonably fil ed on February 8, 2008 its administrative claim for refund or ta x credit in the sum of P7,842,632.34 for the four quarters of 2006. \ /

DECIS ION CTA Case No. 7800 Petitioner likewise t im ely filed its judicial claim for refund on June 27, 2008. Admittedly, respondent failed to act on petitioner's application for refund or tax cred it within the prescribed 120-day period or until June 7, 2008. Petitioner therefore had thirty (30) days from the lapse of the 120-day period to file an appeal or until July 7, 2008 . Thus, petitioner's appea l from respondent's inaction was seasonably taken on June 27, 2008, pursuant to Section 112 (D) of the 1997 NIRC, as amended, which is hereby quoted for ready reference: "SE C. 112 . Refunds or Tax Credits of Input Tax.- XXX XXX XXX (D) Period Within Which Refund or Tax ./ Credit of Input Ta x es Shall be Made. ----:- In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty {120) days from the date of submission of complete documents in suooort of the application filed in accordance with Subsections (A) and (B) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty day- period, appeal the decision or the unacted claim with the Court of Tax

DECIS ION CTA Case No. 780 0 Appea ls." (Boldfacing and underscoring supplied) On the main issue of petitioner's entitlement to a refund or issuance of ta x credit ce rtificate in the amount of P7,842,632.34, representing its unutilized input VAT attributable to VAT zero- rated sales for the four quarters of taxable year 2006, petitioner argues that since it is a power g e neration company duly accredited 14 by the DOE, its sales of el ectri city qualify for VAT zero-rating pursuant to Republic Act (R.A.) No . 9136, also known as Electric Power Industry Reform Act of 2001. Section 6 of the law relevantly states: "SE C. 6 . Generation Sector. Generation of el ectric power, a business affected wi th publi c interest shall be competitive and open . Upon th e effectivity of this Act, any new generation company shall, before it operates, secure fro m the Energy Regulatory Commission (ERC) a certificate of compliance pursuant to the standard s set forth in this Act, as well as health, safety and environmental clearances from the appropriate government agencies under existing laws. Any law to th e contrary notwithstanding, power generation shall not be considered a publi c utility operation. For this purpose, any person or entity engaged or which shall engage in pow er generation and supply of electricity shall not be required to secure a national J fran chise. 14 Ann ex " A", p. 260 of the case docket .

DECI S ION CTA Case No . 7800 Up on the implementation of retail competition and open access, the prices charged by a generation company for the supply of electricity shal l not be subject to regulation by the ERC ex cept as otherwise provided in this Act. Pursuant to the objective of lowering electricity rates to end-users, sales of generated power by generation companies shall be value added tax zero-rated." (Emphasis supplied) In the case of Mindanao I Geothermal Partnership vs. Comm issioner of Internal Revenue, 15 this Court, applying the provisions of R.A . No. 9136, specified t he conditions to qualify for VAT zero - rating of po we r generating compan ies, to wit: . . it is undisputed that Republic Act No . 9136 otherwise known as the 'Electric Power Ind ustry Reform Act of 2001' provided for VAT zero- rating of sales of generated power by generation companies beginning June 26, 2001. Thus, the pertinent provisions of the National Internal Reve nue Code of 1997 are deemed amended by th e provisions of R.A . No. 9136 by modifying t he VAT rate applicab le to sa les of generated power by generation companies from t en ( 10 % ) pe rce nt to zero (0 % ) percent. To q ualify for VAT zero-rating under R.A. No. 9136, petitioner must prove that: 1) it is a generation company and 2) it derived sa les from power generation." (Boldfacing and underscoring supplied) / 15 CTA Case No. 6 788 , Octobe r 13, 2005 .

DECIS ION CTA Case No. 7800 Ergo, in order f.or a power gen era tion company to qualify for VAT zero-rating in accordance with R.A. No. 9136, two (2) requirements must con cur, namely, 1) it is a generation company, and 2) it derived sa les from power generation. However, the forego ing provision was expressly repealed by R.A. 9337, 16 which took effect on November 1, 2005. The repealing clause reads: "SECTION 24. Repealing Clause. - The following laws or provisions of laws are hereby repealed and the persons and/or transactions affected herein are made subject to the value- added ta x subject to the provisions of Title IV of the National Internal Revenue Code of 1997, as amended : XXX XX X XXX (B) Section 6, fifth paragraph of R.A. No. 9136 on th e ze ro VAT rate imposed on the sales of generated power by generation compan ies; and" Notwithstanding the foregoing provision, the sale of generated power by petitioner co ntinues to be VAT zero-rated by virtue of/ 16 An Act Amendin g Sect io ns 27 , 28, 34, 106, 107, 108, 109 , 110, 111, 11 2 , 11 3 , 114, 116, 11 7, 119, 121 , 14 8 , 15 1, 236, 237 and 288 or th e Natio nal Intern al Revenu e Code of 1997, as amended, and for other purposes .

DECISION CTA Case No. 7800 Section 108(B)(7) of the 1997 NIRC, as amended by R.A. No. 9337, to wit: "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties. - XXX XXX XXX (B) Tra nsactions Subject to Zero Percent (0%) Rate. - The following services performed in the Ph ilippines by VAT-registered persons shall be subject to ze ro 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 fue ls." (Emphasis supplied) The record shows that petitioner's 48.25-megawatt geothermal power plant project has been accredited by the DOE as a Block Power Produ ction Facility under the Implementing Rules and Regulations of Exec utive Order No. 215, as amended. That fact alone is however not sufficient to support a conclusion that petitioner is a gen eration co mpany. A thorough analysis of the related law and its im plementing rules and regulations is warranted.;

DECISION CTA Case No. 7800 Section 4(x) of R.A. No. 9136, the term "generation company" is defined as follo ws: "SECTIO N 4. Definition of Terms. - XXX XXX XXX (x) 'G eneration Company' refers to any person or entity authorized by the ERC 17 to operate facilities used in the generation of electricity; II (Emphasis supplied) In relation th ereto, Sectio ns 1 and 4(a) of Rule 5 of the Implementing Rules and Regulations ("IRR") of R.A. No. 9136, provide: "SECTIO N 1. Guiding Princip le. XXX XXX XXX No Person may engage in the Generation of Electricity as a new Generation Company unless such Person has received a COC 18 from the ERC to operate facilities used in the Generation of Electricity. A Person that demonstrates comp li ance with the standards and requirem ents of this Rule 5, and such other terms and co nditions as determined by the ERC to be appropriate to ensure that Perso ns com ply w ith all ap pli cab le leg al and regulatory / requirements, shal l be issued a COC. II (Emphasis supplied) 17 Energy Regu latory Commission. 18 Certificate of Compliance.

DECISION CTA Case No. 7800 Page 1 9 of 25 "SECTION 4. Obligations of a Generation Company. - (a) A COC sha ll be secured from t he ERC before commercial operation of a new Generation Facility. The COC shall stipulate all obligations of a Generation Company consistent with this Section and such other operating guidelines as ERC may establish . The ERC shall establish and publish the standards and require m ents for issuance of a COC. A COC shall be iss ued upon compliance with such standards and requirements. (i) A Pe rson owning an ex isting Generation Facility or a Generation Fac ili ty und er constru ction, shall subm it within ninety (90) days from effectivity of th ese Rul es to ERC, when appli ca bl e, a ce rtificate of DOE/NPC accred itation, a three (3) year operational history, a general com pa ny profil e and other information th at ERC ma y require . Upon making a compl ete submission to the ERC, such Perso n shall be issued a COC by the ERC to operate such ex isting Generation Facility." (Emphasis supp lie d) Clearly, no perso n may engage in the generation of electricity as a new Generation Co mpany unless such person has received a COC from the ERC t ~ operate facilities used in the generation of electricity. Ex isting generation facility or a generation facility under constru ction is obligated to submit within ninety (90) days from effectivity of the Rul es, 19 to ERC, when applicable, a certificate of / DOE/NPC accreditation, a three (3) year operational history, a 19 Ru les and Regu lation I mp lementing R.A. No . 9136.

DECISION CTA Case No. 7800 general company profil e and other information that the ERC may require. Only upon comp lete submission of the foregoing requirements that the generation company shall be issued a COC by th e ERC to operate su ch ex isting generation facility. Thus, to be a Gene ration Co mpany, it must have a duly issued COC from the ERC, without which it is not authorized to operate a generation facility. Simp ly put, without the COC, a person cannot be said to be a Generation Compa ny . In the case of To ledo Power Company v. Commissioner of Internal Revenue, 20 th e Court ruled that failure to submit proof of the approved COC will render the sales of generated power not qualified for VAT zero - rating under R.A. No . 9136. The pertinent portion of the Decision is quoted hereunder: "Pursuant to the above prov1s1ons, petitioner fil ed on June 20, 2002 an application for the issu ance of a Certificate of Compliance with the En ergy Regulatory Co mmis sio n, but it fai led to submit proof of the approved Certificate o f Compliance; t h us, its sa les of j generated power cannot qua lify for VAT zero- rating under the EPIRA. " (Emphasis supplied ) �2 CTA Case No . 696 1, November Jl , 2009.

DECIS ION CTA Case No. 7800 Page 2 1 of 25 Quite recently , the Court in GBH Power Resources, Inc. [Formerly: Mirant (Philippines) Island Generation Corporation] v. Commissioner of Interna l Revenue, 21 ruled that while GBH proved that it actually derived sales from power generation, it, however, fail ed to establish th at it is a generation company as defined under Se ction 4 ( x ) in relation to Section 6 of R.A. No. 9136. Petitioner th ere in failed to submit its ERC registration and COC, thus it cannot qualify for VAT zero-rati ng und er R.A. No. 9136. Pursuant to the aforecited cases , there is a need for petitioner to es tablish that it is authorized to operate as a generation company, as defined under R.A. No. 9136, by presenting its COC from the ERC. In its Quarterly VAT Returns for 2006, petitioner reported a total zero-rated sa les of P556,163,849. 79 and unutilized input VAT of P7,842,632.34, broken down as follows: ,---� Exhibit Year 2006 Zero- Rated Unutilized J "E" 1st Qtr Sa les/Receipts Input VAT "F" p 147 839 344.90 p 3 161 629.67 "G" 2 nd Q!_r " H '' 3rd Qtr 160 169 303.42 1 775 091.70 83 ,639, 42 9.02 1,416,049. 78 4th Qtr 1,489 861.19 164 515 772.45 P556,163,849. 79 P7,842,632.34 21 CTA Case No. 7462, March 26, 2010.

DECISIO N CTA Case No. 7800 Pa ge 22 of 25 Per ICPA repo rt 22 dated March 31, 2009, the zero-rated sales/receipts in the amount of P556, 163,849.79, as reported in petitioner's "Schedule of Zero-Rated Sales/Receipts" 23 for taxable year 2006, consisted of sal es of energy to PNOC-EDC. Petitioner submitted Certificate of Accreditation issued by the DOE 24 and the related invoi ces and offi cial rece ipts25 issued by petitioner to PNOC- EDC for the y ea r 2006. While these documents show that petitioner actually derived revenues from sale of power generation, they are not sufficient to establish that petitioner is a "generation company" within th e definition of R.A. No. 9136 and its related implementing rules and regulations. Petitioner fail ed to satisfactory demonstrate compliance with the standards and requirements of Section 4(a)(i) of Rule 5 of the rules and regulations implementing R.A. 9136, which particularly dictates th e presentation of a COC to be considered a generation company. The Certifi ca te of Accreditation from the DOE is simply inadequate to sustain petitioner's claim that it is a generation company entitled to the prayed for refund or issuance of tax credit certificate. / 22 Exhibit " P", with sub- m arki ng. 23 Exhibit " P" Ann ex " K" 24 Exhibit "A'/ . 25 Exhibits " AE.l " to " AE . 12", "AF . l " to " AF .20", " AG.l " to " AG.7", and "AH. l" to " AH .9".

. DECIS ION CTA Case No . 7800 Evidence reveal that petitioner failed to present in support of its claim for refund its ERC registration and Certificate of Compliance covering the first to the fourth quarter of taxable year 2006. Th ere is also no showi ng that petitioner is duly authorized by the ERC to operate fa ciliti es used in th e generation of electricity. In th e absence of eviden ce that petitioner is a generation company, all of the reported zero-rated receipts of P556,163,849 .79 cannot qualify for VAT zero - rating und er Section 108(8)(7) of the 1997 NIRC, as amended by R.A. No. 9337, and Section 4 of Rule 5 of the Rules and Regulations Implementing Republic Act No . 9136. Consequently, its cl aim for refund or issuance of tax credit certifi cate in the am ount of P7,842,632.34, allegedly representing its input VAT attributable to zero-rated receipts from power genera tion serv ices rendered to PNOC -E DC for taxable year 2006, should fail . Elementary is th e rule that a taxpayer claimant has the burd en of proof to show th at it is entitled to the refund of the amount claimed as refundable because taxes are presumed to have bee n collected in accorda nce with laws and regulations on the matter. The burden of proof rests upon the taxpayer to establish by sufficient and competent evid ence its entitlement to a claim fo /

' ~I DECISION CTA Case No. 7800 Page 2 4 of 25 refund. 26 And for failure of petitioner to establish the factual basis of its claim for refund, the Court has no option but to deny the present claim. In view of th e foregoing, a discussion on petitioner's compliance with the other requisites for refund of input tax attributabl e to zero - rated sales is deemed unnecessary. WHEREFORE , the instant Petition for Review is hereby DENIED, for insufficien cy of evide nce . SO ORDERED. We co ncur : \ ~ v.D.~ ERNESTO D. ACOSTA Pres idin g Justice ER~. UY Associate Justice 26 Commissioner of Interna l Revenue vs. Tokyo Shipping Co., Ltd. , eta!., G.R. No . L-68252, May 26, 1995

DECISION CTA Case No. 7800 CERTIFICATION Pursuant to Arti Cle VIII, Section 13 of the Constitution, it is hereby certifi ed that the conclusions in .the above Decision were reached in consultation before the case was assigned to the writer of th e opinion of the Court's Division. \)~19� ~ ERNESTO D. ACOSTA Presiding Justice