CBK Power Company Limited v. Commissioner of Internal Revenue (Cons. with 8302)

REPUBLIC OF THE PHILIPPINES Court of Tax Appeals QUEZON CITY Special Third Div ision CBK POWER COMPANY CTA CASE NO. 8246 LIMITED, Petitioner, -versus- COMMISSIONER OF INTERNAL CTA CASE NO. 8302 REVENUE, Members: Re s p o nd ent. BAUTISTA, Chairperson, and X---------------------------------------------X COTANGCO-MANALASTAS, JL CBK POWER COMPANY LIMITED, Petitioner, -versus- COMMISSIONER OF INTERNAL Promulgated: xR--E--V---E--N---U--E--,--------- - -------R--e--s--p--o--n--d--e-n--t--.--------- --------- --------- J--U~ ~N~~1---0~ -- ~2:!)0"~"~;1":"~:::-:~:n:~~.---~:-;;~::::- :--x DECISION BAUTISTA, [.: The consolidated Petition for Review filed on March 30, 2011,1 and Amen ded Petition for Review filed on April8, 2013,2 p ursu ant to Section 112(A) of the 1997 National Internal Revenue Code, as amen ded,3 seek 1 Records, CTA Case Nos. 8246 & 8302, pp. 1-49, with Aru1exes; docketed as CTA Case No. 8246. 2 Td., at pp. 1439-1642, with Annexes; d oc keted as CTA Case No. 8302. 3 SEC. 112. Refunds or Tax Credits of Input Tax . - (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT-registered person, whose sales are zero-ra ted or effec tively zero-rated may, within two (2) yea rs after the close of the taxa ble qu arte r when the sa les were made, apply for the issuance of a tax credit certifica te or refund of creditable input tax due or pa id attributable to such sales, exce pt h�ansitional input ta x, to the extent that such input tax has not been applied again st output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(8)(1) and (2), the acceptable foreign currency exchange proceed s thereof had been dul y accounted for in accordance with the rules and regula tions of the Bangko Sentral ng Pilipinas (BSP): Provided, fur ther, That where the tax payer is engaged in zero-rated or effec tively zero-ra ted sa le and also in taxa ble or exempt sa le of goods or properties or services, and the amount of creditable input tax du e or paid ca m1ot be di rec tly and entirely otiTibuted to any one of tho '"~.c hon,, it>ha ll be allocated pmpmtionatoly on tho ""'" of the volume of>al" f

DECISION CTA CASE NOS. 8246 and 8302 for the issuance of tax credit certificates in the respective amounts of ~17,784,968.91, for unutilized input taxes on local purchases and importations of goods other than capital goods, local purchases of services, payments for services rendered by non-residents, including unutilized amortized input taxes on capital goods, all attributable to zero-rated sales covering the period from January 1, 2009 to March 31, 2009; and ~5,781,915.24, for unutilized input taxes on importations of goods other than capital goods, attributable to zero-rated sales covering the period from April1, 2009 to June 30, 2009. FACTS OF THE CASE Petitioner, CBK Power Company Limited, is a partnership duly organized and existing under and by virtue of the laws of the Philippines, with principal office at the National Power Corporation Compound, Kalayaan, Laguna. On the other hand, respondent is the duly appointed Commissioner of Internal Revenue, vested with authority to act as such, including, inter alia, the power to decide, approve and grant refunds or tax credit of erroneously or illegally collected internal revenue taxes as provided by law, with office address at the Bureau of Internal Revenue ("BIR") National Office Building, Diliman, Quezon City. On November 26, 2010, petitioner filed with the BIR Revenue District Office No. 55 of Laguna, its administrative claim in the amount of ~17,784,968.91, for unutilized input taxes on local purchases and importations of goods other than capital goods, local purchases of services, payments for services rendered by non-residents, including unutilized amortized input taxes on capital goods covering the period from January 1, 2009 to March 31, 2009. Also, on February 24, 2011, petitioner filed with the BIR Large Taxpayers Service, Revenue District Office No. 121, BIR National Office Building, Agham Road, Diliman, Quezon City, its administrative claim in the amount of ~31,680,290.87, for unutilized input taxes on its local r purchases and importations of goods other than capital goods, local purchases of services, including unutilized amortized input taxes on capital goods covering the period from Aprill, 2009 to June 30,2009.

DECISION CTA CASE NOS. 8246 and 8302 Due to respondent's inaction, on March 30, 2011, petitioner filed a Petition for Review, docketed as CTA Case No. 8246,4 regarding its claim in the amount of ~17,784,968.91, covering the period from January 1, 2009 to March 31, 2009. On June 27, 2011, respondent filed her Answer,s interposing the following Special and Affirmative Defenses: "4. Petitioner is not entitled to [a] refund or tax credit in the amount of ~17,784,968.91 representing alleged unutilized input tax because it failed to submit all the necessary and relevant documents pertaining to the above-mentioned amount with respondent (sic) in the administrative claim for refund or tax credit; 5. In an administrative claim for refund or tax credit of input taxes attributable to zero-rated sales, a VAT[-]registered person must submit complete documents to support its application for refund pursuant to Section 112(D) (sic) of the Tax Code of 1997. Otherwise, there will be no sufficient compliance with the filing of an administrative claim for refund, which is a condition sine qua non prior (sic) to the filing of judicial claim; 6. To support its claim, it is imperative for petitioner to prove and present the following, viz: a. The registration requirements of a value-added taxpayer in compliance with Section 6(a) and (b) of Revenue Regulations No. 6-97 in relation to Section 4.107- a(a) of Revenue Regulations No. 7-95, and Section 236 of the National Internal Revenue Code of 1997 (NIRC of 1997); b. The invo1cmg and accounting requirements for VAT-registered persons, as well as the filing and payment of VAT in compliance with the provisions of Sections 113 and 114 of the NIRC of 1997; ffivolvffig for r c. Proof of compliance with the prescribed checklist :~~~;;d;~~Ca~fN~~::.~::~:: :~_:e subntitted clalln VAT

DECISION CTA CASE NOS. 8246 and 8302 refund pursuant to Revenue Memorandum Order No. 53- 98. It is worthy of emphasis that Section 112(D) (sic) of the NIRC of 1997 requires the submission of complete documents in support of the application filed with the Bureau of Internal Revenue before the 120-day audit period shall apply, and before the taxpayer could avail of judicial remedies as provided for in the law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants [the] immediate dismissal of the petition for review; d . That the input taxes of !47,425,306.79 (sic) allegedly paid by petitioner on its domestic purchases of non- capital goods and services, services rendered by non- residents and importation of non-capital goods for the period April 1, 2008 to December 31, 2008 (sic) were attributable to its zero-rated sales and such have not been applied against any output tax and were not carried over in the succeeding taxable quarter or quarters; e. That petitioner's administrative claim for tax credit or refund of [its] unutilized input tax (VAT) was filed within two (2) year[s] after the close of the taxable quarter when the sales were made in accordance with Sections 112(A) and (D) (sic) of the NIRC of 1997; f. The judicial claim was filed within the period prescribed in Section 112(D) (sic) of the NIRC of 1997; g. That petitioner's domestic purchases of goods and services were made in the course of the trade or business, properly supported by VAT invoices and/ or official receipts and other documents, such as subsidiary purchase journal, showing that it actually paid VAT in accordance with Sections 110(A)(2) and 113 of the NIRC of 1997, and in pursuance (sic) to Section 4.104-5(a) and (b) of Revenue Regulations No. 7-95 (RE: Substantiation of Claims for Input Tax Credit); [and] h. The requirements as enumerated under Section 4.104-2 of Revenue Regulations [No.] 7-95 (Re: Persons who can avail of the Input Tax Credits).

DECISION CTA CASE NOS. 8246 and 8302 7. In Ang Tibay vs. Court of Industrial Relations, G.R. No. L- 46496, the Highest Court stated the primary rights which must be respected even in an administrative proceeding: XXX XXX XXX Petitioner is mandated to present evidence to support its administrative claim and such evidence will be used as basis for the decision of the quasi-judicial body. If there is lack of evidence, then the decision will probably be contrary to petitioner. Only the evidence presented will be reviewed by the quasi-judicial body. An administrative claim is meant to expedite the proceedings where all the relevant evidence is presented. Petitioner, however, instead chose not to submit any evidence to support its claim; and 8. Furthermore, in an action for refund the burden of proof is on the taxpayer to establish its right to refund (sic) and failure to sustain the burden is fatal to the claim for refund/ credit. This is so because exemptions from taxation are highly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of organic or statutory law. An exemption from the common burden cannot be permitted to exist upon value implications (Asiatic Petroleum Co. vs. Llanes, 49 Phil. 466, cited in Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670)."6 On the other hand, on June 28, 2011, petitioner filed another Petition for Review, docketed as CTA Case No. 8302 ,7 regarding its claim in the amount of ~31,680,290.87, covering the period from April 1, 2009 to June 30, 2009. On September 2, 2011, respondent filed her Answer,s interposing the following: "5. Petitioner's alleged claim for refund is subject to administrative routinary investigation/ examination by the Bureau of Internal Revenue (BIR); 6 !d., a t pp. 69-72. 7 Records, CTA Case No. 8302, pp. 1-44, with Annexes. s ld., a t pp. 61-67.

DECISION CTA CASE NOS. 8246 and 8302 6. The amount of ~1,680,290.87 being claimed by petitioner as alleged unutilized input VAT on its alleged local purchases and importations of goods other than capital goods, alleged local purchases of services, including alleged unutilized amortized input taxes on capital goods exceeding F1 Million, for the period April 1, 2009 to June 30, 2009 allegedly attributable to zero-rated sales is not properly documented; 7. Petitioner must prove that it has complied with the provisions of Section 112(A) and 112(B) (sic) of the Tax Code of 1997, as amended; 8. Proof of compliance with the prescribed checklist of requirements to be subm itted involving claim for VAT refund pursu ant to Revenue Mem orandum Order No. 53-98, otherwise there would be no sufficient compliance with the filing of the administrative claim for refund, the administrative claim thereof being mere pro-forma, which is a condition sine qua non prior (sic) to the filing of judicial claim in accordance with the provision of Section 229 of the Tax Code of 1997. Further Section 112(C) of the Tax Code of 1997, as amended, requires the submission of complete documents in support of the application filed with the BIR before the 120-day audit period will apply, and before the taxpayer could avail of judicial remedies as provided for in law. Hence, petitioner's failure to submit proof of compliance with the above-stated requirements warrants [the] immediate dismissal of the petition for review; 9. Petitioner must likewise prove that it has complied with the invoicing requirements mentioned in Sections 110 and 113 of the Tax Code of 1997, as amended, in relation to the provisions of Revenue Regulations [No.] 7-95; 10. In an action for refund, the burden of proof is on the taxpayer to establish its right to refund (sic) and failure to sustain the burden is fa tal to the claim for refund/ credit (Asiatic Petroleum Co., vs. Llanes, 49 Phil. 466 cited in Collector of Internal Revenue vs. Manila Jockey Club, Inc., 98 Phil. 670); 11. Tax refunds are in the nature of tax exemptions. As such, they are regarded as in derogation of sovereign authority and to be construed strictissimi juris against the person claiming the exemption (Commissioner of Internal Revenue vs. S.C. Johnson and Son, Inc., et a l. , 209 SCRA 87 (1999) and further, claims for refund are construed strictly agains t the claimant for the same partake the~ I

DECISION CTA CASE NOS. 8246 and 8302 nature of exemption from taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and, as such, they are looked upon with disfavor (Western Minolco Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211); 12. Petitioner must likewise comply with the provisions of Section 112(C) of the Tax Code of 1997, as amended, which provides: XXX XXX XXX 13. The power of taxation will not be surrendered except in words too plain to be mistaken. The reason is that the State cannot strip itself of this highest attribute of sovereignty - its most essential power of taxation - by vague or ambiguous language. Since tax refunds are in the nature of tax exemptions, these are deemed to be in derogation of sovereign authority and to be considered in strictissimi juris against the person or entity claiming the exception (Commissioner of Internal Revenue vs. Solidbank Corporation, 416 SCRA 436) . It must be indubitably shown to exist, for every presumption is against it (Davao Light & Power Co., Inc., vs. Commissioner of Customs, 44 SCRA 122). Ignoring the above teaching of the Supreme Court and adopting the interpretation favorable to petitioner cannot be done because it runs afoul of its ruling that those who claim to be exempt from the payment (here, claim for a refund) of a particular tax must do so under clear and unmistakable terms found on the statute. They must be able to point to some positive provision, not merely a vague implication (Asiatic Petroleum Co., Ltd. vs. Llanes, 49 Phil. 466), of the law creating that right (Espanol vs. Philippine Veterans Administration, 137 SCRA 314)."9 On October 14, 2011, the Court ordered the consolidation of CTA Case No. 8302, with CTA Case No. 8246, pursuant to Section 1 of Rule 31 of the 1997 Rules of Civil Procedure:10 On December 1, 2011, for failure of respondent to appear during Pre-Trial, and upon motion of petitioner, the Court declared the former f \. 9 Id., at pp. 62-66. 1o Id. , at pp. 81-82.

DECISION CTA CASE NOS. 8246 and 8302 as in default and allowed the latter to present its evidence ex-parte.11 The same was confirmed in a Resolution dated December 23,2011.12 On May 2, 2013, the Court granted petitioner's Motion for Leave of Court to File Attached Amended Petition for Review for CTA Case No . 8302 .13 Accordingly, the Amended Petition for Review was admitted by the Court. In the Amended Petition for Review for CTA Case No . 8302, petitioner seeks the reduced amount of ~5,781,915.24 for unutilized input taxes on its importations of goods other than capital goods for the period covering April 1, 2009 to June 30, 2009,14 taking into consideration the Letter dated February 19, 2013 issued by respondent. On June 11, 2013, the Court submitted the consolidated cases for decision.15 Hence, this Decision. ISSUE The sole issue for the Court's determination is that: WHETHER OR NOT PETITIONER IS ENTITLED FOR THE ISSUANCE OF TAX CREDIT CERTIFICATES IN THE TOTAL AMOUNT OF ~23,566,884. 15 FOR THE PERIODS COVERING JANUARY 1, 2009 TO MARCH 31, 2009, AND APRIL 1, 2009 TO JUNE 30, 2009. RULING OF THE COURT The Court finds the Petition for Review and Amended Petition for Review partly meritorious. 11 Records, CTA Case Nos. 8246 & 8302, p. 125. 12 Id. , a t p. 127. 13 Jd., at pp . 1653-1655. 14 l d., a t pp . 1439-1642. 1s Id., a t p. 1701 .

DECISION CTA CASE NOS. 8246 and 8302 The subject claim in the amount of ~23,566,884 . 15, consisted of the following input taxes: 1st Quarter 2nd Quarter Total Input VAT -200916 -200917 Claim Input Taxes on Importations of Goods Other ~ 335,565.oo18 ~ 5,781,915.2419 ~ 6,117,480.24 Than Ca pital Goods 6,024,501.8720 Input Taxes on Domestic Purchases of Goods 10,414,723.9221 - 6,024,501.87 Other Than Capital Goods 474,530.3022 Input Taxes on Domestic P urchases of Services - 10,414723.92 Input Taxes on Services Rendered by Non- Res idents - 474,530.30 Amortiza tion of Input Taxes on Capital Goods Exceed ing ~1 Million: Input Tax Deferred on Ca pital Goods Exceeding P1Million 4,626,744.0823 from Previous Quarter Add: Input Tax on Capital Goods Exceeding ~!Million Purchased this 1,469,860.7824 Q u a r te r To tal Unamortized Input Tax on Capital Goods Exceeding ~!Million 6,096,604.86 Less: Input Tax on Capital Goods Exceeding ~!M illion Deferred for the Succeeding 5,560,957.0425 Period Amortization of Input Taxes on Capital Goods Exceeding ~!Million 535,647.82 - 535,647.82 1!17,784,968.91 1!23,566,884.15 TOTAL CLAIMED UNUTILIZED INPUT TAXES 1!5,781,915.24 Accordingly, Section 112(A) of the 1997 National Internal Revenue Code ("NIRC"), as amended, allows the refund or tax credit of unutilized input taxes attributable to zero-rated or effectively zero-rated sales, to wit: 16 Exhibit "B B-1-002 ." ( 17 Supra, note 14. 1s Exhibit " BB-1-002," line 21H. 19 Exhibit "BB-2-002, " line 21H. 2o Exhibi t "BB- 1-002," line 21F. 21 Exhibit "BB -1-002," line 21) . 22 Exhibit " BB-1-002," line 21L. 23 Exhibit "BB-1-002," line 20B. 24 Exhibi t "BB-1 -002," line 21D. 25 Exhibit "BB-1-002," line 23A.

DECISION CTA CASE NOS. 8246 and 8302 "Sec. 112. Refunds or Tax Credits of Input Tax.- (A) Zero-rated or Effectively Zero-rated Sales. - Any VAT- registered person, whose sales are zero-rated or effectively zero- rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax: Provided, however, That in the case of zero-rated sales under Section 106(A)(2)(a)(1), (2) and (B) and Section 108(B)(1) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods of properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales." Thus, enumerated hereunder are the requisites that must be complied with: 1) the claimant must be a value-added tax ("VAT")-registered person; 2) there must be zero-rated or effectively zero-rated sales; 3) input taxes were incurred or paid; 4) input taxes are attributable to zero-rated or effectively zero- rated sales; 5) input taxes were not applied against any output VAT liability; and 6) both administrative and judicial claims for refund were seasonably filed. At the outset, the Court finds it appropriate to first determine petitioner's compliance with the sixth requirement - that the administrative and judicial claims were timely filed .

DECISION CTA CASE NOS. 8246 and 8302 As earlier-quoted, Section 112(A) of the 1997 NIRC, as amended, provides that the application for refund or tax credit of unutilized excess input VAT must be filed within two (2) years after the close of the taxable quarter when the zero-rated or effectively zero-rated sales were made. Based on the records, petitioner filed its administrative claim on November 26, 2011 covering the period from January 1, 2009 to March 31, 2009; while it filed on February 24, 2011, its administrative claim covering the period from April 1, 2009 to June 30, 2009. Applying therefore Section 112(A) of the 1997 NIRC, as amended, petitioner had until March 31, 2011 and June 30, 2011, respectively, within which to file its administrative claims for refund/ tax credit. The Court, thus, finds the administrative claims filed well within the two (2)-year period. Also, Section 112(C) of the 1997 NIRC, as amended, provides as follows: "Sec. 112. Refunds or Tax Credits of Input Tax.- XXX XXX XXX (C) Period within which Refund or Tax Credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue the tax credit certificate for creditable input taxes within one hundred twenty (120) days from the date of submission of complete documents in support of the application filed in accordance with Subsection (A) hereof. In case of full or partial denial of the claim for tax refund or tax credit, or the failure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) days from the receipt of the decision denying the claim or after the expiration of the one hundred twenty- day period, appeal the decision or the unacted claim with the Court of Tax Appeals." It has been settled that the Commissioner of Internal Revenue has one hundred twenty (120) days from the date of submission of the complete documents in support of the application for tax refund/ credit within which to grant or deny the claim; and in case of full or partial denial thereof, the taxpayer has thirty (30) days from receipt within which to elevate the same to this Court; nonetheless, if the Commissioner ;Z '

DECISION CTA CASE NOS. 8246 and 8302 of Internal Revenue fails to act thereon within the allotted one hundred twenty (120) days, the taxpayer has thirty (30) days to appeal the said inaction to this Court. Based on the records, the following hereunder are the relevant dates: CTA Taxable Close of Date of Filing of End of120 End of 30 days Date of Filing of Case No. Quarter- Taxable Administrative days from the lapse of Judicial Claim CY 2009 Quarter 8246 Claim the 120 days March 30, 201126 8302 June 28, 201127 1st Qtr Ma rch 31, 2009 Nove mbe r 26, 2010 Ma rch 26, 2011 April 25, 2011 2nd Qtr June 30, 2009 Februa ry 24, 2011 June 24, 2011 July 24, 2011 From the foregoing, the judicial claims filed by petitioner for the first (1st) and second (2nd) quarters of taxable year 2009 were timely filed. To continue, for the first requisite - that the claimant must be a VAT- registered person - as borne by the records, petitioner is registered as a VAT entity with TIN/VAT No. 205-760-474-000; it was issued a BIR Certificate of Registration OCN 1RC0000050243 dated April 10, 2000 by the BIR Revenue District Office No. 55 (San Pablo City, Laguna), which was updated on May 11, 2005, thus, it was issued a BIR Certificate of Registration OCN 1RC0000195405; and that on January 12, 2011, it received a letter from respondent dated December 21, 2010, informing it about its classification as a Large Taxpayer under the Large Taxpayers Service pursuant to Revenue Regulations No. 17-2010, dated November 16, 2010, and under the jurisdiction of Revenue District Office No. 121 effective January 1, 2011,28 thus, the Large Taxpayers Service issued a BIR Certificate of Registration OCN 8RC0000019901 dated April 10, 2000. 29 From the foregoing, petitioner is a VAT-registered person, and has clearly complied with the first requisite. 26 Supra, no te 1. 27 Supra, n ote 7. 2s Records, p. 2 and p. 68. 29 Exhibit "M."

DECISION CTA CASE NOS. 8246 and 8302 Onto the second requisite- that there must be zero-rated or effectively zero-rated sales - Section 108(B)(7) of the 1997 NIRC, as amended, provides that sale of power generated through renewable sources of energy is among the transactions subject to zero percent (0 %) VAT, to wit: "(B) Transactions Subject to Zero Percent (0%) Rate.- XXX XXX XXX (7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels ." In relation thereto, Section 4.108-5(b)(7) of Revenue Regulations No. 16-2005,30 which implements the afore-quoted provision, qualifies the applicability of such zero-rating as follows: "(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 XXX (7) Sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal and steam, ocean energy, and other emerging 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." While Section 4.108-3(f) of the same Revenue Regulations provides: "SEC. 4.108-3. Definitions and Specific Rules on Selected Services. (l 30 Entitled "Consolidated Value-Added Tax Regula ti ons of 2005," dated September 1, 2005.

DECISION CTA CASE NOS. 8246 and 8302 XXX XXX XXX (f) Sale of electricity by generation, transmission, and distribution companies shall be subject to 10% VAT on their gross receipts; Provided, That sale of power or fuel generated through renewable sources of energy such as, but not limited to, biomass, solar, wind, hydropower, geothermal, ocean energy, and other emerging energy sources using technologies such as fuel cells and hydrogen fuels shall be subject to 0% VAT. 'Generation companies ' refers to persons or entities authorized by the Energy Regulatory Commission (ERC) to operate facilities used in the generation of electricity. For this purpose, generation of electricity refers to the production of electricity by a generation company or a co-generation facility pursuant to the provisions of RA No. 9136 (EPIRA). They shall include all Independent Power Producers (IPPs) and NPC/Power Sector Assets and Liabilities Management Corporation (PSALM)-owned generation facilities." Therefore, to qualify for VAT zero-rating, petitioner must prove that it is engaged in the sale of power or fuel generated through renewable sources of energy. It is undisputed that petitioner is a special purpose entity, the sole purpose of which is to engage in all aspects of (a) the design, financing, construction, testing, commissiOning, operation, maintenance, management and ownerhisp of Kalayaan II pumped-storage hydroelectric power plant, the new Caliraya Spillway, and other assets located in the Province of Laguna; and (b) the rehabilitation, upgrade, expansion, testing, commissiOning, operation, maintenance and management of the Caliraya, Botocan and Kalayaan I hydroelectric power plants and their related facilities located in the Province of Laguna, as shown in its Securities and Exchange Commission Registration and Amended Articles of Parh1.ership.31 Also, petitioner has entered into a Second Accession Undertaking with the National Power Corporation ("NPC"), Industrias Metalurgicas Pescarmona, S.A. ("IMPSA"), and CBK Power Corporation on September 20, 2000,32 wherein it became a party to the Build-Rehabilitate-Operate- " &ro'd', p. 2 � nd p. 68. ~; } 32 Exhibit "D."

DECISION CTA CASE NOS. 8246 and 8302 Transfer ("BROT") Agreement dated November 6, 1998.33 Under the BROT Agreement and by virtue of the Second Accession Undertaking, petitioner shall cause and be responsible for the rehabilitation, construction, operation and maintenance of the Caliraya, Botocan, and Kalayaan hydroelectric power plants and other civil structures for the purpose of generating electricity for the NPC. In consideration thereof, NPC shall pay petitioner Capital Recovery Fees and Operation and Maintenance Fees and other fees in accordance with the BROT Agreement.34 In performing its obligations under the BROT Agreement and the Accession Undertaking, petitioner entered into an Agreement with IMPSA Construction Corporation designated as Turnkey Contract35 on August 18,2000, by virtue of which IMPSA, as Contractor, undertook the design, engineering, procurement, supply of all plant and materials, rehabilitation, construction, commissioning, testing, completion and handover of such power plants, together with the civil structures, access roads and other works as specified in the BROT Agreement.36 Petitioner then generates electricity through its Caliraya, Botocan and Kalayaan I hydroelectric power plants, as well as from the Kalayaan II hydroelectric power plant. The plants generate electricity by drawing water from an upstream reservoir, passing the water through a penstock and in the process utilizing the force of gravity to rotate the turbines. The turbines in turn rotate the generators, thereby generating electricity .37 Petitioner's Caliraya, Botocan, Kalayaan I and Kalayaan II power plants were likewise found by the Energy Regulatory Commission f!- ("ERC") to be compliant with the pertinent rules and regulations as evidenced by the Certificates of Compliance ("COC")38 issued by the ERC to petitioner. 33 Exhibit "C." 34 Exhibit "N." 35 Exhibit "E." 36 Exhibit "N." 37 Ibid. 38 Exhibits "F" to "1."

DECISION CTA CASE NOS. 8246 and 8302 And a verification of various sales invoices39 and official receipts40 issued by petitioner to NPC showed that for the first (1st) and second (2nd) quarters of 2009, it has derived revenues from sales of electricity to NPC in the amount of ~1,949,421,902.14 which was reflected in its Quarterly VAT Returns, as follows: Exhibit Period Zero-rated Sales "BB-1-002e" 1st Quarter IJ1,113,056,584.68 "BB-2-002e" 2nd Quarter 836,365,317.46 P1,949,421,902.14 Total With the foregoing sales of electricity generated through a renewable source of energy, particularly, hydropower, the Court finds that the same qualifies for VAT zero-rating under Section 108(B)(7) of the 1997 NIRC, as amended. Then next to the third requisite - that input taxes �were incurred or paid - petitioner reflected in its Quarterly VAT Returns for the first (1st) and second (2nd) quarters of 2009 its claimed input taxes in the amount of ~23,566,884.15, broken down as follows: Exhibit Period Input VAT "BB-1-002n" 1st Quarter F17,784,968.91 "BB-2-002" 2nd Quarter 5,781,915.24 Total F23,566,884.15 To prove that it has incurred/paid the aforesaid input VAT, petitioner submitted various suppliers' invoices, official receipts, Bureau of Customs ("BOC") Import Entries and Internal Revenue Declarations ("IEIRD"), BOC and bank official receipts,41w hich were examined by the Court-commissioned Independent Certified Public Accountant ("CPA"), Ms. Myra Celeste 0. Dabalos. Upon scrutiny of the Independent CPA's Report42 and the related supporting documents, the Court finds that the input taxes in the to 39 Exhibits "Il-l" "II-102." to 40 Exhibits "MM-0001" "MM-01 46." to to to 41 Exhibits "CC-010001 " "CC-010268," "CC-020001" "CC-020417," "CC-030001" "CC-031250," "CC-040001" to "CC-040352," "CC-050001 " to "CC-050545," "CC-060001" to "CC-061332. " 42 Exhibit "DD. "

DECISION CTA CASE NOS. 8246 and 8302 amount of ~702,904.61 should be disallowed for non-compliance with the substantiation requirements under Sections 110(A)43 and 113(A) and (B)44 of the 1997 NIRC, as amended, in relation to Sections 4.110-2,45 4.110-3,46 4.110-8,47 and 4.113-148 of Revenue Regulations No. 16-05.49 43 SEC.110. Tax Credits. - (A) Creditable Input Tax. - (1) Any input tax evidenced by a VAT invoice or officia l receip t issued in accordance w ith Section 113 hereo f on the follow ing transactions sha ll be credi ta ble aga ins t the output tax: (a) Purchase or importatio n of good s: (i) For sale; or (ii) Fo r conversion into or intended to fo rm part of a finished produ ct fo r sale including packaging ma terials; or (iii) For use as s upplies in the co urse of business; or (iv) For use as ma terials supplied in the sa le of service; or (v) For use in trade or business for w hich ded uction for deprecia tion or amortiza tion is a llowed under this Code, except automobiles, aircraft and yachts. (b) Purchase of serv ices on which a va lue-added tax has been ac tu a lly pa id . (2) The input tax on d omestic p urchase of good s or properties shall be credita ble. (a) To the purc haser upon cons umma tion of sale an d on importation of goods or p roperties; and (b) To the importer upon pay ment of the value-added tax prio r to the release of the good s fro m the custody of the Burea u of Customs. However, in the case of p urch ase of serv ices, lease or use of p rop erties, the input tax shall be cred ita ble to the purchaser, lessee or licensee upon payment of the co mpensa tion, rental, roya lty or fee. (3) A VAT- regis tered person w ho is a lso engaged in tra nsactions not s ubject to the value-ad ded tax shall be allowed tax credit as fo llows: (a) Total input tax which can be direc tly attributed to transactions subject to va lue-add ed tax; and (b) A ra table p ortion of an y inpu t tax which ca nnot be directly a ttributed to either activity. Th e term " input tax" means the valu e-added tax due from or paid by a VAT-regis tered person in the course of his trade or business on importa tion of goods or loca l purchase of good s or serv ices, incl ud ing lease or use of p roperty, fro m a VAT-regis tered person. It s hall also incl ude the h�a nsitiona l input tax de termined in acco rdan ce with Section 111 of this Cod e. The term "output tax" means the va lu e-added tax d ue on the sa le or lease of taxa ble good s or properties or services by an y person regis tered or required to regis ter under Section 236 of this Cod e. 44 SEC. 113. invoicing and Accounting Requiremen ts for VAT-Regis tered Persons. - (A) Invoicing Requirements. - A VAT- regis tered person shall, for every sale, issue an invoice or receipt. In addition to the information required under Section 237, the following info rma tion sha ll be indica ted in the invoice or receipt: (1) A sta tement that the seller is a VAT-regis tered person, followed by his taxpaye r's identification number (TIN); a nd (2) The total am ount wh ich the purc haser pays or is obligated to pay to th e seller with the indica tion that su ch amount includes the value-added tax. (B) Accounting Requirements. - Notwithstanding the provisions of Section 233, all persons subjec t to the value- add ed tax under Sections 106 and 108 shall, in add ition to the regular accounting records required, maintain a subsidiary sales journal and subsidiary purchase journal on wh ich the daily sales an d pu rchases are recorded . The subsidiary journa ls shall contain such informa ti on as may be req uired by the Sec reta ry of Finance. 45 SEC. 4.110-2. Persons Who Can Avail of the Input Tax Credit. - Th e input tax credit on importa tion of goods or loca l purchases of good s, properties or services by a VAT-regis tered person sha ll be credita ble: (a) To the importer upon pay ment of VAT prior to the release of goods from customs cus tod y; (b) To the pu rchaser of the domestic good s or properties upon cons umma tion of the sa le; or (c) To the purchaser of services or the lessee or licensee upon pay ment of the co mpensa tion, rental, royalty or fee. 46 SEC. 4.110-3. Claim for Inpu t Tax on Depreciable Goods. - Where a VAT-regis tered person purchases or imports capita l goods, which a re d ep recia ble assets for income tax purposes, the agg rega te acquisition cost of w hich (exclusive of VAT) in a ca lenda r month exceed s One Million pesos (I11,000,000.00), regardless of the acquisitio n cost of each capital good, shall be cla imed as credit agains t output tax in the followin g manner: (a) if the estima ted useful life of a capital good is five (5) years or more - The input tax s ha ll be sprea d evenly over a period of sixty (60) months and the claim for input tax credit will commence in the calendar month when the capital good is acquired. Th e total input taxes on p urchases or importa tions of this ty pe of ca pita l good s shall be divided by 60 and the qu otient w ill be the amoun t to be claimed monthl y. (b) If the estimated useful life of a capital good is less than five (5) years - The input tax shall be sp read evenly on a monthl y basis by d ividing the input tax by the ac tua l number of months comprising the es tima ted useful life of f-

DECISION CTA CASE NOS. 8246 and 8302 the capital good. The claim for input tax credit shall commence in the calendar month that the capital goods were acquired. Where the aggregate acquisition cost (exclusive of VAT) of the existing or finished depreciable capital goods purchased or imported during any calendar month does not exceed One million pesos (F 1,000,000.00), the total input taxes will be allowable as credit against output tax in the month of acquisition; Provided, ho�wever, that the total amount of input taxes (input tax on depreciable capital goods plus other allowable input taxes) allowed to be claimed against the output tax in the quarterly VAT Returns shall be subject to the limitation prescribed under Sec. 4.110-7 of these Regulations. The aggregate acquisition cost of a depreciable asset in any calendar month refers to the total price agreed upon for one or more assets acquired and not on the payments actually made during the calendar month. Thus, an asset acquired in installment for an acquisition cost of more than P 1,000,000.00 will be subject to the amortization of input tax despite the fact that the monthly payments/installments may not exceed P1,000,000.00. 47 SEC. 4.110-8. Substantiation of Input Tax Credits. - (a) Input taxes for the importation of goods or the domestic purchase of goods, properties or services is made in the course of trade or business, whether such input taxes shall be credited against zero-rated sale, non-zero-rated sales, or subjected to the 5% Final Withholding VAT, must be substantiated and supported by the following documents, and must be reported in the information returns required to be submitted to the Bureau: (1) For the importation of goods - import entry or other equivalent document showing actual payment of VAT on the imported goods. (2) For the domestic purchase of goods and properties - invoice showing the information required under Sees. 113 and 237 of the Tax Code. (3) For the purchase of real property - public instrument i.e. , deed of absolute sale, deed of conditional sale, contract/ agreement to sell, etc., together with VAT invoice issued by the seller. (4) For the purchase of semices - official receipt showing the information required under Sees. 113 and 237 of the Tax Code. A cash register machine tape issued to a registered buyer shall constitute valid proof of substantiation of tax credit only if it shows the information required under Sees. 113 and 237 of the Tax Code. (b) Transitional input tax shall be supported by an inventory of goods as shown in a detailed list to be submitted to the BIR. (c) Input tax on" deemed sale" transactions shall be substantiated with the invoice required under Sec. 4.113-2 of these Regulations. (d) Input tax from payments made to non-residents (such as for services, rentals and royalties) shall be supported by a copy of the Monthly Remittance Return of Value Added Tax Withheld (BIR Form 1600) filed by the resident payor in behalf of the non-resident evidencing remittance of VAT due which was withheld by the payor. (e) Advance VAT on sugar shall be supported by the Payment Order showing payment of the advance VAT. 48 SEC. 4.113-1. Invoicing Requirements. - (A) A VAT-registered person shall issue: - (1) A VAT invoice for every sale, barter or exchange of goods or properties; and (2) A VAT official receipt for every lease of goods or properties, and for every sale, barter or exchange of services. Only VAT-registered persons are required to print their TIN followed by the word "VAT" in their invoice or official receipts. Said documents shall be considered as a "VAT Invoice" or VAT official receipt. All purchases covered by invoices/ receipts other than VAT Invoice/VAT Official Receipt shall not give rise to any input tax. VAT invoice/ official receipt shall be prepared at least in duplicate, the original to be given to the buyer and the duplicate to be retained by the seller as part of his accounting records. (B) Information contained in VAT invoice or VAT official receipt. - The following information shall be indicated in VAT invoice or VAT official receipt: (1) A statement that the seller is a VAT-registered person, followed by his TIN; (2) The total amount which the purchaser pays or is obligated to pay to the seller with the indication that such amount includes the VAT; Provided, That: (a) The amount of tax shall be shown as a separate item in the invoice or receipt; (b) If the sale is exempt from VAT, the term "VAT-exempt sale" shall be written or printed prominently on the invoice or receipt; (c) If the sale is subject to zero percent (0 %) VAT, tl1e term "zero-rated sale" shall be written or printed prominently on the invoice or receipt; (d) If the sale involves goods, properties or services some of which are subject to and some of which are VAT zero-rated or VAT-exempt, the invoice or receipt shall clearly indicate the break-down of the sale price between its taxable, exempt and zero-rated components, and the calculation of tl1e VAT on each portion of the sale shall be shown on tl1e invoice or receipt. The seller has the option to issue separate invoices or receipts for the taxable, exempt, and zero-rated components of the sale.

DECISION CTA CASE NOS. 8246 and 8302 Below is the detailed breakdown of the disallowed input VAT of ~702,904.61: Exceptions Exhibit Input VAT Input taxes on domestic purchase of goods supported by "DD-5" P-4,423.23 documents other than VAT invoice- Supported by other "DD-7" 61,710.78 non-VAT document, ]st Quarter "DD-8" 5,235.00 Input taxes on domestic purchase of goods supported by "DD-9" 58.93 VAT invoice but not an original copy, ]sf Quarter "DD-10" 18,344.99 Input taxes on domestic purchase of goods supported by "DD-13" 14,119.23 VAT invoice not issued in the name of petitioner (e.g. "DD-14" 72,450.00 Power Co. Ltd.) but with TIN and address of petitioner "DD-17" 174.79 Input taxes on domestic purchases of goods supported by "DD-23" 29,693.58 VAT invoice not issued in the name of petitioner (e.g. "DD-24" 18,301.21 CBK only), ]sf Quarter Input taxes on domestic purchase of goods supported by "DD-26" 493.75 TIN sales invoice, ]st Quarter Input taxes on domestic purchase of goods supported by VAT invoice but not dated within the VAT-taxable year, ]st Quarter Input taxes on domestic purchase of goods supported by VAT invoice that is not BIR registered, 1sf Quarter Input taxes on domestic purchase of goods with correction on the year of the invoice date without counter signature, ] sf Quarter Input taxes on domestic purchase of services supported by documents other than VAT OR (i. e. VAT invoice, etc.), ]sf Quarter Input taxes on domestic purchase of services supported by documents other than VAT OR (i. e., statement of account, non-VAT invoice, etc.), ] sf Quarter Input taxes on domestic purchase of services supported by VAT OR not issued in the name of petitioner (e.g . EME Phils. Services Corp. and CBR Power Co. Ltd.) but with TIN and address of petitioner and the amount of tax was not separately shown (3) In the case of sales in the amount of one thousand pesos (~1,000.00) or more where the sale or transfer is made to a VAT-registered person, the name, business style, if any, address and TIN of the purchaser, customer or ;;;? client, sha ll be indicated in addition to the information required in (1) and (2) of this Section. 49 Supra, note 30. ( '-

DECISION CTA CASE NOS. 8246 and 8302 Input taxes on domestic purchase of services supported "DD-27" 4,505.03 by VAT OR not issued in the name of petitioner (e.g. CBK "DD-28" 22,422.85 only, CBK New-Spillway, CBK Training Center) but "DD-31" 187,801.33 without TIN and/ or address of petitioner, ]sf Quarter "DD-32" Input taxes on domestic purchase of services supported "DD-34" 1,189.68 by TIN OR only, ] sf Quarter "DD-40" 39,594.02 Input taxes on domestic purchase of services supported by VAT OR dated within the VAT-taxable year "DD -41 II 180.48 Input taxes on domestic purchase of services supported "DD-42" by VAT OR that is not BIR-registered, ]sf Quarter 2,972.51 Input taxes on domestic purchase of services with "DD-44" 32,698.72 correction in the OR date without counter signature Double claiming of input tax on domestic purchase of "DD-46" 4,768.41 services "DD-49" Input taxes on domestic purchase of services supported 25,580.99 by VAT OR. However, the sentence: "This is not a source "DD-50" 97,499.10 of input tax" isE_rinted in the VAT OR, 1sf Quarter Input taxes on domestic purchase of goods and services 58,686.00 without supporting documents, ]sf Quarter F702,904.61 Overclaimed input tax on domestic purchase of goods/ services due to erroneous computation (i.e. arithmetical error), ]sf Quarter Overclaimed portion of input tax arising from forex rate used on foreign currency denominated purchases of goods and services, ] sf Quarter Input taxes on domestic purchase of services supported by VAT OR which is not an original copy Input taxes on importation of goods supported by a document other than an original copy of the IEIRD and BOCOR Total In addition, the claimed input VAT in the amount of ~737,559.61, as detailed below, should be disallowed for non-compliance with the substantiation requirements under the VAT law and regulations: Vendor O.R.j O.R.j Exhibit "CC-" Input VAT Invoice No. Invoice Date ) Input VAT without supporting documents - ~ 18,325.49 - - - 1,339.28 Multiple J Enterprises - - - 1,917.88 - - 34,815.00 Rejoice Tyre Gallery & Auto Center - - - 38,941.20 Asee Enterprises - - - - - 263,718.69 Multiple JEnterprises - 34,012.22 - - Phil. En virom11ental & Teclmica l Systems and Serv ices, Inc. - Hitachi Asia Limited Kokusai Commerce

DECISION CTA CASE NOS. 8246 and 8302 Sumitomo Corporation - - - 71,243.16 Tecnored Ingeniera 64,991.49 Viking Cars, Incorporated - - - Airfreight 2100, Inc. 9,510.01 Airfreight 2100, Inc. - - - 80.43 Airfreight 2100, Inc. 80.43 Airfreight 2100, Inc. - - - 55.26 Airfreight 2100, Inc. 72.52 Globe Telecom - - - 72.52 Viking Cars, Incorporated Center Lane Car Rental Services - - - 151.83 Subtotal 1,356.31 2) Input VAT on domestic purchases of services - - - 780.00 supported by VAT ORs but the amount of VAT was - - - �541,463.72 not separately shown Counterflow Movers, Inc. - - - ~24,816.37 Counterflow Movers, Inc. PLDT - - - 9,720.25 Firstly & Foremost Resort Corp. 107.14 Firstly & Foremost Resort Corp. - - - 101.24 Firstly & Foremost Resort Corp. PLDT 2425 1/9/2009 010001-010002 2,555.42 PLDT 2425 1/9/2009 010001,010003 717.60 PLDT 000072575 2/4/2009 010105-010106 910.69 PLDT 0602 2/10/2009 010015-010017 133.63 PLDT 0602 2/10/2009 010015-010017 369.78 PLDT 0601 2/10/2009 010033-010039 123.81 PLDT 000072576 2/4/2009 010097-010098 121.63 PLDT 000072572 2/4/2009 010099-010100 292.39 PLDT 000072573 2/4/2009 010101-010102 121.63 PLDT 000072574 2/4/2009 010103-010104 738.21 PLDT 000072577 2/4/2009 010107-010108 235.77 PLDT 000072578 2/4/2009 010109-010110 157.38 PLDT 000072579 2/4/2009 01 0111-010112 PLDT 000072580 2/4/2009 010113-010114 1,066.20 PLDT 000072581 2/4/2009 010115-010116 139.63 PLDT 000072582 2/4/2009 010117-010118 927.23 PLDT 000072583 2/4/2009 010119-010120 577.80 PLDT 000072584 2/4/2009 010121-010122 126.13 PLDT 000072585 2/4/2009 010123-010124 854.51 PLDT 000072586 2/4/2009 010125-010126 151.90 PLDT 000072587 2/4/2009 010127-010128 347.71 PLDT 000072588 2/4/2009 010129-010130 PLDT 000072589 2/4/2009 010131-010132 1,910.53 Firstly & Foremost Resort Corp. 000072590 2/4/2009 010133-010134 151.08 Gencars-Sa n Pablo, Inc. PKPOR0002 2/13/2009 010206-010207 151.08 PLDT PKPOR0002 2/13/2009 010206,010208 151.08 PLDT PKPOR0002 2/13/2009 010206,010209 156.54 PLDT PKPOR0002 2/13/2009 010206,010210 885.13 Qconsult, Inc. PKPOR0002 2/13/2009 010206,010211 306.11 2/26/2009 020012-020019 123.81 0604 3/16/2009 020024-020025 122.76 23045 3/10/2009 020097-020098 000075268 3/10/2009 020099-020100 10,236.57 000075269 3/10/2009 020101-020102 4,320.00 000075265 2/19/2009 020103-020104 0111

D E CI S ION 40894 3/3/2009 020112-020114 78.57 40894 3/3/2009 020112-020114 78.57 CTA CASE NOS. 8246 and 8302 40894 3/3/2009 020112-020114 78.57 Page 22 of 25 170866 3/16/2009 020138-020140 159.00 1204459 2/16/2009 020162-020163 41.89 Banahaw Telephone Corp. 1204484 3/2/2009 020164-020165 89.80 Banahaw Telephone Corp. 14085 3/5/2009 020240-020243 9,115.39 Bana haw Telephone Corp. PKPOR0002 3/11/2009 020246-020247 2,393.77 Toyota, Ba tangas, City PKPOR0002 3/11/2009 020246,020248 151.08 Airfreigh t 2100, Inc. PKPOR0002 3/11/2009 020246,020249 151.08 Airfreight 2100, Inc. PKPOR0002 3/11/2009 020246,020250 151.08 New Wo rld Internationa l Development Phi ls., Inc. PKPOR0002 3/11/2009 020246,020251 171.28 PLOT 0621 3/27/2009 030073-03007 4 1,891.52 PLOT 000077286 3/27/2009 030100-030101 910.69 PLOT 000077301 3/27/2009 030102-030103 121.63 PLOT 000077302 3/27/2009 030104-030105 364.69 PLOT 000077303 3/27/2009 030106-030107 121.63 Firs tly & Foremost Resort Corp. 000077304 3/27/2009 030108-030109 121.63 PLOT 000077305 3/27/2009 030110-030111 153.63 PLOT 000077306 3/27/2009 030112-030113 121.63 PLOT 000077307 3/27/2009 030114-030115 1,182.86 PLOT 000077308 3/27/2009 030116-030117 142.36 PLOT 000077309 3/27/2009 030118-030119 121.63 PLOT 000077310 3/27/2009 030120-030121 524.53 PLOT 000077311 3/27/2009 030122-030123 126.13 PLOT 000077312 3/27/2009 030124-030125 139.63 PLOT 000077313 3/27/2009 030126-030127 13,878.45 PLOT 000077316 3/27/2009 030128-030129 133.63 PLOT 000077317 3/27/2009 030130-030131 355.93 PLOT 000077318 3/27/2009 030132-030133 79.88 PLOT 000077319 3/27/2009 030134-030135 13,511.15 PLOT 000077479 3/31/2009 030140-030141 107.14 PLOT 0216 3/17/2009 030146-030147 192.86 PLOT 0448 3/31/2009 030151-030152 1,139.15 PLOT 0448 3/31/2009 030151,030153 94.87 PLOT 14383 3/27/2009 030190-030191 720.00 PLOT 14383 3/27/2009 030190,030192 720.00 Re joice Tyre Gallery & Auto Center 0588 1/31/2009 030214-030220 5,113.36 Wo rld Best Logistics Phils., Inc. 030214,030221- World Best Logistics Phils., Inc. 0588 1/31/2009 030227 576.79 New Wo rld Interna tional Development Phils. Inc. 030214, 030228- New Wo rld Interna tional Developmen t Phils., Inc. 0588 1/31/2009 030234 829.53 Firs tly & Foremost Resor t Corp. 0589 1/31/2009 030235-030245 865.74 030235,030246- Firs tly & Foremost Resort Corp. 0589 1/31/2009 030260 1,407.88 030235,030261- Firstly & Foremos t Resort Corp. 0589 1/31/2009 030267 850.53 Firstly & Foremost Resort Corp. 030235,030268- 0589 1/31/2009 030269 187.50 Firstl y & Fo remost Reso rt Corp. 030235,030270- 0589 1/31/2009 030271 187.50 Firstly & Foremost Reso rt Corp. 030235,030272- 0589 1/31/2009 030277 679.66 Firstly & Foremost Resort Corp. Firstly & Forem ost Resort Corp. Firstly & Foremost Resort Corp.

DECISION CTA CASE NOS. 8246 and 8302 PLOT 000070622 1/14/2009 030349-030350 133.63 PLOT 000070623 1/14/2009 030351-030352 461.53 PLOT 000070624 1/14/2009 030353-030354 123.81 PLOT 000070625 1/14/2009 030355-030356 198.75 PLOT PKPOR0002 1/20/2009 030414-030415 2,139.91 PLOT PKPOR0002 1/20/2009 030414,030416 165.95 PLOT PKPOR0002 1/20/2009 030414,030417 151.08 PLOT PKPOR0002 1/20/2009 030414,030418 154.08 PLOT PKPOR0002 1/20/2009 030414,030419 169.10 Tricom Dynamics, Inc. 1/9/2009 030439-030440 469.29 162163 P128,431.69 Subtotal 3/17/2009 030799-030800 ~) Input VAT on domestic purchase of goods supported 0385 ~0,193.34 1/22/2009 010239-010240 by VAT invoice but the amount of VAT was not 2902 P40,193.34 separately shown Jems Teclmik Corp. ~ 22,071.43 Subtotal P22,071.43 ~) Input VAT on domestic purchase of goods supported by VAT invoice with correction in the date but ~4,285.71 without counter signature MFT International Corporation P4,285.71 Subtotal ~750.00 ~) Input VAT on domestic purchase of goods supported 500983 3/18/2009 030863-030864 by a VAT invoices that is not BIR-registered 13486 11/28/2008 030212-030213 P750.00 Canon Marketing (Phils.), Inc. ~120.95 Subtotal Eastern Aluminum Glass Supply 101.50 Subtotal 141.27 P363.72 R. Ong Shell Gasoline Station 2089 3/18/2009 031133,031153 P737,559.61 R. Ong Shell Gasoline Station R. Ong Shell Gasoline Station 2090 3/18/2009 031133, 031169 Subtotal Total 2763 3/26/2009 031133,031172 Thus, from the total input VAT claim in the amount of ~23,566,884.15, only the amount of ~22,126,419.93, as computed below, has been duly substantiated: Claimed Input VAT P702,904.61 P23,566,884.15 Less: Disallowances 737,559.61 1,440,464.22 Per CPA Report P22,126,419.93 Per Court's further verification Valid Input VAT And for the fourth and fifth requisites - that the input taxes are attributable to zero-rated or effectively zero-rated and the same -were not applied

DECISION CTA CASE NOS. 8246 and 8302 against any output tax- the Court finds that petitioner's reported sales for the first (1st) and second (2nd) quarters of 2009 were all zero-rated, thus, the substantiated input VAT in the amount of ~22,126,419.93 is entirely attributable thereto and was not applied against any output tax. In addition, in its reported unutilized input taxes for the first (1st) and second (2nd) quarters of 2009 in the respective amounts of ~17,784,968.91,50 and i231,680,290.87,51 the same were deducted as "VAT Refund/fCC claimed" in the said Quarterly VAT Returns for the same taxable quarters preventing the carry-over or application of such input taxes in the next taxable quarter/ s. In sum, the Court finds that petitioner is entitled to the reduced amount of ~22,126,419.93, representing unutilized input VAT incurred in relation to its zero-rated sales of electricity to the NPC for the first (1st) and second (2nd) quarters of 2009. WHEREFORE, the consolidated Petition for Review and Amended Petition for Review are hereby PARTLY GRANTED. Accordingly, respondent is hereby ORDERED to ISSUE a TAX CREDIT CERTIFICATE, in favor of petitioner, in the reduced amount of ~22,126,419.93, representing unutilized input VAT incurred in relation to its zero-rated sales of electricity to the NPC for the first (1st) and second (2nd) quarters of 2009. SO ORDERED. TISTA Associa I CONCUR: ~rvrj__ /- ~,L- AMELlA R. COTANGCO-MANALASTAS Associate Justice 50 Exhibit "BB-1-002a." 51 Exhibit "BB-2-002a. "

DECISION CTA CASE NOS. 8246 and 8302 ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Assoc� te Justice Cha� person C E R T IF I CAT I 0 N Pursuant to Section 13 of Article VIII of the Constitution, and the Division Chairperson's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division. Presiding Justice