CE LUZON GEOTHERMAL POWER CO., INC. v. COMMISSIONER OF INTERNAL REVENUE

REPUBLIC OF THE PHILIPPINES Court Of Tax Appeals QUEZON CITY FORMER SECOND DIVISION CE LUZON GEOTHERMAL C.T.A. CASE NO. 7738 POWER COMPANY, INC ., Petitioner, Members: CASTANEDA, JR., Chairperson, -versus- UY, and PALANCA-ENRlQUEZ, JJ. COMMISSIONER OF INTERNAL Promulga ted: REVENUE, iUL D l 20l(J / Respondent. CCI ,,:r< t! · JII · X - -------------------------------------------------- -------------------------------- X DECISION PALANCA-ENRIQUEZ, J.: 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 fue ls, by a VAT registered person is subject to a zero percent rate (Section 6 of RA 933 7) . THE CASE This is a Petition for Review filed by CE Luzon Geothermal Power Company, Inc. (hereafter "petitioner") praying for the refund or issuance 65 6 rw

C.T.A. CASE NO. 7738 2 DECISION of a tax credit certificate (TCC) in the amount of P24,673,243.53, allegedly representing unutilized input value-added tax (VAT) paid by petitioner on its domestic purchases of non-capital goods and services, importation of non-capital goods and services rendered by non-residents for the first to fourth quarters of calendar year (CY) 2006. THE PARTIES Petitioner is a domestic corporation duly organized and existing under Philippine laws, with principal office at Ormoc City, Leyte. Petitioner was incorporated on May 16, 1994, the primary purpose of which is to design, develop, construct, erect, assemble, commission and operate geothermal power plants and related facilities for the conversion into electricity of steam and brine provided by and under contract with the Philippine Government, or any subdivision, instrumentality or agency thereof, or any government-owned or controlled corporation, or other entity engaged in the development, supply or distribution of energy. Petitioner has been accredited and certified as such by the Department of Energy (DOE) (Exhibit "B "). Petitioner is registered with the Bureau of Internal Revenue (BIR), as a VAT taxpayer, in accordance with Section 236 of the National Internal Revenue Code (NIRC), with Taxpayer Identification No. 003-924-356-000 (Exhibit "C""). (J}P 657

C.T.A. CASE NO. 7738 3 DECISION On the other hand, respondent is the duly appointed Commissioner of Internal Revenue (CIR) empowered to perform the duties of said office including, among others, the power to decide, approve and grant refunds or TCC of erroneously or excessive ly paid taxes, with office address at the BIR, National Office Building, BIR Road , Diliman, Quezon City. THE FACTS The facts of the case, as culled from the records, are as follows: Petitioner filed with the BIR its Original Quarterly VAT Returns for the first to fourth quarters of CY 2006 on the following dates: Taxa bl e Date of Filing of Exhibit Quarter Original Return l st April 25, 2006 E nd 2 July 25, 2006 F rd 3 October 25, 2006 G 4th January 25, 2007 H Petitioner filed with the BIR its Amended Qumierly VAT Returns for the first to fourth quarters of CY 2006, reflecting petitioner' s zero- rated sales, domestic purchases of non-capital goods and services, services rendered by non-residents, and impmiation of non-capital goods, on the following dates: 2006 Date of Current Transactions Taxable Fi li ng of Zero-rated sales (P) Domestic Impo rtatio n - Domesti c Services Quarter Amended Purchases - Goods Goo ds oth er Purchases of Rend ered by No n- Qua r ter ly oth er th an Capita l th an Ca pital Services (P ) Residents (P ) VAT Return Goo ds (P ) Goods (P ) I" Jul y 3 1,2007 908, 123, 188.65 8,324,45 4.13 267,036.67 45,349,684 . 12 7, 17 1,669.67 2nd Jul y 3 1,2007 1,09 5,655,943.47 12,641 ' 130.22 7,286,220.00 18,334,975 .57 490,662.42 65 8

C.T.A. CASE NO. 7738 4 DECISION 3'" Jul y 31,2007 I, I 04,026,676.27 15,013 , 136.42 12,995,075.00 29,580,546.03 195,687.08 4'" Jul y 31,2007 I ,239,387,79 1.88 9,258,385.42 4,345, 791.67 25 ,773 ,550.92 13, 11 6,558.75 Total 4,34 7' 193,600.2 7 45,237,106.19 24,894,123.34 119,038,756.64 20,974,577.92 On September 11, 2007, petitioner filed an administrative claim for refund/issuance of a TCC of unutilized input VAT in the amount of P24,673,243.53 with the BIR Large Taxpayers Audit and Investigation Division I. Due to respondent's failure to act on such claim, on March 14, 2008, petitioner filed the present Petition for Review. In his Answer, respondent by way of special and affirmative defenses alleged the following: "5. Petitioner's (sic) claim for tax refund is subject to administrative investigation and/or examination by the respondent; 6. Taxes remitted to the BIR are presumed to have been made in the regular course of business and in accordance with the provision of law; 7. To support its claim, it is imperative for petitioner to prove the following, viz: a.) The registration requirements of a value-added taxpayer in compliance with the pertinent provision of the National Internal Revenue Code of 1997 ( 1997 NIRC), as amended, and its implementing revenue regulations; b.) The invoicing and accounting requirements for VAT -registered persons, as well as the filing and payment of VAT in compliance with the provisions of Section 113 and 114 of the 1997 NIRC, as amended; (;? 65 9

C.T.A. CASE NO . 7738 5 DECISION c.) Proof of compliance with the submission of complete documents in support of the administrative claim for refund pursuant to Section 112 (D) of the 1997 NIRC, as amended, otherwise there would be no sufficient compliance with the filing of administrative claim for refund which is a condition sine qua non prior to the filing of judicial claim in accordance with provisi'on of Section 229 of the 1997 NIRC, as amended; d.) That the input taxes of Php 24,673,243.53 representing unutilized input VAT from its domestic purchases of non-capital goods and services rendered by non-residents for the calendar year 2006 were d.i paid by the petitioner d.ii attributable to its zero-rated or effectively zero-rated sales; d.iii such have · not been applied against any output tax e.) That petitioner's claim for tax credit or refund of the unutilized input tax (VAT) was filed within two (2) years after the close of the taxable quarter when the sales were made in accordance with Section 112 (A) ofthe 1997 NIRC, as amended; f.) That petitioner's domestic purchases of non-capital goods and services, services rendered by non- residents and importation of non-capital goods were made in the course of its trade or business, properly supported by VAT invoices and/or official receipts and other documents, such as subsidiary purchase journal, showing that it actually paid VAT in accordance with Sections 110 (A)(2) and 113 of the 1997 NIRC, as amended and in pursuance to Section 4.104-5 (a) & (b) ofRevenue 660

C.T.A. CASE NO . 7738 6 DECISION Regulation 7-95 (Re: Substantiation of Claims for Input Tax Credit); g.) That petitioner has complied the requirements as enumerated under Section 4.104-2 of the Revenue Regulations 7-95 (Re: Persons who can avail of the Input Tax Credit). 8. Excess input tax over output tax should be carried over to the succeeding qumier/s. However, input tax attributed to capital goods purchases or to zero-rated sales may be opted to be refunded or credited against other internal revenue taxes. This is provided under Section 110 (B) ofthe 1997 NIRC, as amended, which states in part: 'xxx If the input tax exceeds the output tax, the excess shall be carried over to the succeeding quarter or quarters. Any input tax attributable to the purchase of capital goods or to zero-rated sales by a VAT-registered person mav at his option be refunded or credited against other internal revenue taxes, subject to the provisions of Section 112.xxx' (emphasis supplied) Likewise, Section 110 (c) of the 1997 NIRC, as amended, provides: 'Determination of Creditable Input Tax- The sum of the excess input tax carried over from the preceding month or quarter and the input tax creditable to a VAT-registered person during the taxable month or quarter shall be reduced by the amount claim for refund or tax credit for value- added tax and other adjustment, xxx '. (emphasis supplied) 9. Petitioner's claim for refund has already prescribed pursuant to Section 112 (D) of the 1997 NIRC (now Section 112 (C) of the New Expanded VAT Law) in 661

C.T.A. CASE NO. 7738 7 DECISION relation to Section 4.112-1 (D) of the Revenue Regulation No . 14-2005. Pertinent provisions thereof states that, to wit: 'Section 11 2, Refunds or Tax Credit of Input Tax.- XXX XXX XXX (D) Period within which Refund or Tax credit of Input Taxes shall be Made. - In proper cases, the Commissioner shall grant a refund or issue a tax credit certificate for creditable input taxes within one hundred twenty (120) davs from the date of submission of complete documents in support of the application fi led 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 fai lure on the part of the Commissioner to act on the application within the period prescribed above, the taxpayer affected may, within thirty (30) davs (rom the receipt of the decision denying the claim or after the expiration of the one hundred twenty-day period, appeal the decision or unacted claim with the Court of Tax Appeals'. 'Section 4.112-1 Claims for Refund/Tax Credit Certificate of Input Tax. - XXX XXX XXX (d) Period within which Refund or Tax credit of Input Taxes shall be Made. - In proper cases, the Commissioner of Internal Revenue shall grant a tax credit certificate/refund 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 subparagraphs (a) above. 66 2

C.T.A. CASE NO. 7738 8 DECISION In case of full or pmiial denial of the claim for tax credit certificate/refund as decided by the Commissioner of Internal Revenue, the taxpayer may appeal to the Court of Tax Appeals (CTA) within thirtv (30) days (rom receipt of said denial,· otherwise, the decision shall become final. However, if no action on the claim {or tax credit certificate/refund has been ·taken by the Commissioner of Internal Revenue a[ter the one hundred twentv-day (120) day period (rom the date ofsubmission ofthe application but before the lapse of the two (2) year period (rom the close of the taxable quarter when the sales were made, the taxpayer may appeal to the CTA." (emphasis and underscoring ours) 10. Upon careful perusal of the records of the case, petitioner admitted that it filed the administrative claim for refund/tax credit of unutilized input VAT with the Large Taxpayers and Audit Investigation Division I (LTAID I) of the BIRon September 11, 2007. Petitioner, likewise, admitted in paragraph 4 of the Petition that the 120-day period within which the Commissioner is required to act on the claim has already lapse. Thus, based on the above-quoted provisions of the 1997 NIRC, the corresponding revenue regulations and admissions of the petitioner, the 120-day period to act on the refund lapsed on January 19, 2008. Petitioner had 30 days from the inaction to file an appeal with this Honorable Court or until February 18, 2008. Hence, the Petition for Review filed before this Honorable Court on March 14, 2008 was already filed out of time. 11. In an action for refund, the burden of proof is on the taxpayer to establish its right and failure to sustain the burden is fatal to the claim for tax refund/credit. This is so because exemptions from taxation are high ly disfavored in law and he who claims exemption must be able to justify his claim by the clearest grant of 663 ~

C.T.A. CASE NO. 7738 9 DECISION organic or statutory law. An exemption from common burden cannot be permitted to exist upon vague implications; 12. The claims for refund are construed strictly against the claimant for the same partakes the nature of exemption from taxation and liberally in favor of the taxing authority." Petitioner presented Leilah Yasmin E. Alpad, Senior Accountant of CE Luzon Geothermal Power, and Jerome Antonio B. Constantino, the Court-Commissioned Independent CPA, as witnesses, and documentary evidence, marked as Exhibits "A " to "S ", inclusive of their sub- markings, which were all admitted by the Court in its Resolutions dated May 11, 2009 and June 10, 2009, after petitioner filed a Motion for Reconsideration. Respondent, on the other hand, manifested in open court on September 9, 2009 that he has no evidence to present in this case and he is submitting the case for decision based on the pleadings. Thereafter, both parties were ordered to file their simultaneous memoranda, within thirty (30) days from notice, afterwhich the case will be deemed submitted for decision. Petitioner having filed its memorandum on December 1, 2009 and respondent having filed its memorandum on October 8, 2009, the case was deemed submitted for decision on December 7, 2009. 66 4 ·~

C.T.A. CASE NO . 7738 10 DECISION ISSUES As stipulated upon by the parties, the following are the issues for this Court's consideration: I WHETHER OR NOT THE UNUTILIZED INPUT VAT OF THE PETITIONER FOR THE 1sT TO 4TH QUARTERS OF CY 2006 AMOUNTING TO P24,673,243.53 IS SUBSTANTIATED BY DOCUMENTARY EVIDENCE IN THE FORM OF INVOICES AND OFFICIAL RECEIPTS. II WHETHER OR NOT THE SAID UNUTILIZED INPUT VAT OF THE PETITIONER FOR THE 1ST TO 4TH QUARTERS OF CY 2006 AMOUNTING TO P24,673 ,243 .53 WAS APPLIED AGAINST ANY OUTPUT TAX OF THE PETITIONER IN THE SUBSEQUENT QUARTERS. III WHETHER OR NOT THE PETITIONER IS ENTITLED TO A REFUND AND/OR ISSUANCE OF TAX CREDIT CERTIFICATE IN THE TOTAL AMOUNT OF P24,673,243.53 , REPRESENTING ITS UNUTILIZED INPUT VAT FROM PURCHASES OF TAXABLE GOODS AND SERVICES AND IMPORTATION OF GOODS FOR THE 1ST TO 4TH QUARTERS OF CY 2006. 66 5

C.T.A. CASE NO. 7738 11 DECISION IV WHETHER OR NOT PETITIONER'S CLAIM FOR REFUND/TAX CREDIT OF UNUTILIZED INPUT VAT WAS FILED WITHIN THE TWO (2)-YEAR PERIOD IN ACCORDANCE WITH SECTIONS 112 AND 229 OF THE TAX CODE. Principal Issue The foregoing issues boil down to the principal issue of whether or not petitioner is entitled to a claim for refund or issuance of a TCC of its unutilized input VAT for the first to fourth qumiers of 2006 in the amount ofP24,673,243.53. THE COURT'S RULING The petition is partly meritorious. Petitioner anchors its claim on Section 112 (A) of the NIRC of 199 7, as amended, which provides, as follows: "SEC. 112. Refund s 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)(l), (2) and (B) and Section 66 G (JJJZ

C.T.A. CASE NO. 7738 12 DECISION 108(B)(l) and (2), the acceptable foreign currency exchange proceeds thereof had been duly accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas (BSP): Provided, further, That where the taxpayer is engaged in zero-rated or effectively zero-rated sale and also in taxable or exempt sale of goods or properties or services, and the amount of creditable input tax due or paid cannot be directly and entirely attributed to any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales: Provided, finally, That for a person making sales that are zero-rated under Section 108(B)(6), the input taxes shall be allocated ratably between his zero-rated and non-zero-rated sales." From the afore-quoted provision, in order to be entitled to a refund or issuance of a TCC of unutilized input VAT arising from zero-rated or effectively zero-rated transactions, the following requisites must be complied with: 1. there must be zero-rated or effectively zero-rated sales; 2. that input taxes were incurred or paid; 3. that such input VAT payments are directly attributable to zero-rated sales or effectively zero- rated sales; 4. that the input VAT payments were not applied against any output VAT liability; and 5. that the claim for refund was filed within the two- year prescriptive period. 66 7

C.T.A. CASE NO. 7738 13 DECISION Prescription The Court deems it appropriate to determine first the timeliness of the filing ofthe instant claim. The two-year prescriptive period for the filing of a claim for refund or issuance of a TCC of input VAT under Section 112 (A) of the NIRC of 1997, as amended, is reckoned from the close of the taxable quarter when the relevant sales were made, regardless of whether said tax was paid or not (Commissioner of Internal Revenue vs. Mirant Pagbilao Corporation [Formerly Southern Energy Quezon, Inc.], 565 SCRA 171) (Mirant case). In the case at bar, petitioner is claiming refund of input VAT paid for the four quarters of 2006. Applying the Mirant case and Section 112 (A) of the NIRC of 1997, as amended, the fo llowing are the pertinent dates relevant to petitioner's claim for refund: Taxable Quarter Close of the Taxable Last Day For Filing of Quarter the Claim 1st March 31, 2006 March 31, 2008 2nd June 30, 2006 June 30, 2008 rd 3 September 30, 2006 September 30, 2008 4 th December 31, 2006 December 31, 2008 Records show that petitioner filed the administrative claim on September 11 , 2007 (Exhibit "M "), and the instant Petition for Review on 668

C.T.A. CASE NO. 7738 14 DECISION March 14, 2008 (Docket, p. 1). Hence, both the administrative and judicial claims for refund were filed within the two-year prescriptive period. Other Requisites The Court now proceeds to the detennination of petitioner's compliance with the other requisites for input VAT refund for the four quarters of 2006 in the amount of P24,673 ,243.53, which was duly filed within the two-year prescriptive period. First Requisite: There must be zero-rated or e(fectively zero rated sales As regards the first requisite, Section 108(B)(7) of the NIRC of 1997, as amended by RA 933 7, provides that among the transactions subject to zero percent (0%) VAT rate is: "(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." Section 4.108-5 (b)(7) of Revenue Regulations No. 16-2005, implementing the foregoing provision, further provides: "(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: 66 9

C.T.A. CASE NO. 7738 15 DECISION 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." To qualify for VAT zero-rating, petitioner must be able to prove that it is engaged in sale of power or fuel generated through renewable energy. Records show that petitioner is engaged in the business of power generation and sale of said power generated energy to the Philippine National Oil Company-Energy Development Corporation (PNOC-EDC) (Exhibit "D '') . As such, petitioner owns and operates a 180-megawatt geothermal power plant facility located in Mahanagdong, Province of Leyte, which was accredited by the Department of Energy, as a Block Power Production Facility since June 15, 1994 (Exhibit "B ") . For the period covering January 1, 2006 to December 31, 2006, petitioner generated gross receipts from sale of power generation services to PNOC-EDC, as evidenced by sales invoices (Exhibits "R-2.1 " to "R- 670 {9)g

C.T.A. CASE NO. 7738 16 DECISION 2.14 "), and official receipts (ORs) (Exhibits "R-4.1 " to "R-4.38 ") issued by petitioner to PNOC-EDC for the same period. Such sale of electricity generated through a renewable source of energy, particularly geothermal energy, qualifies for VAT zero-rating under Section 108(B)(7) of the NIRC of 1997, as amended by RA 933 7, as implemented by Section 4.108-5 (b)(7) ofRevenue Regulations No. 16-2005. However, the Court-Commissioned Independent Certified Public Accountant (ICPA), Jerome Antonio B. Constantino, noted that there is a discrepancy between the amount of gross receipts from sale of generated power, as reflected in the VAT returns, and as shown in the official receipts (Exhibits "R-5-IQ.l" to "R-5-4Q.14 ") , to wit: Amount Zero-rated Sales per Quarterly VAT Returns (Annex 2) p 4,347,193,600.27 Less: Amount of collections per Summary of Official Receipts (Exhibit R-3) 4,347,393 ,641.45 Difference p (200,041. 18) The Court-Commissioned ICPA found that the aforestated discrepancy of P200,041.18, represents under-declaration of petitioner's zero-rated receipts for the first quarter of 2006 in the amount of P200,000 .00, and rounding off-difference in the amount ofP41.18. Pursuant to Section 114(A) of the NIRC of 1997, as amended, petitioner should have declared the zero-rated receipts of P200,000.00 in 671

C.T.A. CASE NO. 7738 17 DECISION its Quarterly VAT Return for the first quarter of2006. Thus, petitioner's input VAT claim corresponding to the undeclared zero-rated receipts of P200,000.00 is hereby denied. Second Requisite: Input taxes were incurred or paid As regards the second requisite, petitioner's Quarterly VAT Returns for the four quarters of 2006 showed input taxes amounting to P24,673,243.53, detailed as follows: INPUT VAT Domestic Purchases - Importation- Services Goods Other Goods Othet· Domestic Rendered by Year Than Capital Than Capital Purchases- Non- Ex h. 2006 Goods Goods Services Residents Total "E- 1" 1st Qtr p 892,935.94 p 27,578.00 p 5,056,568.63 p 860,600.36 p 6,837,682 .93 "F-1" 2nd Qtr 1,503,079.38 862,602.00 2,179,294.22 58,879.49 4,603,855 .09 "G-1" 3rd Qtr 1,801,576.37 1,559,409.00 3,547,923.28 23,482.45 6,932,3 91.10 "H-2" 4th Qtr 1,111,006.25 521 ,495.00 3,092,826.11 1,573 ,987.05 6,299,3 14.41 Total P5,308,597 .94 P2,971,084.00 P13,876,612.24 P2,516,949.35 P24,673,243.53 In support of the above-mentioned input taxes, petitioner presented its Summary List of Purchases (Exhibits "R-5-JQ.l ' to "R-5-4Q.14 "), general ledgers (Exhibits "R- 7. 1 " to "R- 7. 115 ") and the related suppliers' invoices, official receipts, Import Entries and Internal Revenue Declarations (IEIRDs) (Exhibits "R-6-JQ.l" to "R-6-4Q.1288 "), for the period January 1, 2006 to December 31, 2006, which were examined and verified by the Court-Commissioned ICP A.

C.T.A. CASE NO. 7738 18 DECISION After a careful examination and review of the report submitted by the Court-Commissioned ICPA (Exhibit "R '), as well as petitioner's supporting documents, the following input taxes in the total amount of P661 ,525.27 should be disallowed from petitioner's claim for failure to meet the substantiation requirements under Sections 11 O(A) and 113(A) of the NIRC of 1997, as amended, in relation to Sections 4.110-1 and 4.110- 8 ofRevenue Regulations No. 16-05: Disallowed FINDINGS Exhib it R Inpu t Tax Annexes 1-1 Q- Domestic purchases of goods supp01ted by TIN-Y A12 l-2Q-A12 1- ' ' I. mvo1ces 3Q-A12, 1-4Q-Al2 p 20,747.44 Domestic purchases of services supported by TIN-V 2. OR Annex 1-4Q-B 12 4,821.43 Annexes 1-1 Q-A I, Domestic purchase of goods supp01ted by documents 1-2Q-Al, I-3Q-Al, 3. other than a VAT invoice and 1-4Q-Al 87,201 .03 Annexes 1-1 Q-A3, Domestic purchase of goods supp01ted by a VAT I-2Q-A3 , l-3Q-A3, 4. invoice but not an original copy and 1-4Q-A3 61 ,011.58 Domestic purchase of goods supported by a VAT invoice not issued in the name of the company (i .e. Annexes 1-1 Q-A4 5. issued in employee's name) and I-2Q-A4 426.57 Domestic purchase of goods supported by a VAT invoice issued 10 the name CE VisayasNGPC Annexes 1-3Q-A5 6. (whichever is applicable) and I-4Q-A5 793 .75 Domestic purchase of goods supported by a VAT 7. invoice but without invoice date Annexes I-2Q-A I 0 6,955 .71 Domestic purchases of goods supported by a VAT Annexes 1-1 Q- invoice not dated within the period of claim (taxable Al4, 1-2Q-A14 8. year 2006) and l-3Q-A 14 172,113 .91 Annexes 1-1 Q- Domestic purchases of goods supported by a VAT A 15, 1-2Q-A IS 9. invoice with changes in the name of the company and 1-3Q-A15 5,262.25 Domestic purchase of goods supported by a TIN # only; TAN-V ; TAN VAT; TIN-NY/Non VAT 10. stamped/handwritten TIN-VNAT tape receipt A1mex I-3Q-A 16 3,969.64 Domestic purchase of services supported by Annexes 1-1 Q-B 1, 11. documents other than a VAT OR 1-2Q-B1 , 1-3Q-B1 , 81,990.81 67 3 ~

C.T.A. CASE NO. 7738 19 DECISION I-4Q-81 Annexes l-2Q-B3 , Domestic purchases of services supported by a VAT !-3Q-B3 and 1-4Q- 12. OR but not an original copy 83 4,452.52 Domestic purchase of services supported by a VAT Annexes 1-1 Q- OR not issued in the name of the Company (i.e., A 12, 1-2Q-A 12, 1- 13 . issued in employee's name) 3Q-A 12, 1-4Q-A 12 6,760.64 Domestic purchase of services supported by a VAT OR issued in the name of Visayas Geothermal Power Annexes 1-2Q-85, Company/VGPC/CE Casecnan Water Energy/CE 1-3Q-B5 and 1-4Q- 14. Cebu (whichever is applicable) 85 5,168 .80 Domestic purchase of services supported by T~ # Annexes I-2Q-B7, only; TIN-NV /NON VAT OR stamped/handwritten 1-3Q-B7 and 1-4Q- 15. TIN-Y/VAT 87 50,844.74 Annexes 1-1 Q- Domestic purchase of services supported by a VAT BIO, 1-2Q-810, 1- 16. OR but without OR date 3Q-B 10, 1-4Q-B I 0 33,326.78 Domestic purchase of services suppotied by a VAT OR not dated within the period of claim (taxable year Annexes 1-1Q-Bl4 17. 2006) and 1-4Q-814 2,464 .88 Domestic purchase of services supported by a VAT Annexes I-2Q- 18 . OR with changes in the name of the company 815 and I-3Q-815 2,533 .50 Importation of goods supported by an original TETRD Annexes 1-1 Q-C3 and BOC OR not dated within the period of claim 19. (taxable year 2006) 3,559.00 Overclaimed input tax on domestic purchase & Annexes 1-1 Q-E 1, importation of goods and services due to erroneous 1-2Q-E1 , I-3Q-E I, 20. computation (i.e. arithmetical error) l-4Q-E1 7,860.84 Annexes 1-1 Q-J 1, Effect of forex on foreign currency denominated 1-2Q-JI, 1-3Q-JI, 21. purchase of goods and services -overstatement 1-4Q-J I 40,399.65 Annexes 1-1 Q-F, l-2Q-F, I-3Q-F, 1- 22. Supporting documents not available 4Q-F 58,859.80 TOTAL p 661,525.27 Therefore, petitioner's valid input VAT claim amounts only to P24,0 11 ,718.26, computed as follows: Amount of Input VAT Claim p 24,673,243.53 Less: Disallowances 661,525.27 Substantiated Input VAT p 24,011,718.26 674

C.T.A. CASE NO. 7738 20 DECISION Third Requisite: The input taxes are attributable to zero-rated sales or e([ectively zero-rated sales As regards the third requisite, since petitioner's sales for the four quarters of 2006 were all zero-rated, the substantiated input VAT of P24,011 ,718.26 is entirely attributable thereto. However, as earlier stated, the input VAT related to the undeclared zero-rated receipts of P200,000.00 shall be disallowed. Consequently, petitioner's substantiated input VAT attributable to the declared zero-rated receipts of P4,347,193 ,600.27 amounts only to P24,010,613.61, computed as follows: Substantiated input VAT p 24,011,718.26 Less: Input VAT attributable to the undeclared zero-rated receipts (P200,000.00/P4,347,393,641.45 X P24,011,718.26) 1,104.65 Input VAT attributable to the declared zero-rated receipts p 24,010,613.61 Fourth Requisite: The input VAT payments were not applied against any output VAT liab ility As regards the fourth requisite, although petitioner carried-over the subject claim to the succeeding first three quarters of 2007 (Exhibits "1-2 ", "J-1 " and "K-1 "), the same remained unutilized until it was fully deducted as "VAT Refund/TCC Claimed" (Exhibit "K-1 ", line 23D) from the total available input tax as of the third quarter of 2007. Thu s, the excess input 675

.. C.T.A. CASE NO . 7738 21 DECISION VAT carried-over to the succeeding fomih quarter of 2007 (Exhibit "L-2 ", line 20A) no longer included the instant claim. Petitioner, therefore, has complied with the fourth requisite. WHEREFORE, premises considered, the present Petition for Review is hereby PARTLY GRANTED. Accordingly, respondent Commissioner of Internal Revenue is hereby ORDERED TO REFUND OR TO ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner CE Luzon Geothermal Power Company, Inc. in the reduced amount of TWENTY FOUR MILLION TEN THOUSAND SIX HUNDRED THIRTEEN AND 61/100 PESOS (P24,010,613.61), representing unutilized input value-added tax paid by petitioner on its domestic purchases of non-capital goods and services, importation of non-capital goods and serv ices rendered by non-residents for the first to fourth quarters of calendar year 2006, attributable to zero-rated sales. tLGMrt-&~UEZ SO ORDERED. Associate Justice WE CONCUR: ~~-,fz, c . Q.a?-o.-<P~ . S2 . J-0'ANITO C. CASTANE)j'A, JR. ER~P.UY Associate Justice Associate Justice 676

C.T.A. CASE NO. 7738 22 DECISION 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. ~~h. C . ~~ Q.. .ftJANITO C. CAST ANEDq\, JR. Associate Justice Chairperson 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. ~..._;- y . D~ ERNESTO D. ACOSTA Presiding Justice 67 7