COMMISSIONER OF INTERNAL REVENUE v. MIRANT PAGBILAO CORPORATION (Formerly: Southern Energy Quezon, Inc.)

REPUBLIC OF THE PHILIPPINES Court ofTax Appeals QUEZON CITY ENBANC COMMISSIONER OF INTERNAL C.T.A. EB NO. 422 REVENUE, (C.T.A. CASE NO. 6957) Petitioner, Present: -versus- ACOSTA, Presiding Justice, CASTANEDA, JR., TEAM ENERGY CORPORATION BAUTISTA, (formerly: MIRANT PAGBILAO UY, CORPORATION), CASANOVA, and PALANCA-ENRIQUEZ, JJ. Respondent. Promulgated: AUG 14 2009 ~~~~ //7, '/,_f- i'ff. r '-91- � X ------------------------------------------------------------------------------------ X DECISION PALANCA-ENRIQUEZ, J.: The reckoning of the two-year prescriptive period for the filing of a claim for refund or issuance of a Tax Credit Certificate ("TCC") for input VAT under Section 112 (A) of the NJRC of 1997, as amended, commences from the close of the taxable quarter when the relevant sales were made pertaining to the input VAT regardless of whether said tax @1J was paid or not.

C.T.A. EB NO. 422 2 (C.T.A. CASE NO. 6957) DECISION THE CASE This is a Petition for Review filed by the Commissioner of Internal Revenue (hereafter "petitioner CIR") under Section 11 of RA 9282 (An Act Expanding the Jurisdiction of the Court of Tax Appeals), in relation to Rule 43 ofthe 1997 Rules ofCivil Procedure, as amended, which seeks to reverse the Decision dated May 16, 2008 partially granting the Petition For Review in the reduced amount ofP69,618,971.19, and the Resolution dated September 8, 2008 denying Commissioner of Internal Revenue's "Motion For Partial Reconsideration" rendered by the First Division of this Court in C.T.A. Case No. 6957. The respective dispositive portions of said Decision and Resolution read, as follows: "Wherefore, IN VIEW OF ALL THE FOREGOING, the instant Petition for Review is hereby PARTIALLY GRANTED. Thus, Respondent is hereby ORDERED TO REFUND OR ISSUE A TAX CREDIT CERTIFICATE to petitioner in the reduced amount of SIXTY NINE MILLION SIX HUNDRED EIGHTEEN THOUSAND NINE HUNDRED SEVENTY ONE AND 19/100 PESOS (P69,618,971.19) representing unutilized input value-added taxes paid by petitioner on its domestic purchases of goods and services and importation of goods attributable to its effectively zero-rated sales of power generation services to the National Power Corporation for the taxable year 2002. SO ORDERED."

C.T.A. EB NO. 422 3 (C.T.A. CASE NO. 6957) DECISION "WHEREFORE, finding no basis, factual or legal to grant the reconsideration sought, respondent's Motion for Partial Reconsideration is hereby DENIED for lack of merit. SO ORDERED." THE PARTIES Petitioner is the duly appointed Commissioner of Internal Revenue and is empowered to perform the duties of his office, including, among others, the duty to act on and approve claims for refund or issuance of a TCC of overpaid internal revenue taxes, as provided by law, with office address at the BIR National Office Building, Agham Road, Diliman, Quezon City, where he may be served with summons and other court processes. Respondent TeaM Energy Corporation (respondent "TeaM Energy"), on the other hand, is a domestic corporation organized and existing under and by virtue of Philippine laws, with principal office at Pagbilao Grande Island, Quezon. It is principally engaged in the business of power generation and subsequent sale thereof to the National Power Corporation ("NPC"), under a Build, Operate, Transfer ("BOT") scheme. It is registered with the Bureau of Internal Revenue ("BIR"), as a value-

C.T.A. EB NO. 422 4 (C.T.A. CASE NO. 6957) DECISION added tax ("VAT") taxpayer, in accordance with Section 107 of the Old Tax Code [now Section 236 ofthe NIRC of 1997], with BIR Certificate of Registration bearing RDO Control No. 96-600-002498 and Taxpayer Identification No. 001-726-870. It was originally registered with the Securities and Exchange Commission ("SEC") under the name of "Hopewell Power (Philippines), Corporation", which was subsequently changed to "Southern Energy Quezon, Inc." on September 22, 1999. On June 28, 2001, respondent's name was again changed from "Southern Energy Quezon, Inc." to "Nlirant Pagbilao Corporation". On July 23, 2007, respondent again changed its corporate name from "Mirant Pagbilao Corporation" to "TeaM Energy Corporation". THE FACTS The facts, as culled from the records, are as follows: On the following dates, respondent TeaM Energy filed with the BIR its first to fourth quarterly VAT returns for the calendar year 2002: Quarter Date Filed First April25, 2002 Second July 23, 2002 Third October 25, 2002 Fourth January 27, 2003 (Y(;J

.. C.T.A. EB NO. 422 5 (C.T.A. CASE NO. 6957) DECISION On July 25, 2003 , respondent amended its first to fourth quarterly VAT returns for calendar year 2002. On December 22, 2003, respondent filed an administrative claim for refund of unutilized input VAT with the Revenue District Office No. 60, Lucena City, in the total amount of P79,918,002.95 for calendar year 2002. Due to petitioner CIR's inaction and to toll the running of the two- year prescriptive period, on April 22, 2004, respondent elevated its claim to this Court, by way of a Petition For Review, docketed as C.T.A. Case No. 6957. In his Answer, petitioner CIR alleged the following special and affirmative defenses: "5. Petitioner' s alleged claim for refund is subject to administrative investigation/examination by the respondent; 6. 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 Section 6 (a) and (b) of the Revenue Regulations No. 6-97 in relation to Section 4.107-1 (a) of Revenue Regulations No.7- 95, and Section 236 of the Tax Code, as amended;

C.T.A. EB NO. 422 6 (C.T.A. CASE NO. 6957) DECISION 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 Sections 113 and 114 of the Tax Code as amended; c. Proof of compliance with the prescribed checklist of requirements to be submitted involving claim for VAT refund in pursuance to Revenue Memorandum Order No. 53-98, 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 the provision of Section 229 of the Tax Code, as amended. It is worthy of emphasis that Section 112 (D) of the Tax Code, as amended, 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 immediate dismissal of the petition for review. d. That the input taxes of P79,918,002.95 allegedly paid by the petitioner on its purchases of goods and services for the four (4) quarters of the year 2002 were attributable to its zero-rated sales and such have not been applied against any output &AJ tax and were not carried over in the succeeding taxable quarter or quarters;

C.T.A. EB NO. 422 7 (C.T.A. CASE NO. 6957) DECISION e. That petitioner's administrative and judicial claims 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 Sections 112 (A) and (D) and 229 of the TAX Code, as amended; f. That petitioner's domestic purchases of goods and services were made in the course of its trade and 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 Tax Code as amended, and in pursuance to Section 4.104-5 (a) & (b) of Revenue Regulations No. 7-95 (Re: Substantiation of Claims for Input Tax Credit); g. The requirements as enumerated under Section 4.104-2 of the Revenue Regulations 7-95. (Re: Persons who can avail ofthe Input Tax Credits); 7. Furthermore, in an action for refund the burden of proof is on the taxpayer to establish its right to refund 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 common burden cannot be permitted to exist upon vague implications (Asiatic Petroleum Co. {P.I.} v. LLanes, 49 Phil. 466 cited in Collector of Internal Revenue v. Manila Jockey Club, Inc. 98 Phil.670); 8. Claims for refund are construed strictly against the claimant for the same partake the nature of exemption from 1 :�, , .. ,.,

C.T.A. EB NO. 422 8 (C.T.A. CASE NO. 6957) DECISION taxation (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95) and as such, they are looked upon with disfavor (Western Minoleo Corp. vs. Commissioner of Internal Revenue, 124 SCRA 1211)." After trial on the merits, the First Division of this Court rendered judgment in the terms earlier set forth with the Court En Bane. Not satisfied, petitioner CIR filed his Motion For Partial Reconsideration, which the First Division denied in its Resolution dated September 8, 2008. On October 10, 2008, petitioner CIR filed the instant Petition For Review with the Court En Bane. On October 24, 2008, We required respondent TeaM Energy to file its comment on the petition, and not a motion to dismiss, within ten (1 0) days from notice. On November 6, 2008, respondent filed its Comment (To: Petitioner's Petition For Review). On November 12, 2008, We required both parties to submit their simultaneous memoranda, within thirty days from notice. Petitioner CIR having filed his memorandum, without respondent filing the same, the case was deemed submitted for decision.

C.T.A. EB NO. 422 9 (C.T.A. CASE NO. "6957) DECISION On February 24, 2009, respondent filed a "Motion To Change Caption" praying to change its corporate name from "Mirant Pagbilao Corporation" to "TeaM Energy Corporation", which the Court granted in a Resolution dated April 30, 2009. Hence, this Petition For Review raising this sole: ISSUE WHETHER OR NOT RESPONDENT IS ENTITLED TO REFUND OR ISSUANCE OF A TCC IN THE AMOUNT OF P69,618,971.19 REPRESENTING INPUT VALUE- ADDED TAXES ALLEGEDLY PAID BY RESPONDENT ON ITS DOMESTIC PURCHASES OF GOODS ATTRIBUTABLE TO ITS EFFECTIVELY ZERO-RATED SALES OF POWER GENERATION SERVICES TO THE NPC FOR TAXABLE YEAR 2002. Petitioner CIR's Arguments Petitioner CIR argues that respondent is not entitled to a refund or tax credit even in the reduced amount of P69,618,971.19, representing alleged unutilized input tax, because respondent failed to submit all the necessary and relevant documents pertaining to said claim; that for respondent's failure to submit relevant documents with the BIR for the purpose of determining the propriety of the subject refund, said administrative claim for refund filed by respondent is considered pro

C.T.A. EB NO. 422 10 (C.T.A. CASE NO. 6957) DECISION forma; that a pro forma administrative claim for refund produces no effect and warrants the dismissal of the petition filed before the First Division; and the First Division lacks jurisdiction to entertain the same. Respondent TeaM Energy's Counter-arguments Respondent counters that its administrative claim filed on December 22, 2003 and judicial claim filed on April 22, 2004, were both filed before April 24, 2004, well within the two-year prescriptive period reckoned from the filing of the original first quarter VAT return on April 25, 2002; that the sale of power generation services to the NPC is effectively zero-rated VAT, pursuant to Section 108 (B) (3) of the NIRC of 1997, as amended, in relation to Section 13 of RA 6395, as amended, otherwise known as the NPC Charter; that respondent successfully established that the unutilized creditable taxes amounting to P69,618,971.19 is duly substantiated by official receipts and invoices, bank debit advices, BOC official receipts, IERDs and other documents (Exhibits "CC-I to CC-2988 ", "DD-1 to DD-2795 ", "EE-l to EE-3254 ", "FF-1 to FF- 4244 ", "JJ" to "DDDDD "; TSN dated July 12, 2005, pp. 5-28), also, the input VAT declared in respondent' s VAT returns for the four quarters of 4 � ., r n

C.T.A. EB NO. 422 11 (C.T.A. CASE NO. 6957) DECISION calendar year 2002 were all substantiated by supporting documents (Exhibits "C", "D ", "E", and "F "); that the total amount ofP69,618,971.19, representing unutilized input VAT for calendar year 2002, was not applied against any VAT liability in the same or succeeding quarters, thus respondent is entitled to the claim for refund or issuance of a TCC. THE COURT EN BANC'S RULING The petition is partly meritorious. Section 112 ofthe NIRC of1997, as amended, provides: "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)(l), (2) and (B) and Section 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 4 ; ... .. ,-.

C.T.A. EB NO. 422 12 (C.T.A. CASE NO. 6957) DECISION any one of the transactions, it shall be allocated proportionately on the basis of the volume of sales." (emphasis supplied) Pursuant to the above provisiOn, to be entitled to a refund or issuance of a TCC, petitioner must prove compliance with the following requisites: 1) there must be zero-rated or effectively zero-rated sales; 2) the input taxes were incurred or paid and are duly supported by VAT invoices or official receipts; 3) such input taxes are directly attributable to zero-rated or effectively zero-rated sales; 4) the input taxes were not applied against any output VAT liability; and 5) the claim for refund was filed within the two-year prescriptive period. First Requisite As to the first requisite, record shows that petitioner has complied with the first requirement. Section 108 (B) of the NIRC of 1997, as amended, subjects to zero percent (0%) or effectively zero percent (0%) rate, the following sale of services: (}P

C.T.A. EB NO. 422 13 (C.T.A. CASE NO. 6957) DECISION "SEC. 108. Value-added Tax on Sale of Services and Use or Lease of Properties.- XXX XXX (B) Transactions Subject to Zero Percent (0%) Rate. - The following services performed in the Philippines by VAT-registered persons shall be subject to zero percent (0%) rate: XXX XXX (3) Services rendered to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the � supply of such services to zero percent (0%) rate." Pursuant to the aforequoted provision, the services rendered by a VAT registered entity to persons or entities whose exemption under special laws or international agreements to which the Philippines is a signatory effectively subjects the supply of such services to zero percent (0%) rate, shall be subject to zero percent (0%) rate. In the case at bar, respondent TeaM Energy, a VAT registered entity, has rendered power generation services to NPC, an entity with a special charter (RA 6395), which categorically exempts it from payment of all taxes, direct or indirect. This exemption from direct and indirect taxes of NPC was affirmed by the Supreme Court in the case of Maceda

C.T.A. EB NO. 422 14 (C.T.A. CASE NO. 6957) DECISION vs. Macaraig, Jr. , et a/., 197 SCRA 771. Hence, pursuant to the Supreme Court ruling and by virtue of the said charter, services rendered by respondent to NPC are effectively subject to zero percent (0%) VAT. Second and Fifth Requisites: As regards the second requisite, the First Division ruled that out of the claimed unutilized input taxes of P79,918,002.95, the amount of P69,618,971.19 was duly substantiated, computed, as follows: Claimed Input VAT P79,918,002.98 Less: Disallowances: 10~286A92.68 Substantiated Input VAT 69,631,510.27 Less: Output tax liability Refundable Input VAT 12~539.08 P69,618,971.22 As regards the fifth requisite, Section 112 (A) ofthe NIRC of 1997, as amended, provides that a VAT registered taxpayer whose sale is 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 refund or issuance of a TCC of its creditable input tax due or paid attributable to such sales. In the recent case of Commissioner ofInternal Revenue vs. Mirant Pagbilao (Formerly Southern Energy Quezon, Inc.), 565 SCRA 154 (}tU

C.T.A. EB NO. 422 15 (C.T.A. CASE NO. 6957) DECISION (hereafter referred to as the "Mirant Case"), the Supreme Court definitely settled the issue on the reckoning of the prescriptive period on claims for refund of input VAT attributable to zero-rated or effectively zero-rated sales, as follows: "The claim for refund or tax credit for the creditable input VAT payment made by MPC embodied in OR No. 0189 was filed beyond the period provided by law for such claim. Sec. 112 (A) of the NIRC pertinently reads: (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 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: xxx. (Emphasis ours .) The above proviso clearly provides in no uncertain terms that unutilized input VAT payments not otherwise used for any internal revenue tax due the taxpayer must be claimed within two years 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. As the CA aptly puts it, albeit it erroneously applied the aforequoted Section 112 (A), 'Prescriptive period commences from the close of the taxable quarter when the sales were made and not from the time the input VAT was paid nor from the time the official receipt was issued.' Thus, when a zero-rated VAT taxpayer pays its input VA~ar

C.T.A. EB NO. 422 16 (C.T.A. CASE NO. 6957) DECISION after the pertinent transaction, said taxpayer only has a year to file a claim or refund or tax credit of the unutilized creditable input VAT. The reckoning frame would always be the end of the quarter when the pertinent sales or transaction was made, regardless when the input VAT was paid. Be that as it may, and given that the last creditable input VAT due for the period covering the progress billing of September 6, 1996 is the third quarter of 1996 ending on September 30, 1996, any claim for unutilized creditable input VAT refund or tax credit for said quarter prescribed two years after September 30, 1996 or, to be precise, on September 30, 1998. Consequently, MPC's claim for refund or tax credit filed on December 10, 1999 had already prescribed." Pursuant to the above ruling of the Supreme Court, it is clear that the two year prescriptive period provided in Section 112 {A) of the NIRC of 1997, as amended, should be counted not from the payment of the tax, but from the close of the taxable quarter when the sales were made. Pursuant to the above ruling of the Supreme Court, the following are the pertinent dates relevant to petitioner's claim for refund: Period (2002) Close of Taxable Quarter Last Day for Filing of the Claim 1st Quarter 2"0 Quarter March 31, 2002 March 31, 2004 3ra Quarter June 30, 2002 June 30, 2004 4m Quarter September 30, 2002 September 30, 2004 December 31, 2002 December 31, 2004 Record shows that respondent filed its administrative claim for refund or issuance of a TCC on December 22, 2003, while the judicial

C.T.A. EB NO. 422 17 (C.T.A. CASE NO. 6957) DECISION claim for refund was filed on April 22, 2004. Since respondent filed its judicial claim for refund for the four quarters of 2002, only on April 22, 2004, twenty two (22) days from March 31, 2004, the last day prescribed by the Mirant Case, respondent is barred from claiming refund of its unutilized input taxes for the first quarter of 2002. Therefore, the claim for refund granted by the First Division of this Court in the amount of P69,618,971.19 should be reduced by deducting the portion of the claim corresponding to the first quarter that had already prescribed, computed as follows : Total Claim Per Petition for Review P79,918 ,002 .95 24.476.329.78 Less: Prescribed Claim- 1st Quarter 55,441,673.17 Unprescribed Claim Less: Disallowance per Decision dated May 16, 2008 Due to Substantiation Requirements P10,286,492.68 Adjustments on Disallowances per Court en Bane 's verification Unconsidered retrieved documents on local purchases of goods and services (the detailed computation ofwhich is part and parcel ofthis Decision as Annexes "A" and "A-5") (4,228.18) Transposition error on input taxes claimed on local purchases of goods and services dated outside the period of claim 10.000.00 Adjusted disallowances p 10,292,264.50 Less: Disallowances pertaining to the 1st Quarter before effecting transposition error (the detailed computation of which is part and parcel of this Decision as Annex 5,983,098.34 107G

C.T.A. EB NO. 422 18 (C.T.A. CASE NO. 6957) DECISION Additional Disallowances: Transposition error on input taxes claimed on local purchases of goods and services dated outside the period of claim (Exhibit "S- 72") 10,000.00 Net disallowances pertaining to the Ist Quarter ?5,993,098 .3 4 P4,299.166 . 16 Less: Unprescribed disallowances after 51,142,507.01 effecting adjustment 7,555.61 Substantiated Claim- 2nd to 4th Quarters P51,134,951.40 Less: Output VAT - 2nd to 4th Quarters (12,539.08- P4,983.47) Refundable Input VAT- 2nd to 41h Quarters In sum, the Court En Bane finds that the total substantiated input tax filed within the two-year prescriptive period of respondent TeaM Energy amounts to P51,134,951.40 only. Third and Fourth Requisites As regards the third and fourth requisites, We fmd that respondent TeaM Energy input taxes were directly attributable to its effectively zero- rated sales and they were not applied against output VAT liabilities, except with respect to the minimal amount of P12,539.08 (consisting of respondent's sale of transport equipment for the first, third and fourth quarters of calendar year 2002, which resulted to output VAT liability of P4,983.47, P5,316.36 and P2,239.25, respectively), as shown in its Quarterly VAT Returns for the four (4) quarters of 2002 (Exhibits "C" to "G''). This output VAT liability of P12,539.08 was already deducted 1G77

C.T.A. EB NO. 422 19 (C.T.A. CASE NO. 6957) DECISION from the substantiated input VAT of petitioner, as shown in the above computation. Moreover, respondent TeaM Energy's second quarter VAT return for calendar year 2004 shows that its claim for unutilized input VAT for calendar year 2002 in the amount of P79,980,002.95 was deducted from the total available input tax of P210,307,638.69 {Exhibit "P ", TSN dated May 10, 2005, pp. 31-32). While its third quarter VAT return for calendar year 2004 shows that the amount of P79,980,002.95 was no longer carried over to the succeeding taxable quarters {Exhibit "Q '~. Hence, We find that the unutilized input VAT ofP51,134,951.40 was not applied by respondent TeaM Energy to any output VAT liability, therefore, the same should be refunded. WHEREFORE, premises considered, the petition is hereby PARTLY GRANTED. The assailed Decision dated May 16, 2008 and Resolution dated September 8, 2008 are hereby AFFIRMED, with modification that only P51, 134,951.40 is the refundable amount to respondent for taxable year 2002. Accordingly, the Commissioner of Internal Revenue is hereby ORDERED to REFUND or ISSUE a TAX CREDIT CERTIFICATE in favor of TeaM Energy Corporation the 107 8

C.T.A. EB NO. 422 20 (C.T.A. CASE NO. 6957) DECISION reduced amount of FIFTY ONE MILLION ONE HUNDRED THIRTY FOUR THOUSAND NINE HUNDRED FIFTY ONE AND 40/100 PESOS (P51 ,134,951.40), representing the latter's excess and unutilized input VAT for the period covering calendar year 2002. SO ORDERED. ~~UEZ Associate Justice WE CONCUR: ~__.:: \r 0. ~ ( Wi+l-1 ~cut'r;~ ""'lOi.isem;"'-9 J Opi"'iO'\ ERNESTO D. ACOSTA Presiding Justice Q.~~c~~.9. JifANITO C. CASTANED'K, JR. Associate Justice CAESAR A. CASANOVA Associate Justice 107 9

C.T.A. EB NO. 422 21 (C.T.A. CASE NO. 6957) DECISION CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the above Decision has been reached in consultation with the members of the Court En Bane before the cases was assigned to the writer of the opinion of the Court. L w-. ohV'--- ERNEsTo D. ACOSTA Presiding Justice 1080

C.T.A. EB NO. 422 22 (C.T.A. CASE NO. 6957) DECISION Annex "A" Computation of the Disallowances Original First Quarter Unprescribed Exhibit/ Amount Portion Reference a) Input tax on purchases of goods P10,404.73 198.82 P10,205.91 "S-6" supported by invoices with pre-printed TIN-NONVAT 5,457.86 1,436.37 4,021.49 "S-6" b) Input tax on purchases of goods supported by invoices with pre-printed 9,026.33 -0- 9,026.33 "S-7" TAN-VAT c) Input tax on purchases of goods 3,454.55 -0- 3,454.55 "S~7" supported by invoices with pre-printed TAN 76,311.36 -0- 76,311.36 "S-7" d) Input tax on purchases of services supported by ORs without pre-printed 247.71 -0- 247.71 S-7" TIN-VAT 16.30 -0- 16.30 "S-6" e) Input tax on purchases of service 3,850.59 " S-7" supported by ORs with pre-printed TIN 44,057.97 40,207.38 only f) Input tax on purchase of service 41,309.71 730.36 40,579.35 "S-6" supported by an OR with pre-printed VAT No. only 974.46 -0- 974.46 "S-7" g) Over-claimed input tax on purchase 7,074.84 -0- of goods 11,968.00 -0- 7,074.84 "S-6" h) Over-claimed input tax on purchases 45,583.00 45,583.00 of services 11,968.00 "S-8" i) Input tax on purchases of goods -0- "S-8" supported by VAT invoices issued not in the name of the petitioner/no name j) Input tax on purchases of services supported by VAT ORs issued not in the name of the petitioner/no name, broken down as follows: k) Input tax on purchases of goods supported by photocopied VAT invoices, broken down as follows: I) Input tax on importations supported by a photocopied lED only, broken down as follows: m) Input tax on importations supported by a photocopied informal lED n) Input tax on purchases of services

C.T.A. EB NO. 422 23 (C.T.A. CASE NO. .6957) DECISION supported by ORs without BIR permit 812.84 -0- 812.24 "S-7" o) Input tax without available 2,576,620.30 747,868 .2 I I ,828,752 .09 The detailed �supporting documents on local computation purchases of goods and services and 4,374,424.00 P89,171.2I of which is importations 221,662.25 P237,918.05 made part and 1,669.63 parcel of this p) Input tax on local purchases of P4,463,595.21 Decision as goods supported by YAT invoices, on P459,580.30 137,267.47 Annex "A-1" local purchases of services supported 149,915.64 The detailed by ORs, on importations of goods 298,492.00 computation supported by original copies of BOC P5,983,098.34 of which is ORs, and on importations of goods made part and supported by original copies of BOC parcel of this ORs dated outside the period of claim Decision as q) Input tax on local purchases of Annex "A-2" goods supported by YAT invoices as well as on local purchases of services The detailed supported by YAT ORs issued in the computation former names of petitioner of which is made part and parcel of this Decision as Annex "A-3" r) Input tax on local purchases of goods P51,884.63 50,215 .00 "S-9" & supported by certified true copies of 924,345.96 787,078.49 "S-54" YAT invoices The detailed s) Input tax on local purchases of computation goods supported by invoices with Pre- of which is printed TIN-Y as well as on local made part and purchases of services supported by ORs parcel of this with pre-printed TIN-Y printed after Decision as January I, 1996 Annex "A-4" t) Input tax on local non-life insurance "S-9" & "S- premium payments supported by YAT OR's issued by the insurance agent 243,231.62 93,315.98 64" u) Input tax on importations of goods 1,310,535.00 which are supported only by P10,286,492.68 1,012,043.00 "S-9" & "S- photocopied IEDs certified by BOC P4,303,394.34 67" Total Disallowance (4,228.18) Adjustments: (4,228.18) The detailed computation Unconsidered retrieved documents of which is on local purchases of goods and made part and services

C.T.A. EB NO. 422 24 (C.T.A. CASE NO. 6957) DECISION Transposition error on input taxes parcel of this claimed on local purchases of goods Decision as and services dated outside the period of Annex "A-5" claim (Exhibit "S- 72 ") The detailed computation 10,000.00 10,000.00 -0- of which is P5,993,098.34 P4,299,166.16 made part and parcel of this Decision as Annex "A-2 " Total Disallowances P l 0,292,264.50 1083

C.T.A. EB NO. 422 25 (C.T.A. CASE NO. 6957) DECISION Annex "A-1" Input tax without available Original First Quarter Unprescribed Exhibit/ supporting documents Amount Portion Reference 1) on local purchases of goods P1, 868 ,654. 88 P537,524.03 P1,331,130.55 "S-8" and services (373, 08 9.58) (P137,957.82) The detailed Less: Input VAT pertaining to computation documents retrieved per the P1 ,495,565.30 First Division's computation P 1,78 3, 842. 00 (235, 131.76) of which is made part Input tax without supporting P7 02, 78 7. 00 and parcel of documents on local purchases of P l ,081,055.00 this Decision goods and services after taking asAnnex "A- into consideration retrieved P2,576,620.30 2" documents P399,566.21 � Pl,095,998.79 "S-8" 2) on importations 695,415.00 1,088,427.00 "NN" to Less: Input VAT pertaining to "NN-54" documents retrieved 347,113. 00 355, 674. 00 Input tax without supporting documents on importation after 348,302.00 P732,753.00 taking into consideration retrieved documents P747,868.21 P1,828,752.09 Total input tax without available supporting documents on local purchases of goods and services and importations 108 4

C.T.A. EB NO. 422 26 (C.T.A. CASE NO. 6957) DECISION Annex "A-2" I nputTaxes 0 UtSl'de the Pen.od 0 fCIa1. m Total 1"1 Qtr 2"d Qtr 3ra Qtr 41" Qtr Exhibit No. 1) Input taxes were claimed on local purchases of goods which are supported by VAT invoices "S-8", "S-44" dated outside the period of claim ?2,439,836.82 ?2,352,165.61 ?61,569.70 ?23,754.24 ?2,347.27 to "S-52" 2) Input taxes were claimed on local purchases which are supported by OR's dated outside "S-9", "S-58" tc the period of claim 195,758.39 194,258.39 -0- -0- 1,500.00 "S-60" 3) Input taxes were claimed on importations of goods which are supported by original copies of BOC ORs dated outside the period of claim and photocopied lEOs certified by the BOC 12,859.00 12,859.00 -0- -0- -0- "S-9" & "S-68" 4) Input taxes were claimed on importations of goods which are supported by original copies of BOC ORs dated outside the period of claim and photocopied informal IEDs certified by the BOC 6,897.00 6,897.00 -0- -0- -0- "S-10" & "S-69 5) Input taxes were claimed on importations of goods which are supported by original copies of Bank ORs dated outside the period of claim and photocopied "S-10" & "S- IEDs certified by the BOC 131,898.00 131,898.00 -0- -0- -0- 70" 6) Input taxes were claimed on importations of goods which are supported by original copies of Bank ORs dated outside the period of claim and photocopied IEDS certified by the BOC issued "S-10" & "S- not in the name of the Company 216,624.00 216,624.00 -0- -0- -0- 71" 7) Input taxes were claimed on importations of goods which are supported by original copies of Bank ORs dated outside the period of claim and photocopied IEDs certified by the BOC issued in the former name of the "S-10" & "S- Company 1,469 ,722.001 1,469,722.00 -0- -0- -0- 72" 1 The amount as appearing in No. 16 of the summary of observations of the Court-Commissioned Independent CPA is ?1,459,722.00. However, Annex 21 of the Court-Commissioned Independent ~ .. ,,8 r): .i \.) '

C.T.A. EB NO. 422 27 (C.T.A. CASE NO. 6957) DECISION Total input taxes outside the P4,473,595.21 P4,384,424.00 P61,569.70 P23,754.24 P3,847.27 period of claim as found by the Court En Bane P4,463,595.21 4,374,424.00 Total input taxes outside the PlO,OOO.OO P10,000.00 period of claim as found by the First Division Adjustment on disallowances on input taxes outside the period of claim Annex "A-3" Input tax on local purchases of goods supported by VAT invoices as well as on local purchases of services supported by VAT ORs issued in the former names of petitioner 1) Purchases of goods Total 1�t Qtr 2�0 Qtr 3ro Qtr 4t" Qtr Exhibit No. 2) Purchases of services P284,590 .02 P220,516 .37 P36,1 85.86 P27,887.79 -0- "S-9" & "S-53" Total "S-~" & "S-61 " 174,990.28 1,145.88 144.10 44.08 173,656.22 P459,580.30 P221,662.25 P36,329.96 P27,931.87 P173,656.22 Annex "A-4" Input tax on local purchases of goods supported by invoices with pre- printed TIN-Vas well as on local purchases of services supported by ORs with pre-printed TIN-V printed after January 1, 1996 1) Purchases of goods Total 1�t Qtr 2�0 Qtr 3ra Qtr 4t" Qtr Exhibit No. Pl33,244.20 P47,867.47 P28,277.1 2 P15 ,934 .29 P41 ,165.32 "S-9'~ "S-55" 2) Purchases of services to "S-57'' Total 79 1,101.76 89,400.00 165,323.34 118,394.22 417,984.20 "S-9" & "S-61" P924,345.96 P137,267.47 P193,600.46 P134,328.51 P459,149.52 @1..J CPA's Report shows that the correct amount as added is P1,469,722.00, which the Court accordingly _ adopted. 108 G

C.T.A. EB NO. 422 28 (C.T.A. CASE NO. 6957) DECISION Annex "A-5" Adjustments on Amount Reconsidered by the Court on Local Purchases of Goods and Services Due to Documents Retrieved by Petitioner Per the Court En Bane's Verification Total 1'1 Qtr 2"" Qtr 3ru Qtr 41n Qtr Exhibit No. P1,363.64 -0- -0- "JJ" to "JJ-6" I) Horsepower Builder & -0- "KK" & "KK-1" -0- P696 .55 Industrial Supply, Inc. P96,337.50 P94,973.86 -0- P4,422.5 8 -0- "LL" & "LL-1" -0- 7,12 5 .00 -0- "MM" & "MM-1' 2) Quan's Worth Farm & Resort 696.55 -0- 68,399.62 12,582.99 15,049.33 3) Famous Electrical & 25,805.00 36,495.21 P19,809.60 Construction Supply 4,422.58 -0- 38,960.41 -0- 8,650.01 P134,528.67 P60,625.78 P44,205.49 4)Deltech Industrial Trading Corporation 7,125.00 -0- 5) Eagle Express Lines, Inc., Race Enterprises, Azulrem Construction & Engineering Services, All Trans Link Network Phils. Inc., Diamond Rent a Car, Inc., Mirant Philippines Employees Association, Inc., Sky A ire Industrial Sales and Services & "00" to "CCC- System 10 Alarms P96,695.58 663.64 2" 5) JMTSUKI, Luisa Restaurant, "DDu" to Zetroc Trading, 124,430.13 42,320.32 "MMMM" 6) Dealo Koffee Klatch, Gould Star Corporation, Race Enterprises, Junna Industrial Corporation, Manila Fluid System Components, Inc., Michelene's Mart & P.T. ''NNNN'' to "EEEEE" Cerna Corporation 47,610.42 -0- Total Retrieved documents on P377,317.76 P137,957.82 domestic purchases of goods and services per the Court en Bane's Verification Total Retrieved documents on Decision dated May 16,2008, p. domestic purchases of goods and 14 services per the First Division's Verification P373,089.58 Adjustment P4,228.18 1087